What smoke?

Some people think houses will never again be affordable if governments keeping pimping them. And maybe they’re right. Now that we’ve lost Michael Ignatieff.

Harper, of course, we lost long ago. Father of the zero down, forty year mortgage. Booster of the RRSP raid for down payments. Creator of the Home Reno Tax Credit. Disciple of emergency interest rates. Giver of the first-time buyer’s closing cost gift. Conservatives, in fact, have been like pre-crash Republicans in the US, pumping the Ownership Society with gifts, incentives and inducements until demand swelled, prices popped and a bubble was born.

Almost singlehandedly, through cheap rates, lax regulation, government housing subsidies, presidential boosterism and financial engineering, George W. Bush managed to get the home ownership rate to 70%. After that collapsed and cruelly destroyed the US middle class, Stephen Harper picked up the torch. As a result, we’ve had more pro-real estate initiatives in the last five years than in the quarter-century prior.

You’d think the Libs would get it. Today the cost of home ownership in Saskatoon, Toronto, Vancouver, Calgary or Winnipeg is so high that families can only get in by miring themselves in debt. Once interest rates normalize, there’ll be rivulets of equity streaming into the suburban storm sewers. The last thing we need from government is another program – subsidized by tax revenues – directing millions more to flow into houses.

Alas, Iggy’s no different. The HGTV generation won. Federal Liberals, if elected, will be giving people up to $13,500 to renovate their homes. Nominally, it’s for energy efficiency. But let’s face it – when you pay people to upgrade to new windows, doors, roofs, gas-saving 60” Wolf stoves and water-wise oil-rubbed bronze Moen faucets, who won’t? This money will come in the form of a massive tax credit, but if you don’t have enough income to qualify, worry not.  Ottawa will just send a cheque. Cost: $400 million, on a permanent basis.

Now this brings me to my miserable little point. If the two main parties think it’s perfectly fine for your family to be forever indentured to real estate, turning your house lust into an economic platform and bribing you with your own funds, could the bubble also be permanent?

That’s exactly the argument some people have been pushing on this depraved blog. The government, they say, is so invested in house porn that it’ll never precipitate lower prices. So, rates will stay dirt cheap. Lending standards will not rise. Liar loans and zero-down will be allowed to stay. CMHC will keep sucking off lender risk. Kids with no money will still buy houses. Just as the housing market starts to flame out, political leaders will throw on more gas.

Watching this election campaign, you gotta wonder. When did leadership turn into followership?

Well, this much is clear: all bubbles burst. All booms end badly. And attempts to blow more gas into the dirigible simply result in a bigger fireball. When a SFH costs eight times family income in Toronto and 13 times in Vancouver, even jets full of horny Chinese won’t save this market.

However, people will still buy houses. Families crave homes in which to live. Pregnant couples  are desperate to nest. There’s nothing inherently wrong about wanting to own real estate, which is why 90% of the people reading this are, well, reading this.

So, how do you protect yourself against the inevitable?

First, never think a house is an investment plan or a retirement strategy. Those days are gone, and won’t return until after the next market crumble. Second, never eschew diversification. Real estate is just one asset class you should own. Third, the worst thing you can do is have too much of your net worth in a home. When the market turns, and it will, you would lose a bundle and see what’s left turn stone cold illiquid.

So here’s a rule of thumb appropriate for the times. Take 90 and subtract your age to equal the percentage of your net worth a house should represent. So for a couple in their twenties, it can be in the 70% range. For a Boomer in her sixties, it shouldn’t exceed a third. How to calculate net worth? All your assets minus all your liabilities – so home equity is on one side of the ledger and the mortgage on the other. Then divide in fair market value of your property.

My actual number is 31. And you?

213 comments ↓

#1 Willa on 04.03.11 at 6:51 pm

My number is 28.

(I still feel broke, though.)

#2 Richard on 04.03.11 at 6:55 pm

im in my twenties but i would definitely keep it way below 70%

#3 homeinboca on 04.03.11 at 7:01 pm

My number is 36 and I have 50% of my net worth in my 2 homes, and no debt. No rent payments for the rest of my life if I choose to.

Where did this formula come from? I read alot of articles on financial planning and I’ve never seen it before.

#4 Joe on 04.03.11 at 7:03 pm

59%. Really? Still seems high to me. Does that include the percent that’s stuffed in my mattress or no?

I like the idea of tax credits for windows and doors. It might encourage people in the Lower Mainland to actually install some, justifying the price of the 1980s homes in my neighbourhood. Granted, they are sitting on the market a very long time, several months. Beautifully remodeled inside, stainless, granite, Ralph Lauren paint, but no mention in the specs about roof, windows, doors, furnace, etc. So all hat no cattle. I just don’t get it. $600,000 for a new place or $400,000 for a 20-year-old, well, pretty much a tear-down. It’s no wonder new homes are so popular and sell so well.

So the tax credit would be a really good thing, but under normal, balanced-market circumstances.

#5 Geoffrey L. on 04.03.11 at 7:12 pm

The Harpercons went right along with the program that led to the financial meltdown in 2008. Check out this documentary “Inside Job.”

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

#6 Fractional Reserve on 04.03.11 at 7:16 pm

Garth, do you lump all real estate, even rentals, into one asset class? In other words, should all forms of real estate be included into one asset class that should not exceed the 30-40 % of total net worth?

#7 Joe on 04.03.11 at 7:17 pm

#40 Utopia on 04.02.11 at 1:31 am

You said we’re in a commodity cycle and that will soften the crash into a melt. I agree with the melt part, mainly because I don’t think our subprime lending is as bad as in the U.S. Yeah, we’re bad, but I think people will bleed longer with the slow rise of interest rates, they won’t go from a $1,200 to a $5,000 mortgage payment overnight.

Two, I disagree because I understood the end of the commodity boom is nigh. What say you?

http://seeker401.files.wordpress.com/2011/03/commodities.png

#8 Flashback '08 on 04.03.11 at 7:18 pm

Holy replay of 2008 batman!

Oil again on it’s way to toppling the world economy, stock markets looking toppy by May and to top it all off, a federal election campaign. I don’t know about you batgirl, but I’m thinking about laying off the LSD-laced J’s.

#9 Abitibidoug on 04.03.11 at 7:20 pm

Well, I’m probably not the first to post on this topic, but the above reminds me of what someone said in early 1929, namely: it looks like stocks will stay on a permanently high plateau. But then again, won’t this time be different?

#10 Smokanagan on 04.03.11 at 7:24 pm

Zero! Let the landlord deal with the bongwater stains when I ditch (I love liquidity!)

#11 LH on 04.03.11 at 7:31 pm

My number is about 130%.. more than double my guideline of 90-26=64!

#12 Getting Tired of Waiting on 04.03.11 at 7:31 pm

Garth,
Are you softening your stance? I have been putting off my wife for 2 years now waiting for affordability that keeps on evading me.
I sense the high prices are here to stay. Not sure, but tired of waiting.
It’s easy for everyone to say stay out of the market, but when we’ve been waiting for long, how much longer should we wait? This is getting disgusting. I know if I buy now I will lose money, but it’s just that I am not that sure.
Where I live in Mississauga, there’s a lot of Indians and they seem to withstand these high prices by renting out their house and having multiple families live in the same house. I am not sure housing will drop here. I know what you’ll say, but now even 15+ year old houses here are over $700K . It’s getting absurd, and my worst nightmare is that things keep going up here to become like Vancouver.

#13 Rent in the Annex on 04.03.11 at 7:34 pm

Toronto is grossly overvalued and no reason to buy an overvalued home where rents are almost half the cost of owning. Here in the Annex you have homes on the market for lowest $800K plus(Dump) and I rent my 3 bedroom for $2400 plus Ult. I feel like I live for free by renting in the Annex and the home below need all kinds of work and my rental is all done up. Renting now is smart since every idiot has bought or going to buy. BTW I sold a few months ago and will not buy back until a 40-50% correction happens. Smart money is renting and saving. Spin that realtors. LOL

Here is an example
http://www.realtor.ca/propertyDetails.aspx?propertyId=9900297&PidKey=585600907

#14 S.B. on 04.03.11 at 7:39 pm

“Once interest rates normalize, there’ll be rivulets of equity streaming into the suburban storm sewers”

I thought that shiny stuff was just oil leaking from a Harley. ;)

Disclosure: a “Cager” here.
Bikes can be annoying given that

#15 Angry Red Dots on 04.03.11 at 7:40 pm

The angry red dots on the MLS and lack of sales = downturn. Nothing is selling and a simple drive around the GTA is very telling. For every ten for sale signs maybe 2 are sold and eight are sitting on the market without buyers. As listing increase and sales continue to decrease the end result is a US style crash. Realtors can put their heads in the sand like US realtors. Sorry realtors you can lie all you want but the housing crash can not be stopped.

#16 I. Muvrini on 04.03.11 at 7:41 pm

My number is #DIV/0! (Divide by Zero Error)

Oh, and by the way :

First!

#17 S.B. on 04.03.11 at 7:41 pm

oops cut off, given that 80% of them seem to be driven by young people so aggresively. 80/20 rule, on the wrong side.

#18 Fran on 04.03.11 at 7:51 pm

Have no idea about Toronto and the surrounding areas but I can tell you Brampton Real Estate is not going anywhere. My BIL has been trying for the last eight months and a few price drops without success. As someone who lives and owns in Brampton I can tell you prices have not gone up since 2006. The market here has been flat and those who over price it never sell. Lucky for myself my home was bought in 2003 but BIL bought in 2007 and maybe forced to take a loss. I don’t think prices will go down much since they never went up. Funny thing is how the buying realtor said to him that prices always go up but now the same realtor is changing his story. BIL is not to happy with her and will fire her in the next month.

#19 AKatz-Oaville on 04.03.11 at 7:54 pm

The Wall Street Journal:
Housing Booms North of the Border
Some Economists See Canada’s Market Ripe for a Correction, With Debt Rising to Worrisome Levels
http://online.wsj.com/article/SB10001424052748703784004576220994025363866.html

#20 Ant-626 on 04.03.11 at 7:55 pm

Garth, Iggi would not do what you did, he will not risk his political future by doing (well, promising) what’s right. All what’s you are saying is right, but there’s no use. It’s like mom’s muttering “don’t forget to brush your teeth”. By the way, you keep talking about property virgins. There’s another kind, those who enjoyed paper gains and never turned them into real ones. Or those, who has never had a brokerage account with leverage. Yeah, I know, it’s too risky. The same is house long with 1:19 leverage. Anyway, my whining (and yours) will have no effect in this bull housing market – all that’s left is to watch a stampede. It’s like commodities or AAPL – you’d better own a piece of them. Sure, they will crush some day. But nobody knows when.

#21 Mr. Reality on 04.03.11 at 7:56 pm

I still cannot imagine why anyone would want to be a slave to their mortgage and their home at the same time……ahhhh liquidity the secret to success that so many have no clue about.

Keep em coming Garth. Things have changed in the past couple weeks and that pendulum is changing direction!

Mr. R.

#22 Debtisforever on 04.03.11 at 8:00 pm

It will pop, despite what people tell me about the government wanting to keep housing prices high. Too bad for them. One guy argued with me and said we will have massive inflation and high wages before housing prices drop. I doubt it. Consumer sentiment on housing can change in a flash, while it would take ages for you to convince your employer to give you a raise to keep up with inflation (which governments like to insist is next to nil, anyway).
And so we shall see. I look to the Okanagan, where nothing seems to be selling. Prices will have to drop. Even the lonely realtor in my building in Vancouver has been looking rather forlorn the past couple weekends (despite dropping the price, I guess rich mainland Chinese don’t like overpriced condos).
It will happen.

#23 john m on 04.03.11 at 8:00 pm

I find it very curious that no politician has brought up “the housing bubble”?..probably the most serious threat out there to an economic crash for our country.Its almost like the money supply is endless and aren’t we lucky cause we get to pay the tab.

#24 Rookie on 04.03.11 at 8:04 pm

Garth, I have been reading this for a while and your view is at least interesting and you make a lot of sense. That was until yesterday when you indicated that you ride a Harley……………… i mean really?? a Harley??? Although i whole-heartedly respect the Harley Davidson marketing department for managing to sell a sub-standard product for MORE money than the better competitors, i am not sure i can take you seriously anymore. Say it aint so, say you ride a Honda or something

#25 Cellar Dwellar on 04.03.11 at 8:04 pm

About 35 -40 % which(according to your “90 minus age” ) is about right…..

#26 Montrealer on 04.03.11 at 8:13 pm

Mine is 60.
but 60% of not much, is still not much, and certainly not enough. Unless I buy with zero down. The banks would love to give us a $500k mortgage.
Even kids in their twenties, at 70% fof their net worth, can’t buy because almost all of them have zero or negative net worth.

#27 Devore on 04.03.11 at 8:19 pm

#3 john m

I find it very curious that no politician has brought up “the housing bubble”?..

No mainstream economist, bank or RE industry has called a bubble. Oh, there’s talk of “are we at risk of having one”, but no one sees one right now. So why should politicians rock the boat? What’s the benefit for them? Zero. No benefit, only uncomfortable questions.

#28 Jas on 04.03.11 at 8:29 pm

How about having only 35% max of your net worth in real estate, no matter what your age is? I think that is more conservative and safer.

#29 BPOE on 04.03.11 at 8:33 pm

Shiller blinked. Soooo Canada is just a random success story now eh? Time to go back to University and do some homework Shiller cause you got an F on Vancouver Real Estate. Canadian Government supports Real Estate. The Canadian Government will never allow interest rates to rise. The world has many problems and Vancouver is viewed as a safehaven, a storehouse of wealth. Renters have been waiting for an event (falling housing prices) which is not happening. Another FACT that the American amongst others don’t get is renters in Vancouver have lost out big time in the past decade. And now here is Shiller in all his glory. The true fool of Real Estate. Clueless, brain dead intellectual claptrap. Listen to Shiller and you rented and lost, BIG TIME, life changing. Anyone who listened to Shiller will NEVER RECOVER FROM THE BIGGEST MISTAKE IN THEIR LIFE! Listened to BPOE and your secure and rich in retirement.
_____________________________________
NEW YORK — Canada is being feted in international circles after coming through the financial crisis relatively unscathed, but the accolades may be unwarranted.

That’s the conclusion of a leading U.S. economist who’s crunched the numbers and determined two factors that may take Canada down a notch or two: the housing market looks due for a U.S.-style drop; and, without oil, the country would be in trouble.

Robert Shiller, the Yale professor who correctly predicted the 1987 stock market collapse and the recent U.S. housing market meltdown, said Canada’s robust financial health compared to other nations is largely due to a random run-up in oil prices in the midst of the global financial crisis.

“It’s a major export for Canada and it went to US$140 a barrel in 2008, right when Canada needed it,” Prof. Shiller said in an interview Tuesday.

Canada’s economic output fell roughly 4.2% from its peak in 2007 to its trough in 2009 — even with the oil price surge, while the U.S. saw a near-identical decline.

“It seems that if the country didn’t have that boost from oil, it would have done worse than the United States,” Prof. Shiller said.

While many economists, market observers and Canadian politicians trumpeting Canada’s success like to highlight the country’s differences from the United States, Prof. Shiller said that historical economic data show they are very much alike, with both economies heavily influenced by a similar human psychology, a theme he explored in a 2009 book he co-authored called “Animal Spirits.”

“Our countries are like two peas in a pod,” he said. “A lot of the differences are random, like the oil shock.”

If the historical statistics serve as a guide, Canada looks to be headed for a big drop in home prices, although any decline probably won’t be as pronounced as the U.S. housing bust, he said.

U.S. home prices adjusted for inflation surged 79% between 1990 and their peak in 2005. Canada’s gained about 45% over the same period and have continued marching higher, up to about a 50% gain currently, said Prof Shiller.

“I’m a little worried about the Canadian housing market. Fifty per cent seems like a lot in 20 years,” he said. “I suspect the same forces are in operation in Canada, although maybe somewhat attenuated because mortgage institutions are more responsible there.”

After Canada’s International Trade Minister Peter Van Loan opened the conference with remarks touting the country’s financial might, Prof. Shiller called Canada “a purely random success story.”

“I’m not a salesperson, so I gave Canada a bland view,” he said. “It’s the same thing on both sides of the border.”

Calgary and Vancouver appear to be the biggest possible housing bubbles in Canada, he said.

“Vancouver feels bubbly like San Francisco,” he said. “There’s a West Coast culture that extends from Seattle down to San Diego.”

He advises Calgary homeowners worried about their home values to hedge their bets by shorting oil. “If oil prices go down, your home prices is going to go down with it,” he said.

Prof. Shiller said he owns a house near Yale in New Haven, Conn., and a summer home, both for nostalgic reasons, not as investments, and he believes it makes more sense for most people to rent and put the savings in a diversified portfolio. “People should think of buying a home as risky. They should maybe put some money in housing, but invest all over…and maybe take part in the Chinese Miracle.”

Source: Financial Post (08/02/2011)

#30 Devore on 04.03.11 at 8:36 pm

#12 Getting Tired of Waiting

Are you softening your stance? I have been putting off my wife for 2 years now waiting for affordability that keeps on evading me.

How is Garth “softening” his stance? He’s saying what he’s always said. Do you see a lot of young couples today that are in a position to buy a house in a major Canadian city and still fall within the 90 year guideline?

#31 Dave on 04.03.11 at 8:43 pm

Garth, while I generally agree with you – and I haven’t read the Liberal’s proposal yet, I am mostly in favour of tax credits for home improvement – provided it is aimed at either energy/water conservation or generation. There must be an incentive to get rid of 30 year old furnaces and 13L flush toilets. I’d rather see a lower number, but a carry forward amount – so that if I spend 15k on high efficiency windows, I can take advantage over several years. The amount shouldn’t be so high that people chose to ‘invest’ into their home over their RRSP/TFSA, but high enough to encourage some action. Not all, but many of the products used in home renovations are manufactured in Canada so it gives a bit of an added boost to local business.

#32 Hoof Hearted on 04.03.11 at 8:44 pm

I don’t know and I don’t care:

This is Canada

We are immune from reality.

The Gov’t will take care of us all.

( WTF..you don’t believe me?)

#33 Nostradamus Le Mad Vlad on 04.03.11 at 8:45 pm


“Now that we’ve lost Michael Ignatieff. Harper, of course, we lost long ago. George W. Bush managed to get the home ownership rate to 70%. After that collapsed and cruelly destroyed the US middle class, Stephen Harper picked up the torch.”

We never had either of them, and the Americans never had had Bush, Gore, Kerry or anyone else — same for Layton, May and Duceppe.

See BPOe’s and my comments further on, but in essence this has long been a pre-planned fiscal (uncooked) bacon burger, now burning on the B-B-Q.

Unfortunately, this ‘plan’ has run smack into cycle changes, which is why there is gonna be a lot more hell than heaven.

“. . . to be forever indentured to real estate, . . .” — To debt, no more and no less. When the present generation cannot pay it off, it passes to and enslaves their children. And so on . . .

“My actual number is 31. And you?” — Mine is 35, give or take. No, we’re not going to sell as we don’t need to.
*
#194 BPOe on 04.03.11 at 5:29 pm — “The last resort was RE….the global backrooms figured the system….as long as people can make the payments, it was better than a gold rush ……fiat money chasing a motherhood asset.”

Great post and well pointed out. These worldwide economic takedowns are slow (decades) in creating, then popping bubbles and, as always, the few become wealthier while the current generations are suckered into life-long debt.

Hence, this has been in the planning stage for donkey’s years, and is now manifesting itself on a daily basis. That’s why Garth present column — What smoke? — has hit the nail on the head. The forest fire is burning out of control, and we can’t see the forest for the trees, all covered by smoke and mirrors.

Check out #192 realpaul on 04.03.11 at 5:27 pm’s post — that’s a good post too — politicians of different names, but running under the same colors, making the same rhetorical promises which they will break as soon as elected.

I prefer, in no particular order, None Of the Above, Independent or Libertarian. Whoever serves up a nice piece of pie gets my vote!

#8 Flashback ’08 — Nicely pointed out. Commercial RE begins its’ descent into the swamp this year, combined with foreclosures and the like.
*
0:24 clip Forecast for radiation fallout.

Globalization “It’s better, cheaper and you’ll like it, dammit!”

7:47 clip Elites’ grip on Wall St. must be broken (GS, JPM, etc.

Lawsuits “A new invention to poison people … is not a patentable invention.” Lowell v. Lewis, 1817.

Money The west’s god.

The UK is roughly in the same position as Garth’s column describes.

EU – IMF – NWO – WHO Check yer food lately?

Benghazi “This is precisely how the Vietnam war started: with ‘advisers’.” wrh.com. History rhymes and repeats.

#34 Valyrian Steel on 04.03.11 at 8:45 pm

I’m 38 with a net worth of about 1.4 million… 700k in real estate (Vancouver condo + Gulf Island acreage), so according to Garth, right where I should be. As my property is all paid for, I manage to sock away about 5k per month in savings/investments, so my real estate ratio is actually dropping significantly.

Not everybody in Vancouver is financially moronic.

#35 Burnt Norton on 04.03.11 at 8:56 pm

Anyone who thinks that the Canadian government can indefinitely engineer high real estate values needs to watch the movie “Inside Job”

It’s posted here for free:

http://www.zerohedge.com/article/watch-inside-job-wall-street-horror-movie-free-0

#36 Hoof Hearted on 04.03.11 at 9:03 pm

BPOE

Glad the crotcb invaders issue is resolved.

That keeps 2 hands(10 fingers) free for the key boards.

#37 PermaRent on 04.03.11 at 9:04 pm

There have been federal home energy improvement programs continuously for about a decade now in Canada, and they’ve never included money for faucets of any sort. Insulation, furnaces, air sealing, drain water heat recovery… all the totally unsexy stuff nobody sees but that helps keep your house safe in times of uncertain energy costs and supply.

Oh, and if you live in an earthquake zone, for the love of all you hold holy, tie your house to its foundations!

#38 Timing is Everything on 04.03.11 at 9:05 pm

#10 Smokanagan – “Zero!”

Is that your net worth, Mr Bong? ;)

#39 chinstrap on 04.03.11 at 9:10 pm

41 at age 40.

450k condo / 1088k net worth

#40 VicHomeOwner on 04.03.11 at 9:13 pm

48. Reality is 97% but debt free and working on filling up that TFSA.. thanks Garth!

#41 TheBigLebowski on 04.03.11 at 9:33 pm

A financially free society , free of the burden of debt is a society able to make sound decisions based on prudent logic. An indebted society is a group of people left to the whims of government bribes in the form of bailouts and scare tactics. It is in governments self interest to rule over a people that can not financially support themselves without government intervention. A culture dependent on government policy to pay the bills is no longer a free and prudent society. We are now slaves to debt and slaves to government, they have us exactly where they want us. Gold is the currency of kings, silver is the currency of gentlemen, barter is the currency of peasants and debt is the currency of slaves.

#42 Kevin on 04.03.11 at 9:34 pm

From stats can
Real estate assets comprised 38.3% of the net worth of Canadian households in 1999.
Real estate assets comprised 42% of the net worth of Canadian households in 2005.
From Vanier
Real estate assets now comprise 48% of the net worth of Canadian households.

The richest 20% of Canadian households control about 69% of the wealth in Canada.

So when Garth says that the majority of Canadians have the wealth in real estate, he is not joking.

Canadians real estate wealth vs net wealth
http://saskatoonhousingbubble.blogspot.com/2010/12/canadians-real-estate-wealth-vs-net.html

#43 HouseBuster on 04.03.11 at 9:34 pm

You should take 90 and subtract 90 to determine how much you should have in your house.

The market is going to crash so get out now!

#44 Live Within Your Means on 04.03.11 at 9:40 pm

It’s good to see that Garth has finally realized that the government won’t allow housing market to suffer. He is right. Rates and incentives will remain attractive.

Posters who decided to avoid purchasing real estate have suffered instead. It’s a shame, but everybody gets what they want.

Learn to read. I said the opposite. — Garth

#45 Tim on 04.03.11 at 9:45 pm

At a time when Arabs risk life and limb for political freedoms, Canadians seem largely apathetic about the erosion of their democracy.

On Friday, March 25, 2011, the minority Stephen Harper government fell on a confidence motion by a 156-145 vote. Speaking to the motion, Opposition Leader Michael Ignatieff attacked the Harper government for disrespecting Canadian

DELETED. Don’t post 700-word articles here when a link saves us valuable real estate. — Garth

#46 Blobby on 04.03.11 at 9:51 pm

@ #12 Getting Tired of Waiting

– You have to ask yourself why you feel you HAVE to own? Part of the problem is people like you who feel like they NEED to own a house or else their entire world will fall apart.

Stop thinking that renting is a dirty word. Think about the money your saving/investing while renting. And think of the freedom it brings!

I’ve just lost my job in vancouver (company went bankrupt). If i cant find a new job here, no worries, i’ll move to toronto/quebec.. Or maybe New Zealand or perhaps australia for the weather.

I can do that at a drop of a hat, as i rent and im not tied to this location.

If you’re just sitting around waiting for a crash or a melt to happen so you can finally own.. then you might be in for a really long wait.

#47 WesternCanadian on 04.03.11 at 9:55 pm

“When a SFH costs eight times family income in Toronto and 13 times in Vancouver, even jets full of horny Chinese won’t save this market.”

Why is it that you never mention what this ratio is in Calgary, Edmonton, Montreal, Winnipeg, or Atlantic Canada?

You like to group Canada together, but you ALWAYS use Toronto and Vancouver as examples.

You must be new here. I love to ridicule Calgary. And Winnipeg is irrelevant. — Garth

#48 Tim on 04.03.11 at 9:56 pm

Maybe Iggy has missed the boat with the home reno credit, but at least he has respect for Democracy and our Governing institutions. Harper has no respect for our institutions, he’s undemocratic, tries his best to control the flow of information and prevent people, even his own cabinet from speaking freely. During the campaign last week he told a reporter that he would only answer four questions! How transparent is that?

#49 Kurt on 04.03.11 at 10:12 pm

#29 BPOE – I liked you better when you where writing about crabs. Why the change of heart?

#50 vic_guy on 04.03.11 at 10:12 pm

From the previous post :

timing @ 187
I like Victoria, but not for the weather, read what I wrote sloooowly, it might help ?

>The weather here is nothing special and there is more rain and less sunshine than many places.

Just rained again for a couple of hours(40% chance went to 100%)….I guess if you’ve only lived in Regina and Victoria, then yes, it is better, but stretch your horizons, there is a whole world out there :-)

Lots of Victorian’s heading south to Mexico, etc, currently. Too bad they’re missing the great Victoria weather. I wonder why they go ?

#51 blase on 04.03.11 at 10:14 pm

My mom is a realtor in Calgary. She’s been in the business since the late 80s, member of Million Dollar Club (high sales), huge client list.

She hasn’t made a sale this year. Nothing is moving. The Spring spring hasn’t materialized, despite $100 oil.

Something has changed.

#52 Nemesis on 04.03.11 at 10:15 pm

Griso, la Bestia Crimson – una storia italiana … in data odierna, sulla Highway 97. Garto, dobbiamo cavalcare – insieme – pista piana o in montagna. Chi osa vince. Sì, si può cambiare il mondo. Mantenere ‘la storia spinta’, Garto. Sei combattere la ‘buona battaglia’.

http://tinyurl.com/3lvddsl

Bonus soundtrack for ElGarto’s other blog dogs who… know what it means to, ‘RideHard/Fast’…

http://tinyurl.com/6blgwq

PS to Editor/’Garto’… I think it’s high time you said ‘GoodBye’ to MilwaukeeWisconsinIron… and tried one of these (after due consideration with regard to your heritage, posture, ‘presence’, BigTwin predilections (I’m with you on that one) and beautiful touring companion)… ;)

http://tinyurl.com/44lcjbr

#53 obert on 04.03.11 at 10:31 pm

the governments in Ireland, Spain, Portugal, Greece, France, USA, …, all let the housing bubble to grow until the countries are bankrupt and the economies are in ruins. Then the people suffer: unemployment, poor health care, poor education to children, no pensions for seniors – cuts here and there, austerity national budgets with increasing taxes and reduced social spending. And what happens to the governments responsible – they loose elections and new once promise to fix things.

Regrettably, the Canadian govenments are no different. And the electorate is selfish – later will suffer for the political blindness. And the current house buying public is greedy and irresponsible – later will suffer poverty.

There were no political parties in the above stated countries that wanted to stop the housing bubble when it grew and grew. The nations lose freedom, financial or political because the populace and the leaders are selfish, greedy, lazy – the countries decline.

Hope it will be different here… still hope.

#54 Jon B on 04.03.11 at 10:38 pm

The concept of a permanent housing bubble is interesting. I thought it would have popped years ago, but I didn’t see the the emergency rates coming. I agree this puppy will probably go down in time. BUT, if rates get back up to historic norms and housing prices have yet to tank, well it will be at that moment I convert to a perma-bubble believer.

#55 CalgaryRocks on 04.03.11 at 10:46 pm

Bummer. A bit to high! 60. Of course this is because of the outrageous price appreciation in Calgary since we bought in 2005.

We also have enough cash on hand to write a cheque that will cover the mortgage balance and a little side income stream that will cover our bills indefinitely should both of us become unemployed.

#56 Patz on 04.03.11 at 10:57 pm

Big drop in Vancouver week/week numbers as retailed by agentwill’s weekly stats = 22% drop w/w. These figures are from the very heart of bubbleville. Of course one week’s stats don’t a trend make, but I imagine there’s some very quakey realtors now waiting if Imelda’s got more shoes to drop. There were also a lot of pulled listings, meaning sellers resisting price drops. Bad but typical moves in such a market.

I think this market has finally tapped out but we’ll see. Delusions are so very hard to let go because the delusionee thinks they’re reality.

Agent Will http://agentwill.com/weekly-stats/

#57 kc on 04.03.11 at 10:58 pm

Not sure if anyone has posted this about the 60Minutes tonight about the bank signing papers. However, here is a small excerpt. In depth video opens the eyes.

“In the 1930s we had breadlines; venture out before dawn in America today and you’ll find mortgage lines. This past January in Los Angeles, 37,000 homeowners facing foreclosure showed up to an event to beg their bank for lower payments on their mortgage. Some people even slept on the sidewalk to get in line.”

Mortgage paperwork mess: the next housing shock?

http://www.cbsnews.com/stories/2011/04/01/60minutes/main20049646.shtml?tag=contentMain;contentBody

#58 confused and a little crazed on 04.03.11 at 11:01 pm

Hi Garth,

i can tell buy your tone…you are tired…like all of us whom look to common sense. Who look to accountability of ourselves and those that represent us

and our collective understanding of what comes up must come down.

through out history we have had bubble and nowadays that is the only way to stimulate ther economy.

like most of the population it’s short term thinking which wins election. Let the other guy worry about the debt. which is the case for generation X and Y. i need to be elected…and since it’s popular now …give more credit …give more loans.

I give up on owning…sort of. I just gonna ride the next bubble and the next ….and the next

ohhhh,…there will be one. it’s just a different bubble

there will be higher inflation which each bubble because the govt will print more money and more credit ….rescuing the public from themselves so they can spend more to stimulate economy…maybe milk will rise from $4.20 to $5.00 in 3 years…gas will be $2.20 in that time…but it doesn’t matter…live now. tomoorow is another day.

don’t get me wrong i learned alot these last 4 years…my invest exp will carry me onto my golden years. i feel sorry for the kids under 15.

they will have tuition costs more than double with the same salaries now if inflation hold and learn the same financial knowledge their parents have… which is little to nothing

#59 Another Albertan on 04.03.11 at 11:04 pm

Y’all realize that Garth’s final question _should_ be principally rhetorical, dontcha? But some just have to take the bait…

It is interesting to see who has a need to justify past decisions in front of a nameless, faceless, not-gonna-give-a-crap crowd.

Everyone else’s mileage may vary.

Also interesting to witness the nameless, faceless heroes who criticize everyone else. — Garth

#60 Ayn Rand on 04.03.11 at 11:04 pm

Age 47; magic # is 90-47 = 43
real estate 35% of assets/equity (household assets).
************
I am currently reading The Millionaire Next Door – the authors magic number is age/10*salary should equal your assets (does not differential RE vs other assets).

My number is 47/10=4.7*$95K = $447K in assets (what I should have accumulated by now). But this book was written in 1996, FWIW.

#61 Blobby on 04.03.11 at 11:09 pm

The problem for the politicians is that people are inherently stupid. If one of them announced they were going bring in regulations to cool down the market and stave off a crash – it’d be political suicide as people will think the evil governments were preventing them from spending their money the way they want.

If people thought the government was actively trying to lower their home prices….

#62 Chaiwalla on 04.03.11 at 11:10 pm

Garth you are doing a great service to young Canadians and I salute you. I currently rent, even though I can afford to buy – I’ve done my homework and have learned from my scandalous liaisons with the real estate harlot. Landlord just told me he wants to sell (smart guy), so I’m offering a higher rent in the hope that I will get to stay in the unit. But get this – price for us to buy would require 42% higher monthly payments, and that is with 20% down! And not only that, we would have to cash in valuable precious metals which are increasing in value every year at a nice clip to fund the down payment. What a disaster that would be.

Unfortunately every landlord with a brain is trying to sell into this manic market. I hope that I will be able to find a suitable rental for my family. And dreaming of the day when I can get the property of my dreams for a few gold bars.

#63 Hoof Hearted on 04.03.11 at 11:23 pm

#53 obert

From what I have read….the fallout is on par with the economic hitmen.

The formula was practiced in the 3rd world. Countries were lent etc funds…knowing full well they couldn’t be re-paid.

Then the private sector piggybacked on the IMF etc and forced the deliquent borrowers to suurender assets, which are often resources.

It appears the 3rd world plundering has finished, thus the shadow-gov’ts now attempt invasion of the western world.

The fiat plundering to soften up the modern world is via visible asset horniness ie RE. Now that debtor status is established, the clusterf*cks in Gov’t have to waive the white flag (as they collect their pensions) and surrender the communla assets (ie Oil, water etc).

In BC, Herr Campbell sold out much of BC with the mind candy of the Owelympics to dumb the senses .

Watch the OMEN reruns…….. whose your daddy err “Damien “in your part of the ‘hood.

#64 Utopia on 04.03.11 at 11:36 pm

To #7 Joe who asked…..

“I understood the end of the commodity boom is nigh. What say you?”
——————————————————–

Hi Joe, you make a valid point from a chart perspective however there are some fundamental reasons to be concerned about the commodity boom not relenting for several more years.

This is good for our country while it simultaneously hurts the poor in the world but suggests we will continue to skirt the worst ikmpacts of a housing correction for quite some time as national revenues remain strong.

If I may I will offer you a more concise answer straight from the words of Mark Carney, the Governor of the Bank of Canada. This is what he said in an address to the Inter-American Development Bank just 10 short days ago.

“Commodity markets are in the midst of a supercycle. …This surge in demand is the result of rapid growth in the emerging world, particularly in Asia. …Rapid urbanization underpins this growth. Since 1990, the number of people living in cities in China and India has risen by nearly 500 million, the equivalent of housing the entire population of Canada 15 times over. …Even though history teaches that all booms are finite, this one could go on for some time.” (Governor of the Bank of Canada – Mark Carney, March 26, 2011)

Details on that story follow.

I think this is worth taking note of. The world has changed and although it is agreed that all commodity booms do end eventually, this one has legs for a new set of reasons. The Third World and developing Nations are all coming of age at once.

There will be tremendous stresses and strains on the globes resources over the coming years and much more competition for increasingly scarce materials and foods.

This is in essence why food itself will remain a huge business and growth opportunity until well into the future and many agree you can not go wrong investing there at this time. You will have to do your own research though. Do not accept that as financial advice. It is my opinion.

http://www.republicofmining.com/2011/03/29/the-paradigm-shifts-global-imbalances-policy-and-latin-america-mark-carney-governor-of-the-bank-of-canada-calgary-commodities-speech-march-26-2011/

#65 squidly77 on 04.03.11 at 11:37 pm

53 obert

It’s called stripping the middle class of their wealth, it also eliminates large pass down inheritances from occurring with in the middle class.

Did you ever wonder why Canada needs to import foreign workers? Here’s your answer, the middle class had become to wealthy and lacked the desire to do menial work.

Tempting the middle class young and old with better and nicer material possessions was the perfect bait.

The end game will be very steep interest rates.

Then presto, the middle classes wealth will be gone.

#66 Hoof Hearted on 04.03.11 at 11:44 pm

#29 BPOE

Vancouver is viewed as a safe haven much as a prostitution is not illegal.

The immigrant investor program, to my understanding, was never supposed to allow for RE investment. However the rules got diluted, and the floodgates opened.

No sober politician(in usual symbitoic relationship with bureaucrats) dared stop the cash flow..as this allowed them to ramp up remuneration of what should be a volunteer job, and blow smoke up our asses about how great BC is.

A blind eye is turned about sources of income, and why do you think casinos are growing…..to cater to the offshore culture and funds.

IF Canadas enacted laws of par with the US re residency, visitation and global income sources, then this money laundering machine would stop yesterday and sanity return.

#67 Joe on 04.03.11 at 11:50 pm

#3 — This number came from Garth’s head. It’s not real, he’s just doing a demographic survey of his blog dogs. ;)

#68 squidly77 on 04.03.11 at 11:50 pm

The biggest fish in the lake is never caught.
First the dumbest get caught when they’re only 6 inches long, some that are a little smarter don’t swallow the bait until they’re 12 inches long, the ones that are a little smarter live to be a little bigger and a little fatter.

To take the bait, or not to take the bait, the choice is yours, remember that there’s a razor sharp barbed hook in that fat juicy worm. Once caught, your a gonna.

#69 Crash Callaway on 04.04.11 at 12:00 am

All political parties are allowed to go by clan names
Conservative, Liberal, New Democrat etc…
But all report to the same Don and all are members
of ” Whores R Us”

What probably follows a conservative “F”
is a liberal “G” for gee we’re screwed again.

#70 Kitchener1 on 04.04.11 at 12:02 am

Lots of economic stories are falling by the wayside.

The canary in the coal mine so to speak is fuel prices.

-Walmart CEO is warning of heavy price infaltion
– pundits are now saying gas might be 1.50-2.00 by Aug
– Car inventories all time high-despite free loans
-RE sales are seeing serious volume downside, another 3 months of this and buyers will smell the blood
– interest rates rising large

Funniest thing is all the economists are crying about driving our dollar down. Imagine what kind of inflation we would be seeing if our dollar was at .70 or .80 US. Gas would 1.50 plus, inflation would be 10%.

#71 BPOE crabs on 04.04.11 at 12:11 am

Given the Bilderberg conspiracy ( and how the 12 people that run the world orchestrate things )

Countries that win the Olympic bids tend to go to areas that are ravaged and need an opiate to calm the masses

That’s why London gets them for 2012, via the Euro RE meltdown.

In light of this, it seems logical to predict BPOE pants will hold 2014 games, (and were 2nd in line to hold the royal wedding , and may still if Kate is knocked up or Willy ends up a teddy boy ).

#72 wetcoaster on 04.04.11 at 12:14 am

It hasn’t stopped raining in Victoria for over 5 months now and according to the weather pros it won’t stop for another 3 more. Just the place to be happy and soaked. Can’t golf, can’t bike unless your greenie with no money for a car and you have to dodge the psychos off their meds and crack looking for their next victim. Nice town to blow your brains out on real estate.

#73 Pilgrim for Knowledge on 04.04.11 at 12:16 am

~240% – mid 2003
248% at the end of 2007
252% – 1/1/2009
then I stumbled across this blog
164% – 1/1/2010
140% – now

So, we managed to shave off 100% over past four years.

Above also includes a condo that we subsidize for my parent.

Our ages are 35 & 30.

The million bucks question remains: Will we have enough time to get to solid ground before the big implosion? I can’t paddle any quicker.

#74 Hoof Hearted on 04.04.11 at 12:19 am

#51 blase

Maybe your mom’s competitors are eating her lunch.

Like Garth admitted, the “HGTV generation won”. Real estate is king and there is nothing on the horizon, election or otherwise, that will derail it. The must-quoted bust of real estate never came and prices continue to rise.

Notice that the posters who have real estate are doing very well – many have no debt. One individual even quoted having 2 homes accounting for 50% of their net worth and no debt. That’s the amazing power of real estate.

I’m glad that Garth is finally softening his stance on real estate. It will benefit us all.

#75 Utopia on 04.04.11 at 12:22 am

#13 Rent in the Annex said…

“Toronto is grossly overvalued and no reason to buy an overvalued home where rents are almost half the cost of owning”.
——————————————————-

Good stuff “Rent in the Annex”. I think you have addressed the key point we all need to keep in mind.

Rent versus buy is the real story now. Furthermore, incomes are not increasing in any significant way and so it is difficult for landlords to raise rents without the backlash of frequent moves and empty suites.

On top of this we are all facing rising energy costs and there is inflation pressures in food, insurance, medical fees, vehicle maintenance etcetera, etcetera.

There is now a squeeze on which Garth picked up on and starting warning about more than a year ago (before it had actually happened in fact) and I credit him with waking up a lot of people in this country to a growing risk.

He may not have gotten the timing exactly right but you have to admit that was a very prescient call as it preceded the current commodity boom by more than six full months.

Which is pretty much the main reason why I hang around this site. I get the news long before it is actually a real story anywhere else. Anyway, without getting him all puffed up which would just be overkill during Harley season I have long since suspected he has a bit of an inside edge.

So the basic narrative then is that we live in a time of declining asset prices (it is happening all over the country already) and simultaneously rising costs for all our basic needs (also happening). That is the squeeze. There is no room therefore for major price adjustments in rents as property values fall into decline.

Individually we need to take these factors into consideration before launching into major purchases of the things going down in value and find ways to boost income streams to offset the added costs coming our way.

This is a whole new world for many people who have never known anything except that wages rise year after year while housing prices leap ahead of those wage gains and make many renters feel poorer day after day.

Our whole mentality as a result has now become geared to believing that we must buy now or be priced out forever.

How do we know this?

Just ask yourself this one small question. Do you know anyone who’s home value increased more in a single year than you earned in annual income? That, you see, is the story in a nutshell. That is what is driving people to buy at the market top as they see themselves falling behind day after agonizing day.

That is also what has further driven home values when fundamentals tell us they should be in decline (the recession, remember).

And yet all this is ocurring at the very worst possible time. A time when wages and jobs are under pressure due to foreign competition and at a time when our nearest neighbor is in the death throes of a brutal deflation in housing values. It is happening at a moment in time when the whole globe is swimming in so much debt that bondholders all wear “Depends” just for the added safety.

We need to be vigilant now. This is getting dangerous.

#76 Timing is Everything on 04.04.11 at 12:30 am

#50 vic_guy

Hi guy. Lived in T.O, Boston, Dayton, Vancouver, Victoria. Born a raised in Skatch.

Pleasure travel – Mexico 7 or 8 times, US many times, Hawaii twice, NY, UK (all over), Most Canuck cities.

C. Saanich acreage is home-base and retirement home…10 minutes from YYJ.
Hawaii is booked again (Kaui this time)…Life is good, No complaints at this end. Like I said, We can RENT a hot or cold climate…Anytime. OZ is on our list.

Thanks for the advice though. Spread those wings, eh.

#77 John Saccys on 04.04.11 at 12:42 am

FRAUD…. What Fraud?

http://www.cbsnews.com/video/watch/?id=7361572n&tag=contentMain;contentBody

#78 Utopia on 04.04.11 at 12:44 am

#23 john m wrote…..

“I find it very curious that no politician has brought up the housing bubble?….probably the most serious threat out there to an economic crash for our country”.
———————————————————

Good point John. The topic is a taboo though. No politician worth his salt will open that can of worms during an election. Politics is rarely about bringing bad news to the table at election time. The idea is to bring hope and offer good things, not deliver consequences and bad news.

Nobody wants to be the messenger of this story.

#79 Nostradamus Le Mad Vlad on 04.04.11 at 1:04 am


#32 Hoof Hearted — “We are immune from reality.”

Ain’t it wunnerful to live in a tax-free land of milk, honey, Jack Daniels and KFC coming outta yer ears!?!

#41 TheBigLebowski — “A financially free society, free of the burden of debt is a society able to make sound decisions based on prudent logic.”

But TPTB want to ensnare us all, to be perpetual debt slaves so they get richer and we are raked over the coals. Well, thanks but no thanks, this is not my kinda party, so I’ll just mosey on outta here!
*
2:33 clip Now people are getting as mad as hell in Tokyo.

An earlier link stated that the US had turned the Libyan mission over to NATO. On cue, NATO wants more air strikes to eliminate civilians.

0:17 clip Huge solar flare, coming to a planet near us!

Fukushima Satellite pix.

Replacing Gaddafi The Shah of Iran was installed in 1953, after CIA and Mossad operatives had overthrown the duly elected leader. Looks like the same thing will happen here. Like Iraq, the US is showering Libya with DU. This gives a better view.

Along with Yemen and Syria.

Broken Backs Irish taxpayers.

Guns “A southern Wyoming store that sold both guns and groceries has dropped its food sales after 35 years and will focus on selling firearms and outdoor gear.”

4:49 clip Parody. Dem Strait — ObamaCare for Nothing.

8:09 clip HAARP and stuff over Calif. ‘Quake time again?

Pyramid in Nunavut Apparently, there is one.

Apocalypse Now We may as well enjoy our short time here. It will be blazing heat, frigid cold and plenty of wars in between. 54 min. clip, link in.

#80 SquareNinja on 04.04.11 at 1:12 am

Yes, I am well below the ratio… I have 0% in real estate.

#18 Fran – That’s so funny… because Brampton is probably the municipality with the most SFH building permits on the table right now (in the GTA). Oversupply always means lower prices…

#29 BPOE – You’re very confused, buddy. “Not gaining money” is not “losing money.”

If my friend plays the lottery and wins $1 million… did I just lose $1 million? No.

The cold hard fact is that the days of bidding-wars in Vancouver were over yesterday… lots of real estate is selling for under asking price now.

#35 Burnt Norton – THANK-YOU, I was looking to watch this for free!!!

#44 Live Within Your Means – ROFLMAO.

#46 Blobby – I totally agree with you. I’ve rented for the past six years, and have lived in three different cities around the world. It has been awesome.

However, it ain’t a bad thing to buy real estate when the prices crash. If you get it for a price where you can actually have the renters pay the mortgage and all other expenses… why not?!

#51 blase – Thank-you. Honest information from someone who actually knows what they’re talking about.

#54 Jon B – Pal, there’s no such thing as a permanent bubble. Even in the most expensive cities in the world, where mere mortals cannot afford (New York, Tokyo, London, Paris, etc.)… there were indeed bubbles. But, the difference is that the most millionaires per capita live in those cities… and prices maybe fell 15%, but it still takes millions just to buy a tiny apartment.

#81 edmonton mortgage broker on 04.04.11 at 1:12 am

not sure if this was already posted.

http://www.cbsnews.com/video/watch/?id=7361572n

FYI, as far as i can tell, no such problem in Canada, but simply indescribable how ridiculous the mortgage mess is in the US.

#82 The Original Dave on 04.04.11 at 1:16 am

The concept of a permanent housing bubble is interesting. I thought it would have popped years ago, but I didn’t see the the emergency rates coming. I agree this puppy will probably go down in time. BUT, if rates get back up to historic norms and housing prices have yet to tank, well it will be at that moment I convert to a perma-bubble believer.

———————————————–

so you’re going to believe that for the 1st time in history an asset will stabilize after years of explosive gains?

This is the part I don’t get. Do people believe that Canadian real estate will be the first asset to ever do this? Maybe they aren’t doing the research to know what happens to every asset that behaves this way.

#83 a prairie dawg on 04.04.11 at 1:35 am

32.5 here, present and accounted for.

#84 False Facade on 04.04.11 at 1:43 am

Things are starting to cave in BC: http://www.vancouversun.com/business/Squamish+site+latest+receivership+project+with+bargains/4552616/story.html

#85 March of the Pigs on 04.04.11 at 1:48 am

http://www.cbsnews.com/video/watch/?id=7361572n&tag=cbsnewsMainColumnArea.5

great video about the mortgage mess down in the US. Just scratches the surface. Hope that link works if not it’s from 60 Minutes.

#86 freedom_2008 on 04.04.11 at 1:52 am

26%, no debt, and no more rat race.

#87 Adventures in Sea-Tac with Moneta on 04.04.11 at 2:14 am

55 C-Rocks – not a bummer at all for the reasons you have stated. What I would like to see from garth is a recommendation as to how many “years” of wealth you should have built up by a particular age. That is, how many years could you live off of your non-personal residence accumulated wealth.

#88 (low density) Sam on 04.04.11 at 2:23 am

#18 Fran on 04.03.11 at 7:51 pm
prices have not gone up since 2006. The market here has been flat and those who over price it never sell. Lucky for myself my home was bought in 2003 but BIL bought in 2007 and maybe forced to take a loss. I don’t think prices will go down much since they never went up
___________________________
Depends on what happens to mortgage availability after the crash.

Remember in the US almost all the credit markets crashed severely.

The same credit crash that almost took down the Quebec pension fund and a bunch of Canadian companies that were in ABCP (Asset Backed Commercial Paper), if you remember the alphabet soup from that time.

No one could get credit at all, there were no mortgages to be had, even for many rich folk, so houses did not sell. Anywhere.

Sales volume fell and prices fell even in places that had seen no rises.

#89 TaxHaven on 04.04.11 at 2:27 am

Ours is 35, with our average age of 47 and using the purchase price of the houses. Which, as we have seen, is likely to be inflated.

BTW, 35% is in GOLD.

#90 Cato on 04.04.11 at 2:32 am

This cohort of politicos is fated to go down as the most despised in the nations history. Playing the blame game won’t work if each party had a hand in the calamity. They’ll point fingers and tar each other with the same brush, the rats will drown each other.

This starts and ends with the CMHC. Banks need to be exposed to risk to ensure responsible lending, by removing that risk gov’t ensured we’d see this collapse as an end result. The loss shouldered by taxpayer will be substantial and we can look forward to Genworth dumping a steaming pile in our collective laps when the time comes. Compounding the failure is the infrastructure necessary to clear the system simply doesn’t exist. Anyone under water is going to have a strong incentive to skip mortgage payment and see how long they can get away with living rent free. It won’t take much of an uptick to swamp the system and grind foreclosure process to a crawl.

#91 Mister Obvious on 04.04.11 at 2:41 am

Each time I start thinking this undeniable bubble might become a permanent feature of Canadian RE I take a stroll on down to the Olympic Village.

That place is toast. No guys… honestly… it really is toast. You have no idea if you’ve never seen it.

——————–
BTW, until I sold my SFH in April of 2010 my home represented exactly one third of my net worth. I am 60 so that was about right according to the formula in today’s blog. I sleep better now that RE represents 0% of my net worth.

#92 realpaul on 04.04.11 at 2:42 am

My number is in the 50’s , thats because it matches the percentage change in price that the American market has fallen even with government meddling.

http://money.cnn.com/galleries/2011/news/1103/gallery.best_cities_for_buyers.fortune/2.html

The fact is that once the fall begins there will be no price that a buyer will be willing to pay. As is the case in these large American markets the bottom is no where in site and they can’t give real estate away.

The debt our government is taking on to support the ZIRP is creating a deficit the size of which has never been seen and no one can ever dream about paying back. The debt is becoming so huge after surpassing the trillion mark that Canada’s implosion will make Greece look like a day at the beach.

Just for once …sit back and ask yourself…if the population is already carrying 160% debt and the government is getting warnings from the IMF….where is the money to finance the ‘giveaways’ going to come from? Will the answer be 100% taxation …..for an ’emergency only’ period of time? maybe they have to claw back all public and private pension money….for an ’emergency relief’ of the coffers. Could it come to pass when all publicly held wealth will be confiscated …just until the emergency passes?

The bottom line is that all this debt is real…..it costs to support and we are already at a point where the ultra low rates are costing the governments sphinter to split. So where is the ‘fix’ going to come from? Anyone?

#93 Morry on 04.04.11 at 2:46 am

600K in bank, house worth 1.1 mill. 90-65 = 25%: Am i a loser?

With 600K in the bank, you’re on your way. — Garth

#94 WesternCanadian on 04.04.11 at 2:47 am

Wow!
I don’t know if you don’t read closely enough, or if its a reading comprehension issue.

“You must be new here. I love to ridicule Calgary. And Winnipeg is irrelevant. — Garth”

I NEVER wrote that you don’t mention Calgary in your articles, I’m well aware that you do all the time.

What I wrote was that I have yet to see you mention what the median income to median home price ratio in Calgary is and what the historical average is…

Where did you get from that comment, that I suggested you never discuss Calgary??

Your response was rude, incorrect and completely idiotic as it did not even remotely address my direct comment.

No wonder you we’re a politician.

That’s ‘were.’ And grow up. — Garth

#95 Midas on 04.04.11 at 3:02 am

Well said.

#96 Jody on 04.04.11 at 4:34 am

#55 CalgaryRocks “a little side income stream.”

Me to, I just gotta get the proper timer for the lights in the basement then things should be ready to bud. Hahahaha!

#97 Live Under Your Means formerly Live Within Your Means on 04.04.11 at 6:07 am

#44 Live Within Your Means on 04.03.11 at 9:40 pm
It’s good to see that Garth has finally realized that the government won’t allow housing market to suffer. He is right. Rates and incentives will remain attractive.

Posters who decided to avoid purchasing real estate have suffered instead. It’s a shame, but everybody gets what they want.

Learn to read. I said the opposite. — Garth

……………….

I guess I’ll have to change my name as I never wrote the above.

#98 realist on 04.04.11 at 7:07 am

The sad fact is that most Canadians are poor savers but good bill-payers. Most of us fall in to the category of individuals who will save only by force.

Home ownership is a form of forced-savings and come hell or high water we Canadians make our mortgage payments. During the last big real estate crash in Canada, residential mortgage defaults hit an all-time high of 1.6%. The current default rate is .45%.

A decade or so after buying their first home, starting a family and paying all the bills, many home owners turn around and find themselves with no money in the bank, no RRSP’s or other savings to speak of. All they have is a little equity in their homes.

So what do many of them do? They parlay that equity and buy a bigger house, that’s what. Oh, the pride of home-ownership!

This methodology continues until they reach their mid-fifties and realize that most, if not all of their net worth is represented by the roof over their head. And so they shrug and say to themselves, “it could be worse, at least we have the house.”

The moral of the story is that left to our own devises, without home ownership and the forced-savings it entails, most of us would reach our mid-fifties and have nothing at all.

#99 Danforth on 04.04.11 at 7:37 am

85% of net worth is in the house, 15% in RRSP/TFSA.
Yet the formula says I should have 51% in Real Estate.
Not ideal. But could be much worse!

#100 Utopia on 04.04.11 at 7:53 am

Speaking of numbers….

The owners of the nuclear plant in Japan that has been causing so much trouble are now saying they will release 10,000 tonnes of radiated water directly into the sea. Apparently they need the room for even more toxic radiated water so some just has to go out.

Why are they talking tonnes for a liquid measure though? Do you think it is to minimize the size of the real problem?

By my quick reckoning, if one kilo is equal to one liter of liquid and there are 1000 kilos per tonne then the officials are actually telling us that they will release 10 million liters of nuclear waste water into the sea.

Maybe someone with better math skills can tell me that is right or wrong. It just sounds like a lot of toxic material. I wonder how many Olympic size swimming pools is equal to 10 million liters of water anyway.

#101 David B on 04.04.11 at 7:56 am

Do not have to worry about Iggy ….. he is gonzo now down 14% and this week the cowboys are coming out riding into town with their fancy 30-30 Winchesters all shown up …. Real Estate will boom again when Canadians start building all those new additions on their homes to show off their buy one rife and get another one free with no licence required to hang over your fireplace …. King Steve Rules … hey Garth F is giving everyone income splitting …. guess it appears you are still on his team …. albeit in spirit only. LOL election 2011 Canadian rodeo style.

And this is only week two …… with only four questions allowed by the King of Canada … soon our media will be gonzo two …. Fox News North can not be far behind.

The West is in …. sell now and move west y’all and live the life of the rich and very rich ….

#102 Moneta on 04.04.11 at 7:59 am

When we sold our house in Montreal in 2008, the buyer decided to convert to gas. The quote = 2500$. In Ottawa, we had to replace the gas furnace, the quote = 4500$.

The tax credit created inflation and people are dunce enough to think they’re getting a deal but in reality, the tax credit is going directly into the home reno service providers’ pockets. Look at their trucks, it’s pretty obvious who’s raking in the money.

In Ottawa, there’s a lack of quality trades workers. I’m thinking of going into a trade. I think you can get richer than by getting a PhD.

All these tax credit on homes are a bad joke on educated people. Parents keep on pushing their kids into higher education but the top 10% keep on creating policies that keep educated people enslaved.

#103 Moneta on 04.04.11 at 8:08 am

One guy argued with me and said we will have massive inflation and high wages before housing prices drop
———-
If there is high inflation, the economy will go through the wringer to adjust to new inflation expectations.

If the economy goes throught the wringer, jobs will be lost.

If jobs are lost, households won’t be able to make they monthly mortgage payments and we’ll get repos or sales and the makret will weaken.

Even with inflation, there will be a period of pain before housing reflect inflation. Marginal players will get wrung out.

Just hope you’re not one of those caught in the whirlwind.

#104 charles on 04.04.11 at 8:12 am

Kevin Oreally in Chicago today to open the Bernie Madoff Stock Exchange and disscuss with executives how to simplify and legitamize the ongoing theft of pension funds. Remember his mantra, “Canadian seniors should be living in ditches on the side of the road”.
CBC blondes can’t get enough of him.

#105 Moneta on 04.04.11 at 8:15 am

FYI, as far as i can tell, no such problem in Canada, but simply indescribable how ridiculous the mortgage mess is in the US.
———–
Everything looked clean while prices were going up.

All we need is for prices to go down 5-10% and things won’t sparkle as much.

#106 Moneta on 04.04.11 at 8:24 am

Home ownership is a form of forced-savings and come hell or high water we Canadians make our mortgage payments. During the last big real estate crash in Canada, residential mortgage defaults hit an all-time high of 1.6%. The current default rate is .45%.
————
It used to be forced savings until households jumped into HELOCs and started using their houses ast ATMs.

Most equity today is not forced savings, it’s paper capital gains which could vanish quickly.

In the US, delinquency rates peaked at around 3.5% in the last crach. In this crash, it peaked at over 11%.

As for charge-offs, the peak in the last crash was .3% and peaked at 3.9% in this crash.

As you can see, US banker could also count on American households’ loyalty… until they couldn’t.

#107 charles on 04.04.11 at 8:30 am

On topic,Talking Heads, “Burning Down the House”
http://www.youtube.com/watch?v=-3L3rr3dknU&feature=related

#108 S.B. on 04.04.11 at 8:39 am

I saw this on a another forum, appears the realtor(r) kool-aid is wearing off!

Posted: Tue Apr 13, 2010
“Well the short term, small town home ownership experiment is almost over. Were listing our house and moving back to Toronto. I thought owning a home would be a sure way to earn back some rent money when we sold, turns out I didn’t take into account a few things such as a stagnant market, length of ownership, additional costs including: second car, upkeep on car and house, Reno’s, CMHC fee’s, realtor fee’s/closing costs and so on.

Moral of the story, it would have taken 4 years in a stagnant market to the break even point of “rent VS ownership”. You need to factor in so much more then just the mortgage costs. All in all, a financial loss but gains in both life experience and a better understanding of personal finances.”

#109 Herb on 04.04.11 at 8:51 am

#97 Live Within/Under your Means,

“… I never wrote the above.” That was quite clear from the message, style and language.

The question is what kind of animal your impersonator is: blog roach, or troll.

#110 luc on 04.04.11 at 8:52 am

Will home equity or house investment save Baby Boomers? Looming baby boomer crisis in health care, pension plan payments, OAS and GIS not addressed by politicians. SCARY stuff… http://www.financialpost.com/news/Canada+demographic+time+bomb/4544389/story.html

#111 Steven Rowlandson on 04.04.11 at 9:27 am

Garth Wrote:

“Almost singlehandedly, through cheap rates, lax regulation, government housing subsidies, presidential boosterism and financial engineering, George W. Bush managed to get the home ownership rate to 70%. After that collapsed and cruelly destroyed the US middle class, Stephen Harper picked up the torch. As a result, we’ve had more pro-real estate initiatives in the last five years than in the quarter-century prior.”

Garth the question is why? And I would suggest that the answer is because in the eyes of those who finance, sell and buy/own real estate propping up the over inflated prices is essential to their financial strategy. Prices and sales must go up forever and must not in any serious way come down. Otherwise the fecal matter is going to hit the fan financially speaking that is.

Steven

#112 Brian1 on 04.04.11 at 9:31 am

I am voting for Mr. Remax. I think it sounds as though Harper will draw a line in the sand. Obama did. I put my money on America today. I bought three stocks to prove it. Cpst, Inhx and Cigx.

#113 BrianT on 04.04.11 at 9:42 am

Mammals (dolphins) which live in the Gulf of Mexico are being killed in vast numbers by the toxic nature of the water-yet the sheeple are encouraged to enjoy splashing in the surf and if you went by MSM reporting everything is a-OK http://www.huffingtonpost.com/rocky-kistner/sea-turtle-deaths-mount-i_b_844123.html

#114 MikeT on 04.04.11 at 9:44 am

is this a dick measuring contest now?

dawgs readily report their numbers to the lead dawg. wigging tails and tongues out. squirrel cookies anyone?

We won’t laugh. Honest. — Garth

#115 Buyer on 04.04.11 at 9:49 am

#12 Getting Tired of Waiting

I was in the exact same situation. I sold, waited a few years renting and bought again this spring. In Calgary was able to get a nice home at 4x our family income.. I’m prepared to lose a few percent but needed the stability with 2 young kids.. renting we were forced to move 2 times with owners deciding to sell. Best of luck!

#116 Pr on 04.04.11 at 10:05 am

The entire Province of Quebec sales are down -13% ! Ouch!

#117 The American on 04.04.11 at 10:14 am

AT #29: BPOE, if the Canadian Government “won’t” allow rates to rise and it keeps rates artificially compressed to emergency rates, it will have a tremendously negative impact on the TRUE value of the Canadian dollar, thus making Canada a much, MUCH less attractive place for investment activity. It won’t speak much for the “value” of the CAD, and the value would quickly deplete itself on the markets. THIS is what the governments do not want to happn, if anything at all. People may be able to afford their homes, but then the value of the currency would be plummeting. Eventually, though, rates WILL have to go up and then people will not be able to afford their homes, which would only add insult to injury when coupled with a lower-valued CAD. Canadian government has itself in a real pickle right now, and the secret is they honestly have no idea how to get of of it, AND THEY KNOW IT.

#118 realist on 04.04.11 at 10:21 am

@Moneta wrote: “As you can see, US banker could also count on American households’ loyalty… until they couldn’t.”

I’m afraid that those who continually compare the U.S. housing disaster to what will happen in Canada are sadly misinformed.

Canada’s miniscule percentage of “sub-prime” loans is nothing in comparison to the level of lending fraud and deception that took place down south. The Yanks invented NINJA loans, mortgage-backed securities and credit default swaps.

And talk about your government intervention. In March of 2009 Obama introduced his $75 billion mortgage modification program which has proven to be another fraud-filled folly which the New York Times declared did more harm than good.

The U.S. government’s attempts to fix the housing market in other ways–mortgage modifications, subsidized low mortgage rates, tax credits–have just prolonged the agony by kicking the can down the road.

They have persuaded many people who would be better off cutting their losses and starting again to stay in houses they can’t afford. They have allowed banks to nurse along bad loans and avoid writedowns, thus delaying the day when the banks themselves will return to health.

They have also unfairly punished those who did not buy into an overvalued housing market–who might now be able to buy in and help the clearing process if the government weren’t doing everything it could to protect those who did.

#119 T.O. Bubble Boy on 04.04.11 at 10:25 am

My only RE exposure at this point is through a few REIT ETFs.

So, 95% & 5% I guess?

#120 TaxHaven on 04.04.11 at 10:28 am

That rag the Vancouver Sun really should get an award for Most Shameless Bald-faced Brazen Real Estate Pumper.

This reads like an advertisement, well…because…

http://www.vancouversun.com/business/Squamish+site+latest+receivership+project+with+bargains/4552616/story.html

#121 Adventures in Sea-Tac with Moneta on 04.04.11 at 10:39 am

114 Mike T – dont worry. If the market falls we will all suffer from “shrinkage”.

60 Ayn Rand – IIRC that ratio was for the average person, not the ideal, and did include their principal
residence.

89 Taxhaven – that’s cheating! If retired people in Van used that approach, their house is probably only 10-20% of net worth, but at todays prices it could easily be 60-70%. Yes it is beyond their control, but Garth’s formula is telling them it is time to harvest gains and sell.

If your number is 35 before the house price is inflated it
looks like you are overweight RE and gold.

#122 smw on 04.04.11 at 10:39 am

http://tinyurl.com/3h2z3up

Yeah right, the powers that be won’t ever allow a raise in rates, cause they care…

#123 Timing is Everything on 04.04.11 at 10:49 am

Garth said – “The last thing we need from government is another program – subsidized by tax revenues – directing millions more to flow into houses.”

Hey Garth…You forgot tax deductible interest on mortgages or portion there of…(small mushroom cloud). Coming to a tax return near you. You know…anything to get elected. All means necessary. Just thought I’d mention it.

Will never happen. — Garth

#124 JohnnyBGood on 04.04.11 at 10:49 am

IMHO, anyone who wants to buy a home should not wait for prices to correct. Owning a home is a lifestyle choice, not an investment. You should not be trying to calculate capital gains or losses, or ROIs with your principle residence. It is meaningless to do so. And waiting to buy just means you are putting your life on hold.

What I do recommend is to honestly calculate how much home you can afford. Do not listen to mortgage brokers who tell you all that matters is carrying costs. Do a thorough analysis of how much of your life’s income will have to be devoted to home ownership and what other investments (eg retirement, education) may suffer if you spend more than you can afford.

Also, do a worst case scenario (eg high interest rates, loss of a job) and see if things go bad, what are the chances you may lose your home. If you can still afford the carrying costs under financially stressful conditions, and you plan to live in your home indefinitely, the price should not matter. It only matters if you have to sell. But again, do the math to make sure how much “home” you can actually afford in the long run. And don’t forget the operating and maintenance costs.

You should also consider the cost of renting vs owning and which option may best suit your lifestyle. Some commenters point out that renting is now cheaper. That may be, I don’t know. But in the end, the operating and maintenance costs have to be covered by someone. If these costs are not being covered, you will see a flood of selling if/when land lords believe the capital gains will no longer make up the difference. Again, IMHO.

#125 MikeT on 04.04.11 at 10:55 am

ok, my RE is 50% of my assets. No debt. 34 years old.
May I get the cookie now?

#126 Apsalar on 04.04.11 at 11:07 am

41 here. Just about right on the money :)

#127 LB on 04.04.11 at 11:11 am

It’s started.

TD has raised it’s mortgage rates starting tomorrow.

#128 Timing is Everything on 04.04.11 at 11:11 am

#122 smw said – http://tinyurl.com/3h2z3up

Well, everybody locked in at 3.4%-ish for five years before X-mas right? They did not get greedy and think that Prime interest rates would stay low forever? Hmmm, Some (many?) will watch interest rates rise and ‘float’ their net worth away.

Don’t get greedy. Interest rates will ‘normalize’….and sooner rather than later.

Sit back have sno-cone and enjoy the show.

#129 pjwlk on 04.04.11 at 11:13 am

#12 Getting Tired of Waiting: “…I have been putting off my wife for 2 years now waiting for affordability that keeps on evading me…”
————–
This summer will be 4 years for me. After the October 2008 slide I was thumping my chest as to how smart I was for selling before the down turn. I thought I had it made. I even had a couple of people congratulate me. That lasted all of six months and then the free money started. I’m still waiting for the “second dip” Now I know what they mean by the markets can stay irrational a lot longer than most people can remain solvent.

Waiting for a second drop has become one of the most nagging and difficult things I’ve done in my life. I must give credit to my wife who has been very understanding and supportive over the years, however I will say that there has still been a number of time that the “why are we doing this again” discussion has come up.

I’ve found that there is never any shortage of self-doubt (even for a hard-nosed prick like me) and never any shortage of people who like to remind you that you may have done the wrong thing. Being a contrarian after all goes against our very nature as a herding species.

I’ve been a reader of this blog since day one and have watched a number of people since then succumb to their own self-doubt. Sadly, we rarely hear back from them on how their decision has worked out for them.

The only way I’ve found to survive thus far is by reading, reading and more reading on the historical accounts of boom-bust cycles and applying that knowledge to what you see around you. If you do that you will see that, the final outcome is always the same and that only the length of time and circumstances leading up to it differ. On occasion I also find very useful tid bits of “real world” information from posters and support from others here on this blog. Blind faith alone is not enough…

#130 TaxHaven on 04.04.11 at 11:13 am

@#121 Adventures in Sea-Tac…

Why was I cheating? I don’t get it. Both our houses are paid-off foreclosures and I calculated them as being “worth” what we paid, in 2007 and 2011, $375K total. Thus they can’t be ‘inflated’ anymore! Only $300K is in gold, silver (& few collectables). $170K in stock, most gold. Remainder is cash. So I was a little wrong and according to Garth’s formula the number should be 29%, at age 47.

But I would agree that cash-poor, house-rich Vancouver retirees shouldn’t read anything into this formula except that it is TIME TO SELL & MOVE. For what they can still get for a Vancouver SFH they can buy a palace+land+income elsewhere and real estate agents tell me this what house-wealthy residents of Vancouver & Victoria are increasingly doing…

#131 debtified on 04.04.11 at 11:17 am

Okay, count me in for statistical/educational purposes…

90-36=54

Total assets approaching $1M, of which 86% in a rapidly appreciating beachfront island property in Asia. Now trying to sell subdivided portions to reduce exposure of total assets to RE and reclaim some of the initial capital.

Renting. No debt. I feel poor.

Libs & Cons: Garth, you know full well that what the politicians are doing with people and houses is good politics.

Great point! #98 realist on 04.04.11 at 7:07 am

#132 JOJO on 04.04.11 at 11:23 am

My proposal for the next goverment should be :

Mortgage Interest payments deductible from Income like in USA.
Five percent down, fourty year mortgage.
Booster of the RRSP raid for down payments.
Higher Home Reno Tax Credits.
Lower interest rates about 0.5% Prime.
And the first-time buyer’s closing cost gift.

Mark Carney is a Moron
“Commodity markets are in the midst of a supercycle?. …This surge in demand is the result of rapid growth in the world, particularly in Asia. … Since 1990, the number of people living in cities in China and India has risen by nearly 500 million,
Next 25 years we should have 1.5 billion more population on earth and more than 2 billion in the cities. Well?

#133 Alex on 04.04.11 at 11:26 am

TD boosting mortgage rates tomorrow:

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/td-boosting-mortgage-rates/article1969683/

#134 SK on 04.04.11 at 11:26 am

BC receivership sale, always nice to see bankruptcies marketed as a deal, rather than a signal of things to come.

http://www.vancouversun.com/business/Squamish+site+latest+receivership+project+with+bargains/4552616/story.html

#135 Whattodo on 04.04.11 at 11:27 am

My house is paid 70% of purchase price, I dont care about house market crash, feel bad for others if happen but I have a work were I have to talk with a lot of people and sometimes I bring this topic. MOST OF THE PEOPLE tell me: “really???? or buble???? What are you talking about???…..I think 90% of people dont believe houses can lose price or dont care!

#136 Scare Crow on 04.04.11 at 11:32 am

2 Points I would like to express today ..

A poster said “luckily I rent – I can move at a drop of a hat” – this is a funny comment, I use to rent and if I broke the lease agreement…I owed a charge (often 3 months). Well I own, sure enough there’s obviously more too it then a renter – but the Magic here is – I bought in 2002 – I have alot of wiggle room if it came down to it – lower my price by $25K off a comparable home (big deal – prices have shot up $145K since I purchased).. I didn’t lose anything – and guess what – I will walk with some coin (approx $120K in appreciation based on my above “quick sale” + 90K in hard cold equity that I have worked at paying the past eight years..yep – a quick sell, in my pocket $210K… and you know what – this is my first home – and renting really sucks – that’s money in MY pocket…”take that to the bank” – actually – I will – but renting gave you all that freedom – (I just pictured a hippie and a duffle bag). LOL

2nd Point – Harpy had to follow the likes to prevent total economic destruction. My 2 BIL have great paying jobs in the Construction industry – my neighbour is the head foreman for a construction firm – 3 people that I personally know – if the housing bubble blows (which in due time it will) there will be a lot of pain..

Our society is now service based – our last bastian of manufacturing is auto and housing – with over 100K in Ontario alone who’s income is based on construction … Ontario will turn into one big WasteLand…the government has little option but to keep this going – that’s why Harpy is probably happy to have an election now – cause when it all does come crashing down – at least he will have some time to claim to have repaired the damage – TimberrrRRRRrrrr

#137 wes_coast on 04.04.11 at 11:35 am

Just because you should be targeting a certain asset allocation doesn’t mean you ignore timing. Your portfolio should have x amount of tech stocks – that doesn’t mean you buy it at a 50 times p/e ratio. Same with real estate. You don’t buy it at 13 times median earnings in your region. Side note: BPOE thanks for the comic relief. I feel sorry for your spouse … And your parents.

#138 The American on 04.04.11 at 11:51 am

At #118: Realist, Canada’s sub-prime lending is exactly the same as what happened in the U.S. Only, your government has convinced you that it is different. Canada has indeed been pumping little-to-0% down and NINJA loans with rates that are set even LOWER than what was ever seen in the U.S. Can I ask why you think that isn’t happening in Canada?

#139 realist on 04.04.11 at 11:53 am

There is one important reason why the government is pro-housing – GDP. I recently learned that StatsCan calculates the value of the nation’s housing stock as part of its overall evaluation of our country’s gross domestic product.

Subsidized or not, every government loves to tout GDP growth as proof of their sound stewardship of the economy and yes, they will do almost anything to keep that number afloat.

#140 An Cat Dubh on 04.04.11 at 12:03 pm

Seems the leaders of the political parties are very quiet about Canadian’s personal debt level. They want to spend taxpayer’s money on things that they shouldn’t like daycare and bringing in phoney carbon taxes. Also they are silent on Libya. Trends forecaster Gerald Celente ripped a strip off the western leaders involved in the Libyan war. Clip is only 4 minutes. Never seen him this angry before.
http://www.youtube.com/watch?v=IXi8MFf0D-k

#141 edmonton mortgage broker on 04.04.11 at 12:10 pm

@ #105 Moneta on 04.04.11 at 8:15 am

let me elaborate. being in the mortgage business, dealing with mostly tier one lenders, some b lenders and private lenders, i can honestly say the legal paperwork is rock solid. if you do not pay your mortgage in Canada, your bank will have no problem finding their paperwork and foreclosing or going power or sale on you. no robo signers etc here.

that is a separate issue in itself from the issue of borrows over-leveraging to buy a home. 5-10% drop? oh yes, i believe it’s coming. already has in Alberta. but fraudulent signings and lost mortgage docs? nope, not in Canada. If anyone here in the lending business knows otherwise, i’m all ears.

#142 Cellar Dwellar on 04.04.11 at 12:11 pm

@ BPOE
Interest Rates GOING UP TODAY. YOU HEARD IT HERE FIRST !
Wasnt your post last Thursday mocking Garth about “interest rates haven’t gone up yet because they wouldnt?”
IT”S THE FIRST RATE HIKE OF MANY.
YOU HEARD IT HERE FIRST (from Garth, MONTHS AGO).

How’s that sub sea level house in “Ditchmond” doing? Never mind the Tsunami that’s about 75 years overdue.
Google “1948 Fraser River Flood” . The pictures should remind you of another city that had it’s dikes and levee’s fail. New Orleans ring a bell?
idiot

#143 Moneta on 04.04.11 at 12:17 pm

@Moneta wrote: “As you can see, US banker could also count on American households’ loyalty… until they couldn’t.”

I’m afraid that those who continually compare the U.S. housing disaster to what will happen in Canada are sadly misinformed.

Canada’s miniscule percentage of “sub-prime” loans is nothing in comparison to the level of lending fraud and deception that took place down south.
————
The fact is that we have surpassed 70% home ownership which is the level the US reached.

The fact is that our debt-to-income level is now above the US level.

The fact is that at the peak, the US built 1.9M houses on an annual basis. CMHC reported 240K in Canada which comes to 2.4M on a population equivalent, which means we built more homes than in the US.

At 70%, I think it is a good bet to make that the makeup of a Cdn households is pretty comparable to that of Americans unless of course you are trying to tell me that Canadians are better quality than Americans.

IMO, the big difference between the US and Canada is the CDO business. In Canada, CMHC has been playing the MBS game but has avoided the CDO business.

The CDO is the extra layer that intensified and accelerated the crash in the US. The hedge funds when shorting the market NEEDED greater fools to keep the game going and the CDO was one of the tools to bring it on. The CDO market contributed ot the hockey stick effect. Derivatives always seem to amplify the move.

In Canada, we don’t have the CDO to accelerate the hockey stick effect so it’s going up gradually now surpassing US level. LOL.

But all the household metrics are now IDENTICAL.

At the end of the day, it’s hard to believe that Canadians can stay richer than Americans for very long. We have always lived in their shadow and there is no reason to believe this won’t continue. They still have the reserve currecny which permits them to live beyond their means… until we refuse to play their game. There are no indications yet to show us otherwise.

How can we be competitive when our cost of living is now so much higher than that of An American’s?

Arbitrage is coming to a town near you.

#144 Moneta on 04.04.11 at 12:26 pm

141 edmonton mortgage broker on 04.04.11 at 12:10 pm
———-
If you think Canada’s housing can’t go down 30% because we did not get Robosigning, you’re in for a surprise!

The robosigning issue came to light AFTER real estate prices tanked, households stopped paying their mortgages and forteclusre ballooned. The bad paper work probably boosted prices and will mke it harder for the market to cler but it did not tank.

No matter what happens, prices will go to what people can afford. Max 3X income or 70K * 3 = 210K.

What’s worse in Canada is that we did not even need fraud and CDOs to get to debt levels and house prices beyond the US peak!

#145 pjwlk on 04.04.11 at 12:28 pm

I saw a Toronto Realtor friend of mine last weekend. She seemed shocked that she hadn’t received any emails on her crackberry by the end of the evening. She told me that houses in the $400k – $600k were still moving but that nothing above that was.

She also said that they were thinking of selling and downsizing to an area just outside of the city! It wasn’t long ago she was telling me I was a fool…

#146 Moneta on 04.04.11 at 12:29 pm

And even if you are right and Cdn households don’t renege on their mortgage obligations, that means they will contribute to very low consumrer spending in the future.

That would be devastating for the economy.

#147 Ret on 04.04.11 at 12:41 pm

TD incresing mortgage rates.

http://www.ctv.ca/generic/generated/static/business/article1969683.html

#148 realist on 04.04.11 at 12:44 pm

@ The American wrote: “Canada has indeed been pumping little-to-0% down and NINJA loans with rates that are set even LOWER than what was ever seen in the U.S. Can I ask why you think that isn’t happening in Canada?”
——————————————————————–
According to the Financial Post, published April 11, 2010:

“Prior to 2007, there were at least a dozen subprime lenders in Canada and it was the fastest-growing sector of the entire mortgage market, says Benjamin Tal, senior economist at CIBC World Markets, who pegged it at about 5% of the total market.

But most of those lenders, including players such as Xceed Mortgage Corp., GMAC Residential Lending and Wells Fargo, have either changed their business or closed up shop.”

According to Ivan Wahl, chief executive of Xceed, one of the biggest players in Canada until it recently converted to a bank, the subprime market in Canada grew to about $11-billion in 2006, the year before things started to implode.

Given that the total mortgages outstanding in Canada amount to around $1-trillion today, the subprime portion is indeed miniscule.

Mr. Tal, calls it “a big problem for specific borrowers but not one from a macro perspective.”

#149 T.O. Bubble Boy on 04.04.11 at 12:50 pm

Not to give BPOE and others some ammunition, but the Vancouver insanity is picking up steam!

March numbers from Yatter Matters:

http://www.yattermatters.com/2011/04/vancouvers-glowing-average-price/

March 2011 had about 30% more sales than March 2010, and the average prices are also well above 2010.

The average detached SFH price did fall from Feb 2011 (down to “only” $1.15M), so that will be an interesting trend to watch.

#150 new_era on 04.04.11 at 1:05 pm

I would hate to see a change in government.

It’ll probably be like when Obama took over. First thing the new government will say is “DARN look at the Mess the previous government left”

I think at that time, the truth will be reveal. Because there in no way a new regiem would take on this mess and be the government to take the blame for this.

#151 new_era on 04.04.11 at 1:08 pm

Just finished my Corporate taxes. After all my writeoff I still paid a fair amount.

Luck I was able to write off 60% of my rent. That only mean more cash in my pocket.

Now what gets me is when the board says were not like the US, we cannot write off our mortgages.
Are they kidding, that only mean more cash in the consumers pocket, meaning less time to pay off for their house. If you ask me, that is one less weapon we have to make a dent in our mortgages.

#152 poco on 04.04.11 at 1:13 pm

#139 Realist–There is one reason the government is pro housing—GDP. I recently learned etc etc

at least you’re learning

#153 Devore on 04.04.11 at 1:22 pm

#128 Timing is Everything

Well, everybody locked in at 3.4%-ish for five years before X-mas right? They did not get greedy and think that Prime interest rates would stay low forever? Hmmm, Some (many?) will watch interest rates rise and ‘float’ their net worth away.

I can easily see banks raising 5 year rates in advance of BoC rate increases, just to juice those locking in after the fact, or to scare them away and keep them on the variable treadmill.

If you believe rates will go up, don’t wait until they do.

#154 bill on 04.04.11 at 1:37 pm

hey Garth
do you think the motorcycle market is going to emulate the housing market?
seeing some deals now and I thought it could only get better.
a lot of boomer bikes out there that may ‘retire’ [ and I dont mean new rubber] .

oh and Garth ya got any ‘screamin eagle’ parts on your bike?

#155 Devore on 04.04.11 at 1:38 pm

#139 realist

I recently learned that StatsCan calculates the value of the nation’s housing stock as part of its overall evaluation of our country’s gross domestic product.

http://www.bea.gov/faq/index.cfm?faq_id=488&start=0&cat_id=0

Hmm, this US explanation says GDP includes imputations including housing, but references this to be relative to rents. Price of a house increasing would not contribute to GDP, because it is not productive, but rents are, because they are income, payment for a service (housing).

Price increases would count indirectly, if an owner sells their house and downsizes, spending the extra money into the economy. Like social spending, which does not get added to GDP, it only counts when the end recipients spend the money.

GDP is supposed to measure how productive an economy is. Paper gains are not, because they are paper, not real. If they were real, they would have been spent or invested, and thus counted in GDP.

#156 worked for you I guess on 04.04.11 at 2:00 pm

In response to #136 Scare Crow (excerpt quoted below).

Don’t you see? Your enviable position as a homeowner who can engineer a quick sale and put $$ in your pocket is a result of your luck or foresight in terms of purchasing in 2002. Obviously you’re up significantly….we all get that.

But if you’re currently a renter, what is going to give you the most flexibility? Dumping all your money into a 5/35? Or continuing to rent? (that is a rhetorical question)

Just because you lucked out and built a bunch of equity doesn’t mean that you could do it today…..8 years have gone by and the entire housing market has evolved. And not in a good way unless you are, well, like you, someone who got in quite a while ago.

Get it?

Oh yeah and acting smug is a bit of a turnoff btw. Just sayin’.

*************************************

Magic here is – I bought in 2002 – I have alot of wiggle room if it came down to it – lower my price by $25K off a comparable home (big deal – prices have shot up $145K since I purchased).. I didn’t lose anything – and guess what – I will walk with some coin (approx $120K in appreciation based on my above “quick sale” + 90K in hard cold equity that I have worked at paying the past eight years..yep – a quick sell, in my pocket $210K… and you know what – this is my first home – and renting really sucks – that’s money in MY pocket…

#157 Nostradamus Le Mad Vlad on 04.04.11 at 2:08 pm

#97 Live Under Your Means formerly Live Within Your Means and #109 Herb — “I guess I’ll have to change my name as I never wrote the above.”

Saw that right off the bat. That isn’t your style of writing. Imitation is the sincerest form of flattery!

Too early for new conspiracy theories.

#158 realist on 04.04.11 at 2:15 pm

@poco wrote: #139 Realist–There is one reason the government is pro housing—GDP. I recently learned etc etc

at least you’re learning
——————————————————————–Oh learned one, please enlighten us with your vast knowledge.

Now, perhaps if you have something to add to the discussion….

#159 jess on 04.04.11 at 2:16 pm

the young and hip

“bringing culture closer”

€250,000 a studio flat in one of the busiest and best-known parts of the city is now on the market for just €80,000 – collapse of Ireland’s property market.

Temple Bar has preserved its medieval street pattern, with many narrow cobbled streets. It is promoted as “Dublin’s cultural quarter” and has a lively nightlife that is popular with tourists. Temple Bar is in the postcode Dublin 2 (D2), and has an estimated population of 3,000.(wiki)

=

name me one country that isn’t in a pickle?
although some of us are simmering frogs whilst others leaped into the pot and disintegrated.
=================

no robots here only “jumpers”
it seems nuclear gets a boost through DE nuking $$$$$$

De nun ciation?
god’s helpers are not happy with those other god – like helpers
69m/5 (take home pay for five)
http://www.guardian.co.uk/business/2011/apr/04/nuns-challenge-goldman-sachs-over-pay

Maybe the shiny metal has value afterall rather than plating cars for ads or filling rotting teeth
IMF urged to use surplus gold for debt reliefCampaigners say IMF’s $2.6bn windfall is perfect opportunity to cancel poor countries’ debts

#160 betamax on 04.04.11 at 2:27 pm

#124 JohnnyBGood: “IMHO, anyone who wants to buy a home should not wait for prices to correct.”

Slow day at the realty office?

“waiting to buy just means you are putting your life on hold”

That’s great, because I was looking for some time off.

#161 poco on 04.04.11 at 2:33 pm

#136 Scare Crow
–great to see you’ve gained a bit of equity in your 2002 purchase— but remember there is no gain until it’s safely in your pocket–throw the numbers around all you want but they don’t mean a thing until you have that cash in hand
If you sell? what to do?—buy again –bigger and better–start the process all over again and prey every night that the market in your area doesn’t turn down
Look at the cost so far–realtor fees to get out –lawyer/notary fees–taxes
then to get back in –land transfer tax–lawyer/notary fees–taxes
hell –where did all my profit go?
I think if you do sell you’ll become just like many of us here who have sold and taken a profit and now are content to wait (at least i am) and rent.

I kinda guess you’ll be renting again–do the math–it’s been done on this blog a hundred times

join the buyers strike –it’s been going on in my area for quite some time but i guess we just didn’t know it–properties sitting since last spring –lots of price drops

#162 edmonton mortgage broker on 04.04.11 at 2:37 pm

#144 Moneta on 04.04.11 at 12:26 pm

i’m in agreement that there’s a possibility of significant drops in Canadian real estate. whether it’s 5% or 50%, i don’t know and time will tell. i DO know from personal experience that condos have ALREADY dropped 25% from the peak in Edmonton and rents are dropping as well. so i’m not sure what the point is debating with someone who more or less agrees with you.

The robo signing and other lazy practices is making it harder for the US to dig out of the mess there AFTER the fact. I’m not sure that it contributed to the bubble though. As you pointed out quite correctly, even in an environment where the paperwork is legit with all the I’s dotted and the T’s crossed, we can still experience a real estate bubble.

Look at other real estate bubbles that have burst, ie Ireland, UK etc. I don’t think it had anything to do with sloppy paperwork.

Perhaps the only difference with the Cdn experience will be, when the time comes for the bank to kick you out of house and home, there won’t be a thing you can do about it, cause the papers are in order.

#163 BrianT on 04.04.11 at 2:48 pm

The MSM is having trouble keeping the lid on-listen to these two CNN airheads squirm near the end of the interview http://www.youtube.com/watch?v=loauFJtY5fc

#164 Hoof - Hearted on 04.04.11 at 3:00 pm

Very interesting article: The demographic analysis is fascinating

Smart Meters, Boondoggle in the Making

Why this doomed to fail, billion-dollar mega-project should make BC taxpayers tremble.

http://thetyee.ca/Opinion/2011/04/04/SmartBoondoggle/

QUOTE

BC households are shrinking

Over the last 20 years (from 1991 to 2010), the number of B.C. residents grew (see Table 1, here) from nearly 3.4 million to over 4.5 million. That’s an increase of 34.1 per cent.

The early part of the period saw remarkable growth: in 1994 and 1995, B.C. gained a phenomenal 108,000 and 101,000 people, respectively.

Since the mid-1990s, however, population growth has been slowing.

In 2011, according to BC Stats, we’ll add about 66,000 people. And in the years ahead, that number is expected to decline annually, so by 2031 the yearly increase will be in the range of 53,000.

SMART METERS A PROVINCIAL CASH GRAB?

Smart meters will allow BC Hydro to introduce differential rates, whereby electricity will be more expensive during peak hours, and less so during off-peak periods. The theory is that Time of Use (TOU) rates will encourage consumers to, say, do the laundry or cook a meal at 2 a.m. in the middle of the night when rates are relatively inexpensive, rather than at 6 p.m. when rates are much higher. TOUs, however, will not reduce the overall demand for electricity, but merely shift consumption to off-peak periods. Indeed, some critics believe that the only real benefit of smart meters it that they will allow BC Hydro to raise rates, and send additional revenues to the provincial treasury. — W.M.

Aging is a major reason for our slowing population growth. Forty years ago, in 1971, the median age in British Columbia was 27.8 years of age. Today, that figure is 41.1 years, and by 2036 it is forecast to be 45.6.

=======

So , before microchips are planted in your head….Big Brother wants to meter you for less than altruistic reasons.

However, Go’vt has forecast in the long term ” shrinkage “, no Hot Asian Money to bail out BC . This is in sync with China’s own evolving problem of one child per family….not enough population to sustain existing population.

#165 SAD on 04.04.11 at 3:07 pm

Why are our Federal, Provincial and municipal elected officials so caught up on promoting home ownership? Because it is a much larger contributor to GDP than in the past. The new home industry is covering up the problem we have with our manufacturing base.
At the end of the day if we do not create new jobs the housing wealth effect will be done. All the programs have been created to keep the GDP looking good. Many unemployed manufacturing employees have gotten involved in new construction. We have been kicking the can down the road.

http://www.fxpedia.com/GDP

While typical household spending is not included, spending by households on new houses is included in this category.

#166 Mr. R. on 04.04.11 at 3:09 pm

T.O Bubble boy

The markets are picking up steam. That is the surest sign of a bubble! Exponential curve steepens and then tanks….watching from the sidelines can be quite fun!

Mr. R.

#167 realist on 04.04.11 at 3:13 pm

@ Devore #155:

You are correct. StatsCan calculates the value of owner-occupied real estate by estimating its rental value. But that was not my point.

My point was that the government has a vested interest in juicing the housing market because all housing contributes to GDP. Not to mention the peripherals around home purchases which include furniture, appliances, legal fees, etc. etc.

#168 The American on 04.04.11 at 3:18 pm

At #148: This is precisely what I am talking about. 5% of the mortgages in Canada are subprime (and that doesn’t count what has CONTINUED to take place since 2007). Believe me, subprime in Canada is still alive and strong with minimum down and low rates that reset every 5 years. Realist, do you know the percentage of “subprime” mortgages that were made in the U.S. prior to the RE market imploding? Here the percentage…. 5%!!!!!!!!!! Like I said, Canada has done precisely the same thing.

#169 Victoria on 04.04.11 at 3:22 pm

I was just speaking to my banker about selling. He thinks that RE will double in Victoria in the next 5 years. i.e. our $900,000 house will be worth $1,800.

I explained only if salaries double. He said that is not a problem in Victoria because so many rich people come here to live it keeps the market at a high level and most people can actually afford these prices – no like Vancouver and Toronto (but wait – I thought Vancouver had Chinese).

He also said interest rates will go up slowly. I still mentioned salaries and he said it didn’t matter.

When is this going to happen and people think I am crazy. I mentioned US, Ireland, UK, Spain and he said Victoria is different because rich people live here.

I would love to know what the average family income is in the magic land?

#170 Trader Guy on 04.04.11 at 3:23 pm

Mainland China buyers? I think not.
There are currently 60 million vacant condos in China
Yes, 60 million vacant, entire new cities empty.
The largest shopping mall in the world (China) has almost no stores and its been open for over 5 years.
See this video link and be very very scared if you live in B.C.
http://www.youtube.com/watch?feature=player_embedded&v=rPILhiTJv7E

#171 Winterpeg on 04.04.11 at 3:31 pm

Glad to see you mentioned Winnipeg in today’s cost-of- home-ownership scariness. It’s stupid even here in cheapskate ‘Peg. My 100 year old 700 sq ft.shoebox could fetch >$160,000. Never mind new homes in the burbs which are up, up and away. May sound cheap to the trendier parts of the country, but it’s all relative. Just few years ago $160,000 here could buy a lot more house.
Even though I bought along time ago and it’s paid off, I don’t think it is affordable to sell and move up to something bigger here. That would just set me back.

As for my number, I think I am in the ball park at 38%.
I don’t feel too rich, though. (90-52=38)

At least I have a dry roof over my head (even if the basement could flood soon)

#172 Victoria on 04.04.11 at 3:32 pm

I think I might stop reading this blog (and others). Just go on about my business for the next year and not worry that all of my money (ever damn cent) is tied up in a home (how come I seem to be the only one worried in my family and circle for friends) and then tune in a year from now.

A watched kettle never boils. Just sayin.

#173 Coho on 04.04.11 at 3:34 pm

#12,

I am not sure housing will drop here. I know what you’ll say, but now even 15+ year old houses here are over $700K . It’s getting absurd, and my worst nightmare is that things keep going up here to become like Vancouver.

You said it. It is getting absurd.

We’re told we have choices. We think we have choices. But, do we really? Left or Right. Liberal or Conservative. Chococlate or Vanilla. Actually for frivolous things there is a large variety to choose from.

The dilemma of people waiting to get in on the market are faced with a choice, but really it is a non choice financially. It is perceived as a damned if you do, damned if you don’t scenario. When people feel that way, they know thery are not in the driver’s seat and that can be scary when making a decision about a life long committment in an evil world. Half the marriages will end in divorce but the mortgage will still be there.

Probably what many first time buyers are thinking:

Choice 1) Buy now and be broke while also risking losing one’s job, house price corrections, higher interest rates, maintenance costs and house taxes.

Choice 2) Don’t buy now and risk being broke later as you watch creative (destructive) policies pushing housing prices ever higher while watching your friends use their house like an ATM machine. Like free money!

But, do we really think any of us (working class) are going to get a free ride as this wealth transfer from the middle class to the upper class continues?

#174 C on 04.04.11 at 3:35 pm

For those who are on the sidelines and finding it tough, just keep in mind a saying Jesse Livermore had back in the day. He was/is a legendary speculator.

Some of his wisdom goes something like this:

“The big money is made by the sitting and the waitin, not the thinking. Once a position is taken the next difficult task is to be patient and wait for the move to play out. Be sure you have good clear reason to enter a trade and be sure you have good clear reasons to exit your position. It is the big swing that makes the big money for you.”

True words, being right and sitting tight is the hardest thing a speculator can do. You may do the first step by selling your house and renting, but WAITING is the hard part.

My wife and I sold our condo in April 2010 and have been renting since June 2010. If anything our reasons for selling are even stronger today. Yes at times it is tough to wait, but not really. We are both perfectly fine with being right and sitting tight.

Patience is key. The writing was on the wall in the USA back in 2005 but at the time renting would have been sooo tough to do while dim wits were making money hand over fist flipping real estate. Economists, CEOs, and Greenspan all assured us there wasn’t a bubble in the US, but it was blatently obvious.

Today, we have Economists, CEOs, waitresses and bartenders pushing the same mantra Americans heard 6 years ago. There is no bubble, real esate in Canada only goes up.

I strongly believe the writing is on the wall for Canadian real estate. BE RIGHT AND SIT TIGHT!!

#175 not asian on 04.04.11 at 3:40 pm

#156

“Magic here is – I bought in 2002 – I have alot of wiggle room if it came down to it – lower my price by $25K off a comparable home (big deal – prices have shot up $145K since I purchased).. I didn’t lose anything – and guess what – I will walk with some coin (approx $120K in appreciation based on my above “quick sale” + 90K in hard cold equity that I have worked at paying the past eight years..yep – a quick sell, in my pocket $210K… and you know what – this is my first home – and renting really sucks – that’s money in MY pocket”

– You don’t have money in YOUR pocket because you haven’t sold yet. Until you do, it’s all in your head. Does the $145K take into account realtor fees, lawyer fees, mortgage interest paid for the past 8 years, penalties for payout of your mortgage, repairs and upgrades to the property (roof, hot water tank, granite, floors, stainless steel appliances), property taxes for 8 years, and the quickly declining RE values? Good for you for saving $90K – I think that Garth could have helped you with that.

#176 TheBigLebowski on 04.04.11 at 3:58 pm

#70 Kitchener1-Walmart CEO is warning of heavy price inflation..

Yes , his Chinese slave labor force must be demanding 10 cents a day in wages over their current 5 cents. Prices at the store must reflect this . To shop at Walmart is to sign ones own economic death warrant.

#177 Moneta on 04.04.11 at 4:02 pm

edmonton mortgage broker on 04.04.11 at 2:37 pm
———–
You can’t get blood from a stone. Even if the “i”s are dotted and “t”s are crossed , if people keep on making their payments while in distress, the economy will tank.

I don’t know how it’s going to pan out. I don’t know how many more rabbits our leaders can pull out of their Stetsons. For all I know, the Fibonacci is giving them enough for another decade or until most of the boomers are gone. Who knows.

We are in a period of excess. The excess might be different from the US but at the household level, it’s just as bad. Elastics snap, that’s what I know.

#178 Makes Cents on 04.04.11 at 4:09 pm

Strike. This is a common sense movement to get behind. Risk looking like a fool to your friends and family that want to buy. Don’t let anyone you love buy this year.

#179 jess on 04.04.11 at 4:12 pm

According to Weis’s plea agreement, Weis was the president and a shareholder of Maple Leaf Title LLC (MLT), a real estate title agency located in Towson, Maryland. Weis directed MLT employees in 13 real estate closings conducted between February and September 2009 to withhold the payoff checks from institutions that held the existing mortgage loan notes on the properties. In each instance, the settlement statement sent to the borrower’s lender falsely represented that the payoff was being made.

In an effort to conceal the fraud scheme, Weis caused monthly mortgage payments to be made to the banks holding the mortgage notes. Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. However, because Weis was unable to send checks in every case where he had misappropriated the payoffs from escrow, a number of MLT clients received delinquency notices for non-payment of the mortgage note. A few were threatened with foreclosure and were forced to hire attorneys to prevent being ejected from their homes.

Because the existing mortgages had not been paid off, the liens against the property were not removed and a title free of pre-existing liens and claims (clear title) could not be passed to the new lender and borrower. An insurance company had issued title insurance policies to the borrowers guaranteeing clear title. As a result of Weis’s criminal conduct, the title insurance company ultimately paid out $3.9 million to financial institutions that held mortgage notes.

=====
round-trip transactions?

http://tampa.fbi.gov/dojpressrel/pressrel11/ta033111.htm

#180 Bill Grable on 04.04.11 at 4:17 pm

Z E R O > I sold all my commercial and my home> and TTMAR > Maui for the winter > owe NOTHING and doing well in a fund based on shorting bejabbers out of some things and filling up with bank prefs and some blue chippers.
Oh, and renting is freeing. The A/C died yesterday. The guy from Maui Fix it laughed and said, well there’s another 1750 bucks.

I smiled.

#181 realist on 04.04.11 at 4:22 pm

@ American wrote: “Realist, do you know the percentage of “subprime” mortgages that were made in the U.S. prior to the RE market imploding?”
_____________________________________________
As far as the volume of sub-prime mortgages in Canada is concerned, the 5% number came from Benjamin Tal, who was ball-parking. The CEO of Exceed Mortgage said it represented $11 billion of a trillion dollar market – which works out to a little over 1%. As I said – miniscule.

From the same article that I previously referenced:
John Greenwood, Financial Post · Apr. 11, 2010:

“In the United States the subprime market took off in the run-up to the crisis, growing to more than 20% of total mortgages outstanding as the loans were packaged up into complex securities and sold to investors around the world.”

In addition, the article has this to say about sub-prime lending since 2007 in Canada:

“In the wake of the financial crisis, the business of subprime loans has dried up.”

So contrary to your thesis, not only was the sub-prime mortgage market in Canada never close to the levels experienced in the U.S., they are now virtually non-existant.

#182 Coho on 04.04.11 at 4:24 pm

Attention class! Please lift your heads up from the real estate and financials papers for a moment. :) This fella describes clearly and concisely some of the latest developments at the stricken Fukushima Nuclear Plant. It’s only 7 minutes. well worth the listen, imo.

http://www.youtube.com/watch?v=Y_5qnuudzCA

#183 bigrider on 04.04.11 at 4:38 pm

” real estate always goes up’

Heard some more of that past weekend.

“Donald Trump very rich because of real estate” another comment. Fact that very few billionaires in the world acheived it through real estate fell on deaf ears.

Going to take some meds I think. I heard best stuff is in delusional Vancouver.

#184 realpaul on 04.04.11 at 5:50 pm

US government is spending like a Canadian house horny dweeb.

http://cnsnews.com/news/article/march-madness-feds-spent-more-eight-time#

That gov is spending 8 times what they take in……oh yeah…the US economy is on the verge of turning around…..sure it is.

#185 realpaul on 04.04.11 at 6:03 pm

BTW Garth, I don’t think anyone should calculate a penny of their net worth by including real estate or any portion of it. Real Estate is not a fungible asset and so the ‘value’ is subjective and intangible…solely dependant on the mood of the day. If you borrow against real estate the effect is to make you poorer by taking on debt against something which you may or may not be able to sell. Real Estate is in fact….a mugs game…pure and simple.

#186 New CMHC fees up to 35% on 04.04.11 at 6:31 pm

It look like the CMHC has updated their fee table and now they charge premiums with up to 35% down-payment.

http://www.cmhc.ca/en/co/moloin/moloin_005.cfm

Any comments from the RE agents /mortgage brokers on when this has been introduced

#187 saskatoon missed the boat on 04.04.11 at 6:40 pm

I believe rates were just raised, and are suppose to come into effect tomorrow. I don’t get how all this works, I thought April 9th was some magic date that was the next “to raise or not to raise”. Now I wish I had got preapproved on friday when we were thinking about it.

http://money.canoe.ca/money/mymoney/canada/archives/2011/04/20110404-123128.html

#188 S.B. on 04.04.11 at 6:54 pm

I was in the Leon’s and The Brick superstores this weekend, checking the latest in McMansion furniture (everything is brown in colour?). The flyers look good but upon closer inspection the floor models bore a lot of wear marks I thought.

I lightly moved the tip of fingernail on the veneer corners it it rubbed off the finish! Shocking quality but the prices were not discount prices.

I guess the do not pay until year 2022 or whatever the deal is lessens the blow.

#189 Increasing that 1% on 04.04.11 at 7:02 pm

OT: Blame #107. charles’ link, that led me to Tom Jones’ ‘sex bomb’ – reminding me of how you seem to feel about your Harley, Garth (or how you feel about yourself when riding your Harley?)
Garth- or others with twisted humour, may appreciate some of the pic’s to the song: http://www.youtube.com/watch?v=LrA4jR-rnDw
There’s even a pic for #93. Morry (jk)

#190 Vancouver_Bear on 04.04.11 at 7:09 pm

#29 BPOE on 04.03.11 at 8:33 pm
You are an IDIOT. ’nuff said.
Also I can see that you finally learned how to use copy and paste function on you dumbputer…..Just provide us with the link from your browser address bar (look at the top of your screen) and that’s enough, rather then copying the whole article. It will make skipping your posts easier.
Move on nothimng to see here.

#191 BPOE on 04.04.11 at 7:09 pm

BOOYAH. Looks GREAT!

149 T.O. Bubble Boy on 04.04.11 at 12:50 pm
Not to give BPOE and others some ammunition, but the Vancouver insanity is picking up steam!

March numbers from Yatter Matters:

http://www.yattermatters.com/2011/04/vancouvers-glowing-average-price/

March 2011 had about 30% more sales than March 2010, and the average prices are also well above 2010.

The average detached SFH price did fall from Feb 2011 (down to “only” $1.15M), so that will be an interesting trend to watch.
.

#192 edmonton mortgage broker on 04.04.11 at 7:13 pm

#186 New CMHC fees up to 35% on 04.04.11 at 6:31 pm

That’s been the fee since the REDUCTION in premiums took place in 2003.

Loan-to-Value Ratio Premium on Total Loan

Up to and including 65% 0.50%
Up to and including 75% 0.65%
Up to and including 80% 1.00%
Up to and including 85% 1.75%
Up to and including 90% 2.00%
Up to and including 95% 3.25%

as far as i can remember, there’s always been insurance premium on 65% LTV. also, note, that since that change, the premium at 95% LTV has further been reduced to 2.75% from 3.25%

mortgage borrowers rarely pay the insurance premium though when the LTV is 65% because in most instances, the lender will absorb the cost to stay competitive.

I learned today after speaking with a business development manager at one of my lenders that, the reason some lenders will actually offer their best rates ONLY on high ratio CMHC insured deals is because those deals are 100% guaranteed and allows them to more easily CDO it to 3rd parties. interesting.

#193 BPOE on 04.04.11 at 7:21 pm

No big deal. 5 years from now you renew at another low interest rate, then renew another 5 years at low interest rates. Double up your payments and your almost Home Free. Not rocket science folks

#194 jess on 04.04.11 at 7:28 pm

A group of 25 hedge fund executives in 2010 managed to earn a combined $22.1 billion—an amount equivalent to 441,400 American households each making $50,000 a year (roughly the current average). Considering that the median household size is 2.6 persons, that means that these 25 took home as much as the average 1,150,000 Americans combined. That’s bigger than the population of Dallas…or Rhode Island.

Ten years ago, the same 25 Wall Street barons would have taken home a total of $5 billion. Now, a single hedge fund chief, John Paulson, was able to make that much ($4.9 billion) in 2010. Paulson made billions during the worst of the financial downturn because he bet that the mortgage bubble would burst. Most of his profits in 2010 came from investing in gold, buying and selling stock in Citigroup…and collecting an estimated $1 billion in management fees.
– David Wallechinsky, Noel Brinkerhoff

=
According to Sen. Bernard Sanders (I-Vermont), “If someone is making $15 an hour, it’s taxed 100 percent as ordinary income. Instead, we continue to have a tax system that’s benefiting upper-income people.”
Hedge Fund Managers Fight Off Higher Taxes
Friday, June 11, 2010

#195 Mister Obvious on 04.04.11 at 7:53 pm

#169 Victoria

“I was just speaking to my banker about selling. He thinks that RE will double in Victoria in the next 5 years.”

That’s 15% return for each and every year for the next five years. I would assume then your banker is buying up everthing in sight.

#196 Nostradamus Le Mad Vlad on 04.04.11 at 8:02 pm


3:41 clip Not helpful. Japan says it will dump radioactive waste into the ocean.

Real Food US citizens have to get approval first to eat proper food?!?

CRA Take Note “The IRS finally realized that we poor people simply do not have anything left to tax!” wrh.com.

4:02 clip “So what if there’s a government shutdown? What are they doing to promote safety?” Boeing, and Boeing Two. Cracks have been found in three other jets.

FBI and Viruses “The FBI intends to deploy Magic Lantern in the form of an e-mail attachment. When the attachment is opened, it installs a trojan horse on the suspect’s computer.” No doubt CSIS and the RCMP is involved as well. Sheeple are permanent suspects.

3:29 clip Look! Those EVIL North Koreans!

Economies This would fly under the radar of most sheeple, yet is one of the biggest causes of countries going under.

Oil Speculation Yep, the rich (who control most of the oil and want a carbon tax bought in across the planet), are getting richer.

59:02 clip Texas independence? Yessirreee! Now the four western provinces, three territories and a few of the states can disassociate from the mother hen and fly solo!

Japan Economy – Gold – Silver. Not forgetting radiation-filled food and drink.

Ayn Rand Not the very good poster here. 9:59 clip.

Kosovo “When things go south in the Balkans geopolitically, that is many times accompanied by civil war. Let us hope that the people of Kosovo will be able to resolve this peacefully and quickly, without any bloodshed on either side.” wrh.com.

Bank Studmuffins “Fewer banks to fail!” wrh.com.

Endgame Total war, total enslavement. The west has nothing left.

6:08 clip Re: Commercial RE. Florida in a tailspin.

6:42 clip Oil. The US seems to have a lot, so why are they in the ME taking other countries’ reserves?

14:40 clip Greg W., Oakville — Fluoride lowers IQ in kids.

#197 Utopia on 04.04.11 at 8:09 pm

For those so inclined…here is a lively debate taking place today on the issue of hyperinflation versus outright deflation and the future of the US economy.

There are always ramifications for Canada when it comes to the US and because our future is so closely tied to what happens down there it only makes sense to follow along with the current thinking and concerns.

http://www.rickackerman.com/2011/04/big-gap-in-logic-weakens-hyperinflation-argument/

#198 steve p on 04.04.11 at 8:25 pm

it would be really cool if you switched the words “central state” instead of using the word government

#199 BrianT on 04.04.11 at 8:34 pm

I realize the majority of the public cannot comprehend basic math,but these US spending numbers are absolutely wild http://cnsnews.com/news/article/march-madness-feds-spent-more-eight-time

#200 Dan Gabriel on 04.04.11 at 8:51 pm

1 in 7 Americans are on FOOD STAMPS
Nearly a year and a half into the economic recovery, some 43.6 million Americans continued to rely on food stamps in November.

More than 14% of the population drew food stamps in November to purchase groceries as high unemployment and muted wage growth crimped budgets. The number of recipients was up 0.9% from October, according to the new report by the U.S. Department of Agriculture. Compared to a year ago, the number of people receiving food stamps was up 14.2%.
http://blogs.wsj.com/economics/2011/02/02/some-43-million-americans-use-food-stamps/

#201 Adventures in Sea-Tac with Moneta on 04.04.11 at 9:04 pm

130 Taxhaven – Sorry, interpreted your original post as
meaning your RE had inflated since purchase resulting in the example I gave. Myself? PR (built 2002) is paid off
(say 35%) and share of mixed-use rental (bought 2004)
almost paid off (less than 10%). Not considering selling
either at this point unless somebody makes me a crazy
offer. Still have profitable business with several years of
work left before considering retirement (early 50s) – unless somebody makes me a crazy offer for that too.

#202 Utopia on 04.04.11 at 9:09 pm

#176 TheBigLebowski

“Walmart CEO is warning of heavy price inflation..
Yes , his Chinese slave labor force must be demanding 10 cents a day in wages over their current 5 cents
———————————————————

Funny you mention that. I acquired a brand new pair of military style boots as a gift. They might easily cost in excess of 150.00 dollars here in Canada. So I presumed but I had no way of knowing because they had been purchased by a friend while in China.

Anyway, I went on line to find out the value (I just had to know, it is my nature). Good quality construction, fur lined, skid proof, oil repellant leather uppers with arch support pads included. Good laces too.

I found the factory in China that makes them. They turn out up to half a million pairs of footwear a month. These were available for less than 12 bucks a pair if ordered in bulk to international buyers.

That was the day my eyes were opened to how much room existed for deflation in prices to impact us in the West. Some of this high quality stuff is absolutley dirt cheap everywhere else in the world, and in China in particular.

I just know that you of all people will see the significance of this immediately and connect a few of the dots. Our high prices are a function of our economy and Walmart and other retailers are making an absolute killing on the differential between supply cost and final sales. It is a mammoth difference actually. Forget 100% markups. Think 10 times that number or more!!!

PS: good to see you are still posting.

#203 k on 04.04.11 at 9:31 pm

Up to and including 65% 0.50%
#192

Up to and including 75% 0.65%
Up to and including 80% 1.00%
Up to and including 85% 1.75%
Up to and including 90% 2.00%
Up to and including 95% 3.25%

Does this mean that someone getting a mortgage with only 5% down pays 3.25 % more on their interest rate? I am not clear on this.

#204 The American on 04.04.11 at 9:48 pm

Realist, seriously, you need to read your stories better…
At the end of 2006 and beginning of 2007 U.S. subprime ARMS were about 5% of total market. By third quarter of 2007, it had risen to 6.8%…

“In the third quarter of 2007, subprime ARMs making up only 6.8% of USA mortgages outstanding also accounted for 43% of the foreclosures which began during that quarter.[21] By October 2007, approximately 16% of subprime adjustable rate mortgages (ARM) were either 90-days delinquent or the lender had begun foreclosure proceedings, roughly triple the rate of 2005.[22] By January 2008, the delinquency rate had risen to 21%[23] and by May 2008 it was 25%.[24]”

The point is it doesn’t take hardy anything at all to bring down and entire real estate market.

Canada had 5% at the end of 2007. This doesn’t account for the tremendous amount of additional lending that has entered into the Canadian market place since 2007, which we are ALL aware has happened. So please don’t deny it or try to call it something different than “sub prime” You can call it whatever you want, but don’t try to fool yourself or anyone else into believing it is anything but sub prime lending with 0% down at rates of friggin’ 2.5%. The Canadian government HAD to get creative when the shit hit the fan in the U.S. back in 2007, so they simply stopped calling it “sub prime” lending there and came up with other programs that effectively accomplished the same thing, including emergency rates that STILL haven’t been put back on the shelf. Its called “robbing Peter to pay Paul.” Or, “robbing the future.” Canada, in all effectiveness, is little more than an ARM-lending country, meaning most of all mortgages there are on 5-year notes that amortize over a period of 30 years, 35, years or even 40 YEARS! That’s insanity. Seriously… 40 YEARS?!?!? That’s testament enough that affordability has been severely exceeded. Yes, I know that has been pulled in now to 30 years tops, but the point is that it was allowed for quite a period of time. In the U.S. well over 50% of all mortgages are 30-year FIXED mortgages that NEVER reset, meaning nothing to worry about for those people. When a population of home ownership in Canada is about 72% (exceeding the U.S. at peak) and most all mortgages are ARMs, what will happen when rates rise and the ARMs reset? So, genius, tell me what happens in 2012 when all these Canadian ARMs from 2007 begin resetting at higher rates? Please don’t tell me rates won’t rise there because they JUST DID. As Garth has said, it will NOT end well.

#205 BrianT on 04.04.11 at 9:51 pm

#197Utopia-Nobody knows for sure, but look at one of the first lines this guy writes-‘hyperinflation would allow Joe Sixpack to pay off his debts with confetti”-that is one awesomely stupid statement. What makes it so awesomely stupid is that it is repeated constantly. The illogic is that as prices rise, Joe Sixpack just magically gets a wage increase allowing him to effectively devalue his debts, allowing his residence to increase in value, blah blah blah. Those with first access to the devalued currency-the financial and guv sector yes-most of the population definitely NO.

#206 Utopia on 04.04.11 at 10:17 pm

#129 Pjwlk

“I’ve been a reader of this blog since day one and have watched a number of people since then succumb to their own self-doubt. Sadly, we rarely hear back from them on how their decision has worked out for them”
———————————————————

I have noticed exactly the same thing but never tried to put it in words. We have lost quite a few over the last two years,.. and then…….they are just gone for good.

Not a breath ever heard again.

Into the black-hole of real estate lust they go. They are not even able to get a message out to those poor misdirected souls who might follow as they come face to face with reality and the true cost that home ownership entails.

#207 edmonton mortgage broker on 04.04.11 at 11:31 pm

#203 k on 04.04.11 at 9:31 pm

no, it means 3.25% of the mortgage amount is added as a one time premium to the principle of the mortgage.

however, that 3.25% is outdated. it’s actually 2.75% at 25 yr amortization and 2.95% at 30 yr am. as we all know, there is no longer 35 yr amortization on high ratio deals as of march 18.

#208 Duncan on 04.05.11 at 12:37 am

Garth – You’re an intelligent albiet misguided(maybe?) individual. A house isn’t an asset until the day you sell and make a profit (unless it’s a rental – then it’s down to monthly cash flow).
Should one invest in Canadian Real Estate? That depends. I define an asset as follows: “Does it put money in your pocket, or take money out of your pocket?” Future speculative gains aside, a home is not an asset until the day you sell (unless it’s a cash flow rental).
At the end of the day, people buy a home for security. If you can’t weather the storm of fluctuations in property value for at least a 10 year horizon, rent! For God’s sake (and I don’t believe in God but nonetheless) RENT!)

Garth,
You make good points but I speculate that the real reason you host this blog is the entertainment/income you derive from the flock?

You’re half right. — Garth

#209 Vancouver_Bear on 04.05.11 at 2:33 am

#193 BPOE on 04.04.11 at 7:21 pm

“Double up your payments and your almost Home Free. Not rocket science folks.”

OOPS….Home Free = FORECLOSURE……Finally the TRUTH came out from you.

#210 Matthew on 04.05.11 at 10:24 am

Garth,

Would you pleas opine one of these days about the situation in Quebec and the maritime provinces. It may not be as bad as in T.O or Van. but we have some areas where houses are sold sight unseen.

For example, in the Outremont area of Montreal (my riding), hundred year old homes are being sold for more than $1M. Most of them aren’t anything special.

On the income side of things, my colleagues in other provinces tend to get paid a lot more than I do with a lower tax burden to boot, which does not bode well for the value to income ratio.

Add to this, the hordes of public companies slowly being bought out or moving to Montreal and I don’t see how Quebec can regain its economic prowess soon unless we go all Alberta and open up the shale gas to exploration.

Thank you for your blog,
Matthew

P.S.
Apologies for my comment a few days back about reading your book (unpaid) at Chapters instead of buying it. It was rather cavalier and rude.

Does it make a difference for you if the book is purchased at Chapters or your affiliated local dealer featured on this site?

Apology accepted with grace. The only advantage of buying it through this site is the personalized autograph. That converts the book into an heirloom. — Garth

#211 Matthew on 04.05.11 at 10:25 am

Edit to previous post:

“public companies moving to Toronto from Quebec”

sorry.

#212 jiminy on 04.05.11 at 4:53 pm

Video: Squatters help sell Florida’s foreclosures

http://www.theglobeandmail.com/report-on-business/video/video-squatters-help-sell-floridas-foreclosures/article1971676/

#213 AB Bust Hopeful on 04.05.11 at 6:39 pm

Interesting prediction about our Economy….Edmonton Journal
http://www.edmontonjournal.com/entertainment/portfolio+strategist+tackles+investors+questions/4540579/story.html