Lowball

Days ago, when I asked Jim and his wife if they’d buy their own home in the Vancouver burbs for $700,000, they laughed. Of course not. What a giggle. Way overpriced. And then they worried after a few weeks devoid of serious offers – what if they’d missed the top of the market? What if the endless supply of greater fools had dried up?

But then…

“We were presented with two offers last night,” he tells me, “both sight unseen (builders interested only in the lot).  One was higher than the other with no subject to financing, and entirely reasonable at $685k, so we accepted.”

Attaboy, Jimmy. You clawed your way to the top of the mountain and parachuted off, before the sucker blew.

“It’s scary and exciting – we were talking to a friend about it last night and he commented that it’s good to be pushed out of your comfort zone once in awhile, and I guess it’s fun for everyone watching someone who is. But I am confident that we’ll find the right rental property and I am definitely looking to a brighter financial future of disciplined spending combine with wisely invested and growing assets.”

Of course Jim and Debra can now invest $650,000. If they get a 7% return over the next five years with a balanced portfolio (like over the last five, which included the crash), that’s $3,000 a month net – more than enough to rent a better house than the one they’re selling. They live for nothing, freed of property tax, maintenance and insurance. They have liquidity, flexibility, freedom. Best of all, they miss what’s coming.

I love stories like this. And there may be a few more over the coming months. Or maybe, I should say, weeks.

Today the Toronto Real Estate Board releases its stats for July. They’ll be ahead of last summer in terms of both sales and prices. This will make the GTA the last real estate market in the country to ultimately correct, a fact which will lead many people into decisions they may well regret. You’d have to be sunning your shapely butt on the dock  with Margueritas coursing through your veins for the last two weeks not to know why.

Economic risks have swollen like a bad Botox job. Europe is out of money. Global companies (HSBC, Cisco, RIM, Merck) are again laying off bigtime. Commodities are falling. And the US is sliding, just as it heads into an election year that will make UFC look tame. No, this will not bring economic collapse or a crisis like three years ago. But the last thing real estate needs is about to happen – a crappy economy, more unemployment and skittish buyers. Not even low interest rates will blow gas back into this leaking airbag.

That’s when human nature takes over. As house sales decline and prices flatline or dip a little, housing falls out of favour. People don’t buy losing assets. Only inflating ones. Sellers start popping up everywhere, many of them freaked because they have no equity and mama-sized mortgages, while the buyers who are left quickly learn this is revenge time for all those damned bidding wars.

I’d say it’s already happening in a place like Victoria – interesting because the city of 350,000 has been gripped for  years with the idea real estate will rise forever because everyone wants to live there. The result: a town where the average income is $76,600 (lower than in Hamilton or Windsor) and yet the average SFH costs $581,117, or about twice the national average.

But, that average price was $48,175 more in June than it was last month. Meanwhile sales plunged 15% and listings plumped to a 15-year high. Instead of being the mecca for waddling Boomers from Oakville flush with cash, Victoria now has a 10-month supply of houses for sale, where even realtors are telling sellers to get with the program.

As a Century 21 guy told the local paper: “It will be up to the sellers to come to grips with that reality. The buyers aren’t lowballing, they are saying that’s what they will pay.”

It’s called a buyer’s market. You kiddies reading this jackboot blog may not have heard that term before, so listen up. This is when buyers set the price of houses. Sellers – if they want to sell – have to play along. As the next phase unfolds, I’ll give you a complete how-to manual on being a sumbitch buyer. It’s fun. Tell your friends.

Meanwhile, could the same thing be emerging in delusional Vancouver?

Maybe. Sales plopped more than 20% there last month, trailing even the 10-year average. It takes more than 40 days to sell the average house. Areas that were HAM heaven just months ago – like Richmond, with its romantic views of the bottom of widebodies (the planes, not the locals) – are now comatose.

Of course, prices are ahead of last year by 9%, but that’s exactly the problem. As business slows, the dollar rises, BC’s natural resources-based economy takes a hit and people stagger under elephantine debt levels, who the hell can afford to buy? The Mainland Chinese? Maybe, but so what? After all, 93% of the market depends on sales made to Canadian citizens.

This is why Jimmy boy’s a genius. He made it out alive.

Scores won’t.

175 comments ↓

#1 not asian on 08.03.11 at 9:40 pm

“Of course Jim and Debra can now invest $650,000. If they get a 7% return over the next five years with a balanced portfolio (like over the last five, which included the crash), that’s $3,000 a month net – more than enough to rent a better house than the one they’re selling. They live for nothing, freed of property tax, maintenance and insurance.”

You are assuming that they do not have a mortgage and their house is entirely paid off. The average homeowner has a mortgage. With that in mind, you are correct that it would be better for them to rent because the cost would be lower.

Isn’t that what I just said? — Garth

#2 nemesis on 08.03.11 at 9:47 pm

“an election year that will make UFC look tame…” Hon. GT

That’s the ‘BogeyMan’ that keeps ‘Nemesis’ awake at night, OldChap… (truth be told, there are others – but that one’s near the top ‘o the list)

PS – re: YVRTopic Seller’s future rental prospects… a VeryGoodFriend was (until recently) renting a 6BR 1Acre SouthSurrey/OceanPark MajesticPile (with ‘lavish’ amenities) for little more than you’ve postulated as this couple’s investment NetNet.

Well. There it is.

Thank you.

#3 Victor on 08.03.11 at 9:54 pm

Sky is falling, sky is falling…….. That all I hear from you Garth for the last 3 years. Somehow the same house 3 years ago was sold 300K cheaper than it sold today in Port Moody,BC

Incorrect. You can buy now in Port Moody for 2008 valuations. — Garth

#4 Dave on 08.03.11 at 9:54 pm

Good luck with Real Estate in this pre-depression we’re in!

Navistar closes last heavy truck plant in Canada

The positives? HOMES CHEAP IN CHATHAM!

#5 pablo on 08.03.11 at 9:56 pm

GARTH- his word is law, his wrath mighty, his stature short and portly.

Take a pill dude, or a ride on your Harley, if you can still get your leg over. (nuk, nuk,nuk)

Ever had 900 pounds ride over your fingers? — Garth

#6 Dan in Victoria on 08.03.11 at 9:57 pm

Thank your lucky stars Jimmy.
Right on about Victoria, Garth
When we sold I asked the big boss would she pay that much, no bloody way she said.
So sign the offer I said.

Its funny though we now get the, “oh you’re renting oohhhhh.”

Prices are definately on the adjustment here.
Rents have started to creep lower now also.
A few more of the herd now have their heads up looking around.
Sub trades being a little less cocky, take it or leave it has been replaced with is that price ok?
Its starting to gain speed…..

#7 brucey bonus on 08.03.11 at 10:02 pm

first!!!

#8 Tim on 08.03.11 at 10:04 pm

“After all, 93% of the market depends on sales made to Canadian citizens.”

That’s a load of crap, at least for Vancouver. Have you ever walked around Vancouver? How many white homeowners do you see? Certainly not 93%

I cited Mainland Chinese buyers. Not non-white people. Yours is a sad comment. — Garth

#9 RonInDelta on 08.03.11 at 10:04 pm

Sad days that it takes disasters south of the border to make Canadians fearful of their risky economic behaviour. Even sadder if the States chew up a smart and inspirational leader like Obama. Question for the readers and yourself Garth – is the recent stock fall a small correction or a longer more painful drag down? I’m thinking of my current ZRE REIT holdings (if I should sell) and buying US index.
thanks in advance

#10 timo on 08.03.11 at 10:30 pm

Garth, Vancouver will see price rises every year due to the fact that business and the working class will be moving on to a more affordable climate. :)

#11 Cory on 08.03.11 at 10:34 pm

“and prices flatline or dip a little,”

now it’s “flatline or dip…a little”??

it was years of correction now a little? this is like ping pong.

My context: ‘That’s when human nature takes over. As house sales decline and prices flatline or dip a little, housing falls out of favour. People don’t buy losing assets. Only inflating ones.’ Do you see a prediction in there, or a statement about behavioural finance? — Garth

#12 Cookie Monster on 08.03.11 at 10:41 pm

Garth, I was considering sending you a donation to support the blog, great one tonight, but all I have to give are gold coins and silver bars that keep getting in the way of my mouse. I like to use the silver bars to adjust the angle of my keyboard, to help me with my carpal tunnel syndrome. The big gold bars are excellent at building buff biceps, the chicks are in utter awe when I’m doing my curls.

#13 WI Boomer on 08.03.11 at 10:46 pm

Congrats to Jimmy & Family. Way to get out at the top!! Buy lower- sell higher is the way one makes money – besides having to earn the dam stuff. Money gives choices, Debt does not, it demands being satisfied.

Between now & closing line up that rental you want for a year, or so….many things can change in a year.

A well diversified portfolio of stocks, preferreds, REITS can deliver your 7% average, maybe even better!!
Time to rent, live within your means, let those earnings compound a few years….

Right this minute US stocks are flat for the year, even down a bit. Election year cycle hit a bit earlier than usual but 2011 isn’t over. Neither is the US real Estate Mess, Debt Mess, or our lack of Taxation Mess. Our economy might be up or down 5% or so who knows.

Another day another couple hundred earned. If I can keep 20% for saving & investments good for me.
There will always be time to buy. You might NOT have such a good opportunity to sell.

#14 bbcoq on 08.03.11 at 10:49 pm

I am not disputing your assertion that VCR is primed for a solid correction but in the not too distant burbs (Burnaby, New West, Tri-cities, North Van) detached homes on large lots are being steadily acquired by sellers who cashed in on the HAM that bought their Vancouver and Richmond homes-often, according to my realtor, they are buying 2 homes. They often pay cash and there is a surprisingly high number of them. Open houses are still busy here in Tri-cities-not crazy but busy. I am surprised but not shocked. I think a rate hike or two is likely needed to truly dampen the market because despite higher inventory I still houses moving and as new ones come on the market they seem to sell if the price is reasonable. Those fishing with high prices sit and sit but lots is moving.
I am surprised but it is happening, at least here.

#15 vyw on 08.03.11 at 10:51 pm

Vancouver SFH index prices up 13.3% YOY, 19.3% over 3 years (includes 2007/08 correction), 39.5% over 5 years:

http://www.rebgv.org/housing-price-index?region=all&type=all&date=2011-07-01

Note index prices are for a typical home and tend to under-price the market price in good neighbourhoods.

These gains YOY are tax-free for these homeowners. July volume is low but this is seasonal, with choppy volumes and prices through the fall. Toronto will also be the same.

Its a good time for new homeowners to do a stress test to see if they can make payments on higher mortgage rates or if they can survive a 30+% correction. One option is to cash out like our friend Jim.

#16 Nemesis on 08.03.11 at 10:55 pm

“Ever had 900 pounds ride over your fingers?” — Hon. GT

Well, they are (admittedly) good for one thing – e.g. I once met a HarleyD man who survived a collision with a bear. A rather large bear. The Bear, sadly, did not fare so well.

Regardless, there are alternatives, GT (at half the weight and twice the power)… ;)

#17 Timing is Everything on 08.03.11 at 11:09 pm

“As the next phase unfolds….”

Well, we’ve been through the 1990s, Y2K, DotCom, 911, US sub-prime crisis, financial crisis ’08-’09 (Great Recession?), Canadian housing crash or melt or over-easy …whatever term ya want.

Now, Just waiting for the locusts. Hmmm….Bring ’em on.

http://www.youtube.com/watch?v=IpWDsdD-KJY

http://tinyurl.com/ma9onb

#18 LH on 08.03.11 at 11:15 pm

7% made sense before I was born, however it is too optimistic for 2011. Even the Canadian Pension Plan Actuaries assume a long-term real (after the deleterious effects of inflation) yield of 4%. And where does the Canadian 33-year real yield (Inflation Linker Bond CAN 1 1/2 12/01/44) trade today? A measely 0.80% !! In this environment, it is no wonder that postively carrying real estate in nice locations like downtown Toronto are expensive!

Shameless disclaimer: I bought a few and if prices come off ~20% I would look to add more. All of them are in Postal Codes M5R, M5S and M5T, the heart of the city.

You continuously post the same comment, and I continuously correct you. A balanced portfolio does not mean solely bonds, and it sure doesn’t mean cloning the CPP. Last year a 40-60, fixed-growth portfolio achieved double digits. And last summer (like this one) markets tanked. — Garth

#19 Goldenfox on 08.03.11 at 11:23 pm

Tony wrote:

The stupid people who post here about gold and silver are the clueless morons in real life who look for the one assured thing in life that will make them rich. People with a background in economics know that doesn’t exist. The people who don’t know up from down are the fools who chase both gold and silver and will end up losing all their money… but it’s nice to see them posting knowing what will happen to them.
……………………………………..
I seem to remember Tony a year or so ago predicting that gold was going to $500. Good luck with that one Tony! My 100% Gold and silver rrsp would have to go down 92% for me to break out even.

#20 debtisgood on 08.03.11 at 11:28 pm

those metal heads are wrong again…stop trolling this site and the comment section is not for you.

#21 Utopia on 08.03.11 at 11:45 pm

“The result: a town (Victoria) where the average income is $76,600 …and yet the average SFH costs $581,117, or about twice the national average.

But, that average price was $48,175 more in June than it was last month” ~~Garth
————————————-

Incredible, is it not?

Price growth there in just the span of thirty short days was nearing the ten percent threshold. It is amazing that so few can appreciate that even Victoria is near the manic stage.

When we consider the inflation rate this kind of increase in average home values is off the charts. Home prices in this situation would more than double in a single year.

That won’t happen of course. Sales have dropped like lead.

What we can easily then see is that the bubble is near the bursting point for that locale. Victoria will simply never see average home prices in excess of a million dollars unless this country slips into a hyperinflation.

It is therefore not doomer talk to say “the end is near”.

I tend to agree with your suggestion Garth that we may be just weeks away from the real correction. It can only ever be certain by hindsight though. We will watch and wait but the prognosis is not good.

Out here (Saskatoonish) there is a knowledge amongst many that this city has never seen a property boom of the current magnitude. It is off the scale and the statistics prove we are one of the bubbliest of cities in Canada today.

Our prices have risen more in percentage terms than almost anywhere else. Few seem concerned. Our economy is strong they claim. We have Potash and Oil and Gas.

But commodities are in decline. Boom and bust friends. There may be some tough times coming. As many of you know I post here often and am quite vocal on the subject of real estate and its risks.

I am even more vocal in person. I have warned friends and family to avoid buying now in no uncertain terms. I reference my worry with hard data and statistics.

All to no avail.

Tonight I learned that a good friend has just made an offer on an overpriced home. The fool and his wife ignored all the information I offered and went broke buying on nesting instincts prompted by a convenient downpayment loan from family. They could not resist the temptation of free money and low interest rates.

They think they are doing the right thing.

I am still in shock. Words were not enough. Now only the pain of debt servitude in a falling market will educate and enlighten.

#22 Kitchener1 on 08.03.11 at 11:45 pm

Buyers market, shades of toronto circa 1995-1996 or even 2008.

Fun times.

People out here in my neck of the woods are getting worried (Kitchener-Waterloo). Word is that the majority of RIMM cuts are going to be local. Bad news as the region cannot absorb that amount of high tech workers– simply are not enought high tech firms in this area.

That the story that so many people miss when they read the headline that says 1000-2000 etc.. people laid off from …………..

there are real families and people behind those numbers– real loss and suffering.

The other issue is that when people see those numbers in a localized region, everyone goes into savings mode. I can tell you that the rest of employees of RIM and other shoot off companies that supply will not be
a. buying that new car
b. putting off the home remodel
c. not eating out or spending as much on entertainment.

Since that announcement was made, I’ve had a lot of conversations with diff people in diff fields and the topic has come up (they brought it up) each time.

#23 Smoking Man on 08.03.11 at 11:47 pm

My oldest took me out for a few beers tonight had a haert to heart…..He Wants to join the army……………

Hum? ok why?

Son in my hero out of all me kids he took my lesons well, i did something right….He is a rebel, has a ron paul revolution tatoo on his arm, he is so in tune to the way things really work.

What the fk why? I said

He said

I want to contribute be part of something big…Im empty I don’t want to take I want to give……

All I can say is 2 out of three anit bad…

Idiot

he said
I want to feel part or something…. I said I will pay for 5 hookers just don’t do it, are you nuts….. Ya I am he said. I w

Now you know why I drink…………

#24 HouseBuster on 08.03.11 at 11:50 pm

I put a few dollars into the market(TSX) at the close today. Let’s see if we can get a few up days going now.

Reasoning: the Dow broke a losing streak that was going to match one that occurred in the ’70s. We are due for a bounce.

#25 BC Bring Cash on 08.04.11 at 12:05 am

Here is a good example of things gone bad. This development was built in Kelowna in 2008 and many units are unsold. Many units are being offered at a fraction of original pricing. Units that are brand new and never lived in.
http://southwindatsarsons.com/

#26 HouseBuster on 08.04.11 at 12:06 am

Regarding the couple with 650K if they put all of that in the market and get $3000/month wouldn’t they be spending all of it on rent? How would they save any money for retirement if they are spending all of their income.

Because they can bank their earnings. — Garth

#27 Smoking Man on 08.04.11 at 12:10 am

Can not beilive he is doing this…………………such tallent
Wants to fight a proxy war for I don’t want to say it…

Enjoy his song about me, the somiking man, pic it to sean

Pick of him in the last clip

http://www.youtube.com/watch?v=NmtGuh53Dvc

#28 Kilby on 08.04.11 at 12:13 am

Victoria and area, last 7 days, 33 new sales out of 3,431 listings. Don’t know how many realtors, maybe around 1,200. Does anybody know?

#29 Conflicted Pumper on 08.04.11 at 12:16 am

Funny…

A balanced portfolio always go up in the long run, even though it is nothing more than a collection of imaginary pieces of companies, IOUs of companies and governments, and other derivatives of cash. Seems like you cannot go wrong even if you are unlucky enough to buy just before the last major correction.

But somehow a Canadian real estate can’t possibly always go up in the long run, even though it comes with a parcel of land, bricks and mortar over a solid wood frame, with windows to let in the light, and not to mention all the comforts inside. And it serves a real purpose – to provide shelter.

I’m looking forward to seeing what happens to both when the Fed’s QE luck runs out. Most likely they will come down together, except equities will take the elevator while RE takes the stairs.

#30 dd on 08.04.11 at 12:18 am

#232Two-thirds on 08.03.11 at 4:04 pm

David Rosenberg has just called for a U.S. recession, calling it “a virtual certainty.”

Buckle up, people, it’s going to be a bumpy ride ahead in 2011.
……………………………………………………………………………
Where have you been? He has been calling for a recession since May 2009.

#31 kilby on 08.04.11 at 12:21 am

Last 7 days in Victoria and area there were 33 new residential sales and 3,341 active listings. Don’t know how many realtors in Victoria but over a 1,000. Thin pickins’

#32 Dan on 08.04.11 at 12:24 am

Calgary Real Estate is not doing too well either. Down over 20k from last month and sales 20% below 10 year averages.

Of course the paper only said – Calgary House Sales increase 5% … yes, 5% over last year, 15% lower than last month and 20% lower than the 10 year average.

As for prices, they just said the average family house is selling for 450k, no mention that is down 10k from last year and 20k from last month.

#33 New Attitude on 08.04.11 at 12:40 am

Liking the new attitude, Garth.

Can’t wait for your “Vultching for Dummies” guide.

Food for thought :)

#34 Utopia on 08.04.11 at 12:47 am

“Meanwhile, could the same thing be emerging in delusional Vancouver?…..Maybe. Sales plopped more than 20% there last month, trailing even the 10-year average. Of course, prices are ahead of last year by 9%, but that’s exactly the problem” ~~ Garth Turner
———————————————

Exactly. That is the problem. Anyone with common sense should be able to understand that falling sales and rising prices is a huge red flag. It is a sign of a market that has lost perspective. A sign of a topping market.

We will see a resolution shortly. Hold onto your hats. If the stock market does crater as many now predict the fall in home sales will only be that much more dramatic.

That is when supply will start to finally exceed demand.

There is more than just a mere buyers market approaching now though. There is already a dawning awareness amongst vendors that the top has already come and gone. That finding a greater fool is going to be the real task as the rest of this year unfolds.

That means hustling. Dropping prices to seal a deal. Fighting to get out. Some get it. Most do not until it is too damn late.

Like now.

#35 poco on 08.04.11 at 12:48 am

#3 Victor—do a little more research –Port Moody is toast and has been for quite a while

#13 bbcoq–i might suggest you sit down with your realtor and look at different tri cities areas–condos –TH–and SFH–i kind of think your realtor isn’t telling you everything

check what the owner paid for his property and when–then compare to the asking price now—how many price changes–you’ll soon see that many condo owners are basically screwed if they bought in the last 2 to 3 years–many TH are selling for what the owners paid a few years ago —and the price drops are now hitting the SFH

take these mls #s to your realtor–get him to tell you if these are the real numbers
V# 883813–bought in july 09–540k–last listed at 489.9k
V#880153–bought in june 08–427.5k last listed 409.9–TH
V#880002–bought in feb 08–489.9k last listed at474.9k–TH
don’t know if these are still available–older mls #s–i’m following newer listings now—i’ve got pages and pages of properties that are underwater–all from sitting down with a couple of realtor friends/relatives –as i’ve said before everyone should try it–you’ll be pleasantly surprised

i find it hard to believe that after cashing out a big windfall by selling in Vancouver, that sellers would come out to the burbs and sink alot of their money into two deflating assets—even for fools, it’s not logical—but then again what is?

#36 Morry on 08.04.11 at 12:52 am

Wonder what OZZIE the Vncouver real estate artist is saying?
http://www.globaltvbc.com/money/Purchasers+suing+real+estate+guru+Ozzie+Jurock/5154890/story.html

#37 Helicopter Ben on 08.04.11 at 12:52 am

Manifesto michelle? thanks for the professional advise , maybe you can come and spew your wisdom on my new blog. i love professional advise like when i go to best buy and want to buy a tv , a professional tv salesmen comes and help’s me then i go to the professional cashier to buy the tv, then the professional receipt checkers check my receipt on the way out. i decided to save my parents a 100,000 dollars on my university education though and got a library card instead. garth it seems you have censored all that disagree with you, nothing to do with rudeness but people who talk about pm’s. basically you made a bad call and you got sick of hearing about it .

#38 Smell The Coffee on 08.04.11 at 1:00 am

We have had our seven fat years, and eaten all the cows. We now are entering our seven thin, sickly cow years… and will just be served gristle and hoof.

This predictable economic cycle has been going on for millennia. It’s our short memories and indulgent inability to save for our grandchildren’s future, by unconsciously consuming three generations worth now … without thinking about consequences is the main reason why the whole shebang will blow up. Guaranteed.

This happened in Greece, Spain, Ireland, and good ole’ USA. And we Canucks will have our day too.

Greed is infectious and magnificently disables social mores. Realty porn is endemic and a communicable disease. We get what we deserve.

#39 TippyCanoe on 08.04.11 at 1:12 am

Hi Garth, long, long time reader; first time poster. I think I can now spot the realtor’s by their comments! I hope they enjoyed the ride courtesy of low interest rates, and what I hope were not stupid acts on the part of our government to keep the economy going. Real estate spec is getting some young people in pretty bad situations here on vancouver island. Turns out the jobs they thought were secure, aren’t. Seems no one told them all the costs involved as a seller (realtor fees)…and they are finding out the hard way that real estate doesn’t always go up.
But it’s entertaining to see the realtor’s silly comments as they take their swipes at you. Keep up the common sense blog Garth…you rock!

#40 mackie on 08.04.11 at 1:14 am

A few thoughts…

How much more can you say about RE? Many people here continue to say the same thing over and over again to convince themselves that they made the right decision not to buy a home? In the past year or two you were probably smart not to buy in places like Vancouver and Toronto. But I hate to break it to you, you probably should have bought 5 years ago when prices were better. You would be sitting on some nice profits by now.

Not everything is about money. Some people value a home for reasons other than financial.

Why do those who have very little gold and silver or none at all, continue to attack those who do own it? What are you afraid of anyway? Why do you care that people continue to buy it?

Despite the fact that many here think it’s unwise to buy a home, purchase PMs etc, there are more “fools” who continue to buy and push prices higher than there are “intelligent” people who choose not to buy. Therefore, prices are more likely to go up in the short term than go down. Right or wrong.

That’s all I have to say.

#41 reality guy on 08.04.11 at 1:15 am

Tony wrote:

The stupid people who post here about gold and silver are the clueless morons in real life who look for the one assured thing in life that will make them rich. People with a background in economics know that doesn’t exist. The people who don’t know up from down are the fools who chase both gold and silver and will end up losing all their money… but it’s nice to see them posting knowing what will happen to them.
……………………………………..

The world is so unstable and the US deal is a wimpy bandage for internal rotting problem. I sure hope the US can get their house in order. No matter what happens in the next few years, Canada will also feel their pain. Q3 is probably on its way, because this is how this government solves problems, by throwing more debt into the fire.

http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8677038/Forex-focus-US-debt-crisis.html

#42 from kits on 08.04.11 at 1:16 am

you touched a few buttons tonight, keep it up…nobody likes hearing things that affect them negatively but someone has gotta do it.

hind sight will be 20/20 but it really is hard to believe…I’m sure all those reading this blog will come back on here and post how they knew this was coming..blah blah blah, yet are in your face now.

What are you going to do once all your writing comes true? looking forward to it all and I own in vancouver proper, why I’m happy to lose money on my own home who knows, I guess house porn does have an entertainment value

#43 Thetruth on 08.04.11 at 1:25 am

Fact:

House prices increased rapidly starting in 1987. Immigration to Canada was increased dramatically in 1987. Both haven’t relented since. Sure there have been corrections along the way but the trend is up.

I’m sure people in Vancouver and Toronto see this.

Not tru

#44 Suede on 08.04.11 at 1:39 am

Seeing a helluva lot more For Sale signs around North Burnaby these days…just saying. Still haven’t sold our place in Vancouver close to city hall. Why? – No in-suite laundry. Choosey buyer’s market, seller’s like me have to start to beware.

#45 Not Doomed. on 08.04.11 at 1:39 am

7% return -3.5% inflation=3.5% return.
Chump change. Diddly squat.

#46 goldenshowers on 08.04.11 at 2:21 am

That’s the thing with the interwebs: you set up a site and dish out financial advice and before you know it people are disagreeing with you. Not what the dittoheads and sheeple want to hear, because it’s not comfortable to see real estate continue to rise (or offer little hope of any significant cratering) and gold to keep shooting.
I’ll be less skeptical as soon as I see some ackowledgement that the stock market is a casino and offers no more or less guarantees than real estate or precious metals.
It’s all risk.

#47 Wise Guy on 08.04.11 at 2:28 am

This video talks about pricing your home properly when putting it up for sale in Victoria. The real estate agent is actually the husband of a coworker. I’ll have to direct her to your blog!
http://www.youtube.com/watch?v=zVssBEkmTKA&sns=fb

#48 Off the River on 08.04.11 at 2:53 am

Garh I’m in agreement, with you here. My only question to this is that if the housing markets are going to drop, along with commodoties, then won’t that put us into a double dip? (Depresion)

I’d like to see otherwise; a healthy recovery in America and abroad. But, I just don’t see that playing out untill the whole debt mess –both personal and federal– gets straightened out.

#49 Jody on 08.04.11 at 3:25 am

“a statement about behavioural finance? — Garth”

To true, once some low offers/low balls are accepted then the panic will begin. I was out in Saskaberia last week, people there are in a daze, a ton of homes for sale all over the place but yet people kept saying, “oh just wait, things are really gonna heat up, in a few years they’ll make a killing on that house.” “They’re lucky they got in now.” People are going all retarded. All the houses are cookie cutter images of each other, ugly stucco, bedroom communities with no soul.

Some people are buying for the long term, a home for the family, but there is a ton of speculation and that’s really going to screw things up. Everyone seemed to have/want 3 cars, a 5th wheel, boat and place on the lake, really, does that mean you’ve made it? If people use cash fine, but to take out loans for that junk, that’s beyond stupid. The sad part is people with families think they need all the toys, no, what they need is to spend time as a family, not buy crap. Lots of people keeping “busy,” to put on airs, sad really.

I know Garth has said real estate is local but I think once one area of Canada gets nailed the rest of the country will have a fit and head off the cliff as well. The herd mentality should never be underestimated, after all, it’s what got us into this mess in the first place. Thanks to this blog I sold the real estate I had, invested the money and now get a better return than real estate could ever give me, you should see what happens when I try telling other people that, the venom they spit. I guess they don’t like seeing someone not being in hoc as like they are, screw ’em, they thought they were so smart buying well now look at them.

#50 Dorothy on 08.04.11 at 3:43 am

I think that, for many, it’s already too late to consider selling their home and taking a profit. Because many markets (outside of Vancouver and Toronto) have already fallen far enough to make it impossible for some to sell without having to write a cheque to the bank on closing. Certainly in my neighbourhood, anyone who bought in the last five years with anything less than 10% down, is already “underwater” and therefore unable to sell.

Even though I don’t have a mortgage, I also am unwilling to sell right now because I would lose too much of my original investment. It’s unwise to sell either real estate or stocks into a down market. Much better to hang on until the market improves, even if it takes years.

The only people selling their homes right now should be the ones who are lucky enough to be living in a market that’s still overpriced (which for the most part means Toronto and Vancouver). Everyone else would be well advised to hang on if they can, and ride out the storm.
Obviously there will be people who have no choice but to sell into a down market because of circumstances such as job loss, or having to move to a new town, but for everyone else, if you don’t HAVE to sell and it’s a buyers market in your neighbourhood, then why on earth would you choose to take such a big hit on your investment?

I’ve lived long enough to see real estate go up, then down, then up again. Just like the stock market, real estate is cyclical. But for those who don’t panic and sell into a down cycle, real estate can be a good thing to own.

#51 martin on 08.04.11 at 4:08 am

turner, you are a hell of ultra class economist

and a psychologic doctor

#52 PALI on 08.04.11 at 4:59 am

Hi Garth

Is your book available in the UK and where? – I don’t think I can wait another three weeks before I move to Canada to read it?

Something to read on the flight to Vancouver….

#53 Imstupid on 08.04.11 at 5:58 am

To all the readers here, if you want to see what debt does to a society you only need to look south. Next time you fill gas or buy groceries look at what others are doing, what they are buying and how they are paying. I just witnessed someone who pumped $2.86 of gas and paid with debit card, which declined. It’s a daily occurrence now in Toronto. This is at 5am so it’s a guy going to work. 2008 was used to cut jobs and wages, while debt is at all time high, their is only one future for many and they don’t like it. The party is over now you must make the sacrifices that you promised to make when you took that huge mortgage and heloc or default. It’s simple.

#54 Tim on 08.04.11 at 6:29 am

Sadly a 7% return on investment does not outpace real inflation which would include energy and food. You think coffee for example just goes up 3.4% per year? That inflation number is so manipulated its ridiculous. I could site more things that are way higher than 3.4% – taxes, energy like gas and hydro, produce, anything with grain in it, copper, oil, yes precious metals and anything else people really need. This 3.4% number is really only a reflection of wal-mart clothes and electronics, what a joke.

#55 Beagle on 08.04.11 at 6:56 am

Just wanted to thank you Garth for this blog. My wife and I got out of the Victoria market a couple months ago. We threw the house on the market a few weeks before the March mortgage rule change and a couple house horny 20 something’s with mommy and daddy’s cosign snapped it up at 15000 above appraisal. We are now travelling the US and Canada in a RV having the time of our lives! Everyone I talk to across the US can’t believe how stupid folks in Victoria still are and say we were lucky to have got out.

#56 timo on 08.04.11 at 7:45 am

http://uk.reuters.com/article/2011/08/04/uk-swiss-snb-idUKLNE77301D20110804

0% , i wonder if there might be a panic.

this could be interesting for Canada. If our dollar becomes too strong they might just take our rate to zero. free money should inspire smart investments.

Currency wars anyone?

#57 househornyhousewife on 08.04.11 at 7:49 am

Hello Garth,

I fervently hope you are right because some of us have been waiting for quite some time to see some common sense knocked into these unreasonable sellers who simply choose a price out of thin air and then expect to get it. The situation is quite ridiculous.

In our neck of the woods we have sellers with properties that have been sitting on the market for years (yes years !) without so much as a single buyer stepping foot in the door to have a look. If these people want to truly sell their property then they will get with the program and ask for what is reasonable and not confuse selling their house with winning the lottery.

At any rate, I’m not buying anything until I see a reasonable price attached to it AND a flexible seller who is willing to negotiate all of the other stuff (like closing date etc..). It’s about time buyers started to get some respect since we are the ones shelling out the dough and taking on the risk of ownership. Ever heard of the saying, ” The customer is always right” ? Well this will be true very shortly of real estate in the near future.

What was it you were saying about vengeful buyers ? Did you ever hit the nail on the head with that statement.

HHHW

#58 TurnerNation on 08.04.11 at 8:02 am

FRANKFURT (MarketWatch) — The Bank of England on Thursday left its key lending rate unchanged at a record low 0.5% and left the size of its asset-purchase program unchanged at 200 billion pounds ($327.8 billion). The outcome was widely expected.
Read the full story

FRANKFURT (MarketWatch) — The European Central Bank on Thursday left its repo rate unchanged at 1.5%. The decision was widely expected. ECB President Jean-Claude Trichet’s monthly news conference is scheduled to begin at 8:30 a.m. Eastern.

#59 timo on 08.04.11 at 8:05 am

http://uk.reuters.com/article/2011/08/04/uk-swiss-snb-idUKLNE77301D20110804

0% , i wonder if there might be a panic.

this could be interesting for Canada. If our dollar becomes too strong they might just take our rate to zero. free money should inspire smart investments.

currency wars are fun?

#60 $froma$ia-(The Sun can *&^* my caulk) on 08.04.11 at 8:35 am

mAYBE THE h.a.m. buying RE is trying to get rid of their cash because they know their CA$H is TRASH!

#61 GTA Girl on 08.04.11 at 8:37 am

Still no sales of any homes in my area, another popped up this week. 10 homes, no bites. Into month 3-4, 2homes pulled off market by 1realtor.

This realtor is pretty aggressive. She must be doing backflips. She just put another up for sale…low balled entire area. Anyone who bought a house in our area in last 4yrs just lost $300k. Minimum if this puppy sells.

Just can’t figure out what’s going on just south of us in vast new builds of semis and towns selling for $600 when a McMansion w/pool, 6 car parking and basement media room worthy of CNN control booth can’t sell for a million, just 1/2km north.

I think developers are handing out crack with each sale.

#62 Ret on 08.04.11 at 8:43 am

Siemens Canada in Hamilton closed its turbine plant July 29. Job losses for 550 skilled workers. Siemens moved the operation to North Carolina.

This plant had been a Westinghouse turbine plant until Siemens bought it years ago. Westinghouse was a major Hamilton employer with 3-4 large plants in the city. Everyone had a neighbour on their block who worked in one of the Westinghouse plants. Life was good.

#63 thinktank on 08.04.11 at 8:44 am

Great post Garth … this was what made me a fan of this blog. I dont post often (3rd time) but I also wanted to comment on the “martial law” you laid down yesterday about rude comments. In both my previous posts I have pointed out, what I thought, were intelligent, researched points of view that didnt always agree with some of your positions. As I stated “thats what makes a market” be it real estate, gold, silver, bonds or stock, – a buyer for every seller and sometimes like now, that balance gets out of whack and you have extremes such as real estate and gold. On that note – I too think that a correction is inevitable in real estate and as you have already pointed out – its probably already underway in many if not most of the country – think stealth NOT crash folks but the results ultimately end the same way – lower values.
Finally I will mention that as of yesterday I closed all gold positions (GLD call contracts). Im a trader and do I think Gold will head higher? – I dont know – its all about your time horizon and the time frame you trade… but I know that it reached the most extreme reading yesterday over the last 6 months on all the indicators I use to track it. I dont need to call the very top in order to sell or the very bottom to buy it – “Bulls get rich, bears get rich but pigs get slaughtered”. I have been in an out of gold or the GLD ETF for the past few years and it has rewarded me handsomely. These extreme reading STATISTICALLY result in a pullback, even if it is of the profit taking kind and should that happen, there will be future buying opportunities again… you can count on it. Thats the great thing about an investment portfolioi (as Garth has repeatedly stated) – its liquid or can be very quickly – real estate – not so much.For those who care Silver (SLV ETF) broke out of a technical consolidation pattern and MAY press higher here in the weeks to come – you make your own call as we all must.
Once again great post Garth – I think a lot of your readers have “AHA” moments when they read your blog and if they dont – god help ’em

#64 appraiser on 08.04.11 at 8:48 am

So let me get this straight.

The market is so bad in Vancouver that Jimmy boy recently recieved three offers on his property and accepted one for 98% of the asking price.

And the market is obviously going to correct in Toronto because sales and prices are up significantly over last year.

Sounds like the “Bizzarro World” of real estate where multiple offers and rising prices somehow equates to a buyer’s market.

Anybody can tell you where you are. Where you’re going is the hard part. — Garth

#65 Love this Blog on 08.04.11 at 9:06 am

Garth, thanks for the time and effort you devote to this blog. I rarely miss it.

#66 BrianT on 08.04.11 at 9:14 am

#64Appraiser-You make some good points. Looking at a house’s investment value, the ideal situation is multiple offers and a low price. Currently, parts of vancouver and TO satisfy one half of this ideal.

#67 The American on 08.04.11 at 9:31 am

At #17: Timing is Everything, you’re right about everything you wrote, except for one thing. You have not yet been through the Canadian housing crash/melt. It is only beginning there. This will take years to get through.

#68 Toon Town Boomer on 08.04.11 at 9:34 am

Hey Garth
Apparently theres a realtor on Kevin’s Saskatoon Housing Bubble blog that thinks your a loser because you spend your “empty days” bashing real estate and it only justifies your smallness in society. It all started over a post about the Conference Board of Canada Predicting housing to rise here in Saskatoon by 7%.
While the week earlier TD predicted a fall by 11%. Anyway I hope He/She is reading this blog post. Keep calling a spade, a spade. The Folks are listening!

#69 Mr. Lee on 08.04.11 at 9:45 am

Mr. Turner:

As events in the US and EU effect us in Canada, how long do you see this economic malaise continue in the US, and do you see some EU countries like Germany dump the Euro?

Curious as to your insight please.

#70 jen on 08.04.11 at 10:23 am

A sign the make believe RE prosperity is finally coming to an end. See interesting link below:

http://www.theglobeandmail.com/report-on-business/economy/housing/sprawling-quebec-mansion-back-on-the-block/article2119361/

#71 Michelle on 08.04.11 at 10:25 am

@# 266- Sky:
“I knew the Canadian medical system was in rotten shape but I didn’t realize that it had sunk to the level of offering unsolicited psychological evaluations on the internet. And your psychological diagnosis … of somebody you have never even met… comes as a result of cherry picking quotes that fit your profiling.”

“You call this behavior professional? I can’t think of anything more UNprofessional. I know everybody wants to be Dr. Phil but if you really do have a medical degree… then shame on you .”

My response: I was careful to comment on the behaviour, not the person. If that person does not want to be associated with the behaviour then they should stop doing it.

#72 bill on 08.04.11 at 10:30 am

Helicopter Ben needs a hug…..
my wife [an OC for the brain injured] feels that there are those on the blog who safely qualify for the ‘personality disorder’
regrettably science does not yet have a cure….

#73 expat on 08.04.11 at 10:37 am

Just wanted to share a little success story with you…

I’m so proud of my parents, who recently harvested their substantial gains on their Victoria home by selling to the greatest of the greater fools who bid well above asking during its 3 days on the market. A unique property in a very desireable area, and no others on the market like it at the time, priced aggressively led to a very quick sale. They’re moving to a smaller community where they bought twice as much house for half the price, have moved their real estate equity down to the levels you’ve prescribed (90 minus age) and couldn’t be happier.

After years of asking my Dad to read your website, he finally got a clue and I now don’t have to watch their net worth, representing years of their hard work and sacrifice to raise my brother and I in an expensive town, suffer due to Victoria’s insane real estate situation.

I’m in my early 30s, grew up in Victoria, and have seen a number of my friends stretch themselves to buy property, and who struggle to make ends meet despite having fairly decent jobs. A discouraging story – enough so that my hometown is no longer an attractive destination for my husband and I to raise our children in, beyond the emotional “home” aspect that the city holds for me.

Thank you, Garth. We credit you in part with the peace of mind we’re all feeling now that the beautiful but ridiculously inflated family home has been unloaded.

#74 Jamaican_Gal on 08.04.11 at 10:55 am

Garth, this “decrepit old blog” sure has an allure all of its own. What with your salacious posts, caustic comments and weirdo posters – a digital cauldron of schizophrenic delight!

I visit daily, and even if I miss the day’s lesson, sitting at the back of the class wearing my Dunce Cap, at least I get a few laughs.

Just stay true to you. One love.

Now, about that Gbook?

#75 Utopia on 08.04.11 at 11:02 am

Last week, I was talking to a landlord I know. He has 15 houses in Saskatoon and keeps busy full time repairing them and checking tenants in and out.

So he is doing pretty good. Even in this part of the world, owning 15 houses means you are a multimillionaire. On paper at least.

So I asked him if he was considering cashing out on a few and taking some profits as prices have risen so astronomically here. He just looked at me as if he didn’t know who I was anymore. Kind of funny. He could not quite register what I said and just kept blinking his eyes for a second or two.

“Prices are not going down” he insisted. This is the fastest growing city in the country. Lots of people are moving here now. And anyway, our prices came up because they were always too low. Now it’s normal here.

Long story short, he is thinking of buying a few more places. The income is good and he just hired a guy to help him fix the places up.

Why bother with statistics and charts? That stuff is just for theory anyway. In the real world things are always different. (Nothing to see here folks).

#76 bill on 08.04.11 at 11:03 am

Helicopter Ben needs a hug…..
my wife [an OT for the brain injured] feels that there are those on the blog who safely qualify for the ‘personality disorder’ tag.
regrettably science does not yet have a cure….

#77 thinktank on 08.04.11 at 11:11 am

ok … can you say market meltdown !!??

WOW … critical technical support levels breached on the SP-500, NYSE

US2Y – historical low
US10Y – 2.52 % !!!!!!!!!!!!!!

mortgages are pegged to the 10 year !!!!
wowsers … funny thing is some of you may think this is good for housing … its not if the economy continues this path to a double dip …
Interest rates will fall WAAYY down the food chain as a determining factor on whether to buy inflated homes – if you have no job it doesnt matter if rates go to zero!

Not good – having said that … I would NOT be surprised to see a violent snap back rally from these oversold conditions. Never good to sell out of panic – never. The wild card is the July un-employment numbers that will be released tomorrow – its expected to be brutal.
Hold on – this could be a wild one, and Garth you said you were glad im not your advisor because Im a trader – Traders can handle this if they are any good … not sure I would want to be a long only buy and hold investor in this environment – actually CHECK THAT … I guarantee Im glad Im not a buy and hold long only investor … 2008 should have taught EVERYONE these are different times. 10 years of portfolio appreciation was effectively WIPED OUT in the 6 month correction of 2008.
A well known Canadian Mutual fund’s motto was .. “BUY HOLD AND PROSPER” … in 2008 the joke on the street was it had been changed to “BUY HOPE AND PRAY” …
good luck to all … I wish bad on no one.

#78 bill on 08.04.11 at 11:26 am

please excuse the repeat.

some little computer glitch I reckon….

#79 BrianT on 08.04.11 at 11:41 am

Biggest crash in Cdn banking stocks since the big one-this is with a relatively strong housing market and all the support the Cdn taxpayer can give. CIBC just settled a lawsuit for 10.2 million alleging willful misconduct in managing a fund for their own employees-story seems to be mssing from MSM-http://reviewyourbankforeclosure.com/banks-settlement-negotiations-with-states-over-home-foreclosures/

#80 LB on 08.04.11 at 11:43 am

#168 Mr. Plow from yesterday

A blog entry may not be an “open forum”, but the internet IS, and once a blog is opened up for “comments” it becomes a venue for what should ideally be free discourse in order to broaden the discussion with possibilities and educating everyone, (including the blog author).

It should be censored for personal/hateful attacks only to remain viable, relevant,evolving and read.

#81 dd on 08.04.11 at 11:46 am

Like how you just changed your tune:
Early 2011 – no double dip on stock markets
Later 2011 – might have two dips.

Markets always ebb and flow. I said no 2008-rerun is likely. Still my view. — Garth

#82 HouseBuster on 08.04.11 at 11:47 am

WOW! Yesterday was the wrong entry day for the TSX!

#83 b on 08.04.11 at 11:48 am

Garth,

The raising of the debt ceiling and really no cuts in the USA has not solved the debt problem. All the printing in N America, Europe and the rest of the world just to be like the Jones’ creates more debt and no jobs.

The economy is not getting any better despite all the smoke in the air from all the paper money that is burning.

With the TSX down for the year and sucking wind badly how are your investment recommendations doing on those ETFs?

By the way, gold is making all new time highs and is up double digits on the year, for about the 10th year in a row.

Will you ever figure out what is really going on in the big picture besides just real estate?

My big picture is doing just fine. Thanks for asking. But I’m busy today – buying. — Garth

#84 Alan on 08.04.11 at 11:53 am

Interestingly enough, life goes on regardless of those who fret over rising or declining prices of all things. At one time in my life, I could not fathom buying a townhome on the shores of False Creek in downtown Vancouver for $169,000. I said to myself, why would I spend that much money for a townhome when I can buy a house in a nice neighborhood for the same amount of money. Everyone predicted that housing was in a bubble. It was going to fall and we would all be out of pocket. Well, it did fall and since that time there have been a number of housing slow downs and declines in sales. Never has there been a long-term decline in pricing. Unlike stocks and bonds that have immediate liquidity, housing has a completely different selling cycle. Having your house sell in three days in an anomaly not normal course of business. Lastly, if prices do contract (and they probably will) there is no need to panic as long as interest rates remain low and I see no reason why the government would want to increase rates as it the impact would affect all people and businesses. So, the worst thing that can happen is that people choose not to sell their homes and keep them off the market until prices get back on the trajectory they have been on for the last 50 years. What does this do? Reduces supply and less homes on the market is good for stable and realistic pricing.

People today are seeing stock markets declining and their savings reduced. One could argue that a decline of this nature was/is predictable but the advice is always to stay invested and ride things out. For some strange reason, this blog has been trumpeting RE correction for years and yet no advice to stay put, keep a roof over your head for your family and ride it out. Seems to me that if the economies and businesses of the world are going to get wacked, your stock portfolio is heading south real fast. Faster than the price of your home.

Naively, you seem to believe stocks can drop, reflecting reduced economic confidence, and that will not impact housing. A poor assumption. Financial markets recover much faster than real estate. — Garth

#85 Donald on 08.04.11 at 12:11 pm

Garth,

I have learned more about real estate in this blog than any other information source, you’ve def pointed me in the right direction and I’m looking forward to learning how to be a “sumbitch” buyer.

I’m 31 years old, graduating almost debt free (under 5000 owing). I will be obviously renting for the first couple of years to save up for a down payment, or just investing by the sounds of it. Whats a good game plan for the next 5 years for someone graduating and lucky enough to start from scratch?

#86 Snowboid on 08.04.11 at 12:19 pm

#25 BC Bring Cash…

At least they finished it. We took a drive up Glenmore Road a couple of days ago and were amazed that the ‘Conservatory’ project is still abandoned.

I recall it was started around 2002 and had about 100 units. Last I read in 2009 was that it was back on track to be finished… apparently not.

Interesting guarantee from Sarsons that prices have hit bottom, but based on their fine print the offer expires in December – what happens if prices go lower after that!

#87 bullion.bunny on 08.04.11 at 12:25 pm

DELETED

#88 Devore on 08.04.11 at 12:30 pm

#50 Dorothy

Even though I don’t have a mortgage, I also am unwilling to sell right now because I would lose too much of my original investment. It’s unwise to sell either real estate or stocks into a down market. Much better to hang on until the market improves, even if it takes years.

Whether it is wise or not is irrelevant. There are houses selling even in the toughest and lowest markets. That is because most people who sell, HAVE to sell. Very few trade houses like stocks, or cash out.

Basically, because you have to live somewhere, no one sells unless they have to. It’s a huge hassle. It’s a big expense. The exception to that are investment and speculative properties, which get sold if the pain gets too great. That’s why condos get whacked so hard in housing downturns.

#89 Snowboid on 08.04.11 at 12:34 pm

#47 Wise Guy

I get a laugh out of the statement that sellers have to set ‘responsible’ asking prices or risk having it sit on the market for months.

Oh, our former neighbours are so irresponsible!!

#73 Expat…

Thought you were our youngest son for a minute, but our place took 10 days to sell!!

#90 PTDBD on 08.04.11 at 12:36 pm

Break out the bearded Bernanke
To wave his magic hankie
The market has been brought to its knees
Jiving to his quantitative ease

He’ll turn the world upside-down
More tools to come from this clown
Negative interest for money stored away
Cash expiry dates by the day

If you don’t indulge in a spending fest
Inflation will eat the rest

#91 Devore on 08.04.11 at 12:38 pm

#54 Tim

Of course inflation is low because big ticket items are not going up in price: iPads, cars, TVs, computers, rents, even houses (although things like real estate and financial instruments, asset prices, are not part of inflation calculations). This is of little consolation to the segment of population only able to afford the basics of food, energy, transportation, insurance, health care, taxes, debt service, and not much else.

Sadly, this segment is growing, as inflation on necessities keeps stripping discretionary income, which is not growing with inflation; suddenly that 50% off iPad is beyond reach. I’d love to know how many people the “basket of goods” actually represents.

#92 Devore on 08.04.11 at 12:45 pm

#64 appraiser

Well priced properties ALWAYS sell, sometimes in multiple offers, even in a terrible market.

Hoocouldathunk?

#93 Devore on 08.04.11 at 12:51 pm

#75 Utopia

Depends on his situation. But if income is good, and profitable enough for him to work it full time, even hire a helper, then it seems he is in a good place. Why sell something that’s returning great income? Sure, if he was looking to downsize a bit so he has more free time, he can get rid of the worst performers. Rental situation in the fly-over prairie cities is traditionally pretty tight.

#94 NorthOf49 on 08.04.11 at 1:27 pm

Wow, gold pullback of $42/oz in the last hour. I guess some are harvesting their gains in the golden casino. Don’t see movement based on any fundamentals here.

#95 tran, Calgary on 08.04.11 at 1:31 pm

85 construction companies go under in a month.

http://globaleconomicanalysis.blogspot.com/2011/08/eighty-five-australian-building-and.html

#96 45north on 08.04.11 at 1:31 pm

Utopia: talking about a man with 15 houses in Saskatoon:

So I asked him if he was considering cashing out on a few and taking some profits as prices have risen so astronomically here. He just looked at me as if he didn’t know who I was anymore.

one day he’s the entrepreneur making his own way, the next day he’s the victim of a government scheme to force down house prices

thinktank: talking about trading gold:
I dont need to call the very top in order to sell or the very bottom to buy it

no you don’t

#97 not white on 08.04.11 at 1:32 pm

To Tim “After all, 93% of the market depends on sales made to Canadian citizens.”

That’s a load of crap, at least for Vancouver. Have you ever walked around Vancouver? How many white homeowners do you see? Certainly not 93%”

That is sad Tim. So when you hear Canadians you think White People…

#98 45north on 08.04.11 at 1:34 pm

Utopia: talking about a man with 15 houses in Saskatoon:

So I asked him if he was considering cashing out on a few and taking some profits as prices have risen so astronomically here. He just looked at me as if he didn’t know who I was anymore.

one day he’s the entrepreneur making his own way, the next day he’s the victim of a government scheme to force down house prices

thinktank: talking about trading gold:
I dont need to call the very top in order to sell or the very bottom to buy it

no you don’t, I am not much of a trader but I did push to sell our house in Toronto. It sold March 2009.

#99 Oil worker on 08.04.11 at 1:42 pm

The stock market is really volatile these days. Do you think this is just an indication of the “inflation” that has been going on for the last couple of years? Low INT rates I think have created this atmosphere of false recovery.

#100 disciple on 08.04.11 at 1:44 pm

Yellow Media continues to plummet. I was getting cold calls from one of their subsidiaries to buy ad space the last two weeks. $200 per month for an online ad. Are you kidding me? How can they survive? The big picture is that the old corporate monopolies are dying a slow death so that the rats can escape the sinking ship. Fortunately, the false claims of global consolidation are increasingly being ignored by the younger generations.

Decreasing demand for paper and now for lumber if building starts decline, who will continue to buy the product of decimated BC forests?

Have you heard the product of the music industry the last few decades? And this cartel thought people should continue to pay for this toxic audio?

#101 Rich Renter on 08.04.11 at 1:50 pm

Garth, i would like to know yours and fellow blog dogs thoughts on “expansionary fiscal contraction”
http://www.independent.ie/business/world/the-wests-horrible-fiscal-choice-2839623.html

#102 Live Under Your Means on 08.04.11 at 2:05 pm

Don’t follow local RE market as our home was paid off many years ago and although I would consider selling & renting, hubby would not at this point.

Neighbour has delayed putting their home on sale till next spring when they’ll move to PEI where their son and his family now live. Son still has yet to sell their home here. They may be renting it?. Within a 10 yr period they bought 3 homes. The first 2 here were move-ups, but the last was a semi. They made good returns on their first 2 homes.

Have a chap (friend of ours) painting our foyer & our main level today. It’ll take 2 days. I really questioned the colour I chose before it dried. He’s done work for us before. Hope hubby likes it when he gets back. For once, he said choose the colour you want. Almost fell off the chair. As my twin brother’s wife said years ago, she had never met men that were so ‘choosy’ about home decor. Most men couldn’t care less, as long as they have a comfy sofa and a big screen TV.

Not much of a contribution re RE & zero re investments. I do read comments on G’s blog, but when they get into ‘high finance’ I can’t follow them. We’ll leave our investments in ‘Garth’s good hands’. That’s not to say I’m not paying attention.

#103 Devore on 08.04.11 at 2:13 pm

#100 disciple

YLO continues to have a tough go. They have now completed the sale of one of their cashflowing properties, so now they have to do something very quickly with the money to replace the lost revenues. I imagine some of it will be used to pay down debt, perhaps buy out preferreds, but now the clock is ticking, they will have to execute, or we might well see a ‘0’ in front of the price before the year is out.

At that point the dividend yield will be, what, 100% ;) Good luck with that.

#104 slader99 on 08.04.11 at 2:22 pm

Garth,

I’ve got to agree with LH somewhat – this magical 7% year over year seems like it would be difficult to achieve over the last 5 or 10 year windows…. I buy it when you cherry pick time frames or extend the window to include the last 20+ years.

When you say your balanced portfolio over the last 5 years returned 7% or 8% YOY I’d be interested to see how you get these numbers. When I look at the DOW for instance over the last 5 year window it’s a measly 3.2% total (or 0.6% YOY). Look at the last 10 years and its 10.3% (a whopping 1% YOY).

I understand your balanced portfolio recommendation includes 40% fixed income – it just seems like the piss-poor performance of this major benchmark index would be difficult to counter.

Respectively,

Slader99

Then you need to learn more. During the crisis and recovery (2008-2010) the return averaged 5% annually, and that was the worst mess since the 1930s. Balance and negative correlation of asset classes is critical. Chasing returns then fleeing to safety are the mistakes most people make. — Garth

#105 jess on 08.04.11 at 2:30 pm

250 45north

From yesterday : indeed … measured , but the stress lingers and is passed down through the generations. It makes all of us sicker even at a distance.
It would be cheaper to eliminate ALPHA males at the top ;^)

http://killerstress.stanford.edu/

The research followed communities with lots of shootings, the pregnant women during the dutch famine, women who have disabled children , the whitehall study in England etc.

Robert Maurice Sapolskyis an American scientist and author. He is currently professor of Biological Sciences, and Professor of Neurology and Neurological Sciences and, by courtesy, Neurosurgery, at

Robert Sapolsky: The uniqueness of humans
http://www.ted.com/talks/robert_sapolsky_the_uniqueness_of_humans.html

#106 Victoria on 08.04.11 at 2:32 pm

I am in Whistler for the week. Got a good deal on a condo rental – many to be had. I have struck up converations with many locals. Whistler has dried up – hard to sell – Tourism down 50%. Americans stopped coming – same with Europeans. The Chinese are coming but they apparently don’t spend anything. Japanese have not been seen for about 10 year. So it is just us – the poor Canadians. Interesting ….

#107 jess on 08.04.11 at 2:36 pm

250 45north from yesterday :

Measured but the stress on humans lingers and is passed down through the generations. It makes all of us sicker even at a distance.

It would be cheaper to eliminate ALPHA males at the top ;^) http://killerstress.stanford.edu/

Robert Maurice Sapolskyis an American scientist and author. He is currently professor of Biological Sciences, and Professor of Neurology and Neurological Sciences and, by courtesy, Neurosurgery, at

Robert Sapolsky: The uniqueness of humans
http://www.ted.com/talks/robert_sapolsky_the_uniqueness_of_humans.html

#108 jess on 08.04.11 at 2:38 pm

250 45north from yesterday :

..measured but, the stress on humans lingers and is passed down through the generations. It makes all of us sicker even at a distance.

It would be cheaper to eliminate ALPHA males at the top ;^) http://killerstress.stanford.edu/

Robert Maurice Sapolskyis an American scientist and author. He is currently professor of Biological Sciences, and Professor of Neurology and Neurological Sciences and, by courtesy, Neurosurgery, at

Robert Sapolsky: The uniqueness of humans
http://www.ted.com/talks/robert_sapolsky_the_uniqueness_of_humans.html

#109 SMOKING MAN on 08.04.11 at 2:42 pm

BONDS AWAY>>>>>>>>>>>>>>>>

wowser

5 year mortgages should be down to 3% will the banks drop… mabey in a bit but they need to keep re prices from rising so a little nudge from Carney and they wont budge

#110 JB on 08.04.11 at 2:45 pm

I believe the full reversal of Canadian real estate will be upon us shortly. Markets failing again, debt is the word that will describe this decade best. Wonder what tools the Gov will pull out of the shed to stop the bleeding this time around? Lower interest rates? Back to 35 year mortgages? Don’t think it will work this time around…….. The end IS nigh

#111 Renting in leaside on 08.04.11 at 2:46 pm

Having a great time BUYING….I like going the opposite of the crowd.

#112 betamax on 08.04.11 at 2:48 pm

#24 HouseBuster on 08.03.11 at 11:50 pm: I put a few dollars into the market(TSX) at the close today…We are due for a bounce.”

So, how’d that work out for you?

#113 jess on 08.04.11 at 2:48 pm

250 45north from yesterday :

Measured but the stress on humans lingers and is passed down through the generations. It makes all of us sicker even at a distance.

It would be cheaper to eliminate ALPHA males at the top ;^)
http://killerstress.stanford.edu/

Robert Maurice Sapolskyis an American scientist and author. He is currently professor of Biological Sciences, and Professor of Neurology and Neurological Sciences

Robert Sapolsky: The uniqueness of humans
http://www.ted.com/talks/robert_sapolsky_the_uniqueness_of_humans.html

Robert Sapolsky: The uniqueness of humans
http://www.ted.com/talks/robert_sapolsky_the_uniqueness_of_humans.html

#114 Luc on 08.04.11 at 2:49 pm

“Last year a 40-60, fixed-growth portfolio achieved double digits. And last summer (like this one) markets tanked. — Garth
Balance and negative correlation of asset classes is critical. Chasing returns then fleeing to safety are the mistakes most people make. — Garth”

OK Garth sounds like you are earning a 10% or more return on your investments. Congratulations.

To achieve results like that you must be 100% involved with your broker and spend your time researching and reading about investments all day long.

How can an investor with a family, who earns minimum salary, cooks diner, cleans the house, pays gas and hydro, have time to do what you recommend we do and survive?

#115 old phartz on 08.04.11 at 2:50 pm

Just had the most interesting conversation with a couple of five year old girls that I have to share with the dawgs.

Wife and I are picking raspberries at a friends place in town while they are away. The gardens here are nothing less then show quality.

The two little gals ask if they can pick berries. Wife says NO as she knows that when we leave if we say yes… every kid in the neighborhood will be tromping the gardens.

Five minutes later they come back with change to give to pick. The answer is still no..and they cannot understand why money didn’t change the answer. Called the wife mean.

So…if a five year old thinks that money can change rules….what kind of world are we living in.(sigh)

#116 Renting in leaside on 08.04.11 at 2:58 pm

Having a great time BUYING.. like going the opposite of the crowd!

Gotta run…markets await!

#117 The InvestorsFriend on 08.04.11 at 3:02 pm

SPEAKING OF PAST RETURNS LIKE 7% BALANCED…

I’ve done 13% average annual compounded since 2000. Only two losing years, 2002 down 8% and 2008 I was down 23%. Best years 2003, up 40%, 2009 up 44%. I added funds as much as I could in the bad years. (Dollar cost averaging and a bit of market timing)

That was 100% equities. Carefully chosen stocks. Boring stocks like Melcor Developments, Canadian Western Bank, Stantec, Tim Hortons, Canadian national railways. Home Capital Group, Northbride Financial (no longer public). Sportscene Restaurants (la cage aux sports Quebec), Boston Pizza. Shaw Communications, I have been in and out of these stocks and other over the last 11 years. Almost no energy or commodity stocks, ever (too hard to predict). I try to buy low and sell high and have had some success. I was buying all week, sold a pile last week.

I’ve had losers too, bought Nortel on the way down. Kingsway Financial cost me a bundle.

100% equities is risky but my particular situation allowed me to take a lot of risks. (Mortgage paid off, steady sources of income outside of stocks).

Future may not be like the past. I could lose big at any time. This is not a children’s game.

#118 vyw on 08.04.11 at 3:04 pm

Strong demand in Toronto in July 2011 with sales up 23% compared to last year and avg prices up 10% compared to last year:
http://www.torontorealestateboard.com/consumer_info/market_news/mw2011/mw1107.pdf

#119 b on 08.04.11 at 3:09 pm

Garth,

The USA raised the debt ceiling, so they can go deeper in debt and print more paper money. Jobs and the economy is not improving. Europe is eating its own vomit.

So the TSX down for the year, how are your recommended ETFs doing?

Today, gold is up 16% on the year are pretty steady while the stock markets tanked 3%.

#120 The InvestorsFriend on 08.04.11 at 3:31 pm

INFLATION

People cry about inflation and refuse to believe that it is under 3%.

Yes food and gas are up… Houses are WAY up.

But, I can buy a new 2011 Dodge Grand Caravan for about 22k. I paid 23k for one in 1997. Cars have generally not seen a lot of inflation in 15 years.

Televisions are dirt cheap but cable bills are through the roof.

A vacation property in the U>S. is way down.

Cost of flying has been about steady for the 20 years I have been in Alberta.

Restaurant prices are way up over the years.

Pick and choose. Lots of things are cheaper and lots cost more.

Statistics Canada does its best to measure inflation accurately.

For me what is up is both my income and my spending. It’s not inflation, in my family as the kids became teenagers we just are spending a lot more. With the mortgage paid off I had no trouble finding things to spend the money on.

#121 Josh in Vic on 08.04.11 at 3:44 pm

Hi Garth,

I have to say, reading your blog was partly why I woke up to the fact that being up to your eyeballs in debt is not a smart thing, no matter how bad you want a house. A previous post of yours about Patience reminded me that in this generation of instant gratification sometimes it takes time to come out ahead.

My wife and I put our place in Coquitlam up for sale last year with barely a bit, we were at 309,900. Later we put it up again, lower mind you. That time we ended up getting two offers, we countered the higher and ended up with 279, minus all the fees, mortgage breaking etc. We were lucky to come clean with something in the bank as it was not my house, but my wife’s and she bought at the top of the market. Despite our experience, her mother insists that we should jump right back in and buy a house.

Now I have my wife on board and we just found a great 2bed place to rent in VIC for well under what we were paying for our 1 bed + den in COQ (no more mortgage, no strata, no utilities, no hydro, no taxes). I figure we are saving anywhere from 400-600 a month just on that stuff, and we get a nicer location and a bigger place! It took a while of searching, and some divine blessing mind you to find a good place to rent. Most of the places we saw were dumps, in the 1200 dollar range, and the ones that were a bit higher were not as nice as what we found.

Moral of the story, Ownership with small down-payments equals huge leverage and financial stress. Pressure from the mother-in-law telling you to buy does not make you any happier or smarter if you do buy. We were owners, and now we will be happy renters, for a few years at-least until we have a sizable down-payment, and the market comes to more reasonable terms.

Until then renting an upstairs suite in a mini-mansion on ALR land sounds good to me :)

Cheers!

#122 vyw on 08.04.11 at 4:01 pm

#101
fiscal contraction = reduction in GDP unless the private sector steps up, but there’s no indication that business will invest and hire in this climate.
This is bad news for the unemployed – the jobs report is out tomorrow in the US and Canada. GDP numbers for May (-.3%) and April (0.0%) already suggest that we are performing according to script.

Fiscal austerity => fiscal contraction => higher unemployment => reduced spending => fiscal contraction. It’ll be a wonderful case study in 20 years, if we all pull through that is.

#123 Junius on 08.04.11 at 4:05 pm

#97 Not White,

The 93% is for Canadian citizens, not white Canadian citizens.

Where do you get your stats? Anecdotes are not evidence.

#124 arctodus on 08.04.11 at 4:13 pm

#99 Oil price in freefall today….and it will probably keep going down to test lows of 2008-2009…but don’t worry we really are running out of the stuff….

demand destruction in the western world is rampant now….the collapse of western (and soon eastern economies) is obvious.

Oil prices may drop to 30.00 per barrel WTI before beginning the next hard escalation upwards….

It is a predictable arithmetic of collapse. But no one seems to understand it…..

Oops…..was this acceptable content?……I mean house prices are so much sexier than wholesale economic/sociological armaggedon.

World Made by Hand coming on strong…..do “investor” types still remember what a callus on their hands feel like?

#125 Housing going down on 08.04.11 at 4:13 pm

The stockmarkets are telling everyone that VERY BAD TIMES are a coming. Many will lose their homes JUST LIKE THE US and many will be living in tent cities JUST LIKE THE US. Debt in Canada is GREATER then the Americans at their peak credit bubble. Look out below it`s going to be a nasty crash.

#126 HouseBuster on 08.04.11 at 4:13 pm

@ #112 betamax – Didn’t work out too well. Down on yesterday’s purchase and across the board but still up for the year.

Got to cocky with the feeling of invincibility and this is a rude awakening. I should know that everytime I get the windows calculator out to count profits that it is time to sell! Happens everytime without exception!

#127 Pat on 08.04.11 at 4:26 pm

#117 The InvestorsFriend:
“… 100% equities is risky”

and stupid, because a small allocation in bonds will increase your return.

#128 palebird on 08.04.11 at 4:27 pm

#75
I wish him all the luck in the world..and he will need it soon. I know that town and there is no reason whatsoever for real estate to be where it is. Yes it is a nice little place and yes there are commodities strewn all around but that last bit is a demand item. And once again they will be taught that lesson. Most of them are related to a farmer(s) one way or another and if anybody understands commodity swings it is a farmer so you would think they would be level headed. But seems like the media tends to push common sense out of the minds of most people.

#129 wes_coast on 08.04.11 at 4:34 pm

Congrats Jimmy.

#130 EdmontonJim on 08.04.11 at 4:39 pm

Ok, here is a big question. Where is the smart money going? I mean every dollar going into RE, PMs Stocks or Bonds is a dollar that comes out right? So where is it all going? Are the financiers deleveraging now? Or are they investing more?

I’m not asking what the next big thing is, that’s foolish. And no-one knows the future for sure, but I know there are people who are way smarter and more experienced than me, and I just want to know who these people are and what they are doing, on average. (They can’t all be blogging and appearing in GEICO commercials right?)

#131 Cato on 08.04.11 at 4:43 pm

Jimmy’s timing probably could not have been better. He’ll likely get escrow funds at an opportune time to enter the equity markets.

At least markets are getting interesting again. We’ll see what goodies leveraged fund managers start chucking over the side as they get margin called. A prolonged correction at this point would be nice. Gotta thank the tea party if they can stall intervention and create real crisis buying opportunity.

A strong USD has little to benefit America, more easing is certain. Jobs are more important than foreign debt, the US needs wage growth & jobs to crawl out of this hole. The Fed will have to intervene, just a question of when. Russia and China can whine about it but don’t see either of them contributing much to world at large. The world needs a strong America more than it needs a strong reserve currency.

The US still has long term potential, the corporation that is the USA just needs to restructure. Unfortunately that restructuring will be hardest on Canada, our largest trading partner wants back the manufacturing jobs lost over last 30 years. We are woefully unprepared, at this point I’m more worried about Canada than I am about the US.

Things could be worse, we could be living in Europe which is an absolute basket case. I don’t think there is any saving the EU. Socialism has to die. Can’t blame the banks for this crisis, the blame lies at feet of socialist dreamers that had everyone working a few days a week in an unproductive job while enjoying cradle to grave benefits on backs of others.

#132 Adam on 08.04.11 at 4:56 pm

Never bet against america? Right now I am betting against america.

#133 new_era on 08.04.11 at 5:06 pm

Garth,

The USA raised the debt ceiling, so they can go deeper in debt and print more paper money. Jobs and the economy is not improving. Europe is eating its own vomit.

So the TSX down for the year, how are your recommended ETFs doing?

Today, gold is up 16% on the year are pretty steady while the stock markets tanked 3%.
=====================

Yep the US needs to raise the debt ceiling to pay off the interest on its existing debt.

Its like saying, “I can’t pay my monthly credit cards payments because I ain’t got any money.”

so you have to allow me borrow more money just to pay off my existing debt. Otherwise I will default

Sounds like a recursive procedure to me. For Christ sakes the rating agencies has to wise up and make the US currency as JUNK.

The world’s wealthiest country can easily pay its bills. It only takes political will. This is not an economic issue, which investors understand and why US debt was in such demand today. — Garth

#134 Thank-you Garth turner on 08.04.11 at 5:08 pm

Cato 131

Are you joking we can not blame the bankers for this mess. Bankers got bailed out by taxpayers all over the world to the tune of TRILLIONS of dollars. Since you do not understand what is happening in the world I will explain it in one world fascism. Fascism is socialism for the rich.

#135 Robert Dudek on 08.04.11 at 5:11 pm

M.I.T is doing some great work measuring US inflation. John Williams of ShadowStats uses methodology that the U.S. used a couple decades ago.

In either case, the government-reported inflation number grossly understates the level of inflation.

#136 Burnt Norton on 08.04.11 at 5:24 pm

#115 old phartz on 08.04.11 at 2:50 pm

Sorry mate, I gotta side with the 5 year-olds on that one. Sounds pretty mean to me. Lol

#137 Tony on 08.04.11 at 5:37 pm

#19 Goldenfox

I said the first move down would be to 500 U.S. I still see gold falling back to the 200 U.S. mark.

#138 The InvestorsFriend on 08.04.11 at 5:40 pm

INTEREST RATES ARE DOWN – WHY?

Long-term interest rates are perhaps THE key financial variable. They affect house and stock prices, usually pushing those prices up when rates go down (does not always happen as we saw today)

Despite talk of default and credit downgrades the interest rate on U.S. long -term bonds is in free-fall

Down from 3.0% just a week ago July 27. Has plummeted tis week to 2.46%.

http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2011

Is this becasuue the Fed is buying? It may be

The New York Fed SOLD $4.5 billion of its $1545 billion in bonds the week ended July 27 and that week the interest rate was up about 6 basis points. $4.5 illion is a lot of money even in this marketr and probaly and an impact.

The week ended yesterday, the New York Fed BOUGHT $2.7 billion. That probaly had some impact on bond yields falling. But it certainly can’t explain this plummet. Clearly a lot of big institutions were hell-bent to buy bonds this week for the perceived safty. It’s mind-boggling that the institutions would rush to invest money ina 10-year bond at 2.46%. Sure they may not intend to hold for ten years but if they don’t hold, they could take a big capital loss if interest rates rise from these very low levels.

Anyhow that is some facts. The Fed did buy this past week but certainly was not the only buyer. Perhaps the institutions are convinced the Fed will keep buying and will drive rates down further. It’s a risky bet.

With this development we should see mortage rates falling. The 30-year mortgage rate in the U.S. was a mind-blowing 4.45% yesterday. Joe public can borrow money locked in at 4.45% for 30 years!! Joe public, a U.S. citizen, apparently has a much better credit rating than most of the countries in this world!!

#139 BrianT on 08.04.11 at 5:57 pm

#131Cato-You said it Cato-those socialist dreamers should be more than happy to pay taxes to keep those bankers in the style they enjoy. Socialism for the connected and the jungle for everyone else, you have the right idea.

#140 Mr. Reality on 08.04.11 at 6:01 pm

You should have already been shorting the TSX, Oil and the S&P500 like i have been saying for months.

Then on 400-500 drop days like today you sit back and smile and wait for the bottom…………Then turn bullish. But the problem is the bottom is a long ways away so lotsa smiles until we get there.

Now for tomorrow’s drubbing of the markets when the US payroll data comes out. Funny thing, nobody is talking about China these days….everything must be just fine over there….roll eyes…..

An Italian default is next beating Greece to that wonderful status symbol of Euro-awesomeness.

Mr. R.

#141 Willy H on 08.04.11 at 6:05 pm

I love stories like this. And there may be a few more over the coming months. Or maybe, I should say, weeks.

…. This will make the GTA the last real estate market in the country to ultimately correct, a fact which will lead many people into decisions they may well regret. ….

__ __ __ __ __

Jim and Debra just got out … but as a couple of angels just got their wings a couple more “greater fools” were newly minted.

A friend and colleague at work, who has listened to my bearish sentiments on real estate for years decided to take a leap of faith – GTA north! They wanted an “investment” condo downtown T.O. but I told them “they were nuts” as we are at peak. Just when I thought I had snuffed out a bad case of RE Lust – it came back with an unexpected vengeance. They are upsizing from one mid-sized shoebox to a McMansion shoebox in what is likely the most overpriced area in the GTA.

►currently just under 10 years on their mortgage
►current home valued at $650
►purchased $800K home
►line of credit currently at $40K
►planning $25K in renovations prior to moving in new home.

In less than 72 hours they will have doubled their mortgage amount, within a few months depleted what little cash they have left, and over the next few years exposed themselves to all the risks associated with home ownership in a tepid economic environment.

It was all firmed up today, as several other work colleagues frantically calculated their losses on the TSE.

I have failed miserably!

#142 Rich Renter on 08.04.11 at 6:10 pm

#132 Adam, Your a fool for that statement proven by Japans action today. Hey Garth stop drooling with all this buying opportunity going on.

#143 Willy H on 08.04.11 at 6:16 pm

I forgot to add to my post the following:

►in order to “maintain” their lifestyle – which is code for keeping the monthly payments the same as their existing mortgage – they went from under 10 years on their current mortgage to a full 30 year mortgage – all for a 1000 sq ft, and some hardwood only a few km from their current residence.
►We are fairly sure the RE Agent was about to reach orgasm as the financing came through, all courtesy of your friendly neighbour chartered bank!

As I said in my previous post –

I have failed miserably!

#144 Gold Member on 08.04.11 at 6:17 pm

Re #132

Betting against America is betting against the rule maker. They make the rules, whether they be military or financial, and their rules never put them at a disadvantage.

#145 westopia on 08.04.11 at 6:19 pm

Are you liking G**d now?

#146 gumshoe on 08.04.11 at 6:41 pm

Well, forget about that 7% return after the trouncing capital took today….on top of the down draft that has caused capital losses since March of this year.

Well…………….lets ask that question……what is a 7% return worth if you lose 20% of your capital…….and after all it is only the riskiest assets that pay 7% returns. You can also guarantee yourself that rates will not go down anytime soon.

Even cash lost value today.

#147 Timing is Everything on 08.04.11 at 6:47 pm

Lowball….Everything!

Where are those damn locusts to complete this thing already? Oh ya, flooding this year. Locusts are next year.

http://tinyurl.com/3mpsxx7

#148 eddy on 08.04.11 at 6:51 pm

Banks default on duty, let foreclosed homes become eyesores – and disregard fines

http://www.nydailynews.com/money/2011/07/24/2011-07-24_banks_default_on_duty_let_foreclosed_homes_become_eyesores__and_disregard_fines.html?page=0

#149 appraiser on 08.04.11 at 6:52 pm

Witnessing the carnage today in the stock markets has me believing that real estate may be one the few safe places left to park your money.

The S&P 500 is officially in “correction” territority (not in theory, but for real) having fallen over 10%. Yikes!

Let’s face it, besides real estate there are very few tangible assets out there that have actual utility, are not consumed in a short period of time and tend to hold their value over the long haul.

#150 Nostradamus Le Mad Vlad on 08.04.11 at 6:53 pm


Tomcat Prowl — Had an interesting experience this morning. A neighbor walking her leashed dog stopped to chat, a cat came out to stretch and the dog went ballistic. The cat studied the dog intently, looked at us, looked at the dog again then meandered off somewhere else, leaving the dog doing cartwheels in the air, proving once again that cats ooze class, detachment and aloofness, but dogs are great playmates and even better at letting their emotions run themselves, much like sheeples.
*
#38 Smell The Coffee — Good post and bang on the money.

#45 Not Doomed. — “Chump change. Diddly squat.” — Recommendations?

#53 Imstupid — “2008 was used to cut jobs and wages, while debt is at all time high . . .” and “I said no 2008-rerun is likely. Still my view. — Garth” — Correct. It is similar to the three waves which sank the Edmund Fitzgerald, but Garth may be a little off with his view (then again, so might I).

First, 9-11 (following very quickly on the dotcom bubble), then strong-arm Gestapo-like tactics were introduced to dumb down the populace.

Second, the ’08-09 fiscal shenanigans, then the third and largest wave which will sink many. It will happen in a number of ways — commercial RE defaults, wars, biz. and consumer bankruptcies, etc.

However, Garth and Warren Buffet are right — buy when the others are selling (stock slide), sell when the others are buying (greater fools).
*
Average Life Expectancy of a fiat currency is 27 years, and has to be retooled every 30-40 years; Rather ticked off senior citizen; HSBC Letting workers go here, but hiring like crazy in Asia; China “This means that the interest rates on the debt China holds have just increased. Technically, the US Government has just gone into default. We may well see a “bird on a wire” effect as the other global credit ratings agencies, rather than look like Obama stooges, also start to downgrade the credit rating of the US Government.” wrh.com.

Lemonade The Council (Dictatorship) Of 13 flexes its muscles; Credit Default Swaps Don’t understand them, but they sound nice! 2:14 clip Apple Corp. has more cash than the US govt.; 5:13 clip Italy and Spain about to go the way of Ireland and others.

Sudden Layoffs and Unemployment Up “Which makes today’s surprise gains on the US stock market highly suspicious, along with being quite at odds with the rest of the global markets.” wrh.com; 5:44 clip Young people – where are the jobs (Chindia).

Average Life Span in Fukushima — seconds. Radiation level way too high. 5:47 clip; Blame China to avoid paying obligations and start WW3; CC Hmmm. Frying eggs on ice? Plus Energy; Tea Party Terrorists That’s what the WH says.

#151 kilby on 08.04.11 at 6:57 pm

#115 Old Phartz (and wife) Hope the 5 year old girls don’t tell their 10 year old brothers…..The garden will be the target of every kid in the neighbourhood, kids love a challenge with a bit of risk. If you had kids your wife wouldn’t be so mean!

#152 The InvestorsFriend on 08.04.11 at 6:58 pm

130 EdmontonJim said a wise thing that is not often understood:

“every dollar going into RE, PMs Stocks or Bonds is a dollar that comes out right?”

Yes, Jim is absolutely right. Similarly today, some people sold and got money OUT of the stock market, but for every dollar taken out someone else had to put a dollar in.

Meanwhile the value of all portfolios dropped and billions of dollars worth of stocks simply disappeared into thin air. This money (more properly this wealth)was lost today and did not go anyplace other than to simply dissappear. Gonzo.

The headlines will say investors took money out today. In reality in the net, not a single dollar came OUT of the market today as result of all the trading.

Money only comes out when dividends are paid or stock buy-backs. Trading stocks does not result in any money coming out.

#153 thecomingdepression on 08.04.11 at 7:02 pm

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#154 TurnerNation on 08.04.11 at 7:12 pm

I TOLD YOU TO SHORT/SELL SILVER AT 40. :twisted:
Downside target is 34-35.

#155 Bill Gable on 08.04.11 at 7:19 pm

A lot of punters got their tush handed to them today.

Pay attention – Bond Vigilantes are running amok.

10 yr. Spanish is 6% – US T Bills fell to zero = or nearly, in a rush to quality. Er, quality? What does that say for Eurozone bonds?

China downgrades US debt. Brilliant. Saying you own all these treasuries and they suck wind.

Interesting times.

#156 Utopia on 08.04.11 at 7:32 pm

“We will see a resolution shortly. Hold onto your hats. If the stock market does crater as many now predict, the fall in home sales will only be that much more dramatic” ~~Utopia
————————————————–

When I wrote that line last night I hesitated for a moment. I thought, those words are too extreme. And yet I have seen trouble brewing for awhile now….I hit submit.

I did not expect todays 450 point decline in the TSX though.

Good buying opportunities will emerge out of this. Just not yet. I am on the sidelines. The carnage is not over but you can be certain that the apples of my eyes are all dividend paying, defensives and blue chips with global exposure. Some real bargains are emerging.

I hope I am not sounding dull on that topic already. The income is there though and unlike some past inflated markets these yeilds look good, stock values very tempting.

Not long ago Garth had written a post about delusional Vancouver. Prices on the West Side had risen an astonishing 147,000. dollars in just one month. I said then that the bubble in Vancouver had but weeks left before it would be over.

I have not changed my mind.

On the heels of todays market carnage and judging by the futures tomorrow will see further declines. This is a negative for real estate. A huge negative. News out of Victoria and Vancouver about seriously sagging sales nail it down now. Prices will soon decline.

So I am calling the bubble top in Canada. I believe we have now seen the beginnings of the end of the great real estate price run-up in this country.

And now it is over.

#157 Timing is Everything on 08.04.11 at 7:36 pm

#67 The American

Yes, it will unwind slowly. It has started already though. It’s a good thing. Plenty of time to compensate.

BTW, I’m noticing a lot of ‘picker/pawn’ type shows down thar. ;)
I think there’s a cheesier Canuck version up here.

It’s sno-cone time again.

#158 timo on 08.04.11 at 7:52 pm

Garth,
check the US dollar. Do you think there is a flight from the euro?

making history,tell your friends

Garth’s books made me look more at what is going on.
thx

#159 Great vids Nostra! on 08.04.11 at 8:03 pm

Nostra!

Great vids you posted.

Hard to believe that Apple is more cash-rich than the U.S. Government.

Wow!

Plus, like Max says: If Apple Corp. were a bank, subject to the fractional reserve system, they would almost have a trillion dollars in cash!

Double wow!

Kinda makes ya wonder what Steve Jobs know that we don’t….Hmmm?

Food for thought :)

#160 jess on 08.04.11 at 8:47 pm

Brian T

http://www.truth-out.org/koch-spider-web/1312231636

[insert your state here].watchdog.org web sites are a franchise. Tailor the brand with a state, though not all states are represented, and a whole list of anti-union, anti-regulation, right-wing misinformation articles springs up in one’s browser.

Plug in “newjersey.watchdog.org” and the web site will regale one with tales of greedy pensioners and the evils of the EPA. Type “washington.watchdog.org,” and anti-union propaganda, helpfully tailored for the state of Washington, pop up.

According to the hub web site, watchdog.org is the brainchild of the Franklin Center for Government & Public Integrity, a 5o1(c)3 non-profit organization “dedicated to promoting new media journalism.”

However, those “journalism” credentials have been called into question by groups like the Pew Research Center’s Project for Excellence in Journalism, which rates watchdog.org as being “highly ideological” and “somewhat transparent.”

#161 Adam on 08.04.11 at 8:52 pm

The world’s wealthiest country can easily pay its bills. It only takes political will. This is not an economic issue, which investors understand and why US debt was in such demand today. — Garth

Garth, no it cannot. What you fail to understand is that the USA has over $120 trillion in future debt. If you look at the future liabilities associated with social security, medicare etc rather than the public debt of $14 trillion which is peanuts then you will see how dire the situation is for the usa. the USA only has $2.5 trillion of revenue, how can they possibly pay this debt?

Because income will outstrip debt service charges. Hide under a rock if you want. I’m buying. — Garth

#162 T.O. Bubble Boy on 08.04.11 at 9:00 pm

@ #118 vyw:

Strong demand in Toronto in July 2011 with sales up 23% compared to last year and avg prices up 10% compared to last year

… “strong demand” that is over 11% below July 2007 sales, and over 20% below July 2009 sales.

June-September of 2010 were the worst sales months in 6+ years (after record months for March and April 2010), so of course an average month like July 2011 would seem relatively good when compared to that.

And, those average prices area a factor of 2 things:
1) The extremely low number of listings
2) Sales averages skewed by high-end sales

#163 Timing is Everything on 08.04.11 at 9:11 pm

#115 old phartz asked “[W]hat kind of world are we living in.”[?]

Answer:

A mean one.

#164 Adam on 08.04.11 at 9:22 pm

Because income will outstrip debt service charges. Hide under a rock if you want. I’m buying. — Garth

Debt service charges? We are talking about potentially $120 trillion in liability vs $14 trillion in public debt. Who cares about debt service charges. Even accounting for future GDP growth how is the USA going to raise enough revenue (it currently pulls in $2.5 trillion in revenue) to deal with $120 in liabilities. Either way higher taxes, default or renagging on medicare, social security etc. That’s the only way Garth. Can you explain what you mean?

The liabilities are not payable at one point in time. Rising income will handle the bills, or taxes will increase, or program spending will be trimmed. But there will be no default, collapse, hyperinflation, devaluation or locusts. — Garth

#165 TurnerNation on 08.04.11 at 9:28 pm

Oh noes, after Metalheads now BIKERS are swarming this weblog!

(Disclosure: cager here). ;)

#166 betamax on 08.04.11 at 9:28 pm

#126 HouseBuster: “I should know that everytime I get the windows calculator out to count profits that it is time to sell! Happens everytime without exception!”

I know the feeling. Sorry if I was too flippant about your loss. I didn’t see your second post till later.

#167 Nostradamus Le Mad Vlad on 08.04.11 at 9:38 pm


#157 Timing is Everything — “It’s sno-cone time again.

May I have a double chocolate fudge nut sundae sno-cone pretty please?!

#159 Great vids Nostra! — Yeppers, Steve Jobs is a very smart man. Sure turns out good stuff, ‘tho the hackers and viruses are starting to creep in. Cheers!
*
Big Mistake The US Fed; Europe A high-speed train wreck in slo-mo? Iran No doubt this will liven things up plenty; Beggars Banquet The EU is begging. Wot a bunch of miserable failures. Listen to Iceland! Japan vs. Switzerland No, it’s not the World Cup.

Market Crash? Duh; 4:03 clip Print mmore, don’t pay it back and bring in severe austerity measures; Italy and Spain freeze Not because of CC; Obama – Bernanke “We can hire everyone to watch everyone else! Oh, wait, we tried that with TSA and now we have all these oncology bills piling up!” — Official White Horse Souse. That’s what the nazis did;

CC “Global Warming has now taken its rightful place alongside killer bees, and Y2K.” wrh.com; Collapsing Volcano Stock markets have a wider effect than first imagined; Super Dictatorship is a better term than a super congress;
Helicopter Ben Weren’t there training drills just prior to 9-11? Yahoos Gone Wild Actually, it city and / or municipal govts.

Fukushima Radiation spike in BC; Secession A super congress plus a dictatorial leader may be the beginning of the end of the US; Super Congress “Senator Lieberman argues that the “Super Congress” needs to cut social security and medicare to fund our illegal perpetual wars.”; Chemistry Bacteria is good for us; Uneatable Cookie For computers only.

#168 JRH on 08.04.11 at 9:42 pm

Because income will outstrip debt service charges. Hide under a rock if you want. I’m buying. —Garth I think that’s the problem, people don’t plan on paying off anything just paying the interest portion of what they owe.

#169 Ryan on 08.04.11 at 9:52 pm

Sales are slowing down in many places now. The bubble is bursting right now. Sharp declines in sales will begin shortly followed by sharp price declines.

As I said in another thread, it will not take a rate hike to tank this market. It is going to go down on its own. The only good thing is that the BoC will lower rates to 0% next year and we will be paying next to nothing on our mortages.

#170 vyw on 08.04.11 at 10:00 pm

#162
strong demand coupled with low listings suggest to me that the market still has some strength – a flood of listings will be needed to push sellers to drop prices

your point re avg prices is valid; prices are actually down from the May 2011 high, but then is this a seasonal pause?
or a top finally forming.

again, the demand ie. sales suggest that we have some ways to go but then again another 20+% drop in the TSX might freeze things for a couple months (I hope this doesn’t happen)

but I would suggest new owners (as you are most at risk) to stress test their mortgage payments in the event of an interest rate hike and correction of 30+% – if the numbers dont work, then this might be time to get off the train before it goes off the rails

#171 Utopia on 08.04.11 at 10:24 pm

#140 Mr. Reality on 08.04.11 at 6:01 pm

“You should have already been shorting the TSX, Oil and the S&P500 like I have been saying for months”
————————————————
Well congratulations are in order.

You surely made out like a bandit today. Tomorrow is a Friday and the odds of a healthy bounce are not good. I am betting that after some reflection over the weekend that quite a few will be heading for the exits. In other words, Monday will be soft too.

I do not know if what we saw today can be classified as a panic but it was surely a slaughter for many. The fear in the voice of one person I talked to was palpable. He lost a truckload of money and is getting out.

The guy was invested all wrong of course. A gambler.

#172 Utopia on 08.04.11 at 10:59 pm

#138 The InvestorsFriend on 08.04.11 at 5:40 pm

“INTEREST RATES ARE DOWN – WHY?”
——————————————–
The battle for capital is upon us. That is why.

Because the debt ceiling was raised and the US needs lots of cheap money fast. Any good crisis will send money fleeing to Treasuries.

A stock market sell-off is perfectly acceptable as an excuse to attract capital at a time when European debt issues with their higher (and riskier) rates are drawing the cream off the market and the bulk of risk funds.

There was no good valid reason for todays sell-off.

The truth is, there is only so much money to go around and the fear trades will always ensure debt instruments get their fair share of the pie. Capturing some of it takes effort. Bond raters are working overtime to drive up European rates which is just a kind of tax on the whole continent yet the US cannot be left out of the equation nor see failed bond auctions.

Financing pressing obligations is urgent now and funding is still needed back home in North America. Thus it is being attracted to where it is needed despite low rates. Stock markets got shafted in order to deflect cash here despite the low yields. It is not over yet. Not by a long shot.

The upside is that corporate dividends will almost certainly rise as a result. Corporations also need their share of the wealth. They also compete and few want to see stock prices decline especially following good earnings reports. So as stock prices fall, dividend yields are expected to increase thus attracting some of that capital to return and bolster share prices.

In short, a tremendous buying opportunity is arising to take advantage of both fair share prices and at a time of rising dividends. Anyone not seeing the potential is under a rock. Let’s not forget who has the really strong balance sheets and the cash to pay out and reward investors.

It is the corporate balance sheet that matters here.

Let orphans and grannies buy bonds and treasuries until they are blue in the face. Some of our prime companies and blue chips are now set for stellar growth in the face of declining commodity prices. Next quarters earnings should surprise many on the upside.

Some will not agree with me. That only means they don’t understand the fierce competition that now exists for fresh capital infusions between Europe and America, between strong corporate interests and desperate borrowers.

I would say the US is winning that war today, but the real money is still to be made by strategically betting on the best companies this continent has on offer. The best of the best have global exposure and well recognized brands.

I have no doubts in this regard.

#173 Habbit on 08.04.11 at 11:24 pm

Hi Garth. Am sitting on some cash waiting for lower prices. Could you share with us what you are buying? Thanks

#174 Angus on 08.05.11 at 1:45 am

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#175 kilby on 08.05.11 at 2:07 pm

#96 Utopia.
One week July 30th to August 5th new sales in Victoria (including Vic. West) 18 total, 7 SFH and 11 condos. If projected at same for 3 more weeks would be monthly sales of only 72 residences. Figures from Real Estate Board…..Interesting considering their last month sales numbers assuming they were just for Victoria proper, not including neighbouring municipalities