Xtreme buying

The tide is turning in Toronto. Looks like Vancouver may be the last place to get it. And it’ll probably get it good.

Housing affordability is now shot to hell. People buying in this environment might as well join the Libyan army. They’re fried. Any doubt of that within the largest housing market in the country was erased this week as the latest stats emerged.

In the first half of April, sales were down again (albeit by a small slide) for the tenth straight month. But prices have erupted – ahead an unsustainable 12% in a year, while new listings tumble by a withering 21%. The result: the average detached house in 416 now sells for $772,721, an increase of 15%, while the average shoebox-in-the-sky is up 10% at $356,500.

So why do I say the tide’s turning when prices are ripping?

  • Fewer buyers are chasing even fewer sellers. No matter how you spin this, it’s not a healthy or robust market.
  • The average SFH in Toronto is now valued at 8 times the average household income of $93,040.  The US market collapsed at 4.6 times.
  • Interest rates will be rising soon – May 31st likely, July 19th for sure. This will mark the beginning of the end of emergency interest rates – the only reason housing’s alive.
  • It’s finally dawning on even the media that there’s no more money to be made buying a house. Real men now rent. Patiently.
  • Incomes are stalled and job creation sucks. Higher house prices don’t mean more money floating around, just more debt.
  • Tactics like the ‘bully offer’ are now common – a buyer making an instant offer for far above the listing price, good only for two or three hours. Designed for shock and awe.
  • A YoY price hike of 12-15% on lower YoY sales should remind us how irrational and horny houses can make people.
  • And what of that plunge in listings? Typical of a market top – when owners balk at selling for fear they’ll be priced out. Irrational. But so was selling your stocks and mutual funds in crisis in March of 2009 – and most people did just that.
  • Factoring in closing fees on the average home, and even with still-cheap loan rates, the occupancy cost of ownership is now double that of renting similar digs. And that holds true not just for Toronto, also for those oily Alberta cities and the nutbars in Vancouver.

On a day when the debt of the USA, our benefactor and the reason we’ve all had a nice life, was downgraded, the Toronto Real Estate Board said, “Positive economic news has kept households confident in their ability to purchase and pay for a home over the long term.”

See what I mean? Totally screwed.

What positive news would that be? We lost jobs last month. The dollar’s rendered us uncompetitive. Gas prices are sucking off twelve billion a year from consumers. Household debt now surpasses that of the Yanks. The stimulus money will end soon after May 2nd. Supermarket chicken costs more than steak used to. And has a factory opened in your town lately?

Add in even slightly higher mortgage rates, and the people who bought houses in April could look like the greatest fools of a generation. They may well have a future of capital losses ahead of them, which brings me to Jimmy, from Markham.

Yeah, I know. It may seem like an extreme case. But only in retrospect. Jimmy writes:

I’m just down in Florida now visiting my daughter. We were discussing her financial situation last night and I told her I would run the numbers by you and see if you had any insight. My daughter and her husband are thirtyish with two kids. Combined they make about 95k per year.

They bought their first house here in 2000 for around 90k. The boom started and they drank the Kool aid in 2006. They found there dream house and found a lender to front them the money for a down payment. Now they own two houses, one a rental property.

The rental property now has a market value of around 50k. It needs some renovation soon. There is a first mortgage on it owing 86k at 7% with 21 years left on it. There is a second debt on it a HELOC actually in the amount of 71K which was used to buy the present dream home.

The home they now live in and purchased for around $275,000 has a market value of about $100,000. The first mortgage is about $240,000. It’s 30 years with 26 years left. Interest rate is 6%.  Most of their friends and relatives that also drank the Kool aid have declared bankruptcy and are in recovery mode I guess.

The husband is emotional and isn’t keen on defaulting on their debts. Daughter is looking out for Number 1. Garth, any comments or recommendations would be appreciated.

Jingle mail, Jimmy. Tell them to walk.

Now come home, and tell us it can’t happen here.


#1 Ex-Cowtown on 04.18.11 at 9:53 pm

oh…oh…oh… nevermind.

#2 Ignorance Is Bliss on 04.18.11 at 9:54 pm

Too bad (for consumers) that there’s no Jingle Mail up here in Canada…oh yeah, silly me, I forgot the system is rigged to protect the banks, not consumers.

#3 shanks on 04.18.11 at 9:59 pm

lets just hope and cope. and enjoy renting ;)

#4 Mr.Lee on 04.18.11 at 10:02 pm

After the 2000 tech bubble burst, the peddlers of financial porn focused the middle class’s attention on where they lived and what a great investment vehicle the dwelling would be. The irony is that the Zombies fell for it, and one by one, from the USA to GB to Continental Europe……home prices began to correct.

Here in Canada we started to see the same thing happen in 2008 when oil hit 147 pbl. Interest rates started to rise and here in Cow Town the housing boom of two years earlier with bidding wars and the like was pretty much over. Then came the Lehman Bros and AIG saga……emergency rates….presto…..the revival of housing.

Rates are going to go up rather soon, inflation is already making a nasty come back, and as Mr Turner has stated many times…..job growth and real income is stagnant. So, go ahead and figure out how this is going to end.

#5 Ex-Cowtown on 04.18.11 at 10:02 pm

“Real men rent”

Absolutely. We helped our friends move into a fabulous rental home over the weekend. Between the mortgage and taxes, I figure the owners are subsidizing our friends lifestyle to the tune of around $2500 a month.

The scary part of this is it really shows where the fair market value on this house should be, and that points to a 50% haircut to the owner.


#6 DeeTan on 04.18.11 at 10:02 pm

Hi Garth,

Funny video about Canada’s housing bubble & the CMHC


#7 TaxHaven on 04.18.11 at 10:03 pm

“Positive economic news has kept households confident in their ability to purchase and pay for a home over the long term.”

Reminded me of Nassim Taleb’s “The Black Swan”, in which the author recounts the story of the turkey who, having been regularly fed by the farmer for months and months, concluded on the basis of past events that the future was sunny. But then, very suddenly, one day in November…

Waiting on rising unemployment.

#8 Pr on 04.18.11 at 10:05 pm

…Real men now rent.
Ahahah! absolutely! My wife gona love that one.

#9 MikeT on 04.18.11 at 10:07 pm

why would the buyer make an offer far above the listing price in bully offers? If I were to bully a seller, I would make it far below the price, and keep it valid for a couple of hours…

#10 MikeT on 04.18.11 at 10:10 pm

The US debt was not downgraded – its outlook was turned from stable to negative. I am afraid to even imagine what a downgrade would cause to the markets. And the scariest part is: I think it will happen!!! :(

#11 angry Bird on 04.18.11 at 10:18 pm

Garth its an extreme case your no better then the real estate agents you’re pushing your own agenda and using extreme examples to keep the sheep from straying. The only people on this blog are the ones who couldn’t buy and are kicking themselves just hoping that an another opportunity comes around. They’ll listen to anyone. I wonder what the typical education and income are of the people who come to your blog. Make 60K family income and work at Mc Donalds!

That would be your dream job, I’m guessing. — Garth

#12 sick_of_waiting_to_buy on 04.18.11 at 10:20 pm


How many times you have called buyers greatest of fool and yet they are wiser than people like me waiting only to see 12% rise in just a year. Let alone 2-3 years rise since you are predicting real estate correction. what difference even 15-20% correction would make for buyers in last two years? May be rising interest rate would offset the price decline if it ever happens.
How many times, you would tell interest hike would kill it, they already went up last year from bottom.
How many times you have referenced US market to base your forecast.
How come fewer buyers can create more demand?
Sales decline: remember last year was record sales year, come June and we would see how sales number look like compared to last year.

So buy. Tell us how it works out. — Garth

#13 mid-Ontario on 04.18.11 at 10:23 pm

“In the first half of April, sales were down again (albeit by a small slide) for the tenth straight month. But prices have erupted – ahead an unsustainable 12% in a year, while new listings tumble by a withering 21%. The result: the average detached house in 416 now sells for $772,721, an increase of 15%, while the average shoebox-in-the-sky is up 10% at $356,500.”-Garth

My hairdresser who just bought thinks that Garth has misread this market completely.

Things have progressed to the point where the smaller players (flippers) cannot compete. This leaves only those who truly seek a home. The only homes left on the market are quality homes, hence the higher average price.

In the future, these quality homes will dominate the market and create a strong base for future sales.

There are no concerns for future interest rate increases as Canada will follow the US in a program of reducing long term interest rates by buying puts against treasuries resulting in low long term interest rates supporting a robust RE market of quality homes and quality buyers.

Many who did not act quickly simply will be left behind.

My hairdresser has happily moved from her apartment which she could not afford and now resides in a very nice house with a very nice backyard and is very confident of the future. She is ticked though about the HST reducing her business about 13% since its inception last July.

I just smile and make sure my hair looks good.

#14 45north on 04.18.11 at 10:24 pm

People buying in this environment might as well join the Libyan army.

pretty funny

I’m afraid for Jimmy’s daughter and son-in-law. What their mortgages have 21 and 26 years to go? That’s a long time.

I’m guessing the French Foreign Legion would be a better choice. Good chance to brush up on French.


#15 morpheus on 04.18.11 at 10:26 pm

Garth. Small correction. In Canada it would be 10 straight months. But in the GTA you were referencing it would be 12 straight months of declining sales. Splitting hairs but we’ve had this conversation (-;

#16 HouseBuster on 04.18.11 at 10:27 pm

2003 prices – a bounce – and then to 1998 prices.

That is what is coming down the pipe.

#17 LH on 04.18.11 at 10:29 pm

supply / demand dynamics are much worse in Florida than in New York, SF, Toronto, Vancouver, Sydney, etc.

Apples and oranges.

Garth, would you live in Florida?

#18 bubble town on 04.18.11 at 10:34 pm

Me first!!!!!

#19 squidly77 on 04.18.11 at 10:41 pm

Those Florida price drops are more common than uncommon. On a recent fishing trip down to the Florida Keys is was blatantly obvious the distress that their housing market is in. A property in Key Largo I looked at in 2006 was priced at about $400,000, it’s been bank owned for the past 24 months or so and can be had for $125,000, it.s also vacant.

It was my regular trips to Florida that clued me in early of Canadas eventual crash. The irrationality present in their housing market during 2002-2006 existed in Alberta from 2004-2008.

#20 ANONYNUS1 on 04.18.11 at 10:50 pm



#21 Nick on 04.18.11 at 10:51 pm

People who say “We have a better banking system” are missing the point. It’s like saying “We have better airbags, so we can drive 3x faster than the speed limit, no problem”. Good luck with that.

#22 DM in C on 04.18.11 at 10:52 pm

#11 Angry Bird

Sorry AB, no green pigs to take your anger out on this blog. Our family income is $150k+ and I’m a VP at my company. Renting is fab. Nice try though.

Couldn’t sell any houses this month, eh?

#23 Nick on 04.18.11 at 10:54 pm

#17 LH

More people want to live in Florida than in Vancouver. Do yourself a favor and go see the world outside your Tim Horton-fueled comfort zone.

#24 k on 04.18.11 at 10:54 pm

Hello Garth,

I am wondering what you think the average drop in home prices will be? Since prices have increased so much I am wondering what you estimate they will revert back to? Will the “melt” be the real killer?

I enjoy reading this blog and am learning a lot. Thank you!


Depends on the market. From irritating to debilitating. — Garth

#25 squidly77 on 04.18.11 at 10:55 pm


Garth, would you live in Florida?
Apples and oranges.

Your kiddin right LH ?

Florida’s a great place to live. I know you’ll play the ‘but they have no health care scare tactic card’

Don’t be scared of your own shadow LH, do as the yanks do, buy your own.

#26 BraveSirRobin on 04.18.11 at 10:58 pm

I don’t see interest rising in the near future. Inflation is essentially flat and downgrading the US debt would be deflationary, which the Fed will fight at all costs. The BoC on the other hand won’t like what raising interest rates will do to our already strong dollar if they raise rates unilaterally. So there may still be some life in the RE market yet.

#27 Network Admin on 04.18.11 at 10:58 pm

BTW, it is always a good idea to “check with a lawyer before [walking away], but the consequences will probably be more limited than you think”


#28 Habsfan on 04.18.11 at 11:00 pm

Hey Angry Bird

Would that be your code name for Small Man Syndrome???

#29 squidly77 on 04.18.11 at 11:02 pm

As far as reduced MLS listings are concerned, give me a break, the realtors have a new term, it’s called ‘pending listings’ they probably hold more properties off the official MLS database then are listed.

Another day and some very expected trickery from our favorite cartel.

#30 Hoof Hearted on 04.18.11 at 11:07 pm

Yeah……things are lingering…..
One can almost smell it.

After the election..tough medicine.
Hope it includes a clamp down on HAM

#31 PSYSTARCRAFT on 04.18.11 at 11:10 pm

Apparently we’ve been ‘totally screwed’ for the last 5 years.

Yeah, like totally.

Really, I mean it this time.


#32 JohnnyBGood on 04.18.11 at 11:11 pm

So SFHs in Toronto cost 8 times income? I don’t see prices peaking until they reach at least 16 times income. I know that sounds a bit over optimistic but I believe this time is different. We are not the US. Americans are stupid. We are Canadians. We are far superior, especially when it comes to money and finance things.

I forecast the average Toronto SFH to reach a solid $1.5 million, at least. We should reach that point in about 18 months. I know, what a drag to have to wait that long, but you can’t expect prices to rise that fast in this economy when incomes are stagnant.

At that point I will sell my house. I am confident there will be long line ups, so I may cordon off a section of sidewalk to keep the process orderly. I will probably end up selling to a couple of property virgins (preferably Asian) for nothing less than 40% above asking (50% would be better, but you can’t expect too much).

I will then wait for a 2.3% correction in housing (huge, I know but I never believed that stuff about real estate never going down). I will then jump right back in and buy another house before the next big leg up.

That’s the way it’s dumb (I mean done), baby. How can I lose?

#33 Joe on 04.18.11 at 11:12 pm

angry Bird: “Make 60K family income and work at Mc Donalds!”

That would be your dream job, I’m guessing. — Garth

If I could make $60K working at McDonald’s it would be my dream job, too!

#34 no guts on 04.18.11 at 11:14 pm

#21 Nick on 04.18.11 at 10:51 pm
People who say “We have a better banking system” are missing the point. It’s like saying “We have better airbags, so we can drive 3x faster than the speed limit, no problem”. Good luck with that.

But they ARE right. The banks are in good shape. It’s their customers that are on shaking ground, wondering what a tsunami looks like.

#35 John on 04.18.11 at 11:20 pm

Hey Garth,

I know you say were all screwed but i beg to differ in Alberta. We are already experiencing labor shortages,unemployent at 5,5 down 21% yoy. Migration is runnin rampind. You might have to put a disclaimer on future posts **may not include alberta as oil is the wild card in myt dire predictions, not responsible if ur priced out waiting on prices to erode*….somethin like that ur pretty clever.

Oil at $147 didn’t do much for Calgary, did it cowboy? — Garth

#36 The American on 04.18.11 at 11:22 pm

At #25: Squidly77, I have to agree with you I have a vacation home in Florida I frequent in the winter months. I’d rather pay $150/month out of pocket for my healthcare premiums and have my employer cover the rest to receive the quality of care I get here.

Seriously, my life has been saved two times in the last six years and I thank my lucky stars I had access to this kind of care. I stand by the quality of care I receive. It is amazing.

Can someone break down for me the amount of tax dollars that go toward the Canadian healthcare system on a per-capita basis each month to sustain the “free healthcare?” This is an honest question. I am BY NO MEANS knocking the Canadian healthcare system. I really mean that. I am more curious than anything as to what the monthly cost is per-capita. As you know, the U.S. is undergoing a lot of social restructuring, and healthcare is one of the priorities.

However, if you live in the U.S. you cannot receive “affordable” healthcare if you have a major pre-existing condition and you have let your premiums lapse. You cannot, however, be denied coverage if you develop a condition while paying your premiums under coverage, nor can they cancel it or deny you continued coverage. It is terrific for those who will pay for it (if you are not employed, the cost is about $350/month for healthcare coverage for the average consumer in the U.S.). Then you pay roughly 10% out of pocket to cover what insurance doesn’t.

I just treat it like a monthly “tax” in my mind and I make sure that I make those premiums. It is unfortunate that many Americans do not look at it this way, but it is upon them to pay or not to pay. For families, however, with children who have conditions it is completely unfair the way the insurance companies treat them. I am most certainly in favor of reform to stop the greed of the insurance companies. Obama’s plan has put a stop to that with respect to children (thank the Universe).

#37 Happy bird... on 04.18.11 at 11:26 pm

Angry bird…

I’m in the $300k / year range… Could buy many Vancouver properties with 50%+ down payments, making me low risk from any point of view.

Well I make 2x of my yearly rent from the interest of my balanced portfolio. I max out my and my wifes TFSA’S, RRSP’s and RESP’s for 2 kids. The additional free cash I invest in non registered accounts.

I guess I’m boring because I don’t drive the latest German tractor either… You’re right, I don’t. I bought my ’09 jeep in cash, from a muppet who had to choose between his car or his unsustainable mortgage when he did not make the commissions that were so conveniently made to look like his base yearly salary…

Why would I want to throw all that away, flip the risk over to my dime, and tie myself to one location at the whim of a real estate market? Why?

Oh yes, to support my fellow citizens (eg. The surrealturds who can’t make money).

P.s. I have never used one, can’t see the value as I have sold and bought homes directly…

Marco in Vancouver…

#38 Jane54 on 04.18.11 at 11:27 pm

I was home in Canada during the last three weeks and visited my cousin in Aurora, Ontario.

First she said that 2200 sq ft detached homes there in an isolated new development cost $550,000 to 600,000 and second when I commented on the already run-down look of 5 year old houses , she explained that her neighbours were so tight on their mortgage payments that they didn’t have a cent for home maintenence or furniture. What my generation called house-poor.

What kind of family life is this and with 3% mortgages too!!

Both signs of total madness as folk buy in places like Auroa for cheap living only and then suffer the commuting problems into TO.

#39 Investx on 04.18.11 at 11:36 pm

It’s different up here – no jingle mail.

#40 The American on 04.18.11 at 11:38 pm

At #34: No guts, you do realize the U.S. Banks were “very healthy” too right before the real estate collapse happened, right? U.S. consumers too were on shaky ground, not realizing just how fragile the value of their investments were. Of course, Americans ignored the warning signs of real estate values declining, never believing they could compress to the degree they have in the past 5 years.

Canadian banks may be in “good shape” today, but the story is indeed changing. Trust me. I’d really love to get into it, but I cannot. So, I guess that makes this post a moot point. Just remember the CMHC is much like FNMA and FDMC and FHLMC. Even though banks may seem “off the hook” for poor lending practices (trust me, Canadian banks are some of the biggest offenders), the cycle dictates that it comes full circle back to the banks’ bottom line in the long-term.

#41 Andrew on 04.18.11 at 11:39 pm

While I think that there is a significant overvaluation of real estate in Toronto, I think that you exaggerate it a bit. Toronto is not nearly as bad as Las Vegas/Phoenix/Miami during the US bubble.

1. Most houses in 416 Toronto do not cost anything like $772,721. The “average” is skewed up considerably by a few houses in Rosedale, Forest Hill etc. selling in a given month. You can still get a decent house in suburban 416 Toronto (in decent neighbourhoods even like the middle class parts of Scarborough or Etobicoke) for $400000-500000. Overpriced yes, but not nearly as much as you suggest. In poorer neighbourhoods (a large percentage of the area of 416 Toronto), it is more like $300000-400000. Of course this applies to incomes as well, i.e. the average income is much more than the median income.
2. Because of land use restrictions introduced by McGuinty, there is less land supply for new houses in the 905 suburbs. Some of the price increase in the last 10 years is due to that rather than any overvaluation. Same thing in Vancouver with the Agricultural Land Reserve. In contrast in the US virtually unlimited urban sprawl is generally allowed in most places. Given these land use restrictions, using numbers like “a single family house costs 8 times household income” does not necessarily mean real estate is overvalued. In many cities in Europe, houses have always been very expensive because governments don’t allow many to be built, and most people live in apartments instead.

I think that much of the real estate bubble is concentrated at the high end of the market, especially very high end condos e.g. Trump Tower, Four Seasons, Aura etc. Lower end condos aren’t nearly as overvalued e.g. you can buy a 1+den condo built in the 1980s around Yonge/Wellesley for about $300000 and a very low end condo of the same size built in the 1960s for about $200000, much less than the outrageously priced “Aura” condos a few blocks south at Gerrard. Most of the value of a condo is in the building, and I am sceptical that there is much demand for ultra-high end condos whose prices rival those of detached houses in many wealthier neighbourhoods of Toronto.

#42 Mister Obvious on 04.18.11 at 11:40 pm

#13 (mid-Ontario)

Are you for real?

#43 saanichtonian on 04.18.11 at 11:40 pm

In reply to #137 Fractional Reserve

“Yes, this would be the ideal situation. My argument is that the fractional reserve method is not itself the problem. It is a very profitable system and very flexible as opposed to the gold standard and a no fractional reserve system. ”

Profitable for whom?

“It would provide billions in revenue for Canadian citizens if it was in the hands of the government.”

It would provide billions in revenue for Canadian citizens if it was in the hands of the citizens.

It would provide billions in revenue for Canadian government if it was in the hands of the government.

“Will our banks ever be taken over by the government?
Of course not but in a theoretical world it would be a win-win situation for all if they were. Credit would be available to citizens and the enormous profits generated would be used for the benefit of Canadian citizens.”

You mean something like, say, the Bank of Canada, an institution that was made a federal public utility in 1938 and issued much of our currency until about 1974, that paid for WWII, the St. Lawrence Seaway. the public medical plan, the transcanada highway and much more, all without the onerous interest we now pay.

Consider that the total federal debt was $18 Billion in 1974, and then reread the excerpt from the 1993 federal auditor general’s report.

“5.41 The cost of borrowing is the third area that affects the annual deficit. In 1991-92, the interest on the debt was $41 billion. This cost of borrowing and its compounding effect have a significant impact on Canada’s annual deficits. From Confederation up to 1991-92, the federal government accumulated a net debt of $423 billion. Of this, $37 billion represents the accumulated shortfall in meeting the cost of government programs since Confederation. The remainder, $386 billion, represents the amount the government has borrowed to service the debt created by previous annual shortfalls.”

A total shortfall of $37 Billion since 1867 (125 years).

A total shortfall of $19 Billion since 1974 (18 years).

And an increase in total federal debt of $386 billion in that same 18 years…almost all interest.
Not for the benefit of any Canadian, and no debt paid down.

We had the system in place.

Where has it gone?

#44 Jsan on 04.18.11 at 11:41 pm

#12 sick_of_waiting_to_buy on 04.18.11 at 10:20 pm


How many times you have called buyers greatest of fool and yet they are wiser than people like me waiting only to see 12% rise in just a year. Let alone 2-3 years rise since you are predicting real estate correction. what difference even 15-20% correction would make for buyers in last two years? May be rising interest rate would offset the price decline if it ever happens…..


Boo Fricken Hoo!!! Look, if you do not have any patience to wait, go buy already, mortgage your life away if you so desire. Just don’t whine when the inevitable crash happens. I remember reading all of the US housing bubble blogs and reading the same arguments. People asking why prices were still going higher and higher, etc. etc.

There is one very common theme about bubbles. They can inflate longer and go higher than anyone can predict. It is very easy to spot them but much tougher to tell when they will collapse. The Internet/Tech stock bubble of the late 90’s was a clear example. Many people warned about it’s collapse for a couple of years before it finally blew up.

People are priced out of the market and can no longer afford to buy even though interest rates are still at Century low levels, what do you think will happen to that affordability once rates begin to head up? If you don’t know the answer than I would suggest you go and get the largest mortgage you can afford and than bask in the short lived glow of being a home owner until the stark reality of climbing interest rates rudely awakes you out of your stupor as it will many recent buyers.

#45 Ex-Cowtown on 04.18.11 at 11:43 pm

#35John on 04.18.11 at 11:20 pm
Hey Garth,

I know you say were all screwed but i beg to differ in Alberta. We are already experiencing labor shortages,unemployent at 5,5 down 21% yoy. Migration is runnin rampind. You might have to put a disclaimer on future posts **may not include alberta as oil is the wild card in myt dire predictions, not responsible if ur priced out waiting on prices to erode*….somethin like that ur pretty clever.

Oil at $147 didn’t do much for Calgary, did it cowboy? — Garth


$147 oil changed my name from Cowtown to Ex-Cowtown, as in got-the-hell-out-of-town-git-while-the-gittin’s-good-Ex-Cowtown.

Must be your first time to the rodeo John.

#46 AAA on 04.18.11 at 11:49 pm

#11 angry Bird:
master degree in computer engineering
I rent


#47 not 1st on 04.18.11 at 11:50 pm

U.S. debt default by one of 3 ways:

1. print to hyperinflation
2. raise debt ceiling which says to foreign creditors they can’t pay current obligations
3. don’t raise debt ceiling which also says to foreign creditors they can’t pay current obligations

Or they can get into a room and cut 300 billion from govt spending. Not going to happen.

U.S. is insolvent. Period. And the outcome of the 4 scenarios I laid out are all the same = reduced consumer demand, higher taxes, reduced benefits. Expect a 5,000 point haircut on the DOW sometime in the next 18 months.

#48 no guts on 04.18.11 at 11:54 pm

Just watched another tsunami video. It was amazing to watch human nature at work. The tsunami was already wiping out the houses in this town, but the elderly folks living behind an elevated railbed stayed in their homes and watched. As soon as the first houses began washing over the railbed the people came out of their houses and began running to the hill behind.

They were way too slow and way too late. The water that overtook them was carrying whole houses. They trusted in the protection of the railbed until it was too late.

That same trust/fear can be seen in our elderly with houses. They know that if they sell now while they are able, it would a good idea, but the thought of packing up everything and moving is that big hill they don’t want to struggle up. So they trust their health won’t fail or the value of their home won’t fall and they can sell when they are more ready.

Then as they watch others fail they realize they have run out of time and all they trusted in has failed. It’s too late and too big a job now.

This can apply in different ways at different ages but the instinct and the reaction is the same. Those who heed the warning and react live to see another day. Those who wait and hope things are going to be OK because they always have been, react too late.
The person filming this video was already up the hill. Must have been very troubling to watch your elderly neighbors being washed away.

#49 wes_coast on 04.18.11 at 11:55 pm

Amazing how QE2 (the US federal reserves second attempt at massive quantitative easing) put some false shine to the economy for a while. Funny how quickly the rust comes back through to the surface when you just paint over it. Its not just housing. This economic crisis has not played itself out yet.

#50 Big Al (New) on 04.19.11 at 12:02 am

Hey LH
Leave your parents basement and see the world will you. Florida is the BPOE. Go to Fort Lauderdale and go through the canals on a tour boat and then talk to me. I would live in Florida full time if I could.
Today was a shot across the bow from the Bond markets their not going to put up with the status quo for much longer. When Greece 2 year yields rise above 20% with 135% debt to GDP ratio how far are we from seeing something besides Zero percent in the US with nearly 100% debt to GDP. The math is pretty easy to do and it would indicate rates will rise and their hand may be forced with higher rates and faster increases.
The only thing that’s been keeping this economy going after 2008 has been free money. When that free money spigot is turned off, read this summer, the market will reverse commodities will reverse and the lipstick will have worn off the pig. I can’t imagine what the Canadian economy would look like the past ten years if people weren’t able to access cheap money in the form of a HELOC. Hell I don’t know anyone that didn’t use it to purchase a car a vacation a reno a you name it, and while incomes have remained flat consumer spending increased because of that very reason.
So the HELOC is spent the cards are maxed out the cars are all leased and every penny has been accounted for. So when that interest rate
increase comes and it will your toast.

#51 Toon Town Boomer on 04.19.11 at 12:02 am

Why bother comparing US to Canadian banking systems all you need to remember is this: Banks are more than happy to have plenty of debt to earn interest on and your debt is thier wealth.

#52 debtified on 04.19.11 at 12:06 am

#11 Angry Bird, you must be new here. Stick around, you might learn something. I doubt it, though.

Great post, Garth. I always learn something from you whether I agree with you or not. I gave my bestfriend your book as a gift and she just finished reading it. She loved it and she has started investing based on what she learned from you. Thanks!

#53 ottawan on 04.19.11 at 12:08 am

We are one of those couples renting and worried as we see house prices soar again this spring. Something that I have done has made me feel less worried and more in touch with what has happened in the market these past few weeks has been the following. Every day I check four districts where we have been looking at houses, and I mark on the calendar the number of homes under $400,000. I can tell weekly how sales are moving… and they really haven’t as a whole. I know that spring is the biggest season for housing as most people want to move in the summer when school’s out, so I figure May will tell the story. If things change in May and lots of homes are sold, I will know that people are still offering these rediculous prices, but if things don’t pick up from now, I will know that the market is not accepting the prices that the agents have set. It makes me feel better, and it may help others.

#54 Walks Like a Duck on 04.19.11 at 12:11 am

To Angry Bird…

Bought my house in 1995 for 130,000. Last assessed around $400,000. House is paid off. No debt whatsover.

University educated (first class honours btw)My income over $120,000 per year and I don’t work full time – hubby around $140,000, but he works full time.

Any other questions?

#55 Dimaga on 04.19.11 at 12:13 am

#37 Happy bird…

It’s good to know that your ego is healthy even though your arguments aren’t.

#56 BrianT on 04.19.11 at 12:26 am

#36American-The bottom line is that overall the USA has the sickest population of any developed country, using any logical metric. The USA also spends roughly twice per capita what any other developed country spends on “healthcare”-most Americans realize at this point it is one big mess. Obama’s nonsense was written by and solely for big sickcare interests.

#57 Aussie Roy on 04.19.11 at 12:44 am

Aussie Update

Quick buy, buy before no one will lend you money…

Snare a home loan while you can, as banks set to get tough


Opinions divided over housing bubble fears

Those that still can think for themselves and do a little math versus the delusional.


The RE bulls lack of reasoning exposed.


#58 Dark Sad Monster Bunny on 04.19.11 at 12:45 am

36 American – these figures are years old now, and the graph is rigged to make the life expectancy look worse
but you will get the idea:


I have also seen more recent figures that showed the US health care system accounts for 14% of GDP, while Canada’s is only 8%. So we cant knock the quality of
health care you get in the states, it’s just the access to it,
or more correctly the lack of access to it, that seems
so “unCanadian” to many of us. If you have coverage, you will get better treatment in the US.

#59 Dodged-A-Bullit-in-Alberta on 04.19.11 at 12:46 am

Greetings: # 13[mid-Ontario]

” My hair dresser who just bought….”

A trip to the hairdresser costs my wife 40-100 bucks. I have never, never paid more than 20 bucks for a visit to a barbershop in my whole life. Can you not see why this country is totally screwed??? One shower later, her “hairjob” is gone. Madness!!!!

#60 Timbo2 on 04.19.11 at 12:48 am

Garth, your #20 response, perfect ! LOL and almost choked on a cold one. Where was all that humour in caucus ?

#61 Dark Sad Monster Bunny on 04.19.11 at 12:49 am

36 American – a better link for you


#62 Junius on 04.19.11 at 12:52 am

#36 The American,

According to the OECD the annual per capita health care costs in Canada were $4079 and in the US were $7,538. Note these numbers are from 2008 which are the last years available.

Not that the US numbers were the highest by far – 2nd was Norway at $5,003 and most of Western Europe was in the 3-4K range.

US health care costs remain the highest more an account of the inefficient bureaucracy and monopolistic practices of their HMOs than the quality of health care. It is another case where “free markets” are neither free or really markets.

#63 Junius on 04.19.11 at 12:54 am

#35 John,

I love the “it is different in Alberta” crowd. Check out prices now in Calgary and Edmonton.

At least those of us Vancouver know how badly we are going to be screwed.

#64 Chaos on 04.19.11 at 12:57 am

Price of gas in the lower mainland today…


Only 12 cents until the tipping point…or until the oil tanker runs us down.

It really won’t end well, will it?

#65 Devore on 04.19.11 at 12:58 am

#9 MikeT

why would the buyer make an offer far above the listing price in bully offers? If I were to bully a seller, I would make it far below the price, and keep it valid for a couple of hours…

No one said it was rational behaviour, but that’s what people do when they have to have now or be priced out forever. Apparently it does happen, but I only heard of this when there are multiple offers. The bully buyer throws in an unconditional offer that is almost certainly higher than any of the multiples, with a short expiry time, and hopes the seller will accept their offer and stop further bidding.

#66 canali on 04.19.11 at 1:00 am

and of course you get vancouver sun business ed. fiona anderson still believing in ‘how we’re different here’ (duh): http://communities.canada.com/vancouversun/blogs/businesseditor/archive/2011/04/14/real-estate-comparing-canada-and-the-us.aspx

#67 Steve on 04.19.11 at 1:26 am

garth, I do find your comment about Fukushima, well distasteful. My wife is Japan now with our son and staying with her mother. I am well aware that you are very much a tongue-in-cheek commentator but the situation here with a financial mess is no where near the natural disaster/nuclear made issues over there. Your choice of words are less than fitting and very poor considering your insight.

It was a synonym for meltdown. I regret you took it otherwise. — Garth

#68 poco on 04.19.11 at 1:27 am

#12– sick_of_waiting_to_buy on 04.18.11 at 10:20 pm
How many times you have called buyers greatest of fool and yet they are wiser than people like me waiting only to see 12% rise in just a year. Let alone 2-3 years rise since you are predicting real estate correction. what difference even 15-20% correction would make for buyers in last two years?—-etc etc etc…………….

here’s a little stat for you and the other whiners who can’t see the forest for the trees
–of the condos in the tri cities that were either listed (or relisted) or had a price change just today–20% of those are now selling for less than they paid.——–a couple of good buys in the bunch–more and more everyday—you want to buy ? you find them–do a little homework for yourself –don”t rely on others……………

#69 DON on 04.19.11 at 1:31 am

“sick_of_waiting_to_buy on 04.18.11 at 10:20 pm


How many times you have called buyers greatest of fool and yet they are wiser than people like me waiting only ….”

So buy. Tell us how it works out. — Garth
Go ahead and buy, and see what happens, I believe you to be a shrill Mr sick of waiting. The world doesn’t operate on your schedule, you are the one that must wait…critical thinking is a dead end for some folks.

Some people’s children…

#70 SafetyBear on 04.19.11 at 1:36 am

the citizens of Auystralia are so blissfully unaware that the entire economy over here is being eviscerated. All manufacturing in the country and exports are being hollowed out by a ridiculously overvalued dollar whilst mining companies take the money and run with little or no benefit to the other 95% of the economy. It’s a joke and the laughs are gonna be on us.

Oh yeah, the housing’s the most expensive in the world. Did I mention that?

#71 mel on 04.19.11 at 1:47 am

After reading many truly strange comments, it has reminded me as to why most people loose money over time. Why you ask? Because many are of ‘herd’ mentality. They follow, instead of lead.

Whoever think this housing bubble is real, needs to go back to history. No excuses people, if it is real, it would make sense. This one DOES NOT!

In the end, who cares. It is your money. Go out and spend it. Put your big cash, or debt, around your future leaking roof. I rather invest it, and live life in full. My obsession in life is cash-flow first, and a house only if it make financial sense. As I always remind my good husband, ” we shall buy only when house costs will match renting”. The kind of lifestyle that we live in our retirement, even when prices do correct, we might not want to put our cash into a house. WE RATHER INVEST IT, AND LIVE LIFE IN FULL WITHOUT ALL THAT HASSLE OF OWNING.

#72 Not Fooled By Property Spruikers Hype on 04.19.11 at 1:55 am

You owe the Bank $200,000 & values fall 50% then you have a problem.

1 million people owe the Bank $200,000 & values fall 50% Now the bank has a problem?

Garth I think your advice was wrong. The Daughter in Florida should first stop paying the mortgage, Sit tight the bank will take 2 years to kick them out, during this time they can set aside their mortgage payments to start a new future (Not in a bank account Hidden!!)

After all if they simply walk away they will have to pay rent somewhere? this way it’s Win / Win.

Teach the bank a lesson in risks.

BTW anyone like to see what a $200K Haircut in Perth Western Australia looks like?




#73 BigAl (Original) on 04.19.11 at 1:56 am

Never let electronic voting in Canada.

“Programmer under oath admits computers rig elections”:

You will now see a MASSIVE push by the two big parties, and the media (esp. SunTV) to push for this, under the guise of “efficiency”, cost, etc. etc.

Watch this testimony in this video.

Keep the vote counting on paper ballots counted by your neighbours and community members!

#74 Tim on 04.19.11 at 1:57 am

“Factoring in closing fees on the average home, and even with still-cheap loan rates, the occupancy cost of ownership is now double that of renting similar digs”

What price would a two bedroom condo on the west side of Vancouver have to drop to before it was worthwhile buying? (assuming I could find one that was well built)

#75 Popeye the sailor man on 04.19.11 at 2:20 am

11 angry Bird;

Diploma in Marine technology, We are a single income family Make 94K own a home 75% paid for, and have two preschoolers and a dog. I’m not rich but how you doing? I hate when people try to lump all of us in a category.

PS I’m giving you the Angry bird !

#76 Popeye the sailor man on 04.19.11 at 2:29 am

#29 squidly77

WTF ‘pending listings’ If I had a realtor do this to a listing I had I would freak out on them and report them. Other realtors with what buyers are left should be reporting this also. The MLS needs to be more open, real-estate data should be open to the light of day, and realtors should be held more responsible for there conduct. This should be an election issue! Maybe next time after the POP.

#77 Captain Jack on 04.19.11 at 2:34 am

Florida easily beats yvr. Yvr is a shit hole. People that have never lived anywhere else would not understand. Rain and clouds and swamped with Chinese standing on your back.

#78 Kilt on 04.19.11 at 2:48 am

These people sound like idiots. This isn’t an example of a bad investment (well it is) its an example of people being bad with money.
86k mortgage on 90k home (after 10 years of paying it off)
and do I follow the math correctly on the second house?
71k + 240k on a 275k home?

do they really have more debt that homes were worth in the first place? Or am I not following things.


#79 unpredictable on 04.19.11 at 2:59 am

#11 angry Bird

I make myself 93000$ Total my spouse and me 133000$k we are still renting. The time will come soon. Just matter of time.

#80 Utopia on 04.19.11 at 3:03 am

#5 Ex-Cowtown

“I figure the owners are subsidizing our friends lifestyle to the tune of around $2500 a month. The scary part of this is it really shows where the fair market value on this house should be, and that points to a 50% haircut to the owner”

Good point Ex-Cowtown. We do hope however that a soft landing for Canadian real estate can be engineered and such a dire outcome never materializes.

I mention this because, in fact, you can get even more than a 50% rental subsidy by letting in the very best parts of most cities and enjoying all the benefits of both location and good neighbors. The prices are just so out of whack in some neighborhoods and yet rentals remain relatively competitive.

Guess that all has to do with the fact 70% already own and so plenty of good quality competitive rental stock is coming available as many recent buyers come to terms with the reality of home ownership.

We have often noted here on this site that one of the biggest causes for concern for the future of housing is the fact that there are so few willing bodies available to be sacrificed at the altar of fresh mortgage debt.

The bulk of all the good prospects have already signed on willingly and are now trapped in 30 year bondage to the gods of debt.

The other side of that situation though is that it leaves a surplus of rentals available. This may be part of the reason why so many hi-rise rental buildings were converted to condos in the past two years. Not enough quality tenants.

Renting out space has in effect become a more difficult business lately as so many good quality prospective tenants bought their own homes instead. In many cases these same people would have been the most preferred and stable of rentiers.

There is yet another dimension to the high rate of ownership that for some reason did not sink into my head until tonight.

Does everyone recall that back in January we were discussing why real estate should be correcting this spring due to a “flood” of new listings?

But the flood has never materialized.

Instead what we see are fewer listings in many cases and as Garth has pointed out today, even fewer buyers chasing what the market has on offer.

He then went on to comment that potential vendors were resisting selling as they themselves might end up getting priced out of the market later as it is moving so quickly (paraphrasing here Garth and I hope that is what you meant).

I think that the conclusion must therefore be that because ownership rates are so high that virtually everyone of note is fully invested in the market NOT suffering a correction. The limited numbers of buyers are not yet in a position to really impact pricing set by sellers (not yet anyway).

We might come close to total resistance to any major price moves to the downside for awhile longer, especially if employment rates remain at healthy levels and incomes hold steady or rise.

If this is the case then Bank economists like Benny Tal who see only modest price declines emerging may very well be vindicated in the end as broad market forces will tend to resist any downward price pressures based almost purely on the sentiments of the majority home owning class. Nobody wants to lose money that is for sure. If the economy is robust then there are ample reasons to hold on and not sell. There is not therefore a sense of urgency to lower prices and no desperation.

We are not exactly like America in one important respect. Our banks did not precipitate the financial crisis that effectively tanked a weakened US housing market. I think that is an important distinction.

We have done everything that has already been done in the US while exceeding all the worst aspects such as overall debt/income ratios and price/income housing costs, zero down lending etcetera and yet we are still standing.

Canadians as a whole may not be bullish on the real estate sector anymore but neither are we really negative. Market sentiment has never turned to outright fear and apprehension as it did in the US during the heights of the credit crisis. In fact we have rebounded with vigour and seem to remain hell-bent on outdoing all the negative housing metrics seen to our South.

Could it be that we will last long enough to see the beginnings of a real economic recovery from recession before the negative consequences of high personal indebtedness actually catches up to us?

If that is the case then the possibility does exist that we could go through another housing cycle without a major correction albeit one where prices remain very stagnant while wages and economic activity slowly catches up.

It is possible.

#81 reality guy on 04.19.11 at 3:05 am

Hey Happy Bird

Listen to CKNW about people whining about gas prices and how un-affordable things are and how the government should subsidize Gas to the locals.

My take on that is, with so many millionaires in vancouver the price of gas is chump change. so Deal with it.

I just spent a week at the Arial Hotel in Vegas, lunch cost 60 bucks a meal per person and a muffin and coffee was about 9 bucks. Just chump change to me!!!

They only reason why I can afford that is because high gas prices is making me rich. Oh yeah my bank stocks are too. Because they do a good job raping and pillaging the average joe.

#82 Thetruth on 04.19.11 at 3:27 am

False claims or facts? 559,000


#83 Utopia on 04.19.11 at 3:32 am

#36 The American

Off the top of my head I would say that if you did two meaningful things in the States you would get more cost effective health care.

First, dump the “for profit” model that is draining your wallets and your system and second, embrace a VAT tax willingly.

You see our system is a taxpayer funded system for the most part. We have also accepted a system of transfer payments from richer provinces to poorer provinces via the Federal government that equalizes the burden across the whole country.

It is called sharing the wealth.

Some provinces also impose an added monthly fee for medical services on top of taxes already paid. In addition there is the option to purchase private medical insurance to “top up” your existing benefits.

On the downside though, we do not have the rapid access to medical services for such things as hip replacement or open heart surgery and it is common to be placed on a waiting list until services come available.

This is a natural outcome of service rationing and while many complain, it does work rather well because important medical services rarely become surplus and go under-utilized. It is therefore cost effective from that standpoint.

How much we actually pay is the domain of another poster with details on costs. We do pay a lot more taxes than you folk in the US though but the basic principle is that our system can therefore offer transparency of service to all citizens more or less equally with few ever complaining that they have been burdened unfairly by the illness of others.

#84 Cato on 04.19.11 at 3:40 am

Jimmy’s clan will join horde of strategic defaults, Florida is practically ground zero so neighbours should have plenty of helpful advice in taking advantage of uncle sam. If they game the system properly they’ll get a few years free rent. Skipping mortgage payment and going to mall to shop instead is practically only thing keeping US retail afloat.

Had local candidate knock on door – took opportunity to pop a few economic misconceptions. Don’t bait the bear with an indefensible position – its just makes a smack down too tempting. Who in right mind would run for office if they truly understood what was coming down the pipe. Up until now this “recession” has been a spectator sport for the majority who are happily employed or those lucky retirees drawing full suite of social benefits. That ends when everyone starts feeling the stinging bite of inflation this fall, and its all downhill from there. The keynesians got it horribly wrong, the austrians were right all along. Now we all pay the price.

#85 Utopia on 04.19.11 at 3:57 am

#11 Angry Bird

Sorry Angry Bird, you are going to have to choke back those words. Never underestimate a site dominated by daily pictures of naked fat Boomer’s and Squirrels armed with bazookas.

Need Tinfoil….?

#86 don bool on 04.19.11 at 4:22 am

We just spent the last three months travelling in the States. Mostly in Arizona. Three years ago the financial crisis hit as a result of ABCP. We were in Vegas at the time and witnessed the end of the housing bubble. It was the same in Nevada, California, and Arizona. The next winter we travelled to all these States and the abandoned malls, empty buildings and businesess and housing complexes in subdivisions that were vacated or not sold was troublesome.

We thought this year we,d see some recovery. With the markets and confidence riding high again and with a recovery in sight, we were sure there,d be an improvement from the previous year. It was worse. After a while you get immune to vacant subdivisions, vacant malls, and empty businesses. Three years and it,s worse with the powers that be just continuing to kick the can further down the road.

On the positive side there,s some great deals if you know what you,re doing. The State that seemed to be the least affected was Utah. We didn,t see this devastation at all in Salt Lake City and surrounding area. Looks as those this State didn,t get suckered into the madness of the bubble.

You can,t help but look at where we are and how the hype of the housing crisis in the U.S.A. looks similar here. It,s just plain good luck that our ABCP situation didn,t get started here until P.M. Harper came into power in 2006. If he was in power the same time as Bush we,d be up the same creek. It,s troubling to see the public being sold a security blanket of how we,ve come out of this recession in great shape. Keeping the public upbeat and confident is fine to a point , but using their ignorance to manipulate them and tap them out financially and continue kicking the can down the road and not prepare themselves for possible negative events borders on criminal.

I don,t see how there can be any recovery in the States when this housing crisis hasn,t even begun to be resolved , and now we add a fuel crisis on top of that.

Diesel fuel was averaging over $4.00 a gallon in Arizona and much more in California. A housing crisis and a fuel crisis doesn,t make great conditions for a recovery. There,s no way we can escape the repercussions of the American economic situation forever. That goes world wide also. It,s fine to be a commodity rich country, and we,re doing well but, just like 2008, if the wheels stop turning the markets dry up. The world won,t come to an end and neither will the economy but don,t forget the lesson of 2008 and the fact you can be caught with your pants down if you,re not carefull.

It,s interesting how the financial crisis and the political situation in America that brought them to this point seems to be repeating itself here. It,s right in our face what the repercussions are both politically and economically in Canada, but i suppose B.S. and lies take precedence over history that has a good chance of repeating itself here.

#87 Aussie Roy on 04.19.11 at 5:47 am

Aussie Update

PLUMMETING house prices have hit hard in Melbourne’s northern suburbs.

The median value of Essendon houses has dropped $200,000 in the past three months, from $1.1 million to $900,000.


“At this stage, the fundamentals are still strong,”



Cost, not interest rates, main obstacle to housing market: survey

The cost of housing rather than the level of interest rates is the main obstacle for home buyers, a survey by mortgage broker Loan Market finds.

Of those who responded to the survey, 13 per cent said the lack of competition between lenders was a major issue facing home buyers, 10 per cent cited a potential housing bubble a the main factor.

Those who can see the obvious bubble is slowly growing, 10%.


#88 market top on 04.19.11 at 5:49 am

To 37 Happy Bird
Good post, thanks

Today must be bash Garth day, I admit I was going to get my teeth in as well, but since there is so much blood, I will take a different approach.

My only critical comment is the yanks were at 4.6 times income and Toronto is 8 times income. I would believe the 4.6 was an average. It would be nice to see a comparable US city to Toronto. Nevertheless I get the point.

Houses are emotional yes
They are a place to hang your hat yes
It is a lifestyle of choice yes
renting is a lifestyle choice yes.

So my point, is to the people above who say they have been waiting while prices go up and up. I told Garth years ago (okay maybe months), my house went up 30% so who cares about a 30% decline.

Here is what Garth told me and it still is stuck with me, If I have made a $100,000 tax free gain in three years why would I not sell? or something to that effect.

1. Emotion
2. I have a wife
Need I say more. Oh yes a lifestyle choice

Actually my wife and I looked at renting a condo, the bedrooms were so small our furniture would not fit. Ah some of you will say lead a simple life? But if I was 20 yes, but after 25 years of being with a women I have a lot of junk.

So Garths advice again sell the house get a balance portfolio and live rent free. Well I live mortgage free.
Although Happy Bird free lifestyle is now haunting me.

I think we all dream in averages, some markets will fall more than others.

Is renting the answer? I do not know. As we compare ourselves to US all the time; I read yesterday rents are set to go up 12% this year? Which makes sense as everyone is walking away from houses and renting. Supply and Demand.

Now listen to this comment people, then read it again,

A forecast is a moving target, no-one has a crystal ball.
Houses may decrease in value, in the short term, and as Garth loves to point out when boomers retire R/E will decline even more. It might be 10% or it might be 50%, every city will be different.

Now read this again

It is a forecast based on current trends, statistics and what Garth and a few others feel will happen.

He might be right, maybe next month, next year or in 5 years. The point is you either agree with the facts or you do not.

Read this again

Do not come to this blog looking for free advice and expect the market to collapse tomorrow. Duh!

The only correct answer is the choice you make is your choice.

But here is a repeat of common sense that Garth has posted over the years.

1. Pay off all debt, DUH! I still love to ask how many stupid people do not pay off their credit cards every month????
2. Do not over leverage like 5% down over 40 years or remortgage and buy toys. Oh yes I look down the street every house has two cars and they are in the driveway because the garage is stuffed full of junk
3. Save all the money you can, live within your means.
4. A women will break your heart and your wallet, opps sorry that one is my advice, it just slipped in there.
5. A house is a place to live, think of it like buying a car. It is not an Investment.
6. Have a nice day because in 100 years none of this will matter.

Thanks for reading to the end, And why do people want to be first post? its 5:00am I cannot sleep and it is at post 37 and by the time I get to work I will be post 90.


#89 Ayn Rand on 04.19.11 at 6:51 am

Angry Bird

Family income of almost $200K. Have owned our Toronto home since 1989 paid off in 13 years and after another 3 years moved out to the “country” and have sadly another mortgage. Was considering purchasing a rental property over a year ago and found this site when my financial advisor advised me to do the research on ownership.

#90 palebird on 04.19.11 at 7:05 am

#35 Alberta can think whatever it likes but the global economy is slowing and oil is going to drop again like a rock..

#91 Waiting for the sun on 04.19.11 at 7:14 am

))) Garth: Jingle mail, Jimmy. Tell them to walk.

Why would you advise this? Since this advice is intended for people in Florida, please elaborate. Florida is a recourse state, so walking does not get you away from the mortgage.

Non-recourse state. — Garth

#92 David B on 04.19.11 at 7:23 am

Soon gas will be $1.50 per ltre …. and King Steve of Canada will be rolling in cash and he will buy more guns and war toys and every male under age 50 can go off fight to save the world. This will open up really big paying jobs for all the women of Canada and all will live happy there after … Think I am wrong check the polls ….

#93 David B on 04.19.11 at 7:24 am


Interesting read ….


#94 S.B. on 04.19.11 at 7:37 am


The longest rally in developing- nation stocks since 1997 may be ending as higher interest rates in Brazil, Russia, India and China curb earnings growth.

For the first time in two years, emerging-market analysts are cutting profit estimates more than they’re raising them, consumer stocks are trailing energy producers and shares of smaller companies are losing to larger equities, data compiled by Bloomberg and Morgan Stanley show. The same reversals foreshadowed the end of the emerging-market rally in 2008.

#95 OttawaMike on 04.19.11 at 8:03 am

#80 Utopia on 04.19.11 at 3:03 am
Good Post and similiar points I tried to elicite here a couple of months ago.

#96 The American on 04.19.11 at 8:04 am

At #93: Waiting for the Sun, Florida is a non-recourse state. The banks have no recourse on you if you default, other than to take back your home and ding your credit. You cannot have wages garnished, be placed in debtors prisons, or have judgements placed against you (on first mortgages…. seconds follow you around for life unless you 1. pay it off, or 2. have the bank agree to release you of your second’s obligation at the same time you’re released on the first)

#97 The American on 04.19.11 at 8:07 am

At #89: Ben, fat chance. Give it two years :-) Unless you’re already 85 years old or so, you won’t be in some raisin ranch saying that. You’ll be in the gym (if you can still afford the membership) talking with your buddies about the big fall.

#98 Moneta on 04.19.11 at 8:08 am

That’s the point. Garth is essentially saying that this strategy is risk free and that people with their mortgage paid off not doing are idiots.

I said neither. So much for the respect I held you in. — Garth
You might not have said it explicitly but you imply it.

Look, I’m in the portfolio management/pension business. I’m in a good financial position and I still have 20 years ahead of me… absolutely no reason to be worried. Yet when I read your posts, once in a while I feel like running for the hills.

So I can only imagine how the ones who are behind financially feel and react when they see they are not taking advantage of some leverage on their paid off house.

I did not state it. I did not imply it. Apologize. — Garth

#99 OttawaMike on 04.19.11 at 8:08 am

A successful business associate who owns a multi million dollar commercial property told me yesterday he sold his Riverside south McMansion in 3 days, private sale.

He has the means to easily buy again but is going to rent in the same neighbourhood and wait things out.

This fellow is both an immigrant and has never heard of this blog, by the way.

#100 Bob Copeland on 04.19.11 at 8:09 am

Does anybody know if an American can visit Canada and rent a safe deposit box in a canadian bank?

#101 The American on 04.19.11 at 8:10 am

At #87: Aussie Roy, I’m very sorry to hear that. What angers me is the fact the media is still trying to spin what is nearly a 20% haircut already. This trim in prices is in a mere three months! Unbelievable. That is a tremendous drop in only 90 days. To call the fundamentals of the housing market “strong” is criminal. That isn’t hitting a wall, it is driving over a cliff.

#102 S.B. on 04.19.11 at 8:12 am

#48 no guts on 04.18.11 at 11:54 pm

Apparently what you watched is not a tsunami video but a video of a dam bursting. How did it burst – due to quake or man-made? See: New Orleans flood barriers suddenly crumbling. Either way the end goal is destroying Japan’s economic (add it to the long list of countries).

#103 RentinginRosedale on 04.19.11 at 8:12 am

#35 John on 04.18.11 at 11:20 pm

“…Migration is runnin rampind”

John, what the heck does that even mean??

#104 RentinginRosedale on 04.19.11 at 8:19 am

Angry Bird,

I work at Arby’s, 30K income. Wife works at Wendy’s, 30k. $60k total. Guess you were right!

#105 S.B. on 04.19.11 at 8:25 am

#70 SafetyBear on 04.19.11 at 1:36 am

Yes that’s the plan: all homogeneous, middle class, First World countires must be destroyed. The War on Middle Class.

By hook or crook, by economic or man-made weather disaster (lest we forget, every square inch of the earth, sea, sky, and even space is thoroughly weaponized using technology we can only dream of – stolen from out taxes, but I digress..) every country must fall.

The middle east gets bombs, and the First World receives economic or “weather” bombs.

Immigration: USA, Canada, and UK being swarmed by 2nd and 3rd World immigrants who will reduce us to, well, 2nd and 3rd World countries.
Proof: On TV saw a UK town that is bankruped by the poor immigrants who have stressed the health, school, welfare, housing systems the max.
In some areas of USA the teachers cannot cope, most of the class is Mexican and speaks no English.

Not knocking immigrants themselves, lord knows most everyone simply wishes to provide for their families and earn a honest living. But from what I see in Downtown Toronto, most every low-paid service position is held by immigrants or at least people who have little command of the language. There are no good-paying jobs remaining for immigrants, and their degrees are worthless over here unfortunately. Yes I once met a Toronto taxi driver who held a PhD.

Can we continue to fund CPP and health care system from taxes of $10/hr service jobs? Sustainable?

#106 Apsalar on 04.19.11 at 8:38 am

It looks like people are beginning to “get it”:


#107 The American on 04.19.11 at 8:55 am

At #29: Squidly77, you are precisely correct. At the peak of market in the U.S. I began noticing the immense amount of developer holdback that was NOT being placed on the MLS. This was one of the few remaining last resorts used to keep prices propped up before the pop. The realturd will tell you this is a matter of of a “phased sales approach” so that they can determine the true market value of a building before selling all their inventory. In all honesty, it is because they know the old fundamentals of supply/demand come into play and too many MLS listing means price drops.

At #32: JohnnyBGood, that’s damn funny :-)

At #56: BrianT. There you go again with your anti-American undertone… You didn’t answer my questions. And again, you make false statements. You’re so misguided.

At #58: Dark Sad Monster Bunny, THANK YOU!!! That’s exactly for what I was looking!

At #62: Junius, thank you.

This is legislation I am pushing for here in the States. I believe if a condo building, or multi family development, is created then it should be REQUIRED for all units to be placed simultaneously on the MLS for transparency purposes to the consumer. Effectively, if there is a taxable unit, it must be placed on MLS as long as other inventory within that building are also on MLS.

At #86: Don Bool. You said it as plain and clear as anyone I know. Great post!

#108 SMOKING MAN on 04.19.11 at 9:03 am

In the GTA April is shaping up to be a record month in sales and prices. Anywhere you look all you see are sold signs and political signs.

In my hood, almost everything is selling above asking.

This nasty end that you all talk about well no sign of it yet…

Heard dynamics kids, learn it and prosper……Fundimentals don’t mean crap………

#109 AACI-Okanagan on 04.19.11 at 9:03 am

watched a really great documentary this week-end, I suggest everyone go and rent it..


#110 Moneta on 04.19.11 at 9:10 am

I agree that there are some portfolio managers out there who will make 8%+ but where I get flustered is when you make it look as if it’s low risk when you find the right manager.

It is very hard to know if returns over a short period of time are talent or luck. And over the long term, it’s even more dubious because there is so much turnover in PMs that long term returns don’t mean much anymore.

That’s why the rich go for well known conventional asset management firms which charge lower fees. Let’s see how they have done, I have those numbers right in front of me:

For the last 3 years, balanced portfolios in Canada have returned between 2-4.5%. And over the last 5 years, they all converge to around 5.5%. And that’s before fees.

Let’s not forget that Canada’s markets have done the best globally over the last decade, meaning that balanced portfolios would have offered lower returns everywhere else.

Thus considering that most investors who can leverage a paid off house are usually over 50, I would say that 5 years is a long time for a strategy to bring a spread that is much lower than you would get with a 8% return.

So to get the 8+% returns you are talking about, you need to go with someone who is less conventional. But here is the problem, if you are not an investment pro, do you have the proper skills to assess if the the talent is really there or not?

It’s always a leap of faith.

Your numbers are without credibility. Investing in bank/insurer preferreds alone gives a yield of over 5% – and in tax-efficient income. Mix in REITs and a modest basket of the bluest blue chips and your 5.5% number is absurd – and this is a very conservative balanced portfolio. Stop trying to convince people that investing in financial assets is fraught with risk, when most urban Canadians are throwing themselves over a cliff with real estate leverage. As I said, I had far more respect for you before you took up this little, misguided crusade. — Garth

#111 Gord In Vancouver on 04.19.11 at 9:15 am

March inflation soars above target range

Carney should raise interest rates soon but you know he’ll find any excuse to cater to the real estate industry:


#112 whiteshoes on 04.19.11 at 9:15 am

Vancouver Ltd By Donald Gutstein,1975


#113 BadMother on 04.19.11 at 9:35 am

Hey Angry Bird – we make $200K+ here in Toronto and could buy any of these overpriced homes…but we choose not to. University educated with two previous condos owned and sold under our belts. Dr. T is absolutely right about the upcoming crumble of our housing market and we can thank the Conservatives for that.

$60K at Mickey D’s? I think not. Maybe in Fort McMurray….

#114 Utopia on 04.19.11 at 9:39 am

#73 BigAl (Original)

“Never let electronic voting in Canada”

Hundred and ten percent agree BigAl. If those lazy buggers cannot cheat elections the good old fashioned way with alcohol and gifts then they have no rights at all to an easy-as-pie method like “home voting” for invalids and the generally disinterested youth or by e-mail and online button pushing.

Ironically enough it is the “left” that will push for these changes because they are incapable of getting the vote out through well trodden true and tried methods like car-pools and phone campaigns.

Well why not bring the vote to them since they won’t show up in person? Vote in the comfort of your own home friends. Hell, you can even do it naked and drunk with your Gran. In fact, let that senile old bat push the buttons for you….You are ok as long as you have a connection and IP address. Right?

Psssstt, don’t worry, nobody will steal your vote (hee, hee)

Seems harmless enough. As long as you trust your computer and all its software….and add-ons…..and your service provider….and the veracity of protocols…and home security…..and privacy laws…..and faith in electronic media….and a belief that hacking cannot ever happen, oh no!!! not to you!!!!

but do you?

Seriously. Do you?

#115 SMOKING MAN on 04.19.11 at 9:39 am

The only thing that will unhinge this market is a huge spike in rates…..

As I have said before and I will keep saying the same thing till proven wrong(not going to happen) is The Bank of Canada will spike rates when they see big job gains or a massive spike in wages. Is in not funny that the last stat before BOC’s overnight announcement is the job numbers. To add insult with the dollar way up, it’s economic suicide for the BOC to even suggest a spike.

Now Garth in this post you say, Job and wage gains suck….That being the case no darn way you will see a spike in rates.

BUY virgins BUY

A spike will not be required. Incremental tightening will do the trick. The virgins will be after your cancerous hide. — Garth

#116 Paul on 04.19.11 at 9:42 am

#94 David B on 04.19.11 at 7:23 am

Soon gas will be $1.50 per ltre …. and King Steve of Canada will be rolling in cash and he will buy more guns and war toys and every male under age 50 can go off fight to save the world. This will open up really big paying jobs for all the women of Canada and all will live happy there after … Think I am wrong check the polls ….

Gas will probably be $1.50 ltre but the polls mean didly squat this time. King Steve has pissed off the wrong people……http://www.youtube.com/watch?v=e0LpldpPwUU&feature=share

#117 Moneta on 04.19.11 at 9:43 am

Your numbers are without credibility
The numbers are even lower in here, but here they are:


Pooled fund data for institutional fund managers, most with mandated pension obligations. Meaningless for individual investing. — Garth

#118 45north on 04.19.11 at 9:57 am

jane54: (me north you jane)

her neighbours were so tight on their mortgage payments that they didn’t have a cent

My sister lives around there. I figure interest rates will go up, jobs will disappear and gasoline prices will hit $1.50 a litre. The perfect storm.

on another subject: Herd refers to a group of domestic animals like cows or sheep. You can have a herd of cows or a herd of sheep but you have a flock of chickens.

Heard is the past particple of the verb hear. Present tense is “I hear”, past tense is “I heard”.

Herd and heard are pronounced the same but mean completely different things. According to wikipedia they are homonyms in the looser sense.


#119 Live Under Your Means on 04.19.11 at 10:04 am

#73 BigAl (Original) on 04.19.11 at 1:56 am
Never let electronic voting in Canada.

We were just talking about this a few days ago. I am totally against electronic voting. This testimony just confirms what millions suspected.

#120 Dmitri on 04.19.11 at 10:16 am

Answer to Angry Bird: That is your wish :-) I am university educated with around 180k income in Toronto. Love this blog. Was glad that I was not alone with that kind of thinking. Just because my wife and me were not obsessed with stainless steel and granite when we came to Canada in 96 and after several carefully thought through financial decisions today, at 48, can spend couple of weeks almost every month here, in Florida in our 1600 sq foot house in Miami burb which we picked up last year for 57,000. Our neighbors, two identical houses of 1,200 sq feet. Their owners paid 150,000 in 2007 and 35,000 in 2011. Our life is set of choices and outcome is mostly based on your own decisions, not luck! If you have an obsession or cave in to social pressure you pay and pay and keep paying long after obsession and pressure are gone. And you can always find: Socially Acceptable Reason For Failure :-)

#121 SMOKING MAN on 04.19.11 at 10:19 am

Another thing worth mentioning is bond yeilds are dropping like a rock, which means fixed rate mortgage rates set to drop again…

Since Apr 11th to 18th almost a 30 basis point drop..on benchmark 5 year………

God does not like bubble heads………


Long-term mortgage rates recently increased. So much for your “drop again” statement. — Garth

#122 Moneta on 04.19.11 at 10:19 am

I enjoy your blog and your colorful personality but I just have trouble with how you present a consistent 8% annual return on a portffolio as a given.

I know how retail investors are. They’ll go see an advisor and ask them what returns they should expect. Most advisors will say that he should not expect much more than 5.5% (with 3.5% from bonds and 8% from equities).

The investor reading that he should be making 8% will keep on knocking on doors until he finds the first bozo who tells him that anything lesst than 8% is unacceptable.

My bozo balanced, conservative, entirely liquid portfolio returned 15% last year and is making 9.3% this year. Just quit this tirade. The facts do not support your position. I am still waiting for that apology. — Garth

#123 Live Under Your Means on 04.19.11 at 10:20 am

#78 Kilt on 04.19.11 at 2:48 am
These people sound like idiots. This isn’t an example of a bad investment (well it is) its an example of people being bad with money.
86k mortgage on 90k home (after 10 years of paying it off)
and do I follow the math correctly on the second house?

Not sure whether I mentioned the following on another of Garth’s posts. We know someone who bought a house several years ago when he was single. A couple years ago he met a woman with 2 children from a prev. marriage and they moved in with him. Married a year ago. They now owe more on the mtg. than what he paid for it. Not because of home renovations. They’ve been using it as an ATM to buy all the expensive toys, etc. They’re worried, yet just came back from a week vac. in cuba. Not sure if he even has a pension plan. She doesn’t.

#124 45north on 04.19.11 at 10:21 am

Canada Inflation Surges: Core Comes At 0.7% On 0.2% Consensus

USDCAD moved a good 50 pips from 0.963 to 0.958 in seconds


in seconds

Many here say that the Bank of Canada won’t raise interest rates because they like interest rates just the way they are.

Bank of Canada will do what it has to do.

#125 Junius on 04.19.11 at 10:26 am

#117 Smoking Man,

You certainly are smoking something if you think the only thing that will move interest rates are job gains.

First of all, the 3.3% inflation rate we saw last quarter if well over the B of C goal of 2% so that could be enough to trigger it.

However you, like all of the people here who suggest it is all within the B of C’s control are completely forgetting the bond market and its impact on interest rates.

It is now very likely that the gov’t bonds will be under selling pressure which will lead to higher interest rates. The 5 year is where fixed interest rates are set.

#126 Gord In Vancouver on 04.19.11 at 10:28 am

#124 45north

Many here say that the Bank of Canada won’t raise interest rates because they like interest rates just the way they are.

Bank of Canada will do what it has to do.

I agree but we’ve seen this movie before.

#127 Moneta on 04.19.11 at 10:34 am

I am still waiting for that apology. — Garth
Let me sleep on it.

#128 BrianT on 04.19.11 at 10:35 am

#122Dimitri-Sounds like you like your Miami place-would you mind providing details re property taxes and the neighbourhood? Hard to beat that price. How about your hurricane ins?

#129 JoshL on 04.19.11 at 10:37 am

To all of those who simply MUST buy.

Go ahead and buy. It might even work out for you. But please … for the love of god … buy something that you can put 10 to 20% down on and afford the payments. Not barely afford … really afford, with money left over at the end of the month. If not you’re setting yourself up for disaster.

#130 squidly77 on 04.19.11 at 10:49 am

How about your hurricane ins?

Calgary and Red Deer have more weather related disasters than Florida.

Florida has no State personal income tax.

#131 Denisa on 04.19.11 at 11:11 am

@ angry bird; You’re showing your ignorance…( I’m embarrassed for you)

You don’t get it. You’re too angry. The resentment is obvious. Financial security is the goal, even people with a modest income can build a lot of wealth if they decide to follow Garth’s financial strategies and tips.
The interest I make off the money from the sale of my real estate (since 2005) pays for the cost of living today. Life is sweet. Don’t be so resentful angry bird. Take some good advice.

#132 squidly77 on 04.19.11 at 11:24 am

“There is no doubt that we are seeing more and more the impact of severe weather in Alberta,” said bureau vice-president Doug Noble.

Insurance companies are working through about 60,000 claims. The $400-million estimate does not include damage to agricultural crops in the province.

That’s a lot of damage for a city of only a million people.

Alberta Tornados

The Pine Lake, Alberta Tornado was a deadly tornado in central Alberta on July 14, 2000 that struck a campground and trailer park. Twelve people were killed, making it the killer tornado

#133 Devore on 04.19.11 at 11:26 am

#26 BraveSirRobin

I don’t see interest rising in the near future. Inflation is essentially flat


Do try to keep up with the news.

#134 rory on 04.19.11 at 11:29 am

Another little update from Karl D on the USA housing market titled “Did the Realtors screw you?”

Of course we all know the answer no matter what the market is.


#135 Waiting on 04.19.11 at 11:44 am

“I wonder what the typical education and income are of the people who come to your blog. Make 60K family income and work at Mc Donalds!”

Family income, 120k. Savings, 40k. 27 & 32 y/o, both of us with government pensions brewing.

Why can’t we afford a place to live? Aren’t we exactly the couple that should traditionally be buying a home right now? How can a family that will probably approach 200k yearly be priced out of a housing market forever? That does not make sense.

#136 Steve on 04.19.11 at 11:50 am


Housing market collaspe is the least of our worries. The video is funny but very sobering.

#137 bill on 04.19.11 at 11:51 am

angry birdie
I have been laughing at the deluded fools who buy in vancouver for years.
wet coast condo rot says it all..and the houses are no better,just more expensive.
fwiw I am a retired sawmill worker and my wife is an occupational therapist.
we invest my meager pension and live off her wages.
we dont spend much on vacations as we find that any sunny spot combined with a cooler replete with sandwiches and suitable refreshment works just fine.
I love sitting in a mountain stream [in a chair!] reading newspapers and drinking beer. I find that the typical mountain stream fed by snowmelt brings the beer to an optimum temperature. and so handy right beside you in the stream.
what does an angry birdie do for vacation I wonder?
do angry birdies go on vacation? you sound like you need one.
two of my favourite spots are between the bridges on the lynn creek and downstream of the bridge at canal flats. silver creek by hope is nice too.
you should try it. maybe you will become a happy birdie…
so dont worry about us kicking ourselves [seems stupid no matter what the circumstances] for not buying.

#138 MP on 04.19.11 at 11:55 am

Easy on Moneta; she is one of the few people’s comments I actually fully read on here.

#139 BrianT on 04.19.11 at 11:56 am

Gasoline at $5.34 US/gal in the sprawling suburban landscape of Southern Ontario with no effect-pretty wild.

#140 Cellar Dwellar on 04.19.11 at 12:13 pm

@ #114 whiteshoes
ANY idea where I can get a copy of that book? Its like looking at a 40 year old time capsule of Vancouver.

#141 randman on 04.19.11 at 12:15 pm

Here you go Garth

Marc Faber says”Diversify”

According to Faber once the Federal Reserve’s quantitative easing ends in June, the central bank will come under pressure to announce another round of easing, or QE3. While he acknowledged the greenback may see a temporary rally, he said long-term the dollar would to continue to decline. Click here for more.

“The value of the U.S. dollar will be precisely its intrinsic value — namely zero, precisely zero,” said Faber. That in turn would boost demand for gold and silver.

Another factor that would boost gold prices were negative real interest rates in emerging economies. He said interest rate hikes in countries such as India and China would not keep up with the rising cost of living and that would make assets such as gold and property attractive.

Faber recommended holding physical bullion over other gold assets such as ETFs or gold mining companies. However, he advised against holding gold assets in the U.S. because of the risk of “expropriation” of gold assets by U.S. authorities. Click here for full interview.

Faber also said he expects property prices in places such as Singapore to continue rising given negative real interest rates in that country. And he said the most important thing investors needed to do at a time like this was to diversify.

“(Investors) need to own some real estate, they need to own some farmland, they need to own some equities, some cash and some precious metals,” Faber added.

#142 grantmi on 04.19.11 at 12:16 pm

#131 JoshL on 04.19.11 at 10:37 am

To all of those who simply MUST buy.

Go ahead and buy. It might even work out for you. But please … for the love of god … buy something that you can put 10 to 20% down on and afford the payments. Not barely afford … really afford, with money left over at the end of the month. If not you’re setting yourself up for disaster.

they won’t! They’ll leverage themselves to the teets and call foul to the local paper when they lose their home to the banks!!

#143 Live Under Your Means on 04.19.11 at 12:30 pm

#113 Gord In Vancouver on 04.19.11 at 9:15 am

I was going to send the following earlier but waited to see if anyone had sent it. This is a Canadian Press article, published in today’s Chronicle Herald.


We have the highest inflation rate. Not surprising. Did some grocery shopping yesterday. A loaf of reg. whole wheat bread was $2.69 so I drove less than a km and got the same bread for $2. at the mfg.’s outlet store. Bought 3 and froze 2. I feel sorry for those on min. wage and those with x number of kids (especially teens). I know transportation costs are partly to blame. But why is that when the cost of fuel decreases, prices never seem to be reduced. And, am po’d by the blatant misleading advertising by the big chain grocery stores; r flyers offering specials – save $2.00 when you you’re only saving $1+ or 2 for 1 but the reg. price has been bumped up 25+ % from the previous week’s price – and this before the latest hike in fuel prices. When I see a really good deal on non-perishables I buy lots. But I have lots of space and can afford to do so. Many are just surviving. Lost another 350 full time local jobs yesterday, in addition to several hundreds recently. Glad I’m retired an hubby has a secure job.

#144 AG Sage on 04.19.11 at 12:32 pm

>Jingle mail, Jimmy. Tell them to walk.

Walk? How about run?

That bank knew exactly what they were doing when they issued that mortgage–they were churning it to Wall Street for their own personal annual bonus. Let ’em eat it.

#145 Double down on 04.19.11 at 12:51 pm

I don’t know if this blog is suppose to be factual or comical – (regarding bloggers postings) –

Seems everyone on the blog is anti-Harper – didn’t you know it was his personal doing that all these hardships around the world – why people even post that Harper wants to bring down the Canadian economy, based on what – if the NDP or Liberals are such saviours, why don’t they spell out what they will do – (not the promises of more deficits) – on a fair scale – while most industrial nations have been kicked in the bong-gos – Canada at least has stayed above water (and Harper should be given credit for having the savvy to understand economic structure) I wonder – just wondering – if the Wonderful and enlightened Liberals were in power, would we all have 3 homes, 4 cars and having someone clean our sh$t… Oh the Liberals will bring prosperity and joy, not just in Canada but througout the entire world –

God help us if the Liberals win, Iggy’s own words while he lived in the states – belittling our country – He will sell us out in a matter of minutes once he gains power. He’s a self-centred a-hole, and nobody speaks for the Liberals but him (his exact words).

Of the parties at hand – I will take helmet hair harper – I would rather eat off a plate with Harper then eat out of a garbage can with Iggy – Okay Liberal lovers – eat crow and tell me how wrong I am – but you know I am right!!

This is not a political blog. Move on. — Garth

#146 Macrath on 04.19.11 at 12:56 pm

#129 Moneta
Investment pro`s 4.5% max before fees! I have a GIC that`s paying that.

#147 JT on 04.19.11 at 12:56 pm

It seems likely to me that people will decide not to sell their houses, suck it up and get paper routes if it comes to thaat. I mean, if you can’t dump it anyway, what the hell? But no one is going to sell their house for $100,000 if they paid $800,000 for it. One can always get room mates, its what I’d do if I couldn’t sell. Just my little idea.

#148 realpaul on 04.19.11 at 1:04 pm

Chinese crooks still loving Vancouver as a place to wash money. Here’s one that was thwarted by the Americans….he should have dealt with the CDN authorities…he would have got off with a fine.


Money laundering is so common in the Vancouver casino’s ( reported by the RCMP) that the cops say they won’t make any arrests unless they get more money in their budget. Isn’t this like the Willie Picton murders where the cops refused to investigate unless the insiders got a raise and promotion?

Bad money will continue to flood Vancouvers real estate market as long as the police refuse to make any arrests. The casino workers report that people ( high rollers fron China) walk into the casino with cardboard boxes full of twenties and walk out with a cheque from the casino. Are the banks in China giving out cardborad boxes full of twenties for these supposed ‘high rollers?’

Where does one get a cardboard box full of twenties? Is selling lottery tickets at the corner store that profitable? Criminals with money don’t care about the price of real estate

a) they want the money laundered…they get it washed through the real estate spin cycle

b) They get a foothold in Canada so that they can’t be extradited back to China.

c) when the money is free…its freely spent.

#149 Taiwan is not China on 04.19.11 at 1:10 pm

Too many fools out there… and MSM is a fool by itself…
Extreme actions are required to stop this madness or else the extreme debt will destroy everyone in its path including the economy….

Can someone with time please start a first time home buyers strike just like in Australia ??

#150 Stevo on 04.19.11 at 1:17 pm

#11 Angry Bird – my wife and I pull in 300 large, are university educated, own with 66% “equity”.

Judging by your comment and the responses to your comments, I think the average IQ here would comfortably outstrip yours.

Maybe you should take an IQ test. I would guess you would come in sub-90. (and that’s being generous)

#151 BrianT on 04.19.11 at 1:19 pm

#137Waiting-I guess it is the whole Facebook/Twitter/Narcissism trip-why would anyone care in the least how much money you do or don’t have-you are trying to impress us of your worth as a human being on an anonymous blog site.

#152 more sickness = more stupidity? on 04.19.11 at 1:22 pm

#56 Bri

ironic, ain’t it?

some things to consider:

more people are employed by the cancer industry than actually HAVE cancer.

organizations promote “cancer awareness”…not cures.

cancer screening devices may potentially cause cancer.

one of my best friends just discovered that one of the side effects of his asthma inhaler (advair) is…you guessed it…asthma.

SSRis (prozac) is well known to cause depression.

perhaps this explains why so many people are so mindless when it comes to real estate.

essentially, they are not well, physically, or emotionally.

food for thought.

p.s. where’s the SOMA when you really need it, hmm? ;)

#153 BadMother on 04.19.11 at 1:28 pm

#140 – MP

Agree, Moneta and the American have great insight. I always read their views. Smoking Man on the other hand is smokin’ sumthin…must be why he can’t spell or is grammatically incorrect.

#154 BPOE on 04.19.11 at 1:29 pm

Gold hit 1500 bucks folks. My prediction of $1500 gold by Easter came true. Vancouver up 15% Mar 2010 – Mar 2011. No excuses just solid investment advice. By the way interest rates are never going higher.

#155 eddy on 04.19.11 at 1:44 pm

I agree 100%, a correction is inevitable, selling now makes sense if inventory is low

Re: the election. No one hates Zteven Haarper more than me (cough)
For me the issue is globalization -I HATE IT, and I figure Ignoratieff is a lot worse than even Haarper.


Toronto just voted to keep fluoride in the water. Read the Globe article, read the comments, the Vast majority of readers do not want fluoride.
I smell a rat, and the rat is the bottled water industry.

#156 Raven on 04.19.11 at 1:47 pm

The world seems to be going crazy. Gold just hit $1500/oz. Silver has nearly tripled in value in two years. Real estate prices in Vancouver still climbing despite the rest of the world. Impossible for average folks to buy a place here. Since when does a two bedroom condo need to cost $500K plus?? Gas hit $1.40 a litre. I paid almost $70 for a tank yesterday.

The poor and middles are getting squeezed. Wages are not going up. How do most people keep up? By getting further into debt, I guess. With credit cards and loans. Chasing a celebrity dream and some delusional sense of what they deserve or need to be. I don’t get it. I just don’t understand how this can be sustained. Whacked.

Is $1500 gold the new normal? Do the old rules of “live within your means” not apply anymore? The way the world economy is managed is totally outside of my realm of understanding and I am not a stupid person. I just get the sense we little people are being played. But eventually even what we can cough up for sham investments, real estate and other consumer nibbles has to get tapped out. Aren’t we already? I wonder how much of daily commerce is just trading debt for debt rather than coming out of cold hard cash and true wealth? All a shell game?

My plan: stick to debt repayment. I will be utterly out of debt in two years, thank goodness. Then I can start packing away the savings and investments big time. I will continue to rent. It makes sense when a 20% down payment will take years to save and most people are amortizing over 30+ years. Just doesn’t seem like a wise investment to me. I figured if I save enough in retirement and other savings funds I can pay for rent out of interest alone without touching capital when I retire, even with cost of inflation factored in. (Good advice offered on this blog suggests a modent 5% is totally doable). No mortgage, no on-going repairs, no property taxes and strata fees. No stress. Move wherever I want when I want and have a healthy nest egg that doesn’t need to be touched. Free shelter, essentially. Even when you pay off a house and are mortgage-free, you are never expense free because your place needs upkeep. But if renting doesn’t suit anymore, I’ll have a massive chunk to lay down on a place if I choose. Just makes sense to buy when you are older than when you are young, underpaid and economically vulnerable. When did it become a birthright to own a place in your 20s anyway?? How did I get so far “behind”?

There are a few people out there making a lot of money right now, but not that many. I will not be chasing it. I will be debt free soon enough. I have a stable well paying job and I have trained myself to live on half my net income. But I am not a cheap or overly frugal person. I like a good time and have travelled and just worked extra jobs here and there for that extra stuff. I drive a well maintained 2003 VW, rent a comfortable apartment in a prime city location where I want to be, not have to be, and I live in a city I want to be in, close to family and friends and the beach. I have lived that other life of home ownership in the burbs and in the city. It was unsustainable and I was not a happy person living behind the facade of normal. Rent, save money, invest prudently, slow and patient execution of the plan. Cushion myself from others’ folly as best I can. But why do I get the sense that ultimately those of us that aren’t part of the herd madness will be stuck with the bill anyway?

#157 JoshL on 04.19.11 at 1:52 pm

My bozo balanced, conservative, entirely liquid portfolio returned 15% last year and is making 9.3% this year. Just quit this tirade. The facts do not support your position. I am still waiting for that apology. — Garth

Two words for you Garth … Quantitative Easing.

QE 2 is about to run out. Want to bet they initiate QE 3? I’m not going to bet on it, but as soon as it’s announced I’m going to get myself more exposure to the stock market that’s for sure. No QE 3 would be a signal that things are about to turn south. QE 3 will just pump things up a bit more … before they crash. You simply can’t keep printing cash forever and not destroy the purchasing power of the average joe.

#158 eddy on 04.19.11 at 1:56 pm

I agree 100%, a correction is inevitable, selling now makes sense if inventory is low

Re: the election. No one hates Zteven Haarper more than me (cough)
My issue is globalization – we have to fight it. I figure Ignoratieff is a lot worse than even Haarper. I won’t vote.
Someone please remind me, I forget, which NATO country did Libya attack?

Toronto just voted to keep fluoride in the water. Read the Globe article, read the comments, the Vast majority of readers do NOT want fluoride.
I smell a rat, and the rat is the bottled water industry. Just a hunch.

#159 Debtfree on 04.19.11 at 1:58 pm

@ john # 35 . this link below shows why alberta could be a banana republic if you only had bananas .

#160 Steven Rowlandson on 04.19.11 at 2:00 pm

Garth wrote:

Housing affordability is now shot to hell. People buying in this environment might as well join the Libyan army. They’re fried. Any doubt of that within the largest housing market in the country was erased this week as the latest stats emerged.

Garth housing affordability has been shot to hell for a long time now. The thing is it is now being officially admitted to. Better late than never but the economic damage is done. What has to be examined is the demographic and reproductive damage done by high real estate prices. I would imagine that that once imigration is discounted canada is barely growing if at all. It might even be shrinking in some respects.


#161 jess on 04.19.11 at 2:02 pm

internet poker gdp elaborate scheme

… the unsealing of an indictment today charging 11 defendants, including the founders of the three largest Internet poker companies doing business in the United States—PokerStars, Full Tilt Poker, and Absolute Poker (the “Poker Companies”)—with bank fraud, money laundering, and illegal gambling offenses. The United States also filed a civil money laundering and in rem forfeiture complaint (the “Civil Complaint”) against the Poker Companies, their assets, and the assets of several payment processors for the Poker Companies. In addition, restraining orders were issued against more than 75 bank accounts utilized by the Poker Companies and their payment processors, and five Internet domain names used by the Poker Companies to host their illegal poker games were seized.containing the proceeds of the charged offenses. Pursuant to a warrant for arrest in rem issued by the U.S. District Court, the United States also seized five Internet domain names used by the Poker Companies to operate their illegal online businesses in the United States….

By late 2009, after U.S. banks and financial institutions detected and shut down multiple fraudulent bank accounts used by the Poker Companies, SCHEINBERG and BITAR developed a new processing strategy that would not involve lying to banks. PokerStars, FullTilt Poker, and their payment processors persuaded the principals of a few small, local banks facing financial difficulties to engage in such processing in return for multi-million-dollar investments in the banks. For example, in September 2009, ELIE and others approached defendant JOHN CAMPOS, the Vice Chairman of the Board and part-owner of SunFirst Bank, a small, private bank based in Saint George, Utah, about processing Internet poker transactions. While expressing “trepidations,” CAMPOS allegedly agreed to process gambling transactions in return for a $10 million investment in SunFirst by ELIE and an associate, which would give them a more than 30 percent ownership stake in the bank. CAMPOS also requested and received a $20,000 “bonus” for his assistance. In an e-mail, one of ELIE’s associates boasted that they had “purchased” SunFirst and that they “were looking to purchase” “a grand total of 3 or 4 banks” to process payments.


#162 Rs on 04.19.11 at 2:06 pm

Angry Bird,

Here’s a thought – don’t read this blog!
My Husband & I are both university educated, earn $250,000 plus & rent! In the process, we are saving over $2,000 per month to live in the same place!!!!


#163 dave99 on 04.19.11 at 2:07 pm

#149 JT, you wrote:

“One can always get room mates, its what I’d do if I couldn’t sell. Just my little idea.”


I agree with you, but I think it will have the opposite effect than what you suggest.

The more spaces that are rented out to roommates and/or tenants, the less demand there will be in the rental and resale market. Thus, those with investment properties are stuck between a rock and a hard place.

Simply put, when more roommate/tenant spaces are offered that creates more supply, whereas demand has remained constant.

#164 KingBubbles on 04.19.11 at 2:08 pm

The peasants are revolting in Winnipeg – how will the the Realtors ™ spin affordability next?


#165 Taiwan is not China on 04.19.11 at 2:11 pm

#11 angry Bird
You are just like many current first time buyer’s….just a fool.

I have more than 200K for downpayment and I will never use it now, because there is no value. I have never owned a home, I am 32 and I will never until there is value in owning a home. Renting is way way better and its has helped me save more than 200K ( not including my TFSA and RRSP which I will never use for downpayment).

Now go and calculate your equity you created by paying the mortgage.

#166 Ret on 04.19.11 at 2:13 pm

#83 We have “for profit,” health care in Ontario but it masquerades as a “public” health care system. Ditto for colleges and universities.

Every hospital in Ontario pays their CEO’s and a plethora of VP’s big bucks to rip off OHIP at every opportunity. The province of Ontario spends 46% of provincial revenues on what is essentially a broken health care system.

Hamilton Health Sciences pays the CEO over $700,000 yearly and a large number of VP’s over $275,000. Lots of nurses on the salary disclosure list at over $100,000. Cleaners are good for $60,000. All receive gold plated benefits thanks to bullet proof union agreements.

Universities are funded and operate the same way as the hospitals, richly rewarding their Presidents for bringing in as much government and tuition money as possible while providing students with the minimum. Universities are big businesses just like hospitals. The CAW represents most of the university workers in Ontario.

It is not really greatly different in Canada than it is in the US, we just like to pretend that it is.

#167 Utopia on 04.19.11 at 2:16 pm

#97 OttawaMike

Thanks Mike, It’s not so easy to explain our system by boiling it down to one tiny post but I was happy to see you appreciated the effort.

#168 Utopia on 04.19.11 at 2:23 pm

#154 more sickness = more stupidity?

“One of my best friends just discovered that one of the side effects of his asthma inhaler (advair) is…you guessed it…asthma”.

You know, that does not surprise me at all. I had suspected exactly that as I once used one and noticed symptoms were worse after I stopped.

This also reminds me of what others have noted; that toothpaste actually causes cavities and antiperspirants and deodorants can lead to chronic problems and a dependency on the products.

Not sure if it is true but I really would not be surprised. I stay the hell away from all those chemicals and still smell sweet as a rose.

(Ex-wife may not totally agree)

#169 MP on 04.19.11 at 2:24 pm

At the end of 2010, the fourth year of the housing collapse, the share of people who said a home was a safe investment dropped to 64 percent from 70 percent in the first quarter. The December figure was the lowest in a survey that goes back to 2003, when it was 83 percent.

“The magnitude of the housing crash caused permanent changes in the way some people view home ownership,” said Michael Lea, a finance professor at San Diego State University. “Even as the economy improves, there are some who will never buy a home because their confidence in real estate is gone.”


#170 jess on 04.19.11 at 2:30 pm

SB – cost minimization strategies

…”Established in 1951, IOM is the leading inter-governmental organization in the field of migration and works closely with governmental, intergovernmental and non-governmental partners.

With 120 member states, a further 19 states holding observer status and offices in over 100 countries, IOM is dedicated to promoting humane and orderly migration for the benefit of all. It does so by providing services and advice to governments and migrants.

Economic liberalization

The trade and investment climate has sustained the flow of migrants. Higher demand for labour in the developed economies and availability of labour in underdeveloped economies has set global labour migration in motion. The huge global labour market has offered employers the chance to hire migrant workers as part of their cost minimization strategies.

Moreover, globalization with its associated forces has increased the mobility of labour across borders. It has already reinforced the movement of skilled workers. Multinational corporations favour the movement of labour, especially highly skilled labour. Faced with acute labour shortages, the industries of developed countries are evaluating migration policies and are showing preference for a relatively flexible mechanism. American and European service industries in particular have been pushing for a “liberal policy” for movement of labour as “service providers,” especially in the hotel and restaurant, software, insurance, and financial industries.

#171 Victoria on 04.19.11 at 2:34 pm

“In a survey carried out last year by CAAMP (read their full report here) respondents said they could afford to pay another $1,000 a month on average on their mortgages if rates went up”. (From the Vancouver Sun – of course)

Really! With housing 7 to 8 x the average salary. Really? With the debt that Canadians have??? I would love to see this.

#172 Edmontonian on 04.19.11 at 2:36 pm

In Edmonton here I am concerned that the Real Estate Cartel is really “spinning” the numbers falsely.

On the link that I’ve been checking out the average condo is up $6000.00 per unit, but the average Price per sq ft is down from $200 plus to $51. Someone at work told me several whole buildings have gone bankrupt and they must be listing the whole building as one condo to keep the collapsing prices from showing up.
In downtown edmonton you use to pay about $225,000.00 for an highrise concrete 1 bdrm with balcony & insuite laundry, now they can be had for about $179,000.00 ish or about $139,000 without a balcony.

#173 The American on 04.19.11 at 2:39 pm

At #149: JT, that very well may be the award for the dumbest commentary of the day. Are you serious? When recession hits, people do not have a choice whether to stay or go. Affordability comes into play. If you cannot make the payments, you cannot stay in the home. Look at the U.S. and are you trying to tell me Americans just said, “ahhhh, we can’t afford the payments anymore, but we’ll stay anyway and get more jobs to make it affordable.”

Your theory is flawed. When jobs are scarce, how the hell are you going to have two, let alone one. As for people moving in with one another, this only compounds the problem as inventory levels sky rocket and values drop like a brick. Duh.

#174 Hell in a Handbasket on 04.19.11 at 2:49 pm

@ Sannchatonion #137

You know who is talking about the banking in this election? Ony one candidate I know of. Jamie Scott, running as an independent in Surrey North, one riding over from mine. It is unfortunate that I can’t vote for him.

He has got a website, but I’m not going to post the link

#175 The American on 04.19.11 at 2:50 pm

At 91: Ben, I can assure you if you’re staying in that place (I lived in Dallas) you are not being forthright with information. First, why would stay there? Extended Stays are a dump. Second, they’re more like $50/night, and you DO pay tax on all hotel stays in the city of Dallas. Next, Extended Stays are a national chain (dumps for sure), but they do employ ONLY legal aliens within the U.S. Companies such as that MUST as they’re under a watchful eye. Just because someone may not speak English, doesn’t make him or her an illegal resident.

As for the people who “live” there… many of them are staying because they have children in Children’s Hospital, and they provide reduced rates for these poor people.

#176 The American on 04.19.11 at 2:53 pm

At #110: Smoking man, heard get lead to the slaughter…

#177 The American on 04.19.11 at 2:54 pm

Moneta, how may we get in contact with one another?

#178 jess on 04.19.11 at 3:02 pm

Walker’s admission is crucial because he had long claimed that his anti-union “budget repair bill” wasdesigned to save the state money, not bust unions. But his words todayecho thoseof Wisconsin state senate leader Scott Fitzgerald (R), who last month effectively admitted that the union fights are not about budgetary issues, but rather about winning the next election by depleting the ranks of organized labor.


#179 The American on 04.19.11 at 3:02 pm

At #132: Squidly77, you’re right again. Florida has not state income tax, nor does Washington State, Alaska, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.

Hurricane insurance isn’t a big deal. I pay more for earthquake insurance in Seattle BY FAR than hurricane insurance in Florida.

#180 TheBigLebowski on 04.19.11 at 3:04 pm

Don’t view the downgrade of the U.S debt by S&P as a trivial event. This is the first time in over 70 years this has happened. As I have been saying for those who are willing to listen. There will be a meeting in the near future similar to the Louvre Accord of 1987, or the Plaza Accord of 1985. All nation will get together and revalue and devalue currencies against one another and default on at least 2/3 of their debt. If you don’t understand what impact this means on the fiat currency system we are entrapped in then you need to do some research. All currencies will continue to fall verse gold and inflation will continue to escalate over the next several years. QE3 will be announced next year under a different name to keep the sinking ship we call the western economy afloat. Turn of the T.V which is there to keep you dumbed down with sensationalism on the 6 o clock news. It has been decades since any real news has been reported with an unbiased spin when it comes to mainstream media.

#181 betamax on 04.19.11 at 3:20 pm

#173 Victoria: “respondents said they could afford to pay another $1,000 a month on average”

Another poll demonstrating only that people have no clue how much they’re already over-spending every month. Maybe they’re planning on pulling that $1,000 out of a HELOC.

#182 Debtfree on 04.19.11 at 3:22 pm

still too soon to buy america imho.


#183 whiteshoes on 04.19.11 at 3:27 pm

#142 cellardwellar

regarding “Vancouver Ltd.” in my post #114


I believe the google books page in the link has some sources (Amazon.com etc.) on the left side of the frame; public libraries may have a copy, Vancouver Public Library has 4 at the moment, as example.

I highly recommend the book, its a good background on the Vancouver RE mythology, many of the local attitudes from decades ago still prevail. Just a look at the table of contents suggests Garth’s POV regarding the myths driving this market is well-founded and has been around a considerable period…

Aside from Gutstein, you may also find James Lorimer (The Second City book,especially) of interest.

Google ‘news’ also has made many old newspapers’ microfiche collections availible, if you have a topic of special interest from the past.

#184 TheBigLebowski on 04.19.11 at 3:40 pm

Any arrangement that demotes the dollar’s global role will involve a significant re-pricing of gold in terms of all paper currencies. China, Russia, Brazil, and others are already making deals to settle contracts in their own currencies. The dollar is going much lower from here. These are just the facts. Its the massive debt that is like a yolk around the neck of the U.S dollar that will take it down.

#185 jess on 04.19.11 at 3:40 pm

Big U.S. Firms Shift Hiring Abroad
Work Forces Shrink at Home, Sharpening Debate on Economic Impact of Globalization


#186 Mikey the Realtor on 04.19.11 at 3:46 pm

The next RE bull run on the way folks!!!

More and more Asian and Italians are piling into the RE game, as already mentioned prices are up and heading higher. Sales are down as nobody is willing to give up their property for less and so they hold.

Get in pups, drop your preffs and bonds and get into the real money maker, the movers and shakers are investing in real assets not phoney matrix type investments. Tangible is where it’s at, get in or be priced out forever!!!

#187 squidly77 on 04.19.11 at 3:49 pm

All he want’s to do is bash this blog

#188 Alpha Bravo on 04.19.11 at 3:50 pm

Increases chance for interest rate hike soon.


#189 Live Under Your Means on 04.19.11 at 3:58 pm

#147 Double down on 04.19.11 at 12:51 pm

Seems everyone on the blog is anti-Harper.

Paranoia anyone.

#190 MikhailC on 04.19.11 at 3:59 pm

Garth, I think it would be more appropriate to compare Toronto and Vancouver with NY and LA, not Florida…

#191 Mr. Plow on 04.19.11 at 4:07 pm

#2 Ignorance Is Bliss

Yes being able to back out of your commitments and debts is in the best interests of the consumers. What sort of steps do you think lenders would take to ensure they were protected? Just cause Jimmy’s daughter gives back the keys doesn’t mean she is free and clear.

Also, why should someone who took on a loan not be held responsible for it?

#192 JackRussell on 04.19.11 at 4:10 pm

What you call “house poor”, we call “living the Ramen noodle lifestyle”.

#193 Mr. Plow on 04.19.11 at 4:11 pm

#9 MikeT

Because in a market like TO or Van, the seller would look at your offer and then use it to line the bottom of their bird cage, or for their untrained dog to crap on.

They would then look at the other lineup of offers they would receive in the coming hours/days.

#194 Mr. Reality on 04.19.11 at 4:13 pm

#12 sick_of_waiting_to_buy

Go on a vacation…you’ll feel better and won’t dump 250k to get the same feeling only to lose 50% in the next few years. Trust me

Mr. R.

#195 Nemesis on 04.19.11 at 4:15 pm

Speaking of ‘XtremeBuying’, HarleyDavidson’s buyers would appear to be ‘in a bit of a pickle’…

[G&M] – Harley-Davidson hit by disruption in Japan

“Harley-Davidson Inc. (HOG-N37.75-1.96-4.94%) trimmed its full-year forecast for motorcycle shipments, citing problems with supply of an electronic component after the earthquake and tsunami in Japan, sending its shares down in trading Tuesday.”


#196 Live Under Your Means on 04.19.11 at 4:17 pm

#186 Live Under Your Means on 04.19.11 at 3:58 pm
#147 Double down on 04.19.11 at 12:51 pm

Seems everyone on the blog is anti-Harper.

Paranoia anyone.

#197 Mr. Plow on 04.19.11 at 4:18 pm

#33 Joe

60K FAMILY income, would be 30K each.

Likely what, “do you want it supersized” pays.

#198 Mr. Plow on 04.19.11 at 4:22 pm

#11 Angry Bird

Why did you have to do that?

Now we are gonna be slammed with exaggerated posts about how rich everyone is and how well off they all are. Sprinkled in with bravado and contempt for you.

#199 doctore on 04.19.11 at 4:24 pm

Real men rent. Well apparently this does not bode well for men in China….


#200 bridgepigeon on 04.19.11 at 4:27 pm

67 Steve
Get your family out of Japan now.

#201 Happy I listened on 04.19.11 at 4:31 pm

Garth – just wanted to give you a big thank you! I’ve been following your blog with amusement and great interest for about 2 months now here in East Van. While East Van hasn’t had the extreme price increases of the West Side or Richmond, after watching the market over these same two months I noticed an interesting phenomenon – prices up DRAMATICALLY here on the less hot side of the city. Decided to sell the house. Put it on the market April 1, held off showings for two weeks (I have tenants), open houses Sat./Sunday and took offers yesterday. Had 8 offers including from a client that asked our realtor to represent them (a very common practice in Vancouver of late leading to “winning” the house in multiple offer situations even though realtors are ethically not bound to disclose other offers to buyers) and walked away with $177K over asking (we bought in 2000 and have tripled our money). Our strategy was not to undervalue the property and we honestly thought we’d get close to or very close to asking – it’s East Van for goodness sake. I’m telling you (and your readers) not to brag, but to echo your sentiment that we must be nearing the top. I also have to say that if you are in Vancouver (east or west) and you have the opportunity to sell high – you can share this feeling of giddiness (and yes, laughing all the way to the bank). Thanks again!!

#202 Mr. Plow on 04.19.11 at 4:31 pm

#63 Junius

With all due respect, it is kinda different here. I know that is like a swear word but…

We haven’t had the huge increases that VAN and TO have had. We had about a 25% haircut in 2008 and it has probably dropped another 5% since then, prices are about 2006 levels. Prices are about 3 – 3.5 times income (don’t know exact number).

So in that respect it is very different here. Doesn’t mean we are immune to further drops but we have not had the same run up in prices in the last couple of years that other parts of the country have. Also doesn’t mean higher oil means higher prices, but all that he said is true. Migration is up, there is a shortage of workers for blue collar work etc…

#203 Live Under Your Means on 04.19.11 at 4:37 pm

OOps for double posting.

Re #147 Double down on 04.19.11 at 12:51 pm

I read all of the sites that are posted on National Newswatch on a daily basis and others. At least 1/2 of them are right wing papers. Yet, if one or 2 of their journalists disagree with the Harper govt.. e.g the F-35’s, they are totally denounced by right wingers as being leftist, pinkos, etc. The National Post and G&M declared support for Harper in the last 2 elections. The Sun, IMHO, is a rag. Now that some of the G&M journalists are questioning this con govt. they are being accused of being left turds. Some are even calling Andrew Coyne a lefty. LOL

I realize this is not a political site and if Garth does not wish to post my comment, that’s fine.

#204 Paindu on 04.19.11 at 4:45 pm

I have been waiting for this bloody correction for too long, I just hope it will happen before I run out of patience!!!

#205 Mr. Plow on 04.19.11 at 4:51 pm

#162 Steven Rowlandson

You have said some things in the past that I have rolled my eyes at, I admit it.

But that is a great point. I had never thought of that, how this may all affect demographics. Who can afford kids if so much of your income goes to servicing debt?

#206 Mr. Plow on 04.19.11 at 4:56 pm

#189 squidly77

Aren’t you bashing his on your own blog?

Pot Kettle Black

#207 SMOKING MAN on 04.19.11 at 4:57 pm

#140 – MP Said
Agree, Moneta and the American have great insight. I always read their views. Smoking Man on the other hand is smokin’ sumthin…must be why he can’t spell or is grammatically incorrect.

Truth be told there is ms word with speel checker. I just don’t value speeling and grammer. This is why

read at your oun risk :)


#208 Live Under Your Means on 04.19.11 at 5:02 pm

@ john # 35 . this link below shows why alberta could be a banana republic if you only had bananas .

Norway was smart!! IIRC, Canadians are giving a $2B tax credit to the Alberta tar/oil sands. Correct me if I’m wrong.

#209 pjwlk on 04.19.11 at 5:06 pm

#48 no guts: “…The person filming this video was already up the hill…”

I wonder how many thought him a fool for being prepared early?

#210 119 Whiteshoes on 04.19.11 at 5:14 pm

Thanks for the link–very interesting.

Thanks to everyone for the links, actually….

#211 Taiwan is not China on 04.19.11 at 5:21 pm

Too much Debt will kill the economy eventually….be very very scared.

Feds are shit scared…that’s why they are hesitant to raise the rates…

Either interest rate hike or inflation will kill you…Choose your poison !

#212 Taiwan is not China on 04.19.11 at 5:27 pm

With too much debt and soon to be rising interest rates…many people are going to be just servicing their debts… Very Very bad for economy. They have to cut down on other spending and it will drag us back into recession…
Which idiot was rooting for high home prices ???

#213 Oasis on 04.19.11 at 5:40 pm

#182 TheBigLebowski on 04.19.11 at 3:04 pm

i agree completely. additionally, it wouldn’t surprise me to see the US with a dual currency in the future. one for citizens for use within the US, and one for international trade. sort of like Cuba, with the national peso, and convertable peso. but there is no question, there are going to be HUGE changes coming.

#214 Willy H on 04.19.11 at 5:46 pm

” … prices have erupted – ahead an unsustainable 12% in a year …”

Interesting times indeed! Spring 2011 has surprised many.

In our subdivision in a small town nestled between Orangeville and Newmarket on the outer edge of the GTA we have witnessed this insanity!

Record price of $420K on a SFH and the sale of 3 other units in our 100 home subdivision within days of listing in March! The interesting thing we have all noticed is that 3 of the 4 sold homes were all priced to sell – well within the price range of the past 2-3 years $299K – $330K. Yet, we still had a record selling price on one unit, albeit a slightly larger dwelling.

Contrast this with the prior year (2010) when a smaller home was listed for $385K in Feb (which everyone agreed was too high), received an offer of $345K in March, offer declined, no offers received all summer, change in realtor, offer of $335K in November, sold for $340K – $5K less than the original March offer!

Are the buyers of this home kicking themselves when they could have purchased an identical home for $10-20K less in 2011?

I remain convinced that this market must correct sooner than later. Unfortunately my colleagues at work hide when see me coming and avoid RE discussions at all costs because I am the only nutcase forecasting a bear market! I am all but estranged from neighbours and extended family because of my contrarian views! I am beginning to feel great empathy for Copernicus!

#215 Junius on 04.19.11 at 5:55 pm

#204 Mr. Plow,

I certainly agree that Alberta is no Vancouver. I agree with what you said. At this point it is probably Vancouver and Sydney running neck and neck as most insane places on the planet.

I have relatives and friends in Alberta and they keep trying to tell me that Alberta is heading into a boom cycle and everything is up, up, up. That is what drives me crazy.

What is not different is that most people are carrying too much debt and Albertans are nearly as bad as people in B.C. and Ontario.

#216 skyrider on 04.19.11 at 5:58 pm

I am just reading more from the 1975 book link provided by whiteshoes….the chapter on the banks could have been written yesterday, even though we somehow seem to think that the present banking crisis is something new…I am reminded of the old saying that those who ignore history are doomed to repeat it.

Admittedly, the author has an “agenda”(who doesn’t?), but the book is opening my eyes to some facts about the history of Vancouver of which I was only vaguely aware.

As somebody–can’t remember who, sorry!–remarked on this blog recently: read, people, read. It’s all out there.

#217 kilby on 04.19.11 at 6:10 pm

#11 Angry Bird.
Wow! I’m so sorry, hope thing improve for you and your family.

#218 jess on 04.19.11 at 6:11 pm

new evidence that the big oil companies and government ministers had discussions one year before invasion. Secret memos expose link between oil firms and invasion of Iraq

By Paul Bignell

Tuesday, 19 April 2011

Oil lies at the heart of Iraqi politics. Yet in the eight years since the bombs began to fall on Baghdad it has been a taboo subject. In Greg Muttitt’s gripping and far-reaching investigation we are taken behind the scenes of the occupation to answer one of the war’s most pressing questions: what is happening to Iraq’s oil


#219 Bill Grable on 04.19.11 at 6:12 pm

To the cretin that says Florida beats YVR (*and adds a dash of racism, to boot) = my Floridian friends that have been in Vancouver, would move here in a shake.


Bugs, flat, hot, and RE is in the ditch. Crime? Try Riviera Beach, or Miami. Forget it, Jack.

Come on, man, go back to your basement suite in Etobicoke and drop the racist garbage.

#220 wellwell on 04.19.11 at 6:17 pm

Garth, the following succinct paragraph from Chris Martenson’s piece “The Breakdown Draws Near” on today’s zerohedge is nominally about China, but it encapsulates what you’ve been saying for years about real estate on this blog:

“Real estate is easy to track because it always follows the same progression. Sales volumes slow down, and people attribute it to the ‘market taking a breather.’ Then sales slump, but people say ‘prices are still firm,’ trying to console themselves with what good news they can find in the situation. Then sales really drop off, and prices begin to move down. That’s where China currently is. What happens next is also easy to ‘predict’ (not really a prediction because it always happens), and that is mortgage defaults and banking losses, which compound the misery cycle by drying up lending and dumping cheap(er) properties back on the market.”

#221 BrianT on 04.19.11 at 6:28 pm

#159Josh-There has already been months of massive insider selling in NY-who hasn’t got out of the market-basically the pension funds (with some exceptions)-to operate pump and dump there comes a time when they dump (to pump later)-it isn’t called pump and pump. No QE3 is going to kick the crap out of everyone not connected so for that reason it wouldn’t be that much of a surprise either way.

#222 Alpha Bravo on 04.19.11 at 6:31 pm

#88 market top

“4. A woman will break your heart and your wallet…”


“If women didn’t exist, all the money in the world would have no meaning.” – Aristotle Onassis

#223 Jeannie on 04.19.11 at 6:33 pm

Is it just a rumour? I’ve heard that the US.gov’t has some
kind of agreement in the works to allow Canadian retirees to live in the states year round…without the usual Green Card.
This ‘rumour’ has been floating around for a couple of years, but so far nothing to give it credibility.

Untrue. — Garth

#224 BrianT on 04.19.11 at 6:36 pm

#168Ret-It is somewhat different in the USA-the top health grifter down there made 69 million last yr-I don’t think a wage of 700 thousand is going to impressive his country club buddies.

#225 just answering a couple questions for the wife... on 04.19.11 at 6:53 pm

Q: What is the main result of it (gold) going so high? A: Nothing. Gold is a physical material and thus represents final payment, like any other physical object when it changes title and many services too. So if you have a whole bunch of gold nothing changed for you. If you have a stockpile of whisky nothing probably changed there either.

However, if you had phrased the question this way: “What is the main cause of it going so high?”, then I could have explained the nature of intermediary payment and answered the question you probably meant.

Q: What is the main cause of it going so high? A: The main means of intermediary payment (paper dollars) used in commerce is declining in value due to excess amounts of it in circulation.

The dollar is not final payment. It is a promissory note for payment at a later date. Fiat law commands that all citizens of the realm accept it as intermediary payment when selling goods or services. In other words, it’s a contract obliging the issuer to make final payment when presented with the dollar. But everybody exchanges them for lots of stuff and rarely returns them to the issuer except in 2 cases: 1. In payment of taxes, and 2. when returned to the central bank in exchange for gold (which almost never happens anymore. Actually it never did but in theory could have.)

So, for example, when you perform a “service” for me and I pay you with a gold necklaces, we have both completed our end of the contracted exchange and payment is final. However, if you perform the “service” and I pay you in dollars you really don’t have anything but a piece of paper that you are confident the jeweler will accept in exchange for the necklace. Or maybe you want to take it to the liquor store, depending on how unpleasant you find performing these sorts of services, but anyway that’s not my problem, nobody forces you into these exchanges. It’s a negotiated deal fair and square.

Ok, so now we know how we got into the mess of you having pieces of paper in your hands instead of a gold necklace or a bottle of vodka. But what is happening in the meantime is the central bank is continuing to create more and more of these contractual obligations faster than they can be absorbed into the economy. This is causing prices for most everything to rise. So you with your dollars rush to the store and buy gold jewelry or liquor as fast as you can before the amount of each you can receive in final payment declines (i.e. the price goes up). If you are sitting on some dollar savings, you might buy a bunch of gold and vodka you don’t really want right now just to make sure you have it while you can still afford it. And this is, in essence, what is driving the price of gold up right now.

The method the government or central bank uses to put extra money in circulation is simplicity itself. They just print up more, and then offer it to the public in exchange for similar services to the ones you were providing in our hypothetical example, only they call it “lending”. Now everyone has been screwed, has a bunch of dollars, and is eager to get rid of them.

Hopefully question # 2 won’t take as long.

Q: What about oil? A: “What” about oil? What color is it? Black. Is there a relationship between what’s happening to the price of gold and the price of oil? Potentially, but oil is a commodity so there are supply and demand issues that affect the price of oil as well. In dollar terms the price of oil is only up about half as much on a percentage basis as the price of gold, so potentially one could say that oil demand is weak compared to gold demand. People seem to prefer to hoard gold as opposed to oil. However, it is likely that all this extra money printing is causing other goods to rise in price for the same reason as gold. For example, why buy 1 can of beans if you know it’s going to only go up in price? Why not buy a flat of canned beans? They won’t go bad. So money printing can cause a sort of time pull where demand is artificially higher than would be in the present while everyone builds “stockpiles” of things that are perceived to be rising in price. Then, everyone stops buying beans because our collective pantries are all full and the price momentarily collapses because nobody wants any more damn beans that’s all we’ve been eating for weeks! But eventually we finally have room for more beans and we return to the market to find there are other buyers now as well who are also out of beans. But since we probably didn’t all run out of beans at once, the price stabilizes instead of spiking like it did initially, but at a higher level to reflect the money printing and collective screwing.

So let’s have beans for super so that when the government comes for our services we can provide it in an environment that appropriately reflects on what we think of their foul money printing behavior.

PS. After enough of this money printing, you are probably going to want to charge more for your services to offset the cost of whisky. Unfortunately, I can’t print money so that means you will have to get a larger and larger portion of your business from the government as I am increasingly priced out of the market.

#226 Ronaldo on 04.19.11 at 7:00 pm

http://www.financialpost.com/news/business-insider/housing+markets+risk+major+collapse/4614485/story.html U.S. housing market still bleeding and more bad news lies ahead…

#227 Live Under Your Means on 04.19.11 at 7:02 pm

Think I’m about a week late commenting on Garth’s suggestion of taking out a loan for investment purposes for those who have no mortgage. We are in that situation so I sent an email to him. He outlined the benefits and potential risks, but we could liquidate assets if required. He’s a strait shooter, in contrast to our former FM guy.

#228 Devore on 04.19.11 at 7:06 pm

#193 Mr. Plow

Also, why should someone who took on a loan not be held responsible for it?

They are responsible for it. It is just a contract, and like all contracts, it has escape and termination clauses that bind both parties. Businesses get out of contracts (including loans) prematurely, why shouldn’t people?

If they abide by all terms of the contract, then it is perfectly responsible behaviour to end an arrangement that is not economically viable.

#229 Live Under Your Means on 04.19.11 at 7:11 pm

#224 Alpha Bravo on 04.19.11 at 6:31 pm
#88 market top

“4. A woman will break your heart and your wallet…”


4. Not so – my husband spends much more than I do.

#230 Devore on 04.19.11 at 7:11 pm

#211 pjwlk

I wonder how many thought him a fool for being prepared early?

Probably thought him unpatriotic for being a negative-nancy and not sticking it out with his neighbours, or for cheering on (or even causing) the disaster by being prepared for it. Isn’t that what usually happens?

#231 Moneta on 04.19.11 at 7:12 pm

The American on 04.19.11 at 2:54 pm
[email protected]

#232 Devore on 04.19.11 at 7:15 pm

#218 skyrider

I am just reading more from the 1975 book link provided by whiteshoes….the chapter on the banks could have been written yesterday, even though we somehow seem to think that the present banking crisis is something new…I am reminded of the old saying that those who ignore history are doomed to repeat it.

Not only do we think our situation is unique, we also believe that we have better science, better theory, better tools, better people, better technology, better whatever, and so we will be able to deal with the same problems our primitive parents could not. Just like them, we will fail. But we can rest secure in the knowledge our children will try twice as hard to do what we could not, believing it’s different this time.

#233 ballngsford on 04.19.11 at 7:17 pm

Life Lesson from my 3 1/2 year old son. Note: we are currently renting and living comfortably.

Son: Daddy, we need a bigger house. (Mom is probably mentioning this to him when I’m not home.)

Me the Dad says: Why do we need a bigger home?

Son: Because we don’t have room for all my toys.

Me the Dad says: Well son, you have too many toys and we should donate them to a charity that will give them to families whose children don’t have too many toys.

Son: Good idea Daddy. I have lots of little boy toys that I don’t play with now.

Me: Once we do that, do you think we’ll have enough room to live where we live now?

Son: Yes Daddy, we will have lots of room. All my friends live around here, so I don’t want to move.

Me: Maybe we will own a home in the future, but does it matter if we own or rent?

Son: No.

Me: Son, if you have friends later in life that it does make a difference, then they aren’t true friends.

Son: You are right Daddy!

#234 Waiting for the sun on 04.19.11 at 7:23 pm

Oops sorry about the duplicate posts.

#235 pjwlk on 04.19.11 at 7:42 pm

There’s one good thing about the Chinese buying up loads of real estate in Richmond BC. At least after taking all of our manufacturing jobs they’re bringing back some of the money we’ve been sending over there for years!

#236 OttawaMike on 04.19.11 at 7:55 pm

#129 Moneta on 04.19.11 at 10:34 am

Hey, how come nobody posted any comments on that thread??

I have no doubt about your 8%-9% or more returns from your balanced portfolio. In fact I’m going through this with my ex wife and trying to convince her to invest her estate proceeds from a North Toronto house with a fee based planner.

Ex wants to give it to the nice lady at the bank after going mostly sideways on some brokerage mutuals.

Moneta is just pointing out the risks. Having those spreads from GIC’s to fee based brokerage account, there has to be an added element of risk to make up for it.

Also I know your a good guy, you’ve helped me.
But.. you are in the business of selling financial products so the line is sometimes blurry.

Is everything out there really fixed now since March 09?

Big inflation numbers.

A coworker who commutes from Hawkesbury, Ont. how the last 3 factories (steel, textiles, glass)all announced closing time in tandem. 900 people without industrial jobs.
Earnings keep looking good for every big corp but on the backs of product innovation and workers.

I do not sell financial products. Period. The only thing you can buy from me is a $20 book. Try a little trust. — Garth

#237 S.B. on 04.19.11 at 8:16 pm

Where’s Whistler Dude…

Apr 13, 2011 1:41pm
Real estate showing gradual improvement
Lower prices, low mortgage rates increasing in Whistler properties
By Andrew Mitchell

Whistler’s real estate market is re-inventing itself again.

Many buyers are now focused on purchasing a home for the long haul rather that buying purely for speculation.

“The speculative real estate buyer doesn’t have a place in this market,” said Pat Kelly of the Whistler Real Estate Company.

The sale price of real estate is down 10 to 15 per cent from the high mark, and has been at that level for a little while without going any lower, said Kelly. With increased interest and sales picking up it’s likely that the prices may recover, although Kelly expects it to be slow and steady – a year or more – before prices more or less recover


#238 S.B. on 04.19.11 at 8:34 pm

The Remarkable True Story of a $146,194-Per-Year Income Portfolio


#239 Timing is Everything on 04.19.11 at 8:46 pm

#43 saanichtonian – said “We had the system in place.
Where has it gone?”

Thin air.

#240 randman on 04.19.11 at 8:51 pm

“4. Not so – my husband spends much more than I do.”

Buying you things to keep you happy…no doubt!

#241 Gord In Vancouver on 04.19.11 at 8:55 pm

#145 Live Under Your Means

Thanks for the link.

Glad I’m retired an hubby has a secure job.

Good for you : )

#242 randman on 04.19.11 at 8:56 pm

#220 Jess

Not anything most reasonable thinkers didn’t say back then….

Now how about Libya?

Nato intervention for humanitarian reasons my ass!

#243 randman on 04.19.11 at 9:00 pm

Interest rates must rise

But they can’t really or the debt service cost rises

But Interest rates still need to rise

But they can’t or it will scuttle the economic recovery

But interest rates inevitably will rise…

Talk about a rock and a hard place!

#244 maxx on 04.19.11 at 9:21 pm

#78 Kilt: you ARE following things. The short-sighted and innumerate are simply low-hanging fruit for lousy tax policy, banks, mortgage brokers and realtors.

#245 Mr. Plow on 04.19.11 at 9:30 pm

#217 Junius

I agree with you there, possibly worse.

I think AB leads the way in foreclosures.

#246 skyrider on 04.19.11 at 9:46 pm

#218 skyrider

I am just reading more from the 1975 book link provided by whiteshoes….the chapter on the banks could have been written yesterday, even though we somehow seem to think that the present banking crisis is something new…I am reminded of the old saying that those who ignore history are doomed to repeat it.


Devore commented:
Not only do we think our situation is unique, we also believe that we have better science, better theory, better tools, better people, better technology, better whatever, and so we will be able to deal with the same problems our primitive parents could not. Just like them, we will fail. But we can rest secure in the knowledge our children will try twice as hard to do what we could not, believing it’s different this time.

I say: I agree…in fact it is exactly this belief that we have better analytical tools to control risk that has made the system more vulnerable…that, and complexity, and globalization. cf Nassim Taleb

#247 Waiting for the Sun on 04.19.11 at 9:48 pm

e.g. on this page a Flordia RE/Mortgage attorney state that Florida is a recourse state, and the “The granting of a deficiency judgment [ in Florida] is the rule rather than the exception, unless there are facts and circumstances creating equitable circumstances justifying the court’s denial of the deficiency. So generally speaking, yes, there will be a deficiency judgment.”

#248 yaric on 04.19.11 at 10:00 pm


There is simple explanation why there are not enough sellers on the market. A lot of the sellers are actually buyers who up-sizing. They decided not to buy now, it means not sell too, therefore we are observing less sellers on the market.

#249 realpaul on 04.19.11 at 10:16 pm

Like every socialist experiment in the history of mankind…Keynesianism has failed miserably. While most gullible, naive, empty-headed and/or fascist attempts have usually broken one country in the implosion of the failure of socialist economics the idiocy practiced by the G8 governments with ‘globalization’ beginning in the 1970’s has brought the entire world to it’s knees.

Lets see.. it took 70 years for Russia to self destruct…..China is in free fall……Cuba…..Somalia…..Cambodia…Vietnam…..Sweden…Britian…..etc etc ad nauseum……will the average tax payer never learn? You can’t spend or tax yourself to prosperity…..if that was possible we’d all be billionaires and the Martians would be doing our laundry because everyone on Earth would be too rich to work.

Keynes hypothecated that a government could inflate the money supply perpetually and settled on 2% annually. That was before people could imagine a world economy lasting longer than 50 years when prices had doubled and no one could earn enough to enforce the collective bargaining rights and privelages of the civil service. Taxes could allways be increased to the rate of the inflation…….but that couldn’t last because in the business cycle taxes would grow to 100% and there would be no incentive to work.

After Keynes work was analyzed…it was thrown out as garbage…..until the EU and Canadian politicians got hold of it in the 1970’s and resurected it when the do-gooders at the time were looking for a wau to fund ‘sustainable development’. Thats a fancy term for ‘tax the rich’ and send the cash to the third world dictatorships and hope they’ll change their ways. But of course the dictators just stole the money and didn’t change. But……..we did get new idea’s …like ‘climate change’…..What better way to sell fear than to tell everyone that the world is going to end unless we raise taxes to fight a boogeyman. They didn’t tell anyone that the climate is in constant flux and has changed radically without any help from man since the formation of the planet……it changes itself.


Sure will be fun when people wake up and stop pissing their money away on politicians.

#250 The American on 04.19.11 at 11:21 pm

At #250: Waiting for the Sun, Florida is a non-recourse state. Period.

#251 Brew on 04.20.11 at 8:52 am

At #250 The American
I have read conflicting information on whether Florida is recourse or non recourse. What is your source?

#252 The American on 04.20.11 at 10:40 am

At #254: Brew, here’s one source…


Now, by default, Florida is technically a recourse state. But, nearly every mortgage in Florida has a non-recourse clause (its old on the books). Typically, the only thing you can be screwed on is a 2nd Mortgage, or HELOC. These will certainly follow you around and you will most certainly receive a deficiency judgement, unless your lender agrees IN WRITING not to. Additionally, before you were to go into foreclosure, you should talk with your bank about a Deed in Lieu of Foreclosure. This practice is becoming more common and less painful for all parties involved. Or, talk with your lender about doing a short-sale. I hear they’re much more willing to do it these days :-)

You’re probably wondering how I know this? Well, I have family (my brother and his wife) that just recently had to go through this process in Florida. Oh, and my brother is an attorney, his wife is a paralegal. He is a highly-educated person who made EVERY payment on his home. After watching values collapse around him for nearly four years, it was time to get out. Here’s how it works…

The banks, or “experts”, lent everyone ridiculous amounts of money to buy houses, and I mean EVERYONE. 25%+ should never have qualified for these loans. Hell, some couldn’t qualify for jury duty. Anyway, my brother and his wife, he being 27 and she being 25, bought a nice home for $479,000 back in 2005 with a whopping 10% down. Everything was bliss and no kids and their payment was easily made at about $3,200/month. DINKS with the world in the palm of their hands. After all, values only go up… They never go down (values had doubled in about 3 years in the area)! All homes around him were quite nice too. Neighbors were hard-working and white collar. Then, IT happened. One by one, and painfully slow, every home around him began going into foreclosure or became a short-sale. Home values plunged too. His home at peak was valued at $530,000 in early 2006. By 2010, it was valued at $215,000. Yes, a 3,700 square foot McMansion in a great neighborhood was selling for that. All the while, he made every payment. Oh, and I forgot to mention he too had lost his job by this point, but he still stuck by his commitment to pay the bank per the original agreement in the note. That is, until I got ahold of him.

I make no qualms about it – I despise what the banks have done to consumers. Keep in mind, I work in the banking industry. Yes, consumers have a responsibility too, but frankly, banks should be held far more accountable – they are the “experts” pandering to consumers. Banks were bailed out by American tax payers, yet banks lobby for no regulation and free market enterprise. They love it their way, until they too need a handout. So, I have absolutely no sympathy for them. Once you or a family member have gone through it, you’ll understand. And believe me, many of you will in one way or another. Moving on…

We flew to Mexico for vacation in Puerto Vallarta where he and his wife met me there. I wanted him away from the “forrest,” per se, so we could openly discuss his options. We talked a LOT about what he should do. My recommendation you ask? Yes, that’s right… WALK AWAY from the home one way or another. But, do it smartly. He still owed nearly $415,000 on an asset that was now only worth $215,000 – a $200,000 dissonance. Not good. Sure, they could stay and continue to struggle to make payments while he was out of work, watching the value on their home continue to drop. Or, they could cut their losses, suck it up, and move on.

The loss of value on their home was NOT their fault. In my opinion, this is at the hands of the banks. Why should my family have to stay and fulfill their obligation to the contract for the bank on a horrifically depreciating asset? After all, the banks did not fulfill their obligation to lend money only to those who could afford it, ultimately causing financial ruin to ALL their clientele. The banks knew precisely what they were doing, and they’re the “experts.” But, their greed got in the way, and they should have to pay a price as well – not all of it solely on the consumer as it has been. Because of the banks, my family was now upside down $200,000 on his home. My point of view was, “f*ck ’em!” Why continue throwing good money after bad?

We determined it was significantly more costly for he and his wife to continue making a $3,200 monthly payment on the depreciating asset, vs. renting the exact home for as little as $1,400/month. There were several things to consider… The obvious stands out – MONEY. But, besides “saving” $1,800/month by renting, it was also healthier for their mental state. Here’s why… They were constantly stressed and worried about how much more the value of their home would drop. Additionally, if they were to have stayed, we determined it would be at least 15 years before values returned to where they once were. Can you imagine staying in the home that’s worth so little for another 15 years, only to say you’ve fulfilled your contract to a crook bank? With time value of money in consideration, we determined that the cost was somewhere in the neighborhood of $700,000 of expenses that weren’t necessary, and that was just to wait long enough to get back to a break-even point. Therefore, “WALK AWAY!” I said.

His concern was his credit getting ruined and the shame of it. Of course one’s credit is going to get dinged. He and his wife had a FICO score in the low 800s (that’s very good credit). I told him to do a short-sale. Six months later, he had done it. He put the house on the market and received an offer for $210,000. The bank agreed to take it. The other debt was wiped away as a write off.

Now, I’m sure you’re saying that he and his wife get off easily while the banks are getting hurt. Not so. Here’s why… The bank’s are insured for this, and the consumer was paying the premium on behalf of the bank, so cry me a river. Also, the consumer does pay a price of a dinged credit score. Their credit dropped to the high 500s within 60 days after the short-sale. That’s okay, though. They are now able to rebuild their credit and they are HAPPILY renting. This process ended for them about 18 months ago. Today, their credit score is in the low 700s, not great but a good score. They KNOW they made the right choice, because in another 18 months, they’re going to have their scores back in the 800s again.

Basically, they decided to suck it up, hurt their credit for 3 years or so and get out of depreciating asset for which they were paying a significant monthly premium. This was SMART and LEGAL. Sometimes in life, things happen out of one’s control that test one’s belief system with respect to integrity, honesty, and trust. It is in these times you must seek counsel and consider options you may have never considered in your life.

Oh, by the way, the house is now worth $205,000. Another $10,000 haircut. Smart!!!

#253 Whistle punk on 04.20.11 at 5:40 pm

They need to raise the interest rates kill off some of the flies make it so it is an eye opener to see people claim bankruptsy. Dragging out the inevitable is like a women giving a man blue balls.

Get it over with jack up the interest rates the blue balls are going to explode.