Renters

Once upon a time when I was still employable I landed a gig in a city half the country away. Looking at houses, we came across a 6,000 square foot, century-old mansion which had been artfully renovated and was offered at $800,000. “Too much,” I said, “but we’ll rent it.”

Turns out the owner was the local newspaper publisher (big man in town) who’d had the place listed for 14 months, and was desperate for cash flow after having been transferred to Toronto (where he lost his job two years later when the chain was sold). So we did. $1,500 a month. Used the extra cash to put a new Bimmer in the garage. Nobbed with millionaire neighbours. Lived like Kate & Wills.

Two years later, new gig. Back to Toronto. Packed and left. The house went back on the market and sold exactly one year later for $475,000. The publisher, now between careers, was crushed.

Today about 11 million families in the States wish they were renters. Currently 27% of all residential property owners there are in negative equity, which means they’re servicing mortgages greater in value than their properties are worth. Typically, this is because house prices have fallen dramatically in their neighbourhoods, not because they borrowed excessively. In other words, victims.

But while paying a mortgage bigger than your house sucks, it’s the loss of mobility which can be the real killer. Most negative equity families can’t afford to sell, since it means giving up the house, walking away with nothing and also writing a fat cheque just to get out. So in a lousy economy, with too much unemployment, an illiquid property can be a financial death sentence if you can’t move to grab a job.

Renting equals mobility. And in this world, anyone who thinks they’re going to nest and stay there for two decades is not paying attention.

But this is just one of the obvious advantages of not swallowing the home ownership Kool-Aid. For many people the greatest benefit is financial. The reason’s simple – as my example above shows – tenants get dumb investors to subsidize them.

This flies in the face of what your mother-in-law tells you, of course. The why-throw-your-money-away-on-rent mantra is repeated endlessly, even when it’s the worst piece of advice possible. If the goal is to become financially independent and build net worth, renting can beat the pants off owning.

A few months ago I used an example from Calgary, where a blog dog was bemoaning the get-a-house-and-be-a-man crap his inlaws were burying him in. Take the average house in Calgary, for example, I said – $454,000. To buy with 5% down requires almost $43,000 with closing costs and mortgage insurance. The monthly at 4% is about $2,100, and with insurance and property tax closer to $2,500. After three years you’d spend $52,000 on mortgage interest, and retire only $23,000 of debt while making $75,156 in monthly payments.

So, the three-year cost of owning the house would be $133,000, and you’d still owe $408,000. To just break even, you’d need to sell for $568,000, factoring in the cost of selling. So to simply avoid loss, Calgary real estate would have to swell in value by 25% over three years.

But Calgary houses have lost about 13% of their value in an equal period. And during that time we’ve had the lowest interest rates since ever (soon rising), the greatest housing bubble in history (now ending), and state-backed mortgages.

So, you can buy with the faint hope of maybe selling and breaking even, with a monthly cost of $2,500, or rent the same house for $1,600. (“Luxury Estate features throughout home, over 2100 square feet with designer finishes, 2 storey 3 bedrooms with, 3 bathrooms, formal dining room & living on main floor, bonus/family room on 2nd floor, double garage, granite countertops, upgraded ceramic/hardwood flooring, designer colors/finishes, maple cabinets, upgraded appliances, master bedroom ensuite with walk-in closet, soaker tub, fireplace, professional landscaped, etc. — $1,595.” Craigslist Calgary).

Over three years a renter would be more than $30,000 ahead, plus still have deposit money of $43,000. If the forty grand had been invested at 8%, it would be $54,000 in 36 months, so you’d have $84,000 in liquid assets.

Most importantly, a renter would have lived in an identical (maybe better) house while building net worth and taking no risk on a seriously wobbly housing market. Zero debt. Total liquidity. Unfettered mobility. Net worth would be greater, not less. Options enhanced.

Now renting is even getting cool. In the last few days the house-humping Toronto Star carried a column headlined ‘Why I sold my house and rent instead’. Words from the 27-year-old author:

Buying a home is the biggest investment most people will make and it can be a life-altering event. It is also an emotional event and when buyers get emotionally attached to a house or condo, here’s what can happen:
• You overpay and stretch yourself beyond your means.
• You end up with an overlay of stress because you didn’t think it through.
• The location may not be what you expected.
• Your lifestyle undergoes a big change.
• You end up regretting the decision.

And not to be outdone, the Globe and Mail published a piece, ‘Why renting can be the right choice for aging boomers.’ The logic is simple: cash out of housing at the top, invest for income, use the income to rent, and live for free – sans mortgage, property tax, maintenance or lawn Asians.

When the inevitable comes, renting will connote financial acumen.

But your mother-in-law still won’t get it.

171 comments ↓

#1 GreaterFool on 07.03.11 at 9:02 pm

Fast forward to 2013 – Toronto avg SFH 1M, Van:2M … Garth will finally give up and have the following lines on this site:
“I was soo wrong in my analysis of real estate, but a Fool, who follows is a Greater fool”
Yes, am a greaterfool.. i followed your blog :-(

#2 John on 07.03.11 at 9:07 pm

What is a lawn asian?

#3 mississaugasold on 07.03.11 at 9:08 pm

Lovely post. The talk amongst real estate between my friends are sort of in between. They are uncertain of how the market will go. 1) just bought a detached house in an ok area and plan to live there for a while 2) one just bought a condo and is a financial illiterate 3) a couple who bought more than they could chew and moved back home to their free home and renting out the condo; barely covering anything at all and plan to sell as soon as their term ends and 4) a couple who rents a condo at a ridiculous low price but saving up to buy a home some day

And here I am, the only one who plans to rent for the foreseeable future in the best area, shortest commute time and cash in the bank.

It’s still shocking how little people know about the true cost of ownership.

#4 squidly77 on 07.03.11 at 9:11 pm

Priced by the square foot, Edmonton SFH’s are down 19% from peak and it gets worse from there, Edmonton condos are down a Jaw Busting 23%
http://2.bp.blogspot.com/-S5tcowuiSQ4/Tg6apQf14dI/AAAAAAAAASk/9hFRIpC3Xg8/s1600/untitled.bmp

Calculating in the (approx) realtor fees, an Edmonton SFH seller today would see a 24% LOSS and an Edmonton condo seller would experience a 28% LOSS.

Calgary refuses to be outdone, Calgary LOSSES are about 5% less than Edmonton’s.

#5 squidly77 on 07.03.11 at 9:11 pm

Those are American style numbers.

#6 LH on 07.03.11 at 9:12 pm

Real estate is intensely local.
I rent AND own.

I rent my own digs (where buying doesn’t make sense)
and
I own a few houses where I can rent them out for great positive carry, all the while borrowing at negative real interest rates (~2.5% average nominal intereste).

The music is not gonna last forever so I’m prepaying as fast as I can. Goal is to be 100% debt free within the next five years, by the time I turn 32.

Your mileage may vary!

#7 rental monkey on 07.03.11 at 9:12 pm

First?

#8 HouseBuster on 07.03.11 at 9:14 pm

The wife won’t get it either. But a real man can put her in her place.

#9 Jon B on 07.03.11 at 9:16 pm

There’s a third option; buy a home with cash upfront. No mortgage, no monthly rent. Who cares if the value goes up or down, it was purchased with money acquired from the past and not the future. But of course this means living below one’s means; a tall order for most.

#10 Utopia on 07.03.11 at 9:20 pm

“So in a lousy economy, with too much unemployment, an illiquid property can be a financial death sentence if you can’t move to grab a job” ~~Garth
———————————————————————————–

Bingo. Great article. We all have to start getting past this idea that renting is for “losers”. It can in fact be a very sensible strategic decision and I think we may be seeing signs of a new trend emerge.

When people come around to the idea that renting actually represents freedom, especially during tough times, a whole new class of renters may appear.

This has got to please landlords who often have too few choices of tenant to work with. We all know that many (most) on welfare for example are renters and this is partly where the idea of renting connects with the belief renters are financial failures in life.

The freedom to move for work is but a dream for many Americans who are now trapped in their homes. We will see it here too. Sadly, it just compounds the negative aspects of structural unemployment.

#11 not 1st on 07.03.11 at 9:21 pm

Isn’t buying a brand new bimmer the epitome of negative equity? The thing loses value the second you touch it.

Fact is people buy lots of stuff that loses value over time, boats, cars, TVs, stereos, bikes, stocks, houses, etc. I guess everything should be rented or leased.

Where did I say I bought it? — Garth

#12 Ravishing Rick on 07.03.11 at 9:25 pm

blurst!

#13 Roger on 07.03.11 at 9:27 pm

With the coming Canadian household debt crisis that will probably come to a head in 2012, I am thinking that should correlate with a real estate crash..or rather “correction”. Better to rent, save up cash and swoop in like a vulture when rates have to be dropped again and some affordability comes back into the housing market. Hoping to pick up a good bargain and then the debt cycle can start all over again!

#14 vatodeth on 07.03.11 at 9:29 pm

Yeah, me and 2 friends are looking at renting a nice big house in Calgary. Some very nice places for $1800. At only $600/month each we will live in a bautiful house with marble and stainless. This is a lot better than a condo or apartment for us.

At $600/mth we will all be saving huge, living good and waiting for the market to finally crash! When prices get reasonable again, then we will all have money to buy our own little slice of the dream!

#15 Mr Buyer on 07.03.11 at 9:30 pm

My wife will absolutely not entertain the idea of renting but I am using the well worn ‘just temporarily’ approach and she actually gave in a little bit (maybe for a month is ok). She will not stop looking at the biggest houses she can fit on her laptop screen. We live in a very very small house so I think she will be happy with the same size house with a second floor (and a big shower bathtub combo with a wall separating the toilet from the bathing area) but she is hypnotized by the 2500 to 5000 sq ft mini resorts. She unplugs the TV to conserve electricity (she tears a strip off of me for buying drinks from the vending machine) but will blow the whole wad on a house. Houses are like an addictive substance for her. If she did not hate debt as much as she does we would have been sunk (I have changed women a few times and this one is a keeper, so if she really wanted to send us into debt I would have a very hard time saying no but she is a keeper for many reasons one of which is that she is allergic to debt).

#16 Randis on 07.03.11 at 9:33 pm

Well said Garth, and this truly relates to what my in-laws are trying to do … re-finance the mortgage-free home and buy another investment property so that it generates income (rent) when they retire in 3 years … I mean, same old shit same old story happening everywhere so lets not get into the details … but I am truly worrying for them. Wife gets my point and tried her best to talk her parents out of it but we are fighting a losing battle …

That’s why I congratulate you, Mr. Utopia, for scoring a victory as you mentioned is Garth’s previous entry. Thanks for your long input as well, on commodities and other things. I just want to pick your brain and see what’s your take on corporate bonds and how you think they will fare going forward.

If Garth can drop some 2 cents on corporate bonds as well, that will be great.

Thank you very much, fine gentlemen.

Bonds are an important part of a balanced portfolio – but just a part. They lose value when rates rise, but jump in worth when demand escalates. Demand, in fact, is more an influencer of value these days than the cost of money. This is why bonds negatively correlated to equities are essential for smart investors. They are just as capable of yielding a capital gain as a stock or ETF, but they pay you consistently to own them, and always mature at 100 cents on the dollar. Make sure you buy quality, instead of yield. — Garth

#17 Tim on 07.03.11 at 9:36 pm

At what point then does it make sense to buy? What metric other than the yearly rental vs housing price can be used? Obviously median salary doesn’t work, as there are so few nice areas in many cities that people with average salaries aren’t the ones buying

#18 tomohawk on 07.03.11 at 9:39 pm

Hey when the mainstream media and then the general public are convinced that renting is far superior, that will probably be the perfect time to buy, eh? So all you guys out there, use your mother-in-law and wife as a contrary indicator. ;-)

#19 Phinny on 07.03.11 at 9:51 pm

Rent a nice dig with hardwood floors, heated garage and a big garden 50 yards from the River Valley. Get to hob-nob with a bunch of doctor- and professor types for just north of a grand per month.

A house one street over has been for sale for 689 000 for a year now.

I’m no mathematician – probably didn’t even spell it right – but I know when I’m getting a good deal.

Oh, and a good friend of mine has just joined the (used loosely) battalion of new homeowners rushing to market. Living in a nameless mountain town, he just bought his new dig for about half-a-mil. For employment, he ski guides three months out of the year, collects EI until it runs dry, then borrows bucks from his City folks to make up the difference.

Another new, happy, and I’m sure very solvent homeowner.

#20 Omni on 07.03.11 at 9:51 pm

#9 Jon B said … There’s a third option; buy a home with cash upfront. No mortgage, no monthly rent.
——————————————————-
Sorry Jon but you don’t get it. The house is a liability. If you had the cash, you would invest it and have the return pay your rent. Imagine that? So simple, I do it myself. Been doing it since I was 30 and know what? My bank account just keeps growing and growing and growing, imagine that.

#21 Kimi on 07.03.11 at 9:56 pm

i thought Utopia was a lady.

#22 Omni on 07.03.11 at 10:00 pm

Garth your right. I was going to forward this one to my sister and a few others, but once again, you are absolutely right, they won’t get it.

#23 squidly77 on 07.03.11 at 10:04 pm

#21 Negative equity solution – coming soon

Those waiting for a correction and/or melt in Canada will be waiting until they die.

Did you miss my comments @ #4 and #5.

Edmonton and Calgary are already in massive negative equity.

#24 Randis on 07.03.11 at 10:08 pm

@ 22 Kimi …

oops … sorry Utopia …

and thanks Garth for your 2cents =]

#25 Van MD on 07.03.11 at 10:16 pm

Been looking at paulb’s website http://www.laurenandpaul.ca/MarketTrends.ubr in order to gather some info to “troll” the mainland chinese forum which is frequented by realtors/pumpers.

I especially like the juxtaposition of the median & average sales price (and the 3-week trend of falling median prices). I think it’s no accident that other realtors (eg http://agentwill.com/weekly-stats ) only post the average sales price chart.

As for my personal living situation, I’m proud to say that despite family/colleague influences to buy, at 6pm today I signed a 1 year lease at a 23rd floor 5 year old sub-penthouse in Collingwood with gorgeous view of north shore mountains, 1375/month, 5 minutes drive to the clinic where I work : ) In Garth I trust.

#26 nonplused on 07.03.11 at 10:18 pm

Nice post today Garth.

Vancouver and Toronto look like they are well in bubble territory as they continue up with no corresponding changes in the fundamentals, including interest rates.

I hope CMHC is not behind any of those million dollar crack shacks, because it’s a drug money laundering scheme as far as I can see. (Buy your fellow biker’s crack shack for a million, CMHC $900,000, and then pay the mortgage at $5,000 a month in cash generated in the club’s grow ops. Keeps the money legit except the $5,000 a month but you can use cash because it’s below the $10,000 question limit.)

Tin foil theories aside, people look at the monthly payment. When variable mortgage rates went from 5% to 2.5%, house prices had to nearly double. If variable rates ever head back for 5%, prices will drop nearly half. So the only question is “how long can the government manipulate rates?”

But the smoke and the wash are both well above the interest rate explanation now.

#27 Richard on 07.03.11 at 10:28 pm

I’ve rented for many years and I can tell you that it’s not nearly as glamorous as you make it out to be. It sucks not being allowed to do any work without getting your landlord’s permission (usually denied). People say if you rent, you don’t have to worry if anything breaks because it’s the landlord’s duty to fix it. Hah! People who say that have either never rented themselves or have lucked out with great landlords. I once rented an apartment where the kitchen sink clogged up shortly after I moved in, and it took the landlord (large corporate landlord) two and a half months to finally fix it. I bugged the super about it almost every day. I threatened to report them, they didn’t care. During this time I had to do my dishes in the bathtub. Another time I rented a condo, when I gave my 2 month notice to terminate, the landlord began showing my unit to prospective tenants, as was his right. For more than a month I had to tolerate him escorting strangers into my apartment in the evening while I was trying to relax. Not fun. That kinda stuff doesn’t happen when you own. When you own you don’t have to let anyone in, you’re allowed to paint anything in your house any color, nail anything anywhere, cut anything you want, etc. And you have stability, ie you don’t have to worry about getting kicked out because your landlord “needs to move in himself”.

Also a lot of talk has been made of how a house is illiquid so you have no mobility. But rents are almost always a 12 month lease. That is much longer than the average time it takes to sell a house. So if you suddenly need to move near the beginning of a lease, what then? You can find a subletter but even if you find one your landlord still has final say in whether he approves it, and if he doesn’t you’re stuck.

And Garth, if renting is so great why do you own your house?

#28 disciple on 07.03.11 at 10:30 pm

I read this entire post out loud to my wife (she is ill and was in bed so she had to listen anyway). But I thought it really described well the situation not only in the US but also for many new renters such as us. Thanks again, G-man, really appreciate the time you take to write.

#29 blase on 07.03.11 at 10:39 pm

What’s a lawn asian?

#30 Ravishing Rick on 07.03.11 at 10:43 pm

@Greaterfool

Oh please, you need to stop being a drama queen.

Both Bulls and Bears are amazed at how far real-estate has run. However, the logic behind the bear argument has been far more sound because it is based on fact, historical experience, and economic fundamentals.

The Bulls, on the other hand, have been pointing to phantom Chinese investors and the fact that real estate has done well over the last decade to extrapolate real estate will do well for the next decade. You know that this is true otherwise you would have jumped in long ago.

Had it not been for emergency low rates which, I believe history will show Mr. C imposed for far too long, real estate would have fizzled already.

Look at Calgary: $100 oil, record low interest rates, and it still can’t get off the ground – what hope does Vancouver have which has lower incomes, more debt per citizen, and a reliance on the China theme (which has its own faults).

But go ahead drama queen dive into the bullpen if you think that is the right course of action, nothing is stopping you – all i ask is that you be a bull or a bear just don’t be a bitch

#31 Mark on 07.03.11 at 10:46 pm

#21, “Canada cannot print the world’s reserve currency, so it will do the next best thing and forgive mortgage debt of those with negative equity. Thank-you CMHC.”

Dude, you’re on crack. The GoC/BoC can, and will print or borrow enough money into existence to fulfill their legal obligations to creditors that hold CMHC-insured mortgages at 100 cents on the dollar. Primarily Canadian banks and pension funds. These entities will be flush with cash in an environment of significantly higher interest rates, and deflated residential real estate.

Not a chance that actual bailout money or a solution to negative equity will be given directly to homeowners in Canada. But owners of ‘money good’ securities will absolutely clean up as the interest rate cycle turns. Almost all kinds of stocks will rise dramatically in value, either from inflation (ie: gold, oil), or from debt devaluation (ie: telecoms, utilities).

I personally expect Canadian RE to collapse by 50%, while the TSX surges forward to 50,000 or more, before this is all done.

#32 Helicopter Ben on 07.03.11 at 10:52 pm

i get made fun of sometimes from my friends asking me why i rent such an expensive place. it cost me 1800 total every month, not cheap by any means, but it has nice, views of downtown calgary and mountains , floor to ceiling windows throughout. and close to river walkways and pubs. i figure if i was to own it it would cost me double after condo fees and taxes etc. i work away a lot and make decent money and able to afford it, but like garth said the best part is i can walk whenever i want, in 4 months my lease is up and i will tell the owner i will sign a 6 month lease or none at all. ofcourse i could of bought before, i would be paying atleast 700 dollars more a month if i bought a house with no chance of ever making a dime on it for atleast a decade living somwhere in the burbs. I might be the biggest doomer/ Silver,Gold bug on here but i rent this expensive place without any worry as i saved and invested the money i had initially for a down payment for a house,and have 0 debt. 1800 sounds a lot to my friends but not when i explain it to them what it would cost if i bought some poorly built house built in the boom.

#33 Siddelly on 07.03.11 at 10:56 pm

#16 Randis

Very important lesson regarding quality over yield. We sold half of our Yellow media position a couple weeks ago due to falling share price, we got three and a half bucks on a 5 dollar investment and today you can pick this company up for under two and a half dollars that pays you-wait for it- an incredible dividend of 27.1% !!!
The only thing I can say is get to know payout ratios before investing in equities. I think their bond issues are being hammered as well.

Mr. Buyer, when your wife hassles you for going to the vending machine why don’t you ask her why the most advanced nation on the planet does not sell frozen concentrated juice in the supermarket. The bottling factions are very powerful in Japan.
I’m sure your wife and kids would be very happy living in Toronto in a rented 3LDK. Good luck with that!

#34 yogi on 07.03.11 at 10:58 pm

Garth, have you been spying on my life or talking to my mother-in-law? You have pegged our situation exactly. Sold house, rent house, invested during crash, and living debt free!

Thanks for the math though.

#35 Dmitri on 07.03.11 at 11:00 pm

I think the expression “renting – is throwing money away” should be right there with all the other idiotic and illogical crap.

It’s like saying – “paying for gas is throwing money away” or “paying for food”… yet I don’t see too many people owning petrochemical corporations or farms… or performing surgeries on themselves… or representing themselves in courts…

#36 Expedition of Truths » Renting Cool? No Way! on 07.03.11 at 11:12 pm

[…] So it’s been no surprise that my wife and I have decided to rent, we’ve been renting the last year since we moved out of our condo that has continued to drop in price since we sold.  I’ve been keeping an eye on the old location and it’s hurting.  It was a smart decision and based off checking out the market, listening to people we trust and checking out a lot of people who are in tune with the housing market like Garth Turner. Check out his latest blog post about renting and how people that tell you “you need to be a man and own”, or “renting your throwing your money away”. http://www.greaterfool.ca/2011/07/03/renters/ […]

#37 Debt Free in Van on 07.03.11 at 11:20 pm

Why are there so many sexist pigs grunting and drooling all over the comments section of this blog? Hey, #8 HouseBuster. I’m a wife. I get it. We sold our condo and are now renting. Can’t attract a woman with a brain? Maybe that’s because you’re a pathetic, chauvinist loser.

Thanks for the advice, Garth. You’re hilarious. Your comments section is filled with abusive, disrespectful mouth-breathers. Why do you keep publishing them?

#38 Brad in Cowtown on 07.03.11 at 11:24 pm

#20 Omni ——————————————————-
“My bank account just keeps growing and growing and growing, imagine that.”

What a waste.
Letting money grow in a bank account is the same thing as a growing opportunity cost.

p.s. Squidly, I love ya man, but you have to stop quoting percentages off the peaks with the specific intent of making things look worse than they are. It’s misleading at the very least, since a 15-20% correction off an all-time high (following a drastic bull run) is actually not alarming at all. When you double your investment in a stock, and then watch it go down 15% right after, is it giving the situation proper context to focus so heavily on the decline only?

#39 Snowboid on 07.03.11 at 11:26 pm

Thanks Garth, I feel almost smart!

#40 Utopia on 07.03.11 at 11:27 pm

To Herb from yesterday…

Well, glad you managed to get through it all. I know it was imperfect. I just ripped it off the top of my head as usual. Took me thirty minutes. The short version if you prefer is simply this; there will not be a recovery unless commodity prices can be cooled off. It is my belief that steps are being taken to do just that.

Cheers!

#41 tf on 07.03.11 at 11:29 pm

“house humping Toronto Star” LMFAO!

#42 Utopia on 07.03.11 at 11:29 pm

#22 Kimi on 07.03.11 at 9:56 pm

“I thought Utopia was a lady”.
———————————————————-
Nope, but they say I look good in a skirt.

#43 Shut it on 07.03.11 at 11:32 pm

Why, oh why, Garth, do you publish junk like #8 housebuster pounding his chest about putting a woman “in her place”? Are you TRYING to lose credibility and drive away readers? Does a comment like that actually constitute “respectful, wide-ranging discussion” in your mind? Really?

I don’t censor stupidity. — Garth

#44 Shawn Petriw on 07.03.11 at 11:36 pm

The (updated) Three Rules of Real Estate: Mobility, mobility, mobility.

#45 Patz on 07.03.11 at 11:40 pm

Check out Greater Vancouver sales for the past week at Agentwill.com http://agentwill.com/weekly-stats/

Whopping big drop over the previous week and the trendline is beginning to look like 2008. Prices haven’t followed yet but they will.

Unless of course “it’s different here, this time…” Yup!

#46 Nostradamus Le Mad Vlad on 07.03.11 at 11:43 pm


“Renters Lived like Kate & Wills.” — Live next door to Buck Palace? Nice digs!

Does anyone remember what BPOE says? “The shame of renting”, yet “Renting equals mobility.” I’ll take mobility any day!

“Options enhanced. But your mother-in-law still won’t get it.” — Who the hell cares about the MIL? I sure don’t live my life according to someone else’s expectations.
*
Fixed Income I’m on a fixed income, but it’s a little less than this; 2:57 clip Fast effects of hyperinflation; Global Economic train wreck a’comin’; Wot’s Up with China, and Russian Arctic oil.

Mega ‘Quake Are these the same scientists who had all their research paid for by big oil to fool sheeple into GW? More Propaganda BS Just like Sadaam’s nookes; Hmmmm. No-fly zones have increased in the last 28 days.

#47 Westcoaster on 07.03.11 at 11:51 pm

Have owned homes for most of our married life but started selling 5 years ago, starting with our McMansion and now with only one of what was 7 properties left to divest ourselves of. Never been happier.
We’ve rented for the last 4 years, currently in a $1M townhome (one sold 4 doors away last week for $1.035M) for $2200/mo – no strata fees, no muni taxes. Do the math on this one and with our liquidated land in preferred shares, etc. we are being heavily subsidized by our landlords and they’re happy! The place is taken care of very well, the cheques are never vulcanized – they want to keep us for at least another 3 years.
It can be done, folks – at least right now.

#48 westcanguy on 07.04.11 at 12:00 am

My wife will absolutely not entertain the idea of renting but I am using the well worn ‘just temporarily’ approach and she actually gave in a little bit (maybe for a month is ok). She will not stop looking at the biggest houses she can fit on her laptop screen. We live in a very very small house so I think she will be happy with the same size house with a second floor (and a big shower bathtub combo with a wall separating the toilet from the bathing area) but she is hypnotized by the 2500 to 5000 sq ft mini resorts. She unplugs the TV to conserve electricity (she tears a strip off of me for buying drinks from the vending machine) but will blow the whole wad on a house. Houses are like an addictive substance for her. If she did not hate debt as much as she does we would have been sunk (I have changed women a few times and this one is a keeper, so if she really wanted to send us into debt I would have a very hard time saying no but she is a keeper for many reasons one of which is that she is allergic to debt).
_____________________________________________
You get shit for spending money in a vending machine and she unplugs the tv to save on electricity….Yeah, she’s a keeper alright. Has she taken every pair of your pants yet? What a way to go through life.

#49 Devore on 07.04.11 at 12:05 am

#17 Tim

At what point then does it make sense to buy? What metric other than the yearly rental vs housing price can be used?

What’s wrong with rent vs buy? If it’s cheaper to buy than rent, then buy. Otherwise, rent. Housing is an expense, minimize it.

#50 Bench Warmer on 07.04.11 at 12:20 am

Just rented a house in Calgary, Estate community,a little over 3000 sqft, finished walkout basement (with full suite for my mom) , 5 bedrooms, huge double garage and private lake access all for just $2500 a month, the landlord is still paying another $1200 a month, just on the mortgage himself. The owner told us he bought back in 06 at the peak and if he sold today he would be out about $200 grand. Houses across the street are listing for over a million. He said he is holding and waiting for prices to go back up. My wife and I just looked at each other and kept our mouths shut.
Can’t wait to hit the beach!

#51 reality guy on 07.04.11 at 12:20 am

#15 My Buyer.

Man your wife is nuts. 5000 SF for two people.

I lived in a 4400 SF house with wife and one kid. Jesus Christ, we spent more time dusting the freaking place than anything else.

Hey this is a good change for renters to experience the comforts of owning a huge place, without making the commitment.

We downsized to an 2600 sf place and it was perfect size. (and we didn’t even need the basement)!! So 2000SF would of done us fine.

We sold in 2008 and now is renting at prime basement suite with 1300 sf with the marble counter top and all that crap (too bad were never home) within striking distance from work and the sky train.

Hoping interest rates or inflation will rise and kill off the weak. (Darwinism)

#52 Young Old Fart on 07.04.11 at 12:20 am

“The house went back on the market and sold exactly one year later for $475,000. The publisher, now between careers, was crushed.”

Question, had I purchased the house at that time ($475k) and sold it today….would I have won or lost?

Be honest now…..

It’s worth about 600K, and the market is lifeless. Loser. — Garth

#53 TaxHaven on 07.04.11 at 12:50 am

Where is this mythical 8% (after government exactions) return? And can everyone – absolutely all of us – with any cash to spare get in on it?

Gold returned 17% last year, and it isn’t paper.

#54 cool on 07.04.11 at 12:56 am

Update from Red deer,

Builders are getting out first….

http://reddeer.kijiji.ca/c-real-estate-houses-for-sale-IMMEDIATE-POSSESSION-FABULOUS-CHOICES-AMAZING-SALE-PRICES-W0QQAdIdZ295013804

#55 Not Wondering Anymore on 07.04.11 at 1:11 am

#9 Jon “There is a third option. Buy a home with cash…..”.

Note: Even when buying a house outright, it should NEVER represent a commitment of more than one third of your total assets,because in a declining real estate market, anything greater would result in an outcome of overall financial disaster.

#56 Rico Suave on 07.04.11 at 1:25 am

>> When the inevitable comes, renting will connote financial acumen.

Dude, you have serious talent to convey the message.

#57 TheFirstRick on 07.04.11 at 1:27 am

What people will do to ‘own’ and NOT be renters;

http://vancouver.en.craigslist.ca/van/apa/2476006572.html

I can’t imagine the financial discourse in that household, “dear, why don’t we get someone to live in the attic??”

BAAWWWHAWWWHAWWW

#58 Debtfree on 07.04.11 at 1:34 am

what’s the difference between a bmw and a porcupine ….. northern joke ….. drum roll . A porcupine has it’s pricks on the out side.

#59 BPOE on 07.04.11 at 1:37 am

Suicidal advice with the exception for those looking for short term accomodation. Vancouver up almost 50% in a couple of years. So you rent for 5 years and now up another 75% then rent for another 5 years up 50%. US will most likely default on debt. Interest rate cuts coming. Combination of upcoming armageddon and cut rates will shoot Vancouver to the moon and beyond

#60 BPOE on 07.04.11 at 1:39 am

Garth doesn’t understand how women think. Another reason Vancouver going higher
__________________________________________
15 Mr Buyer on 07.03.11 at 9:30 pm
My wife will absolutely not entertain the idea of renting but I am using the well worn ‘just temporarily’ approach and she actually gave in a little bit (maybe for a month is ok). She will not stop looking at the biggest houses she can fit on her laptop screen.

#61 Aussie on 07.04.11 at 1:46 am

Canadian rent seems very cheap compared to renting in Australia.

#62 Responsible Savers 9 on 07.04.11 at 2:03 am

#21 Negative Equity Solution

The re-fi from JPChase in your New York Times article is very simple, completely done to benefit Chase. The lady had an option arm. She was paying 1% interest, with the rest of the interest – probably another 6% – being accrued and added on to the principal. 5 years later in 2011, she would owe about $390,000 on her $300,000 mortgage. At this point she would be ready to mail the keys to Chase and walk. Instead, Chase now gets 5% on $150,000 ($7,500), no foreclosure and the loan stays performing – two and a half times the 1% per year on $300,000 they were previously collecting ($3000).
The real kicker is, $150k of credit money was destroyed from the economy (deflationary) and did you notice she immediately sold her property for $170K after the mortgage principle was dropped? Just imagine the downward pressure on housing prices if this becomes wide-spread!

#63 Aussie Roy on 07.04.11 at 2:24 am

Aussie Update

”Despite this, our bear case suggests downside risks to house prices exist, with potential nominal price falls in 2011 of about 10 per cent and a further 10 per cent in 2012.”

http://www.smh.com.au/business/developers-to-feel-pinch-as-home-values-sink-further-20110703-1gxdx.html#ixzz1R7LiKMlx

The survey also found one in five (21 per cent) Australians admit to finding it difficult to repay debt.

But wait, its just gets better.

Of these people, 28 per cent are likely to apply for more credit in the next six months and 14 per cent of the respondents surveyed had missed a minimum bill repayment.

http://www.news.com.au/money/money-matters/credit-lies-are-piling-up/story-e6frfmd9-1226086859977#ixzz1R7M2pkVu

Looks like even households have fallen for the best way to get out of a debt problem is simply take on more debt.

But the good news is the housing market is just quiet but stable. Thank goodness.

http://www.smh.com.au/business/housing-market-subdued-but-stable-20110703-1gx8y.html

#64 SMOKING MAN on 07.04.11 at 5:37 am

Reality is 99% of the the renters would have blown the 33k.

Garth why don’t you cash in and rent ?

Because RE is less than 30% of my NW. — Garth

#65 Sumadartson jr. on 07.04.11 at 5:48 am

Since we are all gonna die, Party like it is 1999.
Fukushima, Volcanoes, Drought, Fires and Floods.
World War 3 coming.
Canada safest country.

#66 Aussie Roy on 07.04.11 at 5:48 am

Aussie Update

It’s different here, this time. We have those big resource states in Australia, after all we have a resources boom, don’t we?. House prices have probably skyrocketed in these places, right?.

Think again..

Perth values were down 7.5 per cent and Brisbane values fell by 5.9 per cent.

These two weakest-performing housing markets are yet to show any sign of turning around despite the economic benefits associated with the much-touted resources boom, of which Western Australia and Queensland are THE central players.

But its all OK as the delusion in Sydney has not quite broken, YET…

http://smh.domain.com.au/real-estate-news/sydney-still-the-leader-of-the-pack-20110702-1gvy9.html

#67 Utopia on 07.04.11 at 6:14 am

#25 Randis

“oops … sorry Utopia …”
———————————————————-
No need to apologize. I am not a girl. You might all start bringing out my feminine side though if you keep it up. Seriously, I can be really bitchy.

Must be something about this oversexed blog that has everyone confused.

#68 Mr Buyer on 07.04.11 at 6:53 am

#34 Siddelly you know the jargon (3LDK) but I sense your experience in Japan may have been somewhat frustrating (am I ASSuming too much). There are a sea of frustrations to be confronted daily but thankfully they are somewhat minor (but can take a toll). I still do not understand the logic behind how things are arranged on the shelves at my local grocery store and when I get familiar with where everything is (not the logic, just where everything is) they literally change entire sections of the store overnight (I am guessing it bumps up impulse buys, the whole convenience store is rearranged in a single night).

#69 Mr Buyer on 07.04.11 at 7:17 am

#51 westcanguy…Hey man, I did the math, I was pumping 4 to 6 bucks a day 6 days a week into that machine next door. That’s like 1200 bucks a year. All I have to do is ride 5 minutes on my bike to a local drugstore and I save $900 a year. It drove me nuts the first six months we got married but I am used to it now and better off for it. It is hard to believe but it really is not what you make, it is what you spend. I was throwing away money before I met her, dinners out, lunches, movies, gym, travel, computers, computers, computers (I still drop some heavy coin on computers from time to time but 25% of what I used to). The wife gets up at 5 or 6am cooks for the kids and myself, does all the house work and takes care of the kids. I work tons of hours (can not spend money so quickly if I am working) and give her like 80% of what I make. We have zero debt on our house and 8 car parking lot here in Japan. Zero debt on anything. Zero debt. My pants are fine.

#70 Mackie on 07.04.11 at 7:21 am

Speaking of cars, BMW’s et all: I was toying with buying another car last week. Ours are 17 and 11 years old. People make more stupid decisions with cars I think than they do with houses. Cars are even more emotional and are almost guaranteed to go to zero. I am amazed at how people carry a mortgage and car payments on 1 or 2 very expensive cars. I guess they don’t. That’s why we have all this debt. Would love to see more info on cars. I don’t think leasing is really a good financial move, especially for someone who likes to drive cars into the ground.

#71 TurnerNation on 07.04.11 at 7:22 am

#26 Van MD on 07.03.11 at 10:16 pm

Well done, you have earned a one year House Sober chip. Keep up with the meetings on this bilious weblog.

#72 Mr Buyer on 07.04.11 at 7:24 am

#54 reality guy…My wife would feel lost even in a 2500sq ft house. As soon as I convert it into tsubo (1 tsubo = 3.3 sq meters) for her or tatami mats she understands the size and reconsiders. She has never had to pay to heat a Canadian home through a winter so I just give her some of that data and she comes around until the next time she is surfing mls.ca

#73 BrianT on 07.04.11 at 7:28 am

#21Neg-The article is misleading-the banks have crunched the numbers and realize that a smaller loan asset payment being made is better than zero being paid. They are overwhelmed with housing inventory so the last thing they want is more houses. You have millions of USA home “owners” making zero payments for the last couple yrs so they are getting the best deal of all at this point.

#74 Smokanagan on 07.04.11 at 7:47 am

Love it Garth. Don’t forget that renters also have much more free time as we don’t waste it drywalling, fixing the roof, attending strata meetings, I could go on…. Renters probably spend a lot less time cleaning too, I know I don’t care about a little bong water or pilsner stain on my rented carpet….

#75 Steven Rowlandson on 07.04.11 at 8:05 am

Yes sometimes renting can be usefull if it allows one to allocate money towards savings or other expenditures.
The key to it is that rent needs to be modest enough relative to income to make it possible to save and live at the same time. If rent is almost as bad as a mortgage then there would be no benefit to renting.

#76 Utopia on 07.04.11 at 8:08 am

#71 Mr Buyer wrote….

“I still do not understand the logic behind how things are arranged on the shelves at my local grocery store and when I get familiar with where everything is (not the logic, just where everything is) they literally change entire sections of the store overnight”
—————————————————————-

Is it more organized here in Canada? I have been to Great Canadian Superstores in different cities all over Western Canada.

Every single one is almost the same as all the others!

You honestly can forget what city you are in once you step inside a store. Ketchup, same place. Milk and bread…same place. Magazines..identical racks and placement.

Freaking weird. Even the check-out girls look alike!!

#77 Ex-Cowtown on 07.04.11 at 8:19 am

We’re renting. Sold the big Cowtown house and hit the road. In our moneyed enclave over the last 10 years, you were lucky to see 1 or rarely 2 houses for sale. Now? Seven. And this is in an area dominated by the “rich oil” guys. Yeah… oil is $100/bbl… but it costs $85/bbl to get it out of the ground. That’s why the moneyed guys are dumping. They see the writing on the wall.

The numbers don’t get better, they just get bigger.

#78 detalumis on 07.04.11 at 8:27 am

Yep all the renters congratulating themselves on their good fortune except for #28 there. My sister-in-law who is in her 50’s is getting evicted from her rental house of 8 years, can’t find anything comparable to replace it, will have to dump half her stuff. In my neighbourhood the only rental house looks like a slum. There does reach a point in your life where you don’t want to beg somebody to do maintenance on your place and where you don’t want to continuously be packing up and moving. Its okay when you are 25 but not so much at 45. I bought my 1,200 square foot bungalow in 1990 last market peak by the way, I paid it off by throwing every penny at the morgage and was mortgage free in my early 40’s. Sure I didn’t time the market but I never regret buying it. I also have never met any senior who has rented their entire life and is not poor, I don’t know any of them that invested so well on the side and then used all that money to live on later in life.

#79 kimi on 07.04.11 at 8:53 am

Sorry Utopia, I only thought you were a lady because your smart. Opps. I guess I was wrong, but hey, I like smart men too, you have very little competion in that regard on this blogin part. Your just behind Garth (:

#80 Ben on 07.04.11 at 8:53 am

You don’t know cheap rent until your in the U.S.

$700 a month all inclusive, includes a swimming pool.

I have to fight the maids off that want to vacum, dust, change my sheets and towels and start the dishwasher with one spoon in it daily.

Working in Dallas making more money then I could in Canada, go figure. I work remotely and my VPN access doesn’t have any borders, the only requirement is internet. I could work from Canada but I don’t because it would cost me 3 times more to live.
Serious!

#81 45north on 07.04.11 at 8:58 am

Responsible Savers 9: The real kicker is, $150k of credit money was destroyed from the economy (deflationary) and did you notice she immediately sold her property for $170K after the mortgage principle was dropped? Just imagine the downward pressure on housing prices if this becomes wide-spread!

I can imagine and so can the banks, so can CMHC.

#82 Omni on 07.04.11 at 9:00 am

##20 Omni ——————————————————-

#39 Brad in cowtown …
“My bank account just keeps growing and growing and growing, imagine that.”

What a waste.
Letting money grow in a bank account is the same thing as a growing opportunity cost
———————————–
Brad… I said I invested the principal, I didn’t say I put it in a 1 percent term deposit! My Bank account keeps growing because of my investing, I don’t keep my money in my mattress, I guess you don’t invest, so I don’t blame you for not knowing how it works, but you need a bank account to be a invester, lesson numero uno.

#83 Kimi on 07.04.11 at 9:05 am

Debt free said…what’s the difference between a bmw and a porcupine ….. northern joke ….. drum roll . A porcupine has it’s pricks on the out side.
—————————————————-
That was Hilarious!! I am still laughin’… thanks for makin me smile everytime I see a Beemer!!!!

#84 Utopia on 07.04.11 at 9:06 am

#78 Steven Rowlandson on 07.04.11 at 8:05 am

Actually you make a very valid point there Steven. I am glad someone finally brought it up. The problem is that the marginal difference between renting and owning is often not big enough to justify not acquiring property. We are at extreme differences right now and so the reasoning holds that renting is a good sensible strategic decision now but that case is harder to make if rents rise or mortgage costs fall.

#85 Ben on 07.04.11 at 9:09 am

Oh ya and if you wanted that Beamer, Benz or Jag convertible there cheaper here too. I don’t need a vehicle because everything is walking distance but it sure is tempting.

#86 T.O. Bubble Boy on 07.04.11 at 9:22 am

Here’s a great quote from a BBC article on Real Estate in China… pretty much explains the “investment” approach of the mainland buyers scooping up condos in Vancouver/Richmond and Toronto:

http://www.bbc.co.uk/news/business-13959239

“If you’re going to live in a property, it’s worth what you’re willing to pay for it. If the price goes down, you still have a place to live. But if you’re buying as an investment, you better be very confident.”

“Ask yourself – what cash will this investment generate? At the moment in China, individuals are investing with no expectation of a cash yield – they just assume the prices will continue to go up. That’s very worrisome.”

#87 Kimi on 07.04.11 at 9:23 am

#63 BPOE
—————————–
This is what I think about Women.
Every woman thinks different, every woman is like a new maze. Basically a man is more universal, but with a woman, its like a box of chocolates with no paper to tell you whats inside. You got to fiqure each one out and it can’t be easy.

I’m a woman and that is my two cents, I totally get the problem… I am so lucky to be a girl. Thank god for that, I feel bad for some of you guys out there.

But hang in there. Don’t day dream about changing the ingredients of your chocolate, if it dosen’t taste good, its easier to just get out and then pick a new one you like better or accept your chocolate is what it is and don’t think about changing ingredients, just learn to acquire a taste for it. Simple, right?

#88 househornyhousewife on 07.04.11 at 9:27 am

Garth,

I still think that the decision to rent or buy depends on an individual’s situation.

Here in Sherbrooke, you can buy a single family home for as little as $150,000.00 … and this would be in a nice area because if you are willing to go live out in a field, you can buy something for around $50,000.00.

Also, if you guys are trying to understand your better halves when it comes to renting vs buying, there are some other things to consider .. not all of which are monetary in nature. This blog being in need of some balance from the other side, here are some other things to consider:

1. If you rent, you rent for life whereas if you buy, your mortgage will be paid off at some point and your monthly expenses will be reduced (leaving property taxes, utilities and maintenance .. which you are also paying in your rental fee, whether you see it itemized or not). That being said, you have to be sure that you pay your house off quickly or the interest you pay over the life of that mortgage could very well equal renting for life. For example, my husband and I paid off our house in seven years by making double payments (we have a beautiful 4,000 square foot, red brick heritage home that we paid only $260,000.00 for in 2003 .. it would have cost us at least a million if it was located in Toronto so we only have it because we are here .. if we lived in Toronto, we would have made a different decision, that’s for sure … thus my comment that renting vs buying depends on an individual’s situation).

2. Some types of residences are simply not available for rent. For example, if you are looking for a waterfront property and some peace and quiet from your neighbours (ie. more acreage around your home), it is very difficult to find this for rent. It may seem impossibly expensive to find this anywhere near a large city but again, out here you can find something for a very reasonable price so buying is not so outrageous of an idea.

3. You simply cannot do what you want to a rental property whereas you can upgrade and update with your own home and not have to ask permission. Having to move everytime you grow tired of the wallpaper will become extremely annoying over time, to say the least. Also, any upgrades you are allowed to execute will also benefit the landlord (unless they pay you for labour and materials … ha !) and will most likely result in an increase in rent (believe it or not, I have seen this happen when I lived in Montréal .. people made upgrades at their own expense and the landlord used this as a reason to raise the rent).

4. As prices go up, rentals will eventually go up as well. Landlords have to cover costs. In addition, if renting becomes more popular (due to this blog for example … ?!), rental costs will most definitely go up. I am not sure what kind of rental controls are in place in larger cities but I am sure that some cities have very lax control, giving a landlord the power to do what he or she wants. Some of these rules can also be circumvented, in favour of the landlord. In Québec this is extremely difficult as the law is very renter friendly. This is why investors rarely own beautiful rental properties and why many rentals are in poor shape (making buying even more attractive).

5. Landlords can come into your rental abode and make repairs and renovations whenever they please (as long as they give you sufficient written notice). They don’t care if you are in the middle of a life crisis or have just returned home from the hospital or whatever. When you own, you have a certain amount of power over what is done to your abode. In general, there are some privacy issues that are sacrificed when you rent. Your landlord always has a key and the place belongs to them and not to you.

Oh and in regards to leasing a car, it is funny you guys should mention this. We recently looked at the possibility of leasing vs buying our next car. We found that by the end of the 4 year lease, we would have shelled out the entire purchase price of the car. In addition, the dealer would have the option of charging us for any scratches or whatever AND if we went over the alloted mileage … kaching ! yet again. Since we keep our cars for around 10 years, leasing would have been a serious waste of money. One has to pay for damages and service the car whether one owns or leases and if you scratch or damage your car, so what ?! it’s YOUR DAMNED CAR. Leasing is fine for someone who changes cars every year (since a car is heavily devalued as soon as you drive it off the lot so selling and buying shortly after purchase would involve a huge loss of cash) but it is definitely not for someone who plans on keeping it longer term.

Sorry Garth, you have definitely not sold me on the superiority of renting vs buying. I think that if you can afford to buy then go ahead but if you cannot then renting is your only option. There are pros and cons to both. The issue with the real estate market today is that many people who cannot afford to buy expensive homes are still doing so with the help of unscrupulous financiers.

Cheers.

HHW

#89 Bottoms_Up on 07.04.11 at 9:29 am

#28 Richard on 07.03.11 at 10:28 pm
——————————————-
I agree with you in that renting sucks because of the relative lack of control over privacy and who is allowed to enter your home and when.

However, as a renter, after one year lease, your rent obligations rollover to ‘month-to-month’. You do not have to sign another rental agreement, and the landlord cannot kick you out because you refuse to do so. Thus, you have mobility with only having to give 1 or 2 months notice–and this is one of the best things about being a renter.

Also, you can always break your 12-month lease agreement with a relatively small penalty (usually one or two months rent). The penalty should be written into the lease agreement.

#90 BrianT on 07.04.11 at 9:31 am

#81Deta-You are saying that buying a modest affordable house makes sense. It does. Buying an extremely expensive house with low money down and zero investable assets only makes sense if the house value increases greatly. The last 30 yrs was a period of unprecedented credit growth, to the point where it is now a drag on the overall economy. if you look at the math you will see that the next 30 yrs cannot be the same in terms of credit growth or overall RE value appreciation. You don’t care because you purchased a modest affordable house-you are the exception in many areas.

#91 Daisy Mae on 07.04.11 at 9:42 am

“#48 Fingering Freddy on 07.03.11 at 11:40 pmNew bimmer depreciates faster than real estate. All the time. Terrible move!”

I would imagine Garth leased the vehicle….

#92 Omni on 07.04.11 at 9:46 am

#81 delatamis said I also have never met any senior who has rented their entire life and is not poor, I don’t know any of them that invested so well on the side and then used all that money to live on later in life.
————————————————-
I don’t understand why so many people make assumtions. Delatamis are you saying that every senior you met showed you thier personal finaces?

I personally play the show just like everyone eles I say I am in debt, what do I care. I am not pullin out my finacial statements to people I meet, I play broke or there would be a line up at my door of people who want money. That ‘one up’ crap just screws ya.

#93 Utopia on 07.04.11 at 10:05 am

#85 Omni on 07.04.11 at 9:46 am

The truth is, most of the people that I have known who were long term renters are all broke, on welfare or living with a disability. Very few of them have put money away except for one very small unusual group.

That group of people are almost all tenants in their own parents homes. None of them got married (or if they did, it failed long ago) and they are all in effect saving large amounts of money BECAUSE they are fully subsidized by family members. Not everyone has those benefits.

This is not to knock the renting idea. Just telling it like I see it. Many more folks I know are married, with kids, strapped to the nines in debt but they do own something and have tended to get ahead despite all the reasons that their boats should sink. They do have equity, savings and privacy. The sacrifice has been huge debt burdens and even solvency in some cases.

Come hell of high-water, at least they made their mark and tried. The more I look at it the more I realize that those who got married (and stayed married) did the best one way or another.

The rest just pissed it all away and lost the opportunity that relationship stability brings to a persons life and financial health.

#94 Utopia on 07.04.11 at 10:08 am

The previous comment was a plug for a happy marriage and a stable happy life by the way, not a reason to avoid renting and saving!

#95 T.O. Bubble Boy on 07.04.11 at 10:10 am

Funny how people automatically equate “rental” to “student housing”. Yes – student housing rentals are usually dumps, and the slumlords want to minimize all expenses since the students just care about location and price (not granite and stainless).

However, that’s not what today’s blog is talking about. The comparisons here should not be to student housing — if the argument is for buying a SFH, then it should be compared to renting a SFH. Landlords that own these properties will put far more money into renovations and maintenance vs. student housing — it is what the market demands. They know that the house must at least be comparable to others in the neighbourhood, since they might eventually sell the SFH.

#96 JohnnyInAb on 07.04.11 at 10:23 am

I went to a few open houses this weekend as my wife’s nesting instincts are kicking in. I am happy to rent for the next few years to let this whole thing shake out. My wife, totally different story.
At one open house I started asking the real estate agent a few questions. He looked like he was in his mid 30’s and had a nicely designed business card. I hinted at where I thought the market was going and asked him what his thoughts were.
He, ever eloquently, told me that we have hit bottom. I asked him why he thought that as there were 6 new houses for sale on the same block alone. Also, what about those people who have to sell and the fact that there is 7 months worth of inventory on the MLS system? His response to me was that those that have to sell can’t drop their price because they would not get enough from the sale to pay their mortgages so prices aren’t going anywhere. Same thing with new houses. Builders can’t afford to drop prices because they will lose money.
By now my wife is in the car giving me the dirty look that she has heard enough, I smiled and said “makes sense to me” and walked out.
Scary thing is he totally believed what he was saying!
We are screwed!!!!!

#97 Utopia on 07.04.11 at 10:23 am

#91 househorneyhousewife said

“…..if renting becomes more popular…..rental costs will most definitely go up”
——————————————————————————–

Funny you should say that. Rents are indeed on the rise in the US even though home prices are at extreme lows (and falling) and a tremendous amount of surplus space is available.

This was not alway the case. REITS as it turns out are a terrific investment and that idea really runs contrary to some of the thinking here on this blog.

But this is again simply a supply and demand scenario. As home ownership levels drop then rentals will benefit and the existing supply of professionally managed rental space will fall.

Rents do eventually rise even though excess capacity remains.

#98 Joe on 07.04.11 at 10:24 am

#73 Mackie. Would love to talk cars. Have a 12 year old car, “need” to upsize to something with cargo space. Have an idea of what we want, but paying $1000 over three years or $600 over three, even though it will be a car that we drive for more than a decade, the thought of having to dish out that kind of coin to service debt makes me feel sick. We put it off as long as possible. Question: Buy a car in the fall when the sales are on, or drive the old, paid-for car for another six months till the spring when the deals might not be as good? I wish a car would just fall out of the sky into my driveway, and normally I’m not a dreamer, but even at 0% interest a car payment for five years still feels like a life sentence.

Why is it that dealerships charge people to bring the car in from another part of the province? Don’t they just trade with one another? I can go get the car from the other dealership myself, can’t I? So why pay them to bring it in for me. Who do you get around that?

As far as leasing, I think Garth is insinuating that he leased the Bimmer, which is a great idea because they depreciate fast. You basically rent the nice car and get all the perks of using it, just hope no one spills their coffee or swings their door into you, and give it back at the end. Better to “invest” in a long-termcar that will last and not cost so much to repair.

“Lawn Asians” are Asians that you pay to come to your open house and stand on the lawn talking into their cell phone in Cantonese or Mandarin to make people think your property is a hot buy.

#99 BB on 07.04.11 at 10:27 am

#4 Squidly77

The median sfh price in Calgary is down 4.9% from the peak in 2007. http://www.findcalgary.ca/page_content-19.html

#100 BrianT on 07.04.11 at 10:39 am

#91House-You are talking about buying a place for 50-150 thousand dollars. Why not. OTOH you have people encouraged to literally put their financial future on the line in Vancouver and even TO and if they guess wrong it is all over. The other thing is that in towns like yours the whole rent/own math is totally different than Vancouver or even TO. So basically you are absolutely right when you discuss Sherbrooke.

#101 Coraline on 07.04.11 at 10:45 am

If there’s one argument I hate, Smoking Man, it’s the one that says that renters would blow the money they saved on renting, or that buying a house is “forced savings.” Clearly, most homeowners have blown the appreciation on their houses on LOCs.

#102 Keith in Calgary on 07.04.11 at 11:00 am

My wife and I have been renting since 2003 when she moved here.

We presently have over $320K in liquid cash assets due to what this thread implies doing as a financial strategy.

NONE, and I mean absolutely NONE, of the supposed negatives about renting spewed forth by the REIC pumpers out there has affected us in any way, shape, or form……for they are all LIES created by the REIC to get you to fall for their claptrap and buy one of their cardboard boxes.

Funny ‘dat !!!

#103 Derek on 07.04.11 at 11:08 am

#91 househornyhousewife on 07.04.11 at 9:27 am wrote:
4. As prices go up, rentals will eventually go up as well. Landlords have to cover costs. In addition, if renting becomes more popular (due to this blog for example … ?!), rental costs will most definitely go up.

I liked the rest of your post, HHHW, but I’ve got to disagree with you on this part. What you say about landlords having to cover costs is only true of commercial organisations looking to make a profit out of renting. Basically if they can’t make their profit target on a housing unit these guys will try and raise the rent. And if they aren’t successful, they will cut their losses and sell the unit off. So you are totally correct there.

However these are unusual times and one of the things that makes them unusual is that there is a large (and growing) band of small time private individuals who bought when they shouldn’t have and now can’t sell at the price they need to pay off the mortgage. These people would love to cover their costs with rent but have learned that they can’t find tenants at that rent level because the market rent is less than their costs. On the basis that “half a loaf is better than no bread”, they take the market rent that the tenant is willing to pay and cover the rest of the housing costs from their own wages.

These are the people you want to rent from, since they will subside your accommodation costs and be glad that they have you to help them pay their otherwise unaffordable mortgage+property tax+maintenance costs.

#104 Chaos on 07.04.11 at 11:10 am

To whom it may concern

1990 is not 2011.

2011 will not remotely resemble 2018.

Moving forward the past will not predict the future.

The present gives us the clues that we need to see our future.

Read “Black Swan” by Taleb.

The “Black Swan” that we are currently riding has been the making, As Brian T remarked, for the last 30 years, and it’s coming for a “hard landing”.

Enjoy paying for those underfunded indexed pensions of the public workers in the city where you live.

Do the math, your taxes are about to go through your roof! But that’s ok, because your 21 year old roof probably needs to be replaced right about now. Oh yeah and cost of your new roof, well you can forget about taking a vacation for a while.

Anyhoo…thanks for coming out.

#105 pen pal on 07.04.11 at 11:18 am

#1 Greater Fool

You certainly are a greater fool if you think SFH prices in Toronto and Vancouver will be higher in 2013.
Purely wishful thinking.

In fact, here’s to you either leveraging yourself to the hilt now or at least holding your RE through the next rough patch. You deserve no less for your stupidity.

I sincerelt hope you don’t manage money or do anything even remotely responsible for employment given your lack of investment acumen and objectivity.

Boy oh boy are some Canadians are dumb!

#106 BrianT on 07.04.11 at 11:23 am

#96Utopia-The actual reality is that a very small % of Canadians or Americans achieve financial independence, an even smaller % when you subtract out those born into money or inheriting money. A house does not have a magical ability to make one rich-anyone not cashing out of the once in a lifetime opportunity afforded by the Vancouver and TO run up will find that out IMO.

#107 Kimi on 07.04.11 at 11:25 am

#91 househornyhousewife…
—————————————
This proves my point and Who ever got ‘that’ househornyhousewife chocolate, good luck.

#108 Omni on 07.04.11 at 11:31 am

A Car is a liability period. Get one, lease one, whatever. If you ‘need’ one then suck it up, it is what it is, no win finacially, but it give one alot of Freedom, can’t put a price on that.
(and yes, I do own my wheels).

#109 Negative equity solution - coming soon on 07.04.11 at 11:37 am

#32 Mark –

Who’s the one on crack? BoC cannot print the world’s RESERVE currency. They can only print their own. If they do that instead of principal writedowns, we become Zimbabwe. That’s the only way to get your 50K prediction on the TSX.

What a nut.

#110 Utopia on 07.04.11 at 11:38 am

#99 JohnnyInAb wrote….

“His response to me was that those that have to sell can’t drop their price because they would not get enough from the sale to pay their mortgages so prices aren’t going anywhere”.
———————————————————————

Those comments from a Real-turd don’t surprise me one bit Johnny. Those worthless dealers are all conditioned to say whatever it takes to make the next sale. They even openly suggest that prices are frozen because vendors are trapped! Incredible.

They are disgusting really.

But what was really implied by the comments you reported is that the seller cannot get out and the buyer must therefore pay the highest price or they cannot get a sale. Stupidest analysis ever because it does not hold water when supply exceeds demand.

These guys still think they have the cat by the tail and they are in control of the market. It won’t last. Time will tell. If history is a guide then Realtors will be banging down your door with deals galore eventually. Desperation will set in.

Just wait. Then blow them off and do a deal direct with the vendor. Real-tards really disgust me. They just never quit pumping.

Right to the bitter end.

#111 Timing is Everything on 07.04.11 at 11:42 am

Because RE is less than 30% of my NW. — Garth

More like…”My wife won’t let me.” ;)

My wife actually wants to liquidate and rent. However I need somewhere for my strategic oil reserves and light arms cache. — Garth

#112 Patiently Waiting on 07.04.11 at 11:52 am

28 – Renting doesn’t have to suck. If you lived in dives its because you were poor (or too cheap). I know, I’ve been there. When I was young, I lived in some real crappy apartments with scumbag landlords. The problem was I was poor, not because I was a renter.

Richard, if you are renting as a choice instead of buying (meaning you can buy if you wanted to), you should be able to rent something nice on your own terms. Otherwise, you are poor, and decisions about buying versus renting are really meaningless to you at this point.

#113 Devore on 07.04.11 at 11:57 am

#28 Richard

I’ve rented for many years and I can tell you that it’s not nearly as glamorous as you make it out to be.

Who is saying it is glamorous? There are benefits, and there are drawbacks to both renting and owning. It is just worth pointing out that there will be times when you will wish you were renting, but instead you’ll be trapped in your house by your debts. This is not a decision you can undo.

The vast majority of your issues could have been avoided with some due diligence. Looking for a GOOD rental takes time, just like to find anything good. You have to put in the effort. Good results don’t happen by themselves like magic. Interview the landlord/agent. What does your gut tell you? What is the management company’s reputation? Did you talk to a single other tenant or resident in the building? Did you meet the super?

There are rules about maintenance. If repairs don’t happen in a timely manner, you can take the case official. Don’t “threaten”. If you’re fed up and they’re not being reasonable, do it.

There are rules about showings. At least 24 hours notice, and reasonable times and frequency.

For more than a month I had to tolerate him escorting strangers into my apartment in the evening while I was trying to relax. Not fun. That kinda stuff doesn’t happen when you own.

What about open houses, and scheduled showings when you are trying to sell your house, for months, a year, or longer, during which time you need to keep your house decluttered and spotless, and evacuate your family out of sight whenever someone shows up? Oh yeah, that’s totally different, ya?

And Garth, if renting is so great why do you own your house?

And that’s simple, he can afford it! No one is saying never to buy a house, just when it makes sense financially and your lifestyle and future plans allow that kind of commitment.

#114 Victor on 07.04.11 at 12:01 pm

Royal Bank just increased all its ‘special rate’ residential mortgage rates:

http://ca.finance.yahoo.com/news/RBC-ROYAL-BANK-CHANGES-cnw-2756232556.html?x=0&.v=1

The bond market giveth. The bond market taketh away. — Garth

#115 Michael on 07.04.11 at 12:04 pm

Hah! People who say that have either never rented themselves or have lucked out with great landlords. I once rented an apartment where the kitchen sink clogged up shortly after I moved in, and it took the landlord (large corporate landlord) two and a half months to finally fix it. I bugged the super about it almost every day. I threatened to report them, they didn’t care. During this time I had to do my dishes in the bathtub.

You may want to read the tenant act. At least the ones in BC, AB and Ontario have provisions for these kinds of things. Worst case you can hire a plumber, then deduct the repair cost from the rent (just give them the receipt).

Like in every business relationship you need to know your rights and know how to get what you agreed upon.

Another time I rented a condo, when I gave my 2 month notice to terminate, the landlord began showing my unit to prospective tenants, as was his right. For more than a month I had to tolerate him escorting strangers into my apartment in the evening while I was trying to relax. Not fun.

Again, you may want to read the tenant act, there are stipulations on what the landlord can and can not do. e.g. needing to give you 24 hours notice and not to mention there are only certain times he can enter in a non-emergency.

So if you suddenly need to move near the beginning of a lease, what then? You can find a subletter but even if you find one your landlord still has final say in whether he approves it, and if he doesn’t you’re stuck.

Well for one you could try and find an arrangement with your landlord. I never had a problem ending a lease early, but even if, so you end up paying a penalty, or worst, you just move out and have him chase you if you really are that desperate to get away.

Even if the landlord would drag you into small claims the most the judge would probably give him is the difference in rent between the time you moved out and he found another tenant so your financial risk / exposure is slim to none, compare that to a house that ties up your finances and you can’t just “abandon” when you would need to.

#116 Devore on 07.04.11 at 12:36 pm

#60 TheFirstRick

I can’t imagine the financial discourse in that household, “dear, why don’t we get someone to live in the attic??”

In places like Vancouver, Victoria and Toronto it’s not even a question. Having strangers living in your house to make ends meet is par for the course here.

#117 Timing is Everything on 07.04.11 at 12:42 pm

#79 Utopia – said “Freaking weird. Even the check-out girls look alike!!”

That’s because they’re gynoids.

http://ipowerproject.com/profiles/blogs/robotics-ftw

http://www.hypergearmag.com/assets/images/dailygear/frankentech/2010/04/lifelikerobot_02.jpg

#118 poco on 07.04.11 at 12:55 pm

I have many reasons why renting is presently better than owning, mostly all good, but today is one of those “GREAT”reasons not to be a homeowner in BC

check the calendar —it’s Property Tax Day

#119 Devore on 07.04.11 at 12:59 pm

#91 househornyhousewife

1. If you rent, you rent for life whereas if you buy, your mortgage will be paid off at some point and your monthly expenses will be reduced

Typical all-or-nothing extremism. No one’s gonna rent forever. The point of renting is to save money, and build up your finances until you can afford to buy a house.

You buy when it makes sense to buy. Not because interest rates are low and downpayments zero. This is when prices are at their highest. You mention paying off your mortgage as quickly as possible, do you think that is easier to do with a $1,000,000 mortgage, or a $600,000 mortgage? Every extra dollar you can free up to pay towards the principle will have much more impact on the smaller mortgage.

(leaving property taxes, utilities and maintenance .. which you are also paying in your rental fee, whether you see it itemized or not)

Ha! Tell that to the landlords all across the country who are running their “income” properties at negative cashflow, and many who are nearly so. They’re willing to forgo cash income to purchase an asset they hope to sell for more money to someone else later.

#120 Bill Gable on 07.04.11 at 1:16 pm

#85 Omni = Winner of “Stupidest comment of the day”

The truth is, most of the people that I have known who were long term renters are all broke, on welfare or living with a disability. Very few of them have put money away except for one very small unusual group.

> What a yutz. You must have some really smart friends.

Enjoy the rising rates – like RBC just did, as of July 5th.

#121 jess on 07.04.11 at 1:19 pm

Discounted bills, an important source of financing for firms with no access to formal bank loans, accounted for about 2.5 percent of the 49.5 trillion yuan ($7.7 trillion) of total outstanding loans at the end of March, according to data from the Chinese central bank.

The regulator’s latest move comes after discovering that some rural credit cooperatives and banks in the central Henan province were issuing loans through discounted commercial bills and keeping them outside their loan books.

Under China’s banking laws, banks’ deals in discounted commercial bills should be reflected on their balance sheets.

Banks have been asked to investigate all deals linked to discounted commercial bills and submit their findings by Monday, sources said.

Under the review, banks were ordered to verify that bills issued were based on real transactions, and were ordered to track how extended credit was spent, they added.

Banks were also instructed to stop discounting bills that they issued to get funds for property and stock investments.

=

According to Madhur Gandhi, a shipping businessman in Athens and president of an Indian community organisation. Indians are among many south Asians who have left Greece due to riots and job loss 1,000-2,000 Indians have gone back to India. He said that out of about 30,000 Indians in Greece, only 18,000 were legal immigrants. http://economictimes.indiatimes.com/news/nri/working-abroad/nearly-2000-indians-quit-jobs-in-debt-hit-greece/articleshow/9088555.cms

#122 Abitibidoug on 07.04.11 at 1:36 pm

@GreaterFool, #1:
Just like any Americans who sold in 2006 and wish they hadn’t because the market kept going up for ever and ever.

#123 smoking man on 07.04.11 at 1:36 pm

117. Victor
With thr re market on fire in the gta. Expect more stuff like this to hit the airways bit of a sell off on bond markets last week push yeilds up a touch. Now I can’t get over how dumb investors are bailing on bonds thinking that they are out of the woods with greece. Now if I was hoilding a credit default swap against greece and the bond holders give em more time to pay. That’s a default and I would what my claime paid. This is going to get ugly

#124 whiteshoes on 07.04.11 at 1:36 pm

Speaking of cars, I had a 20 year old famous maker domestic rear engined model in high school, and still will be driving it after all the new Beemers are soda cans.

I’m 43, renting and will be forever, theres no circumstances I could envision when owning real estate makes any sense. Watching my father pay a 20% mortgage down with after-tax income thirty years ago made a big impression on me, his 185,000 Calgary house is worth about $450k now, not much of an investment to say the least.

Currently, I pay less than $1000/mo to live in Bill Gable’s hood, two blocks from the beach in Vancouver. The suite in the building next to me, same age, style, space sold recently for $560k. rent would have to rise 400% to be a comparably bad deal.

If you dont want to work in a restaurant or sales, theres practically no jobs in Vancouver, any that call for a degree or any particular qualifications pay a fraction of what they would in other cities that still have local industries and economies. I suspect this is the trend for the rest of the country in time and will be a real mess as the bubble deflates.

I think if anything Garth is a little too timid in his predictions, we’re on the verge of a cultural shift that will make the present day seem like the Edwardian era- the things (like real estate ownership, commuting from suburbs and sitting at home watching plasma TV for recreation) are going to seem at best very quaint throwbacks to another era the way we view dance marathons and raccoon coats today. We’re headed for much higher energy costs that will just kill the suburban lifestyle, higher taxes and cuts in services that will lead to user fees on nearly everything you do day to day and people are going to have to really lighten thier materialistic burdens or die paying to store thier junk and pay to cart off each bag of trash.

Living very simply, wasting little, and spending the money on recreation at your option instead of a high-overhead lifestyle (commuting, home heating, fuel, interest payments) will be probably the best way ahead for the average person if they havent managed to entrap themselves in an outmoded style of living.

Having grown up in the 1970’s suburbs, I had no desire to ape my parents life and relive thier experiences in the isolation of prairies suburbia as a taller person than I was back then.

The mortgaged classes are going to dictate the coming Canadian economy and it doesnt look good, but if you’re not in the same boat theres room for optimism.

#125 Tony on 07.04.11 at 1:55 pm

Also not mentioned is huge future increases in property tax far above the inflation rate because the national debt is increasing due to a poor economy that’s likely to worsen in the coming years. This can only mean real estate will fall in price for years to come in the forseeable future exacerbating eroding values. The same thing has already happened in America.

#126 Bill Gable on 07.04.11 at 2:05 pm

This is one for you to enjoy with a cold bevvie. Be prepared, it isn’t pretty. Mr. Turner has been prescient –
While I don’t agree with all of below – it gives me large pause – From GlobalResearch.ca

“World markets and especially US markets are in a state of uneasiness and it is only a matter of time before they degenerate further. The real question is will everything break loose between now and the end of the year? The answer in part is yes, and it is currently in process.
“The President’s Working Group on Financial Markets,” along with elitist insiders normally have the ability to make the stock and bond markets do what they want them to. That is, at least on a short-term basis. We believe the market is being deliberately taken down by them in order to impress upon politicians that if they do not extend the short-term cash debt limit that the market will fall even further and that in turn will reduce their ability to get reelected. If you do not think that is possible then you have no idea what is going on. At the present time with about a month to the August 2nd deadline the two political parties are nowhere near an agreement. As we draw closer to the deadline investors will become more and more concerned and the market will trend lower.
These problems that we predicted for the second half of the year are all coming together like a bad dream. This could very well be a reply of 2008, but for a different set of reasons. Obviously Wall Street knows something others do not know as they resort to large layoffs.
For months oil prices have tended higher. The official CPI is 3.6% when in reality it is well over 10%. Unemployment officially under U3 is 9.1%, when in reality it is 22.6%.
No solution has been found for Greece’s problems, even though an agreement has been made with lenders, and as an extension of that, we see euro, euro zone and European Union problems that probably are unsolvable.
Debt ratings for sovereign nations are falling like ten-pins, which we look at very skeptically. Why were not these ratings reduced by rating agencies some time ago? We see the rating agencies, as controlled by Wall Street, and we see no coincidence that these ratings are all being lowered almost simultaneously. We think these events are being timed to force debtor European nations to heel to European bankers’ demands.”

http://tinyurl.com/3zvfpxl

#127 jess on 07.04.11 at 2:15 pm

neo liberals would be rejoicing with these numbers

“In terms of actual dollars, pretax corporate profits amounted to $464 billion out of the $528 billion in national income generated from the second quarter of 2009 through the fourth quarter of 2010. The amount that went to wages and salaries was only $7 billion, after accounting for inflation.”

The Wageless, Profitable Recovery (by Steven Greenhouse, New York Times)
The “Jobless and Wageless” Recovery from the Great Recession of 2007-2009 (Center for Labor Market Studies at Northeastern University) (pdf)
=
July 1, the state had no choice but to shut down, putting more than 20,000 public employees out of work for an undetermined period. For those relying on the Minnesota government for assistance, such as the poor and disabled, the shuttering of offices means no social services or aid checks.

Dozens of social service providers hope a court-appointed retired judge will order the state to make exceptions for the needy. But it remains to be seen how much authority former Supreme Court Chief Justice Kathleen Blatz has to force the state to act.

#128 disciple on 07.04.11 at 2:30 pm

#28 Richard…
If you can’t unclog a kitchen sink, you have no business owning a house, because that’s the least of your worries. You actually waited 3 months to unclog your kitchen sink?

The house I just moved into is immaculate, but I discovered that the dryer hose was partially broken off in a somewhat inaccessible area between floor joists (that must be why the previous tenants were hanging their clothes to dry). So I got out the duct tape and put in some elbow grease and a little effort to twist that thing up to the outlet while simultaneously wrapping it securely.

It was barely long enough at this point after breaking more of it off while trying to repair it and I had just thrown out my spare coil from Home Depot that I was keeping for just such a potential issue. Damn! Funny how that always happens.

Anyway, I finally got it going and the hot air is being blown out of the house rather than back in (fire hazard, among other things). I just saved the landlord potential problems and made sure that my clothes will get dry. I also leveled the stove as I don’t know how well someone could have been cooking on it slanted forward like that.

If you took some ownership of your own problems, you would see that renting isn’t all that bad…

#129 Devore on 07.04.11 at 2:33 pm

#104 Coraline

If there’s one argument I hate, Smoking Man, it’s the one that says that renters would blow the money they saved on renting, or that buying a house is “forced savings.” Clearly, most homeowners have blown the appreciation on their houses on LOCs.

Of course the “forced savings plan” aspect of home ownership is total bunk. It is as easy to setup automatic regular withdrawals to an RRSP or TFSA as it is to make a mortgage payment. It’s as easy to spend your savings as it is to take out a HELOC. (Although difference is in one case you have no savings, in the other you have a big debt that needs to be serviced.) The proliferation of HELOC credit cards and products like the Manulife One account indicates there is a very healthy demand for credit amongst homeowners (above and beyond their mortgage), which tells a very different story from the “forced savings” myth.

Regardless of how you bring the horse to water, you cannot make him drink.

#130 disciple on 07.04.11 at 2:43 pm

A while ago, The National Film Board released a really good docu-comedy on life in the suburban sprawl of new sub-divisions. I can’t seem to find it anymore on the nfb.ca site mostly because I don’t remember the title. But it made me laugh, especially since I once upon a time bought it into the myth.

#131 Mr. Reality on 07.04.11 at 2:50 pm

The problem with this whole siutation is somebody can buy a house, flip it for a presumed profit and call themselves an investor.

It disgusts me how many “investment property” owners have no idea how to properly calculate cash flow and assess risk. This house=money phenomena reflects how stupid people are today. I have rented for years, not even close to broke and realize that the key to success in life is dodging the tax man every chance you get. Continue your education (tax deductible) live in the north (tax deductable) start up your own business (tax deductible) and use the extra money in investments that are not taxed high when you retire.

When you have too many fools like right now, you are bound for failure. The only problem is waiting for the impending doom can be rather boring at times.

Mr. R.

#132 Medic on 07.04.11 at 2:54 pm

#91
“We recently looked at the possibility of leasing vs buying our next car. We found that by the end of the 4 year lease, we would have shelled out the entire purchase price of the car.”

I find this hard to believe. You need to improve your research skills.

#133 T.O. Bubble Boy on 07.04.11 at 3:10 pm

wow – talk about lack of faith in the dollar:

http://www.theglobeandmail.com/news/national/british-columbia/vancouver-canadian-mint-store-robbed-interior-wall-smashed/article2086022/

Thieves don’t even want dollars anymore — they’ve switched from robbing banks to robbing the Royal Mint!

#134 VICTORIA TEA PARTY on 07.04.11 at 3:56 pm

#96 Utopia

Renting a place in which to reside: under present day “consumer values” it could be a metaphor for restoring an old beat-up vintage car to its original glory.

In other words, renting a home just needs a little (more) respect.

Originally, renting digs was the purview of those who could not afford to “buy” their little piece of real estate paradise. They lived the lives of so-called losers, and generally felt left out of things. But this is changing and it might not be exactly for the better for these folks.

Shortly, if not already, renting will become the “best strategic investment, of our times, for home dwellers seeking long-term solutions to their housing needs”, or some such fatuous blather.

If you hear that, then some busted former real estate broker cannot be too far behind, hustling his/her services to future renters, and giving the oldest profession the kind of recognition it will probably come to regret.

Yes, renters, looked down upon by the indebeted real estate drones for decades, will be having a lot more company that they’ll dread and won’t want to keep.

Why? Supply and demand; it’ll cause a “rental bubble” won’t it, someday?

I mean, I’m just asking!

#135 Mark on 07.04.11 at 4:05 pm

#112, “Who’s the one on crack? BoC cannot print the world’s RESERVE currency. They can only print their own. If they do that instead of principal writedowns, we become Zimbabwe. That’s the only way to get your 50K prediction on the TSX.”

a) What does “reserve” currency have to do with the domestic Canadian economy and its stock market?

b) A 50k TSX, at current market earnings, implies a P/E of around 30-35, which was achieved on the TSX in 1999/2000. Those ratios were quite possible then — so why impossible going forward? After all, our distorted (“Zimbawbwe”) monetary system allowed Vancouver housing to go over a million bucks for a crackshack (figure out the P/E!), so why can’t it let the TSX go to a P/E of 30?

c) Bondholders are owed 100 cents on the dollar, and the mortgages are guaranteed, so why would they accept less? Why would any lender accept a principal write-down when the CMHC is legally obligated to make up the shortfall on an insured mortgage?

#136 Industrial Guy on 07.04.11 at 4:08 pm

Motorcyclist in anti-helmet protest dies after hitting head in crash

From: THE ASSOCIATED PRESS

ONONDAGA, N.Y. — A motorcyclist participating in a protest ride against helmet laws went over his handlebars, hit his head on the pavement and was killed, police said Sunday. The motorcyclist, 55-year-old Philip A. Contos, likely would have survived the accident if he’d been wearing a helmet, state troopers said. The accident happened Saturday afternoon in Onondaga, a town in central New York near Syracuse.

People do dumb things on principle ….. Like buying overpriced houses.

#137 Bill Gable on 07.04.11 at 4:09 pm

#127 Whiteshoes – you nailed it.

We love our 1997 car just now passed official break in km’s. Ain’t living in our hood -nice?
I am hoping that you and I are wrong on this tsunami – see earlier post – best wishes, neighbor.

Rent on, MacDuff.

#138 egghead on 07.04.11 at 4:23 pm

Do an article on “rentiers” too!

#139 Dad on 07.04.11 at 4:30 pm

My wife says this, my wife says that etc. etc. etc.

Noticing a trend you wimps?

Listen to your father, you are a man, not a mouse, squeak up!

#140 Vancouver_Bear on 07.04.11 at 5:03 pm

http://www.theglobeandmail.com/news/national/british-columbia/vancouver-canadian-mint-store-robbed-interior-wall-smashed/article2086022/

Nice work, kudos to BPOE!!! You pulled it this time. It’s Best Pot on Earth indeed!!!!

#141 jess on 07.04.11 at 5:05 pm

… the renters in Zug are getting the squeeze as the “foreigners” have made it too expensive for them to live in their own city. Technology allows buyers to go directly to producer ,why the need for a third party trader?

Trouble in tax paradise swissinfo
Jun 29 – See the video – ‘In recent decades Zug has managed to attract numerous multinational companies thanks to its low tax policy. The downside of the economic growth is rapidly increasing rents, which make it hard for middle class families to find affordable homes.’
June 29, 2011
Trouble in tax paradise
Families struggle to find affordable homes in Zug.
========================
In recent decades Zug has managed to attract numerous multinational companies thanks to its low tax policy. The downside of the economic growth is rapidly increasing rents, which make it hard for middle class families to find affordable homes. (TSR/swissinfo.ch)

Canton Zug
.
Switzerland is home to a number of large international trading companies, whose business consists of buying commodities and selling them on to third parties. The commodities themselves, principally cereals, sugar, cotton, oil and gas, never enter Switzerland. These companies are not listed on the stock exchange.

http://www.swissworld.org/en/economy/key_sectors/trading_companies/
franc’s appreciation

#142 SMOKING MAN on 07.04.11 at 5:33 pm

GTA Re market is on fire right now expect tones of cold water stories coming out soon in the media , cause Carneys nuts are tied and he can’t do a thing. To put out this fire with out doing more damage. His only hope is for big job numbers on Friday, with out that. Floating rate goes nowhere.

Heck they might even promote this blog to cool things down…..Naw Grath made too many enemies, that’s why I like him…….

#143 The InvestorsFriend on 07.04.11 at 5:34 pm

Garth said at number 16 : [Bonds] always mature at 100 cents on the dollar. Make sure you buy quality, instead of yield. — Garth

That is true. And if that maturity is within the next few years you don’t have to worry much that 100 cents losing purchasing power.

But if that maturity is 10, 15, 20 or 30 years distant then you should worry that this 100 cents will have much diminished purchasing power. A little inflation compounds up a lot in a couple of decades.

If you think long-term rates can keep falling then long-term bonds are okay.

My worry with bonds is that inflation would harm me.

I’m happy to be 100% in stocks have been the last 22 years and I have done just great. By either luck or skill I managed to do better than the stock market average. I suffered losses in 2008 but they were more than recovered in 2009.

Most people should own some bonds, but I am willing to accept the risk of being 100% equities and this has worked out well do far.

No thinking investor buys long bonds to hold to maturity. — Garth

#144 SMOKING MAN on 07.04.11 at 5:40 pm

And bubble heads not one of you comment on my post from yesterday. Well sort of. you talked about yellow page bine head move on my part, but did not address my main point. So here it is again

What happend to the surge in listing in the spring, and what happend to the big crash in the spring. Again I was right 95% where wrong…

I would even accept a hey smoking man you where just lucky.

You all run from your wrong predications, man up and say I was wrong….Smoking Man was right yet again….

Little Grasshoppers

#145 Imstupid on 07.04.11 at 5:48 pm

#101 Joe

Buy a car in USA you will save a bundle. Buy it no more than 3 years old. You will pay 30k for a car that retailed new here for 70-80k. You must pay with cash or bank draft though. Don’t listen to others that tell you otherwise. Trust me if you need advise on searching importing and exporting I will gladly tell you step by step what to do. I bought an audi convertible and BMW coupe last year both from USA saved about 15-20k.

#146 Seven Stars and Orion on 07.04.11 at 5:55 pm

My family rents a liveable semi in Hintonburg, Ottawa for ~61% of what the mortgage would be with 20% down, not including upkeep/maintenance fees. Mind you, we are handy, and do a lot of little jobs that require a tiny bit of cash and some elbow grease. It’s comforting to know that if the furnace goes or the roof leaks, it’s only my problem until the landlord fixes it and she’s awesome, not some slumlord scumbag. We lost several bidding wars and inspection costs back in late ’08 and ’09, we thought we were oh so clever urban sophisticates vultching the slide. Read this blog, and did some digging of my own. Fired the Realtor, enlightenment followed.

#147 Nostradamus Le Mad Vlad on 07.04.11 at 5:56 pm


Thought for the Day: “I suddenly realized I had joined the wrong mob.” — Lucky Luciano, comparing Wall Street to the Mafia — wrh.com. Wall St. kills us financially first, physically second. The mob just kills for the fun of it.
*
5:53 clip Disappointing. Next stop Kannaduhhh! Much prefer Farmers Markets — at least food is local and fresh; Thailand Asian Summer, just like the Middle East Spring. Following that, it will be the Eurozone Autumn then NAmerican Winter of Discontent; Privacy No doubt the CPC, with CSIS and RCMP will bring this here; Iran Smart, very smart. “Good thinking on the part of Israel and the USA! They are out your money and Iran not only has the radar anyway but more of them as well.” wrh.com.

2:45 clip NATO has run outta bombs, so Germany steps in; July 4 — Skier’s Paradise Pole shift along with volcanoes and ‘quakes?

Garth is right Problem is insolvency, not liquidity; 8:35 clip Rick Santelli on borrowing costs; Asian Economy Self sufficiency is paramount; 0:55 clip Jim Rogers sayeth “Do not sell thy silver”.

US Fed Wages tank, bank profits soar; 8:17 clip Activists in Florida arrested for trying to help / feed the homeless; Obama The stimulus is now shedding jobs; Iceland “While We The People remain slaves to the private central bankers!” wrh.com; 6:56 clip Greece — The Full Monty. “Bailing out the bankers is leading the world to disaster!” wrh.com; Coney Island Yes, toilet paper is being rationed! Crisis First para. is interesting.

#148 Utopia on 07.04.11 at 6:07 pm

#123 Bill Gable on 07.04.11 at 1:16 pm

“Winner of “Stupidest comment of the day”
————————————————————————–

OK, we get it Bill. You are a renter.

Try to control your temper though and think for 10 whole seconds before calling people names.

A comment is not stupid when it is truthful.

You have to try to appreciate that out where I live you could buy houses for twenty thousand just five short years ago. Right inside the city of Saskatoon for cripes sake. That means that even those living on welfare could afford a mortgage if they made just a small, tiny effort.

Times have changed in the city of course. Nothing is so cheap anymore. But that does not change the truth. In the past the only people renting were virtually always paroles, the disabled, addicts, ex-cons, welfare, kids evicted by Mom, transients, students, new immigrants or the recently divorced who were just lost.

It is not the same typical demographic as owners, now is it? Try not to be so touchy Bill. And save your name calling for others.

Do you treat your landlord like that too?

#149 Mark on 07.04.11 at 6:12 pm

By either luck or skill I managed to do better than the stock market average. I suffered losses in 2008 but they were more than recovered in 2009.

Your situation is quite unusual then. The average Canadian investor in equities can’t even keep up with the index, and the index is still down 13% from its 2008 levels.

#150 Utopia on 07.04.11 at 6:15 pm

#148 Imstupid

“Buy a car in USA you will save a bundle. I bought an Audi convertible and BMW coupe last year both from USA saved about 15-20k.”
————————————————————————————
Your not stupid. I just talked to someone who picked up a BMW Convertible from California and drove it up here. No problem with the inspection or safety checks at all. Beautiful car. Dirt cheap, Late model too.

Too many people down there are stressed financially I think. There is no other reason they would let such a nice vehicle go for so little money.

#151 Onemorething on 07.04.11 at 6:45 pm

Yawn, just another reason to dislike your Mother-In-Law and other enablers in your family who failed math, missed that compounding interest lesson and are not only living but dilusional beyond their means!

#152 Hoof - Hearted on 07.04.11 at 6:55 pm

American Holocaust (part 3……there are parts 1-5)

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

Interesting program re: the players

#153 Bill Gable on 07.04.11 at 7:05 pm

Fair comment – I was a little hyperbolic. Our landlord is a person who is in the same sitaution that many sad people are – a huge elephant – and we get to be rajah and not even have to feed the beast.

Trying to get balance in Vancouver these days has been tricky, and I am do not put myself up as an expert – but, I as a human that, like you, wants to see his Family safe, and secure. That includes dealing with people with respect and total fairness.

When people try to give one the old “boogie woogie” – it serves one well to understand the Rental Act.

I have owned a TON of RE, and sold it all – because the jig is up for me, I am wrinkly – but I give a darn that people play by the rules, but not wind up in a mess because of simple greed.

Leverage kills – I think we both agree.

I also take your polite scorn in good humor. Believe me, all night flights on a packed plane, I get testy.

Sort of like Banks are going to be when the old renewal comes due.

Cheers – and to our American Visitors – Happy Birthday 235.

#154 jess on 07.04.11 at 7:15 pm

The Trade off

Ron Paul suggests a “Creative/ destruction Solution” For Debt Ceiling …burn the 1.6 trillion bonds at the fed.

(a) The President may direct the Secretary of the Treasury to make an agreement with the Federal reserve banks and the Board of Governors of the Federal Reserve System when the President decides
that the foreign commerce of the United States is affected adversely because -(read further)
31 U.S.C. § 5301 : US Code – Section 5301: Buying obligations of the United States Government
Search 31 U.S.C. § 5301 : US Code – Section 5301: Buying obligations of the United States Government
http://codes.lp.findlaw.com/uscode/31/IV/53/I/5301

#155 EnglishInCanada on 07.04.11 at 8:31 pm

“If the forty grand had been invested at 8%, it would be $54,000 in 36 months”

OK. How do I get 8%…sign me up!

#156 TurnerNation on 07.04.11 at 8:33 pm

Argh, comments closed for yesterday. But speaking of “GTA (Pride Capital of the World)”: I am not a Rob Ford (aka Boss Hogg) fan but I support his right for a long weekend family cottage trip free from from attack by a radical minority group.

#157 BrianT on 07.04.11 at 9:10 pm

#160Turn-Like I said, they need a Hetero Pride Parade-all the strippers can go by on floats representing each club and we can spray them with our water cannons-you betcha Robby will be there for that one.

#158 Joe on 07.04.11 at 9:15 pm

#148 Imstupid – Sounds like you got a really good deal. I’ve known people that have bought luxury cars in the States before. My dream car, a 300Z, is about half the price State side than what it costs in Canada. We looked at an Xterra in 2009 that Nissan had brought up from an auction in Seattle. I think it had 20,000 miles on it. It was in great shape but there was something just not right to us about it. They left the invoice in the centre console and we found out they’d paid $19,000 for it, were asking $25,000. It was seriously cheap. I heard you have to convert the odometer to kilometers or something, and we were unsure about the warranty being covered in Canada.

#159 Where's the money Guido?? on 07.04.11 at 9:17 pm

#159 EnglishInCanada on 07.04.11 at 8:31 pm

“If the forty grand had been invested at 8%, it would be $54,000 in 36 months”

OK. How do I get 8%…sign me up!

Hmmmm….my calculation gives me 50, 388.48 after 3 years of 40k at 8% compounded.
Yeah, sign me up too for that deal!!!!!

#160 TurnerNation on 07.04.11 at 9:28 pm

Nobody mentioned flaw in

.#39 Brad in Cowtown on 07.03.11 at 11:24 pm’s logic?

If a stock (or house) drops by 10-15% and you used 80-95% leverage for its purchase, how much have lost?

Many houses/condo are bought using 80-95% leverage.

#161 TurnerNation on 07.04.11 at 9:35 pm

Actually Smokingman-churian candidate almost nailed the bottom on YLO. Panic selling always gives way to at least a short term bounce.

#162 Utopia on 07.04.11 at 10:53 pm

#157 Bill Gable on 07.04.11 at 7:05 pm

“Fair comment – I was a little hyperbolic.”
———————————————————————
You are forgiven. I happen to like you. I have my days too when I get a little testy and temperamental here on this site. Some people just say the dumbest things.

I am one of them.

#163 Siddelly on 07.04.11 at 11:29 pm

#154 Mikey the Realtor

Slight correction Garth, he appears to be trading at a healthy discount to nothing.

#164 Where's the money Guido?? on 07.05.11 at 12:00 am

Re: #90 Kimi on 07.04.11 at 9:23 am

I’m a woman and that is my two cents, I totally get the problem… I am so lucky to be a girl. Thank god for that, I feel bad for some of you guys out there.

But hang in there. Don’t day dream about changing the ingredients of your chocolate, if it dosen’t taste good, its easier to just get out and then pick a new one you like better or accept your chocolate is what it is and don’t think about changing ingredients, just learn to acquire a taste for it. Simple, right?

Yeah, why don’t women think the same way about men?
Every one I’ve had the honor of dating/living with had the ulterior motive of ‘changing’ me, wtf for….they obviously liked me enough to date/live with me, didn’t they?

#165 Not Wondering Anymore on 07.05.11 at 1:34 am

Local news reports tonight that Victoria now has in excess of 5,000 listings. Last time this happened was 14 years ago.

This was followed by a report on RBC’s mortgage rate increases today.

The MSM then announced that a “buyers market” in Lotus Land has officially begun,indicating that reality, apparently, is NOT “different here in Lotus Land.

Watch now for a rush in the dumping of even more Victoria and Island real estate as the “Uh-oh” moment hits “investors” of empty second and third properties, in a market also currently awash in an excess of rental options.

A very good time to be out of real estate,out of debt and in cash that works for you, instead of vice-versa.

#166 makemysteakrarethanks on 07.05.11 at 5:44 am

>#68 Sumadartson jr. on 07.04.11 at 5:48 am
>Since we are all gonna die, Party like it is 1999.
>Fukushima, Volcanoes, Drought, Fires and Floods.
>World War 3 coming.
>Canada safest country.

You are on such a roll there, I’m surprised you aren’t worried the U.S. is going to invade.

#167 Dad on 07.05.11 at 10:25 am

#161 BrianT on 07.04.11 at 9:10 pm#160Turn-Like I said, they need a Hetero Pride Parade-

Son they have those already, they are called SlutWalks.

#168 Kevin on 07.05.11 at 10:59 am

Disclaimer: I’m late to this party so I didn’t read the comments. If someone else already noted this, then I apologize for being redundant.

“After three years you’d spend $52,000 on mortgage interest, and retire only $23,000 of debt while making $75,156 in monthly payments.”

I have a couple of problems with this example.

First of all, it’s a bit of a strawman. Everyone agrees that if you’re only going to be there for 3 years, then you don’t buy. You rent.

Second of all, you’re ignoring that the renter has thrown $57,600 out the window in rent, with nothing to show for it but a leaky toilet the landlord won’t fix.

Thirdly, you’re cherry-picking a period when homes dropped in value, and comparing it against a hypothetical 26% market gain. Of course a loss is going to do worse than a gain, and leverage magnifies it exponentially. If you flip your situation around (13% stock market drop against a 26% leveraged housing gain), suddenly the owner has $165,000 in home equity ($118,000 of which is completely tax-free gain), whereas your renter’s $43,000 stock portfolio has shrunk to $37,400, representing a loss of $5,600 (on top of the $57,600 he’s flushed away on rent). Suddenly the owner looks like the genius.

And while it’s easy to find a window where housing has pulled back a little, the truth is that in the long run, it WILL always go up. Housing prices will never, ever, ever go back to what they were in 1990, or 1980, or 1950. And no matter how much prices crash over the next few years, I’d bet my last underappreciated penny that by 2030, they’ll be even higher than they are today.

#169 Snowboid on 07.05.11 at 11:30 am

148 Imstupid, 153 Utopia, 162 Joe

If you do the research (see RIV.ca) and are prepared to do some paperwork, you can save $ 10-15,000 on a typical luxury car that would cost $ 60,000 in Canada.

Plus you can find models that just aren’t available in Canada anymore.

Why stop at cars?

You can buy a winter home – say in Phoenix and save $ 450,000 on a home/lot that would cost $ 600,000 in Kelowna or a suburb of Victoria.

And as a bonus, while you spend your winters down there you can save about 35-40% on your cost of living compared to Canada. And no more snow tires!

#170 smoking man on 07.05.11 at 12:55 pm

Following my dumb sons move Iby selling his condo -ii two put my rental up for sale. At a riculous price. Got an offer last night signed iit back. I’m in shock they accepted. Bad news is its pending finance. Don’t think the bank will approve it. After apprasal

Why did ii sell talked my son into buying a bungalow on a fifty foot so we can tear it down and put up two. That way he and his soon to be bride will have a house that’s paid for and not using my money

#171 Stevermt on 07.05.11 at 7:11 pm

hellooo people..the only thing you should be investing in is your health..are you doing that? its the only thing that truly matters…when you don’t have it anymore you’re screwed !!