Shelter

Donna lives in a medium-sized Ontario city, on a street where houses are selling for about $265,000. “To be frank,” she writes me, “I am frightened, but want to do the best thing for my future and my children.” What frightens Donna? Her husband. And me.

“We have no savings and live paycheque to paycheque. This was the choice we made to raise our 2 children without daycare. One child will now be in school full time and the other will be attending half days in September. My government job is our only income.”

That income, for a family of four, is $45,000 a year. But they have a house, and a variable mortgage of $150,000. “This equity is all we have,” she says. “There is nothing else.”

Here’s the issue. “My husband bought your book and has devised his plan: sell our home, grab the equity $100,000, rent a home, by back into the housing market when homes are reduced in price and become mortgage free earlier. My concerns are that the housing market will not go down and we would have taken the trouble and expense of selling/moving and/or the lower house prices will come with a higher interest rates. Can you advise? Is this plan sound?

I really have nowhere left to turn for this advise. I hope you will take the time to reply.”

Yes, Donna, of course I will. You may have a lesson for all of us.

First, the risks and dangers to your family.

All of your net worth is in the form of equity in the home. If the housing market falls 15%, which is entirely possible, then you’ll lose 40% of your wealth. That is a stunning blow. It is stays depressed for some time, it could be worse. And if you find you must sell, then 25% of your remaining equity will disappear in commission and closing costs. You could walk away with just $30,000 – and that is the result of only a mild real estate correction.

Worse, if mortgage rates jump substantially over the next few years, ratcheting up your monthly payment, the market could grow cold and your house become illiquid. Unable to easily sell, you might have to discount the price even further, and end up with precious little.

Speaking of rates, Donna, you might have heard that central banker Mark Carney this week all but said they’ll rise. His words cranked the Canadian dollar and sent bond yields higher. It had economists speculating the bank will double its lending rate (from 1% to 2%) by the end of the year. This will directly affect your family by spiking your variable mortgage.

So, D, the risks are not small. By holding on you might well be caught in a housing downdraft and lose big. By selling at this moment you could cash out at the top and crystallize your equity – turn illusory gains into real ones. In that regard, hubs is right. It’s a plan.

But on the other hand, selling will cost you $15,000. Investing the remaining hundred grand and achieving a steady 7% will net you only $500 a month – not enough to rent a family home in your town (about $1,400). Buying the same house after a 15% decline in price will require $230,000 after closing costs, so the mortgage you’d end up with would be only $20,000 less than the one you have now – and likely at a rate of 1% or more higher. Monthly mortgage payments would exactly equal the ones you have now.

So, Donna, the risks of staying put are clear. The benefits of selling, renting and buying later, are essentially vapours. Your husband’s plan is ambitious but fruitless. But staying where you are could result in a serious financial setback.

There is no right answer to your question. Many people who come to this site (as witnessed by yesterday’s doomfest) are convinced financial collapse and misery are just months away. Others will tell you that owning your own home provides a safe refuge against worse times and an emotional shelter for your family.

Both of these are wrong.

Real estate has a poor future as an investment asset, and your mortgage is not going to disappear even if your house value drops. Only your net worth will erase. Therefore the real estate will not protect you against reversal any more than it’s done for millions of American families trapped in homes they can’t sell, and on which they owe more than they own.

Having said that, the economy won’t implode. Since I wrote my words here 24 hours ago, a compromise in Washington emerged capable of solving the debt ceiling crisis. No default. And the very fact Carney is warning of a rate hike this summer shows Ottawa has data supporting inflationary economic growth. The nihilists among us will be well fed, having millions of words to munch on in the next two years.

So what to do?

Here’s my plan: First, tell hubby to stop sitting home being a financial genius and get his ass out to find a job. You’ve shouldered this burden too long. Second, borrow $10,000 against your equity and remodel the basement into a rental suite. Use the rent ($900 a month is standard there) to pay off the loan over a year. After that, it’s welcome money which mitigates against an equity loss. Third, lock in that damn mortgage so you are not caught by the four rate hikes coming over the next seven months. Yes, your monthly will rise about $100, but that’s what working husbands are for. Finally, this: even with property tax and the lost earning power of your equity, you’re still no further ahead selling, investing and renting.

Yes, that means keeping the house.

Damn, but I’m full of surprises.

190 comments ↓

#1 Scalgary on 07.19.11 at 9:18 pm

Garth,

The kind of advice you gave to Donna is what makes me to visit your blog 15 times a day…!

In one word: Honesty

Keep up the great work..!

Cheers…

#2 Prufrock on 07.19.11 at 9:21 pm

Dude, I sooo thought you were going to tell them to sell, which would be this blog’s equivalent of jumping the shark–like that’s not already been done.

Folks, do just as Garth says and thank your lucky stars you’re not in Vancouver.

#3 Kurt on 07.19.11 at 9:22 pm

Heads up! Not everyone is cut out to be a landlord! Make sure that you are. Once you do those renos you’re committed until you pay off the loan. As well, choose your tenants carefully. Make sure that you’re an attractive landlord with an attractive property so that you can pick and choose. Good luck, and have courage – I know many people who have done what the G-man proposes, so I know it’s possible.

#4 Hashnugs Inthebong on 07.19.11 at 9:36 pm

Third!!!!!

#5 kimi on 07.19.11 at 9:39 pm

A true leader always keeps an element of surprise up his sleeve, which others cannot grasp but which keeps his public excited and breathless.
(:

#6 Brad in Cowtown on 07.19.11 at 9:42 pm

You just advised someone to keep 100% of their net worth in a house, because the alternative leaves them “no further ahead.”

Shouldn’t preservation of worth be the first priority? I thought that’s the first thing they teach you in the CSC?
You basically said “it’s ok to stay undiversified because the alternative doesn’t add to your net worth.”

And yet status quo is the most dangerous option for eroding their wealth.

Another finger wag. :(

#7 Jody on 07.19.11 at 9:46 pm

I wonder if she can transfer to another place which is cheaper. Hubby also needs to get a job, or better yet, start a business selling supplies to us doomers. A case of canned water? Why, only $400 sir! Will the banks give them a loan for a secondary suite? Do they live in a college/uni town? They are average, they represent what most Canadians have to face, except they only have one worker and can’t make ends meet, think of all the families who have two workers and still can’t make it. I wish them well and hope things work out, and follow Garth’s advice.

I could care less about the US debt ceiling, I had no interest in that, of course it was going to be raised, like DUH! No, I see the world leaving the US dollar, and that is the only thing keeping the US dollar alive, the fact that it’s the worlds reserve currency. Add the fact that when Saddam was set to start trading Iraqi oil in Euros the US invaded, when Gadafhi was going to dump the US dollar the US invaded. See a pattern? The empire is about to fall and thankfully so. They are so overstretched it ain’t even funny.

Look at all the people the world over who are going into physical PM’s. Does that not tell you something? Well, everyone except north Americans who are mailing it away for fiat notes. I’m sure people in Germany back in the 20’s never thought their currency would hyperinflate. I stay diversified but now I’m at 35% PM’s – physical that I have in the safe deposit box at the bank. I may even go higher as the debt ceiling rise will do nothing but make the US dollar worth even less, it’s value is going into freefall, and the dollar is not rising against the Euro, it’s falling vs PM’s.

As the months go on and more dollars and Euros are printed so that scum bag ank owners can stay afloat higher and higher inflation will set in. Eventually the DOW and gold will meet and once they do things will really get interesting. We’ll see hyperinflation and people will start getting violent because they won’t be able to buy what little food is left in stores, governments will set price controls then it will really get out of hand.

No, the US government should never have raised the debt ceiling, they need to leave Mr. Market alone, let him die then be re-born. The more those fu**muppets interfere the worse it’s going to be. This is a beast with two backs that should have been left for dead ages ago. 2008 won’t happen again, that’s correct, but what should have happened in 2008 was post-poned when it shouldn’t have been, now we’ll see worse. But I think governments will go all totally facist on us before then.

http://www.youtube.com/watch?v=3RcbpYR5Joc&feature=related

#8 Mwalimu on 07.19.11 at 9:48 pm

Moja!

#9 the Phantom on 07.19.11 at 9:50 pm

Garth and fellow bloggers:

The advice sought out almost appears as one of those “dammed if you do and dammed if you don’t scenarios”. I know from personal experience that as the sole breadwinner in the family from 1998 to end of 2010, I made some observations around and about the home. Stay at home mommy was an excellent idea for a younger family but our youngest was in Grade 3 and the oldest in Grade 12. The house was an utter disaster zone and working three jobs and trying to keep up with the yard afforded me little time to tackle the clutter and dirt. After some time to best consider my approach, I mentioned casually to my better half one day last fall after a particularly grueling work week of four days around the clock at three jobs (group homes, teaching as a substitute and work for the CF) the question, “Housekeeping’s not your first love, is it?”

Although she was hurt, I explained that what I was doing was going to age me even further if done over the long run and I suggested that she consider finding some kind of employment. To her credit, she went out and got a part time job as an EA. It was good for her as it got her out of the house and meeting new people and she used her earnings to help out with gas and groceries and it relieved me of some of the financial burden throughout 2011. Win-Win!

I suppose in our own situation, although I am also tempted to lock in our equity through selling, our PIT is only $500/month with taxes comprising $175.00 of that amount. We plan on remaining here for a long time yet (although plans can change in an instant I know) and so selling, while appealing isn’t in the cards currently. Anyway, it sounds as though they have some options to consider that, if followed will help ameliorate some of the issues that could potentially mushroom into full-fledged disasters in the months and years to come.

the Phantom

#10 Min in Mission on 07.19.11 at 9:52 pm

Evening All, After reading the entire post, and not being a major math wizard, staying with the house is probably the best bet. IMHO. Neither option has the “go for it” enthusiasm. For people, like me, staying with the house has the most benefit. Less hassle, less emotional strain, more domestic stability. Having always worked, I find it hard to understand a husband not working, at least, part time. The recommendation for staying in the house are all good, although, I would struggle with having a tenant in the basement.

#11 Tami Lyons on 07.19.11 at 9:53 pm

Thank you Garth, I got a lot out of this article and I have recently locked in my mortgage and I have had many people tell me that it was the wrong thing to do. But I personally thought the rate was good and I like knowing what all my monthly expenses are going to be.

#12 The InvestorsFriend (Shawn Allen) on 07.19.11 at 9:53 pm

Donna, I certainly agree with Garth here. (Knowing that, Garth can relax now)

Hubby needs a job. Now. And certainly does not get to wear the pants until he has one. (i.e. he has no say in selling the house and renting until he has that job, but even then it sounds like a bad idea, it does not sound like you are in a City where house prices are most at risk)

Keep the house. Yeah renovate and rent the basement if you can do it cheap. But first hubby needs that job. Else trade him in.

#13 Financial Uproar on 07.19.11 at 9:53 pm

Good advice, but I gotta disagree with the basement suite part. There’s no indication the couple knows anything about being landlords. Most tenants will avoid a basement suite with kids living above them- kids are noisy and tend to stick their noses in places they don’t belong. Besides, the kids probably live in the basement, meaning unhappy kids if they’re forced to share a room upstairs.

Yeah, hubby needs to get a job.

#14 Snowboid on 07.19.11 at 9:55 pm

Good advice, at $ 45K it’s amazing a family of four even make it paycheque to paycheque.

In fact your advice is like three HGTV shows rolled into one – you have missed your true calling!!

#15 JohnnyBravo on 07.19.11 at 9:56 pm

#204 Utopia on 07.19.11 at 7:30 pm (yesterday’s entry)

That’s a great story! See, great fortunes can be made in real estate! ;)

My wife’s family is from the same region (Campagna). My family is from Calabria. We were there last in the summer of ’07. We did southern Italy, from Rome through Sicily. My God, la dolce vita! While there, we took a private, guided tour of the ruins of Pompeii. It was as hot as Hades, but that did not diminish the shear enjoyment (I love all things ancient Roman). And I must tell you, walking about in the shadow of Vesuvius is an ominous feeling. I wonder if I was on some your bisnonno’s former property. :) I can’t wait to go back some day.

#16 Young Old Fart on 07.19.11 at 10:01 pm

Get that lazy ass Mr. Mom out there working!! You will find it amazing when your 45k doubles.

The scary part is the husband sitting around doing NOTHING and coming up with ideas…..

#17 Utopia on 07.19.11 at 10:08 pm

“My concerns are that the housing market will not go down….or the lower house prices will come with a higher interest rates” ~~Donna
———————————-

You have the interest rate part right Donna. That is one aspect of housing that you can bank on. Think of housing prices and interest rates as being on opposing ends of a teeter-totter. Generally, when one rises the other falls. This is how pricing fairness is arrived at as the cost of carrying debt must be balanced against the total purchase price.

In other words, your house will almost certainly fall in value as rates rise and since we are at historically high home ownership pricing the effect will only be magnified further as the correction proceeds.

We cannot know how far prices will really fall though. Harvesting capital gains is almost always a good idea though. I think a lot will really depend on your personal circumstances.

In short, if you think you may be moving to another city in the next few years then take profits. The last thing you will want to do is sell into a declining market later on down the road. If selling is inevitable then sell when the going is still good.

If you are stable and secure then buckle under, pay off your debts (credit cards, LOC etc) and stay home.

#18 TurnerNation on 07.19.11 at 10:09 pm

That must be a pic of “HOOF hearted”!! What’s next, Ewetopia?

p.s. does Bandit shed much fur? Why no pics of Bandit? :)
This weblog could use a Meet & Greet, a QA session with Bandit.
_____________________________________________

Some say this is beginning of QE3? Love that Invisible Hand eh!?!?

http://www.newyorkfed.org/markets/tot_operation_schedule.html

Across all operations in the schedule listed below, the Desk plans to purchase approximately $14 billion. This represents purchases associated with principal payments from agency debt and agency MBS expected to be received between mid-July and mid-August.

#19 Dr. WAYNE on 07.19.11 at 10:27 pm

What if their house has NO basement to remodel … ???

And you actually bothered typing that? — Garth

#20 Chris L. on 07.19.11 at 10:29 pm

Awesome! This is exactly what many, many people need to hear explicitly from this blog. Many cities are not overvalued enough to jump ship. I’ve run this exact same calculation many times and couldn’t justify selling in a similar market.

What Garth hasn’t mentioned is all the hassle of having tenants living on the same property. It’s not easy, and not for every, but it can certain pay off for the right personality.

#21 squidly77 on 07.19.11 at 10:30 pm

45K, take home 38K, definitely using a VRAM, best sell soon. Hey Gold Bugs, shoot over to my site tonight, I got a post up that’ll give you sweet dreams, so long as you don’t go to Bloomberg and realize that you’ve just be knee capped.

You can’t sell the stuff can ya!

You watch it go up, you watch it go down.

Sorry for the self promotion Garth but I gain nothing from increased traffic. Nada.

#22 Mr Buyer on 07.19.11 at 10:39 pm

This is what I am afraid of, the 260k priced homes all over this country, that doubled in value over the course of this bubble (from 130 to 260), not going down in value significantly (This is where the banks will harvest the overwhelming bulk of their interest payments, not TO or Van, as crazy as they are). There is no excuse for it. I do not see an availability of 80k, 60k or even 40k a year jobs. We are now standing on a playing field that has been significantly altered. My hometown has a third the population it had when I was a child and one of my childhood friend’s old home then was selling for 264k recently. This was a drastic change we underwent recently and an astute political type could institute sweeping changes of similar magnitude in this environment (change is not a one way valve).

#23 JohnnyBravo on 07.19.11 at 10:40 pm

Garth, I think that’s great advice you offered Donna; and a good lesson for some of the binary thinkers around here.

Years ago, I wanted to do the same thing: turn our basement into an apartment to collect some extra income from what, at the time, was essentially useless, extra space. But my wife would not even consider it.

As a rule of thumb, and to help Donna decide, finishing a basement with standard materials (eg drywall, laminate, ceramic/porcelain, MDF trim, pot lights, standard doors, soundproofing the ceiling, etc) would cost about $30 to $40/sq. ft. (materials and labour). Any special issues, such as with the foundation wall or floor would obviously add costs.

Because this reno is for investment purposes, and it will be tenanted, and money may be tight, they should do careful due diligence to calculate the costs and get a number of fully detailed quotes from reputable contractors (hard to find).

Even if hubby can do the work himself to save some on labour costs, unless he is an expert in the business, he should still get a knowledgable advisor to help make sure the reno meets codes, safety standards, insurance requirements, etc.

But if it’s done right, I think it’s a great idea.

#24 Crazy on 07.19.11 at 10:44 pm

Garth,

Setting up a second dwelling unit in their home is likely illegal.

#25 Crazy on 07.19.11 at 10:46 pm

Donna,

Check with your municipality’s building department before you follow through on this advice. It could save you a great deal of trouble.

#26 Lisa on 07.19.11 at 10:49 pm

Donna, get a hold of this really good book from the library: The Cheapskate Next Door by Jeff Yeager. If you’re gonna keep your house, you need this guy’s frugal living tips to pinch every penny. It seems like a boring drag at first but saving money becomes really addictive & fun. You soon realize what a total RIP OFF everything is and stop wasting money on useless junk.

#27 yogi on 07.19.11 at 10:50 pm

As I was reading the post, I was thinking the same advice. We had a rental basement suite for years. It paid off a huge chunk of the mortgage. Best advice is finding someone who like children – another family can work.

Another family friendly option is to run a dayhome using the basement (less renos too). I have a friend who runs one with 4-5 kids and makes 30-40k a year and is there for the 1/2 day child when they come home.

Good luck!

#28 waterloo Resident on 07.19.11 at 10:53 pm

Donna, don’t sell, not now. With our high Canadian dollar there is NO FRIGGIN WAY that our interest rates will be going up anytime this year, and next year it won’t be more than maybe two or three rises, for about a 0.5% to 0.75% rise in rates. Meanwhile your home will go up from $265,000 to over $325,000 during a 5 year period and you’ll have to buy your house back at a much higher price.

Have your husband get a part-time job at Wal-Mart or Home-Depot to bring in some extra income and rent out a bedroom or two of your house. Even better yet, try to rent out your basement as an apartment and bring in some extra income that way.

Either way, your house is not going to be going down in value, in fact over the next 5 years I’m 90% sure it will be going up, way up, so hold onto it for now and try to get some extra monthly cash flow to pay for the slightly higher rates in one or two years from now.

#29 Chaddywack on 07.19.11 at 10:59 pm

The point though Garth is that he didn’t raise the rates. What I don’t understand is if Carney could possibly raise rates by 1% in the remaining 4 months of the year why didn’t he just do 0.25 now……to sort of even the spread so to speak?

#30 siddelly on 07.19.11 at 11:00 pm

Nihilist: We believe in nothing, Lebowski. Nothing. And tomorrow we come back and we cut off your chonson.
The Dude: Excuse me?
Nihilist: I said
[shouting]
Nihilist: We’ll cut off your johnson!
Nihilist #2: Just think about that, Lebowski.
Nihilist: Yeah, your wiggly penis, Lebowski.
Nihilist #3: Yeah and maybe we stomp on it and squoosh it, Lebowski.

Your advice was bang on the money tonight Garth and may I suggest they try renting their suite out to foreign students (German perhaps?). It worked really well for us out here in Burnaby although possibly not as well in Tuktoyaktuk.

#31 Will on 07.19.11 at 11:01 pm

@Jody if you think ANY country wants to have the worlds reserve currency your wrong. The US would benefit if it moved to the export model and had other people buying there goods.

As for hyperinflation, does the US have war repartriations to repay to Europe? Did it evict all the farmers responsible for its food production ala Zimbabwae? The current inflation rates are no where near what they were leading up to hyperinflation in those countries.

Banks have a huge amount of excess reserves on deposit with the fed. The money supply has grown but much of it is just stuck trying to repair insolvent banks balance sheets and hasn’t made its way into the economy yet…

#32 Utopia on 07.19.11 at 11:02 pm

#10 Min in Mission on 07.19.11 at 9:52 pm

“Evening All, After reading the entire post, and not being a major math wizard, staying with the house is probably the best bet”.
——————————-

I disagree actually. I strongly disagree and I want to say so in no uncertain terms. Although I just posted that Donna should focus on paying off debt I cannot get past the idea of not taking an easy gain. Profit is still the opposite of economic loss.

There is no real difference between one investment or another when we appreciate that economic advantage is the bottom line motive and selling at the top is still the correct course of action. Always.

I am not moved at all by the fact that there are children there, stable schools presumably and lots of friends and connections.

Look, what is the real difference here anyway?

Whether the family stays in their home or not they will still be paying monthly accommodation costs. We know that real estate prices will fall, that is just plain obvious. We also know interest rates will rise. Setting aside the additional opportunity of having a ripe bank account or investments that earn an income (however small), I cannot conceive of any good reason to hold on through a long price decline.

That decline is certain, inevitable and unavoidable. Canada in fact is the last Western nation to experience a real contraction in housing prices. We will be hit harder than others too as our experience will be a decline that accompanies a US recession and that spells major jobs losses here at home. Please recall that almost 20% of our GDP relates to the housing sector and that consumption itself accounts for the largest share of our economies activity.

That is not doomer talk either. That is fact. Declines in housing prices here could therefore potentially be very bitter and lead to a hard landing. Get that through your heads. This is not fun and games anymore.

We already have everyone else’s experience to learn by so we do not need to reinvent the wheel here. Think of Ireland, the US, England Australia, and Spain just for starters.

At the end of the day all that really matters is how much cash is in your bank account. What matters is your personal solvency position and on that note, the golden opportunity to eliminate debt and bank some profits cannot be stated more strongly.

Debt is the killer in this economy. In most others too. We have blogged endlessly here on that topic. Debt is what has ruined most of the US middle class.

Furthermore, rents have fallen there as the credit bubble in housing deflated and there is currently a large surplus of empty homes and properties in that country. Rents may now again be creeping back up but that is a function of having so many more renters than existed five years ago. It did not happen overnight.

Let us put this another way.

We can assume that prices will drop and the opportunity to sell for profit will yield less and less as time progresses. A point will likely be reached when no surplus capital will be available for harvest. The market will bottom eventually too. The debt persists.

Is it better then? Or is it better to be renting with a hundred thousand in the bank? We need to consider the ongoing costs of ownership too while we are at it.

Fourty Five thousand dollars income is peanuts for a family of four. Factor in maintenance, taxes, lack of flexibility and all the myriad costs of home ownership and it actually makes no sense to even own property on that income. I have not even touched on the fact that austerity in this country implies lost jobs in the public sector. Thousands of lost jobs. Is Donna secure?

It is great to agree with Garth on this blog and that makes him easier to get along with but sometimes he is wrong and this is one time I cannot go along with him (no offense Garth-man, you know I love your blog).

I just don’t like your advice today.

#33 Debtfree on 07.19.11 at 11:04 pm

@ #24 Crazy . tell that to half of surrey and points east . And in whistler a closest under the stairs will set you back 600 $ a month .

#34 Joseph [original] on 07.19.11 at 11:05 pm

Garth is right about honing in on your husband’s non-income status. He has to step up to the plate and make a difference. I know of many couples which have the lady of the house single-handedly bearing the burden of the household and it isn’t right. It’s extremely stressful. In a lot of these situations, the wives act as “enablers” to their husbands in some way, shape or form, and refuse to confront the dependent spouse to go get work out of various fears (e.g. fear of divorce). Each of these guys are also further enabled by involvement in outside activities which (in their own minds) keep their self-worth intact. Dr. Phil has a hey-day with these fellas. And a common trait of many of these guys is they say that “they are writing books” in an attempt to persuade their spouses that their future illusory income is just around the corner. If your situation in any way resembles the couples I know in similar circumstances, I really pity you.

#35 Mr Buyer on 07.19.11 at 11:05 pm

Sure, drop your kids off at a daycare where everyone is paid minimum wage. They will have a quality experience. I would stay quite because the kids raised by motivated parents have a huge edge, but it is kids we are talking about. How about not having kids at all if you are not going to take care of them. What McJob and 45k (as if people are getting 45k a year jobs now) salary is worth it? I have not been able to maintain my psychopathic levels high enough over the course of my life to not understand what I am doing to my children by being distracted all the time. At least they have their mother. When you go to see model homes here in Japan you will find many that have large desks built into the structure, in or at the entrance to the kitchen. They are for the kids to do homework while their mother keeps an eye on them while she’s cooking. Most women stay home in Japan and if not the grandparents are not far away so the kids are always with family. If the family are not motivated teachers then the shell out serious coin bringing them to after school schools. Mr Mom, short sighted not so tough talk, all the while our kids are getting ‘shorted.’ I would love to tear a strip off you quasi r-selection types that can not see your part in the creation of unstable environments r-selection predominates in (K/r selection theory has fallen out favor and has been supplanted by life-history theory. r-selection means many offspring that are provided little support by the parent, I say quasi r selected because most are no longer having many offspring. r-selection is seen a great deal in unstable environments ). But hey, preferred shares are great.

#36 nonplused on 07.19.11 at 11:06 pm

I have to admit I agree with Garth’s advice to this couple. There isn’t enough on the table to make selling a really good idea. And given the hassle factor, no way.

Fact is hubby can probably earn as much in one year as the whole proposed sale thing would assuming Garth’s timing is spot on. He didn’t see the recession saving housing in 2009 (due to the interference by Blarney Carney, and to be truthful I didn’t either. 3 years we’ve been waiting for Mr. Market to return to the scene and knock some sense into Mark the lark. He will, but when???)

Suiting a basement is not for the faint of heart. With 4 people in the house already I would not suggest it unless the space is unused at present. And for $10,000??? You won’t pass inspection that way. You need separate heating and air circulation, certain size windows, fire ratings are higher for the ceiling and the entrance doors, provisions for parking, etc. And then you have to deal with someone else’s laundry in the drier, extra noise, and strange people bbq’ing in your back yard with their closest 20 friends. Better if hubby gets a job.

My predication: Either hubby gets a job or this couple is divorced in 2 years.

And I don’t like all this doomer bashing, Garth, seeing as how you were the Grand Pooh-Bah of Doom up until a year or 2 ago, about when you shut down Xurbia.com. And least we forget, Jesus might have been off by, oh, 2000 years and counting now about when he thought the world was going to end, but it will still end one day. Probably not today though. And the way I read the bible none of the prophets foresaw the world ending with someone named “Michele Bachmann” pressing the big red button and exclaiming “That was easy!” But what is clear from the bible is that God did not major in any of the natural sciences, so cut him a little slack!

Garth, we will have to disagree on the shape of things to come, but I am planning as if one day in my lifetime, and probably sooner than later, the great government Ponzi borrowing scheme will come to a screeching halt. It always has every other time its been set up in history. Our wise men are no wiser than the wise men of yesterday when it comes to Ponzi schemes. In the modern experience, the Dutch invented it, John Law popularised it, and it continues to this day with very little refinement. The only difference is that in past years they sometimes allowed the wise men somewhere near the politicians be they elected or divine. Milton Friedman was the last wise man to hold court, and he wasn’t exactly the brightest bulb on the Christmas tree.

But it will be a financial event. These are hopeless, but not serious. I doubt we will even bring the guillotine back this time, as appealing as the prospect might seem every time someone from the Giant Squid (Goldman Sachs) appears before congress.

#37 GTA Girl on 07.19.11 at 11:09 pm

Garth, the Toronto Star has a story tonight how condos are selling like wildfire despite all indicators that it is dangerous.

The mention investors may be as high as 60+% on a condo. I drove by one all-glass condo and noticed 12floors of 1bedroom units empty floor over floor.

I am beginning to believe this is shady. Money laundering?

How would people make money on this? I’m not seeing it.

#38 Mean Gene on 07.19.11 at 11:20 pm

They could hire a live-in Filipino nanny, then the old man could go back to work.

#39 wes_coast on 07.19.11 at 11:23 pm

Wow. This type of honesty can be addicitve. That was great and balanced advice. Considering that rates like this (once they’re gone) will not be seen in generations again – do you see any value in locking in for 10 years versus the usual 5. Imagine knowing your payments are stable until 2021? Think of your income growth in 10 yrs and the fact that kids would now be in their teens and some additional freedoms to work that comes with that. I could be wrong but isn’t that worth the added payments in the short haul?

#40 Dad on 07.19.11 at 11:25 pm

Son, unfortunately if she told you to get a job and you decided to divorce her, you would get nothing.

That’s the way the courts work. May I suggest a mistress? No income means no child support.

#41 Mr Buyer on 07.19.11 at 11:25 pm

#7 Jody … I have heard many people deride the US. Just consider the alternatives. As for the state of affairs, well a textbook I had to read in a Poli-Sci class it took for fun a hundred years ago was entitled ‘The Irony of Democracy’ and its main thrust was that most people do not participate in democracy (they do not even vote never mind being keenly aware of their situation and developing economic political issues, I myself am guilty ). If I do not keep an eye on things and get pummeled by these same things then I am indeed partially to blame (that rational should not stop there though as it often does. The ‘pummelers’ shoulder a large majority of the responsibility for the pummeling they dole out to the unwashed). Our lives have become increasingly more difficult due to our permitting things to evolve as they have. The debt course we set sail on was the course of least resistance and we are responsible for choosing it but this was not done in a vacuum. This travesty of a real estate bubble can serve to awaken, unify, and mobilize if exploited properly. Self rescue and extraordinary measures are in order here.

#42 dd on 07.19.11 at 11:28 pm

#4 Hashnugs Inthebong …Third!!!!!

Bet you have trouble getting a date.

#43 Dad on 07.19.11 at 11:29 pm

And yet how many wimpy beta-males have posted on here about what “wifey” says and wants and mewling their pathetic objections into the wind to be carried off to nowhere.

You poor saps, balls in a jar, twig in her purse, left to whine about an alpha who can game his wife into paying the bills.

Who is the greater fool? You beta-males of course. But check with wifey just to make sure, maybe she’ll answer her mobile from the other mans house.

#44 Utopia on 07.19.11 at 11:30 pm

#22 Mr Buyer on 07.19.11 at 10:39 pm

“This is what I am afraid of, the 260k priced homes all over this country, that doubled in value over the course of this bubble (from 130 to 260), not going down in value significantly”.
——————————-

Has this blog gone crazy this week?

What the hell are you people smoking anyway? Of course prices will come down. Does anyone here even understand how idiotic it is to buy a house at 5, 7, 9 or 11 times income anymore?

Have you all forgotten the basics?

Prices will come down just like they always do. And the bigger they are the harder they fall. They will decline a lot actually before all is said and done though it could take several years. Vancouver sales numbers have fallen off a cliff this month I hear. Perhaps that parabolic move has finally met it’s Waterloo. As Garth mentioned recently, the declines there will be biblical….even epic.

I don’t envy the younger buyers.

The day is coming though when we will look back on these prices and ask ourselves how anyone could ever seriously consider such absurd and ridiculous levels of housing debt.

We might even split a gut laughing at the shear stupidity of it all.

I just needed to say though that your lack of conviction and insecurity about prices really bothers me, Mr Buyer. You should know better with all your first-hand Japanese experience of housing manias.

Being a Canadian, you are also fully aware we have an economy here that is affected in large part by commodities and the health of the global economy.

China in particular.

Our very own TSX is heavily weighted there and has been declining for two months as the commodity sell-off proceeds. With the exception of Gold there has not been any real bullish impulses for awhile now. Look at the charts….that should be telling you something no matter what country you actually reside in.

So lets recap…a declining stock market, a coming recession in the US, rising interest rates, a Canadian housing bubble in the process of popping and debt worries galore while wages are stagnant or dropping.

Do you still think these price levels will hold?

In your dreams man.

#45 race against time on 07.19.11 at 11:37 pm

Great advice Garth. An example of critical thinking as opposed to blind adherence.

#46 dd on 07.19.11 at 11:40 pm

…a compromise in Washington emerged capable of solving the debt ceiling crisis. No default….

Too funny – very easy call to make. Solving the debt ceiling crisis yes, solving the problem. With the Fed hinting at QE3 this fall the problem is getting worse. Open your eyes and read beyond the G&M.

#47 Jane on 07.19.11 at 11:50 pm

A refreshing post, Garth. Reality and the best financial advise for the specific situation is what you have given. Lucky Diana to have gotten such an honest response, one that is in her best interests, not just what she may want to hear, or what some banker may want her to hear.

thank you for keeping the focus on good financial advise.

#48 BigAl (Original) on 07.19.11 at 11:52 pm

Iran’s oil bourse – moves NOW from selling just oil by-products to actual crude oil in other-than-dollar currencies:
http://oilprice.com/Energy/Crude-Oil/Iran-Opens-Oil-Bourse-Harbinger-of-Trouble-for-New-York-and-London.html

#49 Hovering on 07.19.11 at 11:54 pm

spell check is a bithc

para 4

“by back into ” should read “buy back into”

no need to post

#50 Timing is Everything on 07.20.11 at 12:00 am

#12 The InvestorsFriend (Shawn Allen) – said “Else trade him in.”

She’d have to pay him alimony.

—————————————————-

Ataboy Garth…It was the humane thing to do. We did it back in ’91 at age 28……except, we planned to be landlords. They might just make it.

#51 HouseBuster on 07.20.11 at 12:05 am

I’m hearing of people taking there houses off the market in the GTA because ‘things are slow due to the summer heat’. LOL They are going to relist in the fall.

#52 Mr. Reality on 07.20.11 at 12:07 am

Donna

I say sell while you can. Take the leftovers, slap it into something safe and fixed income. You be liquid with cash and have options. It sounds like being chained to your home is not in your best interests.

Next you rent. You have your cash from your home sale as an insurance policy if you are that worried about things. Having cash on the sidelines is a tactic used by many people during times of uncertainty. If something unthinkable happens you will have a slush fund.

Then, husband gets a job and bang you are increasing your cash flow and down payment amount through saving what you can. Maybe start some retirement savings. This will put you in the position to buy back into the market at lower prices with a larger down payment.

Buy low — sell high. That is the name of the game. Problem is people forget that and speculate their way to something called irrational exuberance. We have been swimming in those water for some time now.

Mr. R.

#53 Utopia on 07.20.11 at 12:25 am

#9 the Phantom wrote….

“I know from personal experience that as the sole breadwinner in the family from 1998 to end of 2010, I made some observations around and about the home”.
———————

Stop it man! All this time I thought yu were a super-hero. Now you practically admit you do the dishes sometimes and say you were working three jobs……well the whole picture is ruined now.

Crap. Are we all just typical Canadians after all?

#54 Cherry Picker on 07.20.11 at 12:37 am

I think it was Bernstein in 4 Pillars of Investing who described the balance between fixed income and equity that optimizes near the middle instead of 100% of either. I’m wondering if the same concept applies to house prices. That is, for cheaper homes, is there a price that not selling is still more optimal. Cheaper house will lose less value. I’m wondering if there is a price that buying, or not selling, is still more optimal than renting. Can you give an idea of the cut off price.

#55 Utopia on 07.20.11 at 12:43 am

#6 Brad in Cowtown

Just read your post Brad. I agree. What concerns me most is the attitude that just because this particular families prospects are “slim to declining” is not a good enough reason to offer advice that runs contrary to this blogs long history and philosophy.

And why the hell are all you other blog-dawgs agreeing and getting on board with today’s advice?

Doesn’t anyone think independently on this sorry site anymore?

#56 April Showers on 07.20.11 at 12:59 am

# 7: Jody, you could be the most paranoid, ignorant, propaganda-believing fool on the entire blog. Well, besides BPOE. You’re a delusional, American-hating moron who gives Canadians a bad name. Get lost, would you? You have wanted the USD to fall from day one, which is evident in all your posts. You want the collapse of the US empire. If they aren’t here, what does that leave us? China? HA!!! WHAT A FU*KING MESS THAT COUNTRY IS! Europe? DOUBLE HA!!! Europe is in far worse condition than even the US! You’re so stupid you couldn’t find your way out of a paper bag. The USD is still the world’s reserve currency because, get this, they’re the most productive country on Earth and the stability of their currency is still at hand. Their country is still AAA rated, you idiot. If anyone can find themselves out of this mess, and they will, it will be the Americans. Mark these words.

#57 Utopia on 07.20.11 at 12:59 am

Look. I am going to be honest here.

I am pissed about a few of the comments this evening. Some of you might not realize that this site has had a long history of open and honest dialogue.

Very few comments ever get censored.

What bothers Garth is personal attacks, racism, extremism and outlandish commentary that distracts from the daily theme. Hate mongering and gold pumping have always been unwelcome.

Nobody ever said you had to agree with Turners daily remarks though. The guy is human like the rest of us and he can be wrong sometimes.

Dog-piles on the daily thought in sympathy with his remarks just make everyone look like stupid mindless sheep who cannot think for themselves.

Oh yeah….”rant off”

#58 Josh L on 07.20.11 at 1:01 am

This is exactly the point. Every situation is different. Learn to take into account all of the costs of each choice and you’ll make a much better decision. At 260 k you need a fairly significant correction to make the sell, rent, and buy back in strategy work. 500 k it starts to make more sense. 1000 k plus and in Vancouver or Toronto … Makes a lot of sense. It all depends on how much you save by renting.

#59 cj on 07.20.11 at 1:24 am

Good advice to them. It shows that real estate is not black or white. We have a home that is working for us – a rental in the basement and a home readiline for investments.

Most basements suites are illegal but if the municipalities banned them tomorrow, many people would be out on the streets – both tennants and owners!

#60 Deliverator on 07.20.11 at 1:45 am

Garth: Having said that, the economy won’t implode. Since I wrote my words here 24 hours ago, a compromise in Washington emerged capable of solving the debt ceiling crisis. No default. And the very fact Carney is warning of a rate hike this summer shows Ottawa has data supporting inflationary economic growth. The nihilists among us will be well fed, having millions of words to munch on in the next two years.

Greenspan under W. had data supporting inflationary growth, too. Too bad it was almost fully driven by HELOCs. Think that might be the case in over-indebted Canada?

A rather level-headed and I might even say optimistic analyst strongly disagrees with you, Garth. I’ve been reading Mauldin for a few years now, and while he disagrees with the raccoon stew and gold crowd, he doesn’t envision much better than a muddle through economy over the next generation. And this muddling will not come without its waterfall events. Take the preamble to this week’s letter for example (I’ve underlined the good part for you):

http://www.johnmauldin.com/images/uploads/pdf/mwo071811.pdf

As I write, Europe is starting to unravel. This is going to be much worse than 2008, at least as far as Europe is concerned, and odds are high that it will be very bad for the US. And the markets are still acting as if the problems in Europe can be resolved. The recent bank stress tests were a joke, as they assumed no Greek or Irish defaults. This simply can’t be. There is a banking crisis of massive proportions in our future.

As Lacy notes, we are testing the economic theories of three (I think von Mises should be added) dead white guys. The dominant theories are being shown to be wrong. The sooner we acknowledge that the better. But don’t hold your breath waiting for the major economic schools to come to grips with their failure.

This is a real problem, and there is just no way to avoid it. I wish I had more positive things to say.

Your trying to figure this out analyst,

John Mauldin, Editor
Outside the Box

#61 Derek R on 07.20.11 at 1:53 am

At last! A picture of a Greater Foal !

#62 Mooks on 07.20.11 at 1:54 am

What a steal!
MLS: V898747

#63 Andrew on 07.20.11 at 2:00 am

Garth, do you really believe that when they raise the debt ceiling this week, they will be set on a course to end the deficit and start paying off the debt? Obama wants to raise the debt limit by 2 trillion dollars for just a single year of spending, and Congress is arguing over cutting 4 trillion over 10 (!!!) years.

If their most ambitious long-term plan is to temporarily slow the deficit by 20%, then I’m pretty hard pressed to find anything “wrong” with the doomsday theories.

The US will not pay off the debt. Nor does it need to. — Garth

#64 Canuck Abroad on 07.20.11 at 2:03 am

Garth I don’t disagree with your advice but have a question. You said the proceeds of their investment of $700 per month would not be enough to cover the rent. But should you not be combining what they are paying now in mortgage payments plus the proceeds of their investments to see if that will cover the rent? Sorry if being thick but I’m not seeing where you have taken into account that they no longer have to pay the $150k mortgage if they rent…

The example is interesting because at the time they bought, the house was probably not much more than 3 times their income, so it does not sound like they overreached like many buyers today. And they probably imagined that both parents would work once the kids were in school and they would be on easy street. Husband definitely needs to get out to work now.

#65 martin on 07.20.11 at 2:06 am

turner,
you are a genius of the geniuses by getting so many greater fools reading at your blog. i tell you, i have made a fortune in tsx by just reading your blog as it gives me a great economic prospective indication on buying and selling my etfs. thank you and i hope you keep up dhe greater fooling

#66 TaxHaven on 07.20.11 at 2:36 am

One word of caution: in a town in which houses cost “only” $265,000, prices are not likely to decline at Vancouverite or Calgarian rates. They may hardly decline at all, in which case the couple would be stuck, out of pocket to finance the sale of the house and still find buying back in rather expensive…

And what’s THIS? “…a compromise in Washington emerged capable of solving the debt ceiling crisis. No default.”

Garth, you’ve been reading too much of the mainstream press or watching too much TV, haven’t you?

Hands up anyone who thinks the U.S. is serious about cutting spending! That or raising taxes in the face of recession? Cutting (slashing!) entitlements – not likely. Cutting the miltary/surveillance state budget? Inconceivable.

The problems are insurmountable longer-term, as everyone secretly acknowledges, and can only result in either renewed recession/depression OR rampant inflation. You don’t have to be a doomer to expect, and prepare for, at least one of them.

#67 munch on 07.20.11 at 2:36 am

Keep the house, ditch the husband

#68 Aussie Roy on 07.20.11 at 3:53 am

Aussie Update

Only fools can’t see the bubble.

‘Bubbling Over’ examines the history of house prices in Australia from 1880 to 2011, including a critical analysis of the arguments offered by the mainstream against the existence of a bubble and compares these to robust and tangible statistics.

“Failing to recognise a $2 trillion bubble when Australia’s GDP is $1.35 trillion seriously undermines the standing and credibility of many of Australia’s so-called experts.

http://www.prosper.org.au/2011/07/19/bubbling-over-the-end-of-australias-2-trillion-housing-party/

Definition of a bubble Part 1

http://aussiehouseprices.blogspot.com/2011/03/definition-of-bubble-part-1.html

Part 2.

http://aussiehouseprices.blogspot.com/2011/07/definition-of-bubble-part-2.html

The 2 speed Aussie economy.

However, the main reason I support Evans’s medium-term call is different. No other mainstream economist has acknowledged (implicitly in his references to deleveraging) one simple truth, that Australia is experiencing not one, but two major economic adjustments simultaneously.

The first adjustment we all know about. It’s the mining boom. As we’ve been told ad nauseum, economic resources such as labour need to be freed up so that this boom can unfold without becoming inflationary.

The second, however, is our secret shame. It is the adjustment of bringing the value of our private debt load and the bloated house prices that it services, back into some reasonable proportion with the economy.

http://www.theage.com.au/business/the-onespeed-economy-slow-20110720-1hoc6.html#ixzz1SdIMk4Bn

The perfect DEBT storm.

The economy could slow further with a ‘perfect storm’ of falling house prices and tax uncertainty dragging domestic growth lower, according to a long-time observer of Australian real estate.

Chief executive of home price data group Residex, John Edwards, said this week that sliding home prices could be a leading indicator of what was happening in the broader economy. A slump in house prices – the biggest source of wealth for most Australians – would further crimp the spending and borrowing needed to keep the economy expanding, he said.

“I can tell you that in the whole time I have been studying the market I have not seen the makings of such a perfect storm”.

http://www.theage.com.au/business/perfect-storm-threatens-economy-residex-20110720-1hoe2.html#ixzz1SdIk4Jh6

#69 detalumis on 07.20.11 at 3:57 am

I don’t think the posters finances are that dire even if she is living paycheque to paycheque. She has an ironclad government job which will ensure an okay retirement without having to do much on her part, she doesn’t have to worry about being turfed out of her job when she is 50 or so but can stay as long as she likes and I doubt her job is that stressful, nothing like the private sector where you need to say work 10 hours free overtime a week or get the axe. She also doesn’t commute long hours to get there either. I would save my tears for somebody else.

The reason a family can live okay on 45K is because of the magic of child benefits and paying almost no income taxes. We live in a fantastic country that thinks people making 90K are uber-wealthy and tax those people to death to let the rest do things like stay at home and raise their kids until they are 20 or so. I was downsized last year and found that although my gross income went down by more than half my monthly net is almost the same and my lifestyle sure has improved dramatically. No more commuting 60 hours a week and doing free IT on-call support nights and weekends. My taxes ratcheted down from >30K a year to 5K and I now get to have people feel sorry for me as well which I make sure to do at any and all opportunities.

Yes I will continue to say the scariest thing is the dependent spouse which is even worse than having a disabled child. With the latter you do have options down the road like placing them in a group home for e.g. but with the former you will be financially responsible for them for your entire lifetime.

#70 immigrantvoice on 07.20.11 at 4:06 am

If I were you D, I would NOT take out a loan to fix up the basement. The last thing you want is to borrow more money and rent out to an immigrant like myself. Move back in with your parents for free and have grandma/grandpa take care of the kids if possible. This’ll buy you time, money and build a strong family. Think and act old-school.

#71 Aussie Roy on 07.20.11 at 4:42 am

Aussie Update

Sorry didnt include link to PDF “Bubbling Over”.

Australian housing prices 1880 – 2011.

http://www.prosper.org.au/wp-content/uploads/2011/07/PhilipSoosBubblingOver.pdf

#72 BrianT on 07.20.11 at 5:37 am

#37DD-It is straight out of the funny pages-a problem of too little income and too much debt is fixed by adding a lot more debt.

#73 Beach Girl on 07.20.11 at 5:38 am

He is a deadbeat, causing that much stress on his wife. Life is hard enough, to not have a fully participating partner. Good Morning everyone.

#74 BrianT on 07.20.11 at 5:44 am

#61Deliv-I am surprised you have fallen for the “raccoon stew and gold” B/S. A high % of the richest people on the planet have moved into gold investment in a huge way-you have fallen for MSM propaganda on this one.

‘A high % of the richest people on the planet have moved into gold.’ Source? — Garth

#75 steve p on 07.20.11 at 5:57 am

sell the house, have money in the bank

hubby may never find a job again in his life as there are no jobs
you could be let go as well you never know

#76 househornyhousewife on 07.20.11 at 6:12 am

Garth,

Your advice was truly excellent !! As I was reading Donna’s blog, I was thinking exactly what you recommended, including the renting of a part of the house in order to help with expenses.

Donna, I don’t know how you manage to feed a family of four on such a small income but KUDOS for all of the hard work. It must be near impossible to do what you are doing. Having a stay at home parent is just fine and I can definitely see your point (if I had decided to have children, I would have stayed at home too) but when those beautiful children grow up, they are going to need things that cost a lot more than diapers and plastic toys.

Now that they are in school, your husband definitely needs to get out there and earn some much needed cash. You need to start saving something for your family’s future AND for your couple’s retirement (you would be surprised at how quickly time passes). DO NOT rely on eventually selling your house in order to retire. You live there so although it is definitely worth something (unlike the car in your driveway if you have one), it is a place to live in and not a financial investment (I believe that Garth has been hammering this on his blog for an eternity ..)

Do as Garth says. It is very sound advice, especially the locking in at a fixed rate. Variable rates are cheaper in the short term but they can be volatile. Fixed rates will enable you to budget properly because you will know exactly how much your mortgage payments will be for an extended period of time. Also, if you have any other assets that can be liquidated without hardship, liquidate them and pay off that house by making small balloon payments (look at your mortgage contract and see what is allowed). The sooner you are mortgage free, the sooner you can begin to put that extra (?!) money towards savings (investment) for your future.

Garth, I have to admit I thought that at first you were going to give Donna the horrible advice to sell her house with only the $100,000.00 balance left (which would be disastrous in her situation since selling a house costs money and would seriously eat into their built up equity) but your excellent advice has impressed me. I am definitely going to go out and buy your book to see what else you have to say.

All the best.

HHHW

#77 big T on 07.20.11 at 6:14 am

re dad, and beta males, his alpha description was more
resume for a pimp..

#78 House on 07.20.11 at 6:36 am

Correction, Art Carney said yesterday that rates will not rise. Art as a good Conservative is talking about what should happen not what will happen. Like for companies they should only sale safe products, but they will only ask for voluntary compliance says Jerry ” Cold Cuts” Ritz. Finance companies should only charge fair rates, but loose laws should be in place. So why don’t they apply this to individuals like voluntary compliance to parking laws, voluntary compliance to speeding laws or voluntary compliance to bank robbery laws.

#79 David B on 07.20.11 at 6:38 am

Well said Mr. Turner …. I knew you had it in you …. BTW … should Obama put pen to ink and sign a $3.7+ deficit reduction plan … it will be a historical financial event cementing the mighty USA as top dog on the planet for many years to come.

#80 Aussie Roy on 07.20.11 at 6:38 am

What can we learn from history?.

Economics Professor: “[We’ll Have] a Never-Ending Depression Unless We Repudiate the Debt, Which Never Should Have Been Extended In The First Place”

Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840’s, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically called “internal improvements”), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830’s. Most of these securities were financed by British and Dutch investors.

http://www.washingtonsblog.com/2011/07/economics-professor-well-have-never.html

#81 Steven Rowlandson on 07.20.11 at 6:41 am

“So what to do?

Here’s my plan: First, tell hubby to stop sitting home being a financial genius and get his ass out to find a job.”

Problem: The best pay canada has to offer working men is $10.25 an hour to start and little or no chance of getting raises. That would be okay if the average house price was in the $30,000 to $60,000 range but it isn’t. So from my point of view economic and demographic decline or collapse is unavoidable.
But what the hell, a global population of half a billion people is what the elite want and it is written in stone.

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

A message consisting of a set of ten guidelines or principles is engraved on the Georgia Guidestones in eight different languages, one language on each face of the four large upright stones. Moving clockwise around the structure from due north, these languages are: English, Spanish, Swahili, Hindi, Hebrew, Arabic, Chinese, and Russian.

1.Maintain humanity under 500,000,000 in perpetual balance with nature.
2.Guide reproduction wisely — improving fitness and diversity.
3.Unite humanity with a living new language.
4.Rule passion — faith — tradition — and all things with tempered reason.
5.Protect people and nations with fair laws and just courts.
6.Let all nations rule internally resolving external disputes in a world court.
7.Avoid petty laws and useless officials.
8.Balance personal rights with social duties.
9.Prize truth — beauty — love — seeking harmony with the infinite.
10.Be not a cancer on the earth — Leave room for nature — Leave room for nature.

To make this so 13 out of 14 people alive now must die!
With this agenda on the table why should any man make any kind of contribution to society? THERE IS NOTHING IN IT FOR HIM EXCEPT POVERTY AND DEATH.
Also a man better be a financial genius because for the most part all the market has to offer is poverty and financial death unless you are an insider and then may be. All this will be disbelieved untill those that read these words find out the hard way. Experience is a cruel teacher.

Holy crap. I’m going for a ride. — Garth

#82 blase on 07.20.11 at 6:51 am

Detalumis,

You said, “My taxes ratcheted down from >30K a year to 5K” on 45K gross pay. But according to the Federal income tax form, your federal taxes would be $7,000 on 45K, and $17,000 on 90K. You didn’t state your province of residence, but if it were Ontario, you would pay $2,600 on 45K and $6900 on 90K. You would then net $35k from the 45K gross, and 66K on the 90K gross. So, 10K in taxes on 45, and 24K on 90. In other words, you pay an extra 4K in taxes on double the income.

I don’t see your numbers adding up.

#83 Aurora Borealis on 07.20.11 at 7:03 am

Spot on with your advice for Donna, Garth!

If they don’t want to put their children in daycare (something I fully understand and support) then there are creative ways for “Dad” to still stay home with the child/children while “Mom” works days at her government job.

Dad could take in other children in a home daycare setting, or Dad could work evenings/weekends, or do home-based work of another sort.

Financial security is also important to children – perhaps not as important as having someone who loves you like crazy being there for you on a daily/primary-care basis, but it matters too, and lying in bed at night, hearing Mom & Dad fighting over bills will also have a negative effect on their identity formation, sense of security, etc..

#84 Dave M on 07.20.11 at 7:05 am

Keep the house?

Who are you and what have you done with Garth Turner?

#85 sue on 07.20.11 at 7:24 am

@41 Dad
Yes, that’s what all potential mistresses are looking for…a lazy, unemployed dude. Brilliant.

#86 Mr Buyer on 07.20.11 at 7:33 am

#45 Utopia … I believe what you are saying. I will not be buying anytime soon. I have first hand experience in Japan for certain. This Canadian bubble following immediately after the American bubble burst and attaining such levels has given me pause. I do not want my kids growing up and thinking this is what one should pay for a house. There is no question that TO and Van as well as a few other cities are going to be putting on quite a show during the bursting of this bubble but this was widespread. Depressed areas saw houses rise in value, it is beyond any reasoning, so I am left harboring suspicions.

#87 J of C on 07.20.11 at 7:54 am

Garth great posting and completely honest.
I’m continually told by some i know your a crack pot however common sense ( which most don’t have) says your not just dishing on real eastate but speaking about balance.
This posting shows demonstrates this balance
Soldier on

#88 bigrider on 07.20.11 at 8:10 am

Excellent article on page 58 ( front page headline) in August edition of Canadian Business. Talks about our obsession with houses here in Canada and how owning one is costing about twice what a comparable rental would be.
Make sure you read it.

#89 Tom from Mississauga on 07.20.11 at 8:34 am

Didn’t see that advise coming, but the logic is there.

#90 Lisa on 07.20.11 at 8:37 am

Here’s some against the herd thinking: a parent should stay home and raise their children. It’s the right thing to do. Daycare centres and other ” caregivers” such as nannies do nothing except raise angry, anxious, baggage ridden and mal adjusted children. Kids grow up without the proper social skills only a loving parent can teach them. It takes time to do the job right. You aren’t a good parent by being a weekend parent, a guilty permissive parent or a friend parent. It’s the hardest job in the world that doesn’t pay a dime. It’s way more important that a parent stay home and raise the kids they had than work some meaningless job to make a few bucks so they can buy overpriced stuff and homes. Live cheaper and use common sense!
Major companies aren’t hiring Millenials because they are unemployable…whiny, entiteled, lazy, wimpy, addicted to media. Boomers ruined them by spoiling them with guilt ridden parenting because they were not home to raise them.
There are priorities in life and if you’re going to have kids, one parent needs to stay home and the other is the breadwinner.

#91 Van Isle Renter on 07.20.11 at 8:42 am

Tough call on this one….

Should I stay or should I go?

If I stay there will be trouble

If I go there will be double…

Thought about this for a bit. Two issues:

If their equity position was stronger AND the house was worth a lot more, sell, wait for the drop and buy back in as the investment side would cover rent. That makes sense to me.

Assuming that they can put a LEGAL suite in the basement, OK…. that works too.

But if they can’t put in a suite, Sell. It may not be so much about taking a “vaporous” profit as it is about avoiding a rock solid loss and upside down mortgage that then ties them to that house and limits their ability to move to better jobs elsewhere.

In this day and age, liquidity rules as GT says, but liquidity also means having a liquid job situation. Just ask the millions of Yanks who are stuck and can’t go to where the jobs are. On one hand, there is a shortage of workers in specific fields, and on the other hand there are workers who can’t move there to fill them.

Talk about the definition of Hell.

Keep your own future job prospects liquid: SELL.

#92 jerry on 07.20.11 at 8:44 am

I can only see house prices really dropping when streets become over saturated with listings. (Buyers market)

I wonder if there are or will be demographic swaths of houses that will pop up, reflective of the pressures of new higher rate renewals on mortgages or of pension poor boomers seeking to cash out?

Vultures do tend to hover in certain areas more than others.

#93 Canuck Abroad on 07.20.11 at 8:45 am

84 / Aurora B – you raise a good point. It is entirely possible for one parent to be home at all times even if both are working. Indeed my parents did it. My dad worked night shifts for years while my mom worked days and he slept while we were at school. Two incomes enabled them to pay off their house very quickly. Definitely doable.

#94 Ret on 07.20.11 at 8:45 am

Time for Mr. Mom to man-up.

He couldn’t work the night shift at Timmy’s, Walmart or Costco for 2-3 nights a week?

Cut the neighbour’s grass. 3-4 customers and you’ve got $400 a month or more, tax free, for 7-8 months.

A small bar near me, offered me $20 a day, 7 days a week, tax free, to come in before before 8 am and mop the floor, take down chairs, refill soap dispensers etc. The job takes 1.5 hr max. everyday. Cha-ching, $6000 year tax free. Split the job with a friend and still take in $3000 yr.

#95 Sumadartson jr. on 07.20.11 at 8:56 am

“”Yes, that means keeping the house.

Damn, but I’m full of surprises.

Garth””

The first many similar statements to come from Garth.

#96 The InvestorsFriend (Shawn Allen) on 07.20.11 at 8:58 am

So Mr. Buyer at 35 decides to Bash Daycare.

To each his own. Our two kids were in daycare and it turned out well.

Good daycares exist and the people giving the care are good with kids and that does not change depending on what they are paid.

Not every Mom is cut out to be with the kids 24-7.

Why is it okay to send kids to scoll at age 5 but not to daycare at age 2.

Each choice can work out wonderfully. To bash day care in general is mindless.

I imagine day care is as old as humanity. Imagine villagers 10,000 years ago. Mom was inn the field and probbaly another Mom was selected to look after all the kids. (Grandma was dead becasue people did not live so long back then).

Again, daycare is neither good nor bad in general. It is a parent’s choice. Mind your own business.

#97 Daisy-Mae on 07.20.11 at 8:59 am

Lisa on 07.19.11 at 10:49 pm

“Donna, get a hold of this really good book from the library: The Cheapskate Next Door by Jeff Yeager. If you’re gonna keep your house, you need this guy’s frugal living tips to pinch every penny. It seems like a boring drag at first but saving money becomes really addictive & fun. You soon realize what a total RIP OFF everything is and stop wasting money on useless junk.”

This is true. Saving money becomes a real challenge. After all, everything is so over-priced — mark-ups are atrocious.

#98 Kevin in Winnipeg on 07.20.11 at 9:00 am

Own all the RE you want, as long as it falls within a balanced asset allocation model. 90 minus your age = % of net worth, is a good rule of thumb. — Garth

Would a company / government pension count as net worth?

No. — Garth

#99 The InvestorsFriend (Shawn Allen) on 07.20.11 at 9:05 am

ORIGINAL DEBT?

Nutbars and doomers decry all forms of debt.

Yesterday i said the first debt transaction might have been a starving caveman borrowing food from another with a promise to repay that and more later. Prevented starvationa dn led to excess food being used that might have gone to waste. (The one caveman had just bagged a Wooly Mammoth)

Or for creationists, maybe it was between Adam and Eve.

Somethink like Adam going into debt to clean the outhouse next day if only Eve would allow him to work on that go forth and multiply bit one night when she had a headache.

Either way debt has been with us forever and allows us to get more of what we want now. In moderation, it is a very good thing indeed. (A happy husband AND a clean bathroom!)

#100 JRL on 07.20.11 at 9:10 am

Respectfully disagree – 100K is a LOT of money, it would take decades to save on 45K per year. Further, the ‘economy’ and job prospects are not going to turn around any time soon – the rich outsourced too many jobs and are now at the point of diminishing returns. Cash makes you mobile – you can chase good paying jobs around the country, but I suppose a young family would prefer stability. House hubby just sits around all day – learn about investing that money! Disaster investing has worked out pretty well for me, if you follow politics (ie: big oil spill? Buy BP) It’s kinda cynical, but what the hell. I’m no Garth or Warren Buffet, so 100K seems like a pretty good nest egg to start out with. And the worst thing: renting is a horror. Do you really want somebody living in your basement? Anyway, I could be wrong, but I would sell the place and RUN for your lives!

#101 Lloyd on 07.20.11 at 9:10 am

Young Old Fart, #16 (and others calling care giving an ‘easy’ job

A man (or woman) who stays home and takes care of the kids is FAR FROM LAZY!

Yes, they do need another income but it is extremely stressful and demanding being a stay at home dad.
You obviously have no idea and have never cared for kids full-time. You better believe it is hard work, anyone that has a hard time realising that should be left at home with the kids for 2 weeks and then make a statement!!

Yes, it is different from an office job but it can be more stressful and totally exhausting. What do you guys think, they are just chilling on the sofa?! Ahhh, to walk in someone else’s shoes…

#102 MoneyMyHoney on 07.20.11 at 9:11 am

“And the very fact Carney is warning of a rate hike this summer shows Ottawa has data supporting inflationary economic growth.”
Garth, please don’t mention Carney anymore. Carney has been crying wolf for more than 2 years. May be it is a lame wolf or even a dead one.

#103 kimi on 07.20.11 at 9:20 am

43 Dad And yet how many wimpy beta-males have posted on here about what “wifey” says and wants and mewling their pathetic objections into the wind to be carried off to nowhere.

You poor saps, balls in a jar, twig in her purse, left to whine about an alpha who can game his wife into paying the bills.

Who is the greater fool? You beta-males of course. But check with wifey just to make sure, maybe she’ll answer her mobile from the other mans house.
———————————————————
Dad, your so smart. I got a good chuckle outta this one. Thanx!

#104 waterloo Resident on 07.20.11 at 9:24 am

The guy should just get a part-time job for the evenings, the times when she’s home and he can go out and get 4 or 5 hours of work, minimum wage is okay there, its better than nothing. So don’t sweat it, don’t argue, just have a bit of fun working is some odd jobs here and there to see what the outside world is like. If you don’t like the job then just quit and get another part-time evening job, there’s TONS of them out there now as nobody wants part-time work, everyone wants full-time work.

As for renting the basement apartment: Yes, that’s probably NOT a good idea since it will cost WAY TOO MUCH to turn it into an apartment. But there are a lot of people looking to just rent out a bedroom, so let your kids sleep in the basement ( make sure the basement is livable FIRST ), and then rent out one or two extra bedrooms if its possible for them to be rented out that is.

As for interest rates going up, well, lets put it this way: The world economy is a mess so rates are not going up anytime soon, and with money literally being given away by the banks then home prices will continue to go up even if they are insane levels right now.

#105 kimi on 07.20.11 at 9:33 am

I dont believe he will get a job. Guys like that dont. They just dont. History has shown … he is still at home, he could have easily gotten a part-time job or a weekend one. So reality is …. She has to support THREE KIDS.
My bet is he stays home Forever, or until she throws him out, which is another extremely unlikely senario. Hes been a slump all his life and I am not bashing or commenting on who should raise the kids, but even most women try to do something part-time when the kids are in school. Where is his initiative… I just cant see it and as for her… shes got one eye close, if its gone on this long, it will go on forever.

#106 Oakville Owner on 07.20.11 at 9:36 am

Garth and Blog Dogs:

Have been thinking about doing the same thing as Donna’s husband for some time but our #’s are a little different. Would you give us the same advise to stay put?

Here are the #’s.

House- $800 000.00
Mortgage- $345 000.00, at Prime -.80%
Gross Family Income- $200 000.00

We are early 30’s both with good secure jobs, one DB pension and one DC pension. Two kids under 4 yrs old and in full time daycare ($1700 month).

Have about $100 000 in RRSP’s and $20 000 in RESP’s.

Bought the house only 3 yrs ago during the crisis and paid only $585 000 at the time. Have since put another $50 000 into it. My agent would sell it for 3.5% commission but even she says we should not sell. When was the last time an agent turned down a sale?

What do you think?

#107 Utopia on 07.20.11 at 9:41 am

#74 Beach Girl on 07.20.11 at 5:38 am

“He is a deadbeat”
——-
How do you know the guy is not in a wheelchair Beach Girl?
********************
#69 Aussie Roy on 07.20.11 at 3:53 am ~~~~Thanks Roy. I love the material you keep posting up. I keep thinking everyone is nuts down Australia way, and your articles keep confirming the whole population there is insane and drunk on the ether of house lust …..then I remember I live in Canada and the cold perhaps makes us equally delusional, blind to reality and obsessed with property at any price. If not more! Does nobody fear debt anymore?
***************************
#67 Taxhaven wrote..

“The problems are insurmountable longer-term, as everyone secretly acknowledges, and can only result in either renewed recession/depression OR rampant inflation. You don’t have to be a doomer to expect, and prepare for, at least one of them”.
—————
Bingo!
*************************

#77 HouseHornyHouseWife wrote:

“Garth, I have to admit I thought that at first you were going to give Donna the horrible advice to sell her house with only the $100,000.00 balance left (which would be disastrous in her situation since selling a house costs money and would seriously eat into their built up equity)”
——————–
Are you kidding me? You worry about the costs of selling and how that will affect built-up equity but seem to be forgetting we are on the cusp of a major correction that will wipe away most recent gains anyway. Not selling represents loss too. Maybe we should all just start pumping home ownership in an age of deep debt on this site. Then we could be like almost everyone else in this sorry country who is on the hook during our nations most historical and delusional highs.
*********************

#15 JohnnyBravo on 07.19.11 at 9:56 pm

Hey great! The family home there is over 400 years old now. Who knows, maybe you even saw it. Great Grandad bought it because it had long since proven it could survive the earthquakes. I have never seen it firsthand but the invitation has always been open. Family owns a few chains in the province (did I mention they were doing well?) but when you think about it hard you can only conclude it was insanity that got them there. I mean, who in their right mind buys property next to an active volcano? It was a pretty gutsy purchase. Brilliant too as it turns out.

But it could have ended very badly. The record does not tell a happy story for those poor souls who got caught in the periodic blow-out eruptions.

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

#108 Rich Renter on 07.20.11 at 9:42 am

Garth despite the US agreeing to raise the debt level and Europe staring down the barrell, Carney is still stuck. The current variable rate is about 2.25% what would this be should BOC raise rates by 1%?

The average 5-year VRM at the banks is 3%. In any case, all BoC hikes increase a VRM at the same rate. A 1% central bank move turned a 3% VRM into one at 4%. — Garth

#109 kimi on 07.20.11 at 9:44 am

Donna husband has time to read… to formulate a plan… if that plan included him working I d be at Utopias making Gazpacho!!
The guy is a smuck! Trying to formula a better plan so he himself dosent have to work.
Im telling ya, ANY advice given to this chick, without taking in the fact she is with a smuck is useless.

#110 dd on 07.20.11 at 9:49 am

#75 BrianT

‘A high % of the richest people on the planet have moved into gold.’ Source? — Garth

China’s central bank.

Try again. — Garth

#111 svet on 07.20.11 at 10:06 am

Anybody who is thinking of being a landlord should go spend a morning at the landlord tenant hearings to see the worst case scenarios playing out.Little landlords with no experience being shafted by a system that protects dirtbag tenants who know how to play the system

#112 Brad in Cowtown on 07.20.11 at 10:10 am

#56 Utopia on 07.20.11 at 12:43 am

Thanks Utopia.
I am still trying to figure out why this particular situation with Donna justifies a deviation from the basic premise of this blog… that diversification and liduidity will be king. A premise that has been repeated hundreds of times.
And here he is telling her to ignore both diversification and liduidity because it would put them “no further ahead” if they sold.

I’m not trying to be controversial; I just don’t understand what is so unique about Donna’s situation?

I ask again… what about protecting what they already have???

Garth – you’re contradicting yourself here.
And you criticize those of us with 25-30% PM holdings; yet you feel comfortable telling someone to keep 100% of their net worth in an asset that is almost sure to lose value?

Maybe Garth is tired of all the whiners out there in Vancouver and Toronto who come here and say they sold early and therefore missed out on the crazy gains lately???

#113 kimi on 07.20.11 at 10:17 am

Utopia its easier for a guy in a wheelchair to get a job. There is Canadian rules that apply to big corp.s that a certain amount of minority groups be part of the overall employees.

He has been home for quite a while now, so what about being a contributor, when she gets home, he could go and work somewhere part-time. Actually most people with children today do just that. One person not working and living off 45000 a year for four people… I myself am a minimalist and that just seems pretty damn slim.
Some people may think he can change. I dont.

#114 Brad in Cowtown on 07.20.11 at 10:18 am

LiQuidity
Diversification
Less Stress
No maintenance
Mobility
More time

vs.

Might as well stay put because you wouldn’t be any further ahead.

Garth, please help us understand this strange 180 you took on this post. Alot of your readers are strangely kissing your butt and scared to get one of your angry replies, but others like me just want to understand the basis for this deviation from your usual preachings…

I gave the reasons in the post. Others were able to comprehend them. — Garth

#115 Sheila on 07.20.11 at 10:19 am

Hi Donna – I am glad Garth advised you to keep your home, because that makes sense to me. Your husband should have borrowed Garth’s book from the library, however, because every penny counts for you both. Perhaps you can ask him to research frugality at the library and online, while he continues to look for a job.
Good Luck!

#116 vyw on 07.20.11 at 10:29 am

Mid-sized Ontario is already correcting so selling on the way down and buying back is an option but they don’t have enough equity to make it work – the realtor fees, closign costs, moving costs, etc make it a wash.

I’d stick with the variable for the rest of the year. Variable rates are around 2.2%.
$150,000 mortgage would be $150 weekly or $7800 a year, very manageable.
Maybe boost the payment to 4% level ie. $120 a week – this will reduce the outstanding mortgage and then lock in when the 5 year rates start to go up.

re rental suite. Best to assess privacy, safety, neighbourhood profile etc. I end to think the better option as mentioned by others is to consider p/t evening and weekend work. Also they should save 50% of every extra dollar earned and invest so that their net worth is more diversified.

#117 dd on 07.20.11 at 10:39 am

…the economy won’t implode….

Europe: “Realistically, there are only two ways out of this mess. A fiscal union that involves massive transfers from Germany to the peripheral countries — and quite possibly to Spain and Italy as well. Or else a managed default and an exit from the euro by Greece, Portugal, and potentially some other countries as well”.

Source? — Garth

#118 vyw on 07.20.11 at 10:39 am

Apologies for the typos in the previous post:
closign costs = closing costs
4% level ie. $120 a week = 4% level ie. $180 a week
I end to think the better option = I tend to think the better option

oh and 20 hours p/t work @ $15/hour is $15K a year which would help. One final word, keep one day ie. Sunday free for the whole family.

#119 J:LG on 07.20.11 at 10:47 am

Great advice. And very supportive….did she send a photo along? Is she hot? HaHa. On topic, I am looking forward to the months coming, should be very interesting indeed.

#120 The InvestorsFriend on 07.20.11 at 10:52 am

Net Worth?

Donna’s problem is not net worth. It’s having enough money to pay the mortgage and other bills.

If the house were sold then the equity remaining after the real estate commission and moving costs would likely soon be whittled away due to pressures of living costs.

Garth never ever said home ownership was stupid or that everyone should sell and rent. It always depends on the full situation.

Just becasue Garth advises those with $500k or $1 million in capital gains on the house and where house prices are most at risk to sell, does not mean people with $100k equity should rush to sell.

A house is not like a stock that you can sell for a $10 commission. You don’t change houses like you change your underwear. A change of house is almost as disruptive as a change of spouse.

#121 Brad in Cowtown on 07.20.11 at 11:10 am

“I gave the reasons in the post. Others were able to comprehend them. — Garth ”

Well, as long as the masses are happy. And buying your books of course.

You preach diversification and liquidity day after day, month after month, but then you do a complete 180 out of the blue. Donna’s situation is not overly unique. Like everyone, preservation should be the first goal.

Just worry about yourself, cowboy. — Garth

#122 dd on 07.20.11 at 11:19 am

#119 dd on 07.20.11
…the economy won’t implode….

Source? — Garth

http://www.marketwatch.com/story/printing-money-is-europes-only-way-out-2011-07-20

Nice cherry-picking. The quote you scalped is not indicative of the intent of the article. Disingenuous. — Garth

#123 Kaganovich on 07.20.11 at 11:42 am

Hudson has penned a thorough survey of the recent state of things:

http://michael-hudson.com/2011/07/the-euthanasia-of-industry/

Please peruse if you have the time. I think there is a bit of ‘whistling past the graveyard’ on this blog today.

#124 Brad in Cowtown on 07.20.11 at 11:46 am

#122 The InvestorsFriend

1) They haven’t been able to save a penny. She said so herself. People who can’t save any money shouldn’t be buying houses in the first place. It is compounding their original error by advising them to stay put. The noose will only get tighter.

2) “Preservation of capital” = Number one rule for any financial decision or investment. For anyone. Yet you and Garth think it’s ok for them to keep 100% of their net worth in an asset at its peak value, poised for a drop in value. You wouldn’t keep 100% of your net worth in any one stock. Nor would you keep 100% in any one sector. Nor would you even keep 100% in growth or fixed income. But it’s ok to keep 100% in a house? Just because you “have to live somewhere” and “changing houses is disruptive” and you won’t be further ahead so “why bother selling just to protect what you already have”?

Lunacy.

#125 garrulous squirrel on 07.20.11 at 11:48 am

Crooks from China all know Canada is a sucker for sheltering criminals.

http://www.vancouversun.com/news/from+China+trial+vigilante+justice+collect+debt/5128047/story.html

#126 dd on 07.20.11 at 11:55 am

#124 dd on 07.20.11 at 11:19 am

…Nice cherry-picking….

I don’t know what you read but there was no cherry picking. The whole article is written in plain english. It is obvious you really don’t understand what is going on in world and banking markets. You really don’t understand what QE, derivatives, and stabilzation funds are all about. Close your eyes and pretend the problems will go away.

Interesting that when I don’t agree with a doomer, I ‘don’t really understand.’ Says more about you than me, dude. — Garth

#127 Dr. Fred on 07.20.11 at 11:59 am

#37 GTA Girl

You’re not seeing it, that’s why you have no money!

#128 Mr. Plow on 07.20.11 at 12:05 pm

Squidly77 from yesterday…

You think a property that is a couple blocks from the municipal airport, literally across the street from train tracks, is known for having drug houses in the area, and is blocks from prostitution is a “nice pocket for homes?”

With that logic, not so sure you should be calling me the fool.

Why don’t you buy it and see how a Saturday night sounds? Planes, trains, drug users and hookers. Enjoy your nice pocket for homes.

#129 TakingResponsibility on 07.20.11 at 12:06 pm

Booo’ yaaa’

Let dah “Archie Bunker Foo’s Club” comments roll!!!

‘Meathead – get a job’

and, duhhhh’

‘if yuh don’ work at a real job, yuh have no say’

Keep the comments coming!!! Love ’em!

On a side note: Funny how most “looking-for-advice-emailers” make soooo much more than the national average while poor-government-worker Donna makes less???

#130 Bailing in BC on 07.20.11 at 12:07 pm

#98 The InvestorsFriend (Shawn Allen)

Grandma was not dead. People didn’t live that long but they bred earlier so a woman dieing at 35 could have been a grandmother for many years. There is a theory that this is the biological reason that women live longer than men.

#131 Mr Buyer on 07.20.11 at 12:18 pm

#111 kimi … A little bit of projection going on there maybe. The dude might be being a great father (who knows, stranger things have happened). Nothing is forever, especially the kids being kids. When I die, at the moment of death, I will likely be thinking about my kids, my wife and maybe my parents and best friends when I was a boy. Like I would trade part of that for $10 an hour. Guys have been supporting women for a long time. The wife can work while he takes care of the kids (I myself feel its the man’s duty to work, but such is the lay of the land presently). Economic ‘realities’ mean the children have no parents at home with them. Eat the young, great survival strategy. Not on my watch. It is soon time for a reality adjustment. You think we crawled down out of the trees and started chasing our dinner down at the same time trying to avoid being dinner after dropping the young ins off at the daycare. Modeling is a primordial mode of teaching and the young need us desperately (this is pointless).

#132 Mr Buyer on 07.20.11 at 12:29 pm

#98 The InvestorsFriend (Shawn Allen) … Mindless, hmm. Hey, I am not going to waste my time on you.

#133 Devore on 07.20.11 at 12:31 pm

#55 Cherry Picker

I’m wondering if there is a price that buying, or not selling, is still more optimal than renting. Can you give an idea of the cut off price.

You wonder? What do you mean you wonder? That’s the whole point here. House cheap enough = cheaper to buy than rent. Or at least not hurting nearly as much as buying a house 5x income because rates are low. Traditionally, affordable house debt is 2-2.5x hosuehold income.

#134 Mr Buyer on 07.20.11 at 12:41 pm

#92 Lisa … It is not popular to speak out for the children or their future. Frankly I feel the children should be with their parents as much as possible, especially when they really need them. I am always left wondering why people have children, are the kids lawn ornaments or something (that’s harsh I know but really, take on two jobs before standing by the kids. really, that’s the best we can do? It can not be). More mindless ramblings by a crispy boomer. Hey, back to REALLY important stuff, how’s are the bond markets holding up anyways….

#135 fancy_pants on 07.20.11 at 1:03 pm

yawn. so it’s all status quo for another 7 weeks.

But what a wonderful benevolent shepherd! Always watching over the flock. Hey, our accounts may not be earning much $ but we do have a pretty little bean counter watching over us.

Surely they fleece us from time to time, but how could anyone think they could slaughter us, their fluffy white faithful pets?

#136 Government Dude on 07.20.11 at 1:08 pm

@129 Mr. Plow:

Do not waste your time arguing with squidly77. If you visit his blog it is one of constant contradictions, his own thoughts. That is- he believes- what makes him a contrarian. He told folks last month that oil would be at $70 right now… He does not understand basic economics, way beyond his intellect level. I guess he copy/paste articles, make a collage of them and posts the result on his blog, which is, I must admit admirable for its nonsense.
Sad.

#137 Smoking Man on 07.20.11 at 1:18 pm

LMAO Craney tries to grow some yesterday and sends the dollar on a rampage…….. With down the road I’m spiking.

Today he back tracks………………..The new normal

Get the condo Cash tommorow…. what will I buy?

Wish I knew…..I have no cahoonas sober..

#138 Imstupid on 07.20.11 at 1:27 pm

UTOPIA

I read your story of your great grand father. That’s just dumb luck. It’s a great story he had a goal and accomplished it but the fact some of his property was on pompeii is just luck. I don’t mean to comment to offend you. I hope you don’t take offense to it. I just responded to it because I too own half a mountain in southern Italy. My grand parents would grow crops, grapes, and had olive oil press to process the trees on the land. The current land value is less than 20,000 euros. No roads, horse or donkey ride in and out. I also had a home in a little town I sold it for 2000 euros. Southern Italy is a waste land. Too much corruption, no work etc. The only places worth anything are places that are either costal or in major cities. Or if they happen to fall on pompeii.

Did your grandfather get to keep some artifacts from Pompeii?

#139 Smoking Man on 07.20.11 at 1:28 pm

Bubble Heads which one is you

a) I hate to lose more than I like to win.
b) I love to win more than I hate to lose.

If your ANSWER is b you will be in the millionaire club one day.

If you pick a) enjoys mon’s basment

Making money is all about attitute and the above a) and b) question is like e=mc2 when it comes to money.

Which are you and don’t lie to yourself

#140 Utopia on 07.20.11 at 1:35 pm

#139 Imstupid on 07.20.11 at 1:27 pm

“Did your grandfather get to keep some artifacts from Pompeii?”
—————————-

Family secret. Sorry.

#141 refinow on 07.20.11 at 1:38 pm

I find it really funny that everyone is looking at Garth as the almighty “Should I Sell” guru…

You sell, you shouldn’t but add a basement apartment, you should have never bought, and likely cant afford to sell…….

Maybe we should all ask Garth if each and everyone of us should stay or sell. Are you kidding me…????

Garth do you gaze into a crystal ball before each answer???

The man behind the curtain doesn’t have the answer…

It really comes down to how bad the correction is going to be:

10 -15% shouldn’t sell, moving costs legals, re fees will cost you more then the loss of equity

15-25% Those who are living paycheque to paycheque, with current high ratio mortgages, SELL…Call your agent tonight….

25-40% We are all screwed….Might as well stay put and hope the Cdn Banks follow the US and forgive portions of your debt if you continue to pay the mortgage…..and keep the house in good shape.

One thing for certain, make a decision and stick with it, if you sell, do it now, if you decide to stay put, understand that you are in it for a long term basis, minimum 10 years…. and stop reading the papers, going to open houses and stop surfing the MLS.ca site.

Your advice would have been worth more uncloaked in man envy. — Garth

#142 a prairie dawg on 07.20.11 at 1:59 pm

@ #62 Derek R

“Not now, I’m feeling a little hoarse.” :)

#143 DARLENE on 07.20.11 at 1:59 pm

Man the husband bashing is harsh today. There are many reasons why he would stay home with the kids.

Just because a woman actually gives birth to them doesn’t mean she has the patience needed to be with them 24/7.

There could be many reasons why he was the one to stay home. Good child care costs. He might have had a low paying, high stress job. The money that they didn’t spend on childcare probably more then made up for his loss of salary.

If you go to a fixed mortgage, you will need him to earn $100 bucks a month. If he wants to make the difference of what you would make if you invested the hundred grand add $500 dollars to that. So he needs to create $600 income in a month. You need to set aside $500 of that going straight into investments or pension savings.

If he works 20 hours a week at minimum wage it will at least give you some savings and cover the costs of the fixed rate mortgage. He will easily be able to do this without creating child care expenses if he works evenings and weekends. You won’t see much of each other but at least it allows you to start putting money aside.

Do whatever you can to avoid creating any additional costs if he returns to the work force. Make sure his part time job is walkable, ride able or bus able. Do not buy another vehicle no matter what. Those costs will eat up any savings you can achieve. Be smart and diligent.

#144 jess on 07.20.11 at 2:17 pm

6. Congress has provided the authority, in legislation passed in 1996, for the US Mint to create platinum bullion or proof platinum coins with arbitrary fiat face value having no relationship to the value of the platinum used in these coins. The US code also provides for the Treasury periodically sweeping the Mint’s account at the Federal Reserve Bank for profits earned from coin seigniorage. These profits are then booked as miscellaneous receipts (revenue) to the Treasury and go into the TGA, narrowing the revenue gap between spending and tax revenues. Platinum coins with huge face values e.g. $2 Trillion, would close the revenue gap entirely, and technically end deficit spending, while still retaining the gap between tax revenues and spending.

10. So, if no action by Congress raising the debt limit is forthcoming, it will be the President’s sworn DUTY AND OBLIGATION to either use platinum coin seigniorage, or some other revenue creating tool legislated by Congress in past years, to make the money necessary to avoid default, since his failure to use an available way of creating revenue for continuing to spend appropriations, which he is mandated to do, would be a violation of his oath of office.

http://neweconomicperspectives.blogspot.com/

#145 Cato on 07.20.11 at 3:00 pm

A house should never be treated as an investment and Donna is an example of the other side of the fence where its more financially prudent to stay put. Trying to time any market carries risk, Donna’s other half is in no position to expose the family to that risk.

The housing decline when it comes will not be homogenous. Certain sectors and locales will fair far better than others. People have to live somewhere, and it could be likely that a $250K home hits sweet spot for high income earners forced to downsize from 800K palatial pad into something more manageable as they rebuild their lives after a bankruptcy. An influx of demand in Donna’s price would mean not only would the family be priced out of another home odds are high rental rates would be rising as well.

The greatest investment anyone under 40 can make is leveraging their abilities into greater earning potential. Perhaps Donna @ 45K and hubby near 0 is the family’s full potential, but I doubt it. If a career change is in order, now is the time to do so. Look at education as an investment, what is the ROI for a chosen profession.

Truth is the world economy is fine. The planet is producing new consumers at an exponential rate and technology is giving us a glimpse of a standard of living unfathomable to previous generations. If kings & emperors of the past could travel to this point in time I think many would willing switch places with any of us and trade their position the past for an opportunity to live in a future most of us take for granted.

The USD could fail but the US would still be the world’s dominant economic force, europe will falter but will pick itself back up and be stronger for it. Its human nature to overcome adversity, and an economic re-organization is a trivial matter compared to what the war generation faced.

What will change is the misguided notion that all members in society must be economic equals. That everyone deserves a predetermined standard of living we call the middle class. Its not in our nature, we are all born with differing desires,abilities & positions in life. We are born equals under the law, but where ones life goes cannot be predetermined by bureaucrats. Your ultimate position in life is determined by decisions you make, or don’t make. For far too long big gov’t has attempted to swim against the tide of human nature and dictate structure of society but those efforts are now set to unwind in a big way.

The fact is there are going to be winners and losers on a global scale in the future. Many ambitious people living in emerging economies are destined for middle class life, and many less ambitious people living in developed economies are destined for a lower class life. People like Donna need to be aware that gov’t & society owes neither her nor her children a thing. Her children’s future may very well rely on obtaining an education that may be unattainable to most in this new world order. When she reaches retirement age quality of life & life expectancy may very well be tied to size of her bank account. It might fly in face of Canadian sensibilities, but its the reality everyone needs to be preparing for.

#146 Bill Gable on 07.20.11 at 3:11 pm

This blog needs a psychology workup – stat.

Guys – what the heck is going on here?

This is becoming like a Chinese fire drill at Rideau Hall.

Talk ECONOMICS. Put down the knife, and and add something, instead of stomping someone for their ideas.

Mr. Turner, you must have learned patience dealing with constituents.

Gotta go – Bond Vigilantes at the door, and it sounds like they are speaking Spanish. Again.

#147 GrammarCop on 07.20.11 at 3:15 pm

#115 – “There is Canadian rules… ” I remember when grammar mattered. Now there’s not even attention to subject-verb agreement. Oh well… that made my retinas hurt.

#148 mid-Ontario on 07.20.11 at 3:21 pm

Nice post.
Must be the first one by Mrs. Turner.

First, keep the house…agreed.

Second, fortify the basement for PM storage. A renter is a nightmare. $10k will get probably not even make it livable.

Thirdly, the US “agreement” is a joke. The US will never repay its debt.

When Greece goes (and it will soon), even MR. Turner will see the light.

I hate all the bashers of the Dad.
Grow up, They chose to raise their kids with love and affection and not farm them out. Two pre-schoolers are a big deal to care for. He will work soon but hopefully to fill the basement with PM’s for his family’s future and not to fill the house with crap toys.

#149 JoshL on 07.20.11 at 3:45 pm

Brad in Cowtown,
The reason that it’s sometimes right to stay put has to do with the following:

1) Difference in cost of owner ship and cost of rent. If it costs way more to own then you should sell. If it costs only a little bit more (10-20%) to own then you should stay put.

2) Price of the home compared to price of selling. Right now it could cost them as much as 5% to 10% of the price of their home to move out. On more expensive homes the % is lower. So if you’re in a market that hasn’t gone crazy (ie not a big city) and you’re already down from the highs it can deffinitely make sense to ride it out. The numbers are a lot different on a $1 million to $2 million home compared to a $0.3 million home.

If they had not already bought the home the advice would be to stay out of the market. Since that’s not an option they definitely should not sell and then buy back in. Either they hold on … or they sell and stay out. The husband’s plan is the worst of them all.

#150 Burnt Norton on 07.20.11 at 4:00 pm

#148 Bill Gable on 07.20.11 at 3:11 pm

Hear, hear. Holy doodle.

It seems that the reason housing is the most emotional of assets is because of the emotional maelstrom contained within the average four walls, herein exposed for all to gaze upon, like a train-wreck reality show.

Yo Hashnugs Inthebong, howz about a hotbox to mellow things out in here a bit?

#151 Rocket Boy on 07.20.11 at 4:09 pm

Ah Yes, remember the stories when the government scrapped the production of those jet fighters in Milton in the 60’s. I believe it was called the Areo (?). Anyways, the surrounding communities took a serious dive. Stories that owning a home was the worst thing to do. Houses were dropping in value daily. Just shows what a little whisper and panic can do. That market rebounded in under 2 years. And those who visioned profits made a killing. People need to live somewhere, and renting is not the answer.

I read a story about those who bought raised bungalows in north Etobicoke in the late 50’s- $38K each (assuming that was a fair chunck of change back then). Why buy, real estate is for suckers and you’ll lose money over time. Those very same houses, which probably were paid off within 10 years (discipline financing of course). And now sell for $600k. Mortgage free for probably 50 years, and now are handed a nice $600K for their “shelter”.

I own, for shelter, I bought pre-bubble – big flipping deal. The markets would have to correct nearly 72% before I am underwater. On the same token, I had rented before that, never saved a dime and if I had listened to Garth in 2002 preaching the same line – I would be in the same boat – no money – no asset – no nothing!

Our house made us savers, our house created that sanctuary, our house gave us purpose. So all you basement dwellers who missed out on the opportunity of a lifetime … suck an egg and and wish your evil thoughts on your own family. I’ll be living mortgage free within 3 years and will raise my glass of wine to all those who keep paying rent…

#152 Chris no longer in England on 07.20.11 at 4:14 pm

Lisa #92: “There are priorities in life and if you’re going to have kids, one parent needs to stay home and the other is the breadwinner.”

Or, harder still, both work different hours so there is always someone home. That’s what we did and it almost killed me but our son was only ever looked after by us, or occasionally, his grandparents. The good news about this approach is that the parents are both too tired to spend the extra money they make, so it’s a great method as long as they can keep their eyes taped open.

Once upon a time, we made choices about how to live because we knew we couldn’t have it all. It was called priorities. Nowadays everyone seems to think they can have it all – and a house too. I didn’t start thinking I could have it all until I was 50 and had painstakingly engineered things so I potentially could have it all.

#153 Soylent Green is People on 07.20.11 at 4:15 pm

re #98 The InvestorsFriend (Shawn Allen) on 07.20.11 at 8:58 am

But every child IS CUT OUT to be with mom or dad, every day.

Ask any child what they would prefer.

………………………………….

STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥ STAY AND RENT THE BASEMENT ♥ THANK GOD YOU SKIPPED STRANGER CARE ♥

#154 VICTORIA TEA PARTY on 07.20.11 at 4:19 pm

WOULDN’T IT BE JOLLY IF…

Our glorious fianancial wizards who brought us 2007-ongoing world economic train wreck, suddenly obtained enough “smarts” to rectify their mess and put the Rest Of Us on a more sure financial footing.

Thus would aging gloomers FINALLY have NOTHING TO BITCH ABOUT!

Wouldn’t be nice! Fat chance.

On Tuesday the markets rocketed upward on US Administration lies that a debt-ceiling deal was near.

Wednesday, so far, no deal. And the markets closed tepidly lower; next up Asian markets later on this date. We’ll see how they’ll do…

Apparently Mr. Obama and various Democratic senators are meeting, about now, and some Republican congressional-types will attend later. It has to do with a $3.7 trillion budget cut/debt ceiling arrangement.

If it goes through, then they’ve got a “terrific solution” that’ll have a life span of about 10 seconds.

The markets will go up for a day or two.

BUT, in the US it won’t bring back higher home prices, 20 or so million new jobs, an actually functioning education system and an end to all empirical wars.

The deal will accomplish absolutely NOTHING, because the various special interests affected will eventually gut the deal and the pork, paid for with more debt will continue to roll out into the constituencies as bait for votes for 2012.

The ABSOLUTE difference between US spending insanity and that of Greece is precisely NOTHING. Fiscal and monetary delinquency means never having to pay your bills on time, if ever, and rigging the system to ensure that does not EVER HAVE to happen.

As well, in the Rest of Europe, there will be no solution for Italy, Spain, Ireland, Portugal and so on. It won’t happen because if it did, too many spoiled rotten special interests would fire too many politicians at the next elections and then the whole process of corruption will continue.

That’s why investing in the stock market is good these days because it’s built on a massive foundation of special interest corruption and greed. Fear is on a holiday right now, so line up for your fair share, folks. After all you deserve it!

Lots more ammo for grounches like me! Wunnerful.

#155 jimsum on 07.20.11 at 4:51 pm

I think the real question is whether this family can afford to live in a house at all. Rent of $1400 a month seems pretty high for an income of $45000. Paying principle and interest on $150,000 may be affordable with a record-low variable rate mortgage; but what happens if rates go up? If they can’t afford the higher interest rate of a fixed-rate mortgage now, will they be able to cope with an increase in their variable mortgage?

I think they are living beyond their means; or at least beyond their means in a normal interest rate environment. They have an incredible opportunity to move to affordable housing at a profit. That would be a smarter move than speculating that rates will stay low long enough that they can afford to own a house.

#156 David on 07.20.11 at 4:56 pm

Yup, Carney said rates are almost certainly going to probably rise, someday, and this time I’m not kidding. You just watch me…one of these days…maybe not this year, but probably the next year. Of course, with all the risks to the Canadian economy, and the dollar is too high, and Europe…sure is a risky time to raise them now. But, someday….ooooohhhh you just watch!

#157 george on 07.20.11 at 5:05 pm

naahhh….keep the house, houses will not go down in price, mark my words!

#158 Stevie Why ?? on 07.20.11 at 5:43 pm

Holy Sh*t Sherlock …… Harper pontificates under the pseudonym CATO …….. get a freaking life before the great unwashed rips your heart out.

#159 Devore on 07.20.11 at 5:56 pm

#136 fancy_pants

I think I know how the old-timey Incas and Mayans felt wrt their high priests. They’d appear every few weeks from up on high, descending from the mighty pyramids, stroke their beards, and make wise pronouncements about the future. No one knew exactly what they were talking about, or how they came upon the knowledge which they were relaying with such certainty, but listen intently they did, with baited breath, hanging on to every word like it came from gods themselves. Good thing too, because their very lives depended on what was said.

That’s exactly how I feel about our economic puppet masters. They pull on a string, this way and that, themselves barely understanding how the thing is connected up. But they still pull the strings, then see what happens. Then they pull some more, or try another string. If you believe this is an exact science, you better think again. Black magic is more like. They sure dress it up with fancy language, terms, models and theory. Experimenting on the live economy.

#160 Cory on 07.20.11 at 6:04 pm

Keep the house. You need a place to live anyway and I agree with Garth on this, hubby should get a job. If the idea is to stay home for the kids and avoid daycare, this is commendable. Nothing wrong with this at all. But since one will be in school fulltime, and your husband is the chosen one that is staying home with th ekids, then a part time job at least is not unrealistic or unreasonable.

My first wife stayed home with our 2 kids, we lived within our means and I worked like a mofo and we made it. We did not jump onto the debt wagon like most do/did but we are sitting very nice right now compared to those who tried to have us drink the koolaid that everyone else was drinking.

#161 Devore on 07.20.11 at 6:13 pm

#157 jimsum

I think they are living beyond their means; or at least beyond their means in a normal interest rate environment. They have an incredible opportunity to move to affordable housing at a profit. That would be a smarter move than speculating that rates will stay low long enough that they can afford to own a house.

When it’s such a toss up between staying and selling/renting, that the hassle and expense of selling is not nearly worth the marginally improved financial situation, you have a family that is living on the edge. As they admit, paycheck to paycheck. An unexpected expense (of which children and a house are an excellent source of) could easily push them over.

The choices they are looking at are not the choices they need to make. The choices they need to make revolve around how to reduce their costs of living, and how to increase their income. Because they are living beyond their means. Investing into an income suite may be an option, if it is feasible in their situation. Husband working part time to at least make enough money to pay for groceries, probably a good idea. Breadwinner pursuing better career options, also a good longer term plan.

If they have already reduced their expenses except for housing, and no immediate relief is in sight, it may very well be the house’s turn. Sell, rent something cheaper until they get back on their feet.

#162 TurnerNation on 07.20.11 at 6:30 pm

BC housing prices strike again!!

Hospital loses $3M on vacation home lottery

The Royal Columbian Hospital Foundation says it’s getting out of the home lottery business after it lost $3 million in its inaugural vacation home lottery

http://www.cbc.ca/news/canada/british-columbia/story/2011/07/20/bc-royal-columbian-hospital.html

#163 Willy H on 07.20.11 at 6:38 pm

Very interesting article outlining the gloomy economic future of the USA based on Gary Schilling’s forecasts. The housing market plays a key role in his analysis:

http://www.marketwatch.com/story/5-buys-5-sells-for-10-long-years-of-no-growth-2011-07-19?link=home_carousel

Found this advice very very familiar:

► Sell commodities. This bubble’s blowing big, will pop. Commodities are not an asset class for your portfolio. They’re a gambler’s bet taking you off your game. In the coming years of weak demand, expect excessive capacity and soft prices. China is buying up long-term supplies across the world, playing games, speculating, living dangerously.

► Sell your house, second home or single families investment realty. Most families have the bulk of their net worth and retirement funds tied up in their home equity. That’ll hurt Americans as underwater mortgages increase from 23% to 40% of the national total. Shilling’s been warning of this for a long time: If you do plan to sell any time soon, do it now, before inventories depress prices another 20%.

►Sell home builders. Our disastrous housing market says sell builders, sell, sell.

►Buy Income-producing stocks. The stock market’s gone nowhere for 12 years, says Shilling. Inflation-adjusted returns say Wall Street’s a loser. Buy direct or ETFs. Pick selective income-producers: utilities, drugs, telecoms, high-grade munis, preferreds.

#164 TurnerNation on 07.20.11 at 6:53 pm

WASHINGTON (Dow Jones)–Sales of previously owned homes in the U.S. dipped in June to the lowest level in seven months amid weakness in the job market and overall economy.
Existing-home sales decreased 0.8% from a month earlier to a seasonally adjusted annual rate of 4.77 million, the National Association of Realtors said Wednesday. It was the third-straight monthly drop. The sales pace in May was unrevised at 4.81 million per year.
The results were worse than forecast. Economists surveyed by Dow Jones Newswires expected home sales to rise by 1.9% to an annual rate of 4.90 million.
Lawrence Yun, NAR’s chief economist, said 16% of buyers who signed contracts for properties wound up canceling them in June, up from a typical level of 10%. While Yun said the reason was a mystery, Paul Dales, the senior U.S. economist for Capital Economics, said buyers might have been scared off by the economy.
“The further fall in the number of existing home sales in June … suggests that the recent deterioration in economic conditions has already hit the housing market,” Dales said.
The median sales price was $184,300, up 0.8% from $182,900 a year earlier.
The inventory of previously owned homes listed for sale, meanwhile, grew at the end of June to 3.8 million. That represented a 9.5-month supply at the current sales pace, compared to what is considered a healthy level of about six months.
The struggling housing market is one of several key burdens of the economy, which has seen its recovery slow this year.
Though construction of single-family homes and homes overall were up in June from a month earlier, it was still the second-worst June for single-family construction on record dating back to 1959, the Commerce Department said Tuesday.
Demand for apartments has been strong of late as more families opt to rent than buy. But the market for previously occupied homes has been far softer amid an oversupply of foreclosed properties. About 2.2 million properties have been foreclosed but have yet to go up for sale, according to Lender Processing Services Inc.
Government incentives, such as a tax credit that mainly benefited first-time home buyers, helped home sales last year. But the housing market has faltered since it expired.

#165 TurnerNation on 07.20.11 at 6:55 pm

Parents struggle to save for kids’ post-secondary studies

Tuesday, July 19, 2011
By IE Staff
Many high school graduates preparing to attend college or university this fall won’t be relying on their parents to fund it, according to the TD Canada Trust 2011 Education and Finances Survey.

Of 640 parents surveyed, 45% of those with children eligible to attend post-secondary school this fall have not started saving for their children’s education. As a result, one-in-three anticipate they will be able to contribute to less than 10% of the cost.

“Next to saving for retirement, one of the biggest financial challenges the majority of Canadians will face is saving for their children’s education,” said Shahz Beig, associate vice president of personal lending at TD Canada Trust. “For university and college students living away from home, the cost of pursuing an undergraduate degree is approximately $80,000, so it’s no surprise parents are struggling to make ends meet.”

The survey found only 12% of Canadian parents with children under age 18 plan to fund 100% of their children’s post-secondary education. Half plan to pay for most of their children’s expenses but expect their children to contribute some of their own earnings, while one third plan to pay for the essentials like tuition, books and rent but expect their children to pay all the other expenses.

#166 Mr. Reality on 07.20.11 at 6:55 pm

The funny thing about this country is that Canadians love to talk about how Canada is different than the US. Problem is 75% of our exports go to one of the most indebted countries in the world. Now tell me that will not have an effect on our real estate prices and jobs moving forward.

I mean really. The debt insanity continues……….

Mr. R.

#167 Junius on 07.20.11 at 7:00 pm

Interesting article out of the US asking the question whether it has been better to own or rent over the past 30 years. Answer to rent most of the time.

http://www.fma.org/NY/Papers/Lessons_from_30_years_of_Buy_vs_Rent_Decisions.pdf

Some interesting assumptions. One of which I question is whether renters will actually save money and invest. I have always seen the only benefit of having a mortgage being the discipline it brings in regards to savings.

The other thing it misses is paying off a home and living debt free. However it is interesting to see the comparisons.

I guess the answer to the question is very much like in today’s blog answer: It depends.

#168 Junius on 07.20.11 at 7:05 pm

#141 Smoking Man,

Which is you?

(a) Drunk idiot.
(b) Drunk loser.
(c) Both.

#169 TurnerNation on 07.20.11 at 8:05 pm

This is a funny home inspector ad. Realtors inspecting homes…sounds scary.

http://hamilton.kijiji.ca/c-real-estate-other-HOME-INSPECTION-WITH-25-YEARS-OF-REAL-BUILDING-EXPERIENCE-W0QQAdIdZ287887942

DO YOU KNOW WHAT YOUR HOME INSPECTOR DID BEFORE HE BECAME A” HOME INSPECTOR”?
Some were “Engineers”, some were “Contractors”, others were salespeople, realtors, some were even McDonald’s employees when they discovered that they could take a course in Home Inspection for 6 months and, “voila”, they were allowed to call themselves “Home Inspectors”.
Home Inspection is not regulated by our government, like most professions and trades. Many “old boys” have set themselves up as “associations”, taking people’s money for professional fees, in exchange for “accreditation” and “certification”. Some have even run off with the money, just like Bernie Madoff, in a ponzie scheme.

#170 45north on 07.20.11 at 8:06 pm

JRL: Respectfully disagree – 100K is a LOT of money

well it is, I hired a man to do some plumbing, he had bought a house two years ago, I didn’t offer any advice. I still thinking about it.

svet: Anybody who is thinking of being a landlord should go spend a morning at the landlord tenant hearings

they should and talk to my sister-in-law about being a landlord

refinow: It really comes down to how bad the correction is going to be:

it does, the US is down 15 to 25%, don’t know what makes us different

Rocket Boy: Ah Yes, remember the stories when the government scrapped the production of those jet fighters in Milton in the 60′s.

Malton

The last best hope for Canadian airplane manufacturing was the Avro Airliner.

Our house made us savers, our house created that sanctuary, our house gave us purpose.

same for my family Rocket Boy, doesn’t mean that buying now is a good idea

#171 Stevie Why ?? on 07.20.11 at 8:11 pm

#167 Turner Nation:

Yes indeed … 9 years of university for my two, paid totally by moi. Could I have had stainless and granite …. most definitely yes. Could I have had that bigass 4 x 4 …..or Beemer… most definitely yes. The best investment I ever made was in THEIR education and enjoying their smiles on graduation day. They have a great start on their lives and through living a tad frugally I have enough to carry me home.

BTW …. I RENT

#172 Yank on 07.20.11 at 8:19 pm

“Having said that, the economy won’t implode. Since I wrote my words here 24 hours ago, a compromise in Washington emerged capable of solving the debt ceiling crisis.”

I dunno. I hope not, but I don’t think they have enough time to get the Gang of Six plan through before August 3rd. There’s too many legislative tricks that can be used to hold it up.

I know it’s insane, but I don’t think we’re going to make the deadline.

#173 Thetruth on 07.20.11 at 8:31 pm

This blog’s getting scarier by the day.

Dissenters are far and few.

Use caution when using advice from here. It’s become more like a cult where you will be shunned for presenting different views.

#174 squidly77 on 07.20.11 at 8:34 pm

The train tracks are on the other side of the Yellowhead DOPES, it’s a little rough on the west side of 124 street but not to bad, kinda like bridgeland. Between that property and the hookers and drug houses there’s the Kingsway mall, A hospital that I dont know the name of, an airport, at least 2 and I think 3 major hotels, and some sizable business, thats a nice little secluded spot. Very few planes approach the airport from the south so as to avoid buzzing downtown Edmonton. No that place sounds fine.

That plow things a bag of hot air.

#175 supermike on 07.20.11 at 8:40 pm

Donna, don’t listen to Garth this time. Don’t sell your shelter!

It is not only your asset or investment, whatever Garth likes to call it. It is your home, your sweet home. Garth might have many houses to be home so that he thinks about asset more because he has too many choices.

150K mortgage is not a big issue. According to the current fixed rate, 3.89%, you pay $780 a month.

If you take variable, you might get p-0.8, then the rate would be 4.2% even the rate goes up to 5%(it is 3% now), you will pay around $800 a month.

Believe me, the rental won’t be much cheaper for a family of 4. I have been renting for over 10 years. I know what renting it is. For a family with 2 kids, renting is not your choice!

Yes, Garth is right somehow. Only if you are rich enough! You can rent a decent house for $2-3000 a month while waiting for the housing market to correct. You just take your time and enjoy your life.

However, according to your family income, you can’t rent a house like that. You will end up renting a cheap apartment unit full of mold/rats/cockroaches…

I am not BSing. I went through all these for 6 years until I moved to Condo units after our family income increased. Your quality of life will go down a lot! Believe me, a 10-year renter with a daughter.

Stick with your sweet home and try to make more money. Not selling your home.

Garth’s thoughts are suitable for rich people who want to maximize their investment. Not

#176 squidly77 on 07.20.11 at 8:40 pm

DOPES is actually Brad In Cowtown, but since your one of the same you can have it to.

By the way, how come you shut your blog down and ran away and one more thing, how many different names do you post under, you’ve used 3 here today allready.

#177 supermike on 07.20.11 at 9:00 pm

Ouch! My bad!

I started replying after reading half of Garth’s post as he has been telling people to do for 3 years.

Then I read the whole thread. I was wrong. Sorry Garth. You are more reasonable that I thought.

#178 Garth Is wrong on 07.20.11 at 9:12 pm

I really like Garth and his logic would hold water if the markets were not manipulated. Mark “the greenspan” Carney will keep rates low until the ponzi housing bubble pops. How long will that be? People will borrow from their LOC , credit cards and whatever free money hey can from the banks until the game is over. In the end banks will have to forgive debts and lower mortgage payments much like the US. Hundreds of thousands of people will walk from all their debts. I’ve seen reports on Americans walking away from thie homes and LOC debts. Some banks begged people to pay back $3k from a $100K LOC. Take the free lunch and enjoy it. I was foolish to work hard and save. Now I play the spend all the credit game until it’s over. I’ve started to work less but use more credit. I can’t wait to move into my home. Going to live it up and make alot of money. If it pops??? I walk.

#179 Utopia on 07.20.11 at 9:19 pm

#165 Willy H on 07.20.11 at 6:38 pm

Great link Willy. I liked your synopsis too. This Shilling article is very much in line with my own thinking. I notice he recommends preferred’s and income producing stock as well. Very timely. A debt shock is coming, best to go with quality and strength through thick and thin.

#180 WI Boomer on 07.20.11 at 9:29 pm

(Sigh)….some days it is better if i just shut-up

#181 kimi on 07.20.11 at 9:35 pm

135 Mr Buyer…. if you read the story, the kids are now ready and going to school. I don’t think a part time job for the husband or wife is unreasonable considering they are living off of 45,000 a year for four. Regardless, husband or wife, if you are trying to plot a way to survive better and why not plot a way that you can be with your children, when they are home, and work part time, when they are in school. Really, really, not unreasonable.
Unless the husband/wife is actually a full-time volunteer at the kids school, and sitting next to them during the whole day… but I really don’t think they allow that these days.

#182 Utopia on 07.20.11 at 9:39 pm

#122 The InvestorsFriend wrote….

“A change of house is almost as disruptive as a change of spouse”.
——————————–

Not always. Maybe you didn’t hear it yet, but the plural of spouse is spice”! Sort of like the plural of mouse is mice but a lot different….

#183 April on 07.20.11 at 9:46 pm

Garth you said “….economists speculating bank of Canada will double it’s lending rate by 1% to 2% by end of yr”. 2010 or 2011?

#184 Where's The Money Guido? on 07.20.11 at 10:15 pm

Re: #33 Debtfree on 07.19.11 at 11:04 pm

@ #24 Crazy . tell that to half of surrey and points east . And in whistler a closest under the stairs will set you back 600 $ a month .

Not True…I was just there 2 weekends ago and spoke with a ATV guide and she told me you can rent a bachelor suite for about $800/month right now.
Maybe this winter it will go back up.
You can also find rooms in hotels/residential places on the net right now for $35/night for 30 days or more stays.

#185 disciple on 07.20.11 at 10:29 pm

Spice is nice, but if twice the price, becomes a vice, and halves your rice.

#186 Where's The Money Guido? on 07.20.11 at 11:25 pm

Re: #103 Lloyd on 07.20.11 at 9:10 am

Young Old Fart, #16 (and others calling care giving an ‘easy’ job

A man (or woman) who stays home and takes care of the kids is FAR FROM LAZY!

Yes, they do need another income but it is extremely stressful and demanding being a stay at home dad.
You obviously have no idea and have never cared for kids full-time. You better believe it is hard work, anyone that has a hard time realising that should be left at home with the kids for 2 weeks and then make a statement!!

Yes, it is different from an office job but it can be more stressful and totally exhausting. What do you guys think, they are just chilling on the sofa?! Ahhh, to walk in someone else’s shoes…

I agree 100%. I was a single father and I ran from morning to night, not a second was “easy, laid back time”. I thought the same thing until I had to do the parenting 100% and boy did it open my eyes.

#187 Hosehead on 07.21.11 at 3:27 am

Very refreshing to hear you say to someone keep your house.

#188 Beach Girl on 07.21.11 at 6:53 am

Okay Utopia, Kimi is smarter than you. No one mentioned deadbeat dad was in a wheelchair. You just imagined that. And if he was, the weasil would be getting all the government assistance he needed. As he would have the time to hound every doctor in his province. Which would have given the family extra income. I understand people have disabilities, and should be cared for adequately. I do not think this is the case. Also I think people on Disabilty are being under funded. No I am not there, so do not go there. Also I have been a landlord for over 15 years, and am quite good at it. Treat people fairly, they will respond in kind.

#189 JRL on 07.21.11 at 8:55 am

Pffft. I raised kids, mine are grown and flown the nest, both good kids. Taking care of a household hasn’t been difficult since the days of my great grandmother. In my Moms generation they invented a ‘labour saving’ contraption for EVERYTHING…pop the top, throw the laundry in the machine, go back to watching Oprah. In all human history no one had it easier than the 1950’s stay at home Mom. So don’t give me this BS how hard life is – it’s a piece of cake. I shouldn’t be surprised the Me Me Me generation thinks raising children really cramps their style.
Bottom line: these young people may never get another chance in their whole lives to cash in on 100K – grab the money, save and invest it. Rent, learn how to manage your money, and wait for housing to crash. Worst case – put a small down payment as possible on another house and let the bank take the risk. Protect your 100K. Do NOT dump it into another house. Prices tanked for a decade after ’82.

#190 TurnerNation on 07.21.11 at 8:48 pm

Could solar and wind power keep up with our demand for A/C during this heat wave? I doubt it. The Greenwashing movement just another form of population control. Many young and elderly would perish if A/C were unavailable.

The kids have got it now: humans = bad. Hydro = bad. They got to the kids. Supermarkets throw out a ton of food each night and we have enough money to invade all kinds of countries, but cheap power has got to go, they say. They are taking us back to the stone ages.
Wind up your battery car, pay carbon and emissions taxes, pay road tolls, or better yet use horse or bike to get to the store (just like in 3rd world countries!).

Turn off your lights for Earth hour, use candles, get used to it the new normal; meanwhile our war planes/ships/subs guzzle gas and spew uncontained emissions. War ! The perfect business model.

We have more than enough food and power for the entire world but violence is used to keep it in the hand of a select few. Democracy is but a myth, a fable. Look at the back of your coin. Whose face do you see? Your elected leader or a face from an unelected, violent, inbred, elite family linage? Yep, who’s the boss indeed.