Uncool

When I built my first house, at age 23, the contractor’s bill was $63,000. I paid much of that with a mortgage. The rate was 11%. I was making twenty-eight grand at the time. I was happy.

Today’s twenty-something homebuyer in, say, Toronto, would pay $440,000 for an average condo, finance it with a VRM at 3% or less, and earn about $45,000. So whereas I ponied up two and a half times my annual wages to get a two-story house sheathed in green aluminum, today’s kid has to fork out almost 10 years’ worth of earnings to get a concrete box.

Did towering mortgage rates decades ago help keep house prices in check? Is Pippa hot?

The fact emergency interest rates have been in place during the sharpest escalation in real estate in living memory is no fluke. Nor is it lost on Brother Carney. The more income that’s sucked off by houses, the less there is for spending on other stuff – like cars and adult novelties – which actually create jobs. But, ironically, as interest rates jump to temper inflationary housing expectations, billions more are flushed to the banks in interest payments.

Worse, higher rates which depress house values also kick the crap out of homeowners’ equity – making everybody feel poorer (and spend less). Yet without this brake on house lust, real estate becomes unaffordable and mortgage debt swells uncontrollably.

This is why, if the Bank of Canada calls you in the morning and asks you to be Governor, you turn the dudes down.

In any case, it’s coming. In one way or another, the air will hiss out of this housing gasbag. It might be a series of rate hikes alone, or a modest nudge in mortgage costs accompanied by tighter credit rules. But it’s now a matter of economic policy that Canadians can no longer afford to hand over an average of 47.5% of their pre-tax income for a roof.

Here’s why.

The average house in Canada (says CREA) sells for $372,544. The average household income (all the money a family takes in annually) is $83,010. So, the average house costs the average family 4.5 times what they make. This is exactly the point at which the US housing market collapsed.

Speaking of the Yanks, the average house price south of us is $173,000. The average household income (post-recession) is $64,400. So, the average house costs 2.7 times what families make. And hey! That’s about what I paid for my first digs.

In fact, the 32% decline in US house prices over the last six years has brought with it an outbreak of affordability. More people can afford houses now than at any previous moment. In the last 90 days, almost 75% of new and existing homes could be afforded by families making that paltry $64,400.

Of course, it took a financial crisis, a banking collapse, massive government upheaval and the onset of a global contagion to get there, but what the hell? I guess we could choose to go the same route. But higher mortgage rates and less credit would probably be less painful.

Those people who come to this nasty blog to assert rates will never rise because the government wouldn’t risk a housing correction better not be acting on their own advice. Of course the cost of money is going up. The consequences of the status quo – homes people can’t buy without indenturing themselves forever, shackling economic growth – aren’t on. Brother Carney and F know this in spades. Pricey real estate and the speculation it breeds (remember what I told you about Toronto condos last week?) are economy-killers.

We just learned US house prices are now falling at the fastest rate since the darkest days of 2008. The problem is not less confidence – people can afford houses like never before. Instead, the issue is a simple lack of demand. Real estate stung. The memory lingers.

There’s a lesson in here somewhere. Houses have no intrinsic value. They can go to $1 million. They can go to $1. They’re only worth what buyers are willing to pay.

When the twenty-year-olds learn that one again, stand clear.

172 comments ↓

#1 The Original Dave on 05.25.11 at 9:10 pm

it’s full out mania mode in Toronto…..again. I’m hearing of bidding wars in places like Bolton! lol. There’s no shortage of crazy. Almost $500k for a semi over the weekend..hahahaha.

#2 enlightened on 05.25.11 at 9:11 pm

Help! Can anyone recommend a financial advisor in the Kamloops/Vernon/Salmon Arm area. I have interviewed a couple and no luck so far….unless of course you think working with someone who says $500/month is chump change is a good idea! :0
Primarily I require help with getting going on investing as well as some tax planning. Thanks in advance…

#3 R U SERIOUS on 05.25.11 at 9:14 pm

Your brother?

#4 T.O. Bubble Boy on 05.25.11 at 9:14 pm

Is this why F came out today with his press conference just to say that he doesn’t back Carney for the IMF job?

Is he pushing for Carney to stick around just so that he and Harper have someone to blame when the sh*t hits the fan from 2011-2015?

#5 SMOKING MAN on 05.25.11 at 9:16 pm

So the average a family takes in annually is 83,010

That number is generated by T4 slips. and heavily weighted to those that punch a clock for a living, who don’t make alot. Waitresses and bartenders can make over 100gs in tips.

Reality is there are many people who are self employed or a spouse might own a business and take little salary while investing via corp. with big tax savings.
In reality I don’t know a single family that could survive and not go bankrupt on that money in the GTA weather they own or rent.

People make a lot more money than gets reported on T4 especially if the deal with cash.

#6 Sunny on 05.25.11 at 9:16 pm

WTF now they are buying up West Vancouver, meanwhile Richmond is falling fast….bit fickle I’d say

http://www.nsnews.com/business/Bidding+wars+house+prices/4837120/story.html

god i hope I’m not “First”

#7 sue on 05.25.11 at 9:17 pm

My 10 yr old son (who has heard a lot about money from me) saw the Scotia Bank “richer than you think” commercial and said in a perky voice “Scotia Bank, we’ve got you by the balls”. My work here is done.

#8 Victor on 05.25.11 at 9:19 pm

Hey Garth,
I just read in Greater Vancouver Weekly real estate magazine that prices for real estate in Greater Vancouver went up 10% compare to the last year.
I follow the real estate market in Vancouver and in some cases I think it’s went up about somewhere arount 15% to 18%. What is going on?
What do you think about it?

#9 Mariea on 05.25.11 at 9:19 pm

Thank you Garth, please don’t stop blogging some of us have to read it over and over before we get it and understand everything. I wish you could tell us where to find a financial advisor to help us invest as you recommend. It’s like swimming with the sharks out there, in a rubber dingy….

#10 Cognizant on 05.25.11 at 9:24 pm

I’ve said it before. This thing will not have run it’s course until the “man on the street” tells you that buying a house is a stupid idea. The same “man on the street” who currently tells you it is stupid to rent.

#11 Elmer on 05.25.11 at 9:25 pm

It’s not 20-somethings that need to learn anything, it’s old people. They bought their house 40 years ago for 40k and now expect to sell it to me for 900k to fund their retirement. I see nothing but grey haired old geezers around my neighborhood stubbornly holding onto their houses, despite the fact that they’re retired and have no conceivable reason to remain in Toronto. Why don’t they move to Florida? If they had invested some of that money in companies in the technology sector and health sector and mines and factories imagine how much better off this country would be now. Today’s 20-somethings have it MUCH harder: there are less jobs to go around (because the boomers outsourced so many of them), the few existing jobs pay less (after inflation), education is more expensive, taxes are higher, and we can’t get 20% interest guaranteed in a savings account like you could in the 70s and 80s.

#12 wicked as it seems on 05.25.11 at 9:27 pm

So what if i am first!
Still living the dream of selling at market peak in June 2007 and learning on a daily basis the rules of investing with the said rewards! Having lived and survived 1981 maybe the younger crowd have to learn the lesson the hard way.

#13 Wildered on 05.25.11 at 9:27 pm

We learned nothing.

#14 AG Sage on 05.25.11 at 9:28 pm

>This is why, if the Bank of Canada calls you in the morning and asks you to be Governor, you turn the dudes down.

pics phone recording or it didn’t happen.

#15 disciple on 05.25.11 at 9:28 pm

It will be an interesting exercise to try to anticipate which of the various factors will trigger the collapse, er, I mean, correction…

#16 Devore on 05.25.11 at 9:31 pm

Is Pippa hot?

Well, ya, but now we’ll never have a Queen Pippa.

#17 Big Al (New) on 05.25.11 at 9:40 pm

Really could it be this easy, First. Oh and as for real estate in TO so far this year, somebody needs to call it. Time of death May 2011.

#18 Devore on 05.25.11 at 10:36 pm

I think a bigger factor in the tepid US housing market is not lack of demand due to uncoolness of RE, but rather inability to purchase (no money, terrible credit). US home ownership fell a few percentage points, not because of unprecedented household formation, but because of unprecedented evaporation of household wealth.

#19 NorthYork on 05.25.11 at 10:46 pm

@ #6 sue

That comment was priceless… You made me Haul!

Garth, you are a champ for giving out this advice, in the future when I’m rich following your advice and the likes of other experts, I’ll send you a bone.

#20 Abitibidoug on 05.25.11 at 10:50 pm

We hear a lot of horror stories about how the U.S. housing market is troubled or unhealthy. In fact, the U.S. market is normal and affordable, having come back to reality after an unhealthy bubble with distorted values corrected itself. History has shown that whenever any asset values get too far above (or below) their long term trend, eventually they will correct and come back to normal. House prices in Canada are bound to follow that pattern and correct also. If you think housing corrections in Canada are a thing of the past, you haven’t been to Windsor, Ontario lately.

#21 Don on 05.25.11 at 10:51 pm

Sue #6 ‘My 10 yr old son (who has heard a lot about money from me) saw the Scotia Bank “richer than you think” commercial and said in a perky voice “Scotia Bank, we’ve got you by the balls”. My work here is done.’

PRICELESS – that commercial is pure psychological crap.

#22 Lisa on 05.25.11 at 10:52 pm

Keep it coming! This blog is like an AA meeting for my real estate/ house lust addiction/obsession. When I’m not on here, I’m on MLS.ca searching for value in this country! Have not found any value anywhere except maybe Hamilton, Ontario.
I have to agree with Elmer. There are a lot of boomers and older folks who are hanging onto their large houses. The highest and best use for these properties would be for younger families who work in the city. So much time is wasted on the clogged GTA highways by breadwinners who could be spending more time at home with their kids (if they lived closer to the city).
The ENTIRE system is F***ed up…the North American economy is false; wealth and prosperity based on slave labour in China, people living on borrowed money, celebrity worship, consumerism gone bezerk, etc…etc…
Hey, that includes Canada too!
We need a big toilet flush to happen and soon!

#23 Utopia on 05.25.11 at 10:53 pm

#10 Elmer

You are just a fat lazy person Elmer who expects old folks to die off so you can inherit easy money and get to earn a lifetimes prosperity with no work or effort on your part whatsoever.

You clearly have no idea what people suffered through during the high-interest times in the late 70’s and early 80’s.

But of course, you already know that because you are just shilling for your own benefit and making a mockery of society in the process while denigrating those who went before you.

You Hate Mommy right?

Did I say you are an ass yet? Come out to the bald flat prairie buddy. There is real work here and you need both an education and a major kick in the arse.

I really hope I am your shift boss. You earned a boot today.

#24 Jon B on 05.25.11 at 10:55 pm

Talk about annoying, the Bank of Canada did call me earlier today. It must have been about 6:45am. They asked if I wanted to be the Govenor of the Bank of Canada. Obviously I gave them a flat no and told them to remove my name from their short list of candidates.

I am proud of you. Hug? — Garth

#25 KingBubbles on 05.25.11 at 11:00 pm

Good to see m$m finally having some bearish stories about the housing market:

http://baystreet.money.ca.msn.com/quotedata/partners/msn/ca/the_economy.aspx

http://www.bnn.ca/News/2011/5/25/Reno-figures-point-to-housing-bubble.aspx

#26 PLP on 05.25.11 at 11:07 pm

The idea is not to let same people go into more debt, but to have more (new) people into debt.
Debt is the tool to have today’s people working without tomorrow’s retirement. Not having money to afford children’s education (who needs an educated class).
Indebted = Controllable.

#27 JB on 05.25.11 at 11:12 pm

Can’t take it anymore……. An entire nation and government is completely against what we’re all about here. They’ll do absolutely everything to keep this charade going.

I was at the inlaws this weekend, watching a baseball game, all of a sudden everyone filed into the living room and surrounded me, it was like an intervention people. They said “you sound no different than the preacher saying rapture is coming on May 21st”… It was HORRIBLE! I asked every single one of them to give me a factual reason why housing will keep going up for ever, not ONE of them could give me a straight answer, but they all looked at me like I was in a straight jacket… Un ****ing real!!! Common sense is completely out the window right now. WTF do I do?!?!

#28 Patz on 05.25.11 at 11:14 pm

Is it different here?

Serious question. I was just reading that the US sub—prime collapse didn’t get really rollin’ downhill until hedge funds found a way to short housing. So, is there a element missing in our downturn? I.e. big money betting against the housing market.

To be clear I’m not suggesting housing will continue wafting up, just wondering if the lack of big money betting against it will give it a softer ride down?

#29 Soylent Green is People on 05.25.11 at 11:20 pm

Pippa, the apple through the fence needs eating.

#30 Torquemada on 05.25.11 at 11:22 pm

Aussie Roy,

Just wanted to let you know that your daily Australia updates are appreciated. I look forward to them with interest. I don’t often see many people respond to your posts so I want to make sure you know you’re appreciated.

#31 bad day there Utopia? on 05.25.11 at 11:31 pm

Hey Utopia, did you get out the wrong side of bed this morning or what?

Elmer has got a point or two there…..didn’t realize you were such a hardass :)

#32 Tim on 05.25.11 at 11:36 pm

What is the likelihood that rates will rise to above their long term average of 6% in the next two years? Very little, given what’s happening in the States. How can rates rise significantly more in Canada relative to the United States? Our dollar would skyrocket, and God knows the business community doesn’t want that to happen, because they can’t compete on a level playing field, so they whine about the dollar being to high. How can the rates increase to six percent in the States given the mess they are in? Sure, they may rise a bit, but not enough to wipe out the 100% gain in real estate over the last 8 years.

#33 serge on 05.25.11 at 11:38 pm

Just like kids chemistry kits all you need for an economists kit is:
A ruler
A marker
A transparent sheet
Just take the current price bubble graphs and keep extending that line out 35 years, straight line with the ruler … It should get you up to 15 millions dollars for 2 bedroom in anytown canada. If having done this you sleep like a baby thinking about life as a multimillionnaire in 2045 by all means tell your neighbors to send 40$ for lil’economists kit of their own!

#34 Tim on 05.25.11 at 11:39 pm

Obama is standing up to the Oil companies and calling for an end to their massive tax breaks. We are getting hosed at the pump, they make record profits, e.g. One company made a profit of 11 billion in one quarter, and we continue to give them massive tax breaks. Will Harper stand up to them like Obama? No, he’s too gutless

#35 The InvestorsFriend (Shawn Allen) on 05.25.11 at 11:53 pm

Garth’s first house $63K 11% interest would be almost 7k interest per year (assume 100%5 financed for simplicity) or 25% of his 28k income.

Today’s twenty something pays $440,000 at 3% or $13.2 k per year in interest or 29% of his $45k income.

So on an interest-only basis our newbie is not far off of the then young (and imagine how virile) Garth.

But principle has to be paid too.

And as Garth points out it is only that rock-bottom interest that makes the $440k remotely possible for our $45k newbie.

Can’t wait for higher interest rates since I am not in debt and I can use higher interest on any portion of my investors I choose to stick into fixed income.

Also the spectre of higher rates and the howls will be entertaining. That may sound cruel but hey I took care of myself and now I need some entertainment.

Remember you are not on team Canada you are on team you. Take care of your own self and family and you won’t have to worry much what Carney does or where interest rates go. If you banked on rates staying at 3% you just were not paying attention and so you become entertainment fodder for those who were more prudent.

Thank you. Let the Show Begin!

#36 HouseBuster on 05.25.11 at 11:57 pm

#7 sue on 05.25.11 at 9:17 pm
My 10 yr old son (who has heard a lot about money from me) …
—————————————-
I think it is sad that your 10 year old is making comments about banks and money.

He’s too young to be thinking about money. There’s plenty of time for that.

#37 debtified on 05.25.11 at 11:59 pm

The 20-somethings I know want to buy houses and they do at the first opportunity. Most who have bought are definitely sub-prime.

I am in Vancouver right now and the air is definitely bullish on real estate. I get thoroughly confused when my friends admit that prices are too high and still expect it to continue to go higher without an end in sight. So, they conclude, buying now is still a good idea (and selling now sounds like an even crazier idea!).

Despite the real estate state of affairs, Vancouver remains beautiful to me. Don’t hate it because BPOE lives here.

So far my recently purchased sail boat drains cash. My investments are not doing any better. I expect to lose money on both in the next 12 months – the equity market is in a bigger bubble in my opinion (the real estate correction/crash/whatever will take the equity market down with it, or vice-versa). My sail boat makes me happy. I can’t say the same with my investments right now.

I might do something crazy like short China/Australia/Canada. Tough times ahead! We deserve it. We’ve been consuming too much; financed by easy money – putting most of us deeply in debt.

#38 Adam in Montreal on 05.26.11 at 12:01 am

Check out this piece of crap article about how easy it is to go from renting to owning — and how dumb people are who rent. From the Globe and Mail. It’s probably the most ridiculous article on this topic I’ve seen in years…

“How to Give Up Renting Without Going Broke” @ http://bit.ly/jraFLs

#39 Nostradamus Le Mad Vlad on 05.26.11 at 12:09 am


“They’re only worth what buyers are willing to pay.” — With potential buyers (some quite sensible) waiting on the sidelines for a while to see how all this plays out, these will be the ones who buy — only if they must, as there is no law to enforce people to buy at all — at the low end of the scale.

Whether the homes increase in value after a decade or so is debatable.
*
US Durable Goods down over past six months, and Before and After Pix Joplin.

Spring and Summer Not as nice as one might think. Snake-People What’s the difference? See the pix; no change, esp. Tony Blair.

Greeks and Iranians (the latter runs on The Bovine Excrometer). War Something between America, Iran, China and probably Russia. Layoffs Economic recovery? In yer dreams!

Canada We used to be a peacekeeping nation. Not anymore, and it’s killing the economy. Out of Control Govts. can’t stop it from happening.

US Home Prices Not going anywhere, and So much for attending college.

Why the rich love high unemployment — it forces wages down, so profits rise. How is unemployment these days?

#40 False Facade on 05.26.11 at 12:16 am

The guy in the picture looks like Brian Mulroney!

#41 Mr. Reality on 05.26.11 at 12:21 am

#5 SMOKING MAN on 05.25.11 at 9:16 pm

Sorry i clicked on your name and it took me to your blog.

You are a 100% certifiable nut bar…….
That self-righteous dribble is unbelievable. What a whack job!

Mr. R.

#42 Debtfree on 05.26.11 at 12:27 am

Garth I can see why you’d like to call this blog quits.

#43 Dr.NickRiviera on 05.26.11 at 12:43 am

We’ve made the decision, based in part on reading the wisdom in this blog over the past year, to sell our house here in Edmonton and invest our small amount of equity (while it still exists!) and rent for a couple of years – depending on how long the coming houseapocalypse lasts. Our current income/price ratio is 5.3, which is completely unsustainable and makes absolutely no sense whatsoever.

We will dive back into real estate one day, but things are getting to be a bit out of control as this massive, bloated bubble prepares fall in line with the rest of the world and implode in spectacular fashion. I really do think we’re at the edge of the cliff and most Canadians are completely unprepared for what’s to come.

Any predictions on the Edmonton correction? 10%? 30%? I doubt it will be as dramatic as the hotspots of Vancouver and the GTA.

Thanks for everything Garth!!

#44 American Werewolf on 05.26.11 at 1:08 am

@ Abitibidoug
“We hear a lot of horror stories about how the U.S. housing market is troubled or unhealthy. In fact, the U.S. market is normal and affordable”

It doesn’t seem so healthy when 1 in 4 families are wiped out and at least a third of homeowners are underwater. I’ve seen countless of my friends’ families & marriages torn apart over this, and I’ve even moved one into a literal tent. There is pain and suffering abound, and perhaps a “lost decade” ahead of them as they face hopeless stagflation with mountains of debt with waning job opportunities.

There are no healthy buyers with healthy futures in the US to buy into the market, no matter how “normal” and “healthy” the prices appear to be. Perhaps, when the economy catches up and light appears at the end of the tunnel, then and only then, could we consider it to be healthy.

For anyone giddy about this happening in Canada, I don’t think many of you have an inkling of what lies ahead (the hopelessness, the fear, the anxiety, the stress, the pain). Its not going to be a quick painless correction where you wake up one day to The Beatles “Here Comes The Sun” playing. If it comes, its going to be hell (as it is down south for so many I know who open up with the stories).

Hope should not be that people face such suffering, but rather, such suffering is avoided in the first place. Hope should not be for the immediate gratification of being able to finally afford a home, but rather, for the relief of a financial calamity that grows more dire at every passing day. We should try to repress the smirks and learn, rather than behave as vultures without empathy who benefit from the flipside of the bubble. Id suggest, as long as some people will always advance themselves from the boom OR the bust, there will always be forces pushing for the continuation of the bipolar economy and asset bubbles. We are all in this together in the end–you will see. When it all comes crumbling down, remember, “it tolls for thee”.

#45 FranSix on 05.26.11 at 1:17 am

Variable rate mortgages are what bankrupted most homeowners in the U.S., the recession did the rest. However, its the three-month treasury that sets the benchmark rate.

Lower interest rates followed on the housing decline in the U.S., and rates have been lower in Canada as well. You need merely confirm this notion by verifying at the Bank Of Canada website or elsewhere. (not surprisingly long term rates are lower in Canada than the U.S. on the heels of the financial crisis.)

http://ow.ly/53hp1

Bond rates can be compared with those in the U.S. and elsewhere:

http://ow.ly/53hr4

The way to deal with a housing bubble collapse is the re-negotiate a fixed rate mortgage at lower rates, if you have enough equity in the property and it doesn’t bankrupt you. (but no more housing ATM – that will be over soon)

Governments are in some way thankful that rates across the board are lower, because they also mortgage the future at lower rates.

#46 reality guy on 05.26.11 at 2:01 am

Blackstone selling 900 million dollars of canadian real estate

Looks like the big boys are even getting out of real estate. Profiles are not profits until you sell

http://www.theglobeandmail.com/report-on-business/blackstone-to-sell-900-million-canadian-portfolio/article2032501/

#47 BPOE on 05.26.11 at 2:08 am

June 6th interest rates to go down. Folks, Garth and The american continue to confuse america with Canada. The Conservative government will announce shortly interest rates going down. This could happen as early as June 6th. DEMAND outstrips SUPPLY. Shiller aka the american aka the SNAKE does not understand this concept. Folks, gold now over $1500. Vancouver up up and away and Seatlle still a polluted backwater town. Congestion plus air pollution = Seattle dropping like a stone. High demand plus BPOE = RICHMAN

#48 BPOE on 05.26.11 at 2:14 am

Folks, THE WORLD DISCOVERED CANADA. It’s called a paradigm shift folks. The world cares nothing about american real estate. Some still don’t get this simple fact. Canada is cool and America sucks. It’s that simple. People want to live where it’s cool like Vancouver not where it sucks like Seattle

#49 BPOE on 05.26.11 at 2:25 am

To The American
READ IT AND WEEP. Your Seattle Sucks t-shirt is on the way. White t-shirt with black letters to compliment your redneck ways. Your 40% drop spouts are shameless, disgraceful and just plain wrong. Hmmm just like america with a small a
*************************************
When real estate agent Mike Oxley held an open house on Haywood Avenue last month, he knew that the flat Ambleside view property was going to be a popular item.

He didn’t know how popular, however.

By the end of a weekend that saw an estimated 500 prospective buyers view the home, the owners had received 26 offers. The house, which as a structure had little value, ultimately sold for $1.57 million — more than $300,000 over the asking price.

“It was absolutely unbelievable,” he said.

Oxley’s story is one of numerous similar anecdotes to emerge from West Vancouver in recent months in which prospective owners have entered bidding wars over a property and driven the purchase price to well above the listed figure. It points to a frenzy of buying at the high end of the market that appears out of keeping with most of the Lower Mainland.

A home next door to the Haywood house received 10 offers a short while after that first sale and eventually went for $1.65 million — $360,000 above asking, said Oxley. Another in the 2300-block of Ottawa Avenue recently received eight bids and sold for $2.3 million, again for about $300,000 above the listed price.

#50 Canuck Abroad on 05.26.11 at 2:30 am

Elmer, boo hoo hoo. You do realise that if you were getting 20% on your savings account the mortgage rates would be even higher, right? That’s how the banks make money.

Seriously your ageist shtick is getting a bit tiresome. My great auntie recently moved out of her house that she had lived in for many decades. She is 99 and still going strong but broke her arm in a fall and the doctor recommended she move somewhere she could live all on one level. My grandmother lived alone in her house right up until she died age 94. I am only 50 so indeed very young. Guess where I plan to “retire” after living in half a dozen countries all over the world? Yep, Toronto. And I will be sure to buy a house after reading all the horror stories about how poorly condos are maintained in Canada. Then I will plan on living in it until I am well into my 90s as well. Oh, and I’ll be paying cash, so I don’t care if mortgage rates go to 25%. Bring it on.

#51 CaptLou on 05.26.11 at 4:22 am

I just heard some really scary news. Most of us will note that the rapture did not occur on schedule. We are now told that reason for this is that the rapture will be administered by Carney over the next 2 years. Get someone to look after your dogs!

#52 Dontcallmeshirley on 05.26.11 at 5:57 am

Never mind the 20 yr olds.

ING, Canada’s 6th largest mortgage lender, announced yesterday the offering of mortages to landed immigrants with “little or no credit history”.

Hmmm, better push that correction time frame ahead from 2013 to 2014.

Capital continues to be plentiful in Canada. Lots of time, barely at Defcon 2.

#53 Ret on 05.26.11 at 6:00 am

#22 Re: Hamilton–Don’t!
Unless you like high taxes, flooded basements and a tax and spend Council. Lower city from Westdale to Stoney Creek has been conceded to hookers and drug dealers. It is too late for me, but you have been warned.

Could be good if you are a slumlord around McMaster as there is no enforcement of by-laws, property standards etc.

#54 Ronaldo on 05.26.11 at 6:07 am

When I bought my first house (brand new condo) at age 23, I paid $20,800. The rate was 9.5%. I was making 8 grand at the time (2.6 times my salary). I too was happy. That was 41 years ago. I didn’t even have to include my wifes income. Those were the days. Same place today sells for $507,000 or 8.7 times what my salary would be in todays dollars. If Interest rates were what they were back then, it would take my entire net salary to cover the PIT assuming same down payment of 15%.

#55 young & foolish on 05.26.11 at 6:13 am

I just don’t get it ….. Garth makes an obvious point that RE prices are well above the mean (3 times average earnings), but people seem to continuously argue against it. Why?

Do people really believe “it’s different this time” applies here and now? Every possible justification, like cheap credit, foreign investors, and the real value of fiat money, is brought out as arsenal to support RE “values”, when it’s obvious from examples such as the US, Ireland, or even Windsor/Detroit that economic contraction can turn sentiment into negative territory overnight! Value is nothing more than what people are willing to pay, period. Buyers beware!

We really are no better than gamblers!

#56 i pity the fool who drinks soy milk on 05.26.11 at 6:20 am

#27 JB

I empathize with your situation JB. My wife and I have never owned, and could easily get into a quality SFH, avoid CMHC, and still have half our assets outside RE. I’m not the sharpest tack in the box, but I can see that residential RE has had it’s day as an investment or even as a store of wealth. What I don’t understand is how so many intelligent, educated, and otherwise responsible folks continue to sing it’s praises. I am the only renter I know of in my circle of friends and family, and also, in terms of household income, the wealthiest. The ridicule led first to shame, then stubborn defiance, and finally I am seen as the cute but stupid black sheep. Is it normal to want a pint at 7am??

#57 SMOKING MAN on 05.26.11 at 6:35 am

41 Mr. Reality on 05.26.11 at 12:21 am
Said:

#5 SMOKING MAN on 05.25.11 at 9:16 pm Sorry i clicked on your name and it took me to your blog. You are a 100% certifiable nut bar…….
That self-righteous dribble is unbelievable. What a whack job! Mr. R.
…………………………………………………………………………..
Mr reality, I agree, I don’t even try and hide it.
Let me school you:)

Think of the pure genius of the concept of bloging from the prospective of a mad man. You can get away with saying just about anything, as long as everyone know you are mad., if you cross the line and really p!ss someone off and they WANT TO SUE YOU. Go with the insanity defense.

Law suits re out off control bloggers (pushing out truthes) are coming,

#58 bullion.bunny on 05.26.11 at 6:40 am

Interest rates do not have to rise significantly for EVERYONE to be in trouble. Debt loads are high, if not totally out of control. Young people are hooked on low interest rates and easy money, old farts are hooked on under funded pension funds. Credit can become scarce as it has in every post bubble contraction all the way back to Rome. You are correct that low interest rates and easy money fuel the housing market! What even surprises someone as jaded as myself is the size that this bubble is allowed to grow. Caution is thrown to the wind as the party rages on, even with the warnings from south of the border. Of course prices are still rising and Canadians are still buying, including carrying 800K mortgages. This will end in nothing but tears. The European warning lights are flashing on the dash, fall should be interesting.

#59 C on 05.26.11 at 6:51 am

As I have said before the fact that the BoC has left rates at emergency levels for this long is a complete joke. We have a national housing bubble that is heating up AGAIN!?!

I met with a client yesterday in north Burlington, Ontario and couldn’t believe the for sale/sold signs. I mentioned it to her and she said it’s crazy, nothing stays on the market longer than a week. She asked about where I was living now and I said we are about to move into our second rental. A beautiful bungalow downtown. She was so confused, and couldn’t believe we were renting?

Don’t you think that a real estate bubble and record commodity prices would be enough incentive for Carney to raise rates away from emergency levels?

When the housing market hits the rocks, Carney should be the poster boy to direct blame. People are ultimately responsible for their actions but he is like a drug dealer peddling mortgages with ultra low rates.

I believe the next BoC meeting is May 31st? Seriously Mr. Carney do the right thing, get some integrity and raise rates at least 0.25%. You’ve warned everyone you are going to raise rates, so do it! It’s way overdue.

Housing market euphoria is beyond control today thanks to rates that have been too low for too long and the only thing you can try to do now is minimize the pain.

Do the right thing and raise, ASAP!

#60 confessions of a real estate bear on 05.26.11 at 6:51 am

Garth. You mentioned the rot starts at the edge and moves inward, We have been saving for a cottage and this spring we have finally seen some resoable price reductions in the area we are looking at. It has started already in certain markets and will follow in the rest. Why must we focus on the absurd market.

#61 House on 05.26.11 at 6:54 am

Yesterday in the news I heard mutterings that rates would not start up until the fall or early 2012. If Art Carney is so smart as to know what present conditions are creating, why didn’t he know what was going to happen when he created them in the first place. It seems that Carney and the Conservatives did not know and are merely playing with the economy to see if any of the myths that they believe really have any validity.

#62 bigrider on 05.26.11 at 6:55 am

Garth, so you were in Port Dover on the 13th (picture).

When that guy walked by me, I puked my $5 hotdog all over my builder buddies new 2011 screamin eagle streetglide.

I see the gold bikini really made an impression on you !

#63 bigrider on 05.26.11 at 7:03 am

JB at #28.

Are your inlaws Italian? If so , there is no hope .

My sympathies.

#64 pbrasseur on 05.26.11 at 7:04 am

Garth – Are you sure about your household income numbers, they look wrong.

Sources: Wealthscapes, Environics Analytics, RBC Economics, Statistics Canada. Yeah, I’m sure. — Garth

#65 fancy_pants on 05.26.11 at 7:15 am

Well, I’m one of those folk who are NOT convinced rates are going to rise in a hurry but I really hope I am wrong. For me, they can’t go up fast enough. I would love to see RE ‘correct’. I’m mortgage free, have always lived within/below my means and have $ in the bank.

Time to reward the savers , not the spenders.

F is really the one to blame. It was the window of opportunity for the ridiculous lack of qualifications required for a mortgage (ie. 40 yr, 0 down) coupled with the low rates that created this mess. If mortgage qualification rules were not made ridiculous, the low rates wouldn’t have been able to draw in as many victims.

#66 bigrider on 05.26.11 at 7:18 am

Canuck abroad #50.-” have lived in half a dozen countries and gues where I will retire yep Toronto”

Why Toronto Canuck? I’ve been born here and lived all my life but I am curious as too why people choose it over the multitude of other places.

Seems to be nothing but traffic congested, overcast and gloomy or bitterly cold all of the time.

#67 Calculon The Mighty on 05.26.11 at 7:27 am

Howdy G,

Quick run through of your numbers via the BOC inflation calculator:
Your 1972 wage in 2011 dollars: $154,580.65
Your total bill served to you by your contractor, by the same measure: $347,805.46.

If the average wage in 1972 has any resemblance to today’s, it would have been in the $7,200 range, giving us a roughly 8-9 times annual earnings ratio.

What say you, good sir? Any insights?
I am

Absurd. — Garth

#68 Kevin on 05.26.11 at 7:37 am

Garth, I have to take issue with your very last paragraph, specifically your assertion that houses have no intrinsic value. People have to live SOMEWHERE, and (barring charity) anywhere you live is going to cost money. Therefore, by providing shelter (which has value), a home has intrinsic value.

Even beyond that, you claim a house’s value can go to $1, but that’s not true. The materials themselves have value. Toilets, cabinets, appliances all have value. Even the wood itself has value as firewood. The Copper wiring/plumbing, the carpet, the wood in the fencing, those all have value. Any code-compliant home will always have at least some value, and will never go to $1.

Is it overpriced at $500,000? Sure. Is it overpriced at $2? That’s ridiculous. The “bottom” is in the middle there somewhere, but it’ll never be $1.

Not the US experience. — Garth

#69 T.O. Bubble Boy on 05.26.11 at 7:46 am

So, mainland Chinese $ are buying up West Vancouver, plus London (UK), plus Singapore, plus Sydney Australia and many other places around the world…

BUT

100,000 apartments are sitting unsold in Beijing, as yet another Chinese company is found to have shady accounting, and Chinese RE developers have too much over-priced land on their balance sheets.

This is going to get ugly!

#70 T.O. Bubble Boy on 05.26.11 at 7:50 am

Oh ya, and in cased you missed out on LinkedIn’s bubbly IPO:

Zynga (developer of Facebook games like Farmville) is ready to IPO.

The social media stock bubble is in full swing. Maybe Friendster and Classmates.com should try to make comebacks!

#71 Steven Rowlandson on 05.26.11 at 8:01 am

I find the idea that working men make $45 grand preposterous. I was lucky to have a job where I made a pretax 66% profit on $18 to $26 thousand a year building stairs for several stair companies between 1983 and 2009.

I might have been born in Canada and still alive in Canada but if I was asked to say I live in Canada I would suspect I was lying. Why?
Canadian employers are unwilling or un able to pay blue collar workers enough to meet the cost of living and live like adult men in Canada and that includes being able to buy a house.
Don’t mistake special situations for standard operating proceedure.
Now how the hell do all you people expect tradesmen/ working men to live in your country based on what you are willing to pay for their services?
When you run out of home buyers and are down to guys like me your house prices will drop off a cliff for lack of buyers. Did you think those earning 10 to 15 an hour are able to buy your average 379 grand bungalow?
Flush out your head gear people. I expect a 90% or better drop.
Oh yes, expect fewer children in Canada. People who can not live any where near a job don’t need to start families, its a luxery they can not afford. Canada is a dying country that can’t survive without immigration
to prop up the real estate market and the demographics.
How pathetic and all because of some BS political agenda and greed.

#72 Fractional Reserve on 05.26.11 at 8:02 am

#51 CaptLou

The real reason for the rapture being cancelled, according to Joan River’s tweet, is that Oprah had it postponed until after her final show.

#73 Mystery Man on 05.26.11 at 8:07 am

“Houses have no intrinsic value…They’re only worth what buyers are willing to pay.”
_____________________________________________

Huh? Shelter has no value? Imputed rent has no value? Rental income has no value? Land has no value? Building materials have no value?

It’s one thing to argue that market prices are in excess of intrinsic value, but it’s quite a stretch to propose that real estate has none at all.

It’s quite a stretch to declare that real estate has no value

I said it has no intrinsic value. And it does not. — Garth

#74 Fractional Reserve on 05.26.11 at 8:08 am

On a more serious note, the drop in American real estate values is due to the fact that the massive credit binge of the last couple of decades effectively ended in 2008. Credit is extremely tight and the banks in the US went from lending to anyone with a pulse (and some without) to imposing strict requirements on lending. Further and just as important, the US of A has gutted its manufacturing base and sent offshore many of its high paying factory jobs. They are never, all of Donald Trump’s protests notwithstanding, going to return. Minimum wage service jobs are not fuelers of high real estate prices. Even civil service jobs, once thought secure, are being slashed. US real estate, except for areas like Manhattan and other high wage supported areas, will never return to its former glory.

#75 Canuck Abroad on 05.26.11 at 8:17 am

56 / Bigrider – Yes the cold will take some getting used to again. All cities have their pros and cons. All my family is within 2 hours of Toronto. School chums also in Toronto.

#76 BrianT on 05.26.11 at 8:20 am

#11Elmer-Count your blessings-the average 20 yr old has it a lot better than the average 20 yr old of 2031 will.

#77 Alex on 05.26.11 at 8:28 am

#68 Kevin on 05.26.11 at 7:37 am

15 Detroit Houses You Can Buy For Less Than $500

http://www.businessinsider.com/houses-for-1-dollar-2010-12

#78 BrianT on 05.26.11 at 8:30 am

#53Ret-A few weeks ago I drove around the west area (just up the hill from King St) and I was rather surprised how beautiful the neighbourhood was. The streets were Turner, Ravenscliffe, etc.

#79 Willa on 05.26.11 at 8:37 am

#68 Kevin

Read Robert Schiller’s book “Irrational Exhuberance.” It’s about housing prices and its ups and downs.

One chapter focuses on one village in Holland that has records back to the 1600s. When matched with average earnings in that area over the four centuries, they found that the houses increased in price an average of only 1% per CENTURY (So 1/100th% per year).

Housing prices are like an elastic being stretched. They can pull away from earnings for a while, but eventually they snap back. But when they snap back, they go too far.

Schiller’s book is a classic, a good read with some interesting graphs.

#80 bigrider on 05.26.11 at 8:52 am

Vancouver- the home of coffee enemas and colonic cleansings..

#81 Aussie Roy on 05.26.11 at 8:55 am

Torquemada on 05.25.11 at 11:22 pm

Thankyou…

Aussie Update

Steve Keen has his say on Aussie housing bubble – Video

http://www.finnewsnetwork.com.au/archives/finance_news_network17809.html

Mortgage delinquencies point to property market chill

http://www.theaustralian.com.au/business/mortgage-delinquencies-point-to-property-market-chill/story-e6frgak6-1226063484615

Arrears on mortgage repayments spiked to a record high in the first three months of 2011, as more Australians struggle with rising costs, Fitch ratings agency says.

http://www.theage.com.au/business/lowdoc-mortgage-arrears-top-gfc-peak-20110525-1f3v7.html#ixzz1NSuQsrXJ

RBA warns many first home owners who used grants may now be vulnerable

http://www.news.com.au/money/interest-rates/rba-warns-many-first-home-owners-who-used-government-grants-may-now-be-vulnerable/story-e6frfmn0-1226063399790#ixzz1NSuYarUz

5 Myths That Won’t Stop a House Price Crash

http://www.moneymorning.com.au/20110526/5-myths-that-won’t-stop-a-house-price-crash.html

#82 bigrider on 05.26.11 at 9:00 am

#75 Canuck Abroad- response to Bigrider.

Cool, Canuck you have family here. A great reason to value T.O over other parts of the world. Understood.

What I was questioning, or inferring from what you said earlier, is the proposition that some people make that T.O is something special and that everyone from all over the world wants to live here. I would ask these people to shake their respective heads and wake up.

There are countless cities with better living standards, climate and culture than T.O., not to mention the dubious distinction of having the worst commute times in North America.

I stay here because like you my family, roots and successful business are all contingent on my staying.

#83 john m on 05.26.11 at 9:07 am

Great post Garth and how very true. The bubble is going to pop in fact i believe it has already started even without rate increases.Wages are flat lined,the economy sucks,the biggest and largest spending government in Canada’s history spending billions on war machines and the largest rise in cost of living for the average Canadian in the last year in my lifetime.Taxes are going to rise..they have to and they will whether it is in another “sneaky little H.S.T.” or whatever they will. The slide has started and it will slowly pick up speed and we are stuck with the “wizards” who created this mess to correct it? Any one with some good squirrel recipes?

#84 RentinginRosedale on 05.26.11 at 9:17 am

#11 Elmer on 05.25.11 at 9:25 pm…It’s not 20-somethings that need to learn anything, it’s old people.

Elmer, Oh great and brilliant Oracle, I’ve reflected on your comment and realize that you’re correct. It’s indeed people over 60 who need to learn a few things.
I’ve created this list, you can add items as you see fit…

– Old people should learn that 20-somethings, especially those with no money, are entitled to own a house in Toronto.
– Old people should learn that after a while, they need to just move somewhere (anywhere) and make space for the all important 20-somethings. After all, what do old people they think they’re doing, living in a paid-off house
– Old people should make every effort to die soon, since they are essentially useless, and their savings could be put to much better use by ungrateful 20-somethings
– Old people should reflect on the fact that, as Elmer says, 20% interest rates were in fact good, not bad, since you could get a high interest savings account

#85 refinow on 05.26.11 at 9:21 am

#60, who is considering buying a cottage>>>>

Put you money back in your pocket and wait… Rent a beautiful cottage for a couple of weeks this summer, lots to choose from, will end up costing you 2000 -6000 in total…

Then sit back and watch.

Wonder why there has been recent reasonable drop in the cottage market?? Because this is the market that changes first.. Cottages are purly luxury items, not a neccessity, and will likely see the most significant correction..

With tighter credit policies and now a restriction of 85% maximum for refinances people can not squeeze anymore “EQUITY JUICE” from their principal residences to create the downpayment for that cottage, you will see an instant drop in demand, lower prices to follow…

Now how do you feel about that recent reasonable drop in that cottage price ???

#86 Devil's Advocate on 05.26.11 at 9:28 am

Intrinsic?… Extrinsic?

Is There Such a Thing As Intrinsic Value At All?

In the history of philosophy, relatively few seem to have entertained doubts about the concept of intrinsic value. Much of the debate about intrinsic value has tended to be about what things actually do have such value. However, once questions about the concept itself were raised, doubts about its metaphysical implications, its moral significance, and even its very coherence began to appear.

http://plato.stanford.edu/entries/value-intrinsic-extrinsic/

#87 Just Jack on 05.26.11 at 9:39 am

The income multiplier is just a unit of comparison not the cause of the decline in prices. A government can stimulate the housing market and thereby push the income multiplier to higher levels. And in a recession the multiplier shows how low prices can fall before investors buy back into the market. Real Estate is horrendously more difficult to understand than this simplistic multiplier. Economic, social, political and geographical conditions are the foundation of value, but that ain’t sexy to say. You paid 3 times income because interest rates were 11%. Today’s buyer pays 9 times income because interest rates are a third of what you paid. What has happened is that the shrinking pool of prospective buyers are faced with paying an extreme percentage of their income over the entire length of the amortization period (remember how many years it actually took for you to pay back the mortgage). Without appreciation, this group of prospective buyers will judge the factors that make up value and not accept the risk and burden of home ownership. Then you can light a stick of dynamite under a prospective purchaser and they won’t budge to buy.

#88 REAL ESTATE SCAM on 05.26.11 at 9:52 am

Board of Trade has a session on Canada Real Estate last week. There is no doubt we are in a bubble. The Fact is there are 2 bubbles. Financial bubbles and Real estate.
Real estate bubbles burst every 20 years. Last one burst 89/90. So its due anytime. Fascinating to understand is. There is no cash value on real estate. Over 70% of its value is DEBT. Eg. If 10 homes on a street of 20 sell and they do not purchase. The money does not exist. As of today there is no doubt this pyramid has reached the top. Next step is Canada will start losing jobs to U.S. because housing is less expensive.
Detroits prices are 70% lower than the GTA. So where do you think all the future jobs will go to. The session ended with. People wake up and smell the coffee.

#89 Stevermt on 05.26.11 at 10:03 am

Maybe that nutbar preacher was right(eous)..anyway America just reached its debt ceiling of 14.3 trillion and the Fed will pull off some crazy ass accounting tricks to make the cash last until Aug 2 or 3..but then what?
so maybe May 21 (my birthday btw) was the beginning of the TEOTWAWKI…..

#90 karen on 05.26.11 at 10:15 am

For a look at what the 50% under 30 unemployed say in Spain:

http://www.democracynow.org/2011/5/26/toma_la_plaza_frustration_with_unemployment

Don’t miss, this thing is BIG!

#91 john m on 05.26.11 at 10:17 am

“So whereas I ponied up two and a half times my annual wages to get a two-story house sheathed in green aluminum, today’s kid has to fork out almost 10 years’ worth of earnings to get a concrete box”…………When one also considers the difference in the cost of living today compared to 40 years ago (food,utilities,transportation etc.,etc,etc) the contrast is staggering and ridiculously unaffordable. It simply can not last.

#92 Mr. Reality on 05.26.11 at 10:24 am

#5 SMOKING MAN on 05.25.11 at 9:16 pm Sorry i clicked on your name and it took me to your blog. You are a 100% certifiable nut bar…….
That self-righteous dribble is unbelievable. What a whack job! Mr. R.
…………………………………………………………………………..
Mr reality, I agree, I don’t even try and hide it.
Let me school you:)

Think of the pure genius of the concept of bloging from the prospective of a mad man. You can get away with saying just about anything, as long as everyone know you are mad., if you cross the line and really p!ss someone off and they WANT TO SUE YOU. Go with the insanity defense.

Law suits re out off control bloggers (pushing out truthes) are coming,

Heck of a point! Can’t sue a blogger! rofl

Mr. R.

#93 45north on 05.26.11 at 10:26 am

Steven Rowlandson: When you run out of house buyers and are down to guys like me your house prices will drop off a cliff for lack of buyers. Did you think those earning 10 to 15 an hour are able to buy your average 379 grand house?

no I don’t think they will be able to buy a 379 K house

[email protected]

#94 GregW, Oakville on 05.26.11 at 10:27 am

Hi Garth, If your in Oakville Sat and interested. http://www.ourpower.ca/community/halton/382

Oakville Conserves Energy Fair
This Saturday, May 28, the Town of Oakville will host its annual Oakville Conserves Energy Fair. HEN/HERE! will be among the exhibitors showcasing energy conservation and green energy products and services. The event takes place from 9:00 to 1:00 in the South Atrium at Town Hall, 1225 Trafalgar Rd., Oakville, just north of the QEW.

As part of the day’s activities, Graham Flint will be presenting a workshop on solar PV and MicroFIT. The workshop is from 10:00 to 11:00.

Solar Tour
We are planning a solar tour in Oakville on the afternoon of Sunday, June 12. Please email …

#95 maxx on 05.26.11 at 10:48 am

#7 Sue-

You’re raising a really smart child!

#96 Stormwatching in the Kawarthas on 05.26.11 at 10:52 am

Hi Garth, big fan and enjoy the read daily. Was wondering if you can shed a bit of insight into the cottage market? Here’s our situation in a nutshell, wife, 3 year old and myself rent at Y+Bloor in large, old apt that has been in family since 1980….yes rent is very good! 5 years ago, we determined housing was to pricey in TO and decided to buy a cottage in the Kawarthas. Have thoroughly enjoyed the splashing about and upgrading our shack over the years intending to flip to buy (now rent) a larger pad to house the growing family. We’ve listed in March, to date have had 6 visitors, one relatively lowball offer and seemingly not much activity overall. Since we’ve listed, many others have listed nearby with none moving either. Thankfully (I think), we’re one of the lowest price in town, to get in this area of the market. Financially fine to carry $225K mortgage, combined income over $150K, decent RSP’s and RESP’s, and both our jobs have decent pensions. Once cottage sells, plan to max out TSFA for both of us and “diversify” the rest, then wait out the storm……that is if a storm doesn’t knock over the cottage before it sells!
Appreciate your insight…..cheers.

#97 maxx on 05.26.11 at 11:07 am

#36 HouseBuster on 05.25.11 at 11:57 pm

” …. I think it is sad that your 10 year old is making comments about banks and money.

He’s too young to be thinking about money. There’s plenty of time for that.”

You have GOT to be kidding!! Financial ignorance is what allowed society to get into the huge mess it is currently in.
We absolutely need more parents like Sue.

#98 Hoof - Hearted on 05.26.11 at 11:18 am

Re Cottages:

Our family has a waterfront cabin the the BC interior.
Had it since 1974. Paid $ 17,000. Funny thing was when the area first sold in 1970, waterfront lots went for $5000.

We had a lot of great times and pleasant memories.

However, we (I)have sort of hit this wall.

My sibling and I will ultimately inherit it.. Until recently I loved cutting the grass, cutting firewood ,building/fixing this and that.

In essence, I did about 99% of the work , and my sibling and her spouse basically F*ck all

Our kids , however, lost interest in going up a few years ago, find it boring, prefer the City .
When I was their age I couldn’t wait to go up, I counted count the days.However, this is a common theme amongst others with kids…..too urbanized.

My sibling, of course, and her kids LOVE it up there.
Now the sharp elbows are happening. We used to divvy up the time so as not to overlap uses, but now their kids have drivers licenses and want to go up with THEIR friends, in addition to the family trips.

I bite my tongue, but as I said…I hit the wall re: interest.
I guess one reaches a certain age that hits one sudddenly aka WTF ? The novelty has worn off….too much like work.

Another anomaly that has happened in the last 10 years is the urban cowboys. They buy shitty lots, in swamp and shade, and are not building cabins..but literal fully serviced houses.
Then they bring up all their toys (ie boats, off road bikes etc).
Your new neighbours can be assholes, weird attitude and ” I have MY rights you DON”T F*ck you ” attitude.

So, what used to be a calm enjoyable back to nature area is now a weekend warrior place.

In addition, the taxes are TWICE the rate of our City taxes based on assesment, with NO services(ie water is via well….hydro and telephone you pay…garbage dump is 10 miles away.)

What I have noticed is the Local Gov’t..which a regional district, located 100 miles away..keeps ratcheting up the taxes. A volunteer fire department levy was attempted , but a petition to stop it stooped it. However 10 years later, the regional district pulled a fast one with holding a referendum at a time(between holiday) that favoured locals. This resulted in a $200 levy for the Fire Dept. on top of taxes. I have no idea why taxes rise…..I see no benefit .

Any way long and short of it is…I hinted to my sibling time has come and gone, its becoming more of a liability than asset ..lets sell it.
Their usual esponse is deer in headlights uh uh uh…

However, many of our old neighbours have been through the same evolution, and sold it.

In addition, retirees?
Find the cold weather in winter too much and cabin fever isolation.

Also hospitals are far away, and that becomes an issue

FYI: The place is currently worth approx. $350,000.

I would shy away….especially the prices being asked….way overvalued

Rent…don’t buy…the novelty of ownership will wear off rather quickly

Please share your cottage stories

#99 Hoof - Hearted on 05.26.11 at 11:23 am

Within a month of putting her two-bedroom house in San Francisco on the market recently, homeowner Linda Gao had five offers, each one above her asking price of $699,000. So before accepting the most-attractive bid, she threw in an extra condition: If you want to buy my house, you have to feed the squirrels.

Two weeks later, she and the buyer hammered out a contract that included feeding the backyard wildlife, which Ms. Gao has done three times a week for the past two years. “I don’t think it matters if it’s a buyer’s market or a seller’s market,” Ms. Gao says. “Anyone with a good heart would feed them.”…

Indeed, when Susan Butler was negotiating to buy Ms. Gao’s San Francisco property, she was resigned to the feeding schedule. “At that point, I said, ‘Yeah, what the hell, I’ll feed the squirrels,’” she said. She signed a contract in April, paying $815,000 — or $116,000 over the asking price. Will Ms. Butler actually feed her new furry friends? “Probably not,” says the college administrator. “I don’t want to encourage other rodents.”

June 2005

http://quotations.amk.ca/housing-bubble/

==========

Here”fat ” little squirrel ….gootchee goo says Garth

#100 BigAl (Original) on 05.26.11 at 11:29 am

Chilliwack, BC and Milton, Ont.

Both the same population.

Chillwack MLS listings: 1700
Milton MLS listings: 360

#101 [email protected] on 05.26.11 at 12:00 pm

4.5 X income comparing to US, doesn’t take into account the difference we pay here for everything, higher taxes, gas, higher prices for everything. So we are much much worse off than the US peak.

My dirt cheap US home is now rented out for 850 a month so I am happy. Might buy another. Rental demand is strong since nobody wants to own and be tied down since everyone is insecure about their jobs.

When McD’s receives a million job applications for 16,000 jobs you know jobs are scarce.

#102 bill on 05.26.11 at 12:06 pm

”Go with the insanity defense.”
only if there is a sanity clause

#103 Mr. Plow on 05.26.11 at 12:26 pm

#7 sue

Way to go Sue! You have raised a 10 year old pessimistic cynic.

You should be so proud!

#104 Abitibidoug on 05.26.11 at 12:27 pm

In response to American Werewolf #44 ; The housing market itself is back to normal valuation, but many people like those families who are wiped out and underwater are the result of the fallout from a market that was dysfunctional and grossly overpriced, as it still is in most of Canada now. In the short run values coming back to normal can create a lot of pain, but in the long run it’s an adjustment that’s better for the economy. Think of it this way, would it have been wise to throw billions of dollars of tax payers money to prop up tech stocks such as keeping Nortel at it peak of $120 per share rather than let it fall to its present value of 2 cents? Similarly, as housing prices fall it will be easier for new buyers (such as younger people) to get into the market. Is that a bad thing?

#105 Mr. Plow on 05.26.11 at 12:32 pm

#35 The InvestorsFriend (Shawn Allen)

You and I see eye to eye on a lot of things.

#106 Vancouver_Bear on 05.26.11 at 12:33 pm

#8 Victor on 05.25.11 at 9:19 pm

You were grossly misinformed….the prices have quadrupled from the last year.

Sarcasm off…..bummer.

#107 Mr. Plow on 05.26.11 at 12:36 pm

#43 Dr.NickRiviera

My prediction, which I made last year and has held so far.

Edmonton – very minimal correction.

There is a reason why a lot of Garth’s posts are centered around TO and Van. Those are the cities where prices have inflated the worst in the last couple of years.

Edmonton has not, and last I checked the avg house was about 3.5 times income.

Does sound like you overspent if you are 5.8, but I wouldn’t expect to see 30% drop in prices in Edmonton.

Just me, everyone has an opinion and I am no different.

#108 Devore on 05.26.11 at 12:37 pm

#38 Adam in Montreal

“How to Give Up Renting Without Going Broke” @ http://bit.ly/jraFLs

I read the comments, and my faith in humanity is restored.

#109 jess on 05.26.11 at 12:37 pm

people will want to move there

Vermont is a land of proud firsts. This small New England state was the first to join the 13 colonies. Its constitution was the first to ban slavery. It was the first to establish the right to free education for all – public education.

This week, Vermont will boast another first: the first state in the nation to offer single payer healthcare, which eliminates the costly insurance companies that many believe are the root cause of our spiraling healthcare costs. In a single payer system, both private and public healthcare providers are allowed to operate, as they always have. But instead of the patient or the patient’s private health insurance company paying the bill, the state does. It’s basically Medicare for all – just lower the age of eligibility to the day you’re born. The state, buying these healthcare services for the entire population, can negotiate favourable rates, and can eliminate the massive overhead that the for-profit insurers impose.

#110 Mr. Plow on 05.26.11 at 12:46 pm

#79 Willa

Did you just compare the real estate market today to Holland in 1600?

Now I am the first to admit when I am wrong, but I am guessing the world is a different place 400 hundred plus years later, that kind of makes the comparison a little bit silly.

#111 Mr. Plow on 05.26.11 at 12:49 pm

#86 Devil’s Advocate

Welcome back if you are the original.

#112 Junius on 05.26.11 at 12:51 pm

#107 Mr. Plow,

Edmonton would correct by 30% if interest rates rose above 8%. Unless that happens you are probably correct and it will be less. However that is certainly possible over the next few years.

Everyone from Edmonton will counter that salaries will rise enough to off set. I think that is doubtful but a wild card all the same.

#113 Devore on 05.26.11 at 12:55 pm

#44 American Werewolf

I would tend to agree.

The people who wanted to buy, and had a pulse, have already bought. They are ALL now underwater and in trouble. They cannot trade up. The move up market is dead. It doesn’t matter anyways if they can afford to move up to a bigger/better house, they cannot sell their current one, because….

…the people who wanted to or could not buy, are now in even worse shape financially. The first time buyer market is dead.

Very few people in the US can afford to buy a house. Even if economic conditions improve drastically this year, sales will drag for years. It will be a very prolonged recovery down there. And while I am sure some people are terrified of buying now, the primary obstacle now is financing and affordability (in terms of being underwater or in lots of consumer debt for example). I think most people are still hot to buy a house.

#114 betamax on 05.26.11 at 1:19 pm

#27 JB: “WTF do I do?!?!”

Nothing worse than being lectured to by a gaggle of idiots. Avoid them till the crash…no great loss even if it’s years away.

Where’s your spouse’s support in all this? Maybe it’s time for some new in-laws…just sayin’.

Otherwise just be resolute and develop a sense of humour about them…laugh on the inside.

Also, don’t expect apologies when it all goes south. You’ll only be disappointed.

#115 Daystar on 05.26.11 at 1:24 pm

#18 Devore on 05.25.11 at 10:36 pm

“I think a bigger factor in the tepid US housing market is not lack of demand due to uncoolness of RE, but rather inability to purchase (no money, terrible credit). US home ownership fell a few percentage points, not because of unprecedented household formation, but because of unprecedented evaporation of household wealth.” – Devore

Excellent points that are worth repeating. Recently, I looked into personal bankrupcy numbers in the U.S. to see for myself how bad it was. This is the condensed version from an entry of mine a few days ago:

Personal bankrupcies 2005′ – 2010′ (dec 31st cal year)
2005 – 2.1 million
2006 – 618,000 (05′ law introduced explained with link)
2007 – 819,000
2008 – 1,086,000
2009 – 1.4 million
2010 – 1.6 million

The link below reveals the number of filings for bankrupcy since 1980 (not the number that has been processed)
http://www.bankruptcyaction.com/USbankstats.htm

Link explaining bankrupcy law changes that delayed bankrupcy filings with 06′ numbers:

http://www.msnbc.msn.com/id/18158583/

Whats worth adding is that a good percentage of bankrupcies filed are joint (husband and wife filings) so the numbers given grow by an average of 32% for actual individuals who have filed for bankrupcy.

Going back to the landmark year of bankrupcies for the U.S., they had closer to 3 million personal bankrucpies on their hands, or 1% of their entire population going broke. I’m just guessing, but the percentage of people who declared for bankrupcy who were not seniors, children or dependant would have been more likely 1.4, 1.5% of the working population. Readers, it was enough to take down Leman brothers, AIG, Freddy and Fanny. Its not a big number until one really thinks about it.

Since the beginning of 05′ interest rates being the catylist to their downfall (how easy a mathematical equation it truly is),

http://en.wikipedia.org/wiki/File:Federal_Funds_Rate_1954_thru_2009_effective.svg

the number of bankrupcies, assuming filers haven’t filed more than once (and I’m not so sure they can with newly revised laws of 05′) total 8.223 million personal filings. Again, an average of 32% of these non business filings are joint filings so this number grows by 32% for actual individuals who have filed for bankrupcy.

So… its about 11.5 million people who have filed for bankrucpy in the last 6 years out of a nation of 300 million so whats the big deal, right? For one, this is but a fraction of those who lost their homes without declaring bankrupcy. There are millions of americans proud enough not to declare, but try to pay off their debts because they don’t want to face this kind of failure and start from scratch. The percentages are unknown, but if housing “shadow” bank owned inventories are any indication its one in 8 americans. A quarter of the population is still in negative equity, americans who haven’t called it quits or walked away either through bankrupcy or working out a deal with the bank to leave clean. Thats a large number of people who simply don’t have the credit or equity to buy a first or second home.

Its really not too hard to guess why U.S. housing is still finding bottom and I thought it would sooner than this myself, its surprised me (course, its worse than I intially thought) but there just aren’t that many buyers who still have a credit rating, equity and a job that pays well enough to buy back in. Lets remember that some states have been hit really hard, construction being their number one industry until boom went bust. Manufacturing states have been decimated. Tech states have hit the skids. Sharp municiple cutbacks have taken place in some areas quite dramatically due to dramatic declines in tax revenue and why did this all happen?

Greed. Greed that allowed banks to lend to the average not so educated borrower 5+ times their total gross salary to buy an asset at or near its peak value. Its a licence to lose money for everyone from the homeowner losing their equity/home, to the worker losing their job to the bank losing their ability to remain solvent. Ah… but the bankers still got their pay incentives for “growing” debt portfolios didn’t they? The politicians got their lobbyist kickbacks and the CEO of Citigroup got his $600 million a year CEO salary…

…and the middle class got their lumps.

#116 BrianT on 05.26.11 at 1:27 pm

#104Abit-What you are missing is the importance of the Ponzi scheme to the overall economy. The US economy cannot recover because when the Ponzi collapsed, the rest of the economy is too small to take up the slack. Canada is a little bit better in this regard, but not much.

#117 The InvestorsFriend on 05.26.11 at 1:38 pm

A HOUSE HAS NO INTRINSIC VALUE?

Well Yes and No…

A house clearly has no guaranteed market value. The market value of a house can swing pretty wide.

But at a given moment in time I think a house does have an intrinsic value that is related to various things like land costs, construction costs, local rents and interest rates and supply and demand. But that intrinsic value can change over time with the jobs outlook, interest rates, rental rates, construction costs.

By some definitions almost nothing has intrinsic value. That is, the value of any item in relation to its purchasing power can change over time. The one possible exception is a risk-free inflation-adjusted bond.

The key concept of intrinsic value is that sometimes intrinsic value can diverge radically from market value.

I think it is fair to say that in some parts of the U.S. market prices for houses are far below intrinsic value. If you can buy a house and “carry” the mortage by renting it out to a snowbird for 8 weeks I think it is clear you have a bargain. If you can buy a house for 30% of its reconstruction costs and you are getting the land thrown in then I think it is fair to conclude that the house is selling below intrinsic value (unless it is in a tzic waste zone or something where noone can live).

Conversely if the price of a house is only barely affordable to current buyers due to record low interest rates then it may be fair to conclude that house is over and above its intrinsic value.

You don’t need to know the exact intrinsic value. You just need to know a bargain when you see one and an over-priced asset when you see one. Warren Buffett has applied that simple logic to become the world’s most successful investor and in the top three richest people in the world.

Many people will disagree with the logic here. So what?

Getting rich is not a matter of taking the popular course. It’s quite opposite.

#118 maxx on 05.26.11 at 2:01 pm

#98 Hoof – Hearted on 05.26.11 at 11:18 am

2 cottages (on “great” lakes) later, we’ve found that cottage life is no longer what it used to be. So we sold up at the top.
We’ve had rednecks chop down trees on our lot because they “didn’t want to scratch their trucks “as they drove past on our private and well-cleared road; had a neighbour erect a huge bonfire pit 10 feet inside our lot line to burn a mountain of treated wood from his old deck (he got busted upon our unexpected return from abroad); another cottager ran a pipe onto our property to evacuate rainwater from his lot; had unleashed dogs run wild in our garden, ruining flower beds; endured hours of continuous dog barking; had 2 docks wrenched apart by boaters exceeding the speed limit by a factor of 3 or more; had to close all windows on numerous occasions due to people burning plastic and toxic materials…these are the highlights…and those ATVs! Cottage life….ha!! Even those paying very high prices for upmarket properties are not immune. Be VERY careful, do your research, do some more and hope mightily that you don’t get the cottagers from hell moving in nearby.
Always find out why people are selling, talk to as many neighbours as possible and check the place out at other times than those with the agent. It can be an investment nightmare.

#119 RentinginRosedale on 05.26.11 at 2:42 pm

on cottages…

As long as you apply the cardinal rule of real estate (ie location is key) you will be fine.

– good waterfront, at least 200 feet owned by you
– Can’t see nieghbors (hill between you and neighbors is best)
– quiet bay,
– reasonable access road – not too long, well maintained
– no hillbilly huts anywhere near (hint – rusted out cars on the property)
– don’t pick a lake with a public camping site anywhere on it
– cottage structure itself doesn’t matter, you can always improve it

#120 BrianT on 05.26.11 at 2:42 pm

#113Devore-Re the prolonged US recovery, looking at the fiscal situation the logical conclusion would be that the recovery has already happened and now it is back down the slope.

#121 Junius on 05.26.11 at 2:44 pm

#110 Mr. Plow,

The world may be different than 400 years ago but human nature is the same – irrational and driven by fear and greed.

That is the point.

#122 Josh L on 05.26.11 at 2:46 pm

#7 Sue,
When I say Scotia Bank was the new title sponsor of the Saddle dome I quirked “Scotia Bank, THEY’RE richer than you think!”.

#123 Hoof - Hearted on 05.26.11 at 2:54 pm

#118 maxx

Thanks….excellent reply

As I said…we used to enjoy it….back to nature….cooking on a 1920 McClary cast iron wood stove…

However…peoples dark side tends to come out more and more in these cabin/cottages….they wouldn’t dare act like that in an urban setting.

With just the property taxes paid, one could go on a nice holiday and “rent ” accomodation (Vegas…California etc)

In fact, in our same area, and even my own neighbour, I could rent their cabin for 3 weeks for what we pay.

Any way, this blog is about sharing info.

#124 Timing is Everything on 05.26.11 at 3:23 pm

#56 i pity the fool who drinks soy milk said – “Is it normal to want a pint at 7am??”

Yes, if you work the night shift….Or, you may just have a problem.

#125 disciple on 05.26.11 at 3:33 pm

Human nature is neither irrational nor driven by fear and greed. This is an insane aberration typical of our current world system run on “credit” that doesn’t even exist. You either serve God or Mammon, the choice is yours. There is the herd mentality embraced by…the herd…but I say, get off the farm. Humanity is suffering from a psychosis that continues to be perpetrated on it by the 300 or so families of mental magicians that hold sway over the human psyche. Does a cow know that his farmer is only feeding it so that one day it is to be eaten?

#126 disciple on 05.26.11 at 3:43 pm

The intentionally hidden archaeological evidence is clear: human civilizations have been on this planet for millions of years at least, and most likely on other planets (never heard of the face and pyramids on mars, have you?). The insanity of money-chasing is then a relatively recent development. Our collective insanity is a destructive mental condition passed on from one generation to the next, because our technological heritage has been stolen from us. Real wealth is not credit, it is technology.

#127 American Werewolf on 05.26.11 at 3:44 pm

@Abitibidoug
“In the short run values coming back to normal can create a lot of pain, but in the long run it’s an adjustment that’s better for the economy…..Is that a bad thing?”

Its complex and not black and white. It also definitely depends on what you mean by “long run”–if the “long run” is simply going to contain many more bubbled cycles (encouraged by both the robbing bulls and bearish vultures–many of which are the same), then no net positive effect will ever be seen. In ten years, up to the run up of the next bubble, sure, there will be some that will benefit within that timespan.

But until the entire economic model is reformed or abandoned, these endless cycles just seem to result in a lot of “bad”. The bipolar capitalistic economy will perpetually create cycles of pain to fleece the working class and skim off whatever wealth they have created since the last bust (never will the parasite intend to completely kill the host). The ever accelerating wealth disparity surely illustrates exactly which direction the net wealth is flowing in the “long run”.

I believe that as long as people are unwilling to look at what is happening perpetually, and learn from it (rather than profit from it), then the flipsides of bubbles will remain as problematic as the upswings. In the end, the lower 90% of people are always going to be on the losing side over a larger span of time, as wealth & power gets consolidated between a select few (proven countless times by statistical analysis).

#128 disciple on 05.26.11 at 4:01 pm

The real value of gold is not because it is a nice shiny metal that resists corrosion, or because it can be used as a medium of exchange. Many other things fit these definitions. Your real rulers need it for technological purposes you would not believe. They have kept your ancestors’ technology to themselves, and instead directed you to a totally fictitious distraction called money, which they gave you in exchange for gold.

#129 Mr. Plow on 05.26.11 at 4:13 pm

#112 Junius

Maybe…

I felt like the losses we saw last year were just eroding the gains of 2009 and that it would flaten out.

It has, I don’t keep as close an eye on it as I used to, but prices here are about 2006 levels. They aren’t higher than what they were in the recession like in Van or TO, they are lower about 25% lower from 2007.

Interest rate hikes will hurt here too just like anywhere, but I still feel like the massive mortgages that will cripple people will be in cities where houses have shot through the roof. If people here are buying 3.5 times their income, 8% interest will hurt but it won’t cause a mass exodus.

Don’t forget during the good times and the bad times real estate is not a stock. It is not a national phenomena, what happens in TO or Van doesn’t mean it will also happen across the country.

Even in the US, yes everywhere tanked. But we all know some places were hit much harder than others some places where speculation and flipping was rampant (Florida, Vegas) they were hurt the worst, I don’t live in TO or Van but I bet there is a good number of people doing that out there. Nothing like that here anymore. Only “investors” here are the true ones, income producing property. Flippers think they are investors, they are gamblers.

I’m guessing 10% when all is said and done as a worst case scenario. And that could be stretched out over years.

#130 American Werewolf on 05.26.11 at 4:15 pm

@disciple

If the human species was enlightened enough to exist for millions of years (master space flight, have beastial relations with dinosaurs and all that other good stuff), don’t you think these people would of developed contingencies with their brilliance & technology to stop mankind from throwing atom bombs at each other, overpopulating till destruction, and destroying planets to support a ridiculous ‘standard of living’? This master race seems like the absentee landlord when they devolve into a mass idiocracy.

Nein….mankind has only existed for a relatively short period of time because they are incapable of developing an existence of perpetual sustainment. Mana’ brains want and irrational amount of “more”, genetically speaking (expansionist man grew and killed off almost all non-expansionist, by smashing them with their expanding capabilities–unnatural selection). Their growth is exponential and knows no bounds, besides utter destruction.

The perfect micro-model of human civilization is Easter Island. Man infests, grows, demands, destroys and dies, because man is irrational with no foresight. Mankind leaves no empirical behavioral evidence of being capable of pursuing “more” in terms of technology without also pursuing “more” everything and raping the world (conversely, those few tribes who do sustain their existence by lack of pursuit of “more” also don’t have the drive for any technological innovation whatsoever).

#131 Hoof - Hearted on 05.26.11 at 4:16 pm

Another sign of RE tanking?

I was wondering what other property owners East of Rockies ( ie stubblejumpers, Newfies and all the assh*les in between ..Tabernac!!!! ) have noticed on their property taxes.

http://www.richmond-news.com/business/hike+inexplicably+high/4837252/story.html

QUOTE:

Like most Richmond residents, I received my property tax notice last week and boy, what a shock did I get. My net taxes payable (after the homeowner and old-age discount) have increased this year by a whopping 14.5 per cent.

I spoke to my neighbour and her net taxes payable have gone up by a similar amount, so I started asking around at the pub. By far, the majority in my circle of acquaintances, who live in single-family dwellings, have also been hit with an increase in double digits including one pal whose net taxes have gone up by a massive 20 per cent!

I hadn’t noticed a huge increase in my inflation adjusted CPP or OAS so I went onto the Statscan website, operated by the Government of Canada, and found that the consumer price index in British Columbia increased by 2.7 per cent from April 2010 to April 2011.

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

This is HAM ville…lots of Hot Asian $$$..yet WTF is going on re property tax jumps…milking the golden goose..?

#132 Abitibidoug on 05.26.11 at 4:52 pm

@American Werewolf, #127

Interesting analysis of what’s been going on. As developed countries like Canada, U.S., and in Europe become mature, the growth rate is less. That is inevitable and normal, in fact some economists like Peter Victor believe society could be structured to function just fine without growth. In other words, a steady state economy. Politicians and economists believe otherwise and are fixated on the idea of growth forever and ever. To maintain this growth, interest rates have been artifically low for many years now. The inevitable consequence has been a lot of money floating around looking for a better rate of return and that’s what has created these bubbles. There will be another bubble, it’s anyone’s guess what kind it will be. Economist Harry S. Dent calls this time the great bubble boom.

However, you paint this picture that all those who are burned when a bubble collapses are helpless victims. Is there anyone left in the world who still believes in free will and choice? A person doesn’t have to buy assets at over inflated values if they don’t want to, or get more mortgaged than they can handle. Also, a person should make the effort to become informed of what’s going around them. If anyone prefers to be caught up in junk like celebrity gossip rather than learn some basic economics and money sense (which happens a lot), that’s their fault and not society’s. It would help a lot if there was some mandatory basic economics courses in public and high schools, but that doesn’t seem forthcoming. it should have been in the ciriculum 100 years or more ago.

#133 THE TITANIC on 05.26.11 at 5:15 pm

Yep the whole thing is frustrating alright. Ever increasing property values are not good for an economy. Big deal so what a crappy two bedroom condo’s worth a mill. What am I going to do, dump it and move two blocks down and buy something just as crappy. People end up back at the bank borrowing more cheap money then get into heavier debt. The younger generation is getting wiser to whats going on. The smart ones will eventually refuse to buy and burden themselves, or they’ll head somewhere where it doesn’t take as much $$$ to enjoy a comfortable family oriented lifestyle. Canada is a haven for hot money for one reason. You don’t have to be very smart or bring any skills to get into this country. Just buy an expensive house. We don’t care how you got the money just keep pumping up the values in our false economy. The many skilled and honest people that have immigrated here… have trades that aren’t even recognized by our gov’t. They end up working in 7-11. Tragic waste of talent. The people that have a lot to offer aren’t being recognized, but we let the opium lords develop shopping malls all over the lower mainland. What a joke, and the sneaky cowards in gov’t reaping all the benefits need to man up. I hope they don’t cry when their kids are forced to leave the country they sold down the drain. Seems to me we’re exploiting immigrants in our own way here. Bring’em in, promise them the world then tell a educated Professional they’re not recognized here… go work at Wal-Mart for min wage. Guess we need to keep suckering in more people to pay the taxes and keep the country rolling. Dummies.
Our PC peace loving country is full of crooks and exploiters too. If you believe otherwise…get off the pot

#134 Live Under Your Means on 05.26.11 at 5:18 pm

Re cottages – used to spend weekends at friends’ cottages back in the early 70’s – one in the Gatineau’s and another in the Laurentiens. Wonderful memories. Both couples still have their cottages.

Years after we paid off our house, DH thought about buying a cottage. Right, just another place for me to clean. No way. Now we spend a weekend or 2 at a neighbour’s cottage on the Northumberland Strait. I’d rather contribute food/wine, etc. and clean dishes for a weekend. There are lots of cottages to rent here if we really want to get away from it all for a week.

#135 jess on 05.26.11 at 5:41 pm

daystar

…Prosecutors in California and Illinois have sent subpoenas [2] to Lender Processing Services, one of the largest firms that processed mortgage documents for the banks. (Read more about LPS in our guide to who’s who of the foreclosure scandal [3].)

http://www.propublica.org/blog/item/foreclosure-contractors-face-new-scrutiny-from-states

#136 jess on 05.26.11 at 5:43 pm

forgot this robo signing on the west side

As we’ve noted [4], the firm—which helps handle more than half of all U.S. mortgages [5]—has been accused of using the same “robo-signing [6]” practices as the major banks, such as signing and notarizing documents that appeared inaccurate or invalid. Bank employees have testified under oath that they relied on LPS to vet the information [7] in foreclosure documents.

#137 Junius on 05.26.11 at 5:50 pm

#125 and #126 disciple,

Are you running for Greater Fool of the year on this Blog? Even BPOE can’t keep up with that lunacy.

Are you off your meds?

#138 bullion.bunny on 05.26.11 at 5:53 pm

#48 BPOE on 05.26.11 at 2:14 am

Folks, THE WORLD DISCOVERED CANADA. It’s called a paradigm shift folks.

You need to adjust your med’s

#139 HouseBuster on 05.26.11 at 5:56 pm

#97 maxx on 05.26.11 at 11:07 am

You have GOT to be kidding!! Financial ignorance is what allowed society to get into the huge mess it is currently in.
We absolutely need more parents like Sue.
—————————————————
No, it’s an obsession with money and material goods that has brought society to its knees. We need less parents like Sue.

#140 jess on 05.26.11 at 6:05 pm

Mr. Harper is going to put prisoners to work how about this one:

Chinese prisoners were forced into ‘gold farming’ – building up credits on online games such as World of Warcraft.
As a prisoner at the Jixi labour camp, Liu Dali would slog through tough days breaking rocks and digging trenches in the open cast coalmines of north-east China. By night, he would slay demons, battle goblins and cast spells.

Liu says he was one of scores of prisoners forced to play online games to build up credits that prison guards would then trade for real money. The 54-year-old, a former prison guard who was jailed for three years in 2004 for “illegally petitioning” the central government about corruption in his hometown, reckons the operation was even more lucrative than the physical labour that prisoners were also forced to do.

“Prison bosses made more money forcing inmates to play games than they do forcing people to do manual labour,” Liu told the Guardian. “There were 300 prisoners forced to play games. We worked 12-hour shifts in the camp. I heard them say they could earn 5,000-6,000rmb [£470-570] a day. We didn’t see any of the money. The computers were never turned off.”

“gold farming”, the practice of building up credits and online value through the monotonous repetition of basic tasks in online games such as World of Warcraft. The trade in virtual assets is very real, and outside the control of the games’ makers. Millions of gamers around the world are prepared to pay real money for such online credits, which they can use to progress in the online games.

The trading of virtual currencies in multiplayer games has become so rampant in China that it is increasingly difficult to regulate. In April, the Sichuan provincial government in central China launched a court case against a gamer who stole credits online worth about 3000rmb.

#141 disciple on 05.26.11 at 6:17 pm

American Where-s-the wolf:

You make all of the typical assumptions that a product of your ‘free’ educational system would. You paint all mankind with the same brush that probably describes you and your ilk, to satisfy your narrow worldview. Evolution is an obvious fabrication. Dinosaurs never existed. There are many, many more assumptions that you and others like you need to internalize before you can even approach “enlightenment”. GET OFF the FARM.

#142 bcPaul on 05.26.11 at 6:20 pm

126 disciple on 05.26.11 at 3:43 pm

The intentionally hidden archaeological evidence is clear: human civilizations have been on this planet for millions of years at least, and most likely on other planets (never heard of the face and pyramids on mars, have you?). ….

How did this crap escape the crack moderator here?

#143 realpaul on 05.26.11 at 6:27 pm

G-Man…you forgot to add that the skyrocketing ‘house prices’ have juiced government revenue into the stratosphere. Where does all the dough for the outrageous salary and pensions come from…..it has been nothing but rolling in the fat for the free spending government fat cats. What happens to the budgets of all these newly established fiefdoms if ‘values’ go down?

We cannot simply assume that the BOC is ‘independant’ when there is so much evidence to the contrary. Rates are low because the Cons wanted to pander to every open hand in order to finally achieve the vaunted ‘majority’. Spending is out of control. But how to cut spending if property value revenues are cut? Thats purely poitical…..nothing to do with Carney.

Anyone thinking that this ( or any) government serves the interests of the people should have their heads examined.

#144 Nostradamus Le Mad Vlad on 05.26.11 at 6:46 pm


#26 PLP — “Indebted = Controllable.” See here.

By controlling sheeples through exorbitant debts, the elite are able to rule the roost over more than 90% of the world. Wars and uprisings are tools they use to supersize their profits. Good post.

#128 disciple — “They have kept your ancestors’ technology to themselves, and instead directed you to a totally fictitious distraction called money, . . .”

Nicely put. It is curious to know and see what they do with their new technologies. Money also is merely a necessary tool, but one that will run its course shortly.
*
Bailout? US$ in freefall. Currency Devaluation Belarus implodes. Mfg. “American mfg. is in a state of deep crisis.” A Dead Debt is a good debt. No Taxes GE (Fukushima reactors) paid no taxes in ’09 and ’10.

Judge Voids Wisconsin anti-union bill “Remember when teachers, public employees, Planned Parenthood, NPR, & PBS crashed the stock market, wiped out half of our 401Ks, took trillions in TARP money, spilled oil in the Gulf of Mexico, gave themselves billions in bonuses, & paid no taxes? Yeah, me neither.” wrh.com. 5:08 clip Good on the Indiana people — they have taken back the Fourth Amendment. It can be done.

US kills its own citizens to justify war somewhere else, and 15:51 clip How FFs are manufactured to scare sheeples shitless (incl. 9-11). Af’stan “There never was a military potential to “win” this war, and the veterans of the old Soviet Union’s attempt to occupy Afghanistan are laughing their heads off at the US.” wrh.com.

Twenty Questions, all of which will be answered by Benny, Timmy, Hankie and others. Believe It Or Not! Civil Disobedience until Benny steps down. It worked for Gandhi.

Anthrax Ripple “Remember; thanks to a provision of the Patriot Act, vaccine manufacturers are held harmless and indemnified against any negative reaction (including death) which their vaccines may create.” wrh.com.

Robo Signers There’s no life like it! CC 27,658 days. Not credit cards. US$300 Debt Go directly to jail. Doping Sheeple Lithium. “Translation: We gotta dope up the people before they force the money junkies into rehab!” wrh.com.

Egypt “Seventeen lost pyramids are among the buildings identified in a new satellite survey of Egypt.” Videos of protests. Spring and summer of rage and anger = Winter of our Discontent, and US in Pakistan “Of course, what will be very interesting to watch will be if the US attacks Pakistan inside its sovereign territory, in light of the fact that Chinese officials have said that any attack against Pakistan will be construed as an attack against China.” wrh.com.

Venezuela Inflammatory talk.

#145 Mr. Reality on 05.26.11 at 6:50 pm

.#117 The InvestorsFriend on 05.26.11 at 1:38 pm

Getting rich is not a matter of taking the popular course. It’s quite opposite.

I agree with you 100%. The more i study finance, investing and economics the more i agree with that statement.
When the minority have more money than the majority you can conclude that following the crowd never pays off.

Mr. R.

#146 Victor on 05.26.11 at 7:20 pm

#68 Kevin on 05.26.11 at 7:37 am

Garth, I have to take issue with your very last paragraph, specifically your assertion that houses have no intrinsic value. People have to live SOMEWHERE, and (barring charity) anywhere you live is going to cost money. Therefore, by providing shelter (which has value), a home has intrinsic value.

Even beyond that, you claim a house’s value can go to $1, but that’s not true. The materials themselves have value. Toilets, cabinets, appliances all have value. Even the wood itself has value as firewood. The Copper wiring/plumbing, the carpet, the wood in the fencing, those all have value. Any code-compliant home will always have at least some value, and will never go to $1.

Is it overpriced at $500,000? Sure. Is it overpriced at $2? That’s ridiculous. The “bottom” is in the middle there somewhere, but it’ll never be $1.

Not the US experience. — Garth

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

Never say never.

http://www.telegraph.co.uk/news/worldnews/northamerica/2560303/House-sold-for-1-in-sign-of-US-property-crisis.html

http://www.guardian.co.uk/business/2010/mar/02/detroit-homes-mortgage-foreclosures-80

#147 American Werewolf on 05.26.11 at 7:41 pm

“Is there anyone left in the world who still believes in free will and choice?”

Certainly. I’m just not one of them :)

#148 confessions of a real estate bear on 05.26.11 at 7:48 pm

85 Refinow Hi I understand all those issues and will be waiting. I am a fish farmer and actually waited four years from 1989 to 1993 to buy my principle residence and farm. The guy who bought in 1989 paid nearly 600 000, He went bankrupt and i picked it up for 223000.

#149 American Werewolf on 05.26.11 at 7:48 pm

@disciple

“Evolution is an obvious fabrication. Dinosaurs never existed.”

True. The last time I asked a threespine stickleback if they’ve seen a dinosaur, they responded with laughter.

“Don’t argue with a fool. The spectators can’t tell the difference.”

#150 ed in edmonton on 05.26.11 at 7:51 pm

I am saddened when I observe what appears to be a generational conflict brewing. I am a tag end boomer. I witnessed a huge economic change take place as I grew older. The economy I dealt with was not my siblings (leading edge boomers) economy. It differed from my parents economy. So woe is me. I paid more for my real estate than my older siblings paid. Guess I should be envious. Interest rates increased. I paid a higher interest rate than my older siblings did. Guess I should feel really resentful. Inflation went bonkers and everything got pricey fast. Maybe I should hate the siblings? And now that I have some savings… I get no rate of return. Is Carney a leading edge boomer? Can I now despise them all? Or should I worry about what the gen x-ers and the echo boomers think of me? Some people on this blog sound like they are developing a generational hatred. I hope I’m just pathetically paranoid. Garth: GOLD. Now theres something that really has no intrinsic value whatsoever.

#151 sotiri on 05.26.11 at 7:52 pm

No US stile crush here? It’s different here? No reckless landing practices here?
Read the below info.
“As a first-time home buyer, you have the ability to put as little as 5% down and even $0 down, provided you meet the necessary qualifications.”
Yes indeed, it’s different here. It’s worst.

http://www.butlermortgage.ca/mortgages/purchase/zero-downpayment-mortgages/

#152 Onemorething on 05.26.11 at 8:02 pm

Been away from this blog for some time. Always new fish Garth to school.

Nice to always read NosLMV’s posts as always relevant and timely and Aussie Roy keeping us posted on AUS. The CAN and AUS market are only 99% similar!

RE for $1. Yes but wait a few more months after that to get it for 70 cents! That’s how it will play out!

My bro in law in Brisbane, really worried about his double plot Queenslander! Purchased 12 years ago for $450K, at it’s high $1.4M, now likely back to under a $M. Nothing selling!

#153 Daisy Mae on 05.26.11 at 8:06 pm

I understand when BC goes to referendum re the HST we have to be very careful how we vote. A ‘yes’ is needed to abolish the HST. Most will think it’d be a ‘no’.

Will it be a trick question? Do any BCer’s know more on this subject?

Business large and small like the HST. They have not passed their savings on to the consumer and we didn’t expect that they would….prices across the board have, as we all know, increased. This tax adds a $350 increase for the average family.

The government proposes to reduce the HST…in 2014. And they’re talking about $175 rebates. To pacify the public. We risk being suckered.

#154 sue on 05.26.11 at 8:07 pm

@103 Mr. Plow A pessimistic cynic? Just because he thinks banks don’t have your best interests at heart? bahahahahahahaha!!

#155 noworries on 05.26.11 at 8:15 pm

I’m noticing the number of listings has now passed the 250K mark in Canada. I don’t remember it being this high last year at this time. Are people panicking?

#156 ultracrystal on 05.26.11 at 8:23 pm

All the twenty somethings out there…don’t worry about how much you pay for a house at this point. Truth of the matter is that the defined benefit pension plans the Government has been handing out for the past thirty years will end up costing you more in taxes.

For the same reasons the housing market will fizzle, so will the assets managed by those pension plans.

Your best bet at this point is to buy that house and hope that by the time you declare bankruptcy the system will be so broken and disparate that there will be no one to evict you from your house.

#157 SMOKING MAN on 05.26.11 at 8:29 pm

My son read a book and said I have a false super ego…wtf is that?

#158 chris on 05.26.11 at 8:43 pm

Hey Garth, look whats happening in West Vancouver.
Sold signs everywhere with sale prices half million over listed price with no end in sight.
Can not believe our government lets our country be sold to the highest bidder without limits.
I guess i should have remembered what B.C stands for ;bring cash;

#159 Amarillo on 05.26.11 at 9:08 pm

Re: #149 American Werewolf on 05.26.11 at 7:48 pm
@disciple “Evolution is an obvious fabrication. Dinosaurs never existed.” True. The last time I asked a threespine stickleback if they’ve seen a dinosaur, they responded with laughter.”

Hello American Werewolf and disciple: Personally, I believe there exists clear fossil evidence of dinosaurs.

But American Werewolf, I’m about to cause a queasy feeling in your gut because disciple is quite right: you have been fed a lot of bunk about the unprovable theory of evolution. And you have swallowed a lot of bullshit over the years of your public education.

Using scientific principles is the theory of evolution even close to being provable or capable of being duplicated? Sorry. Nope. Not even close.

I’ve posted a link for you below.

Please try to read the contents objectively.

You are in for an education that would horrify the politically-correct and disbelieving cabal that makes up our public education system — if the public teacher unions were forced to objectively teach both theories (evolution and creationism). The problem is, the teacher unions are nowhere close to being objective.

Here you go: http://www.evanwiggs.com/articles/reasons.html

And this is just one of many sites supported by PhD level analysis.

Is ‘evolution’ true? Well, there is evidence of micro-evolution.

The rest, not so much. Educate yourself and learn that one of society’s most cherished myths (us evolving from monkeys etc) is mostly conjecture and smoke/mirrors. At the very least, try to keep an open mind.

#160 American Werewolf on 05.26.11 at 9:28 pm

@Amarillo

“you have been fed a lot of bunk about the unprovable theory of evolution”

LOL. That is precisely what the threespine stickleback told me.

Let’s reign in the ridiculous tangents here. This is a real-estate blog after all. Not a soapbox for creationism, scientology or downright stupidity.

#161 disciple on 05.26.11 at 9:55 pm

Thank you Amarillo. In the end, you will find that the seemingly outlandish statements I make turn out to be true because they have been furnished through years of patient research and analysis. Most “fossils” are actually plaster forms hand-made and mixed in with crocodile teeth and elephant bones etc.., I know, it would be shocking for most people to find this out, but that’s why it’s a closely guarded secret. Don’t worry, I’m not a religious nut…Archaeology as a profession is just as culpable as banking in keeping us misinformed. If you dare to ask me more on the subject, feel free…

#162 disciple on 05.26.11 at 10:04 pm

The most basic economic law of unequal reciprocity is taught in archaeology 101 rather than economics 101. I wonder why? Lovers of truth always trump lovers of money.

The road ahead is one without money, without fear or greed. It is our glorious future. Our once and soon to be future, when all material goods and technological advances will be FREE and shared by all…once again.

#163 disciple on 05.26.11 at 10:13 pm

I believe the imminent housing collapse will be heralded first by an economic shock. Perhaps a regional conflict?:

Those nations that are refusing the debt-fiat system (Libya, Pakistan, Iran, N.Korea, Venezuela, Iraq, Afghanistan, Thailand) will eventually ALL be invaded by the Bank Machine. But they will need an excuse of course…hmmm… like perhaps a dirty bomb in Seattle, or….Vancouver?

#164 American Werewolf on 05.26.11 at 10:20 pm

Between the gold bugs, BPOE’ers and downright fanatical nutbags, this blog paints a perfect picture of exactly how many irrational minds can collectively gather and screw up a good thing. Oh, you “It can’t happen here” Canadian exceptionalists should take heed of the flies attracted to light bulb. I feel for you Garth

#165 disciple on 05.26.11 at 10:53 pm

#137 Junius,
Yes I am off my meds. And you would have the same mental clarity if you also got off your drugs. But the trillion dollar Big Pharma racket would be too topically tangential here…

#166 Patz on 05.26.11 at 10:56 pm

I dunno ‘disciple’ is the road ahead perhaps leading towards some alien reptiles who can cleverly morph into human looking beings? Of course dinosaurs never existed. Never saw one outside of a Speilberg movie did you? And how can people be so stupid as to believe in evolution when the the idea of a really smart old guy with an effing big design studio making his own rather elaborate ant farm makes so much more sense?

Er… what was this blog about again?

#167 Where's the money Guido? on 05.27.11 at 12:17 am

#131 Hoof – Hearted on 05.26.11 at 4:16 pm
Another sign of RE tanking?
I was wondering what other property owners East of Rockies ( ie stubblejumpers, Newfies and all the assh*les in between ..Tabernac!!!! ) have noticed on their property taxes.

Poco here…my taxes went up 11%, but the city said in the local paper that they were only going to raise them 3.9%. So how do you square that circle?
Nothing but thieves and liars.
But the question is, how do we make them accountable. You vote one out and the next one does the same thing. Maybe Garth has this one, I hope, because it’s happened every year that I’ve lived here (3 years).

#168 Mark on 05.27.11 at 12:18 am

Chinese buyers appear to keep the market in Vancouver floating. Apparently it are mostly chinese with “non-official”money mostly from smuggling and other profitable activities in the corrupt chinese marktplace. My only question is to really understand the impact of the chinese on the housing market: how many chinese are buying houses in Vancouver, and is it only for being able to enter Canada or is it to white-wash and take out their “not official existing”money out of China. As I say, main question is how many are there buying. Somebody should be able to tell, it is not so hard. And second, why the hell does the Canadian authorities allow people to come into the country who apparently have not earned their money in a normal way.
Seriously, I also came to Canada (from Europe) but I had to submit 3 police clearances, my cv, physical check, get enough points (age, education, etc) to enter. It makes no sense to me to allow rich for that reason only that they bring money. Then you know where it comes from; activities that make the most money are: growing and selling drugs, smuggling anything illegal (persons, babies (china and the 1 baby policy), weapons, etcetera. Are we all totally nuts????

#169 Mark on 05.27.11 at 12:24 am

bye the way: what do you think when you see a 20 year old chinese driving a yellow ferrari (not really a none common thing in Vancouver, ok, the ferrari could be red aswell).
I always ask myself would his father have worked for 30 years hard for his million plus or is it easy (and dirty) money…hmmmmm?

#170 Steven Rowlandson on 05.27.11 at 4:25 am

Canadian and American real estate prices are far too high like 500 to 1000 cents on the dollar. To hell with it let it crash and burn even if it takes the politicos and banksters down with them. Better an end in financial horror than a horror without end!
Rather nihilistic of me don’t you think?
The forest fire brings new life to the forest after burning out the disease and deadwood.

#171 Abitibidoug on 05.27.11 at 10:02 am

@170 by Steven Rowlandson:
That’s a good comparison of how financial shocks or corrections are like forest fires. What we’ve been doing with real estate in Canada is like the human intervention of fire suppression. In the short run it stops fires, but all that fuel builds up and one day a much bigger and unstoppable fire occurs.

#172 Adele on 05.27.11 at 12:43 pm

Mr. Uncool’s hat reads “Free Sex” – because no one would pay him?