In praise of normal

Catherine says she reads this detestable blog daily. “Perhaps I have a new angle for your daily rant,” she says. Rant? Cathy, babe, Fox News, Sun TV and John Baird rant. This site, by comparison, is a virtually font of variegated opinion, where all the citizens and nutbars of this great land come to sip. And foment.

Anyway, here’s her idea. What’s the scenario today in which people actually should buy real estate?

“I’m suggesting this because I read a lot on your blog about how crazy today is, but I don’t have a good idea of what non-crazy could look like. It might be interesting to describe the kind of advice people would have been looking at if the last 10 years had not happened and HGTV never existed.”

Hmm. Pre-HGTV. That’s when Mike Holmes had hair and was caulking basements. When people got horny for each other instead of concrete countertops. There used to be ‘down payments’ back then, and people haggled over the price of a house before they bought it. Young couples rented. There were these weird little things called starter homes. Purchasers spent more than eight minutes going through a property. Most houses cost about three times what most folks made. There were even people who couldn’t afford them. But that was okay. Having a house back then was not a right.

Of course, all that’s changed in the last decade. Now seven in ten of us have a house, at the same time half of us have no savings while virtually all of us have debt. And there is, Cathy, a poker straight line between these realities. Hell, more economists are emerging from the ooze to actually agree with the drivel published here. Like my constant reminder that interest rates will rise simply because Brother Carney knows keeping them low will mean 100% home ownership and so much real estate porn that we’ll wallow in debt forever. Then the economy’s truly toast.

Here’s RBC Global Asset Management chief economist Eric Lascelles, for example, saying exactly thus: “There is a popular misconception that the Bank of Canada cannot afford to raise interest rates because this would prove too damaging for mortgage holders. The opposite is in fact true. The reality is that the Bank of Canada cannot afford to delay raising interest rates, for precisely the same reason. The longer the bank delays, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later.”

This is one definition of sub-prime, Cath. And we have it bad. ‘Emergency rates’ are the same as those teaser rates applied to US mortgages. Cheap loans let people without savings buy houses, but when they ultimately reset, it all blew up. Oakies in McMansions – kinda like property virgins in Yaletown, or student debtors owning in Leslieville. We all know it can’t last.

So your question’s an interesting one, but there is no ‘normal’ anything at the moment. Interest rates will most assuredly rise. Mortgage rates – especially VRMs – will double. People who bought with nothing down in 2010 will be renewing in 2015 to the shock of their lives. The impact on the market will be substantial, especially since that’s when the pathetic, wrinkly, oxygen-suckers start to retire in droves and discover they need to sell. Right. Now.

Of course, it won’t take that long. Many markets are already in decline. Try selling a condo in Port Moody, an acreage outside Penticton or a McMansion in Caledon. The facts are simple. House prices have jumped on the back of higher debt, not higher incomes. Have you received a raise lately, Catherine? Have many new small businesses or factories opened in your hood this year? Or is the only real economic activity coming from guys building yet another condo tower, or turning another field into soulless boxes with garages grafted on the front?

About 20% of the economy is now real estate-related. Roughly the same mistake California made. The average family can’t begin to afford the average home, without accepting record debt. And still we’re being lied to.

Yesterday the shameless Vancouver Sun – published in the most unaffordable metropolis in North America – ran a piece saying there is no bubble.

“The prevailing wisdom that Vancouver has a housing bubble should perhaps be reconsidered. Certainly normal metrics, like the ratio of average price to income, are extraordinarily high and could well be in danger territory. But, existence of more affordable geographic pockets in the Lower Mainland where buyers’ conditions prevail, and softness among apartment and townhouse dwellings, suggest that some markets are much less inflated… Savvy shoppers can still do relatively well in Vancouver by searching for the right unit in the right location, which after all, is the whole mantra of real estate.”

The average SFH across the entire region is $800,000. The average in Van is $1.2 million. The median price for all properties (crack shacks and condos included) is $600,000. The average household income is $83,130. And the average Canadian family has less than $40,000 in liquid assets. Figure it out, Cath. In this world, does a scenario actually exist in which a house makes sense?

Sure it does. Buy a house if you can afford one.

That means keeping mortgage and property tax payments below 40% of your household income. It means being able to own a home and still diversify, ensuring your TFSA is brimming with ETFs, you have retirement savings and money for kids’ education. It means not confusing your house with a financial plan. It ain’t. It’s a costly possession. Remember my rule – take 90, deduct your age and that’s the percentage of your net worth a home should represent.

It means not being useless and naive. If you have $15,000 then you can’t afford a $300,000 property even if the numbnuts at the bank tell you so. Just being able to carry monthly payments means nothing. That’s called rent – but in this case it comes with a mountain of debt.

You should buy property if you understand this is not the end goal of life. Get a grip. It’s a house.

If you want a home, spend some love.

198 comments ↓

#1 Dr Doom on 07.26.11 at 9:16 pm

Earlier and earlier to try to be FIRRRRRST!!!

#2 Mr. Reality on 07.26.11 at 9:20 pm

There is a feeling in the air right now that i have felt before. It was 2008 and right after that feeling there was a recession……..

And yet Canadians never learned the lessons our neighbors from the South have learned.

Anyone getting tired of all the debt ceiling chatter all over the place? I mean default already, and get it over with.

Mr. R.

#3 Boombust on 07.26.11 at 9:25 pm

Port Moody condos are toast, alright. I’ve seen it up close and personal…

#4 nemesis on 07.26.11 at 9:28 pm

…”a virtually font of variegated opinion”…

I think you wanted, “veritable” there, OldChap – otherwise, a tasty turn ‘o phrase, GT.

I’m a sucker for alliteration (and one or two other naughty pleasures – albeit there is only asset one class that merits irrational and/or emotional attachment… and it’s manufactured in Italy, has two wheels, and… yes – is much faster than those charming antiquities from Wisconsin).

PreciousMetal, indeed. ;)

#5 nemesis on 07.26.11 at 9:33 pm

“If you want a home, spend some love.”…

I neglected to add, truer words were never spoken.

#6 Mr Buyer on 07.26.11 at 9:35 pm

This bubble has done just that, reset the notion of normal. I will not go quitely if after all is said and done the correction brings house prices down to 4 times average income. We should not accept this gouging of higher proportions of income by private entities. If it were the government increasing taxes we would be up in arms (maybe not, depends on who is playing or what is on TV) but private entities mix in profit taking for the masses to take the focus off of the harvesting of higher proportions of our incomes.

#7 Small Steps on 07.26.11 at 9:45 pm

Noticing a possible trend here in Alberta:
Some of our friends are restructuring their mortgages as a LOC and only paying the interest on them. They are young families squeezed with extra costs like daycare. I am not sure where they got the idea – is it something the banks are pushing. By doing this, you truly are renting your house and your debt!

#8 Mr. Lee on 07.26.11 at 9:47 pm

‘It means not confusing your house with a financial plan. ”

So many people are and were. I remeber after the tech bubble burst. The mantra was invest in a house because you can control it and unlike the stock market, house keep on inflating in value. Just like the victims of the tech market, the masses fell for the home market argument and now we are here. Ten years later looking over the edge of the cliff.

CMHC has insured over 600 Billion Dollars of this mania, backed by the tax payer compliments of the Fed Gov. So guess who is on the hook if the house situation starts to decline? Joe and Jane Canada. Even if you were prudent with your borrowing decsions and invested prudently, taxes will have to go up to cover the losses that we will all have to pay for.

What a great system

#9 $froma$ia-(The Sun can *&^* my caulk) on 07.26.11 at 9:53 pm

If I can borrow $600k and my wife can too then we can purchase a house for $1.2Million! Wooohooo.

Vancouver is affordable according to the lenders that are backed by CHMC=The Tax payer

$$$

#10 Utopia on 07.26.11 at 9:58 pm

#7 Small Steps on 07.26.11 at 9:45 pm

“Noticing a possible trend here in Alberta:
Some of our friends are restructuring their mortgages as a LOC and only paying the interest on them”
—————————————–
Weird. I also know someone who recently went that route. The problem is that the debt never gets paid down. It simply lingers on to be dealt with at some theoretically better time in the future. Maybe it is a good strategy for them but it tells me that times just got harder.

There is no way they can save when even paying down basic home debt is beyond reach. This society of ours has officially gone crazy.

#11 Off the River on 07.26.11 at 10:00 pm

Always enjoy the comments and the blog posts. The smart money should be getting out, and the dumb money will continue to get into real estate.

I’m wondering if anyone has advice for an expat Canuck with about 200 grand in Korean currency. The exchange rate is terrible, but I’m looking to move back home in the next couple of years.

Own my own house. No debts.

Suggestions?

#12 Victor on 07.26.11 at 10:05 pm

#7 Small Steps on 07.26.11 at 9:45 pm

Noticing a possible trend here in Alberta:
Some of our friends are restructuring their mortgages as a LOC and only paying the interest on them. They are young families squeezed with extra costs like daycare. I am not sure where they got the idea – is it something the banks are pushing. By doing this, you truly are renting your house and your debt!

======

LOC’s are tied to prime rate. Boy will they have a hard time as those rates creep upwards.

#13 Mr Buyer on 07.26.11 at 10:06 pm

I think you webserver or your scripts have a few hiccups going on and are in need of a little fine tuning

What’s the issue? — Garth

#14 Victor on 07.26.11 at 10:07 pm

Canadians fearful about jobs, confidence slips

OTTAWA (Reuters) – Canadian consumers are far less optimistic than employers about job prospects, according to a survey released on Tuesday that contradicts data showing three straight months of stronger-than-expected employment growth.

The Conference Board of Canada’s consumer confidence index slipped in July for the third straight month, down 1.8 points to 81.3.

http://ca.finance.yahoo.com/news/Canadians-fearful-jobs-reuters-1227024155.html

#15 TryingToGetOutAlive on 07.26.11 at 10:12 pm

mr turner,
still impressed by your writing and shocked at the same time –

is it possible someone is getting soft? “spend some love”… i’m pretty sure that’s the mushiest line i’ve read on this blog yet!

now this blog entry is def one we blogdogs should be showing our house horny gf/wives.

You found me out! — Garth

#16 Smell The Coffee on 07.26.11 at 10:18 pm

If you have a mortgage, any type of mortgage… you are renting money. Period. You don’t own your house, the bank, municipal tax, and other tax bodies own your house … and act for the Crown.

If you have no mortgage, and are “titled” to the house you still have lifetime of ongoing obligation in maintenance, fees and taxes. Most taxes grow faster than inflation, which is really money rot in action.

All real property is owned by the Crown and licensed to the user. Zoning rules severely restrict free use of property for gain, as does environmental and other recently invented restrictions. Mining companies own the ground under you and any transiting Fukushima radiation owns the air space above you.

There is no true ‘freehold’ property in Canada, in other words real property absent of ongoing and future obligations simply does not exist.

Everything is leased for rents by virtue of title debts to other private parties,perpetual taxes, or other types permanent obligations, often from 3 to 10% of the properties’ assessed tax worth. This means that a property looses its original value within 10 to 33 years by taxation and fees back to zero- without any accounting for interest and capital payments . Compound taxation is perpetual poverty.

Its all ‘rent’ of one type or another.

Get over the ‘rent versus own’ obsession. It’s a mugs game.

What counts in a persona life is how much you have left over to spend for you own enjoyment at the end of the day for your efforts.
Consider poor Jack Layton… how many ‘days under the sun’ do you really have left after a lifetime of battling against the beast.

A person of modest desires with a positive imagination is a rich person indeed. This is the real measure of wealth, not stucco-castles that rot out before your teeth do.

#17 Mr Buyer on 07.26.11 at 10:19 pm

All is good now. My post was waiting to be moderated, evaporated, and then reappeared. It happened a few days ago as well but all is well that ends well. Forget about it.

#18 Aussie Roy on 07.26.11 at 10:26 pm

“The facts are simple. House prices have jumped on the back of higher debt, not higher incomes.”

Simple, and true but so hard for some to understand.

The RBA Gov (full speech in link below) thinks the same way. Fantastic some more sanity by our central bank.

It will be interesting to see the RBAs response to todays inflation numbers (higher than expected and above the RBAs target range). Many sectors of our economy are in real trouble another rate rise may help dampen our inflation rate but at what cost to the fragile parts of our economy.

AUD/USD broke 110 today on expectations the RBA will again hike rates again sooner rather than later.

I see nothing that could drive further house price increases, certainly not increased debt levels like the past ten years. Here in Australia it appears the emotion and attitude towards debt that has been driving the market is changing for the better.

Aussie Update

The RBA Gov slows down his consumption of kool-aide. Has he been reading Prof Steve Keen?.
Says yes house buyers have been consuming a large amount of the debt drug, but no hangover is expected.

“Using the Treasury’s series for private wealth, from 1960 to 1995 the annual average per capita rate of increase in total wealth, in real terms, was 2.6 per cent. That is, it was broadly similar to the per capita growth rate of real GDP, which is what one would expect. So the growth from 1995 to 2005 was at a pace well over double the average of the preceding three or four decades. A large part of the additional growth was in the value of dwellings. The extent of leverage against the dwelling stock also tended to increase, with the ratio of debt to total assets rising from 11 per cent at the start of 1995 to around 17½ per cent by the end of 2005. It has tended to rise a little further since then.

Had we really found a powerful, hitherto unknown route to genuine wealth? Or was this period unusual?

Looking back, it appears the latter was the case. In 2008, the trend changed. Real assets per person declined for a period during the financial crisis. Given the nature of that event and the potential risks it presented, that is not surprising. Real asset prices have since risen again but, so far, have not resumed the earlier trend rate of increase, and at this stage they show no signs of doing so. They look very much like they are on a much flatter trend.”

http://www.rba.gov.au/speeches/2011/sp-gov-260711.html

Goodbye retail boom times, hello unhappy nation

http://www.smh.com.au/business/goodbye-retail-boom-times-hello-unhappy-nation-20110726-1hylx.html

Moody’s warns on Aussie housing market

The Australian residential mortgage-backed securities (‘RMBS’) market’s performance has to date been positive, with low underlying mortgage default rates and minimal house price declines. However, the wider housing sector remains characterized by the substantial price run-ups and household indebtedness growth over the past two decades. The experience of other countries shows that housing crises may occur notwithstanding good prior performance.

In this context, Moody’s is undertaking a re-assessment of its Australian RMBS methodology. We plan to outline our specific proposals in a Request for Comment in late August. We anticipate increases to Moody’s Aaa mortgage default probability and house price stress rate assumptions. Separately, Moody’s also expects to modify its approach towards incorporating lenders’ mortgage insurance in Australian RMBS.

http://macrobusiness.com.au/2011/07/moodys-warns-on-aussie-housing-market/

#19 Calgary Illusion on 07.26.11 at 10:27 pm

A mortgage should not exceed 40% household income.

Is this net or gross income?

#20 cazzobaby on 07.26.11 at 10:29 pm

It never ceases to amaze me how many people with no money decide they want to own a house. The cons promote homeonership believing they are creating a breed of cons as they believe homeowners will always vote for them.

#21 Utopia on 07.26.11 at 10:29 pm

“There were these weird little things called starter homes. Purchasers spent more than eight minutes going through a property. Most houses cost about three times what most folks made. There were even people who couldn’t afford them” ~~Garth
————————————
You never hear that term much these days do you?

Starter homes. What a crazy old fashioned idea that is. Back then people actually worked their way up to living in a better neighborhood or a more expensive home.

If they had a new family, they still put something away every month in preparation of a move to a larger home suitable for a growing kids.

That was normal. Nobody thought anything of living a bit rough in their first house, doing most of the repairs themselves and slowly building up some sweat equity.

Houses were easier to acquire too. My own father bought his second and third homes after a conversation with the landlord. The owner liked the way he kept the place and was always making small imoprovements despite being a renter.

So he said, “well, why don’t you just buy that place and take it off my hands. The one next door too. Come over for dinner and we will make up an agreement”

And that was it. No loan. No mortgage approval process. No bank involvement. Barely even a regular contract. They just wrote down the agreed price with a small interest rate and Dad made the payments for about ten years until he owned it outright.

Maybe there was more trust then. These days are so crazy though. Now the kids want to live like rock stars straight out of University. Only the best will do. Toniest neighborhoods as well and the house has got to have all the bells and whistles.

They are impressing their own parents with how lavishly they spend and by how quickly they are seemingly getting ahead.

Will it end badly? Make me laugh. Like asking if Vancouver buyers are delirious.

#22 Mr Buyer on 07.26.11 at 10:37 pm

#12 Off the River … Korea was fun. I am sad I could only stay a year (a combination of personal reasons and having to work 15 hours more a week than was in the contract but at the same negotiated salary). I miss how incredibly cheap things were and buying team Canada hockey sweaters in Itteawan , not to mention Steak and a movie at Nashville and dancing until 5am at Hollywood. It sounds like it worked out well for you. Japan has been great for me. I wish I came here in my 20s, spent ten years here and adapted and then returned to Canada hardened by 65 to 70 hour work weeks and keenly aware of another culture. I would have done many things differently in Canada and likely would have achieved higher levels of success, especially financially, at home in Canada. All is not lost but I wonder what could have been…Do not get me wrong, I am not complaining, it just a hindsight thing I guess.

#23 Brad in Cowtown on 07.26.11 at 10:43 pm

I was going to post my best comment ever, but I decided to vomit instead after seeing that “spend some love” line. We, the metalheads, will never let you forget that line. Ever.

p.s. gold at 1623 ;)

#24 Dr Doom on 07.26.11 at 10:44 pm

there is only asset one class that merits irrational and/or emotional attachment… and it’s manufactured in Italy, has two wheels, and… yes – is much faster than those charming antiquities from Wisconsin).

PreciousMetal, indeed. ;)

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

Ah the Ducati’s………. PM indeed

#25 Smoking Man on 07.26.11 at 10:45 pm

I get no respect, I am sort off inverter of the catching diaphragm on the Canadaarm, Space shuttle thingee. It happened in Brighton Ontario when I was about 13 years old. My uncle was at his cottage, ours was few doors down. He was an engineer at spar aero space. He had a bunch of his engineering buddies up for the weekend.

Now me the dyslexic who failed science many times over, had a little wind tunnel and designed and built Radio controlled aircraft. I even built the radio, via heath kit.

Well my new plane was so cool, I mounted a camera to take some shots. Well on the madin flight I was so exited I forgot to raze the antenna on the transmitter. Long story short it crashed. I got a box put the pieces in and went to my uncles to see if he had any fiberglass and glue for the repair.

The guys had paper and writing down sketched on how to build the catching mechanism. On the Candaarm It was ugly, like 3 hooks from a pirate arm. I was holding the lense diaphragm from the camera and said why don’t you do like this…Your design sucks……

The rest is history, no order of Canada, no accolades, no recognition………For the smoking man………..

I predicted the stock market moves with amazing accuracy always with in a month of a major trend change…In my field of expertise I am the go to guy on bay street…..

Yet because I can’t spell, have a drinking problem, and have a fancy for ladies of the night, know one takes me seriously…….

Just the way I like it……………..

Cheers…….good to be off the wagon again………

Real estate is on fire and will be for a long time, interests rates are going no where….watch and learn my little grass hopper tax farm slaves…..

#26 Obama secretly tells banks: No Default. on 07.26.11 at 11:09 pm

In support of Garth’s opinion concerning U.S. default:

http://video.foxbusiness.com/v/1078438751001/gasparino-administration-downplaying-chance-of-default/

Food for thought :)

#27 nonplused on 07.26.11 at 11:25 pm

Nice post Garth, not much to disagree with today!

I think there are times to own a house, and it mostly involves the full cycle cost being cheaper than rent. So,

You have to be relatively sure the house will suit your needs for a significant length of time, or you will get eaten alive by realty fees.

The cost of interest, taxes, and maintenance have to be less than the cost of rent minus expected appreciation (generally use CPI or your preferred measure, not the appreciation we saw in the late 2000’s).

You have to be able to afford the house (generally 3 to 4 times income, best to use after tax).

Your income should be relatively secure and stable.

You have to have a mindset where you don’t mind spending your weekends mowing the lawn and regrouting the shower, or have the money to pay for that stuff to be done by somebody else. Most people mow the lawn and let the rest of the house go for $hit, and then expect to sell at a huge profit.

You should have enough reserves to pay for the kid’s soccer if the furnace breaks. Or the guts to tell your kids there will be no soccer this season.

And finally you have to be prepared to deal with wild swings in prices as Mark plays Dog with interest rates for whatever reason his troubled dreams give him. Without getting a HELOC every time prices go up.

#28 Guy_in_Regina on 07.26.11 at 11:26 pm

#22 – oh come off it. Most people still start in a “starter home” – they just costs a heck of a lot more than they used to. Even old crap shacks in questionable neighbourhoods. You should get out of the sticks more and question your assumptions.

#29 Timing is Everything on 07.26.11 at 11:26 pm

#5 nemesis – said “I think you wanted, “veritable” there, OldChap – otherwise, a tasty turn ‘o phrase, GT.”

No, Garth means ‘variegated’, as in varied [opinion].

#30 JohnnyBravo on 07.26.11 at 11:31 pm

Garth, glad to see some more color on the concept of affordability in your blog. One of the biggest disservices that brokers, mortgage specialists and others who peddle cheap credit have done to the public is the distortion of the concept of affordability. An entire generation is going to have to re-learn what true affordability means. Unfortunately, I fear we will have to learn the hard way.

#31 Utopia on 07.26.11 at 11:31 pm

So what did normal used to look like anyway?

Buying houses was what one did when they started a family (if they could afford it). Having stability was important. People were not on the move so much then and tended to stay where they were planted.

Divorce rates were lower then too, people tended to stay together longer, saved more, kept real gardens and usually live near close family members. Sometimes even in the same house. Imagine!

Educational levels were lower for most too. Degrees were for a slimmer percentage of the population and you did not have to take official training to do mindless tasks like mopping floors. I just heard yesterday that a “sanitation specialist” needs to take a six month course to get qualified as a housekeeper. A cleaner.

Too freaking unbelievable man!

Seems everyone is a professional now. So you need to be more mobile. Even having children is a sacrifice for many. None is too many in some cases with all the stresses. Who can afford them anyway with the high cost of housing. Seems a sad trade-off to me.

So younger people have swapped family, stability and blue collar work for degrees, one-child families (if that), nice houses and mega debt. Is it any wonder fertility rates are dropping and our population is in decline.

So when is a good time to buy a home? I guess it is when you have enough set aside to ensure you can properly take care of a family, prepare for retirement and are getting established in a stable career.

But that’s just old fashioned daft, right? So why not short circuit those old ideas and just go directly to speculating on the housing casino?

All your childless friends are getting ahead that way.

#32 Elmer on 07.26.11 at 11:34 pm

If you think a house is a costly possession, you should buy a boat. They say the two happiest days with your boat are the day you buy it and the day you sell it.

#33 Randis on 07.26.11 at 11:53 pm

Garth, sometimes when I read your blog, I feel sorry for you.

I mean, for the amount of times you have repeated your message, there are still people decide to play dumb and question the logic behind it. If its me trying to send a message out I would only repeat 3 times and after that, let the ppl screw themselves.

I have extremely low patience and for that I applaud your effort. Thanks for being the voice of truth.

#34 Husky on 07.26.11 at 11:54 pm

I am new to the real estate arena. I have been doing some research lately. Does anybody know a guy name Don Campbell?

Is he any good? I read that he supports the idea of buying right now in Alberta because of the fast growing economy there.

He recently also said that people should ignore the notion of “bubble in Canada” because there is no such thing. He suggest that you pick the right spots and you should make good money in 5-10 years.

He said people think too short term and should plan a minimum of 5 years from now in order to make investment decisions.

Don who? — Garth

#35 Andrew on 07.26.11 at 11:55 pm

I think Garth has the opinion that the BOC interest rates are going to be the ones to rise dramatically. I disagree. If Mark Carney had any attitude that interest rates need to rise, he would have done it already. I think it’s the fixed rate mortgages, driven by the bond market, that stand to go sky-high in the next year or two. Given how popular 3- and 5-year fixed terms are in Canada, I think this will truly be the catalyst of Subprime North.

Bonds have never been as expensive as they’ve been in the past 3 years. When this bubble bursts, Canada will be a financial smoking crater.

#36 Rich Renter on 07.26.11 at 11:55 pm

With rates so low, you are foolish not to buy a house right!!!

#37 rp1 on 07.26.11 at 11:57 pm

“Some of our friends are restructuring their mortgages as a LOC and only paying the interest on them.”

Modern slavery, a situation bankruptcy laws are intended to prevent.

#38 March of the Pigs on 07.27.11 at 12:10 am

I think the Canadarm should have a smoke in space for smoking man who designed it. ;)_~ Man you learn so much visiting this blog…

#39 Hosehead on 07.27.11 at 12:10 am

Amen to the two points at the end of this post – that owning a home is not the purpose of life and that love makes a home. My 3 year old knows this.

#40 Bottoms_Up on 07.27.11 at 12:18 am

#18 Mr Buyer on 07.26.11 at 10:19 pm
——————————————-
That happens often. If you make a blog post, and it disappears, it is actually still in the system. Garth just hasn’t gotten around to monitoring/posting it yet. That’s why all those idiots post ‘first’ even though they’re not first. Maybe Garth should put a footnote to ‘not fret’ if the post disappears once you hit the submit button.

#22 Utopia on 07.26.11 at 10:29 pm
——————————————–
Nice little piece of history, thanks. I think the problem today is that over the past decade houses have appreciated so quickly that the old standard of ‘living in a starter home’, and saving money in order to buy a better place in the future just doesn’t work. I think the new thinking is that ‘if I don’t jump in at the top then I’ll never be able to afford it’ because I’ll be priced out. Obviously incorrect thinking but I really do think this is where the average mentality stands today.

#26 Smoking Man on 07.26.11 at 10:45 pm
—————————————–
I give you respect, I read your posts and I do not hold your writing skills (skilz) against you. Ok, so now I have a question for you. If you had $5000 to invest for the mid-to-long term (15-20 years), what would you invest in?

#41 Aussie Roy on 07.27.11 at 12:25 am

Smoking Man on 07.26.11 at 10:45 pm

I get no respect.

True respect is earned and cannot be demanded.

Obviously your impression of your own success is not shared by many of your peers. Perhaps their opinion isn’t based on your narrow criteria but on a more whollistic view of you?.

Personally I find it difficult to understand why you don’t think the other parts of your personality (alco, prostitue loving etc etc) isn’t a negative influence on the way people view you. Maybe I’m just old fashioned.

“watch and learn my little grass hopper tax farm slaves”

Don’t you think its hard to respect anyone who is clearly as demeaning to others as you are?.

I hope I haven’t been too negative the above is not meant to insult you, so please don’t take it that way.

Aussie Update

Australia’s CPI rose 0.9pc in June quarter

http://www.news.com.au/breaking-news/australias-cpi-rose-09pc-in-june-quarter/story-e6frfku0-1226102640219

Aussie dollar hits new record high, breaks through 110 US cents

http://www.news.com.au/business/australian-dollar/aussie-dollar-hits-new-record-high-breaks-through-110-us-cents/story-fn6t6wad-1226102655526#ixzz1THBQO9wu

#42 T.O. Bubble Boy on 07.27.11 at 12:29 am

Wow – add Victoria B.C. to the list of places where it is tough to sell a house these days. I don’t think that I’ve ever seen more For Sale signs.

And, the prices make absolutely no sense… almost every house is at least $500k, in a city with very few jobs beyond Government and Tourism. I guess that’s why virtually every house has a rental suite of one sort or another.

#43 Nostradamus Le Mad Vlad on 07.27.11 at 12:31 am


“In praise of normal, where all the citizens and nutbars of this great land come to sip. And foment.” Well, Vancouver’s normal, TROTW is delusional and I’m nuts.

“The longer the bank delays, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later. Then the economy’s truly toast.” — Hit the head of the nail with that statement!

“. . . without accepting record debt. And still we’re being lied to.” — 4:46 clip Johnny Carson with a lie detector test for politicians, such as Jean Chretien and Jimbo and Stevie. The film Liar Liar stands out, as it is clear that politicians must be first-class liars before stepping into the political arena.
*
The Rothschilds in Hong Kong? Guess they figure the west is toast; Bonds Bombed “The massive trade wasn’t placed in bonds themselves; it was placed in the futures market.”; Obviously the US was never going to default anyway; 3:02 clip George Carlin and Bill Hicks tell it like it is (some naughty lingo); The US Fed says its’twelve banks are private; The average Cdn. woman; Does anything matter anymore?

Libya used to be Paradise for some, until the NATO-US war (on behalf of you-know-who), and NATO butchers bomb hospital in Libya; Further Evidence The Oslo attacks were FF’s, because Norway agreed to support a Palestinian state, and Norway Shootings Further info.; Iran and Russia — cozying up, but US warns (interferes) again.

#44 Investx on 07.27.11 at 12:32 am

SunTV is a refreshing break from the politically correct mainstream media. Love it.

#45 Dr Doom on 07.27.11 at 12:34 am

Smoking Man………

You are my new hero!!!

#46 GTA Girl on 07.27.11 at 12:36 am

It’s now roughly 10-12 weeks since homes in my subdivision went up for sale. There is 9 total. All McMansions w/pools, Downsview kitchens, finished basements w/wet bars and steam showers. 5,000 sqft +. When the market was humming, year ago, onesold for $1.9mill

3are now in the race to the bottom. Dropping from $1.7 to now all sit at $1.28mill. A new listing just appeared at $1.1. With ravine.

No bites. 1home was pulled off the market. Owner can’t take the hit. He bought it for $1.2 4 yrs ago, poured hundreds of thousands into it. He’d lose. But maybe that be better than staying in it.

Nothing is selling. The MLS red dots light up the whole area.

GTA north is drying up. There is no buyers

#47 Devore on 07.27.11 at 12:39 am

#17 Smell The Coffee

Sobering, if depressing analysis.

Many people seek to own their house as their top priority in life, because they believe owning land is how you get rich, or at least reasonably secure. But the point of owning is to minimize your costs. Housing is an expense. Buy when buying is cheaper than renting. Rent when it’s cheaper than buying. Figure out what will cost you more money, then don’t do it.

But, to continue the depressing analysis, ownership does not put you in a higher class. You are still a serf, and you will always be a serf. Granted, today’s serfdom is vastly more comfortable than that of years past, but it doesn’t change facts. A gilded and feathered cage is still a cage.

#48 Chaos on 07.27.11 at 12:43 am

Video killed the radio star Cathy…

it all started to go sideways when we stopped listening to music and started watching music.

Now people who can’t walk and chew gum are walking and talking on their video phones…like they are making million dollar deals that can’t wait…

The video phone is the killed intelligence.

The new normal. God help us.

End of rant.

#49 April Showers on 07.27.11 at 12:44 am

@24: Brad in Cowntown… What is it with you? Can’t Understand Normal Things?

#50 Utopia on 07.27.11 at 12:52 am

#157 BrianT on 07.26.11 to #51 Utopia

“You constantly throw out these “doomers” and “goldhuggers” insults while you consistently type line after line of idiocy”.
——————————————–

Thanks Brian. That was actually my best laugh of the day yesterday. You have sent a few barbs my way lately too. What is so fascinating is that you never directly deal with any of the comments you say you object too.

I can only assume you secretly agree with them.

Anyway, we can’t all get on the Doom and Gloom wagon together. That cars already fat and overloaded. Someone always has to take the other side of the trade. There is far too much negativity with the comments on the economy already. If everyone had no faith we really would be doomed.

But I do not think the end of the world here. This is just a part of the long-run business cycle. Maybe not a good part and, granted, it is worse than most expected. I don’t see anyone starving here though. Do you?

But does it actually bother you that I speculate the US economy will start expanding again once this cycle reaches a conclusion? Honestly man, that is a pretty reasonable outcome.

Eventually US housing prices WILL hit a bottom. We can already see that savings rates are on the rise there. A good sign. Eventually, job creation will kick in again too and you might see a return to more stable consumption patterns (more conservative than in the past though).

But you guys can’t seem to see that. Let me ask you this,…..If you are correct that the economy is doomed, Gold heading to the moon, financial collapse and armageddon looming on the horizon,…… then why are most trained economist not predicting anything of the sort?

Perhaps you imagine they are all part of a grand conspiracy of silence engineered to dupe the middle class out of all it’s wealth.

Seriously though.

Why are the bank economists not running for cover. If gold was such a sure thing don’t you think that Scotia Mocatta would stop selling and hoard instead?

Do you hear the bank economists running around shouting “the sky is falling, the sky is falling!” Of course not. Only you guys who read too much doom and gloom are freaking out and getting way too invested in a single asset class.

And look what that’s done for the economy.

#51 not 1st on 07.27.11 at 12:55 am

Garth, hows that revitalized U.S. consumer spending bet working out for you?

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/david-rosenberg/where-is-the-us-economy-headed-consumer-spending-tells-the-story/article2110390/

Cmon man, no shame in admitting you got that one wrong.

If you are referring to picking up a US property, I got it right. One does not buy investment real estate for a flip but (as my posts pointed out) for a multi-year hold. I have no doubt of the outcome. — Garth

#52 Golden Stewie on 07.27.11 at 1:01 am

hahahah, genius picture, genius post, its what brings us back every day! Congrats.

#53 Hoof-Hearted on 07.27.11 at 1:06 am

#4 Boombust on 07.26.11 at 9:25 pm

Port Moody condos are toast, alright. I’ve seen it up close and personal…

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

Any numbers?

If so, the periphery is getting closer to the epicenter(ie Vancouver)

#54 Hoof-Hearted on 07.27.11 at 1:12 am

Fukushima ?

Anyone reviewed some views that the radiation counts are simply after the long-established fact.

ie Reactors all over the world , even health care facilities , have allowed radiation to leak out into the environment …but official attention has only been made after the Fukushima event….its always been there….or Fukushima is not the primary source of high counts.

#55 somecatchphrase on 07.27.11 at 1:14 am

What does it cost to actually build a house, per square foot? Please enlighten me and the blog –

I’m talking bricks and mortar – concrete, lumber, drywall, electrical, plumbing, labor, roofing, etc?

If someone could give me an idea of what “fair value” is, independent of lot/land cost, that would be much appreciated. This is the key point, what are houses worth, independent of lot/land cost?

If that rough estimate could be broken down into very rough categories, such as “economy”, “middle of the road”, and “luxury,” that would be a huge bonus.

I’m looking to get a sense of what houses are really worth, based on the cost of construction.

Any comparisons to current versus historical prices for building materials and/or labor would also be much appreciated.

In other words, would someone please explain why should homes cost more than, say for the sake of discussion, more than 5% or 10% of median income?

Houses have no intrinsic value. They learned that one in Detroit. — Garth

#56 doc on 07.27.11 at 1:16 am

#24 Brad in cowtown Perhaps you have a dysfunction of the heart. That can be a risk in “cowtown”. I just shared Garth’s comment ” If you want a home spend some love” with my honeybunny, (who has no interest in Garth’s blog) because I felt it was profoundly true. I rented some awful houses when I was young and poor but they were always homes because of the effort we made to feather our nest. Now, as it happens, I do have substantial amounts of gold and silver and might be a “metalhead” in your mind but I recognize human wisdom when I hear it expressed. It is possible to learn from those with whom you disagree on some points. Regardless of the type of head I have, I still learn from the heart. That is where the real gold is found, even in cowtown.

#57 ontheshoreline on 07.27.11 at 1:16 am

Nice comments #17.
I always tell people,”You think you own that property?Try not paying your property tax for a year!”
Property tax is like an interest only loan that you can never pay off the principal.
I’m off to squat on Crown land I think.

#58 somecatchphrase on 07.27.11 at 1:17 am

Correction: Why should debt service cost associated with home ownership exceed 5% to 10% of median income?

#59 CalgaryBoy on 07.27.11 at 1:28 am

In the past month, I know of 2 people who have purchased houses with their significant others. And both got mortgages at the EXACT amount they were approved of. Talk about high risk!!!

One was telling me how lucky he was because the house was just about to go into foreclosure and was told it would have been too much hassle and more work if they didn’t get it now!

Wouldn’t he potentially save thousands of dollars if he waited for the house to go into foreclosure to get a sweet deal?

Or, as horrible as it sounds, knowing the position the seller is in, negotiate the hell out of it; both parties win: the seller doesn’t have “bad” credit and the buyer(s) save money and “save” the seller from obtaining bad credit, although he’s already lost $30K in this market.

At any rate, people are so blindsided by homeownership. They don’t listen to the risks. What can I do now but be happy for them.

#60 Ex-Cowtown on 07.27.11 at 1:50 am

Smoking Man:

I have three words for you:

Lith. I. Um….

#61 Utopia on 07.27.11 at 1:57 am

And then I ran across this beauty in today’s Globe discussing how the US will continue operations should the debt ceiling not be raised.

http://www.theglobeandmail.com/report-on-business/economy/credibility-of-aug-2-default-deadline-under-fire/article2110617/

“Some analysts say the Federal Reserve could come to the administration’s aid to avoid default. The U.S. central bank could buy the government’s gold, giving the Treasury Department enough cash to avoid default for about three months. The Fed could then sell it back to the Treasury when the crisis is over, Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington who worked at both the Fed and the Treasury, said in an interview with Reuters Insider last week” ~~Globe and Mail, Kevin Carmichael.
————————————

Didn’t I tell you just last week that most of the Gold will eventually end up in the hands of Central Banks? That once this was accomplished the price of the yellow metal would be “managed”.

I can almost smell confiscation coming.

If the Fed gets that Gold, it is not going back to the Treasury for a long, long time. The government is broke. It is difficult to imagine how it would be able to repurchase gold if it can barely fully fund the military anymore. Harder still to imagine the public agreeing to free up cash to buy it back as austerity measures and cuts to Social Security kick in.

Can anyone tell me what is the real difference between a government that “borrows” the pensions of it’s citizens to fund operations and one that will resort to strong tactics once the money really runs out?

And since it is obvious that valuing gold is central to managing the currency and bolstering credibility, it is therefore all the more obvious that the Treasury will seek to possess that which is currently held by private investors.

No wonder the scrutiny of who is buying has been stepped up in the US and the new 1099 forms require any purchase over 600 dollars be recorded. Not much will slip between the cracks anymore.

Looks like a reasonable probability to me. And I am not even a conspiracy theorist. Just telling it how I see it will all play out.

#62 FOFOFOA on 07.27.11 at 2:16 am

It seems #5 nemesis is also a sucker for assonance, but then again, who isn’t?

#63 Off the River on 07.27.11 at 3:30 am

Mr Buyer. Korea has indeed been good for me, but I still lack a definite exit plan and I am frusterated with the currency issue.

I bought my house nine years ago cash with my savings, it has increased in value and I rent it out. Pays the taxes, up-keep and small renovations. I could sell at a profit, but I’d also like to move into it. It’s a great location; next to schools ball feilds and hockey rinks (Not far from the location Garth mentioned in rural NB).

I’m mostly concerned with the transition I will make, how to do it and when. I love living in Korea, but I’m a small town Maritimer at heart.

I miss salmon fishing fiddleheads and Mooshead beer!

#64 Adam on 07.27.11 at 3:31 am

Garth, you mentioned once that you would sometime explain why Quebec hasn’t seen an increase in property values like the rest of the country.

#65 MortgageFree on 07.27.11 at 3:31 am

Smoking Man, I’ve learned more from your posts on this blog than from a bundle of books I read about the markets – thanks a million! If you ever feel like chatting with an aspiring trader (I’m a code smith too, as you would say), drop me a note. Garth has my email through this post – I’m sure he’ll be kind enough to provide it to you upon request. Looking forward to it.

#66 Jay Currie on 07.27.11 at 4:04 am

“Normal” is not coming back.

The demographics, the bond market and the housing bubble all say that the “normal” of what? The nineties? The eighties? is dead and buried.

Garth talks about a correction and then a melt and I suspect he has it about right. However, “normal” was a straight line to the moon for RE. There is no “correction” and “melt” in that normal.

So, when to buy a house? Well, certainly after the correction; but recognize the implication of the “melt”. For a very long time, houses are going to go down in value. They will depreciate.

Buy a house for $700K and be prepared to see 1-5% per year drop off its value after the correction. Ten years on it will be worth 600K in inflated dollars.

At the moment I rent and in less than a year, based on the Victoria market and the neighbourhood comparables, the house I rent has dropped a minimum of 100k, more likely 175.

And it, like the rest of the up market houses in Victoria, will keep dropping. But renting…well, here is what 3k/mo gets you in this wee town:

http://victoria.en.craigslist.ca/apa/2513320428.html

It was on the market for several months at over 2m. Apparently Victoria is plumb out of fools.

#67 Blobby on 07.27.11 at 4:29 am

@Calgary Illusion : How about this one.. Dont borrow more than 3 times your yearly wage.

I.e. if you earn 60k a year – your mortgage shouldnt be more than 180k.

if you’re buying with a partner and are factoring in 2 wages.. then no more than 2.5 times.

Anything more than that is just rediculously risky (imho)..

#68 iq42 on 07.27.11 at 4:32 am

Stupid question… but
90 – age = % net worth in a house

then downpayment + mortgage = worth
or
just downpayment = worth?

The mortgage is a liability, not an asset. Equity only. — Garth

#69 timo on 07.27.11 at 5:40 am

http://www.economonitor.com/gmac/2011/07/26/ellis-fox-business-interview-can-investors-still-profit-from-gold/

good video on the pro’s and con’s on gold.

#70 Aussie Roy on 07.27.11 at 6:17 am

Aussie Update

Real estate slowdown forces ‘massively reduced prices’ at Newport Quays

APARTMENTS held out as the future of metropolitan living are being sold at discounts of up to 59 per cent.

Advertisements for penthouses at Newport Quays at Port Adelaide trumpet “massively reduced prices”, and a penthouse originally selling for almost $900,000 has sold for around $400,000.

BUT WAIT

“A lot of them have sold very quickly, so it is having the desired result. I don’t think they will have an impact on price.” – LOL.

http://www.adelaidenow.com.au/property/news/real-estate-slowdown-forces-massively-rediced-prices-at-newport-quays/story-e6frefgc-1226102335738

#71 House on 07.27.11 at 6:57 am

Dollar at $1.06, Inflation on the rise, unemployment not going down, car sales in the doldrums with employee pricing and leasing and soon to become the only country in N America with a AAA rating. Yes I can see Art Carney( I just thought he was so funny in the Honeymooners) rushing in to raise rates in September. That ship has already left port, when he should have done his job last year. Unfourtunately Art has NO intension of actually raising rates bcause that would make the currency go higher and that would, the experts tell us, mean the US would not buy our oil and metals. When a car dealer in Van tells us that when buying a new car it doesn’t matter that the loan on the old car is higher than the value of the trade and you can take a three month holiday on payments and you can include your credit card debt in the new loan, I THINK IT IS ABOUT TIME FOE ART TO GET ON THE JOB!

#72 Dontcallmeshirley on 07.27.11 at 7:20 am

Meanwhile, back on Earth, the Royal Bank did a $350 million note issue (maturing 2016) @ 2.35% coupon; Scotia did a $2 billion bond issue (also 2016) @ 2.15% coupon.

Capital continues to flow into Canada at “low” rates for significant term.

Smart money says Canadian gov’t takes one for the North American team and helps out the US by buying a large US Treasury position. Kinda like the EU…

#73 keny65 on 07.27.11 at 7:22 am

I’m from n-b the only place in the country where house prices are reasonable.I think that has alot to do with the mentality of the people towards real estate…people don’t see houses as investements out here.Hell,most people out here don’t understand the concept of investments period!The acadians of this province have a sense of community and we live from governement check to governement check and we just don’t give a f*** if the government fails…bonus!We have this anarchistic view of the world and still have small town and family values.I think that comes from the fact that my people never stopped struggling so we don’t really see the difference between good or hard times, we figure out a way with what we have,nothing ever changed…and we got the providence of the sea to feed us!I think the rest of this country has alot to learn from acadians…we might be a small nation but we were the first to settle north america(from europe) so we have adapted many times to this rat race.The english of this province or this country don’t understand our”joie de vivre”even though we are poor as f***…maybe it’s them that don’t get it! P.S.Oh yeah by the way I’m having lobster and wild atlantic salmon stuffed with scallops with an oyster entree for supper while I wait for my UI check…life is good!

#74 Utopia on 07.27.11 at 8:07 am

#29 Guy_in_Regina to #22 Utopia

“Oh come off it. Most people still start in a “starter home” – they just costs a heck of a lot more than they used to.
—————————————-

Ha! Good one. You mean like 200 or 300 thousand more. Or like three quarters of a million more in Vancouver and Toronto. Gee, housing was never so affordable. This must be a balanced market….

Starter houses no longer cost an arm and a leg. They only require you sell your soul and your birthright nowadays. Anyway, smarten up Regina guy or I will ride over to your house and throw some manure on your front lawn.

Got some stuck on my boot now.

#75 waterloo Resident on 07.27.11 at 8:17 am

Garth, you said: ((( “interest rates will rise simply because Brother Carney knows keeping them low will mean 100% home ownership and so much real estate porn that we’ll wallow in debt forever. Then the economy’s truly toast.”)))

Please tell me; what is wrong with 100% home ownership? Isn’t that the GOAL of any normal government? and what is wrong with us wallowing in debt forever?

I’m with you, comrade. Why shouldn’t we all drive Mercedes? — Garth

#76 waterloo Resident on 07.27.11 at 8:23 am

Garth, you said: (((“Many markets are already in decline. Try selling a condo in Port Moody, an acreage outside Penticton or a McMansion in Caledon.”)))

I visited my sister in Newmarket Ontario yesterday and of 10 homes that were for sale last week, 9 of them have sold this week. I called up the broker on two of them and both of them sold for more than $100,000 over list price ! So I don’t know what you are talking about when home prices in Newmarket and Aurora are selling in less than 2 weeks, and for more than $100,000 over list. ???

Garth, are you telling us sweet lies just to make us “feel” better?

I may just have more info than your sister. — Garth

#77 DodgedBullet on 07.27.11 at 8:44 am

*noob* All this talk of ETFs has gotten me thinking… well… about ETFs (suprise!)… Any preffered sector ETFs for the Green energy sector in the blogdogs portfolios? (Long term investment).

#78 Kaganovich on 07.27.11 at 8:53 am

Utopia

“But you guys can’t seem to see that. Let me ask you this,…..If you are correct that the economy is doomed, Gold heading to the moon, financial collapse and armageddon looming on the horizon,…… then why are most trained economist not predicting anything of the sort?”

While I don’t totally disagree with what you are saying wrt how doomed the global economy is, I still wouldn’t put too much faith in the predictive powers of trained economists. How many predicted the the 2008 crash again? Steve Keen has some choices words on that topic as well as Yves Smith (Econned is the title of her book). Diplomas don’t mean you can predict the future.

#79 timo on 07.27.11 at 9:07 am

http://michael-hudson.com/2011/07/greece-now-us-soon/

great video on how and why what we are seeing in Greece will spread. Wow!

#80 Shane on 07.27.11 at 9:12 am

Garth, What about buidling your own home you dont mention that much?

Shane

Are you a builder? If not, forget it. — Garth

#81 Utopia on 07.27.11 at 9:15 am

#74 Keny65

“P.S.Oh yeah by the way I’m having lobster and wild Atlantic salmon stuffed with scallops with an oyster entree for supper while I wait for my UI check…life is good!
———————-

What. No Bordeaux or Apertif’s with the main course and EI Cheques? Tough break to be Acadian. You would think there was more than just seafood in your future (yes, I am getting hungry. Freaking LOVE Lobster!!!).

#82 Another Albertan on 07.27.11 at 9:16 am

#73:

Husky Energy did a $1.2B bought deal a few months ago. The banks are still stuck trying to find homes for the remaining $400M and are panicking.

As of about June 1, it became incredibly difficult for resource companies in Canada to raise funds. The appetite simply disappeared… The parade of investment bankers and lawyers through our office just ceased.

When money is flowing unabated into TBTF entities and is avoiding unhedged assets still in the ground in politically-secure locations, we are still firmly ensconced in Bizarro World.

Sure, we could still raise our capital, but not at anything that would look like a preferred or “smart” rate. If the bankers can’t sell Husky to pension funds and other institutional investors, they sure as hell are going to have a tough time with a junior.

When I hear through many hours of socializing during Stampede that other Calgary firms were also “chasing a window” back in the spring and “that window closed hard” in early June, there’s only one reasonable explanation… everyone was trying to get a slice of hot money before QE2 ended at the end of June and everyone was still hoping that QE3 would be announced. When it became clear that QE3 would not be an immediate follow-on, speculative money flow went cold.

What is amazing is that no one will admit or give an explanation of what that “window” was. I point-blank made the assertion in front of some American i-bankers and hedge fund managers that it was the QE2 window – the outright propping of the US economy. All I got back was a bunch of nervous looks. One guy out of five nodded his head, breaking rank and clearly talking about that which is verboten.

No injection of financial heroin == No speculative investments.

Everyone else’s mileage may vary.

#83 Andrew toronto on 07.27.11 at 9:20 am

Garth, with banks ,saying a correction is coming and economist saying the same , some are making a case that , no correction is in the cards and that rates can stay low for a very long time has well has prices to flatline and not go down, what do you put the risk of a 25percent correction , a 10-15percent correction and a flatline , In the past you gave us a 20percent chance of a depresion ,which is out of the cards now.. see below td price predictions.. also Carney not raising rates till early 2012 so we could see more appreciation .. I ‘ve been sitting on the sidelines for 3 yrs and the last 2 yrs have seen new homes go up 20percent a year north of toronto..that right.. from 392k from oct 2009 to 515K,, what the F. what if your wrong and this continues like your saying.. sounds either way where all doomed..

http://www.cbc.ca/news/canada/story/2011/07/13/housing-prices-fall-td.html

#84 eddy on 07.27.11 at 9:28 am

video-

Money and inflation

http://www.youtube.com/watch?v=r0mOTJR_1Lo

#85 lonely limey on 07.27.11 at 9:32 am

Elmer,

They also say the experience of owning a boat can be replicated by standing under a shower and tearing $50 notes.

#86 Oasis on 07.27.11 at 9:32 am

So. let me get this straight.

Gold is going up because of the politics in washington and the debt ceiling, and when they come to an agreement, gold will go down.

hhhmmm… let’s think about this for a moment. the US is broke, and can’t pay for anything unless they increase their national debt to 120% of GDP.

sure this is bad for gold. lol.

gold continues to go higher, and the USD continues to go lower. nothing will happen when the clowns in washington finally agree on something.

the USD will continue to collapse, and gold will continue to move higher.

The US is not insolvent. — Garth

#87 The InvestorsFriend (Shawn Allen) on 07.27.11 at 9:40 am

YOU GET NO RESPECT?

It’s human nature to fail to respect our betters. Or to admit that there are any better than us. Especially for men.

Think of evolution, if everyone respected the village chief too much he would father ALL the children.

All women want to think they (and they alone) are worthy of marriage to the great chief or the great warrior. (Sorry, ladies but I am already taken)

Even the likes of Warren Buffett is not respected by many.

We love to bring down the mighty.

#88 Jane on 07.27.11 at 9:48 am

Garth, work your 90 – age (35) formula backwards please. The net worth is 500k. How much house can we afford? How much down? How much mortgage in your opinion?

How old are you? What’s your income? What are your other assets? What community? Family? — Garth

#89 kimi on 07.27.11 at 9:52 am

You should buy property if you understand this is not the end goal of life. Get a grip. It’s a house.

If you want a home, spend some love.
– Garth
——————————————————
That, was Beautiful!

#90 kimi on 07.27.11 at 10:04 am

#32 Utopia,
You are right, now you need a certificate for everything and then some. Years ago, my dad build homes, he had his plumbers ticket, electricians ticket. and his building inspectors license… and he didn’t have to take years long courses, just a test.
Now you need to be registered, licensed, qualified, backed up and updated just to fit a light fixture. Hell, even a realtor needs to update his license, every two years, cost? 2000.00 smacks. Big Fat Gov’t/Institute Money Grab. They get everybody.

#91 kimi on 07.27.11 at 10:08 am

Elmer…If you think a house is a costly possession, you should buy a boat. They say the two happiest days with your boat are the day you buy it and the day you sell it.
—————————————————–
That is funny, you should see the deals you can get at Coal Harbour on Boats. You can get a boat dirt cheap, but the moorage kills ya. Its double my rent.

#92 BadMother on 07.27.11 at 10:13 am

This came out in May, but an interesting article re: gold in Fort Knox. Seemed obvious this guy was set up a la Assange:

http://www.eutimes.net/2011/05/russia-says-imf-chief-jailed-for-discovering-all-us-gold-is-gone/
*****************************
A new report prepared for Prime Minister Putin by the Federal Security Service (FSB) says that former International Monetary Fund (IMF) Chief Dominique Strauss-Kahn was charged and jailed in the US for sex crimes on May 14th after his discovery that all of the gold held in the United States Bullion Depository located at Fort Knox was ‘missing and/or unaccounted’ for.

According to this FSB secret report, Strauss-Kahn had become “increasingly concerned” earlier this month after the United States began “stalling” its pledged delivery to the IMF of 191.3 tons of gold agreed to under the Second Amendment of the Articles of Agreement signed by the Executive Board in April 1978 that were to be sold to fund what are called Special Drawing Rights (SDRs) as an alternative to what are called reserve currencies.

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

#93 Golden Stewie on 07.27.11 at 10:16 am

Houses used to somewhere to live, then the Gov realised if we keep pumping cheap credit they can stoke the economy. HGTV stocking the imagination fire, cheap credit the fuel. The increasing wealth(!) everyone felt turned homes to an giant ATMs…. right up to the point credit is no longer easy to get.

A little anecdote….

A few years ago at a fund raiser they had blackjack tables set up with fake money for people to play with (cue discussion about fake money!).

Anyway, as it was supposed to be a fun night, the dealer made sure the “winners” far outnumbered the losers. Every one was having a great time, wads of “cash” in their hands inches thick.

Anyway at the end of the night was an auction using the winnings for goods donated by local businesses.

A meal out at the local Pizza joint went for about $300k, Afternoon at the Spa went for $875K.

I made the joke that this was a prime example of what happens when the “money” is made super easy to get. Obviously after a barrel of beer the joke was lost on everyone. Either that or it wasn’t funny!

Money = Debt to the central banks. Keep the debt flowing & “prices” of all homes will continue to rise but the Value falls. This is the insidious nature of inflation. If everyone has a million dollars, no one is rich anymore.

#94 BrianT on 07.27.11 at 10:18 am

#79Kag-Memories are very short-in 1998 (13 yrs ago)-there was widespread agreement among all MSM economists that the USA would run continual budget surpluses until the debt would be actually very small by this point. It was all TOTAL B/S! People should keep that in mind when they hear an establishment economist telling them how things will be 13 yrs from now. Which group of economic forecasters most accurately predicted this current scenario? It was the ridiculed and hated “goldbugs” such as Peter Schiff-anyone that denies that fact is lying to you.

#95 disciple on 07.27.11 at 10:35 am

#17 Smell The Coffee…wow, I thought I was the only nutbar who realized that you never actually “own” your home or land. Glad to see others have awakened. Let the Revolution begin…

#49 Chaos…Kindly stop with the ranting on the younger generations’ use of technology. I find it hypocritical and short-sighted. Do you dig for your own well water? Do you personally kill or grow what you eat? Technology is your ally, ignorance is your enemy.

#56 catchphrase…about $50,000 to $100,00 or more depending on the size of the home and the bells and whistles will cover most of the materials to build a home at currently inflated costs. Labour is extra. I see the new builds now are not even using real wood anymore for the joists. Now they glue OSB between grooved 2×2’s creating an I-beam, and claiming it is stronger over longer lengths, but I’m not convinced of that. Seems like cheap cost-cutting to me. How does it even pass fire code? Why is Mike Holmes silent on this?

#74 keny65…In many ways, you eastcoasters are richer than the rest of us in spirit, and also the main source for our military, which is the reason the gov’t wants to keep you economically dirt poor, so thank you!

Okay, let’s see…did I address every…oh yeah, Utopia. Where do I begin? There is no such thing as normal. Times have changed, most families are in fact more impoverished, via lack of purchasing power and savings. It’s not completely their fault, it’s by design. I contend, as always, that the problem is in their minds, not understanding the enormous power they have over their own destinies, allowing their greed and fear of death to convince themselves that money is scarce and that they have to hoard it. Not understanding that THEY are the money. But I know it’s hard to conceptualize. Viewing the latest self-glorifying rapper in his latest bling bling video may help. They have it right in the sense that you are what you think. Whatever you think…you are – disciple.

#96 kilby on 07.27.11 at 10:40 am

#33 Elmer
Thanks a lot! The only thing that takes my mind off real estate is planning to buy a boat next year…..

#97 refinow on 07.27.11 at 10:48 am

Here is my spin on the next couple of weeks….

The US will likely not make the deadline, however we will not see a global meltdown. Initially we will see the US $ drop further as a punishment for “handing in their homework late”. Approximatly one week later, they will successufully raise the debt ceiling, (like they actually had anyother choice). This is the all time greatest game of chicken to see who flintches first.

But the end result, and would have happended anyways is the US will lose the AAA rating… Interest rates will now have to increase in the US.. Meaning their Prime rate…

How will we be affected in Canada……

Our dollar will gain more strengh due to the weakening US dollar, we will be the last AAA rated country in North American. Foreign investment will seek out our AAA rating, and start to migrate into Cdn Bonds, which will lower Bond rates, pushing mortgage rates lower.

My crystal ball says we may actually see 5 year fixed mortgage rates go below 3.40%. But this will not be a long term trend, the US $ will gradually return back to Par, the US economy will trudge forward.

We wil not see an accereration of the CDN housing market with the reduction of rates, because the majority of home being purchases are still being financed with Varaible rate mortgages, and PRIME will not change one bit during this time of economic uncertanty….

Nothing more then a whole lot of smoke, with no fire…

#98 Fuzzy on 07.27.11 at 10:56 am

When you say monthly mortgage + taxes should not surpass 40% of monthly income, you mean *NET* income, right?

Unless you live in Vancouver. Then just roll over and take it. — Garth

#99 Brad in Cowtown on 07.27.11 at 11:00 am

#87Oasis on 07.27.11 at 9:32 am
hhhmmm… let’s think about this for a moment. the US is broke, and can’t pay for anything unless they increase their national debt to 120% of GDP.

They’re not broke. That’s ridiculous. They’ve got some debt problems, yes. Their dollar will continue to fall, yes. Because of its inverse relationship, gold will continue to rise, yes.
But the US is not broke.
Dig beyond the lies being told by politicians. If the U.S. defaults (like Garth has said many times… they won’t), it’s because they chose to, not because of the debt ceiling farce. Don’t take my word for – ask Peter Schiff. He’s a smart guy and he’s usually bang-on.

#50April Showers on 07.27.11 at 12:44 am
@24: Brad in Cowntown… What is it with you? Can’t Understand Normal Things?

Boy, Garth sure touched some souls tonight. Well done sir.

#57doc on 07.27.11 at 1:16 am
#24 Brad in cowtown Perhaps you have a dysfunction of the heart. That can be a risk in “cowtown”. I just shared Garth’s comment ” If you want a home spend some love” with my honeybunny, (who has no interest in Garth’s blog) because I felt it was profoundly true. I rented some awful houses when I was young and poor but they were always homes because of the effort we made to feather our nest. Now, as it happens, I do have substantial amounts of gold and silver and might be a “metalhead” in your mind but I recognize human wisdom when I hear it expressed. It is possible to learn from those with whom you disagree on some points. Regardless of the type of head I have, I still learn from the heart. That is where the real gold is found, even in cowtown.

I agree – I have learned immensely from Garth. It was evident from day 1 that he’s a sharp dude. I can even concede that I might be wrong about continuing to hold gold, and he might be right about saying “time to harvest.” I don’t think so. But is it possible? Of course.

However, flat out, I don’t agree with using the term “honeybunny” on a public forum. Some lines simply shouldn’t be crossed.

#100 Utopia on 07.27.11 at 11:04 am

# 87 Oasis

“…..the USD will continue to collapse, and gold will continue to move higher”.
—————————–
Oh look who’s back. I notice you were nowhere to be found when the US dollar was rising (exactly as I predicted it would).

Back in April I said the dollar would stage a recovery. You called me an idiot….but I was right in my assessment and you were not. It has been stuck in a trading range since then. That is not the point though. The dollar did rise as expected and has held ground since that time.

In any event, you sorely underestimate America my little friend. It is the worlds largest grains/agricultural exporter. Period. Not a lame duck country by a long shot.

And this is a very hungry world.
See, it is really all about food, not Gold, you fool.

#101 Snowboid on 07.27.11 at 11:14 am

12 Off the River…

If you have 200 grand in Korean currency I don’t think you will find a suitable investment that will help support your lifestyle when you return.

I have a few thousand (won) I can give you from my last trip to Seoul if that helps!!

Okay, I realize you probably meant C$200,000 worth of Korean currency. Depends on what your future plans are, but maybe US real estate or Canadian bonds?

Despite the continuing price dips in the US, some areas are showing price gains – such as the Valley of the Sun (and sand) where we bought a few months back.

This was our first RE venture in the US and we were surprised at how easy it was and the closing costs were miniscule by BC standards.

No transfer tax, closing costs were $ 280 all inclusive. The entire deal was done electronically (Docusign) and we closed 17 days after our offer was accepted.

The total dollars into the home are less than 25% of our net worth – the rest in short term liquid investments.

We may eventually buy in the Okanagan, but are currently happy to have our landlord subsidize our rent to the tune of about $ 1300 a month!!

#102 househornyhousewife on 07.27.11 at 11:16 am

Garth,

Great post today ! Truer and wiser words were never spoken.

Buy real estate for the sake of ownership (as opposed to investment) if you can truly afford it and rent if you can’t. There is absolutely no shame or foolishness in renting a place as opposed to buying it and if anyone tells you otherwise, tell them to mind their own damned business.

Too many of us care too much about what others think of us and not enough about what we think of ourselves.

HHHW

#103 Medic on 07.27.11 at 11:25 am

Either this is a misprint or things are slowing down in Aurora.

http://www.realtor.ca/propertyDetails.aspx?propertyId=10372433&PidKey=7607210

#104 Amarillo on 07.27.11 at 11:26 am

Am driving to Van Island from Alta today via US (cheaper gas, better highway, cheap alchohol). Will see the carnage for myself.

#105 bbcoq on 07.27.11 at 11:27 am

Reversion to the mean:
http://pragcap.com/four-mean-mean-reversions

#106 Daisy Mae on 07.27.11 at 11:33 am

“If you want a home, spend some love.” – Garth

Yes….’a house does not a home make’.

See, cowboys. Chicks get it. — Garth

#107 Live Under Your Means on 07.27.11 at 11:36 am

I think you need a * hug*. — Garth

I’m in need of one, but not for the same reason.

I hope it is not for reasons of health… — Garth

#108 Joe on 07.27.11 at 11:42 am

#47 GTA Girl – Same thing happening in Lower Mainland suburb neighbourhood I’m in. Nothing going on and these are “starter” homes. Older listings disappear, but no sold signs. Occasionally a house sells, usually by people who had a good agent that marketed well, lots of open houses, changed pics and description on MLS often, and probably counselled clients to take a low ball offer, but that’s just a guess. One house sat on market since I think last winter. Owner had left the country or something because of a transfer. Price drop, price drop. Finally the sale sign disappears. This week it reappeared, but all the pictures were new, no picture of the front of the house, AND they totally redid the kitchen and repainted the place. Price was $416,900 when they took it off the market, now it’s $404,900. So they renovated and then they took a haircut at the same time. Bizarre…

Another development nearby is something I keep an eye on. http://www.provinceton.com/highgrove/blog/ Their blog said in May they’re gearing up for a “sell out event.” Still waiting for that to happen. In April they boasted 70% sold out, May it was “only 6 homes left!” According to my calculations that’s two ways of saying the same thing, so no change since April, I think probably since the change in the mortgage rules they haven’t managed to sell anything.

Purely anecdotal, but just a couple of things I’ve noticed.

Pure

#109 westernman on 07.27.11 at 11:49 am

This ones for Mr. Buyer – Yes you will go quietly or the powers that be will send a couple of guys in striped pants with guns to your door to make sure you DO go quietly. What did you think those government gunslingers were for anyway? To serve and protect? Your problem is that you are laboring under the false assumption that you are living in a free country….
There, thats your morning reality lesson Mr. Rambo – you can now go back to watching Walt Disney animated features now.

#110 Helicopter Ben on 07.27.11 at 11:50 am

UTOPIA #101 ……..”In any event, you sorely underestimate America my little friend. It is the worlds largest grains/agricultural exporter. Period. Not a lame duck country by a long shot.” …………………………………………………………………………. Yeah but the average age of a Farmer in North America is 58 years old, there wont be any “added”jobs created . I dont see where all these people who are unemployed and about to be unemployed are going to find work. I disagree with Garth i do believe the states is insolvent just for the fact that they cant afford to pay Social security and Medicare especially with the baby boomers about to retire.100 million of them over the age of 50. sure they can raise their debt ceiling and they will but there comes a point where inflation runs wild when you are flooding the economy with fiat money, so that wont work either. so less jobs and more unfunded liabilities that need to be paid out.i heard yesterday for 3.7 million people their 99 weeks for unemployment cheques runs out, and how many people behind them? and how many more million houses to be foreclosed on? you need jobs to turn around an economy, the government does not create anything they leach off the people, so stimulus is nothing more then them spending your future sweat. According to Bob Chapman QE3 has already started last week, you dont borrow from your self to pay your bills if you arent insolvent.

#111 arctodus on 07.27.11 at 11:52 am

Of course the USA is broke….to say otherwise is to simply ignore reality…..just because they possess more military hardware than everyone else on earth combined does not negate the fact that they are deeper underwater than a las vegas homeowner…..

I continue to find it fascinating how everyone ignores the Giant Elephant sitting in the room….everyone is oh so concerned about whether or not to hold gold (you are a moron if you don’t) or if Canada savings bonds are a good bet (they are not)…..

All the while the Elephant sits with it’s flat gaze eyeing us up, considering whether to go Musth on our asses today or tomorrow…..

Anyone actually notice what the world oil price is?…..hmmmmm……brent crude of $117 per barrel……..

Silly monkeys screeching about the value of pieces of paper with various “priest kings” on their faces…..
Silly monkeys watching their leaders have pissing contests in the local creek while the drought stricken jungles burns around them….

The elephant just sits and watches and wonders when the monkeys will notice that their world is at an end.

The US is not broke, not insolvent and not bankrupt. It will honour its obligations and is the largest economy in the world. Big mistake to bet against America. — Garth

#112 Devore on 07.27.11 at 12:20 pm

#96 disciple

How does it even pass fire code?

Officially, it does. Unofficially, if your house is on fire, it’s burning to the ground. And hopefully no one’s around to breathe in the fumes.

#113 jess on 07.27.11 at 12:21 pm

PPRF INVESTMENTS IN DERIVATIVES
The use of derivatives to generate value-added investment rate of returns and to control risk or alter financial exposures differs significantly across funds.
Not all PPRFs are allowed to invest in derivatives. Countries in which reserve funds are not allowed to do so include Belgium, Spain, Mexico, Poland and the United States. These countries mainly invest in domestic bonds, reducing the need for derivatives. The notional value of derivatives held represents large amounts in Canada (USD 91,849 million) and Sweden (USD 65,178 million for the AP3 fund) (Figure 17). The Canadian Pension Plan uses more equity derivatives than other funds, which mainly use interest rate, credit and currency derivatives.

The use of derivatives increased significantly between 2009 and 2010 in Canada (+52.9%) and some of the Swedish AP funds (respectively +17.0% and +49.8% in the AP4 and AP1 funds). Between 2009 and 2010, the Swedish AP3 fund decreased its exposure to currency and equity derivatives, leading to a decrease in the total exposure of -21.8%.

The funds with the highest allocation to private equity and hedge funds were:
Australia (17.7% of total in 2010), Canada (15.1%) and New Zealand (13.9%).
Source: OECD Global Pension Statistics.

=
dark pools in Canada
http://www.tradersmagazine.com/department/crossing_networks.html

=

The Age of Austerity
Bank of Canada
http://www.bankofcanada.ca/2011/05/speeches/canada-in-a-multi-polar-world/
…”Going forward, Canada’s exposure to emerging markets will be increasingly important. At this stage, it is largely derivative (gaining more from the price impact of commodities than from broader export sales).

Debt-to-GDP in G-7 countries is now the highest since the Second World War. The Age of Austerity is not a slogan but a timetable.

…experience suggests that when debt exceeds 90 per cent of GDP (as it will for most of our trading partners), growth slows, with predictable consequences for our exports.11

Toronto G-20 accord to halve their deficits by 2013 and stabilize their respective debt-to-GDP ratios by 2016.

#114 jess on 07.27.11 at 12:33 pm

2010
United States Social Security Trust Fund founded in 1940
USD billions 2 609.0 % of GDP 17.9 %+2.7

Canadian Pension Plan founded in 1997
USD billions 136. 0 % of GDP 8.6 % increase 13.0

#115 timo on 07.27.11 at 12:33 pm

http://www.youtube.com/watch?v=AzULm4d8h8w

37:40

lol!

#116 nemesis on 07.27.11 at 12:37 pm

“The US is not insolvent.” — Garth

Hmmm… Perhaps not. But there’s no denying it, Uncle Sam’s ‘Cadillac Days’…

http://tinyurl.com/3zwdupc

…are over.

Meanwhile, back in Florida…

http://tinyurl.com/3vavbye

#117 doc on 07.27.11 at 12:48 pm

#100 Brad in Cowtown I’m puzzled. Perhaps I’m dating myself but since when is “honeybunny” offensive? I grew up with Bugs bunny cartoons. Honey was his girlfriend. This is a term of endearment I have used for decades with my sweetheart–the love of my life. Is this part of the new normal–making something sweet into an offense?

Let romance have a renaissance on this randy blog. — Garth

#118 Oasis on 07.27.11 at 12:59 pm

#101 Utopia on 07.27.11 at 11:04 am

Oh look who’s back. I notice you were nowhere to be found when the US dollar was rising (exactly as I predicted it would).

Back in April I said the dollar would stage a recovery. You called me an idiot….but I was right in my assessment and you were not. It has been stuck in a trading range since then. That is not the point though. The dollar did rise as expected and has held ground since that time.
_______________________________________

http://charts.insidestocks.com/chart.asp?sym=DXU1&data=A&jav=adv&vol=Y&divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

that’s what passes for a rally in the Dollar? “holding” at it’s historical all time lows?

Aussie$ 1.09 USD
Swiss Franc 1.24 USD
Loonie 1.06 USD
NZD 0.87/$
Yen 78/$

sure. you were right lol.. the dollar has staged NO rally, NONE. clearly the charts show that. what you term a “rising” dollar is nothing but a DEAD CAT BOUNCE.

since April, the USD has collapsed against the Aussie/NZ/Can Dollars, Yen, Brazilian Reals, Swiss Francs..

the only thing that it’s been holding up against, is the Euro. lol

so much for that conversation. you’re an idiot today, just like in April. the USD is heading LOWER, commodities are headed HIGHER.

#119 disciple on 07.27.11 at 1:11 pm

#113 Devore…speaking of burning to the ground, perhaps this will prove to be an increasingly popular exit strategy for underwater homeowners? There’s an insurance derivative for ya…

#120 Cookie Monster on 07.27.11 at 1:15 pm

I get no respect. Many years ago when I was still a virgin I was visiting Florida with my parents touring Disney World, Bush Gardens and Cape Canaveral space center. While at the space center I happened to get separated from my parents, on purpose of course, and ended up in their engineering and cosmic physics department where I over heard a group of NASA’s top engineers discussing their mirror design for the first space telescope they called Hubble. Until finally I couldn’t take it anymore, the stupidity of these scientist was infuriating, so I Jumped into the middle of their group and slapped them all across the face and said LISTEN you stupid HUBBLE HEADS! The mirror needs to be convex not concave, you bunch of morons. And this is why the Hubble was a huge success and why since then NASA has become such a failure. I left there just disgusted and grumbling about the waste of tax dollars.

I only wish I could have been there when they were designing the O-rings for the shuttle rockets, I could have saved them a lot of lives and embarrassment. Stupid O-ring heads.

#121 Homebound on 07.27.11 at 1:23 pm

#119Oasis “so much for that conversation. you’re an idiot today, just like in April. the USD is heading LOWER, commodities are headed HIGHER.”

Can we ban this guy? He serves no useful purpose.

#122 The InvestorsFriend on 07.27.11 at 1:30 pm

GOVERNMENT BONDS AND LAW OF UNINTENDED CONSEQUENCES.

Once upon a time government bonds were considered the saftest of assets.

Pension funds and insurance companies became mandated by law and or investment policies to hold a large portion of their assets in long-term government bonds.

Bond interest rates have fallen for 30 years which led to capital gains on these bonds year after year. The pension and insurance company managers who bought these got bonuses and felt proud.

Then one day (today) government bonds were at record low interest rates. It no longer made any economic sense to hold them. They were in a bubble.

But old habits die hard and no one had lost any money on a (first world) government bond (mesured over a reasonable period of time like three years) in over 30 years. And everyone else was still holding these, so they must be safe. No one was going to get fired for buying thse bonds, no matter how low the interest rate. So pension funds and insurance companies kept holding them and buying more.

Finally one day (tomorrow?) a really big institutional investor said hmmm, this is ridiculous, I can earn a lot more money in the shares and the preferred shares of really strong corporations. These bonds are in a bubble. I am selling now. Slowly at first and then more quickly there was a stampede to the exits and yields on U.S. government 10-year bonds rose from the range of 3% to 5%. Japanese 10-year bonds went from 1% to 5%.

A lot of financial institutions that held these got slaughtered. House prices in Canada dove as mortgage rates rose. Many people lost “their” houses. Stock markets only went down a little since stocks were not in a bubble.

It was all very amusing to those of us not overly invested in government bonds or other things tied to government bond interest rates (like Canadian houses).

We laughed heartily.

#123 Kevin in Winnipeg on 07.27.11 at 1:37 pm

A question I wonder about often.

What about the countless people who had a decent down payment 2 – 4 years ago and waited to buy thinking a correction was coming? I have not seen an analysis of those people and the outcome of their decision not to buy. Are they better off?

My 2 cents on this – I don’t think anyone can honestly say those people who waited are better off now by not buying then. They missed out on years of building a good safety margin with equity and now are having to wait a few more years to buy. I think buying now would be foolish because house prices are peaking but this was the same argument 2 years ago as well and we all know how that turned out.

“Hindsight is wonderful. It’s always very easy to second guess after the fact. “

#124 disciple on 07.27.11 at 1:37 pm

#114 jess…excellent links, thank you. Here is an interesting excerpt from the Bank of Canada link you shared that flies in the face of mainstream media logic:

However, since only 10 per cent of Canada’s exports go to emerging economies and our non-commodity export market share in the BRICS has been almost halved over the past decade, activity in Canada does not benefit to the same extent as in past commodity booms driven by U.S. growth. The current situation is more akin to a supply shock for our dominant trading partner, with higher commodity prices acting as a net brake on growth. With oil prices up 50 per cent since last summer, the effect is material.

The Bank is subtly admitting that commodity prices are largely derivative-driven. Speculation. And if done by institutions, it is a betrayal, and a fraud upon the people of Canada.

#125 Brad in Cowtown on 07.27.11 at 1:49 pm

#118doc on 07.27.11 at 12:48 pm
#100 Brad in Cowtown I’m puzzled. Perhaps I’m dating myself but since when is “honeybunny” offensive? I grew up with Bugs bunny cartoons. Honey was his girlfriend. This is a term of endearment I have used for decades with my sweetheart–the love of my life. Is this part of the new normal–making something sweet into an offense?

huh?!
Unlike my earlier post, you seem to be taking things a little too seriously. Obviously, it’s not really “crossing a line” if you use the term honeybunny. If it was crossing a line, Garth wouldn’t allow it. Nor was I offended, since I thought (clearly mistakenly) it would be apparent that I was kidding around.

Having said that, there is most certainly a line to be recognized regarding public affection. Watch “the Soup Nazi” episode of Seinfeld for a terrific life lesson about this.
Ultimately, Jerry chooses soup over his “smoochie” honeybunny. And it’s the right choice. The only choice.

#126 arctodus on 07.27.11 at 1:50 pm

Garth perhaps you could please give us your definition of Bankrupt…..?

I am just curious ….I always thought it meant when you could not meet you fiscal obligations and your creditors sent guys named “Bubba” to try and collect….

Now nation states operate under different rules than the great unwashed but they do default…with alarming regularity….and this time the energy peak will mean a complete inability for countries (more than the USA are economic basket cases) to climb out of their respective fiscal pits.

I personally think the political fiasco down south is just so much theater for the sheeple…..the debt ceiling will of course be raised in some fashion…..although it would be much better if it were not (yeah yeah lotsa bad stuff would happen….that is life)

BUT the USA WILL default as nationstates almost always do ……..devaluation of currency (banana republic with loads of nuclear weapons…fun fun)

Of course the US can meet its obligations, and will continue to do so. The current debt ‘crisis’ is just a screw-Obama campaign by the Tea Party-dominated Republican party, setting the stage for the 2012 Presidential election. Surely you can see that. There will be no systemic default. No engineered devaluation. No hyperinflation. No crisis. No mayhem. Just the usual volatility, sprinkled with apocalyptics and nutbars. — Garth

#127 bill on 07.27.11 at 1:58 pm

precious metal = ohlins
who knew some aluminum tubes could be so pricey….
mind you they enhance most other forms of precious metal [ Italian, German, Japanese, etc ] and they should be a good store of value over the years.

http://www.ohlins.com/

#128 Coldlazarus on 07.27.11 at 2:00 pm

And speaking once again of that RE promo channel HGTV, once upon a time HGTV had lots of useful actual Garden Shows! Yes, there are people who like to garden and are not consumed 24/7 with wet dreams of granite and stainless.

Is there not something in the CRTC license about changing the content/concept completely?

#129 Peakoilist on 07.27.11 at 2:30 pm

#33 Elmer on 07.26.11 at 11:34 pm
They say the two happiest days with your boat are the day you buy it and the day you sell it.
================================
yeah, been there, done that ,still wearing the T-shirt..what an amazing feeling seeing a greater fool driving away with that piece of crapola. except that fool paid less than the fool who bought it 3 yrs earlier :)thanks for the memory.(we did have fun floating around on Lake Ontario)

#130 fzz1 on 07.27.11 at 2:31 pm

According to your calculation, I should buy a home worth $870,000.

For $870,000, I cannot find a decent home in Toronto. I can’t find a nice (non-cookie cutter) home in Toronto for less than $1.5 million.

Thus, I will continue to rent.

#131 fzz1 on 07.27.11 at 2:33 pm

in 1998, while I was a student, I rented a 2 bedroom condo in North York for $1650 per month. The condo was worth $145,000 then.

In 2011, the same condo is worth around $300,000, the maintenance fees have more than doubled, yet the rent is still $1650 a month.

Don’t believe me? Go check the records for the condos on Pemberton Avenue.

#132 Peakoilist on 07.27.11 at 2:46 pm

#97 kilby on 07.27.11 at 10:40 am
#33 Elmer
Thanks a lot! The only thing that takes my mind off real estate is planning to buy a boat next year…..
==================================
I heard there are some great deals down at Coal Harbour.

#133 HSC on 07.27.11 at 2:51 pm

I can’t believe what I’m reading in these comments. People speculating that the government is coming to confiscate their gold. People posting links to whacko conspiracy sites that claim the Oslo attacks were a joint CIA-Israeli conspiracy. Another link to a laughable conspiracy article claiming that Dominique Strauss-Kahn was set up on phony sex charges to silence the fact that he discovered there’s no gold in Fort Knox.

Seriously?? Is this seriously the level of discourse here? Whatever. There’s no point arguing with conspiracy nuts. No matter how many facts you throw at them, they stand firm in their absurd beliefs. Heck, even if the US did a full and open audit of all the holdings in Fort Knox, the conspiracy nuts would just argue that the auditors were part of a shadowy secret society determined to prevent gold from reaching a billion dollars an ounce.

Oh well, at least there’s still the occasional comment about real estate.

#134 Dr Doom on 07.27.11 at 2:52 pm

#33 Elmer on 07.26.11 at 11:34 pm
They say the two happiest days with your boat are the day you buy it and the day you sell it.
====================================

B – break
O – out
A – another
T – thousand $$$$$

#135 arctodus on 07.27.11 at 2:54 pm

Of course the US can meet its obligations, and will continue to do so. The current debt ‘crisis’ is just a screw-Obama campaign by the Tea Party-dominated Republican party, setting the stage for the 2012 Presidential election. Surely you can see that. There will be no systemic default. No engineered devaluation. No hyperinflation. No crisis. No mayhem. Just the usual volatility, sprinkled with apocalyptics and nutbars. — Garth

I do agree that the “drama” down south is political theater as I said….however I am still curious as to what your definition of Bankrupty is as applied to a nationstate like the USA?

Also, I had thought that you acknowledged peak oil back in the day? All modern economies are built upon a energy cost of approx 8% of GDP…..this appears gone now.
Do you believe that we will discover a new miracle source of energy that will allow modern economies to function by getting energy costs back below that number?

#136 Devore on 07.27.11 at 2:59 pm

#124 Kevin in Winnipeg

What about the countless people who had a decent down payment 2 – 4 years ago and waited to buy thinking a correction was coming? I have not seen an analysis of those people and the outcome of their decision not to buy. Are they better off?

Countless?

#137 Peakoilist on 07.27.11 at 3:01 pm

Even though Garth is feelin’ the luvvv today…I was laughing my head off at all the dogs yesterday..not so much today.. why so serious? i know JohnnyBravo hasn’t checked in yet……

#138 The InvestorsFriend on 07.27.11 at 3:03 pm

HOUSE PRICES UP IN MAY. THE MADNESS CONTINUES…

As of May Canadian house prices were still rising. Up 1.3% that month alone.

latest report from Teranet just released.

Garth, take cover! (from the your detractors)

http://www.housepriceindex.ca/Default.aspx

Canadian home prices up 1.3% in May
The 12-month gain of the composite index in May was 4.4%, the same as in April. The largest 12-month rise was 6.3% in Montreal, followed by 6.2% in Vancouver, 5.6 in Ottawa, 4.8% in Halifax and 4.6% in Toronto. Though Toronto showed the smallest 12-month inflation, it is the only market in which 12-month inflation has accelerated for three consecutive months. Twelve-month inflation decelerated for a fifth consecutive month in Halifax. Calgary prices were down 4.1% from a year earlier, for an eighth consecutive month of 12-month deflation….

Published: 2011-07-27

Being a fool does not make you wise. — Garth

#139 Cookie Monster on 07.27.11 at 3:12 pm

Those who do not yet understand why gold is money must understand how gold functions as a monetary anchor.

The amount of gold in the world is a finite amount, such that the annual increase in the gold supply is limited by the rate at which it is mined, so in essence the amount of gold is a relatively fixed quantity.

The scarcity and stability of gold is how gold serves as an anchor to money supply, or currency, and for so long backed all currencies including the US dollar which was exchangeable for gold at $35 per ounce. The US dollar then became the default world reserve currency after the second world war and the Breton Woods agreement.

The gold anchor function is critical because it prevents inflation and deflation of the money supply and gives money integrity, honesty and stability. The stability allows businesses to make long term business plans and financial calculations and contract agreements. It also rewards savers who can earn real interest for investing their savings and postponing their consumption into the future.

The fuss today with global currency exchanges and various rates of debasement of global currencys for political gain and false economics such as to help exports via inflation, false interest rates and real interest rates, are all problems brought about by the complete disconnect from a gold backing anchor in 1971 under president Richard Nixon.

The final disconnect of gold from money is why Paul Volcker under president Ronald Reagan had to jack interest rates to 20% in the early 1980s to beat back the price of gold via inflation and credit expansion and the associated fall in the value of the US dollar versus everything. After confidence was restored in the US dollar, society seemed to have totally forgotten why we ever had a gold backing in the first place and now we are reminded by the global monetary system on the verge of collapse, so messed up and often blaming greed of businessmen as the problem, when in fact it’s not greed at all, it’s just pure ignorance and stupidity of modern mankind not understanding why gold is money, and ignorance intentionally perpetrated by all modern economists and academics, socialist universities, socialist governments, and thieving bankers globally who have all been working in cahoots with governments to rape society for their own immoral benefit and criminal greed.

Lesson over bubble heads.

I understand perfectly. Gold is not money. We do not have a gold standard. We never will again. Currency is backed by the power of the state to tax. Gold is a tradable commodity and, as such, a repository of value. But ain’t money. Oh, BTW, the global monetary system is not on the verge of collapse. You’re cute, but stop making stuff up. — Garth

#140 bigrider on 07.27.11 at 3:19 pm

A professor from Carlton University, I did not catch or remember his name, appeared on BNN yesterday evening. He stated that he did not believe Canadas major cities were in a RE bubble because when it comes to Canadians, they will and I quote not perfectly verbatim “skip eating and all spending to make that mortgage payment” unquote.

He went on to say that Canadians are obsessed with their homes and view the home much differently than Americans.

I think there is some basis of truth in that. The obsession with houses is absolutely incredible in T.O.

As bearish as I am on housing prices, they continually move higher defying all logic and reason, which forces me to review my stance.

I invite all opinions to respond.

#141 disciple on 07.27.11 at 3:26 pm

#134 HSC…No matter how many facts you throw at them, they stand firm in their absurd beliefs.

Okay, then, why don’t you throw some facts at me…maybe because you haven’t any? The only thing absurd is how self-assured you are. Everyone else is crazy…except you of course. Why is it that only the blind don’t know that they can’t see? I recommend you float back to your childish happy place. Leave the critical thinking to the grown-ups.

#142 Sphinx on 07.27.11 at 3:27 pm

“The US is not broke, not insolvent and not bankrupt. It will honour its obligations and is the largest economy in the world. Big mistake to bet against America.” — Garth

What a joke!!! How do you define insolvency or bankruptcy? Honouring obligations?!! again, define obligations?.

Better discuss housing, Garth. You have been wrong on many fronts lately, stick to the subject.

No matter how hard you wish for it, or how petulant you may be to those who disagree, the US is not insolvent. — Garth

#143 bystander on 07.27.11 at 3:29 pm

Bank Of America rolls out buldozers.
The codename of the initiative is:
the “Fedral Neighborhood Stabilization Program”

7500 per house for demolition in hope to sustain value of the rest of the housing stock.

http://to.ly/aQrA

#144 disciple on 07.27.11 at 3:32 pm

#140 Cookie Monster…great post, if a little inaccurate. But if you substitute the words “taxed labour” for every instance of the word “gold”, you would be right on the money.

#145 bigrider on 07.27.11 at 3:32 pm

I forgot to mention earlier, that same professor from Carleton University who said RE in Canada not in a bubble on BNN yesterday said that in the early eighties when interest rates spiked to 20% RE default rates went from half of one percent to one percent, so interest rates rising from where they are now to a couple of points higher in his opinion will have no affect.

His opinion not necessarily mine. I am simply trying to understand why the RE madness continues

#146 Mister Obvious on 07.27.11 at 3:45 pm

A #138 bigrider

“…he did not believe Canada’s major cities were in a RE bubble because when it comes to Canadians, they will and I quote not perfectly verbatim “skip eating and all spending to make that mortgage payment”

There’s a non-sequitur if I ever heard one.

Even if its true Canadians will forgo all else for a mortgage payment it does not follow that there is no bubble. The biggest blister of a bubble you could imagine is dominating Vancouver.

The worst thing about such bubbles is not that they will eventually pop (they will), but that thousands of young families are destroying their futures on foolish speculation.

The next worse thing is that people nearing retirement think their inflated houses represent a financial plan rather than a (soon to be) ball and chain.

#147 HouseBuster on 07.27.11 at 3:55 pm

goldbugs and their gold shares are getting taken to the cleaners today

#148 Rich Renter on 07.27.11 at 3:56 pm

#124 Kevin
I am one of those countless people who had a decent down payment 4 years ago and has increased it by 50K since then.
I have also been on two vacations each year, put 10K in my daughters RESP and purchased a new car at 0% down. In the meantime prices have decreased about 10% on average since 2007 here in Calgary. I still think renting is a better option. If Canada had no CMHC, had never adopted 0/40 and current interest rates were at historical levels, house prices would be far from where they are today. I don’t begrudge anyone who buys a home but don’t expect sympathy from me if prices decline.

#149 The InvestorsFriend on 07.27.11 at 3:56 pm

MORTGAGES IN ARREARS? (Not so much)

Hot off the press the bankers association publised today the latest mortgages in arreas figures. This for May.

http://www.cba.ca/contents/files/statistics/stat_mortgage_db050_en.pdf

Arrears are actually down very slightly to 0.41%.

My take is few go into arrears on the mortgage as long as 1. House prices keep rising and 2. You can pay the mortgage with a line of credit or credit card if need be.

So far so good, people are paying those mortgages.

Oh well let’s see what happens if we get a lot of layoffs in Ontario with the high dollar killing the manufacturers.

But so far people surprise me by paying those monster mortgage payments every month.

#150 Cookie Monster on 07.27.11 at 4:01 pm

#145 disciple on 07.27.11 at 3:32 pm

#140 Cookie Monster…great post, if a little inaccurate. But if you substitute the words “taxed labour” for every instance of the word “gold”, you would be right on the money.
——-
Good point and the same point Garth made. But the problem for you and Garth is that taxed labour has a pair of feet and a heart beat, and free will, whereas gold does not.

Gold will be used once again soon by business independently of government fiat. Businesses who deal with real commodities, real labour, real fuel and energy will use real money for calculations and contracts.

The first country who once again instantiates a gold exchange backing of their currency will become a very big winner in the global economy. Businesses will flock to the stability of such a jurisdiction, like they do with Hong Kong, Singapore and Switzerland, it’s an economic law based in reality. Sorry bubble heads.

The 18th Century called. They miss cookie. — Garth

#151 VICTORIA TEA PARTY on 07.27.11 at 4:25 pm

FIDDLESTICKS…SHUFFLE AND JIVE; HEY, MAN!

#143 Sphinx

“No matter how hard you wish for it, or how petulant you may be to those who disagree, the US is not insolvent. — Garth”

TRUE BUT…

The issue most of us economic doomers and gloomers must understand is that, yes, the US is not insolvent because as home to the world’s reserve currency it can do anything damn thing it pleases to keep the economic shuffle and jive going.

Anything.

Anything from pillaging other countries of their resources through the bully pulpit of its military establishment, to currency-favourable trade deals, good old money printing, prime/pump market manipulation.

In other words, this beast has legs and lives.

But, as in all empires’ “lives” there are beginnings and endings. Like the former USSR. Some empires are short-term, others long-term, like Rome.

It all depends.

WHICH IS IT HERE AT THIS TIME?

Right now the arrogance and hubris of the American legislators in DC are utterly breathaking. They’re rapidly developing the mind-set that no deadline is needed because the Great Imperial Spending/Taxation Machine needs to further contemplate its fiscal future regardless of the impatient monetary yappings at their front door from not only their own bond markets just up the road (where the yield curve is now FINALLY gaining serious upside traction), but also from other sovereign marketplaces.

Both parties of Congress, and the Administration, are not trying to find common ground, a solution to the debt-celing/debt matters.

Oh, no. They’re busy organising their next fiddle. That would be the financial fiddle to keep things going the way they are. Forever and ever.

This has an interesting historic precedent.

Because Rome fiddled for quite a while, until it burned; but only after it cut an unsustainable “don’t hurt me” deal with the barbarians, whose descendents have been in charge over there ever since.

They now reside in the EU offices of downtown Europe: suits, cheeky hotel maids and all!

And Italy’s credit IS STILL NO GOOD!!!!

Hello DC. Fiddle while you “work.”

#152 Mr. Reality on 07.27.11 at 4:33 pm

#74 keny65 on 07.27.11 at 7:22 am
Problem is Kenny boy is when your UI runs out there won’t be a job in sight!

Enjoy it while it lasts………….

Mr. R.

#153 Mr. Plow on 07.27.11 at 4:34 pm

#132 fzz1

Condo is either now paid off. Or if a new owner, financed at much lower rates than 1998. Hence able to afford same rent being charged with double the maintenance fees.

#154 somecatchphrase on 07.27.11 at 4:34 pm

Garth –

While I understand that something is only worth what someone is able and willing to pay, what I wanted to untangle is how much “should” a house cost in a perfect, imaginary world, where wise governments recognized that high real estate prices are a terrific drag on the economy, and, made every effort to put a ceiling on prices.

In this imaginary world, banks would be risking their own capital when they made a loan and real interest rates would be positive. There would be no CMHC.

In this perfect world, there would be no property taxes, but higher provincial income taxes. Each municipality would then receive per capita funding from the province. Local governments and their employees would not have a vested interest in rising property values.

In this imaginary world, even relatively low wage workers could contribute to their RRSP and TFSA, because they wouldn’t be forced to spend a bloody fortune just putting a roof over their head.

In this imaginary world, there would be more consumer spending, which means more employment. How many jobs have been lost, or, not created because of high real estate prices?

If lower real estate prices meant a higher savings rate, our hypothetical nation-state would be less reliant on foreign capital, keeping more of the profits to be made from our resource wealth in-country, instead of paying out dividends to foreign investors.

In this fantasy world, every high school student would be educated in the basics of economics and investing in financial assets. This would increase the savings rate by reducing the fear factor that many (most) people have when it comes to investing in financial assets which constantly fluctuate in value.

#96 disciple –

Thanks for the info. It confirms my suspicions. If it’s possible to build a house for $50-$100K, it makes current prices seem all the more ridiculous.

#155 poco on 07.27.11 at 4:42 pm

#4 Boombust on 07.26.11 at 9:25 pm

Port Moody condos are toast, alright. I’ve seen it up close and personal…

==============================
#54 Hoof Hearted wrote
Any numbers?

If so, the periphery is getting closer to the epicenter(ie Vancouver)

______________________________________________

Hoof –where have you been ?–i’ve been posting about the downturn in the tri cities area for over a year–many owners selling for less than they paid 2 to 4 years ago

condo market is toast–townhomes sitting and sitting –no action until sufficient price drop to suck another fool in–even then few are selling
numbers you want??-do a little research into any market and you’ll soon see what’s really going on–don’t believe the CREA numbers !!!

check out this in Pt Moody
V882400–306-3250 St. Johns–bought in apr 08–261k
listed jan 2011-274.9k–droped in apr to259k–now at 239k
there are several for sale in the 3 buldings that make up this complex–the 2 bedrooms (approx 844 sq. ft.) were selling for 305 to 310 before xmas–watch the price drops as these sit and sit with no buyers–it’s neighbour against neighbor –race to the bottom–pre sales for some of those owners were in the mid 270s’ 4 years ago–check it out –it’s the only way to know for sure

lots out there underwater–a lot more than most on this blog want to believe

this has been posted several times before–believe it, it’s true– CREA doesn’t break down the numbers as this does

http://www.youtube.com/watch?v=q3qK1AI5bmo

cherry picking as some will say –not a chance

#156 JRL on 07.27.11 at 4:57 pm

‘20% of the economy is now real estate-related.’

Wow, I had no idea. I also read somewhere that nearly 1 in 4 Canadians now ‘work’ in some capacity or other for government, providing um, “services” …wanted, needed, or not. How can an economy be sustainable based on abstract bullshit? They’re not having a ‘debt’ crisis more like a sustainability crisis. Reminds of Bucky Fullers observation that most people in North America are employed watching and checking up on other people – checkers upon checkers, and nobody creates any product or wealth. Sounds like the future of Canada where everyone will either be employed as a soldier or a prison guard.

#157 Live Under Your Means on 07.27.11 at 4:57 pm

I hope it is not for reasons of health… — Garth

No. That I’ll find out in 2 weeks.

#158 Devore on 07.27.11 at 5:00 pm

#155 somecatchphrase

Thanks for the info. It confirms my suspicions. If it’s possible to build a house for $50-$100K, it makes current prices seem all the more ridiculous.

That is not a very useful number, because it does not tell you much. What are you building? Construction costs are quoted per square foot.

Prices vary per location, type of construction and finishes. In Vancouver you can expect something like this:

http://www.blueoceanconstruction.com/faq.html

Pretty close across Canada, the variance in price of finished property is the cost of land.

#159 poco on 07.27.11 at 5:20 pm

sorry if this has been posted before–maybe this is the kind of downpayment we’ll need to prevent another bubble after our correction

http://howestreet.com/2011/07/property-loans-halted-chinas-2nd-3rdtier-cities-chinas-spectacular-real-estate-bubble-pop/

excerpt from one of the stories—

A US housing bubble was brewing for years. Even after it popped in summer of 2005, many did not recognize that fact for 18 months as the chain reaction mentality “it’s different here” spread to every city that had not yet burst.

what do you think people????–i think by Oct-Nov the majority on the west coast will know we are already in a downturn and the well informed (those that really follow the market) knew, that in many areas, it started last spring 2010 —pretty much how Garth has said it was going since then

#160 Victoria on 07.27.11 at 5:23 pm

If prices are going up 1.3 percent then why is my house the only one in this country that is going down?

Why is Victoria the only place in Canada that sales are way down?

I want to sell but we would loose too much.

#161 Oasis on 07.27.11 at 6:36 pm

the FUNNIEST thing i’ve heard on the radio today was the Treasury was going to sell off it’s $400B of GOLD holdings. HAHAHAHAHHA… desperate times call for desperate measures.

what do you think, China will buy it all in one shot?

#162 TurnerNation on 07.27.11 at 6:37 pm

Yes, Silver dropping as expected. It’s a commodity and nothing more.

http://finviz.com/futures_charts.ashx?t=SI&p=m5

#163 TurnerNation on 07.27.11 at 7:03 pm

Making up for low interest rates I guess, buy a cash cow:

Teacher’s buying Imperial Parking
Tuesday, July 26, 2011
By Canadian Press

The Ontario Teachers’ Pension Plan announced Tuesday that it is acquiring Imperial Parking Corp., one of the largest parking management companies in North America, for an undisclosed sum.
Under terms of the deal, Teachers will buy Babcock & Brown Gates Parking Investments LLC, which includes Imperial Parking.
..
BBGPI, a joint venture between Gates Group Capital Partners, a Cleveland-based private equity firm, and London-based Global Partners Fund, acquired Impark in 2006.
..
Headquartered in Vancouver, Impark is one of the largest parking management companies in North America and currently leases or manages in excess of 2,000 parking locations, consisting of more than 400,000 parking spaces, in over 25 markets throughout Canada and the United States.

#164 Thetruth on 07.27.11 at 7:08 pm

Housing Crash won’t happen soon… me thinks in 2017. In 2018 Canada, the number of people turning 65 will be greater than the number of people turning 20 (labour force). First time in Canadian history that will have happened. Plus interest rates will be higher after they start rising in 2012. 5 fixed years later, it will have an effect.

Vancouver and Toronto will be a different story altogether. Population will continue to grow and land supply artificially limited.

#165 Snowboid on 07.27.11 at 7:14 pm

#161 Victoria…

Don’t think your house is the only one going down. In the area we lived in (2 km from downtown near inner harbour) several properties around us languished because they were asking too much. They haven’t yet sold, some after over a year on MLS.

We may have been able to sell in late 2010 in the mid $500K range – but decided to move our property quickly to list closer to $500K. We sold ten days later.

Some of our former neighbours can’t sell now for what they paid 3-4 years ago, and they are losing more every week they delay.

Unless you plan to live in your home another 10-15 years you should look at selling, even if you ‘lose too much’.

#166 Smoking Man on 07.27.11 at 7:16 pm

41 Bottoms_Up on 07.27.11 at 12:18 am
If you had $5000 to invest for the mid-to-long term (15-20 years), what would you invest in?

Dude mid to long term for me is 2 weeks to 6 months.
15 to 20 years? , water just poped into my brain, something to do with owning rights to water……

#66 MortgageFree on 07.27.11 at 3:31 am

[email protected]
only check it mabey once a month…..

#61 Ex-Cowtown on 07.27.11 at 1:50 am
been there done that, no effect………

#46 Dr Doom on 07.27.11 at 12:34 am
You are not the first lol

#167 jess on 07.27.11 at 7:17 pm

Most of U.S. Debt is Owed to…Americans
Wednesday, July 27, 2011
It is one of the largest, and certainly most powerful, myths in American politics today: that America’s debt is in the hands of foreigners, primarily the Chinese.

If only people knew the truth, which is that nearly 70% of America’s $14.3 trillion debt is held by … America.

According to Business Insider, Americans—from bankers to investors to government officials to ordinary citizens—control $9.8 trillion of the debt, or 68%.

China has $1.16 trillion, or about 8%.

Altogether, other countries possess $4.6 trillion of the U.S. debt.

The bulk of the debt rests with a wide range of institutions and individuals, such as the Social Security Trust Fund (19%), the Federal Reserve (11.3%), households (6.6%), state and local governments (3.5%), private pension funds (3.5%) and commercial banks (2.1%).
-Noel Brinkerhoff

A Debt To Ourselves: Who Really Owns It? (by Kyle Leighton, Talking Points Memo)
The TRUTH About Who Really Owns All of America’s Debt (by Vincent Trivett, Business Insider)
Government Debt, at All Levels, Reaches Post-World War II Levels (by Noel Brinkerhoff and David Wallechinsky, AllGov)
Huge Leap in Debt Dumped on Taxpayers…Before Obama (by Noel Brinkerhoff, AllGov)

#168 bigrider on 07.27.11 at 7:18 pm

#152 -Mister obvious.

Could not agree more with you on all your points but the fact remains the obsession with purchasing houses continues unabated and at ever inflated prices.

Tell me when finally the madness will end because everything imaginable that could have and should have deflated values here in T.O has occurred and still the upward march continues.

#169 bigrider on 07.27.11 at 7:19 pm

sorry meant #147 mister obvious previous post

#170 Johnny Debt on 07.27.11 at 7:36 pm

“goldbugs and their gold shares are getting taken to the cleaners today”

You call that…being taken to the cleaners?

Just wait till you see how little your “Dollar”
buys in 2-3 years…

You won’t be able to afford to “go” to the cleaners!

#171 arctodus on 07.27.11 at 7:56 pm

Garth you have not answered the pertinent question…how do you define bankruptcy as applied to a nation state?

I propose that energy restriction is the sand pouring into the wheels of globalized economies…that global economic activity (major international trade) will grind to a halt over the next 10 years….with the usual Monkey response to hardship……war.

#172 Midas on 07.27.11 at 8:05 pm

Garth writes: “Currency is backed by the power of the state to tax.” — Eleven words to remember.

Gold is no longer money not because the people abandoned it, but because the State commands its subjects to recognise the pictures of the queen as money. The threat of force is why the paper is money.

#173 Murphey Bhead on 07.27.11 at 8:15 pm

Cookie Monster on 07.27.11 at 1:15 pm
I get no respect. Many years ago when I was still a virgin I was visiting Florida with my parents touring Disney World, Bush Gardens and Cape Canaveral…..and said LISTEN you stupid HUBBLE HEADS! The mirror needs to be convex not concave, you bunch of morons. And this is why the Hubble was a huge success and why since then NASA has become such a failure….

=====

This one sounds a bit more believable….. OK, a LOT MORE believable…

.

#174 Nostradamus Le Mad Vlad on 07.27.11 at 8:18 pm


We enjoyed being on holiday so much, having fresh crabs and other denizens of the deep caught a few hours earlier — sea bass, cod, fish sticks — that we’re gone for the weekend again, down to the Kootenays, snuggling up to families of grizzlies, wolves etc.

Getting off this nutbar of a planet is a blessing in disguise. The animals couldn’t care less about money, so why should we? Maybe Bernanke, Geithner, C-H-F can join us, and we can get something sorted out!
*
Thought For The Day — “My greatest wealth is the deep stillness in which I strive and grow and win what the world cannot take from me with fire or sword” — Johann Wolfgang Von Goethe
*
Interesting that the US can blame Iran for something they (the US) is completely responsible for; Is this a means to distract attention away from the US economy? Plus 5:28 clip UK joins in; Evidently, the Cdn. govt. doesn’t care for scientists who speak out.

2:55 clip Watch it and weep, as Harper is taking us down the same road; Meddling China tells the US to back off; CC “First snow in Greytown, Wairarapa, since the 1940s.” Yesssireee, the climate is REALLY changing! Walnuts Are Drugs! And fruitcakes belong here! Monsanto Sue them until they’re broke;

Chart Double dip in housing continues; Rip-off by the US Fed. Now that’s unusual! Another Chart plus 2:15 clip. Seems the US$ has been tanking since 1913; Collapsing Ponzi Scheme The US housing market is imitating lemmings; Distraction 101 The economy is fine, but look at these big, shiny UFOs! Austerity is what causes riots and the like; Pelosi is already a millionaire, so what does she care? Best headline I’ve seen in a while!

Good Question My answer is yes, we are being had; Is Obama using other means and methods, while keeping sheeples distracted? Corporate cash hoard, but no new jobs, But the military keeps spending like there’s no tomorrow.

#175 pjwlk on 07.27.11 at 8:26 pm

A co-worker told me yesterday that she was having trouble selling her house in “the Hammer” (Hamilton, ON). I was stunned to hear that because I gave her the name of an electrician at the beginning of the year to do some work so she could put it on the market. “You’re still trying to sell it?” I asked. “Yup…”

It turns out that she’s had it on the market since late January and that there are 5 other houses on her street that haven’t sold either. She thinks that recent troubles with the steel mills in Hamilton has left people with such uncertainty that no one is willing to buy. So now she’s carrying two houses…

I also have been noticing an ever increasing number of “New Price” stickers on the for sale signs in the Burlington and Halton areas.

#176 Timing is Everything on 07.27.11 at 8:39 pm

BofA bulldozing unsalable properties…
Wells Fargo, JPMorgan Chase, Fannie Mae and Citigroup are all considering similar strategies…

http://tinyurl.com/3wyyzsz

#177 Golden Stewie on 07.27.11 at 8:41 pm

“The US is not broke, not insolvent and not bankrupt. It will honour its obligations and is the largest economy in the world. Big mistake to bet against America.  Garth”

Sorry Garth, but I bet Julius Caesar had a similar view. Rome lives on but only in the Asterix and Obelix series.

Of course you cannot go bankrupt if you print your own money, the problem comes with convincing other to accept it.

Even now during QE2 the Fed has “bought” about 70% of all the US treasuries, no one else want them.

You have no idea what you speak of. — Garth

#178 Timing is Everything on 07.27.11 at 8:42 pm

Oh Garth…your ‘new’ web site ain’t playing nice with Firefox anymore….? Seems OK with other browsers (IE, Chrome, Safari) though.

No need to post this.

The crack Garth engineers are doing their tweak thing (that’s a technical term), and hopefully all small issues will soon disappear. Wicked fast, though, eh? — Garth

#179 Timing is Everything on 07.27.11 at 8:51 pm

Holy Crap…you ‘fixed’ your site fast. Works fine now!

#180 Timing is Everything on 07.27.11 at 9:06 pm

Wicked fast, though, eh? — Garth

Yup…Greased Lightning. ;)

http://video.google.com/videoplay?docid=-7111339021054997948

#181 Helicopter Ben on 07.27.11 at 9:25 pm

I like how some on here try to prove a point how gold and silver are bad investments cause it went down today, silver just climbed 6 dollars in 2 weeks and goes back a dollar today and this proves that its just a commodity? what? . its been money longer then gold 2600 years or so, i dont care what garth or ben bernanke say about it, 2600 years its been used as money so i will go with that. it just happens to be a commodity as well. and no you cant eat it like so many on here like to say, worst argument i have heard like somehow you can eat stocks or bonds. yes gold went up high and came down today, way to notice that 12 hour chart but have you missed the last 10 years? best investment out there and it gets demonized like it somehow was wrong to go up. it hasnt really gone up though, your precious fiat currency is toilet paper and is about to get flushed.

#182 timo on 07.27.11 at 9:32 pm

the US is not going broke.

p.s. its a fake fire to scare the sheep and start sheering the wool. Watch for reductions in social programs to keep the top 10-15% happy. No one burned down the whitehouse when the bailed out the banks.

#183 Blacksheep on 07.27.11 at 9:38 pm

Garth wrote,
“There will be no systemic default. NO ENGINEERED DEVALUATION. No hyperinflation. No crisis. No mayhem. Just the usual volatility, sprinkled with apocalyptics and nutbars”

Hold on there big guy, You were doing so good until the “NO ENGINEERED DEVALUATION” Part.

1] Of coarse the US buck is being INTENTIONALLY DEVALUED to help boost Obama’s export goals.

2] The question of whether or not the DEVALUATION is engineered is completely irrelevant. That FACT is the US does NOT have the funds to finance it’s affairs, necessitating yet another debt ceiling increase.

3] The US, being a sovereign in control of it’s own money supply will not default, unless they choose to.

4] Eventually even the mighty US of A will run out entity’s willing to purchase their ever weakening currency, (other than themselves) and will get a long overdue credit down grade, increasing their cost to carry debt, THIS is when is gets interesting.

5] Supply/demand applies to ALL things with more US dollars chasing the same amount of goods.

take care
Blacksheep

#184 nemesis on 07.27.11 at 9:43 pm

My brain is fried (they’re actually going to ‘do it’, GT – yes, ‘it’. Them.). Ergo, I need a hug… but as beards are somewhat tickly/abrasive, would you mind terribly if I collected on that from Dorothy instead?

And now to other ‘business’ (it’s the ‘silly hour’, after all)…

TimingIsEverything/#30… – Actually, Timing – this is what I was thinking: “…”a veritable font of variegated opinion”…

FOFOFOA/#63… Indubitably. And, best of all, it sounds so deliciously naughty!

DrDoom#25 – Ducati’s are like TrophyWives, if the – ‘upfront’ doesn’t kill you, the maintenance surely will… But agreed, the pinnacle ‘o the art is indisputably the DesmoRR (sigh)… having said that, there are ‘other’ Italians you know… and some of them have been around almost as long as those MenomoneeFalls Chariots. WinkWink, NudgeNudge…

http://tinyurl.com/3pvuo9b

#185 Screwed in BC on 07.27.11 at 9:51 pm

“The US is not broke, not insolvent and not bankrupt. It will honour its obligations and is the largest economy in the world. Big mistake to bet against America. — Garth”

Empires end my friend….

No, they evolve. — Garth

#186 Killer Chicken or Imploding Boomer? on 07.27.11 at 9:57 pm

168 Jess – not surprised by this at all, probably holds true for many nations (ex Japan). Is it good, or bad, or no difference?

#187 BigAl (Original) on 07.27.11 at 10:02 pm

#45Investx on 07.27.11 at 12:32 am
SunTV is a refreshing break from the politically correct mainstream media. Love it.
====================================

Yeah….another right-wing propoganda machine hell bent on getting rid of all of the things that distinguish us from the third world and dictatorships.
Good job!

Name one mainstream media outlet, other than TorStar and a few local rags (NOW, etc), that is this phantom “liberal media bias”. It doesn’t exist. Even the CBC coddles all pro-conservative issues and softballs them now.

There is NO liberal media bias. Just look at the softballing of the conservatives by media in this last election. SUNTV is just proof that their tactics are working. We will be the third world, and without freedoms, before you know it. Think about that – all of the policies the conservatives espouse are already in place and have been for a long time – in the third world. Every last one of them.

#188 Utopia on 07.27.11 at 10:11 pm

#92 kimi……

“That is funny, you should see the deals you can get at Coal Harbour on Boats. You can get a boat dirt cheap, but the moorage kills ya. Its double my rent”.
—————————————
But renting is worth it. Years ago I rented a live-aboard in False Creek and it was but a fraction the cost of rent even then. Not sure if that has changed. You get a great sleep bobbing on the waves. The downside was the damn parking. Plus getting from car to boat in the incessant rain….it always seemed too long a walk to where you were moored especially in winter storms.

#125 disciple on 07.27.11 at 1:37 pm

And thank you to you too Disciple for providing that quote from the Bank of Canada. That has indeed been my contention for quite some time. In essence, that stimulus has backfired by sending speculative capital fleeing into commodity markets. The bank wrote….. “The current situation is more akin to a supply shock for our dominant trading partner, with higher commodity prices acting as a net brake on growth. With oil prices up 50 percent since last summer, the effect is material”.
————————————-

#134 HSC on 07.27.11 at 2:51 pm

Yes, point taken HSC. I have my days when I get carried away with a thought too. And you are right, it is refreshing to get back to discussing real estate,… calms everyone down again. There seems to be growing evidence from so many posts that all is not well in LaLa Land. Could it be the market is actually finally coming to its senses there?

#189 jas on 07.27.11 at 10:20 pm

Garth:
very well said!

#190 Utopia on 07.27.11 at 10:21 pm

#176 Pjwlk….

“It turns out that she’s had it on the market since late January and that there are 5 other houses on her street that haven’t sold either.”
————————————–
And that is her problem. She won’t negotiate on price. Homes will sell well almost anywhere in the country right now if vendors would relent on their inflated expectations.

Greed is still alive and well. But reality is coming.

#191 Utopia on 07.27.11 at 10:24 pm

#175 Nostradamus Le Mad Vlad on 07.27.11 at 8:18 pm

“We enjoyed being on holiday so much, having fresh crabs and other denizens of the deep caught a few hours earlier — sea bass, cod, fish sticks…”
————————————

OK, I am curious. What bait brings in fish sticks?

#192 Cookie Monster on 07.27.11 at 10:28 pm

“The US is not broke, not insolvent and not bankrupt. It will honour its obligations and is the largest economy in the world. Big mistake to bet against America. — Garth”
——
I would never bet against the American principles of small government, sound money and individual liberty. As soon as it all comes back! Revolution! FREEDOM!

#193 Utopia on 07.27.11 at 10:30 pm

#173 Midas said….

“Gold is no longer money not because the people abandoned it, but because the State commands its subjects to recognize the pictures of the queen as money. The threat of force is why the paper is money”.
——————————————
Yeah right. Carney was just over at my place tonight. Said he would kick my ass if I stopped spending Canadian dollars. I am naturally very worried. Guess I just have to keep using these worthless Loonies.

“Or else”…HaHaHa.

#194 HouseBuster on 07.27.11 at 10:30 pm

the fastest it’s ever been

#195 Oasis on 07.27.11 at 10:42 pm

“There will be no systemic default. No engineered devaluation. No hyperinflation. No crisis. No mayhem. Just the usual volatility, sprinkled with apocalyptics and nutbars. — Garth”

funny. i was speaking with Satish Rai last month. he seems to completely disagree with you. says the US is already in default (printing money by the billions), and PURPOSELY DEVALUING it’s dollar (keeping rates artificially below inflation).

i don’t suppose you’d like to debate him next time you’re in town?

Anytime. Anywhere. — Garth

#196 Vulture Fun on 07.28.11 at 3:48 am

Q: What kind of government has to “borrow” from the pensions of Fed gov employees to keep the lights on? A: A broke-ass one.

Garth, I don’t understand the basis for your confidence in the States, unless you figure he who has the bombs makes the rules. Let’s review some escape routes from the current predicament:

1. Print, print, print. Hmmm. Doesn’t seem to be working.

2. Grow your way out? It does not seem likely given the service-oriented nature of most new jobs, the declining factory count, and the out-sourcing of labour to 3rd world hell holes.

3. Shut down the five current military operations? This one actually makes some sense, but there’s no chance of that happening, especially when Palin is elected president ;-)

4. Actually cut some spending? Won’t that crater what is left of the government propped economy?

5. Another Volcker moment? The era of real men in politics seems to be over. All those losers seem to care about is re-election and serving their Wall Street masters.

Perhaps it is a failure of my imagination, but I don’t see prosperity for the States until after a major reset. I would never underestimate the strength, intelligence, and ingenuity of the Muricans in general, but the leadership sucks. BTW, I wouldn’t take the DOW at 15,000 as evidence of a strong economy. Zimbabwe’s exchange did rather well in the first stages of hyperinflation.

Have I covered all the nutbar talking points? Oh, can’t forget about gold. It’s a store of value, for sure. With little effort it could be used for a unit of account, and a unit of exchange. So, how is it not money? Peter Schiff has already set up a Mastercard that can be charged against gold holdings. Sorry, this isn’t available for Muricans.

#197 Gill Taylor on 07.28.11 at 9:18 am

What does all of this mean for commercial real estate? Toronto keeps building to towers: http://tinyurl.com/3uc7c32

#198 T.J. BONES on 07.28.11 at 1:39 pm

Garth, being from no money or power and having put two not one but two daughters through university and college plus having to take early retirement is there any way for us average means folks to survive this mess. Not all of us are blessed with your abilities and experience. Previous attempts at investing = disaster. Am heavy into mutual funds and cash but wish to go into bank prefered and what is a EFT

Ditch the mutuals and find a fee-based advisor who knows how to build a balanced portfolio, and who will watch over it daily. — Garth