Part of the fun involved in publishing this blog is opening my fan mail. It’s like being a rock star and having women in the audience throw their underwear at you. (I hate when that happens on the subway.) Hey, another joyful little note just arrived:

“Geez garth, did you not say on several handred occasions that RE will crash and intereset rates have only one way to go,,,,
Should have listened to the sheeple and bought here in Vancouver 2 years instead of listening to a genius asshole like you just find myself priced out forever.
Don’t you ever get tired of being wrong all the time?”

Apparently not. Here I go again.

A theme of this questionable blog has been human nature. People in Vancouver are horny to buy houses because everyone else is, too. That makes prices go up and gives Global something to put on the news. Folks buy stuff that goes up. They also run screaming from things in decline, which pretty much describes the reaction to stock markets this month. On days when the Dow or the TSX crashes by 400 points, investors are overwhelmed with the urge to bail, even when they know this will turn a paper loss into a real one.

Why do we do this? Because we have the attention span and financial memory of algae. We fear stuff losing value will go to zero, and believe assets on the rise will ascend without end. The fact this has never actually happened is moot. We’re human. We emote. If it doesn’t work out, we attribute blame.

There is no doubt Canadian real estate values will correct in those centres where this is not already happening. That list is growing shorter. A year or two ago it was unthinkable that Kelowna or Victoria would see listings sit for months and values wither. Six months ago who could have imagined an average detached home in 416 would lose $123,000 in a month? And the big shoe to drop – at least in terms of drama and emotional catharsis – is Vancouver. That’s coming. Hell, even the banks are preparing us.

Yesterday’s Royal Bank affordability survey is a classic.

Here’s the story: the bank calculates how much of a family’s income it takes these days to own and carry a home. That number for a detached home, it says, is 49.3%. This sounds disturbingly high to me – spending half a family’s cash flow to carry a house when mortgage rates are near the lowest point in history. The bank calls it normal. But how is that sustainable?

It gets worse. This number is based on buying a house with a 25% down payment. That’s three times higher than the average of just 7% these days. The carrying cost also doesn’t factor in the lost earning potential of the equity in the home, which skews it downward. But most upsetting, the bank’s 49.3% is expressed in terms of pre-tax income. Huh? All of our homeowning costs are in after-tax dollars, so why the misleading math?

Given that most middle-class people lose a third of their income to taxation, this must mean  owning and carrying a detached house with a mortgage worth three-quarters of its value actually takes 64% of a family’s take-home pay. No wonder half of all households have no savings or investments, four in ten run out of money before they run out of month and the average BC family – with the greatest real estate net worth – has a negative savings rate.

In fact, speaking of Vancouver, RBC figures (even with 25% down) that the average family must fork over 92.5% of pre-tax income to own a bungalow. The average household income in that city is $83,113. And 92.5% of that is $76,879. Of course, if you earn $83,113 in BC, you bring home only $64,128 which tells us the average family is nowhere near being able to own the average house.

This is why the market is doomed. There are not enough planeloads of rich Asians landing at YVR to save this sucker. The economics of the market do not work, even when everybody has pasty people living in a moldy basement suite and a meth lab in the garage. The outcome is obvious and inevitable. Worse, the new fiction that mortgage rates will stay low for the next two years may actually encourage more borrowing, more buying and more excess.

Were emotion not blinding folks, they’d see the monster they’ve created. But all they sense now is desire. Lust maybe. Greed for sure.

Oh yeah, and an urge to pummel me. But sadly, no undies.


#1 Thoughts on 08.22.11 at 9:59 pm

How can anyone expect to be taken seriously when they use the term sheeple.

#2 LH on 08.22.11 at 10:01 pm

I just prepared about $50-55k to do my annual prepayment (3.75% fixed 5-year mortgage, maturing Sept 2014). Unfortunately the bank only allows me to prepay 1/10 of the original principal per year so I also subscribe to double payments and every year I also exercise my right to up my payments by 10%. At this rate, I shall be mortgage free on this property around my 30th birthday.

Oh forgot to mention, the house down the road sold last week for 60% more (similar size and vintage, about 10% wider lot) than what I paid for my house in the depths of 2009.

See, real estate can work out sometimes!

#3 Priced_out on 08.22.11 at 10:03 pm

All the readers on this blogs are abnormal now, that is why they are following this blog and actually started believing in it ( including myself).
This is different

#4 The InvestorsFriend (Shawn Allen) on 08.22.11 at 10:06 pm


In the last month, stocks have declined noticeably and bonds are up a lot.

So… those with balanced portfolios NEED to sell bonds and buy stocks simply to keep the portfolios balanced.

But we see little evidence of that happening… Instead everyone seems to want to hold onto to bonds or buy more…

#5 HouseBuster on 08.22.11 at 10:14 pm

Housing is in crash mode. Get ready for 2003 prices.

#6 The Original Dave on 08.22.11 at 10:14 pm

that must be photoshopped. That dude doesn’t look normal. Beetlejuice.

#7 Dan on 08.22.11 at 10:16 pm

True on the outer markets …

You can now find many nice houses (3/2) in Kelowna for in the mid-200’s. Many 1500sq/ft+ houses in Calgary for mid-300 and ranchers in Vic continue to decrease (and stay on the market for 6 months+).

You can now by a nice 300k house with 150oz of gold. A year ago the same house would have cost 300oz of gold!

#8 McSteve on 08.22.11 at 10:23 pm


I’m going to sue you for the unauthorized use of my picture ;0)

#9 T.O. Bubble Boy on 08.22.11 at 10:23 pm

I think that the economics *only* work if there is a meth lab in the garage.

#10 stage1dave on 08.22.11 at 10:31 pm

I just came back from VI on wednesday, & nuthin’ up-island seems to be moving. My relatives are involved with a few homes in the area (two for sale) but zero showings despite low interest rates & all kinds of assorted come-ons.

Depressing bloody road trip…listening to people who bought houses for 130K 5 years ago & now they won’t move for 279K…too bad! Dad’s not doing too well, I’ve got a shop full of work that I’m 2 weeks behind on, a tornado ripped thru my home town last nite , & then I got up to the news of Mr. Layton’s death this morning…

Maybe I’ll just take tomorrow off…but I can’t. Have another 59 Buick Electra sport coupe getting dropped off in the pm. Runs/drives, & it didn’t cost me 49% of my “after tax” income!

Gee, I feel better already…

#11 T.O. Bubble Boy on 08.22.11 at 10:31 pm

I’m pretty sure that guy in the pic isn’t photoshopped… it looks like it is actually Canadian bodybuilder Scott Milne:


#12 martin on 08.22.11 at 10:35 pm

RE is not going down anytime soon. i just had one of my relatives sold his house for 800k whick he bought on 2009 for 580k. that is around 170k clean. the funny thing is that he is planning to re-buy very soon and hopefully make the same profit down the road.

this means that there are still a lot of people out there buying overpriced RE. now days RE is a tabu or lets say a new trend that will take not month but probably years to be normal again.

in addition your financial advise and your economic knowledge is AAA mr. turner. i would say you are a good psycholog as well.

#13 Debtisforever on 08.22.11 at 10:38 pm

But but…Global TV tells me (from an interview with RBC guy) that housing prices in Vancouver will go down-3% this year!
Ya! 3%! I can’t wait!

#14 penpal on 08.22.11 at 10:39 pm

Regarding recent TREB statistics

Does anyone have a link or the latest TREB results that Garth refers to in this article ($123,000 loss on 416 detached home price).

I would greatly appreciate if someone could direct me to that info.

Much thanks in advance!

#15 Will on 08.22.11 at 10:40 pm

@martin – I would tell your relative not to be greedy

#16 John Reid on 08.22.11 at 10:44 pm


#17 Mr. Lee on 08.22.11 at 10:44 pm

Whether the BoC raises its rates, at this point, I feel to be irrelevant. The fact is that in Canada for much of the last 100 years the price of a home (yes a home and not an investment) came to about 3.5 times the family income. Now we are somewhere around 4.6 to 4.8 depending on the source. As you so eloquently put Mr. Turner, in the real world we all have to pay our way in net terms and not in gross terms. So as the necessities of the household go up in price, as the world economy convulses a little more, jobs and wages become stagnant, and austerity becomes the norm…….over leverage with all its little nuances will be dealt with much in the same way the as the housing market has been over the last few years, with emotion.

#18 Mister Obvious on 08.22.11 at 10:50 pm

I’m so proud of my hometown basking in all this notoriety. I look forward to the privilege of saying ‘I was there’ during the greatest Canadian real estate meltdown ever.

#19 AACI-Okanagan on 08.22.11 at 10:57 pm

Garth I said long ago, stop trying to figure out the Vancouver real estate market. Too many variables and wild cards to factor in.

#20 Thetruth on 08.22.11 at 10:58 pm

One month does not make a trend!

Psychology of billion Indians and the billion Chinese is to buy land and hold it for generations. And they are coming here to Van an Toronto with that psychology. That is the majority view. In India and China, RE price vs working annual income ratios mean nothing.

Saw it there first hand. Telling it like it is.

#21 Smell The Coffee on 08.22.11 at 10:59 pm

Just to prove that financial engineering and building elitist castles-in-clouds is a pretty bad business model one innovative US company is worth more than every one of the 32 largest European banks.

Making things still counts.

Big Banks flipping electronic chits for interest and fees has proven to be a ponzi plan.

Giving consumers value still counts.

(Reuters) – Technology company Apple is now worth as much as the 32 biggest euro zone banks. That’s the stark result from a steep fall in the share price of banks including Spain’s Santander, France’s BNP Paribas, Germany’s Deutsche Bank and Italy’s Unicredit, compared to a steady rise in Apple Computer’s equity and stock valuation.”

Interest rate machination , taxes, and monopolies do not create wealth. At least not a common-wealth for the average hard working stiff.

We have to make things in Canada that we need, without selling our souls to the banks for houses that are overpriced by a factor of three and then mortgage (‘mort’ = death and ‘gage’ = agreement) to kay for them.

#22 Min in Mission on 08.22.11 at 11:21 pm

Kind of surprised at how many have missed the “92.5% of pre-tax income part!!”

That does not leave much for enjoying all of the great, world class activities that we can do here in “the best place on earth” How the heck can I get that Grande latte @ S’Bucks??

#23 Nostradamus Le Mad Vlad on 08.22.11 at 11:29 pm

“. . . we have the attention span and financial memory of algae.” — Or gnats. Apt description of the western world.

“Hell, even the banks are preparing us. The bank calls it normal. But how is that sustainable? Huh? All of our homeowning costs are in after-tax dollars, so why the misleading math?”

Hmm. Three question marks in one paragraph, so it may be a conspiracy theory.

The reason why a change in fortunes will occur is that, although time frames are different (evolution — some of us have moved on and kept up to date with life, others are still living in the 90s), sheeple generally frown upon change — most are happy living in their comfort zones and are unwilling to try out fresh, new ideas.

Sheeples’ comfort zones are about to be flipped upside down and inside out. Consequently, they won’t have the faintest idea of what to do next, because that word has never been part of their vocabulary.
Libya — The reality; Libya BS Short video clip; Libya has 144 tons of gold Has anyone made one of the two obvious connections here? NATO loots Libyan gold; Venezuela Chavez tungsten-testing? 9:27 clip Obama being blasted for illegal bombing;

WW3 with stealth warships Conveniently placed around the South China Sea; China “Dow Jones Reports That A Chinese Think Tank Has Implied America May Be Falsifying Its Accounting And Says The United States Is On Its Way To Default.”; China Black death from Euro? UK Banks Shifting assets.

Citigroup insolvent? Corruption Who leads — Bloomberg or the US Fed? Commercial RE and falsifying bank records; 25% of Californians can’t afford to feed their children, yet the WH and Pentagon can afford billions on illegal wars; Fukushima Not forgotten.

#24 City Slicker on 08.22.11 at 11:30 pm

I just saw a news reel on BNN that RBC says Vancouver is the most “housing stressed” city in Canada. Duh eh, what has Garth been saying all along.

#25 Nick on 08.22.11 at 11:33 pm

Today Bloomberg revealed that the Fed gave a secret 1.2 trillion line of credit to Wall Street during the darkest hours of 2008-2009. goo.gl/KA2Jh

Big Canadian banks received 27 billion of Fed’s money :

-RBC got 7 billion in cash (22% of it’s market cap a the time)

-Scotia got almost 10 billion. (40% of market cap)

Please note this Bloomberg News, not anonymous Zero hedge bull…

I guess the ‘Canadian miracle’ is a little easier to explain tonight.

#26 Tim on 08.22.11 at 11:35 pm

Your rationale makes sense, but it has been five years since the market crashed in the states and the market here has hardly budged in any of the major cities. Interest rates will remain low, despite what you predicted 6 months ago.

#27 Tim on 08.22.11 at 11:36 pm

How many millionaires are there in China? What is the number one destination for Chinese in North America?

#28 The American on 08.22.11 at 11:42 pm

At 21: Smell the Coffee, I’m not sure if you were getting at this, but the U.S.-based company, Apple, is not only worth more than each of the 32 largest banks in the Euro Zone, but it is worth as much as all of those banks COMBINED.

You think its bad in the U.S? You haven’t seen anything yet with respect to just how bad it will get in Europe. The Euro has been so disgustingly over valued/inflated for a decade that the Euro Zone can’t frankly manage the catastrophic melt that is going to ensue with their currency. Shit, even the Europeans will tell you that. The Euro is about the worst thing that ever happened to Europeans in general. Nobody won, and all it did was created exceptionally inflated prices overnight. The per-captita spending and national debt per citizen in the Euro Zone nations FAR exceeds that of what is found in the U.S.per-capita, plus the deficit positions in those nations are greater on a per-capita basis. Sure, the U.S. has the largest deficit, but we’re also the third-largest nation on the planet. All things are relative. The USD’s recent trouble is child’s play compared to what is going to happen in Europe. All the cards are falling globally, and as I’ve been saying, the playing field will be level again within a few years. Up next… China.


#29 The American on 08.22.11 at 11:46 pm

Oh, and like I said, S&P sucks still. This is all too telling..


Absolutely ZERO credibility within that agency. Ask Moody’s. :-)

#30 sharpen the saw on 08.22.11 at 11:47 pm

Here are some different scenarios. Which one of these do you think would be better.

(around 30 years of age. Uni grad. Approx. $60K a year.)

Case 1: no real assets but debt free beholden to no one.

Case 2: assets (aka. house, maybe land, some investments but quite a bit of debt in the form of a large mortgage).

Which of these would be a better situation?

…obviously, being filthy rich, and debt free would be the best and being in debt with no assets would be the worst…so I am not putting these up for comparison.

#31 IT IS ALL GARTH'S FAULT!!! on 08.22.11 at 11:49 pm

When house prices first start to get higher than usual, some people notice this and naturally begin to warn that houses are overpriced. They might even suggest that people who own houses should sell them and rent a place to live while waiting for house prices to drop before buying back in again. This all sounds very wise and clever in theory, but things can go wrong with that plan in actual practice.

This sort of thinking does not always work well at times such as these when reduced down payments, increased amortization periods, historically low interest rates, and get-rich-quick-in-real-estate books cause people to jump in and drive prices even higher than the alarmists ever expected. After all, it is not easy to predict when a bubble in something’s price will become fashionable. In fact, prediction is usually quite difficult, especially about the future.

People who owned their houses for a while sell them for what seems at the time like a decent profit, only to watch the price of the house quickly skyrocket upwards to where they could have enjoyed a really indecent profit. The flipper they sold it to makes more profit in a year than they made after many years of owning. The next flipper, who bought from the first flipper, might also make more profit in a year than the original owner.

When a bubble develops, people get so used to living in their bubble that it is all they seem to know. They think it is normal. While appearing to be making fast and easy money, they love their bubbles.

Sooner or later, the bubble must meet the fate of all bubbles and pop. Then the downside of leverage starts to cut like a sharp sword. The debt and leverage that people were told was the secret key to wealth and happiness, and that they thought was going to make them rich quickly and easily without actually having to work for it, start to turn against them. This is when they learn that asset prices can decline while the debt used to finance them remains. This is when they learn that the borrower is the servant of the lender. This is when they learn that they were not as smart as they thought they were.

Now, why has Vancouver real estate not yet crashed, as it surely will, from one level or another? Let us examine only the indisputable facts of the case, and let them lead us to the only logical conclusion that a rational mind could come to. The answer is so elementary my dear readers: IT IS ALL GARTH’S FAULT!!! A watched bubble does not pop.

First, the people like Garth who thought they were wiser and more prudent than everyone else must get tired of watching stupid people get rich quick flipping houses. They must start to second guess their own sanity. They must admit that we have reached a permanently high plateau, and that prices will only go up forever. They must rewrite history and make their new blog entries sound like this is what they have always really believed and taught. Guys like Garth must jump in too and buy at what will then turn out to be the very peak. Only then can the crash begin.

Stop waiting for some politician or central banker or bond trader to do what only Garth can do now. The only question is, how much longer will Garth wait before he does what he has to do to pop this bubble?

#32 Mr Buyer on 08.22.11 at 11:51 pm

You have to see it to believe it. Real Estate is an asset that depreciates much like a car here in Japan. More accurately the house depreciates. People tear down 40 year old houses here. On top of that the bubble did burst here a long time ago and houses decreased huge amounts (40 to 70%, 40% common 70% the exception in our neck of the woods) all across Japan. This is a country with limited living, space, low unemployment (5%) and a huge population that are the number 1 savers in the world with very low mortgage rates for maybe 2 decades now. There is no way that these house prices all across Canada are good for the country and more importantly our children. It simply must end and not sink to an ultimately higher norm but rather return to the 3 times average annual income level. Spinning the wheel, jumping in and cashing out is certainly tempting but the margins are getting far to slim and the risk to high at this point if truth be told. As for the propaganda being disseminated to the masses by our financial and real estate institutions, I am guessing that it is now bordering on criminal activity. I am not a lawyer but if I were, I imagine I would not have much difficulty working up a class action lawsuit, especially if the bubble explodes as I expect it will. Duty to the company and shareholders is one thing, but the willful and active misleading of the public can be addressed in the courts. The value of ethics must be underlined by legal action against unethical practices.

#33 not asian on 08.22.11 at 11:52 pm

I was at a friend’s home in Richmond BC last weekend for a BBQ – 3/6 families had their homes listed on the market (all on the same block). All asking over $1 m. Everyone thinking they were Donald Trump – talking about golfing at their private clubs and tipping their caddies, flying to Vegas for the weekend, comparing fancy restaurants in town. I can’t wait till this whole thing blows up. Frankly it is making me sick. I can’t even blame Garth because I wasn’t reading his blog 2 yrs ago.

#34 Gord In Vancouver on 08.22.11 at 11:55 pm

This is why the market is doomed. There are not enough planeloads of rich Asians landing at YVR to save this sucker.

….and not enough “trade up/down” people who bought in the 90’s.

#35 AKatz-Oaville on 08.22.11 at 11:56 pm

To Penpal:
Reports from Toronto Real State Board
Mid AUGUST: http://www.torontorealestateboard.com/market_news/release_market_updates/news2011/pdf/MID_MONTH_AUG_2011.pdf

#36 Sea Wave on 08.22.11 at 11:57 pm

The jig is almost up once capitulating former-bears throw in the towel and start aggressively blaming someone else for their own decisions.

“First they ignore you, then they ridicule you, then they fight you, then you win” – Mahatma Gandhi

#37 penpal on 08.23.11 at 12:03 am

# 21 Smell The Coffee

“Making things still count.”

Too bad ALL of Apple’s production for the I-phone and I-pad is done in China by Foxconn (over 1,000,000 employees).

Think before you post, it makes you look smarter.

#38 Junkmale53 on 08.23.11 at 12:05 am

Has this been passed around yet?

Very interesting 2005 video of USA…


Change the names to Vancouver, Toronto, Calgary, advance the date 6 years and…. well, it’s still different here.

#39 BPOE on 08.23.11 at 12:06 am

Folks can we get real here for a minute. I’ve been pounding the tabling saying for months that Vancouver will never go up in a straight line. 3% decline after what a 50% increase? First this has to happen. Second this is called THE PAUSE THAT REFRESHES as we head up the next leg of the uber bull market of Vancouver. Folks, there is no way on God’s green earth that a Canadian can afford to get into the Vancouver market. This IS NOT CANADA folks. It’s Vancouver. IT’S SPECIAL! IT’S DIFFERENT! and it’s going much much higher. Vancouver is For Sale folks. New devlopments going up and selling like hot cakes.
Folks interest rates have no where to go but DOWN and we all know that’s the reality coming down the pipe. I’m going to humour the naysayers here for a moment. Let’s just say interest rates rise and housing drops 20%. Has anyone considered that the carrying charges at the end of the day are the same? That million dollar townhome in the above scenario now costs 800k because of the higher interest rates. Is the Canadian going to qualify? NO WAY PERIOD.
The poster has a reason to be pissed off. Buying 2 years ago in Vancouver you would of made out like a bandit. Even Canadians would of been just fine.

#40 SwampLily on 08.23.11 at 12:06 am

Another example on how real estate prices depend on the local mentality: I’m from Smalltown, Texas which is now experiencing an oil boom from the Eagle Ford Shale Play. My dad died almost 2 years ago and at that time we had the homestead and his other little house next door appraised: $80K for the big house, $20 for the little one. My siblings and I are shocked; the big house is now valued at $200K, the little one at $100K. Not all house prices in the U.S. are going down!

#41 thinktank on 08.23.11 at 12:18 am

The good ol US of A has got bigger problems than their current real estate market …

There are now almost 46 million people in the United States on food stamps, roughly 15% of the population. That’s an increase of 74% since 2007, just before the financial crisis and a deep recession led to mass job losses ”

I guess Kim Kardashian missed the memo

#42 ExExpat on 08.23.11 at 12:43 am

After a year on the left coast I am convinced sales and prices in Vancouver will continue to rise until after interest rates go up. The exceptionalism and hubris is too deep set.

Developers, for their part, understand this, and developments are going great guns, still lots of buyers and investors. Check out some of the outfits running private REITs, running banner ads on the G&M and promising double digit returns on their web sites.

Party on Garth!

#43 Devore on 08.23.11 at 12:45 am

#15 Will

@martin – I would tell your relative not to be greedy

He’s not greedy, he just thinks he’s a real estate investment genius!

#44 Mackie on 08.23.11 at 12:49 am

Garth I think it’s only appropriate to ask a person if it’s okay to use their picture in an illustration for your blog.

Yes, you can continue to use my picture. Lol

#45 Whistle punk on 08.23.11 at 1:01 am

Let the fools buy up overpriced Vancouver realestate the realty check will hit pretty quick. Vancouver isn’t special it is a over priced s*** hole.

Why argue with idiots let them spend money, sink themselves into debt.

I wish the total colasp would happen in Vancouver I want to see the fools suffer. It is already happening in the rural town where I live with prices falling and very litle sales. People are already taking losses they are trying to sell currently or have sold this year and took a loss.

#46 Patrick on 08.23.11 at 1:09 am

Hong Kong property is starting to meltdown which means Hongcover is next.

Vancouver downturn has started. Here are 2 listings that are down 100,000 grand each but still at nose bleed levels.

$1288000 to $1188000


$799000 to $699000


#47 Suede on 08.23.11 at 1:12 am

A friend of mine has just asked me the following questions earlier today:

“Suede, how can I get an RRSP loan and borrow from my RRSP to put forth on a down payment?”
“How can I get a first time home buyers credit?”
“Do you think North Burnaby condo’s will continue to go up – and should I get a presale or an older one?”

I want to see my friend do well, and after some back of the envelope calcs that he never thought of (strata, tax, utilities, HD cable, $69.99 UFC fights every month), he was confused and asked “How does everyone else our age (late 20’s) afford a place in Burnaby, wtf?” Answer…they cant or they deal in the pharmaceutical industry.

Signs of a market top #101 – When someone who has no clue ‘hears’ that it’s a good time to get in because ‘everyone else is in and has made money’

My final question:

“Why do fools fall in love?
– Because its with assets they can’t liquidate with a few mouse clicks

#48 Utopia on 08.23.11 at 1:13 am

Absolutely incredible.

The numbers and statistics just get to be more shocking every single day as this withering housing bubble builds daily without remorse or reason.

And still, so very few listen.

Two days ago I told you how the banks ate our babies. I wrote a post describing how the very high levels of personal and mortgage debt were actually driving down the number of live births in this country as debt obligations had consumed the willingness of married adults to form families.

But the situation is even worse than I told you.

The banks have cannibalized all our current consumption and future tax base too. Those f*ckers ate it all and have in essence eaten up the entire economy of this country in the process as they loaned us into oblivion.

They have managed to suck in the lions share of the monthly income and wealth of the majority of Canadian families for their own benefit and left little for even the government to work with.

What a bunch of assholes!

And what a lovely trap they sprung as the lending free-for-all on the cusp of one of the globes biggest crisis in confidence (ever in history) unfolds as we find ourselves trapped in massive non-repayable debt.

Are we F*cked? Yes we are.

In more ways that most of you readers can even imagine. I cannot even bring myself to tell you how bad it really is because, quite frankly, it verges on conspiracy theory.

Yet it is not conspiracy theory at all.

That is the really hilarious part. It is freaking reality. It is truth. Our sorry butts are so wrapped up and glued together at this point that I don’t even have a good solution for the developing problems anymore. And I should be able to see answers where others have failed.

To Mr Carney I say…”this credit stimulus is ruination”.

Raise the damn rates. This has gone on far enough.

#49 RoninBC on 08.23.11 at 1:46 am

The plain fact of the matter is buying a single family home in Vancouver will NEVER be affordable for the average wage earner. It would have to drop by at least 40% probably more.

This just won’t happen folks! It’s always been a very desireable city and a lot of people are continuing to move there. People with big bucks.

#50 goldbug on 08.23.11 at 2:16 am

Garth, glad to see you have looked at Zerohedge even if you don’t agree with it– full of iconoclasts after your own heart.

Thought you’d enjoy this:

Good to see you don’t let the doubters get you down — the timing of an inevitable crash is hard to call, but when you’re right (and you will be) the “told ya so” is gonna be that much sweeter. cheers

#51 penpal on 08.23.11 at 2:27 am

After locating the appropriate data from TREB, it becomes obvious that these bastards have under-reported the drop in prices as a 7% drop instead of a 17% drop.

When challenged, I am sure they will say that it is a “typo” or “error”. I absolutely believe that they will not correct that figure as it is too startling / disturbing to leave on their website.

Additionally, they make reference only to year over year comparisons and completely avoid the month over month comparison which clearly shows a drop from $ 720K to $597K (which is negative 17%).

This is intentionally left out of the commentary attached , which if only skimmed, appears on the surface to indicate only an advancing market.

I am pretty sure that this manipulation of data and it’s dishonest presentation would be the basis for a successful class action lawsuit in the USA (monopoly on info, fraud, etc.), but not sure about the chances in Ontario.

In any event, anyone believing what they read on the TREB website is extremely naive.

Anyone buying into this BS and the conspiracy carried on by Realtwhores nationwide will be hurt very badly. I will not be surprised to see a few Realtwhores beaten and even murdered in coming years as their clients wake up to the great fraud that they have suffered.

One can only hope that justice is somehow meted out to these lying pricks.

#52 Taipan on 08.23.11 at 2:59 am

Cheers big fella.

They will write Phd’s on herd behaviour after the Vancouver bubble bursts. What motivates people to do what is patently insane financially.

Truly unbelievable.

#53 Aussie Roy on 08.23.11 at 4:29 am

Aussie Update

US Bankers predict 100,000 jobs to go in Australia

New forecasts from investment firm Bank of America Merrill Lynch say another 100,000 Australian jobs could be lost from the economy by March next year.


#54 Jody on 08.23.11 at 5:06 am

Gold at $1900, now I’m getting worried, it’s rising to fast. Nice to see the US taking Libya’s gold, what a bunch of scum bags.

#55 E on 08.23.11 at 5:40 am

“Given that most middle-class people lose a third of their income to taxation, this must mean owning and carrying a detached house with a mortgage worth three-quarters of its value actually takes 64% of a family’s take-home pay. No wonder half of all households have no savings or investments, four in ten run out of money before they run out of month and the average BC family – with the greatest real estate net worth – has a negative savings rate.”

That’s not middle-class. That’s self-induced poverty.

#56 alf on 08.23.11 at 5:51 am

“mortgage worth three-quarters of its value actually takes 64% of a family’s take-home pay”

It’s actually 75% Garth.

(1/2)/(2/3) = 3/4

No. The calc was from pre-tax to after-tax. — Garth

#57 Imstupid on 08.23.11 at 6:10 am

#2 LH

Your story is B.S. At your rate you would be mortgage free before your 5 year amort. Original mort 550k 1/10 pre payment 10% every year and double payments every month is total 140k per year over 5 years is 700k. Sing that song to someone else.

#58 OttawaMike on 08.23.11 at 6:31 am

Oops, kind of like real estate:


#59 David B on 08.23.11 at 7:02 am

And dare we add this to the kettle of wage decline in North America …. “Big Business” is now in the process for yet another round of restructuring ( layoffs) to increase profit as has been posted daily on front pages of major newspapers since that fatal S & P downgrade day. There is more to come ….yup even in Canada! kinda like yesterdays bad news from Nova Scotia!!!

#60 Herb on 08.23.11 at 7:27 am

Better change “Helicopter Ben” to “Stealth-Bomber Ben”.

Delivering great loads to pinpoint targets, stealthily –


#61 fancy_pants on 08.23.11 at 7:28 am

Sorry but finger pointing should be directed to MC and Flah – the Bubble Boys.

The prior zero down – 40 yr mortgages along with give away rates, coupled with CMHC backing = recipe for debt orgies… and many lined up to get bent over the banker’s desk.

Wonder what kind of kickbacks those politicians got back from the big banks for setting up that playing field?

#62 Paul on 08.23.11 at 7:30 am

This is a very interesting article which I will be passing on to my daughter so she can understand better what and how much is involved in buying her own real estate.

#63 Rudolf on 08.23.11 at 7:45 am

Nothing will change in Toronto as long as mortgage lenders can be found willing to finance the hype in the local real estate market. To offer $100,000 over the asking price for an about 80-year-old semidetached house listed for $699,000.00 already, is – in my view – not very smart. Particularly if the home is located in an area prone to termite infestation – and the neighbour who lives on the other side of the party wall might like loud music.

#64 TurnerNation on 08.23.11 at 7:55 am

#2 LH on 08.22.11 at 10:01 pm

An investment should PAY cash to you, not force you to shovel copious amounts of money into it.

#65 Moneta on 08.23.11 at 8:21 am

Sooner or later, the bubble must meet the fate of all bubbles and pop. Then the downside of leverage starts to cut like a sharp sword. The debt and leverage that people were told was the secret key to wealth and happiness, and that they thought was going to make them rich quickly and easily without actually having to work for it, start to turn against them
Great wealth has always been built on the back of workers. While the workers toil, the rich sip their wine, the wives get their pearl necklaces and the kids piano lessons. The life of leisure that only a small percentage can have.

Therefore, easy money for many people today is not seen as a chance of a lifetime but as a sign that they are successful magnates.

It does not occur to them that something is wrong when 70% of the population is becoming a wine sipping magnate like them or even to ask themselves who is doing all the work that is supposedly making them rich.

#66 waterloo Resident on 08.23.11 at 8:32 am

Garth ! Don’t worry, all the under-water home owners in Vancouver have to do is simply declare PERSONAL BANKRUPTCY and all of their mortgage debt will be wiped away forever, they can simply WALK AWAY and begin again.

Of course that means that everything they own will be taken away from them, the only thinks they get to keep are their clothes and shoes , almost NOTHING else, even their old car will be put up for auction. Still, its better than living with a ball and chain around their necks isn’t it?

I have talked to a few friends of mine and asked them what will they do if home prices crash like they did in Phoenix or parts of Florida and out of 18 friends every single friend told me that homes in Canada NEVER fall in the long run, they only go up and up, and if for some strange reason prices did go down and stay down then they are not worried because they would simply declare PERSONAL BANKRUPTCY and walk away from their personal debts, they ALL said this to me.

So really, what’s the worry, we do have an escape policy after all ?????

#67 Moneta on 08.23.11 at 8:40 am

The life of leisure that only a small percentage can have.
People know that the those at the top usually work less than those at the bottom. Easy money further confirms to them that they have made it, that they are winners in the current system.

However, many of those really do think they are working hard. That they deserve prosperity. Easy money probably makes them feel as if they are being compensated for all the useless hours at the office, shuffling useless pieces of paper, partcipating in restructuring after restructuring that never seems to work and doing so many things that go against their values and ethics.

#68 disciple on 08.23.11 at 9:10 am

#1 Thoughts…do you take Henry Kissinger seriously? How about David Rothschild? Aldous Huxley? Emory University? The term sheeple has been an inside joke with your real rulers for over a century. It’s been in popular use only recently. A Google search will not even bring up the true origins of the word. Reading actual books will, though, which your off-the-cuff total lack of knowledge on the subject betrays a fear of. Good luck.

#25 Nick…related to the above…have you been sleeping under a rock for 3 years? It’s common knowledge for the rest of us that know to ignore Bloomberg news that Canadian banks were bailed out to the tune of 250 billion dollars by the BoC. The particulars of which minion bank got what is not that important. The Canadian media’s failure to thoroughly report on Canada’s bank bailout is due to the fact that only 4 (FOUR) people have TOTAL control over what you receive as news in Canada. Good luck.

#69 waterloo Resident on 08.23.11 at 9:13 am

So lets say suddenly we find that it takes 380% of our pre-tax income to pay for our houses, really, what’s the problem with that? Just add the bill to our Visa cards, right?

#70 Helicopter Ben on 08.23.11 at 9:19 am

Keiser Report… Talks about Bonds being bought by computers and gold being bought by people , and the crimininal racquet ponzi scheme we call the financial industry. interview with catherine austin fitts… http://rt.com/programs/keiser-report/keiser-herbert-treasury-sec-456/

#71 disciple on 08.23.11 at 9:25 am

#48 Utopia…finally you have come to your senses and made a political stand against the financial parasite class. Bravo! Central banks are a completely unnecessary, unfruitful, hindrance to progress. We can create our own money, we don’t need a handful of elitist families to do it for us and maintain the rest of us as modern indentured servants. You know where I stand on this issue. With Andrew Jackson, God rest his soul.

#72 Brandon on 08.23.11 at 9:26 am

On days when the TSX drops, is it people bailing or just computers?

#73 PEI Red on 08.23.11 at 9:26 am

Love how you crunch the numbers Garth, makes it plain as the nose on a person’s face. Glad we got out of Vancouver RE 2 years ago, much thanks to you!

To those doubters out there…there’s a reason this blog is called “Greater Fool”.

#74 Devil's Advocate on 08.23.11 at 9:40 am

”That list is growing shorter. A year or two ago it was unthinkable that Kelowna or Victoria would see listings sit for months and values wither.”, Garth

Not true, not of Kelowna anyway. Not the unsustainably robust market it was four years ago but not a “bad” market. Certainly a more sane market in which fools need not rush in.

”You can now find many nice houses (3/2) in Kelowna for in the mid-200′s.”, #7 Dan on 08.22.11 at 10:16 pm

Not true, not even remotely. No matter how hard you and I might wish so not true now and not likely to be any time soon.

”Your rationale makes sense, but it has been five years since the market crashed in the states and the market here has hardly budged in any of the major cities. Interest rates will remain low, despite what you predicted 6 months ago.”, #26 Tim on 08.22.11 at 11:35 pm

True, although eventually we will see double digit rates once again, eventually. Which is why I encourage buyers to budget for interest rates in the 8% range when buying a home. The probability is that it will happen, someday, in their mortgage amortization.

”I wish the total colapse would happen in Vancouver I want to see the fools suffer.”, #45 Whistle punk on 08.23.11 at 1:01 am

Nice!?! Sadly your disturbed sentiment mirrors that of too many. What motivates it, jealousy, revenge or just got bored pulling the wings off flies.

”Anyone buying into this BS and the conspiracy carried on by Realtwhores nationwide will be hurt very badly. I will not be surprised to see a few Realtwhores beaten and even murdered in coming years as their clients wake up to the great fraud that they have suffered.” #51 penpal on 08.23.11 at 2:27 am

Do you ever take responsibility for any of your own actions? “Beaten and even murdered in coming years” would that make you happy? Would that compensate you for your poor decisions? What was my comment to Whistle punk?

Yes I can certainly see how flattering it must be for Garth to have such a loyal following of that most deferential segment of our society. Such endorsements add a real credible noteworthiness to his blog. sarcasm off

#75 disciple on 08.23.11 at 9:46 am

Awesome posts today! The fangs have come out like those mermaids in Pirates of the Caribbean.

#51 penpal…I don’t understand the venom directed towards real estate agents/brokers/associations. They’re just earning their income like everybody else. Are you claiming that they’ve been presenting false information to the public? If so, then you’ll have to throw a LOT of other people in almost every industry top to bottom into that kettle. Your anger is misdirected, but right.

#66 waterloo resident…Yes! That is what I hear all the time when I talk about debt and mortgages and household balance sheets with my friends and family and neighbours etc…Bankruptcy looms on the horizon as a viable choice for all of them…is this an emerging trend, I wonder…

#76 cata on 08.23.11 at 9:50 am

I am the one getting tired of saying the same thing over and over: prices will flat for many years to come, price correction in your dreams!

Did I make you come here? — Garth

#77 Goldenfox on 08.23.11 at 9:54 am

Not everybody thralled by Jack Layton,s love-in


#78 BrianT on 08.23.11 at 10:25 am

#77Golden-That is a good one-National Post scum patting themselves on the back for “guts”. That rag has been nothing but an embarassment from the beginning.

#79 Steven Rowlandson on 08.23.11 at 10:36 am

If canadian real estate is found to be contaminated with radioactive isotopes from fukashima does that make real estate worthless and unfit to live in?

#80 Utopia on 08.23.11 at 10:40 am

#71 disciple to #48 Utopia

“Finally you have come to your senses”

Well not quite disciple. Sorry to disappoint you.

The banks are absolutely essential to a properly running economy. I am just annoyed with them for not having exercised a little more sense when they know full well the consequences of too much debt in our system.

They have the experts and analysts on staff, full time economists and a much deeper perspective on both the global and domestic economy than any of us. Still they behave as though everything will work out fine.

It won’t.

Anyway, I just blew a fuse after three beer, a read of Garth’s post and a few moments thought. Maybe it was the spirit of Jack that carried my thoughts.

I just feel that the banks have hogged an excessive amount of our economic output and put us all in jeopardy by not showing more restraint in their lending practices.

It was time I said it, that is all.

#81 Victor on 08.23.11 at 10:59 am

Variable rates going UP when Bank of Canada hasn’t moved….who woulda thought? :)

TORONTO, Aug. 23, 2011 /CNW/ – RBC Royal Bank announced today that it is changing its Variable Closed Residential Mortgage rates, including special rate offers effective August 24, 2011.

The changes are as follows:

Special Variable Rate Offers*
5 Year Variable Closed Prime – 0.45% (increased by 0.20 per cent)

Variable Posted Rates
5 Year Variable Closed Prime + 0.00% (increased by 0.20 per cent)

* The rates indicated are special discounted rates and are not the posted rates of Royal Bank of Canada. To calculate a rate discount compare the Special Offer rate against the posted rate for the applicable term.

Special Offers may be changed, withdrawn or extended at any time, without notice. Not available in combination with any other rate discounts, offers or promotions.


#82 gomi on 08.23.11 at 11:01 am

Hi Garth,

Even though I mostly agree with your contrarian views on RE in Canada, I would like to question the “$123,000 in a month” decline for 416 detached homes. I did get the TREB reports but this number looks wrong (15-20% monthly decline). Could it just be explained by statistics (too low sample size or samples biased). I would really put a grain of salt on that stat…



Grain of salt or not, it’s the realtors’ own number. — Garth

#83 GTA Girl on 08.23.11 at 11:16 am

Anyone offering double digit returns on short term for any investment especially unregistered, is a crook.

Walk away. It’s a ponzi scheme.

There is a big trial coming in October for a ponzi schemer in Ontario. Shy of $50mill. Investors of that gem may hAve been willfully blind. He was their buddy, pal…their kids sat on his knee..Christ they travelled with this crook. He offered 35% returns..he shelled out monthly interest to his close pals as long as they brought him new blood. Many of these people were warned to get out. But greed is so intoxicating. Doctors, business people and developers, all loved this guy.

Now the CRA is looming, the Receiver has asked courts to delve even deeper. There’s already a dead associate by suicide. Wow, what a mess a hack dentist turned financial whizkid crook can cause. Seems he’s driving around in a 15yr old minivan awaiting prison. Lived the highlife courtesy of his friends money…villa vacation in Bahamas, best hotels in Rome..million dollar Oakville homes. Now his investor friends all await the OSC/CRA.

So when someone offers you a great chance opportunity to make huge money…remember it all comes at a cost. Greed is not good, greed makes people stupid

#84 househornyhousewife on 08.23.11 at 11:24 am


I too was rather flabbergasted at the report of how much mortgage debt Canadians are carrying as a percentage of their income BEFORE (!) taxes. This is unreal. Perhaps the governments will be forced to at least allow Canadians to deduct mortgage interest payments from their taxes, like Americans already do, hoping this will help the real estate market. Of course this tiny drop in the bucket won’t do anything at this point but what the heck.

What an interesting world economy experiment we are conducting as to what happens when everyone (individuals and countries alike) hits their debt ceiling. None of the previous stimulus tools seem to work in this situation (low interest rates, government spending etc..) and the only way our economies are going to get moving again is 1) when people pay off their massive debt and actually have money in their pockets to spend and 2) when goods such as houses become more affordable.

This will only happen once we have all embraced a NEW (new for our modern society) paradigm: buy only what you can afford, live within your means, be happy with what you have and stop trying to keep up with the Jones’ (HGTV). A very difficult lesson but one we are all having to learn. Once this is done, our economy will begin to move .. slowly but surely. Slow growth has always meant stronger growth and today is no different from yesterday in that respect.

Hang in there everyone !


#85 timo on 08.23.11 at 11:26 am


The link reminds me of your picture today Garth. Mortgages and dropping prices in housing are keeping the US economy trapped on a leash. Man the banks must be carrying huge amounts of bad loans.

#86 old phartz on 08.23.11 at 11:31 am

golden fox #77

Thanks for the link. This lady is indeed a realist. What I took away from the article was the fact that media induced drama has gotten out of hand in respect to the deaths of public figures be they politicians or entertainers.

All in all a great eye opener as to how the public can be conditioned to respond thru media generated cues… be it death,natural disasters or monetary crisis.

#87 GTA Girl on 08.23.11 at 11:32 am


It’s a great read Garth. For any financial advisor. The ponzi schemers interview is mind blowing. That no one questioned, and how greed blinded them. Unbelievable.

To think of the regulations, securities practices that accredited financial advisors have to go through, yet people give millions to a idiot like this with only a dental degree and no history nor documented experience.

#88 Michelle on 08.23.11 at 11:40 am

“Because we have the attention span and financial memory of algae.”

Hey! Garth! Don’t knock algae!

Algae are very complicated organisms which have a lot of important responsibilities on their plate, like photo-synthesis and stuff…

They don’t have time to think about finances.

#89 Snowboid on 08.23.11 at 11:42 am

#74 Devils Advocate…

In regards to #7 Dan:

I agree (can you believe I agree with DA?) that Dan is way off on the pricing of nice Kelowna SFHs.

With current prices for an ‘average’ 3/2 house in the mid-400s you may be able to buy one in a couple of years for the low to mid-300s. “Nice” 3/2 SFHs may come down to around $ 400K.

Condos are likely to take the biggest hit and you will certainly be able to buy a very nice one for the mid-200s in a year or so.

By the way, Dan, I don’t know of any sellers that currently take gold in exchange for their homes!

#90 The American on 08.23.11 at 11:58 am

Wow, its sure getting interesting around here (Seattle). Several days ago, I posted on my recent vacation to Lake Pend Oreille, Idaho. You may recall how many Canadians I had stated I was seeing there and their take on the local real estate market.

Well, in the past few days, I’ve taken more notice of the same thing in downtown Seattle. Sure, we’ve always had our share of Canadian license plates poking around our city, but this is getting crazy. Easily, Canadian license plates have tripled or even quadrupled year over year. Its amazing, in fact. So, being the natural people watcher that I am, I had to step back and take note of why these friendly Canadians are here and what they have to say. Exceedingly interesting, I have to say.

Again, most all plates were from B.C. and Alberta (probably 4:1 ratio, respectively). It was almost as if 50% of them had never been to our city before just by listening to their questions they were presenting to local shop clerks and the fact that many had their noses buried in tourist maps (sorry, we Yanks can spot a Canadian a mile away as much as you Canucks can spot a Yank a kilometer away… You hear our accents and we do in fact hear your’s, but rarely do we make it known. It is that whole “aboot” and “hoose” and “eh?” thing. We’ve got our “Down thar” thing, I know).

In general, most everyone was looking to tour the landmark sites like Pike’s Market, Seattle Center, the Space Needle, Freeway Park, Capitol Hill, Olympic Sculpture Park, Myrtle Edwards Park, Smith Tower, International District, Pioneer Square, Experience Music Project, Seattle Art Museum, the University of Washington Arboretum, Kubota Japanese Gardens, and Discovery Park (similar to your Stanley Park in Vancouver). Wow, you all know how to get around, and you definitely know what you’re looking for!!! But, much like in Idaho, Canadians were also literally parked inside many of the sales offices for high rise condos in downtown.

So, I couldn’t resist. I picked up the phone and called the sales office in the building in which I live. They informed me that out of the last 30 days, nearly 40%-45% of all “lookers” were Canadian. That is a tremendous number when you consider that Seattle is a primary market and not a secondary market for vacation homes. Of this, only a few have purchased, but the sales team has been shocked at the shear numbers as not seen in a past decade. I asked the sales rep what she had heard in way of feed back. She informed me they found prices to be lighter than what was in Vancouver, but were still shocked the prices are as high as they are. She said many were “misinformed” about the state of the market, and it has been difficult to guide them to the reality of the situation. She also informed me of their feedback, primarily B.C.ers, and many had said they find the city quite similar to Vancouver yet quite different at the same time, stating they found Seattle to cater more toward “comfortable in its individualism, creativity and arts” as opposed to “trying so hard to be shiny and new like Bellevue” (yes, we’re a little different here, and it rummages up images of those terrific Pemco Insurance commercials from which I always get a chuckle). For those who do not know, Bellevue is 6 miles, or 9.656 kilometers, East of Seattle across the water, and it sure does look/feel like a smaller Vancouver. Bellevue is apparently catering to the Asian market that is bombarding us from Vancouver.

For the most part, these smiling Canadians and their families have been looking for JOBS in Seattle, primarily coming from the Vancouver metro area. Apparently, most of these lookers have no jobs lined up here, but they are “kicking tires” with a move to Seattle as they can no longer afford Vancouver, much to Garth’s point. I was stunned, needless to say, as I could understand a move from one city to another within one’s respective country. However, I could not fathom moving from one’s country to another country simply because of affordability being the primary challenge. Of course, we would WELCOME any Canadian to our city as we love you guys. And God/The Universe knows we do have the jobs (job market for high-paying careers is exceedingly healthy here).

This was quite telling, and I feel it ties in nicely to Garth’s post today. Vancouver’s affordability ratios are killing its people and will eventually negatively impact its long-term quality of life ratings. This is sad, and I’ve already seen how this fares for markets like this in the U.S. This is simply not sustainable, and it is not boding well for Canadian-born citizens as opposed to immigrants that are driving prices in Vancouver. At the same time, Canadians are also shocked at the newly-established lending standards that are being strictly enforced in the U.S., most of it requiring 20%+ down and a stellar FICO score to qualify for a decent loan. This sales rep/site manager informed me that this was ultimately the “deal killer” for most potential buyers as “Although our prices are not as high, they [the Canadians] simply do not have 20% down or the income in a solid job to make the purchase in Seattle.”

I’ve heard this story before, and it is like history repeating itself. If you do own right now, please heed Garth’s warnings and make that sell if you can. You will not regret it, and you will find yourself with freeing options to live your life they way you CHOOSE to do it – not the way the Realtwhores and fake reports want you to believe so that you may sustain THEIR lifestyle.

Now, on to a more feel-good note… Here’s some of those Pemco commercials:








#91 dddd on 08.23.11 at 12:04 pm

Patrick on 08.23.11 at 1:09 am
Hong Kong property is starting to meltdown which means Hongcover is next.

Vancouver downturn has started. Here are 2 listings….

well don’t get too worked up over these ones.
just under 1.3M to 1.2M for a van special in the hinterlands of east van is still way above mkt.

7ook for a teardown (ie. lot value 720) even further from dt is more in line and will prob sell\

lot value is running 700-850 in east van, these are not showing any drops yet.

#92 Devore on 08.23.11 at 12:08 pm

#82 gomi

They’re perfectly willing to use distorted averages when they are working in their favour. Touting rising national numbers, when it’s mostly Toronto and Vancouver holding them up. Flaunting “Vancouver” averages, when sagging tri-cities and valley numbers are dragged up double digits by Van west, or whatever the hotspot of the month is.

One of the posh areas of Vancouver has had a dismal sales period, which makes these kinds of statistics totally meaningless.

#93 Devore on 08.23.11 at 12:13 pm

Oops, missing link

dismal sales period

#94 Bruce on 08.23.11 at 12:22 pm

I’m not advocating selling when things are down but you are speaking in hyperbole. Declining assets have indeed gone to zero. I won’t patronize you buy giving you examples – I’m sure you are well aware of them.

An irrational fear for almost all investors. — Garth

#95 Snowboid on 08.23.11 at 12:29 pm

#90 The American…

Reminds me of this quote:

“Exaggeration misleads the credulous and offends the perceptive.” – Eliza Cook

And on the lighter side, a behind the scenes look at the life of a real estate agent:


#96 Bobby on 08.23.11 at 12:37 pm

I had to chuckle at the opening comments that Garth wrote. I have always believed the one that guesses right is the expert.
How many advisors recommended Nortel at $60 or RIM at $75. They sem to be quite quiet right now. In the weekend National Post there was an interesting article in Financial Facelift. Story of a couple of teachers in Alberta who bought 3 condos as investments, that were now falling in value and bleeding them dry. Oh yes, forgot to mention the Latin America condo now sitting in litigation and so they expect to lose their 120 k deposit. They did mention they wanted to walk away from their deposits but the developers of these units threatened legal action. I’m sure their advisor is crowing about all of their real estate picks.
Spoke to a realtor in the interior yesterday about selling my nestment condo. A folksy gentleman who is not big on flash. Said the market is pretty quiet, with few sales, and prospective buyers are price conscious and willing to wait. I mentioned tongue in cheek about the rosy forecasts from CREA. He laughed and said they always seem to make it up as they go along.
I remember looking at a condo here in Victoria a few years back as an investment. Agent said it was a steal and said I would be foolish not to jump in. I asked the obvious, if it was so good why wasn’t he buying. His answer, he got badly burned in the last downturn.
Enough said.

#97 Victoria Tea Party on 08.23.11 at 12:45 pm


A time for everything, means also a time for the black swans to come home to roost in West Point Grey and other ‘burbs of Mighty Vancouver, the Real Estate Capital of record to the vast universe, including all those rubes living beyond Hope.

The following words by Garth say it all:

“…There are not enough planeloads of rich Asians landing at YVR to save this sucker. The economics of the market do not work,…”

Not only is there a paucity of rich Asians, right now, there will be even fewer as this winter approaches and Uncle Ben’s QE 3 is in full swing.

What THAT means is China and other US trading partners will get stiffed some more, in currency exchanges, when trading their money for yet-to-decline-further US bucks.

This is no way for a sick empire to treat those who could help it in its less than finest hours, of which there are currency many.

Come on now!

I know everyone’s excited about Libya being “liberated”by a bunch of Western financed gun-toting stooges. Along with that “victory” is the following fantasy in some minds: the (false) prospect of 35 cent a gallon gasoline so that Mr. and Mrs. America can dig out their 1967 hot Camaro and truck along Route 66 to Pulled Pork Heaven; but that ain’t gonna happen! Sorry ’bout that.

Meanwhile the Vancouver equivalent of that fantasy, ever-growing real estate prices, will continue to screw down hard on most prospective wannabe real estate victims, until those QE 3 swans come home to roost.

At that time the HAM will be gone. Why?

Becuse China’s economy is growing more slowly thanks to problems inside that vast economic engine including inflation, labour unrest, a new leader, and what to do with all of that essentially worthless American “paper”.

Against that hard-assed economic reality, those wanting to buy in Vancovuer should simply skip town and look for something, including an actual life, in the interior of this great land.

Nothing wrong with a good, reliable Saskatoon sunset, eh?

#98 calgary_rip_off on 08.23.11 at 12:58 pm


In Calgary, nothing is moving except high end houses in the $500K and up price ranges.

In my neck of the woods(Hidden Valley NW) my wife and I are still endlessly waiting to find a decent place. The problem is that buyers want more house for less money and sellers cant sell because they wont be able to afford a place somewhere else unless they sell high.

The real problem is that of compromises. If you try to buy without looking at all variables security of doing something becomes insecurity when you realize you have compromised on kitchen, basement, price, etc.

There is no motivation to buy anything if you are renter in Calgary’s market.

I will check back on this blog in maybe a year.

Enjoy the shred guitar on the myspace page.

#99 jess on 08.23.11 at 1:16 pm


By Michael Hudson

The State and Local Budget Crisis

The cost of the 2011 cutbacks in federal spending will fall most directly on consumers and retirees by scaling back Social Security, Medicare, Medicaid and social spending programs. The population also will suffer indirectly, by lower federal revenue sharing with U.S. states and cities.

how federal financial aid has helped cities shift the tax burden off real estate, although the main shift has been off property taxes onto income – and onto consumption (sales) taxes.

He goes furhter to say: ”

Untaxing real estate has served mortgage bankers by freeing more rental income (the land’s site value) to be paid as interest. Property taxes have not absorbed anywhere near the rise in debt-leveraged housing and commercial prices. However, this has not lowered the cost of housing for most people. New buyers must pay a price that capitalizes the property’s rental value. Less and less of this payment has taken the form of local property taxes. More and more has been paid to mortgage lenders as interest. So cutting property taxes has simply left more revenue to be capitalized into higher debt-financed prices.

While homeowners saw their carrying charges rise, they nonetheless felt more affluent as real estate prices rose – inflated on easier and easier credit terms. Prices rose faster than mortgage debt as long as
(1) interest rates were declining;
(2) loan maturities were stretched out (ultimately reaching the point of zero amortization rather than the old-fashioned 30-year self-amortizing mortgages);
(3) down payments were shrinking toward zero (rather than requiring 20 percent equity as used to be the case) and indeed as “liars’ loans” led prices to be bid up recklessly; and finally
(4) cities refrained from raising property taxes as fast as market prices were rising. This left more revenue to be capitalized into higher prices, providing capital gains that home owners were encouraged to treat like “money in the bank” – by taking out home equity loans. This rising mortgage debt was increasingly important in enabling people to maintain their living standards, especially as they had to pay more for housing. So what appeared to be affluence and rising net worth from the value of one’s home on the asset side of the balance sheet found its counterpart in debt on the liabilities side.

From the local fiscal vantage point, these debt-leveraged price gains represented uncollected user fees for the site value provided by public infrastructure and rising prosperity.

The bankers ended up with the rising flow of rental value, not the cities. This obliged tax collectors to look to other sources of revenue. So homeowners paid out what they seemed to be saving in modest property taxes in the form of rising sales taxes and income taxes.

By 2008 these financial system’s easing of credit terms had reached its limit. No more room for credit inflation remained, so speculators began to withdraw from the market. (They accounted for about one-sixth of demand for housing.) When the credit spigot was turned off, prices plunged – leaving the debts in place. (So taking out a home-equity mortgage was not really like drawing down money from a piggy bank after all. Years of future income had to be diverted to spend for past shortfalls.)…”

#100 Victor on 08.23.11 at 1:21 pm

#27 Tim on 08.22.11 at 11:36 pm

How many millionaires are there in China? What is the number one destination for Chinese in North America?


Tim…That door got slammed shut last month by the Feds. Read on below.

Federal Immigrant Investor Program

CIC has announced that as of July 1, 2011, the number of Federal Immigrant Investor applications accepted for processing will be capped at 700 for the coming 12 months. Canadian financial institutions, which act as facilitators in this program, are reporting that applicants will be required to submit government processing fees, a copy of their passport, and completed simplified forms to the Centralized Intake Office in Sydney, Nova Scotia. All other supporting documents will be required at a later stage of the processing.

To qualify for the Federal Immigrant Investor Program, applicants must have:
• Prior business experience;
• A minimum net worth of C$1,600,000 CAN; and
• Make a C$800,000 CAN secured investment.

“Given the demand for this program, especially from Chinese nationals, we expect this imposed cap limit to be reached extremely quickly… probably within a matter of days,” says Attorney David Cohen. “Applicants should keep in mind that Quebec has its own Immigrant Investor Program which could be a great option for applicants who cannot submit under the Federal Investor Program as Quebec will be increasing the number of applications accepted under its program.”

The Government of Quebec is expected to make an announcement regarding its Immigrant Investor Program early next week.


#101 CB Radio Head on 08.23.11 at 1:31 pm

@90: american, you are damn right, great post. We visited there four weeks ago and had an awesome time for a couple of old farts. Not a single bad meal and plenty to see and do and nice people. Your city is uniquely beautiful and enviable. I get the point that it is the same but different. I noticed how your downtown doesn’t turn into a ghost town like Vancouver after 6 p.m. and things really start going after that time there. I also saw how many of us were there and my wife and I felt at home. If we could manage a way to move to Seattle then we would consider it on our top three list. Prices in Van are stupid and many of our friends are jumping ship to leave for a better and life. True quality of life is also about affordability and we do not have that here. Know of anyone hiring for a systems architect?

#102 jess on 08.23.11 at 1:34 pm

Is negative gearing allowed in Canda?

Investopedia explains Negative Gearing
Negative gearing most often occurs in rental properties, where the rental income received isn’t enough to cover the interest costs on borrowings plus expenditures toward property maintenance and upkeep.

Negative gearing only becomes a profitable venture when the property is eventually sold, and a prerequisite is that property values are rising, not falling or holding steady.

Many investors who speculate this way will purposely seek out negative gearing for the tax deductions in the hope that they will make a profit when the property is sold for a capital gain.

Investors considering this type of arrangement need to have the financial stability to fund the shortfall out of pocket until the property is sold and the full profit can be reached. Also of utmost importance is that the interest rate is locked in from the beginning or, if the borrower’s interest is calculated on a floating index, that prevailing rates remain low.


Negative gearing is when your income from an investment is less than the cost of interest on that investment. The difference between the two amounts is usually a deduction on your taxable income. Investors can also claim agents’ fees, cleaning
and maintenance as deductions. Generally, negative gearing isused to reduce the tax on salary income. It can apply to share investments as well as property.

Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan (Interest > Income). In a few countries the strategy is motivated by taxation systems which allow deduction of ongoing speculative losses against highly taxed income, but tax capital gains at a much lower rate. When income generated does cover the interest it is simply geared investment which creates a source of passive income.

A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. The speculator must also be able to fund the planned shortfall until the asset is sold. The different tax treatment of planned ongoing losses and possible future capital gains affects the investor’s final return. This leads to a bizarre situation in the few remaining countries which tax capital gains at a lower rate than income. In those countries it is possible for a speculator to make a loss overall before taxation, but a small gain after taxpayer subsidies.(wiki)
negative gearing Australia 2004
Over the past three years, housing prices have skyrocketed.This has been wonderful
for home-owners but has created plenty of problems for the Australian economy and those without homes. The Government has created the housing bubble by providing too many tax incentives for investors. It has failed in its role of smoothing the boom and bust cycle of the housing market…”


#103 penpal on 08.23.11 at 1:34 pm

# 74 DA

Can you read?
Or do they remove your critical thought process when you become a Realturd?

I said that I wouldn’t be surprised to see this happen as this has happened to stock brokers when markets have melted down in the past, not that I want that outcome. Chrissake’s read the post!

Btw – what’s the matter DA, some skeletons in your closet you are worried about? You seem awfully sensitive to this issue.

#104 penpal on 08.23.11 at 1:40 pm

# 74 disciple

Yes I think that realtors mislead people just like any other saleperson does to make the sale.

The objection with Realturds is that they are often dealing with the major purchase of that person’s life and so their tactics can maim others financially.

They make claims that if any other investment advisor made would lose their licence.

They are almost categorically biased and unable to do math in the manner that provides fiduciary care.

How the f$#k do you think bidding wars develop?

#105 penpal on 08.23.11 at 1:43 pm

re # 74 DA

….and what would you know of any decisions I have or have not made.

You know, I doubt that you are a very good Realturd as you cannot comprehend what you read.

#106 bill on 08.23.11 at 2:31 pm

perhaps a combination of human growth hormone and steroids would produce such a creature…

#107 jess on 08.23.11 at 2:41 pm

Like MR. Layton said: NEVER GIVE UP

“Sandstorm Report” (prepared in 1991), which
arguably played a key role in the closure of the Bank of Credit and Commerce International (BCCI).
9 I am seeking release of the missing parts (pages, appendices, paragraphs, lines, words) of a document known by the codename of the “Sandstorm Report”. It played a key role in the closure of Bank of Credit and Commerce International (BCCI) on 5th July 1991 and arguably contains some details of wrongdoing and wrongdoers.


The Bank of Credit and Commerce International (BCCI)

#108 jess on 08.23.11 at 2:55 pm

tax go to the corporates to retain the jobs ?

Tuesday, July 19, 2011
David Cay Johnston of Reuters:

Illinois state income taxes that come out of your paycheck don’t go to the state government. They are kept by the company.


#109 Renting in leaside on 08.23.11 at 2:58 pm

Knew it was just a matter of time before the CREA would be predicting a growth in the market thanks to low interest rates….


#110 Sean on 08.23.11 at 3:02 pm

You know, I often read through the comments… sometimes it just hits you so plain and simple… IT’S A BUBBLE! It’s hardly even worth talking about. There is literally nothing more that can be said… and kudos to Garth for even trying. It is a bubble, and every bubble in history has ended the same way. And to the “bulls”… yes you too have been present in every bubble… you are the “imbeciles”.

#111 Junius on 08.23.11 at 3:09 pm

#39 BPOE,

You said, “Folks, there is no way on God’s green earth that a Canadian can afford to get into the Vancouver market. This IS NOT CANADA folks. It’s Vancouver. IT’S SPECIAL! IT’S DIFFERENT! and it’s going much much higher.”

One of your most delusional posts ever. Clearly you are desperate. Better find a new audience.

#112 Ultraumatic on 08.23.11 at 3:14 pm


#113 Darryl on 08.23.11 at 3:15 pm


#114 Thetruth on 08.23.11 at 3:18 pm

#100 victor

You’re misinformed. Sure they capped the annual number at 700 for this year. BUT… These applications will be processed in 9 years time. There is an 8 year backlog in this immigrant class. Tens of thousands of investors are in the que. Those coming this year applied about 5-7 years ago.

Only reason for the 700 cap is to shrink the 8 year backlog.

#115 Utopia on 08.23.11 at 3:36 pm

#103 penpal to #74 DA

“Can you read? Or do they remove your critical thought process when you become a Realturd?”

I have to say I really object to the hostility shown DA.

Whether you like it or not he has made many good contributions to this site and has often taken the time to post thoughtful and intelligent analysis.

You may not agree with his point of view but D.A. has expressed reasonable opinions backed by facts that reflect both sides of the debate of our coming housing correction and I give him a lot of credit for that.

Ad hominem attacks are just worthless commentary in my opinion because they add nothing to the discussion. Why not just state your own case in clear terms without adding the personality slander?

Convince me you are right and he is wrong.

#116 Math is Fun on 08.23.11 at 3:52 pm

Cookie-cutter Vancouver condo’s are not dropping y/y prices. It’s worse! They are becoming illiquid. Imagine that. A lack of buyers even with all-time low interest rates? We may not need C to raise rates for this house of cards to fall Garth.

#117 eddy on 08.23.11 at 3:55 pm

These real estate bubbles are created by the Federal Government. Haarper promotes home ownership to folks with no money, but it’s just a proxy printing press to churn out more debt slaves. Inflated values allows the debt slaves to feel rich, and or course the cities collect more money with ‘market value assessment’ and rely less on Ottawa’s hand outs. (But ‘market value assessment’ is a fraud because they are taxing inflation, which is in itself a hidden tax.)

#118 Junius on 08.23.11 at 4:01 pm

#90 The American,

You said, “ancouver’s affordability ratios are killing its people and will eventually negatively impact its long-term quality of life ratings. This is sad, and I’ve already seen how this fares for markets like this in the U.S. This is simply not sustainable, and it is not boding well for Canadian-born citizens as opposed to immigrants that are driving prices in Vancouver.”

We just had a relative stay with us last week. She was in Seattle for a week before staying with her sister. Meanwhile she had just been to a friend in Vancouver who bought a new home in the past year. She couldn’t believe the difference.

Sister lives in a beautiful home in a good area and husband has a good paying job with a video game company. Friend in Vancouver is living a crack shack in East Vancouver. Here is the kicker – Vancouver home is more than 3 times the price of the Seattle home.

Vancouver friend is stressed but proud and convinced she has a great investment. Seattle sister is just happy they have a good income.

It is different here….by about 5 years……but it is coming.

#119 Bill Gable on 08.23.11 at 4:18 pm

RBC just raised var rates 0.20 – and the folks that keep saying we are going to live in a ZIRP world, are dreaming.
Look up Bond Vigilante.
Earthquake on the East Coast – and the DOW is up over 300….aftershocks reported now…..what a day!

#120 Boycott on 08.23.11 at 4:25 pm

Variable Mortgage rates rising…. RBC has hiked its variable mortgage rates without waiting for the central bank to move first. Interesting…


#121 Herb on 08.23.11 at 4:33 pm

Is negative gearing allowed in Canda?

– Jess, at #102

Yes, and no. It’s not allowed, but possible – for a while.

You can get away with rental losses for a few years (five is the number usually bandied about), but CRA may ask you to prove any time their suspicion is aroused that you have a “realistic expectation of profit” (“REOP”). Failing success here, all of your current expense deductions will be disallowed because a business is the profit therefrom, if there is no expectation of profit, there is no business and, therefore, no allowable deductions to earn income. You then would be stuck with capital expenses, which are not as rewarding as current expenses.

#122 bill on 08.23.11 at 4:36 pm


#123 Nick on 08.23.11 at 4:38 pm

A note to those of you who freak out because of stock market dips :

Please pick up a copy of the actual and 10th edition of A Random Walk Down Wall Street, by Burton G. Malkiel. After reading the book, you will be happy when you see red tickers on your screen.

#124 Devil's Advocate on 08.23.11 at 4:42 pm


Just to be clear this was your post in question;

”Anyone buying into this BS and the conspiracy carried on by Realtwhores nationwide will be hurt very badly. I will not be surprised to see a few Realtwhores beaten and even murdered in coming years as their clients wake up to the great fraud that they have suffered.” #51 penpal on 08.23.11 at 2:27 am


And then…

# 74 DA

Can you read? Or do they remove your critical thought process when you become a Realturd?

I said that I wouldn’t be surprised to see this happen as this has happened to stock brokers when markets have melted down in the past, not that I want that outcome. Chrissake’s read the post! #103 penpal on 08.23.11 at 1:34 pm

I can read, I re-read it, particularly this last line of the subject post by you …

”One can only hope that justice is somehow meted out to these lying pricks.” #51 penpal on 08.23.11 at 2:27 am

You want some time to think that one through?

#125 Imstupid on 08.23.11 at 4:42 pm


Canada will not allow deduction of mortgage from income tax. The reason is simple where will the tax revenue come to supplement it? Unemployment is still high, wages are stagnant and the country is running deficits. If people are waiting for a tax credit to save them, they would have a better chance of winning the lottery.

#126 Moneta on 08.23.11 at 5:15 pm

Goldenfox on 08.23.11 at 9:54 am
Who knows who wrote it? Frankly, I don’t care.

All I know is that by looking at Canadians’ reaction, we obviously need a dose of what is recommended in the letter. And I am hoping something good will come out of it.

#127 Victor on 08.23.11 at 5:33 pm

The picture is real. It is Geri Halliwell (Spice Girls) with her giant bodyguard :) google has many more

#128 Rural Rick on 08.23.11 at 5:38 pm

20 odd years ago I wanted to buy a house in Toronto. Ever time I saved another 1000 the prices went up that much. So I bought a house in a south western Ontario small town instead. Best move I ever made. Think about it. Do you really want to live in a concrete wasteland. Oh but I need the theatre and concerts and museums. Be honest with yourself when did you go to The Royal Alex or the ROM last? My last concert was a few friends playing some tasty jazz on the back porch and our museum is great. Houses sell for about what it costs to build them here. Jobs are scarce so you have to be creative but if you are coming up short the neighbors help out. Think about it.

#129 The Original Dave on 08.23.11 at 6:19 pm

The last few people that were bearish with me, have all given up. Recently bought, looking at buying and aren’t talking bubble anymore. These people pay attention to markets way more than the average person. I remember in late 2008 and early 2009 that I was alone and almost questioning myself as to whether stocks would rise again. Those were my best purchases. The top is almost in for toronto real estate. Some of the brighter people have run out of patience. Can’t be an overload of suckers still waiting on the sidelines

#130 Junius on 08.23.11 at 6:45 pm

#114 thetruth,

Are you ever going to post any links to research or facts with these constant postings you make about immigration? You pull your numbers out of thin air in complete denial and contradiction of the facts.

He posted a link….from the gov’t. Yet somehow what you know is different (again, and again, and again).

Facts? Evidence? Something more than your spew.

Please. Or stop.

#131 jess on 08.23.11 at 6:47 pm

thanks Herb

Cake offering

French super-rich want the gov. to tax them
and called for the creation of a “special contribution” that would target wealth without forcing the rich to quit France for overseas tax havens.
The Swiss have offered to impose a withholding tax on the interest earnings of British and German residents and to pay the revenues direct to London and Berlin respectively. In return, Swiss bank’s clients will retain their anonymity (and continue to dodge inheritance and similar taxes), and Swiss bankers will be allowed immunity from investigation and prosecution for assisting with tax evasion.” (tjn)


Back in the usa –
The Bank Secrecy Act, which seeks to target money laundering, has a regulatory as well as a criminal function. That regulatory side allows the exception to the Fifth Amendment

On May 1st, the price of silver dropped 12% in 13 minutes on a Sunday evening in electronic trading.
June 7th in the evening, the price of natural gas dropped 7% 14 seconds. (Bart Chilton)

System speak
“Das Gespenst des Kapitals” (“The Specter of Capital”), Joseph Vogl
His theory is that crises are not some kind of occupational hazard in the financial system. Instead, Vogl argues, it is the system itself that inevitably leads to new crises.


#132 Junius on 08.23.11 at 6:51 pm

#129 Original Dave,

You said, “Can’t be an overload of suckers still waiting on the sidelines.”

I agree. With home ownership rates at 70%, a soft job market and a changing demographics it is hard to believe there are many sideliners. There is nothing that can catch this market as it picks up speed downwards.

#133 David Garbary on 08.23.11 at 7:20 pm

No more derogatory remarks about ALGAE:
“Because we have the attention span and financial memory of algae.” Algae adapt well to changing environments; many ‘know’ what time of month it is; some even ‘know’ what time of year it is. We consume algae every day – they are good for us. Show some respect.

#134 Nostradamus Le Mad Vlad on 08.23.11 at 7:23 pm

Today’s warmly pleasant day was caused by a massive influx of GC into GW, thereby eliminating CC altogether. No more CT’s re: CC!
Five min. clip New gold standard would make depression worse than Tea Party; 3:26 clip Similar to Obama vs. Ron Paul; Cartoon outlining bank-owned homes; Dow up, BoA down (are they still in business?); On The Brink The last act of a broke nation is to loot their citizens; Market Manipulation “Which only underscores that the 300 point run-up on today’s DOW is the product of manipulation, rather than a real economic indicator.” wrh.com; Aldi’s 1K applicants for twelve job openings.

Gold “If they had the gold, they would not need the bailouts!” wrh.com; Keynesian Failures If at first you fail, fail again; QE3 Real speculation.

Libya NATO – US troops willing to occupy for Sssshhh-U-No-Who; NMF Getting antsy and this; Russia – Georgia Remember when Putin said he “should have crushed Saakhville’s balls”? He may get a second chance; Russia – Clinton Guess which side she is on (mentioned prior); Hmmm. An American in Syria? How convenient!

US threatens Egypt Please bow down to [U-No-Who]; In-house FF That’s what the FBI is for! Cost of Libyan war “Call it a billion even.” wrh.com.

#135 dd on 08.23.11 at 7:28 pm

JP Morgan May Take Over Bank Of America within the week.

Not all is well down south.

#136 Markey on 08.23.11 at 7:50 pm

#86 old phartz – You think that the outpouring of grief is generated by the media? How shallow. Those Blatchford and Kay pieces are disrespectful and nasty, not only to Jack and his family but also to all people who are saddened by his passing. Perhaps you’ve never watched someone die of cancer so you wouldn’t understand how that inspirational letter written by a dying man was an act of tremendous bravery that must have taken great effort to create. Shame!

#137 Smoking Man on 08.23.11 at 7:58 pm

Bubble Heads Short US Banks NOW!!!!!!!!!!!!

#138 VanRant on 08.23.11 at 8:04 pm

Great Picture of Geri Halliwell and bodyguard.

#139 Utopia on 08.23.11 at 8:23 pm

#120 Boycott

“Variable Mortgage rates rising…. RBC has hiked its variable mortgage rates without waiting for the central bank to move first”.

I applaud the move by RBC today.

In fact I encourage them to step up the pace of interest rate increases as it is both beneficial to their bottom line (as spreads increase) while it assists in reducing the rate of credit consumption in this country.

That is really terrific news.

I am happy to hear it and I hope the other big banks will respond by matching those fresh rate moves very quickly.

Some say that interest rates are not affecting real estate or speculation anymore; that we have peaked in debt consumption and that money does not matter anymore.

They are wrong.

People in this country are very sensitive to the posted rates and are still making current R/E buying decisions based on what the banks offer.

We need to cool this insane market quickly.

Nobody wants a hard landing but the circus of housing consumption is far out of control and only higher rates will slow that trend.

Mr. Carney may be tied for the moment with maintaining a low rate environment. That is, after all, the only real stimulus we have left in the economy now. I cannot blame him for holding off on rate increases from that perspective.

But we need to do something quickly if we are to avert serious economic damage in the future. What the banks do next is central to addressing this question.

The ball is clearly in Mr Flaherty’s court. The only significant leverage left is for his Finance Department to impose higher down-payment levels or reduce the amortization periods of CMHC approved mortgages. Other less onerous options may still be on the table though.

We need to cut off the easy credit to those with poor prospects of debt repayment. And fast. Blunt tools will do the trick where conversations and media events have failed to communicate this urgent message to the wider public.

Everyone understands higher costs. That matters. A lot.

Incredibly, we actually need tight money policies in an easy money environment. And we need it now. It must be done effective with the announcement too. That entails making serious policy changes without notice.

There should not be a window of opportunity for the real estate cartels to pump a last minute home-buying panic and attempt to pull more demand forward in advance of any major policy change.

Those folks cannot (and should not) be enabled to advertise “the end of low rates” and thus create an environment of fresh demand where none really exists.

We all need to reject that selfish marketing agenda now and instead think in terms of the broader context of the damage that over-consumption in homes can be very damaging to the future prospects of our economy.

It is in the interests of all to level the field of play.

We are headed for very big trouble if this does not end quickly. The real estate lobby in Ottawa is far too strong and they have done serious damage to our country by pushing and pursuing their one sided agenda.

Our politicians have been swamped by their convincing entreaties to the detriment of the entire country. The pressures there are enormous. The banks meanwhile are trapped in working within the rules, yet as public companies must still deliver the goods to shareholders. That means that they compete strictly within the regulations set out by our policy makers.

So they need boundaries too. And they need fairness. The ball, as I said is clearly in Mr Flaherty’s court. He needs to act alone and with complete resolve in this respect.

Like I keep saying, the banks have eaten our babies. Realtors too. They have both consumed an excess proportion of our future consumption via their natural models of business activity.

In the process they have killed off our nations potential for creating families. They have taken an over-sized share of future consumption from the wider economy and they have , as a by product, killed off much of the revenue generating potential of the government.

You will all recall that 65% of our GDP is consumption related and that any reduction there eats into national income. That hurts all of us. That hurts program spending too.

Their habits and business motives are now running contrary to the agenda of government itself and so balance must be created to offset the distortions of the past.

We need to reject the R/E lobby. We need to reign in the banks loose lending policies. It is time to push back and end that nonsense. It is time to start thinking in the bigger picture where all the citizens of this nation are included and where we think and act collectively in our own best interests.

Canada is a nation that stands head and shoulders above most others. Failure is not an option for us. And so there is a tremendous expectation that our governing party will act swiftly to preserve our core interests in this time of global economic distortion and upheaval.

We do not want to be casualties. Families included.

#140 from kits on 08.23.11 at 8:29 pm



#141 from kits on 08.23.11 at 8:30 pm

If Bloomberg is right, then the next year or two (as short-term interest rates stay low) will present value investors with opportunities to take their bond profits and rebalance into stocks.

#142 TurnerNation on 08.23.11 at 9:27 pm

#77 Goldenfox on 08.23.11 at 9:54 am

Reading those comments is a scary experience. They must be paid, disruptive “sock puppet”/psy-ops posters. I’ve not seen people that stupid on any forum for some time now.

A give-away is how they keep circling back on-message, returning the to same empty talking points. Sowing the seed of doubt and discontent in our minds (of which the war is for; natch, diciple)

About the author J. Kay the few times I did look at that rag I found him to be a rabidly pro-Israel type. By that I mean he told us to practically worship a tiny segregated country located a world away. No thanks. And not my tax dollars either.

#143 John on 08.24.11 at 8:39 am

#95 Snowboid, thanks for the blog mention!

#144 penpal on 08.24.11 at 8:31 pm

Re # 124 DA

And the point of your post is?

Seems to me you don’t have one, you are just sensitive to the the implied criticism of your chosen profession.

Boo f’ing hoo!