Why we’re doomed

He was a fireman for the full thirty. She still works, but aches to retire. Both are mid-fifties and when she hangs up the clipboard as manager at a small courier company, they’ll be living on his pension of $3,800 a month.

“Not enough,” Irene says. “I wanna travel.” But that’s not going to happen, unless they give up their entire financial plan – which involves owning two side-by-side houses. The one they live in is worth seven hundred. The one they rent out (for peanuts) is worth five. And the sum total of all RSPs, TFSAs and cash stuffed in the orange guy’s shorts is less than $50,000.

At age 56, they have a net worth of $1.2 million. That’s good. But 96% of it is in one asset – real estate – which in their city (Victoria) is dropping like a stone. “It’s so scary now,” says Irene, ”that I have no idea if we can even sell these places, let alone for what the assessment says they’re worth.”

And she’s right. A 50% decline in that market over the next five years is entirely possible. But anything close to that will underscore how risky a strategy it was to put all of your eggs in one basket. Victoria first, of course, then Vancouver and Toronto. Slowly but steadily, reality will settle in. I mean, have you looked at what $1.2 million buys in 416 lately?

Last year I said the era of the house is ending. Absurd overvaluations will end. They have to. We’re outta money. And one big reason for that is, like the retired fireman and his flame, we’ve sunk almost everything into bricks.

Remember, less than 1% of Canadians have a million dollars outside of their homes. But about 50% of all the people living in Vancouver have $1 million in their homes – at least for now. The latest news shows this is not likely to last for long.

The national economy grew at zero in the last period, and is about to go negative. And you know the US is comatose. But that’s not what homeowners with the bulk of their net worth in drywall should worry about. More chilling is the fact most people are slowly, inexorably, relentlessly and willingly running out of money.

Two-thirds of people over the age of 55, who should be in their fat years, are in debt, says CIBC. According to a new survey from Big Orange, half of the population can’t save even $25 a week. About 47% of people say their financial plan involves cutting back on the amount of food they eat. Forty per cent have insufficient income to pay monthly bills. And in recent years, retirement plan contributions have fallen off a cliff.

At the same time households owe $1.5 trillion, and interest rates are near the lowest point ever. What happens when they start to normalize? The point of the bank survey released this week was to show how delusional people have become. When asked if they’ll be debt free by the age of 55, most people say, yeah, sure. Of course, it won’t happen. It’s a statistical impossibility – unless we start shunning houses.

Has his already begun?

I’d say so in Victoria, the Okanagan and swaths of Ontario outside the GTA. Maybe the latest numbers from CHMC tell part of the story. Since F’s latest mortgage rule changes in March, home loan refinancing has dropped about 40%. The number of people buying mortgage insurance plopped after the announcement, and has not recovered.

Why should it?

As I’ve said here a few times, house prices rose because of more debt, not more income. And now that the economy has developed ED, most people will be lucky to hold on to the income they’ve got. That big plan of making money off rising house values no matter what size mortgage you took is looking suspect. When half the population can’t save twenty-five bucks a week, and two thirds of people ready to retire are in debt, who the hell’s going to buy your house for twice what you paid?

There’s no economic argument for existing home prices in most major cities. The emperor is naked.

If you think this is a poor time to sell, and don’t, you have no idea what’s coming.

187 comments ↓

#1 martin on 08.29.11 at 10:24 pm

as always Great!!

#2 T.O. Bubble Boy on 08.29.11 at 10:25 pm

ED = Electile Dysfunction?

#3 Tim on 08.29.11 at 10:25 pm

Half the population can’t save $25 a week? People are cutting back on their food? Have you been to Vancouver lately? Try and get a table at a decent restaurant. Despite your gloom and doom and predictions about interest rates rising and real estate falling for the last three years, real estate in Vancouver has not corrected to any significant degree, in fact it is much higher that when you started warning it would fall, and interest rates are still far below long term average levels

That’s why you should worry. — Garth

#4 confused on 08.29.11 at 10:27 pm

first?!

#5 Gord In Vancouver on 08.29.11 at 10:27 pm

Another great post – thanks.

Today’s Global BC (Vancouver) evening newscast actually reiterated some of this post.

Looks like you were way ahead of the curve.

#6 Cowboy Pete on 08.29.11 at 10:33 pm

When your horse is going down, the only thing to do is dismount and jump clear before you get crushed.

Do I need to explain the analogy?

#7 MarcFromOttawa on 08.29.11 at 10:33 pm

#3

#8 Mean Gene on 08.29.11 at 10:33 pm

“…the retired fireman and his flame…” that line made me smile, thanks for that!!!

#9 Min in Mission on 08.29.11 at 10:41 pm

Being a ‘minimalist’ by nature, and design, “Awesome Lady” and I have a pretty simple existence. We have managed to keep our ‘toys’ simple. We won’t have a fortune when we retire, but, we anticipate being comfortable. Not 80K per year comfortable, but, comfortable none the less. We are not depending on our house, or others, to look after us.

This post is totally correct about the way that prices have developed in the last few years. Definitely because of “debt” rather than wages. One has increased while the other hasn’t!!

#10 Stinky the Fish on 08.29.11 at 10:44 pm

“When half the population can’t save twenty-five bucks a week, and two thirds of people ready to retire are in debt, who the hell’s going to buy your house for twice what you paid?”
Hey, I’ll buy that house if you subtract 50-75% off the current sticker price. Swoop right in there and snatch that

“About 47% of people say their financial plan involves cutting back on the amount of food they eat.”
Classic Garth. I’m sure they need to lose the weight anyhow.

#11 mike on 08.29.11 at 10:46 pm

Garth your posts are confusing, yesterday everything was fine economically. Won’t most of these people just do anything they have to keep paying their mortgage as long as prices keep rising. What is the event that will shift the tide.

#12 Cookie Monster on 08.29.11 at 10:47 pm

Garth, that was an awesome post! Very convincing. I’m convinced. I think you’re right. Agreed!

#13 Smoking Man on 08.29.11 at 10:48 pm

Ah damn I agree…..Stockhome syndrom I think…….

5 year money in China way cheaper than 1 year money….
Bond market in china is saying a-so, 5 yer from now no good!! sell sell sell….

Can’t figure out what words to say to describe what is coming but, my pocket aces are looking at 2345 of diamonds on the turn and we have 5 people calling. Not good.

#14 Moneta on 08.29.11 at 10:52 pm

Bottoms_Up on 08.29.11 at 9:54 pm
#125 Moneta on 08.29.11 at 9:37 pm
——————————————-
lol, you’re not serious? Or are you?

How about providing a link to a primary research article?
———–
Tongue in cheek.

#15 Smoking Man on 08.29.11 at 10:54 pm

Garth I know you think Im an ass,, and I am but bro you are about to become famous…. finaly after years of bla bla bla.. a revolt by some of your loyal ass kissers……

The sun is coming up…
Enjoy the sunshine you deserve….

This whole Jack Layton thing fd me up…I mean this guy was good. a real good guy……I’m nothing like him the exact other side of yingyang….

I re evaluted my life for a small moment, and thought, if it wasent for guys like me, Jack would not look that great…

Hence I am happy that I may have made this great dude look even better.

#16 WI Boomer on 08.29.11 at 10:56 pm

Garth-

Tonight blog scares the snot out of me, and should anybody else looking at retiement in under 5 years!!!
Those stats do not portray the “golden years” being very plush for most boomers.

Now the big question, we’ll assume they have been making house payments for nearly 30 years, why isn’t that box paid off by now? if you move-up in house, only an idiot would start over with a NEW 30 year mortgage? Hmmm…maybe more idiots than I think are roaming around the streets.

Short of selling your home, where is thy nest egg?
Bad time to discover you’re broke.

#17 [email protected] on 08.29.11 at 10:57 pm

Something that always interests me is the perception of loss by both homeowners and stock investors. If you bought your house for $100k and it went to $800 but you sold at $700, you did not lose $100k (didn’t you just gain $600K?) Similarly, if you buy a stock at $10 it goes to $80 and then slides down to $50, you’re not doing too bad (ask my friends who have SinoForest what bad is). Just some observations.

#18 Jon B on 08.29.11 at 11:01 pm

That CIBC survey was not very surprising. The confidence in debt repayment part certainly was. I guess most people in this country are quite happy taking on enormous debt loads.

#19 martin on 08.29.11 at 11:02 pm

just seeing the news and the first news is about canadian debt delusion. reading garth’s blogg we are ahead of the news too lol

#20 Snowboid on 08.29.11 at 11:03 pm

They need to list right away, if nothing else but the $500K home and hope they get $400K. Take that and buy/read ‘Money Road’ and implement a balanced investment strategy.

Or better still, sell both and rent – even if they only net $800K out of the two. The after-tax returns added to the pension easily cover their travel dreams as well as home rental. Buy back in a couple of years when prices have tanked if they want.

Although we sold our Okanagan investment properties before we read ‘Greater Fool’, we lost about $ 100K by selling our home in Victoria this spring instead of last.

The best move we ever made was selling anyway, even if our timing was a bit late.

We owe Prof. Turner big-time, to say the least.

We aren’t quite millionaires, but sure feel like we won the lottery!

#21 when's the correction? on 08.29.11 at 11:05 pm

Wish I could convince my parents to sell right now, theyre sitting on a gold mine which has appreciated nearly 8x what they paid for it in 20 years. Unfortunately, “its home.” I don’t believe theyre in debt like the two thirds of other people their age, but like the chumps in Victoria, have the bulk of their assets in their home and cottage. Oh well, Ive tried talking sense into them, but like the great majority of people out there, a housing correction won’t happen in Canada.

#22 not 1st on 08.29.11 at 11:06 pm

Thought this wasn’t a doomer or apocalypse blog??

#23 Moneta on 08.29.11 at 11:08 pm

How about providing a link to a primary research article?
———-
However the guy who wrote the book has a good CV:

http://www.bumc.bu.edu/len/about-our-research-staff/dr-mcnamaras-cv/

#24 T.O. Bubble Boy on 08.29.11 at 11:11 pm

Question for F: does that Little Tikes kitchen qualify for the Home Reno Tax Credit?

#25 Ex-Cowtown on 08.29.11 at 11:16 pm

Broke is broke. When the banks won’t re-finance you, it doesn’t matter if the interest rate is 10%, 1% or 0.1%. The bank still wants its $$$$ back…. All of it….now…

#26 Paul on 08.29.11 at 11:24 pm

Now’s the time to buy a house.

http://www.bclocalnews.com/vancouver_island_south/saanichnews/news/128563598.html

#27 Guy_in_Regina on 08.29.11 at 11:27 pm

Wow Garth, you converted Smoking Man! That is great. I for one always read his comments – keep ’em coming Man, and remember “smoke you’re brains out!!” (favorite saying when I used to smoke).

Those stats are UGLY!! The boomers s*#t the bed bigtime.

But when’s it coming to Regina?! – I’ve gotta make some sort of move next fall at the latest.

#28 Utopia on 08.29.11 at 11:36 pm

Mind blowing.

Twenty Five lousy bucks. Who would have ever thought we could fall so low at a time when so many seemed so rich? At a time when our assets possessed us instead of the other way around…..

But it is almost all paper wealth. Pure fiction.

It is also what gets us all horny and hot as we brag vacuously to friends and neighbors about our winter trips to the Caribean or that sparkly, fancy new car.

Soon to be vaporized. Too soon I think. I coined a term for this kind of economic strength. It has never really caught on but here it is anyway.

“Vapour Paper”….(what you think you are worth).

The kind that disappears as wealth evaporates in a housing deflation and proper valuations suddenly meet the reality of market forces. A time when supply exceeds demand and theoretical money and buying power simply vanish into the thin air.

And where it joins the Ether as a simple hot gas.

#29 LB on 08.29.11 at 11:41 pm

Wondering how many people with mortgage renewals coming up who will expect to continue payments based on a now defunct 40 year amortization, and will therefore see their payments rise, in spite of continued low interest rates?

#30 Thetruth on 08.29.11 at 11:42 pm

Markets outside Vancouver and Toronto are all based on psychological momentum, CMHC policies, immigration purposes investing, and low interest rates. NO REAL DEMAND. They will go soon as no recovery happens over the next few years. People will realize and then kaboom!! As Garth says, they probably have started to turn already. Not that I ever advocated owning RE ever outside Van and Toronto unless it carried itself (multi-res or commercial/industrial) with long leases.

Immigration/associated policies and domestic migration will keep Vancity and T. afloat for many more years. I think the best exit strategy is between spring 2012 and spring 2013.

In 10 years, over a million more immigrants will come to the GTA and 500,000+ to Vancity. These cities will be composed mainly of ethnic enclaves with little mixing. Go to the PNE or CNE today and groups of kids hang out with their own ethnicities. The European character (before you start, I’m of South Asian descent) of these cities will be diminishing…until there is a backlash.

Then a great debate (around 2015) regarding immigration will start…thereby reducing numbers while giving up on the idea that we need more young immigrants to support the pensioners.

My bet is that immigration sentiment will change abrubtly in a few years and will be a disaster for RE in a few years time. Just not Yet!

#31 Elmer on 08.29.11 at 11:43 pm

An income of $3800/month (assuming it’s after tax) is an entirely adequate amount for a couple to retire on if their mortgage is paid off, and should let them take nice vacations every year. Now I know Garth is going to make some quip about how they’ll be living in poverty. But Garth is a financial advisor. The more he convinces people to invest, the more money he makes, so it’s in his interest to greatly exaggerate how much money you’ll need during retirement. I suggest reading “Stop Working” by Derek Foster. He retired at 34, and pulls in 35k a year from his dividends and it’s more than enough to live comfortably on.

#32 Carlyle on 08.29.11 at 11:44 pm

My wife has 15k in a tsfa, and 8gs cash. I have 0 savings and 42gs debt thanks to a serious gambling problem I’m only just recovering from. She is 29 and a nurse with a great pension making 60g annually. I’m 35 making 42k.

So the question is what now. We split everything down the middle .., rent 1525 .., debt is all mone so i pay it all … Between household expenses and debt repayment I’m saving almost nothing … But at least she is socking away cash every cheque.

I thought about personal bankruptcy but 15 k of the 42 gs is in both our names … Plus with our incOme we would be in bankruptcy for 21 months and end up
Paying back thousands …. Might as well stick it out. No point to my post relate except to publically say how stupid I was.

#33 Hosehead on 08.29.11 at 11:44 pm

A couple of weeks ago when the markets were acting up and people dumping equities for bonds you made a comment to the effect that people shouldn’t be turning “paper losses into real ones”. That same logic applies to the eventual housing correction (which you can’t accurately predict when it will happen). Some people (ie those who lose their jobs or get divorced) will get smoked, but the vast majority of Canadians will probably ride it out. They will stay put. They will rent the place instead of selling. Some urban centres won’t lose very much value. Of course Nortel was something people couldn’t ride out, but you’re not saying a kitsilano house for 1.5 million is going to be worth zero someday, are you? Maybe it will be worth a million in 5 years – maybe not. But whoever lives in it is less likley to sell it for a million, especially if they bought it for 1.5. They’ll ride it out til it’s back to 1.5. That may take 10 years, but they’ll take that before they turn a half a million dollar paper loss into a real one.

#34 GtaGuy on 08.29.11 at 11:45 pm

Seems like everyone is on a spending spree. I guess they all believe in the get outta debt free card. Debt forgiveness everywhere you look. Can’t listen to the radio anymore without an ad for it appearing.

Punish all the savors and forgive all the irresponsible spending.

Think I am gonna be the great fool for being a savor.

#35 Smell The Coffee on 08.29.11 at 11:45 pm

Economic confidence, like house prices are comparable to a properly inflated tire.

At 100% it is at full productivity, and experiences little wear, tear or stress.

As it deflates as little as 10% the performance is noticeable and things get just a little wobbly.

At 15% loss you start to sweat.

At 25% you can’t feel, breath let alone economically speed and your wear and tear is off the charts.

At 50% you’re going no where, on time anyway, and you know you ain’t keeping up with any one else in the fast lane.

If house prices drop 50%, say in Victoria, which I believe is very probable and has already happened several times in the last 30 years, the economy is going nowhere for decades.

Like your retirement, moving, or even paying out your 40 year high water mark mortgage … your permanently stuck, crawling and more likely fully stopped on the freeway of life.

Your are now in the tow-truck lane for the rest of your sad, misappropriated boomer life. That is what happens when you put all your money into one means of getting there.

Dear God, please, just send us one more boom.This time we promise won’t screw it up.

On reflection a good set of roller skates would have been a better deal and a lot more fun.

#36 Onemorething on 08.29.11 at 11:45 pm

The bottom of the RE market is when it’s realistically affordable again. Simply go back to 2003 for Canada, 1998 for the USA. Might be more!

Garth, you know this is turning, that’s why you are still writing.

That’s why I’m still reading as this blog points to a concensus and evidence of the when.

We’ve lost our way via our goverments big decisions to get in bed with the global elite and banksters for 30 years now. It was a great run for some of us who understood the manipulation.

It’s a cycle, propped up by a world that is easily manipulated but everyone has run out bullets!

I’m beyond buying anything a half off retail anymore, dont need to own RE I believe even when the damage is done!

When a house is a home, easily serviced financially then I might buy but it will only be about 10% of my net worth not 40%.

Garth, what is the next big asset bubble to replace this one?

Good luck fellow Canadians!

#37 JohnnyBravo on 08.29.11 at 11:46 pm

Tonight’s post is chock full of juicy morsels to chew on.

Canada’s latest GDP printed negative. The US: 1%. I said the US was moribund. You say “comatose.” Tomato. Tomahto.

You say interest rates will rise. For over two years, the expectation was for higher rates. In fact, house doomers said, “Better sell before interest rates go up!” At the same time, house mongers said, “Better buy before interest rates go up!”

Then the Beard at the Fed declared the US is the new Japan, and that US consumers look like the supporting cast of a George A. Romero movie. With that epitaph most everyone expects interest rates to flatline for, well, forever.

With this swing in expectation, it makes sense that soon we may start to see interest rates creep up (at last at first). The thirty some-odd years of decreasing rates, the era that encompassed the “Great Moderation” or “Greenspan’s Fraud” may very well be coming to an end. Unless they hyper-inflate, which I doubt.

I said the Fed would drop the economy, and the US consumer like a hot stone if it served their purpose. Prescient? No. They already did. The Fed pumped enough “money” into the banking system to probably pay off the mortgages of every man, woman, child and cat in the US. What do the people get aside from some scraps? They get to deal with crooked banks who perform all manner of actual criminal activity, some literally trying to steal homes from people (some of whom have no mortgages!). Soon, they will get a VAT while large corporations who stuff bills into Obama’s collection plate get exemptions.

I was a nut for saying these things. But Lyle Gramley, former Fed governor, said it himself. He freely admitted that Volcker and the Fed deliberately killed the economy in the very early ’80s to stop inflation and prevent a bond market collapse. I have other sources.

Today is different. Very different. But the people still come last. Today we (or at least the US) are in what they call a “balance sheet” recession. Never mind the crap about two negative quarters or a 10% decline in GDP. Is a deceased person only really dead after the coroner signs the death certificate?

Basically, the US is all tapped out on credit (we’re close or just tipping over the edge). The Beard knows this, which is why he threw in the towel after two massive rounds of QE did nothing but allow the large US money center banks to pretend they are going concerns.

Wanna know why houses correct, like stocks, from time to time? Because you simply run out of buyers. There is not enough wealth to be had from asset markets to provide everyone with a champaign and caviar retirement. By definition, it’s the same with houses. We can’t all get rich from real estate, especially when, as Garth has pointed out so many times, it was a credit-driven boom. Prices did not reflect reality. They floated up on a flurry of easy credit excreted by the banks, not actual wealth. Easy credit creates a disproportionate amount of claims on the wealth that actually exists. The ones who win are the ones who cash in before reality sets in and there is no credit capacity left. If the economy tanks, that point will be reached sooner. Are we there yet, Mommy?

Own a home if you have the means and know what you are getting into, and understand the risks. Otherwise, you better pray the US comes quickly out of this funk, that China does not take a break, and that actual spending (the only thing that drives economies) comes back in a big way.

#38 ozy - 416 pain started already on 08.29.11 at 11:51 pm

Guys, watching a lot of homes setup for “offers august xx” and when xx day come, there are no offers. They change the posting next day saying now “offers anytime”. Sounds familiar?
Then, they (the properties) lainguish on the market for 10, 20, 30, 40 days, sometimes relisted at lower price, or reduced and still not selling. Some sell but not once initial price drops 10% from what I have seen. The inventory of unwanted homes grows everyday, from where you could not see one in the spring. It is “getting thick” boys and a lot of fighting (in families that bought) will erupt. Insure your scull againsts wife pot banging attacks! But if you have a brain inside there, obviously, you won’t need that, use the money on something funny (you know what I mean)

#39 Utopia on 08.30.11 at 12:01 am

#11 mike wrote….

“Garth your posts are confusing, yesterday everything was fine economically. Won’t most of these people just do anything they have to keep paying their mortgage as long as prices keep rising. What is the event that will shift the tide”.
—————————————

What is the event..? Good question Mike. You are probably wondering what future event will make a change in the present.

The thing is, the event that will kill housing values in this country has already taken place. It happened when we became aware that we were running out of first time buyers, when the records showed there was so many more owners than renters and when reality finally intruded and we realized the market could not rise further as sellers began to exceed buyers in an overbought market.

The critical incidents have come and gone already. It is only the outcomes that now await as vendors learn the truth about real estate.

Housing prices do not always rise.

#40 Bill Gable on 08.30.11 at 12:02 am

Jeez, these numbers are staggering. I noted the 40% catering of credit demand, after changes to mortgage rules, but, the lack of savings and the numbers Mr. Turner posted today are unbelievable, if not terrifying.

So many Pensions are underfunded, to add to boomer woes.

Oh, and one of my canniest and wealthiest friends called me and told me he had sold out and rents.

He started reading Mr. Turner’s books about the same time I did.

Funny, that.

#41 Steve on 08.30.11 at 12:04 am

Mortgage insurance, that is the biggest load of crap EVER put out by banks. Sure, any one can apply. But the process to see if one actually qualifies starts after a claim is made. The questions are misleading and it is really just a scam for banks to fatten their bottom line.

#42 Timing is Everything on 08.30.11 at 12:05 am

… who the hell’s going to buy your house for twice what you paid? – Garth

Twice what you paid. Hmmm? If you bought for $200k, I could see getting $400k. But $1.2 million for a $600k ‘home’. That’s a lot harder to comprehend. It can’t be sustained.

———————————————–
Why does S&P still rate BC and Canada ‘AAA’? These ratings seem suspect, given today’s post. How did I get on a doomer site?

http://tinyurl.com/3tx7mgm

—————————————-

#43 vatoDETH on 08.30.11 at 12:19 am

Yup, when I read that this afternoon i realized how screwed we are! $25/wk will break some people? WTF??? Wow! This is not going to end well for many!

I’m behind on my finances for my age, but I’ve been positioning myself quite well for what’s coming. I’ve been more than patient. I’ve endured taunts and called a bitter renter. All along I’ve known that the economics could not support this Alberta boom.

As long as I maintain a decent job and build up my career, I will be fine. I have a lot to learn about investing in the near future. The end of this bubble is so close. Personally, I can’t wait to stop spending so much on rent. Still more patience though. Timing….

#44 Jessie - CMHC coming down on 08.30.11 at 12:19 am

No need to ask, judge for yourself this article on Canadian Free Federal National Mortgage Association (Fannie Mae) and Canadian Federal Home Loan Mortgage Corporation (Freddie Mac), alias CMHC:

Did CMHC support risky borrowing?
http://business.financialpost.com/2011/08/29/did-cmhc-support-risky-borrowing/

In compliance with new federal rules, the Canada Mortgage and Housing Corp. on Monday published its first set of quarterly results, something industry observers say is a good thing.

Among the more salient disclosures contained in the results: refinancing activity tumbled nearly 40% following a move by Finance Minister Jim Flaherty to tighten mortgage rules this spring.

Sales of the CMHC’s mortgage insurance fell by 10% immediately after the changes were introduced, though they have regained some ground since then.

According to the CMHC, these numbers show it’s doing a good job of maintaining a healthy, sustainable housing market.

But Finn Poschmann, vice president of research at the C.D. Howe Institute, is skeptical. “The size of the drop in refinancing is surprising to the point of shocking,” Mr. Poschmann said in an email. “You could hardly have better evidence of the extent to which CMHC practices have been supporting high debt and risky borrowing by homeowners.”

A frequent critic of the organization, Mr. Poschmann argues that CMHC practices have helped inflate housing prices and encourage consumers to take on more debt than they can handle.

Experts say average household debt in this country is sitting at record levels, similar to where it was in the United States before the financial crisis.

Starting in March Mr. Flaherty instituted a number of changes to mortgage rules, including reducing the maximum amortization period for loans qualifying for CMHC insurance to 30 years from 35 years; lowering the maximum amount that Canadians can borrow to refinance their mortgages to 85% from 90% of the value of their homes; and withdrawing CMHC insurance from non-amortizing home equity lines of credit.

Mr. Poschmann authored a report earlier this year which suggested ways the federal government could fix the CMHC, the leading provider of mortgage insurance in Canada. In a letter published on its website, CMHC suggested that Mr. Poschmann’s ideas would only lead to the creation of a system like the one in the United States.

#45 cool on 08.30.11 at 12:24 am

About 47% of people say their financial plan involves cutting back on the amount of food they eat.
-GT

Probably its a good thing, most north americans need to eat less.It will improve health,less burden on people for health care cost, more money for other buying, improving economy.

simple.

#46 SophieZombie on 08.30.11 at 12:39 am

Lotto 65 retirement plan ?

“A poll of Canadians aged 45 to 64 conducted by Environics Research for TD Waterhouse was even more mind-boggling: 32 per cent said they expected a lottery win to support them post-retirement—versus 34 per cent who said they had retirement savings plans with actual dollars in them.”
http://www2.macleans.ca/2011/03/08/retirement-649/

#47 Into the Sunset on 08.30.11 at 12:40 am

30 years as a fireman = about 2880 work days of real work inputs in those 30 years. In addition, many have a second business that takes away from the Joe that is trying to make a living. In the majority of cases the cash is unreported.

$3800/Mth……$45,600/Yr. and crying the blues!!!
Get a life firelady, there are folks that would be delighted to have that pension!

#48 Timing is Everything on 08.30.11 at 12:59 am

They obviously didn’t see these…

http://tinyurl.com/4y7fcn5

http://tinyurl.com/3opme83

———————————————-

Garth, what’s your prediction for Victoria…circa 2030?
I’m thinking about sub-dividing the bunker about then.
I’ll be 66.

#49 Kilby on 08.30.11 at 1:01 am

Victoria (including Victoria West) August 23 to 29th. 797 active listings, 23 new sales. This does not include adjoining municipalities.

#50 Nostradamus Le Mad Vlad on 08.30.11 at 1:02 am


“More chilling is the fact most people are slowly, inexorably, relentlessly and willingly running out of money. We’re outta money. The national economy grew at zero in the last period, and is about to go negative. And in recent years, retirement plan contributions have fallen off a cliff.”

Hmmm. Seems to be a thread there. Sheeple run out of money, with empty pensions. The national economy is toast. Cdns. owe $1.5 trillion, which has to be paid back somehow (probably on the backs of taxpayers).

Conspiracy theory? Probably. A whacknutbar will pick up on this and begin spreading dirty lies about how this is all our fault, but businesspeople and politicos should get off scot-free. Happens all the time.
*
#17 [email protected] — Good post, and it is the ‘perception’ of gain or loss.

Main thing is to get the weight off the back (sell, pay off the mortgage and all debts, no property taxes anymore or any user fees and live debt free) then rent, which leads to —

#20 Snowboid — “We aren’t quite millionaires, but sure feel like we won the lottery!”

Nicely done and a great feeling not to be in hock to anyone!

BTW, where’s Mikey the Realtor and BPOE? Drumming up business someplace else?

#36 Onemorething — “It’s a cycle, propped up by a world that is easily manipulated but everyone has run out bullets!”

Ain’t that the truth! Sheeple are in the wrong place, at the wrong time for the wrong reasons (mostly debt overkill), and now they’re getting smoked left, right and centre.
*
Gold Chinese love gold, I love their food; Lehman A new debt crisis. What would there be to talk about without all these crisisisisis’s? Cash Test for EU banks. They’re all broke and in bed with each other; France – China Something cooking? IMF Small talk. Why was DSK sidelined? Was it because he was going to spill the beans on the fake gold? Recession? What recession? 33:29 clip Money supply in an energy scarce world,

79 Trillion This ain’t money, honey. This is reality in Fukushima and Schools Unsafe; NATO See the ugly face of NATO (U-tube clip link in); Perfect Storm that never was; O’Bomba Four more wars should guarantee re-election next year, but Falling Apart May derail plans for a while; Unusual earth events.

#51 604genX on 08.30.11 at 1:17 am

Global TV update on Vancouver housing market. (WARNING: Barf bag required.)

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

#52 a prairie dawg on 08.30.11 at 1:27 am

So with a CHMC approved loan you can walk into the Little Tikes faux stainless and granite kitchen for 5% down ($5), and amortize the rest over 30 months.

Get the kids started on the road to servitude early.

#53 Bobby on 08.30.11 at 1:38 am

Certainly lots of properties for sale here in Victoria. I see clusters of For Sale signs.
Now who would want to buy a new home today when it will be cheaper in 18 months with the demise of the HST?
The above article is fitting as it probably describes many people here in Victoria. Many properties are marketed as investments when the prospective rent is only a pittance. That 500k home should really rent for 5k a month to make it worthwhile, but my guess the rent is about 1600. I bet some realtor said it was a good deal and of course a sound investment.
I was up to Bear Mountain the other day and there was huge number of homes for sale. Certainly a buyers market.

#54 Bilbo Bloggins on 08.30.11 at 1:41 am

Surveys are useless.
Case in point, many think they’re going to win the lottery.
Numbers, however, don’t lie.

#55 Being John Malkovich on 08.30.11 at 1:57 am

$3800 a month is entirely adequate. . .I could live on less. If you are a D.I.N.K and your wife is pulling in a little sum on the side then you are set. All you need to enjoy retirement is a bunker and a years supply of freeze dried ravioli and ammo to ward off the MZB’s (that’s doomspeak for Mutant Zombie Bikers).

For those of you who don’t know how to build a bunker it starts by digging a 50 foot deep hole in your back yard. I know, I know, difficult to hide a 50 foot deep hole, never-mind digging one, but if you want to build it to Greater Fool specs here is the link: http://www.youtube.com/watch?v=fGngh5nHtrk

#56 poco on 08.30.11 at 2:01 am

#33 Hosehead
A couple of weeks ago when the markets were acting up and people dumping equities for bonds you made a comment to the effect that people shouldn’t be turning “paper losses into real ones”. That same logic applies to the eventual housing correction (which you can’t accurately predict when it will happen). Some people (ie those who lose their jobs or get divorced) will get smoked, but the vast majority of Canadians will probably ride it out. They will stay put. They will rent the place instead of selling. Some urban centres won’t lose very much value. Of course Nortel was something people couldn’t ride out, but you’re not saying a kitsilano house for 1.5 million is going to be worth zero someday, are you? Maybe it will be worth a million in 5 years – maybe not. But whoever lives in it is less likley to sell it for a million, especially if they bought it for 1.5. They’ll ride it out til it’s back to 1.5. That may take 10 years, but they’ll take that before they turn a half a million dollar paper loss into a real one.
______________________________________________
Though you are using an extreme example-re: 1.5m property–i have to disagree with you…..sellers will sell for an enormous loss if they can’t maintain a property(for whatever reason) and no one wants it

this beauty up in Westwood Plateau (Coquitlam) was bought in Nov. 07 for 1.66m–has been on the market for quite a while–now listed at 1.288m —

http://www.realtor.ca/propertyDetails.aspx?propertyId=10198661&PidKey=-1287654125

the million dollar owners are not the ones you have to worry about–it’s the first time owners who bought several years ago, who thought they were buying within their means, who got taken in by all the hype from CREA–MSM and realtors of housing only ever going up up up….

this is what i mean
mls#v878978-211-2620 Jane Poco–bought-june07-206k
listed Feb10-225k–several price drops–now 194.5k

mls#v843953-402-2477 Kelly Poco–bought for 353.9k–two short years ago–now at 318.8k
these are but two of the hundreds selling for less than they paid just a few years ago—can you afford a 20k to 30k loss ????
____________________
“That same logic applies to the eventual housing correction (which you can’t accurately predict when it will happen). ”

Hosehead, wake up already, the downturn is well under way and has been in my area since spring of 2010–do some research — read what others are posting here about their markets and comprehend what it means

#57 Drew on 08.30.11 at 2:02 am

Thanks Garth. You warmed the hearts of me and Mrs Drew as we sit cozily in our suburban vancouver rental home with good jobs, zero debt, great savings, and lots of time to spend with our kids and lots of time to do the things we enjoy. We might buy something we like when we can pay cash, or we might buy a small business – either way we are NOT feeling doomed. Renters revenge!

#58 Tim on 08.30.11 at 2:04 am

“In 10 years, over a million more immigrants will come to the GTA and 500,000+ to Vancity. These cities will be composed mainly of ethnic enclaves with little mixing. Go to the PNE or CNE today and groups of kids hang out with their own ethnicities. The European character (before you start, I’m of South Asian descent) of these cities will be diminishing…until there is a backlash.”
———

Too late, already spoiled…Canadians are too politically correct to make their views known

#59 Alan on 08.30.11 at 2:45 am

When stock markets, bonds are volitile with the wealth of sovereign nations in question and the future of corporate earnings in decline due to lack of spending on the part of consumers, there is only one safe place, Hard Assets. Real estate, oil, gas, gold. Dividends are not guaranteed and suspect to reduction should the economy take a turn for the worst. Something Garth has fails to mention in his advice.

No asset class will be spared in a market malaise, but real estate will always be a store of value. Companies go bankrupt in bad economies and your shares become worthless.

#60 Tony on 08.30.11 at 2:47 am

Home values could fall 50 percent in Victoria in two years instead of five. Edmonton townhouses and apartments fell around 35 to 60 percent from the summer of 2007 to the summer of 2009 depending on the area. A two year span.

#61 Tony on 08.30.11 at 2:58 am

#32 Carlyle on 08.29.11 at 11:44 pm

I made around 20 million dollars betting boxing matches from the early 1970’s to the late 1980’s. Really knowing a sport well helps. I was a ranked welterweight in the 1960’s. It’s only gambling if you lose.

#62 Aussie Roy on 08.30.11 at 4:44 am

Aussie Update

http://www.macrobusiness.com.au/2011/08/alarm-bells-ringing-for-melbourne-housing/

“According to RP Data sales listings in Victoria have jumped from 50,233 on 7/8/11 to 57,139 on 21/8/11 – that’s a 13.7% surge in a fortnight, with sales listings up 42.9% from a year ago. I can’t see any way that demand follows suit, let alone prices”

Quantity of DWELLINGS for sale UP 42.9% YTD

Quantity of MONEY to buy the DWELLINGS UP 5 – 6% YTD

Data here http://www.rba.gov.au/statistics/frequency/fin-agg/2011/fin-agg-0611.html

The outcome for house prices… obvious – More listings, less money. Without a heafty increase in mortgage demand, there seems no where for house prices to go but down. Looking more like 2008 all the time.

SYDNEY’S housing market remains relatively stable with auction clearance rates steady over recent weeks. House prices, however, have drifted down over the past quarter, indicating generally subdued buyer activity.

http://smh.domain.com.au/home-investor-centre/sydney-house-prices-drift-lower-amid-muted-buyer-interest-20110829-1jh7g.html

NEW home sales have tumbled to their lowest level in more than a decade as buyers desert the market amid growing fears about a global economic slowdown.

Housing Industry Association figures released yesterday show the total number of new homes sold across Australia in July fell 8 per cent to 6428 – the lowest level since January 2000.

http://www.news.com.au/money/property/new-home-buyers-scarce-on-the-block/story-e6frfmd0-1226125129306#ixzz1WV2Pvze8

Back in April I questioned whether Queensland was heading for recession on the back of stalling credit issuance and a falling housing market. Later in that month I noted that the Victorian government was also showing similar signs of weakness. To complete the trifecta I note today (h/t Lorax) that New South Wales has also caught the same disease.

http://www.macrobusiness.com.au/2011/08/nsws-revenue-hurdles/

When Irish eyes aren’t smiling.

HOUSE PRICES in Dublin have fallen by almost 49 per cent since the peak of the boom in February 2007, according to the Central Statistics Office.

Overall, residential property prices fell by 12.5 per cent in the year to July, the CSO said in its latest residential property price index.

Its a global thing this house lust / debt bubble.

http://www.irishtimes.com/newspaper/ireland/2011/0830/1224303189611.html

#63 House on 08.30.11 at 6:07 am

The media quoted the same 40%, but for some reason forgot to mention the effect the ” beat the HST ” mania last year had in increasing sales. Come on it was part your mantra last year don’t take the lazy route like the media.

#64 Bottoms_Up on 08.30.11 at 6:53 am

#29 LB on 08.29.11 at 11:41 pm
——————————————
Problem is that they will be refinancing at lower interest rates now than they received in 2006/07. And, their houses are worth >30% more. So they probably aren’t shaking in their boots.

#65 Moneta on 08.30.11 at 6:55 am

Probably its a good thing, most north americans need to eat less.It will improve health,less burden on people for health care cost, more money for other buying, improving economy.

simple.
———–
I think food = 7% of income for Americans
10%-11% for Canadians
Close to 15% for Europeans.

They can’t go much lower unless they increase their consumption of spam, chips and cheez whiz

#66 bigrider on 08.30.11 at 7:07 am

Good and angry post today Garth.

Similar to discussions I have with my RE horny friends and associates.

Hopefully we will have strong evidence that we are right soon.

#67 bigrider on 08.30.11 at 7:17 am

#17 [email protected] -‘perception people have of loss for homes and stocks’. Ron says it is the same, I respectfully say it is very different.

Ron , I want to correct you a bit on your perception of how people perceive gain and loss in houses and stocks..it is different.

If a person buys a home for 100k and it goes to 300k and then back to 200k they will readily say that they made 100k, ignoring all of the costs of said ownership during that period. Why you say, because homes are viewed through rose coloured glasses. Maybe because there is no red and green neon ticker sign in there front lawn showing minute to minute fluctuations in value.

However same example, a person buys 100k worth of securities, goes to 300k and then back to 200k and that person will be jumpin up and down in a panic over the “100k he is down”. I can tell you from experience that this is exactly how people perceive the two different asset classes. Incredibly frustrating how f*&^ emotional and stupid people can be.

Houses and financial securities do not enjoy the same emotional perceptions from people

#68 bigrider on 08.30.11 at 7:22 am

#32 Carlyle.

You are one of the more honest guys here. Always bearing your soul.

Don’t get to hung up on your mistakes. Just endeavor to do better in the future.

As for the gambling and casinos, it has ruined many more Canadian lives here than the Govt wants to admit.

#69 vancouver bubble on 08.30.11 at 7:30 am

Sister bought 3 years ago and can’t sell since she would owe more then the house is worth. How you ask? HELOC and according to her is the only way in Vancouver . Whatever that means.

#70 Ben on 08.30.11 at 7:32 am

Hurry up and crash already, frig… i’ll be 6 ft under waiting.
Europe, U.S. in financial turmoil… what’s so special about this frozen tundra we live in. Absolutely dick all.

#71 pbrasseur on 08.30.11 at 7:34 am

The RE bubble was permitted by easy credit promoted by governement and made possible by low inflation thanks to the productivity gains brought by globalization.

As we are seeing inflation in the durable goods (something we had not seen since the early 90’s while companies were globalizing their production and making huge productivity gains) it is clear the era of low inflation is ending and with it easy credit will end as well.

And even if low inflation persists for a while it will be because of a sluggish economy (as opposed to productivity gains), in the end nothing to support for very long the overdone RE sector in places like Canada.

What this really means is that easy credit promoted by government is a trap wich has never been more dangerous than it is now.

#72 Bond junkie on 08.30.11 at 7:44 am

#36- see any G7 bond market. Swiss 2yrs recently traded at a negative yield. No that’s not a typo, think about that for a second.

#73 Kevin on 08.30.11 at 8:09 am

@[email protected]:

“If you bought your house for $100k and it went to $800 but you sold at $700, you did not lose $100k (didn’t you just gain $600K?)”

What if you’d been refinancing it every few years, cashing out equity to pay for travel and renovations and boats and BMW leases? What if you owed $800 on that house that was only attracting $700 offers?

#74 george d on 08.30.11 at 8:14 am

Cottages in Olcott New York. Just met with real estate agent in Niagara Ny. 10% of sales this summer has been from Ontario residents. Many selling properties here to retire in NY Lake Ontario area. Oclott and surrounding area. Taxes are 1/2. Beer and wine are 1/2. Your cost of living is much cheaper than Ontario. You can get lakefront home for under 200K. Thats is 400K cheaper than Ontario. Direct tv is 1/2 price. Cell phones are 1/2, Internet 1/2 price. Buying online, cars, gas. This is a no brainer. Sell your cottages here if you can and buy in Niagara NY and live high off the hog.

#75 Dave M on 08.30.11 at 8:14 am

$3,800 per month pension is “not enough” to travel? Where does she want to go, Vegas?

Tell you what, I’m young. Give me $45600 after tax income and no work to do, and I’ll travel the world for her. I’ll even send pictures.

You won’t feel that way when you have a house to support, a spouse and whiny adult children (like you). — Garth

#76 Mr. Lee on 08.30.11 at 8:14 am

Whether or not home values are over inflated or not is irrelevant, it comes to what people can afford. If people are cutting back on their food intake to save money I would surmise that they cannot afford the sort of life style ,and the things that go with it, that these folks have.

#77 househornyhousewife on 08.30.11 at 8:20 am

Garth,

Your post was indeed frightening but not all that surprising. My husband and I have been saying for YEARS how everyone seems to be driving luxury cars and building their own home, in addition to sending their kids to the best private schools etc.. It seemed impossible to us that everyone can afford this. What you are saying simply confirms what we have always suspected.

However, the statistic that less than 1% of the population has 1 million or more invested outside of their home was quite sobering. A million dollar nest egg is not all that much these days and in order for a nest egg to generate a decent amount of revenue, it has to be at least this size or more (otherwise one has to cut into the principal and risk running out of money). But I suppose some people do have employment pensions or annuities and of course the Canada Pension Plan, OAS etc.. (to pay for the bare minimum).

I am also wondering if people are so desperate financially then perhaps banks and other financial institutions may begin to take advantage of the fact that people do have all of their wealth invested in that one asset. For example, for those who have paid off their homes and do not have enough invested outside of it, there is the option of a reverse mortgage which would allow them to remain in their homes while financing their retirement (ie. backing out the way they came in). Of course if they wish to leave any money to their children then this option is out.

As for those who have no equity built up in their homes and who also have nothing put aside .. AND who are ready to retire .. well, short of having a good solid defined benefit pension plan from an employer, there is always the CPP/QPP + Old Age Security + the Guaranteed Income Supplement .. after filing for bankruptcy, selling all your stuff and moving to a cheap apartment of course. Thanks to our government safety net (don’t forget that we also have universally accessible health care .. a MAJOR expense in old age) no one should be dying of hunger in the streets. Not the greatest quality of life but life nonetheless.

HHHW

#78 Kevin on 08.30.11 at 8:27 am

@LB:
“Wondering how many people with mortgage renewals coming up who will expect to continue payments based on a now defunct 40 year amortization, and will therefore see their payments rise, in spite of continued low interest rates?”

People who took 40-year amortizations 5 years ago would be renewing today with a 35-year amortization, under the normal payoff schedule. They don’t just keep renewing for 40 years every time, or it would never be paid off. 40 years was the original amortization. 5 years later, you renew at 35, then 30, and so on, until it is paid off. If interest rates remained the same, then your monthly payment would also be the same, the whole way down, until the last payment is made, 40 years after the loan was originated.

However, you do have a minor point, in that those who originally took 40 year amortizations will be expecting to renew for 35. F exorcised CMHC insurance on 35 year mortgages this spring. So folks hoping to renew for 35 years need to get their LTV down below 80%.

Assuming they bought a $450,000 house with 5% down, they would have started with a mortgage of $427,500. If their rate was 5.5% (a realistic rate 5 years ago), and if they’d been paying monthly, with no extra payments, then their renewal amount would be $410,600. In order to get their LTV below 80% and avoid needing CMHC, the house would have to appraise today for $513,250, for a total 5-year appreciation of 14%.

Are house prices today 14% higher than they were in 2006? I think so. I don’t think too many people will get burned by these circumstances.

Note that those who originally took out 35-year loans don’t face the same problem, because they’ll be renewing with a 30-year amortization, which is still eligible for CMHC insurance.

#79 allister on 08.30.11 at 8:32 am

Your statistics are shocking, but we have proof that you are right.

In 2008 when credit markets seized up, the economy had a cardiac arrest. Car sales fell 50%, US banks failed, 100 year old manufacturers ( GM, Chyrsler) failed, insurance companies (AIG) failed etc.

It looks to me like a house of cards – the populus is maxed out, and their countries are to. Demographics have 30% of the people past their best earning years, and, Worse yet, it all keeps going on more debt issuance. CRAZY.

#80 Kevin on 08.30.11 at 8:34 am

One more thing: Even if the couple’s house doesn’t appraise high enough to avoid CMHC, and they’re forced into a 30-year amort instead of a 35, today’s lower rates will save them. Their original loan, $427,500, had a monthly payment of $1,965 (at 5.5%). If, 5 years later, they renew the remaining balance of $410,600 at today’s prevailing rates (say, 3.69%), for 30 years (instead of 35), then their new monthly payment would be $1,887.

That’s right – their monthly payment would actually drop by almost $80.

#81 Chris L. on 08.30.11 at 8:37 am

Getting kind of tired listening to people bark about not having any money. If they could only appreciate the vast amounts of wealth we all have in our possessions already, we’d all be happy.

Your great grandparents would be pretty upset by what we use our labour to claim. Technology has worked to make our lives VERY easy, and yet we use our time to produce and consume (then discard) useless machines. Food is almost free, shelter can be had for cheap (renting), and yet people are as poor as they have been.

I’m starting to think that some people are peasants by nature/birth and therefore by “choice.” The divide is pretty clear already with the financial elite versus the working class.

No matter how much you preach to a peasant; they remain.

#82 Timing is Everything on 08.30.11 at 8:52 am

#65 Moneta – They can’t go much lower unless they increase their consumption of spam, chips and cheez whiz

Have you priced out Cheez Whiz lately? It’s a luxury item these days. Buy the generic ‘cheeze spread’. Yum.

#83 mousey on 08.30.11 at 9:14 am

Re:Utopia
I think your term “Vapour Paper” might catch on with the Sino Forest investors.

#84 Mr. Lahey, Trailer Park Supervisor on 08.30.11 at 9:16 am

Randy and I have left Sunnyvale a few times this summer and travelled into good ol Toronto. In good areas prices have shown no retreat. You have been preaching this real estate meltdown gospel for three years Garth and in those three years, choice areas in Toronto real estate have produced gains which are unmatched in any other financial market. I feel sorry for those who sold in 2008 and missed out on the last three years of amazing gains. Your prognostications have been dead wrong for markets like Toronto since your book Greater Fool came out in 2008. The Greater Fool was the one who didn’t invest in Toronto real estate in 2008. Will your crystal ball gazing finally prove right? Perhaps but to date you have been crying wolf for three years. “Randy, pour me some more scotch and let’s get back to Sunnyvale. Ricky and Julian are up to no good again”.

#85 Tom from Mississauga on 08.30.11 at 9:23 am

Just a follow up from yesterday. I have 1,333 a year to repay from the HBP. Ten years of it to go to. Should I be letting that go into income? What would my personal income need to be to pay it back in?

#86 Paul on 08.30.11 at 9:34 am

http://www.cbc.ca/news/business/story/2011/08/30/poll-cibc-debt.html

#87 Moneta on 08.30.11 at 9:45 am

there is always the CPP/QPP + Old Age Security + the Guaranteed Income Supplement .. after filing for bankruptcy, selling all your stuff and moving to a cheap apartment of course. Thanks to our government safety net (don’t forget that we also have universally accessible health care .. a MAJOR expense in old age) no one should be dying of hunger in the streets. Not the greatest quality of life but life nonetheless.
————–
Right now. There’s problem though…

2/3 of boomers have less than 100K saved up.

You can’t ask the bust generation to fund the boom generation’s retirements + health care when they themselves are full of student and mortgage debt plus have to fund their own retirements.

We had 5 workers per retiree for a couple of decades and we couldn’t keep our economy growing without stimulating housing and consumer debt. Imagine the impact if we go to 3/1 or 2/1.

The problem with health care is that it could suck up our entire economy and people would still get sick and die. Hard choices will be made. People will not get all the treatments that exist. Sad but coming.

The only ways boomers will get their health care is if they keep on working… but we know that in the last few decades 40% of workers have ben forced into early reitrment due to ilness or restructurings. Also, when you are sick, chances are you can’t work.

I really don’t understand how Canadians can actually believe that government will be there. It’s broke.

Wake up. Connect with your close ones. Me, myself and I will not work anymore unless you are extremelly wealthy.

#88 Incubus on 08.30.11 at 9:46 am

Very soon in Canada:

Generation of homeowners stuck in first houses

http://www.sacbee.com/2011/08/29/3868485/generation-of-homeowners-stuck.html

#89 Dontcallmeshirley on 08.30.11 at 9:52 am

Garth you quoted the ING survey incorrectly.

The question ING posed was “how would you save an EXTRA $25”

You’re implying people can’t save $25 at all. That’s overly dramatic.

#90 mailman on 08.30.11 at 10:06 am

Kevin:
…those who originally took 40 year amortizations will be expecting to renew for 35…will renew for 30…

You are wrong. 40 ams for purchases in 2007 will renew in 2012 with 35 year ams. CMHC must commit to the original amortization. You only qualify once. Have you ever owned real estate?

#91 waterloo Resident on 08.30.11 at 10:08 am

(“have you looked at what $1.2 million buys in 416 lately?”) = A parking spot for a car, that’s all, maybe not even that.

(” If you think this is a poor time to sell, and don’t, you have no idea what’s coming. “) = My idea of what is coming is that the economy will soon start to generate millions of new high-paying ‘good’ jobs and when that happens all those $800,000 homes will be flipping for $2 Million, that’s my personal opinion. I think this way because I think people are NUTS! , that’s why.

#92 Dave M on 08.30.11 at 10:14 am

You won’t feel that way when you have a house to support, a spouse and whiny adult children (like you). — Garth

Your client’s the one complaining. I said I’d take it.

But okay, for that pension equivalent to a young professional’s salary for life (defined benefit, too! Find one of those today) without lifting a finger for work for the rest of my life, I’ll take my spouse travelling too if that’s the price I gotta pay. The whiny adult children can take care of themselves.

But if I was serious about wanting to travel, why would I keep a house to support? (Especially if I’m a reader of this blog..)

#93 Dad on 08.30.11 at 10:15 am

@ #32

Pack your bags because she’s already auditioning replacements.

#94 waterloo Resident on 08.30.11 at 10:17 am

To #25 ‘Ex-Cowtown’; ((“Broke is broke. When the banks won’t re-finance you, it doesn’t matter if the interest rate is 10%, 1% or 0.1%. The bank still wants its $$$$ back…. All of it….now…”))

= There is a way out of it if you didn’t know; its called ‘Personal Bankruptcy’. All you have to do is just go to a personal bankruptcy specialist and for a few thousand dollars you declare personal bankruptcy, lose EVERYTHING you have other than some clothes and personal possessions (like photo albums), and you can walk away from 100% of your debt and begin all over again. Its easy !

My feeling is that for people who have too much debt and will be underwater in their mortgage, and have little to no savings, they will go and declare personal bankruptcy and just walk away from all of their debts. That’s what I suggest that MOST Canadians do ‘IF’ they find themselves underwater in their mortgages.

#95 B on 08.30.11 at 10:32 am

#65Moneta – ” I think food = 7% of income for Americans, 10%-11% for Canadians, Close to 15% for Europeans.”

As a European (Canadian Ex-pat), I can assure you it’s cheaper for food in the EU than in Canada. Tonight, we are going out for a £2.99 carvery (That’s a FULL dinner of turkey, beef and ham, plus all the sides). On the weekend we have a 15″ Pizza with 4 toppings for £4.99.

That’s way less than 1/2 the cost for food here in the EU and in Canada. (When we visit back to Canada we are shocked at the food prices you all pay there!)

#96 Hosehead on 08.30.11 at 10:35 am

#56 Poco – that’s a fair comment that some places might be selling for less than a few years ago. But it is just anecdotal. There are places selling for more than they were 2 years ago. Lots of them. I did say that some people will get smoked. Maybe those people you refernced lost their jobs or got divorced or were spec flippers that needed cash. My overall point is that the correctio talk thus far has been grossly overstated. The vast majority of people will be just fine. The vast majority of people bought pre 2005.

#97 Junius on 08.30.11 at 10:37 am

#84 Mr. Lahey,

Garth was correct in 2008. What he underestimated was the stupidity of the Con gov’t to continue to massage the CMHC down and the introduction of emergency interest rates. Canadian markets began sliding in 2008 and where only saved by gov’t stimulus. Now we are seeing the inevitable.

Where there some that jumped into the market in 2009 and made gains by selling in 2011. Sure. However when you factor in the costs of Real estate transactions the bottom line could not have been much.

Since most people don’t buy a home to flip in the first 24 months it appears that Garth’s advice was spot on for the vast majority.

Park Supervisor? Really? Sound like a RE industry person to me.

#98 Brad in Cowtown on 08.30.11 at 10:39 am

#75Dave M on 08.30.11 at 8:14 am
$3,800 per month pension is “not enough” to travel? Where does she want to go, Vegas?

Tell you what, I’m young. Give me $45600 after tax income and no work to do, and I’ll travel the world for her. I’ll even send pictures.

You won’t feel that way when you have a house to support, a spouse and whiny adult children (like you). — Garth

I see the same sense of entitlement that created Canada’s lust for granite has permeated the walls of the impenetrable Garth Turner and his older brethren as they ponder their golden years.

They can’t afford to travel? Boo hoo.
Here’s a kleenex.

The fact you show empathy for people like this, considering the reality of far more unfortunate souls out there, is ridiculous.

By the way, “whiny adult children” become that way because of their parents. Need another kleenex?

That was telling. This is not a social justice blog. You have no money? Tough. — Garth

#99 waterloo Resident on 08.30.11 at 10:41 am

People are NOT running out of money !!!
Yesterday I was driving down the 401 and I counted 6 new Porsche Panamaras passing me by !
From what I can see, we are simply flooded with wealth, so I don’t know where you get all this information from?

More impressive research from you. Well done. — Garth

#100 Killer Chicken or Imploding Boomer? on 08.30.11 at 10:42 am

57 Drew – I have all that, own two businesses and I dont rent.

Living well is the best revenge.

#101 Victoria Tea Party on 08.30.11 at 10:56 am

#31 Elmer

T’is true that living on $3,800.00 a month is doable, IF your monthly expenses are ALWAYS CONTAINABLE AT A LEVEL LOWER THAN THAT. And that’s a tough act to maintain with consumer price inflation being what it is.

There’s a downside, however, to being cheap. People become incredibly lousy consumers. And that kills off local business, as witness downtown Victoria’s many shuttered former stores.

If fact many here ALSO conduct much of their shopping in the wide open spaces of la magasin Boulevarderie. You’d be surprised how many formerly expensive bookshelves we’ve scored (7), chairs (a few), gew gaws (too many) to flog to consignments stores, off OUR boulevards of dreams that were never going to happen.

OMG. We’re lousy consumers, too! The “stores” will hate us in this fake economy by the sea.

And then there’s recycling day when the retired are out at 3 AM competing with the street druggies for cans and bottles in a neighbourhood near you.

Yep. Retirement in Victoria is a hoot alright.

NOW THE CRIPPLING MAIN REAL ESTATE EVENT: OUR VERY OWN HST BLACK SWAN

Victorians have this wonderful habit of shooting themselves in their feet, only to whine about it later.

These folks saw fit to say “no” to the HST, and vote in “yesterday”, (so typical).

Now, of course, they’ll suffer, big time.

Garth, I believe Greater Victoria real estate values will crater a lot quicker, than even you might believe possible, as the outgoing tax regime stifles business for the next 18 months. As for a 50 per cent decline over the next five years, we’ll just have to wait, though.

IN EUROPE AND THE US TODAY

In Germany, Britain and Italy consumer confidence has blown a gasket and Germany, in particular, looks like it is now in recession. This bodes very ill for the EU’s already unseemly future.

In the US, the Case-Shiller home price survey is mostly bad news, meaning that American real estate is still looking for a bottom more than five years on since the Great Depression 2.0 broke out down there.

We’re doomed OK.

Of course you can retire on $3,800 a month in Victoria. But why would you want to if you can have $6,000? — Garth

#102 Steven Rowlandson on 08.30.11 at 11:07 am

“If you think this is a poor time to sell, and don’t, you have no idea what’s coming.”

It is quite possible that we will go from, “To each according to his need or greed to each according to his ability.”
When that happens watch out for falling real estate prices falling at free fall speed. Homes could go for very low prices or even cash if they sell at all.

#103 Brandon on 08.30.11 at 11:20 am

3800 would be more than enough in a city such as London, providing you weren’t still paying your mortgage. I can’t imagine trying to live off that amount in major cities.

#104 Tre on 08.30.11 at 11:21 am

They better prepare to scram like rats. If they don’t choose a balanced investment portfolio, as well as lightening up on the real estate wealth trap. Time is running out.

#105 BrianT on 08.30.11 at 11:43 am

#87Moneta-The whole fantasy that health care =better health is so all pervasive that you really have to hand it to the marketing of this absurd premise. Every objective study done has shown that this simply isn’t the case yet the average person still thinks that their health will be OK because they will get “health care”, which they cannot comprehend is not actually health, it is the care of sick people.

#106 Devore on 08.30.11 at 11:48 am

#78 Kevin

However, you do have a minor point, in that those who originally took 40 year amortizations will be expecting to renew for 35. F exorcised CMHC insurance on 35 year mortgages this spring. So folks hoping to renew for 35 years need to get their LTV down below 80%.

They need to do no such thing. They will renew at 35 years, as per schedule. The insurance is already in place.

#107 ms bboomer on 08.30.11 at 11:49 am

As a Canadian, I always enjoy your stories, Garth, and the shared comments. Today I especially enjoyed and chuckled at a few comments about eating out, owning expensive cars, and declaring bankrupcy. I wonder how many people the ‘pleasant picture’ fools. Debt is not wealth, and ignorance is not bliss.

#108 Patz--Way off topic on 08.30.11 at 11:49 am

@ 3 Tim

Half the population can’t save $25 a week? People are cutting back on their food? Have you been to Vancouver lately? Try and get a table at a decent restaurant. Despite your gloom and doom and predictions about interest rates rising and real estate falling for the last three years, real estate in Vancouver has not corrected to any significant degree, in fact it is much higher that when you started warning it would fall, and interest rates are still far below long term average levels.

Ah Tim, such arrogance. You certainly don’t live in the Vancouver I live in. So many people who look good in those “busy” restaurants are in debt to their hairline. And if you look around you’ll see the ones, and there are plenty, who can’t even keep up the pretense any longer. I walked by the community center at 7th and Main 2 weekends ago and saw a line-up several blocks long. It was a food bank and the people did not look down and out. Most looked middle class and embarrassed to be there. (They shouldn’t be.)

You may never have to go to a food bank but you will eat your words–soon.

#109 Patz on 08.30.11 at 11:51 am

Ooops should have taken the “Way off topic” part out. It’s not.

#110 Living in AB on 08.30.11 at 11:52 am

I seriously cannot believe half of the population cannot put away $25. What will happen if interest rates move 0.25%? Are we headed towards a credit meltdown, one of the most important instruments in our economy. But maybe this is something we have to go through. Perhaps someone has to hit the restet button and North Americans have to re-learn how to live within their means and perhaps our socitey needs to learn sometime we have to save for things.

#111 Incubus on 08.30.11 at 11:55 am

@#90 mailman on 08.30.11 at 10:06 am

You are both wrong.

There is no requirement for a bank to renew a mortgage.

When the term expires, the bank may require full payment of the mortgage.

#112 Snowboid on 08.30.11 at 11:59 am

The comments in this post are very interesting…

I like the response from Garth to #101 VTP, kind of sums it up:

“Of course you can retire on $3,800 a month in Victoria. But why would you want to if you can have $6,000? — Garth”

You either take the action now to correct your future financial situation, or you can sit around and complain about those who have already implemented their plan.

#113 plain_janey on 08.30.11 at 12:21 pm

Cause apparently more houses is what the UK needs, they’re going to run out of island soon! Guess they want to be just like Canda:

http://www.bbc.co.uk/news/business-14708841

#114 gladiator on 08.30.11 at 12:31 pm

I plan to work till I die, because if I stop working earlier, I’ll die sooner. The work I plan to do is having my small business and do it more for pleasure than for money, but make enough money to keep me going. Can’t imagine living day in and day out just sitting idle, playing golf or travelling. Yes, these are good things, but not if you do them for years in a row and don’t do anything else.
There is an old book called “It takes a long time to become young” and it states that when people whose lives were centered around their jobs retired, they died quite quickly: the jobs defined their lives so much, that they saw no sense in life. On the contrary: those who did something they liked after retirement lived much longer lives. There was even mentioned a university professor who was forced to retire at 65, and then he kept doing research in his field of interest (he liked it), and won a Nobel prize.
We humans are built to be active for as long as we live and can move, so I plan to keep doing something I like and that generates some money till I kick the bucket.

#115 bridgepigeon on 08.30.11 at 12:33 pm

Almost a grand a week for life. Sounds like a lottery win. Plus other gov pensions. Unload the houses and travel (learn to travel smart). I haven’t been waiting to travel and live other dreams until I’m too old. The window view on a seniors bus trip isn’t for me. I would say they are in the top 5% of the whole planet. Maybe work a little to keep your body and mind in shape and go enjoy your lives. What the heck is the problem? Do it while you can before it’s too late.

#116 Utopia on 08.30.11 at 12:48 pm

“It’s very clear that those rules did change the refinancing landscape,” said Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce. “It’s much weaker than it was, and that’s exactly what the doctor ordered.”

Mr. Tal believes further rule-tightening could push the economy into recession. “When it comes to credit, really the only thing kicking is the mortgage market,” he said. ~~ Globe and Mail
——————————–

I like that Benny, and he is right.

This also shows us how precarious our situation is now in respect to debt loads and suggests the inevitability of a slowdown in economic activity.

As Benny notes, the mortgage market is the only thing ticking and that is a worry because as we all know, the housing market has crested and is going into decline.

Not that anything can be done about it at this stage of the game. What goes up must eventually come down and we are going to live with the consequences of our credit orgy for a long time to come.

The numbers we saw posted yesterday by CMHC were dramatic evidence that as a nation we had already reached the end of our credit rope at the time the changes were introduced.

There was very little real demand left to be brought forward nor a capacity on the part of borrowers to take on ever increasing levels of debt in the absence of insured guarantees. As Finn Poschmann (C.D. Howe Institute) points out, this is the evidence that CMHC is itself in part responsible for our high home prices (paraphrasing).

When such small relative changes result in such a large movement in refinancing and HELOC activity it tells us that our positions were very weak already. That we were already “tapped out”.

The party built around borrowing from the future to sustain our usual standard of living today is now over and the outcome can only mean that family finances will be strained going forward.

Our standard of living is about to be reduced.

This evidence is already appearing in consumption numbers and can only result in increasing unemployment down the road. That spells contraction as Canadians seek to balance their household books and begin living within their means.

We are truly stuck between a rock and a hard place. Mr Tal points out that further tightening of regulations could send us recessionary. I think we will go there with or without more changes based on the evidence we now have.

The only real difference and choice now is between a hard landing and a slow deflation of our debt burdens. What Benny is saying (in my opinion) is that further tightening could accelerate the inevitable outcome and result in a sharper contraction.

I agree. There is a great deal of risk in introducing further regulatory changes given the facts we now have at hand. Paying off a heavy debt burden is possible. We can and will do it. Obviously the consumer is vulnerable to any tweaking at this time though and a strong approach might only be more damaging.

A lot of us here on this site are unhappy with the situation as it now stands. Get used to it. We already have the debt and it is not going away. The trick now will be to soften the blows as they come, not avoid the unavoidable.

In any event, there is no other good outcome available to us if incomes do not rise or if the global economy does not start showing signs of improvement. Neither of those are likely now. With America mired so deep within its own slowing economy the outlook in this country now appears bleaker.

It will take years before the family balance sheet is repaired to the extent that consumers can begin pushing our economy back into solid growth territory.

I am afraid this soft patch could be a very long one.

#117 Timing is Everything on 08.30.11 at 12:58 pm

That’s it. I’m retiring in Peru.

#118 Moneta on 08.30.11 at 1:04 pm

B on 08.30.11 at 10:32 am
#65Moneta – ” I think food = 7% of income for Americans, 10%-11% for Canadians, Close to 15% for Europeans.”

As a European (Canadian Ex-pat), I can assure you it’s cheaper for food in the EU than in Canada.
——–
I checked those numbers a few times… I guess it’s part of the brainwashing here in North America! LOL!

#119 Nemesis on 08.30.11 at 1:23 pm

“This is not a social justice blog. You have no money? Tough.” — Hon. (most of the time) GT

TskTsk, GT..

The first 3:35 should suffice.

http://tinyurl.com/8yywvn

#120 schrodingerseconomy on 08.30.11 at 1:27 pm

@ 70 Ben
You asked (rhetorically probably, but I’ll answer anyway) what is so special about our frozen Tundra. Well it is actually quite simple: Yes Canada has enaged itself in a self-defeating house-horny debt-binge just like the rest of the western world, but on the back of a pretty healthy economy. One need only look at trade balances over the past decade to see who topple first. The nations that ran balanced trade (i.e. healthy) were on solid ground for their economy as a whole. True production balanced consumption and supported true wealth gain and a healthy middle class. Canada is fortunate to have had it’s run with commodities especially.
Bubbles however, will pop regardless. See Australia, the commodity powerhouse tied at the hip to an actual consumer. China will start to slow and could go into full recession in the next 1-2 years, but one didn’t have to see a collapse of the Australian commodity export sector to see their housing bubble pop.
Ours will too, soon enough. The only question is will is slowly deflate over time or crash 25%-50% (area dependant) in a year. The only way a crash happens is if Chimerica decide to go all deflationary on us, collapsing the commodity space. Otherwise, if you own a house and like it (I do, but it is a personal choice of my wife and I how we would like to live) continue to make payments cognizant of the direciton of house values to make sure you don’t go underwater, if you don’t have a house, think very carefully, if you don’t have a 50% down payment don’t buy.
My wo cents anyway

#121 Live Under Your Means on 08.30.11 at 1:40 pm

#94 waterloo Resident on 08.30.11 at 10:17 am

Hubby told me the other week that a colleague is seriously considering declaring personal bankruptcy. Another already has. I don’t know their situations, but they’re not working for $10/hr.

We have a friend who owes more on his home now than when he bought it 10 years ago – no doubt a HELOC. He’s in his late 40’s, is a mechanic with a big car dealership. He might contribute to an RRSP w/his co. matching it. She’s a hairdresser & works from home. He has a motorcycle, 4 wheeler (or whatever they’re called) and all the other toys. They just replaced their carpeting upstairs w/wood flooring and did other renos. Suspect they did it with another HELOC. What a screwed up society we live in.

We will replace the 30+ YO carpeting in our bedrooms this winter but it will be with cash.

#122 Utopia on 08.30.11 at 1:46 pm

#110 Living in AB on 08.30.11 at 11:52 am

“I seriously cannot believe half of the population cannot put away $25. What will happen if interest rates move 0.25%”?
——————————

Unfortunately we know how this situation ends. It is always the same. The difference and the shortfall will come straight out of consumption spending.

Families will tighten their spending. Nothing changes.

In real terms this means there will be fewer trips to the local diner, less ordering in of meals to ease the burden of our busy days, fewer new vehicle purchases, more trips to the second hand store for shoes and clothes instead of to the Bay or Sears for apparel.

It means cost cutting too.

Perhaps one vehicle instead of two. Bus passes for the kids instead of the daily chauffeured trip to school and evening programs. Used car sales should do well as they usually do in harder times.

Good cheap vehicles will get harder to find. Gas guzzlers will get the deep-six and motor-homes will come on the market by the thousands as family holiday plans are pared back and the excess is harvested off to pay more essential bills.

For some, it could mean fewer trips to the dentist, only the basics for haircuts and services like nail and hair salons will suffer. Dog groomers will go bust altogether. Who will pay to manicure “Fluffy” when the kids are screaming bloody murder once they realize they can’t have the latest X-Box game anymore?

Consumption is where this debt pain will materialize.

It means fewer trips abroad, conserving auto fuel, turning down the gas at night, eating home cooked meals and avoiding all the unique and quaint shops that used to so captivate our attention.

It means the home renovation is on hold, the new flat screen will have to wait. For some, even hiring the local kid to cut the lawn might be axed. You can cut your own lawn. Right?

The really big worry is that as consumers reduce the amount of spending to only essentials that the trades begin to see a big slowdown. Some are seeing it already depending on where they live. This is where employment numbers for quality jobs takes a dive.

You might have no choice about getting your furnace repaired if it fails as that is the field only a skilled trade can undertake but you will be much less likely to have that same furnace serviced annually like you used to do.

You will probably wash more of your own clothing and spend less on expensive dry cleaning. You will learn to fix your own plumbing problems instead of calling a 65 dollar per hour professional.

It means your life is going to get harder as you will do more and buy less. Plenty of the usual work will just fall between the cracks though. It will never get done.

The analogy to this is the state of the national infrastructure in the US which has fallen into deep disrepair as States and local governments have simply run out of money. Bridges and overpasses are collapsing, roads are filled with potholes and winter salting and snow removal are no longer assured.

Like I said. This debt overhang will come out in the consumption wash. It is why I KNOW as a matter of fact that we will go recessionary and that there is no way to avoid that outcome anymore.

So get prepared.

Kill off debt. Save. Stock up on supplies and learn a new skill.

#123 Aussie Roy on 08.30.11 at 1:49 pm

Aussie Update

It’s different here…

You see, dear reader, the property market is in severe difficulty. Stock on the market has gone through the roof while auction clearance rates have fallen through the floor.

House prices are falling, rental vacancy rates are rising, incomes are falling (contrary to popular opinion), and Channel Nine’s disastrous ‘The Block’ finale (watched by 3 million viewers) was the final nail in the coffin.

The media is awash with articles about the oversupply of property, the dreadful consumer sentiment, and the imminent collapse of the great Australian housing bubble.

http://www.differenthere.com/2011/08/on-internet-nobody-knows-youre-dog-or.html

#124 Nostradamus Le Mad Vlad on 08.30.11 at 1:50 pm

#142 disciple on 08.30.11 at 10:23 am — “Look inside your own hearts, the truth is there…”

So very true and accurate. Mulder and Scully (The X-Files) had the right idea, but the wrong location.

The truth is never “out there”, but within. Heroes and the like are made for the outer but, like anything else, they have their day in the sun, their fifteen minutes of fame, and are then consigned to the history books. Good post.

#44 Jessie — So we may have our own FM and FM to bail out, along with a bunch of others. No doubt H-F are mighty pleased with themselves, with their ignorant and failed policies, thus boosting Canada’s debt and deficit.

Didn’t one or both of them say only a few years ago that “Canada is as strong as the northern shield”, “Canada will never run a deficit” and “the CPC will never tax Income Trusts”? Fool me once . . .

#57 Drew — “. . . we can pay cash, or we might buy a small business . . . Renters revenge!” — That’s it — pay cash and avoid banxters like the plague. Renters revenge – great expression!

#81 Chris L. — “The divide is pretty clear already with the financial elite versus the working class. No matter how much you preach to a peasant; they remain.” — Indeed, and that gulf is getting wider, faster. Freedom of choice allows one to stay where they are, so if sheeple choose to remain peasants, nothing can be held against them — they have made their choices and have to live with the consequences of those choices.

#100 Killer Chicken or Imploding Boomer? — “Living well is the best revenge.” — Well said! This when all those years of hard work, overtime and seven-day workweeks pay off — to be able to enjoy this short, temporary physical lifecycle.

#125 bill on 08.30.11 at 1:53 pm

”Yesterday I was driving down the 401 and I counted 6 new Porsche Panamaras passing me by !”

just some lot boys moving some inventory that isnt selling
or maybe they were heading west ? perhaps looking for some chinese investor …..??

#126 neo on 08.30.11 at 1:58 pm

Garth wrote:

The national economy grew at zero in the last period, and is about to go negative.

—————————————————————–

What does last period mean? It’s either last quarter or last month. Last quarter (Q1) it was 3.9%. Last released month (May) it was -0.3%. Tomorrow we will find out June was zero or negative and Q2 will be slightly negative. For someone who rails on posters for poor grammar you should have expressed that more clearly. That’s with me not even going into this nugget “grew at zero”.

Real GDP was zero in April, fell marginally (0.3%) in May and is likely to have been flat again in June. What on earth is your point? — Garth

#127 maxx on 08.30.11 at 2:26 pm

#56 poco on 08.30.11 at 2:01 am

Re: #33 Hosehead.

You’re bang-on poco. Recently met with a realtor who read an email from a client with a pricey house on the market: “will consider any offers”. Note that it did not state any “reasonable” offers, but ANY offers”.
All of this phoney-baloney, steely resolve by some owners to forego their dinners in order to “keep the house” will melt like ice in July when the bills start piling up. Tax, utilities, emergencies and retirement are not negotiable and the unmitigated hell of a bad tenant simply destroys any remaining quality of life.
Strips the shine out of “pride of ownership”.

#128 Onthesidelines on 08.30.11 at 2:31 pm

“That was telling. This is not a social justice blog. You have no money? Tough. — Garth”

Your arrogance is astounding. I suppose you find it impossible that one could still have a social conscience while being in that elusive less than 1% of the population wealth bracket.

That makes no sense whatsoever. Try again. — Garth

#129 jess on 08.30.11 at 2:32 pm

fake products , air pollution but i never heard of a fake ID factory!

CEDAR FALLS, Iowa – Two people have been arrested and 22 more are being sought because their photos have shown on up on fake Illinois driver’s licenses shipped to Cedar Falls from China.

A package with 24 fake licenses had been spotted and then scanned by the Department of Homeland Security when the package arrived in Chicago. Cedar Falls police were tipped, and the two University of Northern Iowa students were arrested after the package was delivered.

The students and several others apparently had sent photos, signatures, descriptions and money to an offshore fake ID factory.

Police are searching for the individuals pictured in the 22 other bogus licenses. Once found they could face criminal charges, too.
=
Nukes

Build quickly and efficiently(cheap), with decades-old technology and, …”according to Westinghouse, is 100 times less safe than the revolutionary passive design of the AP1000. ” End Summary.
http://www.wikileaks.org/cable/2008/08/08BEIJING3055.html

WikiLeaks reveals China’s failure to measure dangerous pollution.

Pollutant levels were not measured and made public because findings would have been ‘too sensitive’ for the authorities

Problems about transparency extended to academia, according to another cable dated 19 September 2006, which describes: “Academics and research scientists in Guangdong, who are increasingly concerned about the region’s serious air pollution, but feel pressured to tone down their comments lest they face cuts in research funding … Scientists acknowledge that lack of transparency for existing air pollution data is a major problem both for research and policy making.”

Jonathan Watts, Asia environment correspondent guardian.co.uk, Friday 26 August 2011 12.19 BST Article history

=

REF: 05 GUANGZHOU 031999

#130 palebird on 08.30.11 at 2:34 pm

#17 Ron
Yes it is amusing isn’t it. I remember a lecture given by one of three shareholders of a company I worked for telling us how we had lost X amount of dollars because our equipment was not ready for an upcoming contract they were bidding on. We never lost anything because we never had it in the first place. Opportunity lost yes but lost money no. What an ass he was.

#131 SCalgary on 08.30.11 at 2:36 pm

Yesterday, one of my buddy was giving me lecture about my decision of not buying house. He showed calculation for rent vs mortgage:

30 Yrs of rent @ $1200 = $432,000.

Can anyone suggest me a fitting reply???

I mentioned him about losing capital and other carrying costs (interest on capital, insurance, maintenance cost , city taxes and utilities), but still need a nice punch to calm him down…

Thanks in advance…

#132 Kevin on 08.30.11 at 2:38 pm

@mailman: “40 ams for purchases in 2007 will renew in 2012 with 35 year ams. CMHC must commit to the original amortization. You only qualify once.”

Isn’t that only true as long as you renew with the same lender? If you want to transfer the mortgage to a different lender (perhaps offering a better rate), don’t you have to re-qualify (and re-pay) CMHC again?

#133 poco on 08.30.11 at 2:39 pm

#96 Hosehead
#56 Poco – that’s a fair comment that some places might be selling for less than a few years ago. But it is just anecdotal. There are places selling for more than they were 2 years ago. Lots of them. I did say that some people will get smoked. Maybe those people you refernced lost their jobs or got divorced or were spec flippers that needed cash. My overall point is that the correctio talk thus far has been grossly overstated. The vast majority of people will be just fine. The vast majority of people bought pre 2005.
______________________________________________

Hosehead—you obviously missed the entire point of my post
—of course there are places selling for more than they were 2 years ago but also there are many, many places,in many areas (especially BC) selling for less than people paid 2 -3 -and even 4 years ago.

in the tri cities alone there are hundreds of owners underwater–mostly condos–these have been falling since spring of 2010 –townhomes are catching up to the downturn in the condo market—sorry don’t follow enough of the SFH market to comment

Hosehead, you probbly won’t want to believe this but when i was “linked” with a couple of realtor friends/relatives i was receiving 400 to 500 e mails weekly on the market within the tri city area alone—gave me all the data required for me to form my own opinion of where this market is going without listening to MSM or CREA

you get all new listings — sales –price changes–you can even get the entire history of anything you may be interested in—-(too much work for the summer months–will get back into it in Jan)

would you believe (i doubt you will) that during the spring -Apr and May- i was finding 45 owners per “week” who were listed or had dropped there price to less than they paid a few short years ago —so divorce?–job loss?” how about a housing downturn—-so “anecdotal”—only in your dreams buddy ! –do a little homework to get the real scoop

i will list the mls #s for you of all the owners underwater if you like–have them checked out to see if i’ve done MY RESEARCH properly — something you must do to make an informed opinion

you must have a friend who is a realtor-there’s only 100k of them in Canada–find out the real truth concerning this market–no guessing required–try these listings for now-tell us what they sold for if they did sell
mls#V879032–bought aug07-363k
mls#V874481–bought oct 07-399.9k
mls#V879457–bought july 07-228k
mls#V872553–bought oct07–319.9k
mls#V887460–bought jan 07-251k——-note when these were bought –all underwater when listed this spring–do a little work–you’ll be pleasantly surprised how some parts of this market have fallen
_________________________

” The vast majority of people will be just fine. The vast majority of people bought pre 2005.”
–can you give me some links to this quote?

PS– I really don’t think you’ll spend any time on those listings–unfortunately i don’t think you’re the type that would do any research–sorry

#134 Junius on 08.30.11 at 3:12 pm

#123 Aussie Roy,

Great post. Fascinating article. In an earlier post on this blog I pointed out someone who I thought was a spruiker.

Using a proper name and profession was suspicious if you ask me.

It comes as no surprise to me that the industry would stoop to these levels.

#135 Smoking Man on 08.30.11 at 3:22 pm

Been saying this for years that a different part of the brain controls spelling laungage, as we all know we judge people based on how well the put key stroke combo’s together.

I have said this is wrong. I know tones of stupid people that can write books. In my case I am one of the most sought after programmers in Capital Market comp’s, cause I am fast, have vision, accurate, my apps never need baby sitting once done.

But I can’t spell worth a crap I’m so bad at it that Garth assumes I am a faux.

That part of the brain for me is toast, booze smoke who knows, I just know it’s busted, its never worked right.

MIT just proved me right yet again.

http://www.balkans.com/open-news.php?uniquenumber=117693

#136 Smoking Man on 08.30.11 at 3:37 pm

As evidence to my earlier post.

Conrad Black a brilliant writer, he pulls words out of thin air and creates artistic combination of wit and meaning. I for one don’t know what he is saying most of the time.

Any stupid idiot would know that if your under investigation and there are cameras all over the place, get someone else to get rid of you paperwork. Dumb Dumb and Dumber.

This was a stupid idiot thing to do, yet we all think he is smart cause of his ability to put together great keys stroke combos.

#137 Cabot Lodge brylcreem & trenchcoat on 08.30.11 at 3:38 pm

With many there’s a chasm between what they think they can afford and what they actually can afford – their delusion appears to grow with age.

#138 Echo on 08.30.11 at 3:50 pm

#3 Tim:

…and how many are paying with their Credit Card?
…and how many of those are making the minimum monthly payment instead of paying off the balance, or even a large portion of it at 25+ %?
…and just fyi, no other place in Canada can compete with the ingrained arrogance of Vancouverites, i.e. that famous facade, and Real Estate is but one category.

*One last note, just for fun because I can’t help myself, would you believe that Vancouverites actually think that they have the market cornered in this country on “the greatest restaurants in Canada”? It’s only because they’ve
#1: never been to Toronto, at least the ones who make this claim and…
#2: they are shallow enough to make such claims without having left BC, ever.

When is the last time a Torontonian made any type of judgement about another province, with malice no less, without having been there before? Right, never. Oh yes, BC IS special, especially Vancouver. Very “unique”.

Anyway darlin’, your comment speaks to all of this. If you’re fooled by the grand facade, all the power to ya.

#139 betamax on 08.30.11 at 3:54 pm

#32 Carlyle: “She is 29 and a nurse with a great pension making 60g annually. I’m 35 making 42k.”

You’re young enough to recover. But try to find a job that makes more money, or a second job, and pay down the debt quicker and start saving.

#140 Echo on 08.30.11 at 3:55 pm

#91 Waterloo:

You are so wrong. Perhaps you should visit, get to know the city.

An educated opinion is always best.

#141 betamax on 08.30.11 at 3:59 pm

#45 cool: “Probably its a good thing, most north americans need to eat less.It will improve health…”

Unfortunately, cheaper food usually means bad food: more processed, higher fat, sugar, filler, etc. Eating may be cheap in this country, but eating well costs more.

#142 Echo on 08.30.11 at 4:08 pm

#99 Waterloo:

I used to repo lux cars like that on a regular basis in the early 90’s. What’s coming is going to make the early 90’s look like a cake walk.

If you’re in the market for one, if you’d REALLY like one yourself down the road, wait a couple of years. Try the Repo Depot or any local car dealership, they get their cars mostly from Bank repos, just sayin’.

Oh, and in case it isn’t clear, the likelihood that they were purchased using not only a lien on the car, but also approved because of the buyer owning real estate and having a bit of equity for future attachment should the repossessed car sale leave a shortfall owing, is about 99%.

You know, the biggest mystery for me is the idea that someone who is not ACTUALLY living under a rock, and reads this finance blog no less, doesn’t understand that people don’t go around paying cash for items, ESPECIALLY luxury items. What sort of fairy dust are you drinkin’? : )

Soon, due to either an interest rate adjustment, so that they have to eventually neglect other payments in order to pay their mortgage, the car will go into arrears, OR, they may lose their jobs due to massive layoffs coming on top of the ones that are already going on so, splat, bye bye car, OR, the CEO position that they hold will cause them to be in a meeting whereby their salaries are cut down in order to save the company (which will be tanking because of the consumer spending crisis domino theory coming from the depths of economic hell….you “should” get it, I’ll stop there, lol), all bets will be off and the facade, that is country wide, just not as fake as in Vancouver, will force all takers to get very real in a flash.

The fun part will be when you see a lux car going down the road, with a driver behind the wheel actually smiling and looking stress free. Be sure to give her a smile and a congrats! She obviously listened to Garth. ; )

#143 betamax on 08.30.11 at 4:08 pm

#105 BrianT: “the average person still thinks that their health will be OK because they will get “health care”, which they cannot comprehend is not actually health, it is the care of sick people.”

Well said. Treatment isn’t health.

The best health care is prevention: eating right and exercising regularly. Ever notice that most octogenarians aren’t obese? The fat ones don’t live so long. I see lots of people who don’t need to worry about running out of money in retirement — because they’re probably going to be dead first.

#144 Echo on 08.30.11 at 4:28 pm

#133 Smoking Man:

The fact that you can READ that proves you’re no dolt darlin’. ;

I probably speak for many here when I say that you are not only amusing, but even if half in the bag and pissing yourself, you so obviously have a handle on the markets. Garth knows this about you, which is why he probably loves ya too.

Chill, keep thinking, pondering, sharing, and most importantly, try, oh just try, stopping the self pity long enough to throw out all of the alcohol in the house, car, backyard shed and inside your jackets, then figure out how to shine straight up.

You certainly have the kahonas and you’d be even more brilliant. : )

p.s. They is no freakin’ way that you are not intelligent enough to know that >>> giving a rat’s ass about what lame brained people think of someone who isn’t a perfect speller >>> is just s.t.u.p.i.d. Chears. Think about that. If you actually thought the musings of such crappy, judgmental spell-checking people mattered could it possibly have been the drink? Oh, the possibilities of a straight Smoking Man ! You’d actually be able to see the crap and the loveliness in people, not just global economics. : )

Now, go have a glass of lemon water, and wash it down with some chamomile tea to help with the DT’s.

#145 Hosehead on 08.30.11 at 4:35 pm

#131 poco – I have no doubt that you are right about attached homes in Coquitlum and surrounding suburbs. You are obviously in the real estate biz. I am not. Your point is: there are lots of people who bought post 2007 in distant vancouver suburbs who are underwater…”. I’m not disputing that. I suppose my main points are that (1) those underwater (on paper) will likely ride it out (which begs the question based on your info – why all these sales and slashed prices in coquitlum – are they all spec real estate agents who bought these? I don’t know; and (2) perhaps more importantly, the vast vast vast majority of Canadians have owned their homes since a date that is prior to 2005 and are probably not going to sell in the next few years unless forced to for some reason. I don’t have the numbers, I’m just using common sense. If there are 30 million people in Canada and 65% of them own homes then there are approx 19.5 million home owners in Canada. Then subtract how many property virgins (ie those 1st time home buyers who bought with less than 20% down) since 2005. (ie don;t include the many people who are buying “up” and have 300K in equity from their previous home). Surely that must be a very small fraction of people – comparatively speaking. Those in the danger zone are probably most of those born between the years 1975 and 1985. They are the ones who, a few years after university, landed jobs, saved for a downpayment, want to buy a home and are faced with a market where it will take a 400K or so mortgage to get anything decent. But it doesn’t follow that “we’re all scrwed” and my original post was making the observation that I think this kind of talk is grosly overstated. Just trying to add some perspective. Is your point, based on tri-city data that yes, we’re all screwed? If so, we disagree.

#146 Peakoilist on 08.30.11 at 4:43 pm

ED=economic delusion …and I believe waterloo resident is suffering with this condition while proudly wearing his/her rose coloured glasses…are they a pair of these??
http://www.luxurylaunches.com/fashion/worlds_most_expensive_sunglasses_cost_383609.php

#147 jess on 08.30.11 at 4:56 pm

143 betamax yes, preventative …

contrast and compare

Medicaid, the U.S. health program for the poor, should be overhauled to limit spending and let states design programs without federal interference, Republican governors said. (bloomberg)

=====

The HCA/Columbia fraud case came down to 2 accountants at 2 different hospitals blowing the whistle for the same problem. They were instructed to keep 2 sets of books for Medicare, one set more aggressive than the other. The accountants didn’t like the ethics of that directive. They received $100 million as the finder’s fee for identifying the fraud. There were over 30 HCA whistleblowers, but the 2 accountants brought the hammer down.

=====

Since their inception in March 2007, Medicare Fraud Strike Force operations in nine locations have charged more than 1,000 defendants who collectively have falsely billed the Medicare program for more than $2.3 billion. In addition, the HHS Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

=
Wendell PotterFormer insurance company executive
http://www.huffingtonpost.com/wendell-potter/insurance-industry-flack_b_864126.html

#148 Coho on 08.30.11 at 4:58 pm

As a European (Canadian Ex-pat), I can assure you it’s cheaper for food in the EU than in Canada. Tonight, we are going out for a £2.99 carvery (That’s a FULL dinner of turkey, beef and ham, plus all the sides). On the weekend we have a 15″ Pizza with 4 toppings for £4.99….(When we visit back to Canada we are shocked at the food prices you all pay there!)

If you’re shocked with Canada’s food prices, you’d faint at food prices in Australia! Even locally grown fruits and vegetables are super expensive.

All considered and depending on where one is living in the US, the cost of living there probably averages about two-thirds of what it does in Canada.

About eating less as a financial strategy — I don’t think I’ve heard such a silly remark in quite a while. There are cheaper places and methods to shop. What is the point of it all if you deprive yourself of adequate nutrition today because you fear there won’t be enough money to eat or live the kind of lifestyle you want tomorrow? As it is, most Canadians don’t eat well. We may eat a lot (too much in many cases) but typically, the Canadian and American diet is unhealthy — ie; too many prepared foods and snacks lacking in nutrition but abundant in calories combined with minimal consumption of fruits and vegetables.

And 32% actually belieivng that winning the lottery is going to fund their retirement? Cripes, the programming to placate the cattle is much worse than thought. This kind of thinking is borderline insanity. To buy a $5 ticket once a week and dream a bit is one thing, but to expect to one day win the jackpot….?

#149 Devore on 08.30.11 at 4:58 pm

#130 palebird

We never lost anything because we never had it in the first place. Opportunity lost yes but lost money no. What an ass he was.

It costs money to evaluate and bid on an RFP. Sometimes, a lot of money.

#150 Devore on 08.30.11 at 5:01 pm

#131 SCalgary

30 Yrs of rent @ $1200 = $432,000.

Can anyone suggest me a fitting reply???

Yeah, you gonna rent for 30 years? Owning has not always been more expensive than renting, and it will not always be more expensive.

If you want to respond to the mythical 30 year forenter scenario, add up all the costs of renting for 30 years, then add up all the costs of owning for 30 years.

#151 Devore on 08.30.11 at 5:20 pm

#145 Hosehead

Your point is: there are lots of people who bought post 2007 in distant vancouver suburbs who are underwater…”. I’m not disputing that. I suppose my main points are that (1) those underwater (on paper) will likely ride it out

No, poco’s point, as you yourself note, is that many will NOT ride it out, all those listings below last purchase price are people selling, and not riding it out.

(which begs the question based on your info – why all these sales and slashed prices in coquitlum – are they all spec real estate agents who bought these

The question is irrelevant. A seller is a seller. The last sale price establishes the best comparable in the neighbourhood that buyers will use when evaluatign properties. Even if it’s 100% speccers selling today, tomorrow it will be owners-occupiers. Someone ALWAYS has to sell, and they have no choice or control over the decision, no matter how much they wish they could “ride it out”.

#152 Peakoilist on 08.30.11 at 5:32 pm

#45 cool on 08.30.11 at 12:24 am
About 47% of people say their financial plan involves cutting back on the amount of food they eat.
-GT

Probably its a good thing, most north americans need to eat less.It will improve health,less burden on people for health care cost, more money for other buying, improving economy.

simple.
====================================
So true. another aspect is that we need to eat less food, but also better food, not just cheaper food. Food is getting cheaper to a degree because only a small number of huge corporations are controlling all of the food production. For example 2 or 3 huge corps in the US produce all of the meat. ie Tyson ,Cargill and Swift. These huge slaughtering facilities used to slaughter 175 cattle per hour, and are now ‘processing’ 400 head per hour. Our food should cost so much more…This leads to very unethical practices in the name of profit and keeping prices down. Buy Organically produced meat.
Check this out :
http://www.meat.org/

#153 Kilby on 08.30.11 at 6:01 pm

#99 Waterloo resident.

Did you count the Chrysler mini vans with rust? Bet there were more than say…..6000. 6 Porsches in an area with 4 million people doesn’t say much, ever been to Mexico City?

#154 jess on 08.30.11 at 6:03 pm

synthetic etf’s

….”European regulators are concerned about the retailisation of complex financial products. Whereas UCITS was initially conceived of as a framework for the creation of collective investment schemes appropriate to retail investors, over time the product has adapted more and more to developments in financial innovation and the UCITS brand now encompasses a very diverse and quite complex array of products. As a result, the extent to which retail investors may rely on UCITS is being challenged.

ESMA has established a task force to consider its role in relation to investor protection.[vii] In order to develop proposals, ESMA is gathering data from competent authorities about consumer trends and financial innovation. Part of this work involves a stock-take of complex UCITS and their key features. This will also assist ESMA in fulfilling its obligations to the new European Systemic Risk Board (ESRB).[viii]

Much attention has been focussed in recent times on the growth in Exchange Traded Funds (ETFs). ETFs have seen significant capital inflows and have developed beyond the traditional physical index replicating product. Recent innovations have seen substantial growth in synthetic ETFs, which use derivatives to gain exposure to indices. Some ETFs are now using leverage and a small number are pursuing dynamic investment strategies. Even though these are listed products, there are concerns that investors are not being provided with sufficient information to distinguish these more complex ETFs from the traditional physical tracking non-leveraged product. Also, the use of collateral within ETFs tracking synthetic indices adds a new level of complexity and risk for investors to assess.

There may also be a need for improved disclosure around the significant level of stock lending being carried out by ETFs, the fee sharing arrangements arising from this activity and the type and quality of collateral taken into these funds. There are a significant number of Irish UCITS established as ETFs and we support proposals to take stock of these issues with a view to the development of appropriate disclosure regulation.”…

Address by Gareth Murphy, Director of Markets Supervision to the Irish Funds Industry Association
2 June 2011

====
Tuesday, August 30, 2011

Hong Kong’s Securities and Futures Commission (SFC) has announced additional measures to enhance the level of collateral provisions and the transparency of domestic synthetic exchange traded funds (ETFs), in a continuing effort to strengthen protection for investors.

It was disclosed that, as of July 31, 2011, out of a total of 49 synthetic ETFs listed in Hong Kong, 13 of them were domestic synthetic ETFs primarily regulated by the SFC, while the rest were overseas synthetic ETFs cross-listed in Hong Kong. The announced measures will be applied to all synthetic ETFs managed by SFC-licensed managers and primarily regulated by the SFC.
“…

Last year, a report written by Harold Bradley and Robert Litan of the Kauffman Foundation…

Having reviewed the current regulatory regime governing UCITS and ETFs, ESMA is of the belief that the existing requirements are not sufficient to take account of the specific features and risks associated with these types of fund.

The paper examines the possible measures that could be introduced to mitigate the risk that particularly complex products, which may be difficult to understand and evaluate, are made available to retail investors. ESMA also cites concerns in the paper about the potential systemic risk caused by these types of fund and their impact on financial stability.

#155 BPOE on 08.30.11 at 6:35 pm

We’re doing GREAT. Folks BPOE is powering ahead just like I predicted.
NO ONE WILL STOP THIS JUGGERNAUT OF WEALTH
http://vreaa.wordpress.com/2011/08/28/renter-displacement-the-cute-little-1940s-bungalow-weve-rented-for-the-past-seven-years-is-for-sale-2300-square-foot-2-million-teardown/

#156 R on 08.30.11 at 6:43 pm

#131 scalgary……You rent from a landlord or you rent from the bank…… When people tell me they own their home I always ask if it’s paid for. The answer is always the same…..NO……I remind them that you don’t own it or anything else until it’s paid in full.

#157 Nostradamus Le Mad Vlad on 08.30.11 at 7:00 pm


China in October “Six major Chinese banks will fix the gold price every morning at 8am their time.”; Consumer confidence plunges. plus other links; White Flag waved by Bernanke; 2:52 clip Why do banks make so much money? Dunno; Gold “And now the US Government plans to confiscate all the Liberty Dollars under an equally flimsy legal pretext, which means we are on the verge of massive gold seizures just like 1933, to loot the people to enrich the bankers!” wrh.com; Screw capitalism — Barter trade instead; WWE Smackdown Excepit it’s gold and silver; BoA The Friendly Local Confiscator Of Homes It Doesn’t Own.

1:37 clip There was a link yesterday, which said Michelle Bachmann was being used as a pawn to guarantee Obama’s re-election. With statements from this clip, he can’t lose, and Corrupt Politicians? Other than Michelle Bachmann and Sarah Palin, another reason why Ron Paul will never win, so it looks as if O’bomba is a shoo-in; Criminal Gardening We have had a abundance of cukes, tomatoes, lettuce, beans, peppers, carrots and beetroots this year. Have no idea what we put in the soil, other than compost; Af’stan Obama is sure sticking with his election promise of bringing the troops home early; China “Anyone notice that the instant China stops lending more money to the US Government, the media starts looking for all the negative things they can say about China?” wrh.com; Dumb or Dumber Who to vote for. ‘Owzaboud None Of The Above? Libya CCatastrophic for US – NATO forces. They have butchered another country.

China slaps US wrists over MEast policy; Virginia ‘Quake Which gives rise to a nuke blast just prior to the ‘quake; Cold Snap in Fla. devastated coral reers, and Wastewater Recycling So can a couple of volcanoes; Syria They are right. Then Yemen, SArabia and finally Iran; Cops Liable? For laying false charges; Unschooling Home schooling seems to be a better bet than public schools; New NAU / SPP stuff Keep it quiet, everyone — we don’t want the zombies knowing what we’re doing.

#158 pablo on 08.30.11 at 7:19 pm

Yeah Garth; Freedom 85, I can hardly wait !! I’ll be lucky to live that long.

#159 pablo on 08.30.11 at 7:23 pm

Hey Garth what about baby boomer echo effect, or is it affect? Isn’t that something we house poor old bastards can hang our hats on to save our flabby asses?

#160 squidly77 on 08.30.11 at 7:28 pm

#131 SCalgary

A $432,000 mortgaged @ avg of 7% you will pay $609,000 in interest over the 30 year period. You would also pay @ $2,500/yr property taxes equalling another $75,000. Additional maintenance at $200/mo will add another $72,000.

Grand total of $766,000. He would also own the house but you would have saved $334,000 by renting. Prudent investing would easily triple your gains to almost $1,000,000.

http://michaelbluejay.com/house/interest.html

#161 squidly77 on 08.30.11 at 7:32 pm

Of course he also has to pay the $432,000 principle on top of the other charges.

$432,000 + $609,000 + $75,000 + 73,000 Grand total = $1,189,000 saving even more by renting.

#162 OttawaMike on 08.30.11 at 7:47 pm

#135 Smoking Man on 08.30.11 at 3:22 pm
& Echo
“This was a stupid idiot thing to do, yet we all think he is smart cause of his ability to put together great keys stroke combos.”

And booze.
Some of the most intelligent people I have ever known are/were total booze hounds. I have often wondered about this and recent neuroscience has shown a connection.

Google alcoholism and intelligence.

#163 Smoking Man on 08.30.11 at 8:06 pm

#27 Guy_in_Regina on 08.29.11 at 11:27 pm
I converted Garth

#144 Echo on 08.30.11 at 4:28 pm
You must be Psychic the main charter in the screen play(smoking man what eles) I have been trying to write for the last ten years is called Steven Dolt.
LOL Good to make the connection.

Actually the theme is how we are all physic connected via the universal consciences consolidator,(black hole) some of us that are insane have a stronger connection. Smoking man dies at a strip joint(he has the strongest connection) only to be taken on a tour of the universe by a gorgeous angle, learns everything.
Is revived then fixes all illness and puts everyone out of work and they wana kill him. All the people trash their religion and worship him so the religious leaders are out to kill him too, politicians, the military, the educators all want him dead. By solving everyone’s problems, folks got nothing to do anymore.

But makes smoking man makes their heads explode and he is left with only crazy people. Can’t give away then amazing ending.

little bit of up north a little bit of 911

#164 Daisy Mae on 08.30.11 at 8:13 pm

Victoria Tea Party: “These folks saw fit to say “no” to the HST, and vote in “yesterday”, (so typical).

Now, of course, they’ll suffer, big time.”

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

Yeah? I don’t think so. The BC Government received the 1.6 billion federal bribe in increments over the past year…and doled it out to various ministries here in BC. That’s what I understand. Don’t know for sure. After all, information has been scarce.

So, they’ll just have to sent the 1.6 billion bribe back to Ottawa, I guess. Boo, hoo. It’s not the taxpayers damn problem — it’s theirs.

And then they can start to revamp their operations. If the collection of taxes is expensive, then make it cheaper and easier.

The Liberals have lost all credibility here in BC, and they’ll NEVER get it back.

“Once burned, twice shy.”

#165 poco on 08.30.11 at 8:14 pm

#145 Hosehead
#131 poco – I have no doubt that you are right about attached homes in Coquitlum and surrounding suburbs. You are obviously in the real estate biz. I am not. Your point is: there are lots of people who bought post 2007 in distant vancouver suburbs who are underwater…”. I’m not disputing that. I suppose my main points are that (1) those underwater (on paper) will likely ride it out (which begs the question based on your info – why all these sales and slashed prices in coquitlum – are they all spec real estate agents who bought these? I don’t know; and (2) perhaps more importantly, the vast vast vast majority of Canadians have owned their homes since a date that is prior to 2005 and are probably not going to sell in the next few years unless forced to for some reason. I don’t have the numbers, I’m just using common sense. If there are 30 million people in Canada and 65% of them own homes then there are approx 19.5 million home owners in Canada. Then subtract how many property virgins (ie those 1st time home buyers who bought with less than 20% down) since 2005. (ie don;t include the many people who are buying “up” and have 300K in equity from their previous home). Surely that must be a very small fraction of people – comparatively speaking. Those in the danger zone are probably most of those born between the years 1975 and 1985. They are the ones who, a few years after university, landed jobs, saved for a downpayment, want to buy a home and are faced with a market where it will take a 400K or so mortgage to get anything decent. But it doesn’t follow that “we’re all scrwed” and my original post was making the observation that I think this kind of talk is grosly overstated. Just trying to add some perspective. Is your point, based on tri-city data that yes, we’re all screwed? If so, we disagree.
______________________________________________
Hosehead–no i’m not “in” the real estate business, but want to get back into the market when the time is right, and it isn’t now–even with the price declines i’ve found.
I follow the markets (certain areas) so i’ll know when that time is right to get back in—might be sooner than i predicated for myself–some smoking deals out there—just depends how far a drop a person thinks housing will take.
I think Devore has answered your number 1 question quite well–sellers get out for many reasons–doesn’t matter who they are—-unfortunately, many of those presently selling who are underwater are just like you and me !
think about it–if all those underwater properties are spec real estate agents trying to get out with minimal losses then i pity the other “ligit” homeowners trying to sell–they’re doubly screwed
I didn’t say we’re all screwed–though many will be in many areas of the country–as long as i keep seeing price declines in the product i’m interested in, i’ll stay away–if in the near future i see the tide changing (prices going up) i will be the first to let you know–but don’t count on that for a long while–we’re only getting started in price declines in most areas. (my opinion on what i’ve found in Coq.– Pt Moody– Pt Coq–Pitt Meadows–Maple Ridge–New west–Langley and Abbotsford )

Re; question 2–no time to go into the many reasons why many pre 2007 owners may still be screwed–read Garths’ posts regarding the percentage of people with-no savings–no pensions–etc etc etc—then look up the definition of “animal spirits” and “herd mentality”

#166 Junius on 08.30.11 at 8:41 pm

#131 poco,

I understand what you are doing regarding the numbers but you have to remember that Real Estate prices always move on the margin. There are never more than a fraction of the home supply on the market. The US market collapsed with less than 10% – perhaps as low as 5% of people in trouble. It doesn’t take much.

Of course others hold but that doesn’t mean their homes don’t lose value. This impacts home equity loans and the overall wealth effect.

#167 Junius on 08.30.11 at 8:44 pm

#155 BPOE,

The place has been listed but not sold. More than 200 people through but no offers.

Is there a point other than that things are clearly slowing?

#168 Junius on 08.30.11 at 8:48 pm

#138 Echo,

I have spent a lot of time in Toronto and have gone to many Toronto restaurants. I can tell you that the food is much better in Vancouver.

We have friends who just re-located back to Vancouver after living in Toronto for 3 years. They have quite a bit of money and eat out a lot. They say that Vancouver is far better.

I am often very critical of Vancouver and the attitudes of its citizens but the restaurants are terrific.

#169 Patiently Waiting on 08.30.11 at 8:55 pm

#131 SCalgary
Yesterday, one of my buddy was giving me lecture about my decision of not buying house. He showed calculation for rent vs mortgage:

30 Yrs of rent @ $1200 = $432,000.

Can anyone suggest me a fitting reply???

I mentioned him about losing capital and other carrying costs (interest on capital, insurance, maintenance cost , city taxes and utilities), but still need a nice punch to calm him down…

Thanks in advance…
____________________________________________
Assuming a $400,000 purchase price with 20% down, 30 year amortization, at 3.5%. Costs of ownership include:
Property Taxes for 30 yrs at say $4,000/yr= $120,000
Mortgage Interest paid over 30 years = $197,299.48
Opportunity Cost of $80,000 down payment
if invested at say 5% over 30 yrs =$265,000
Home maintenance at say $2,000/yr= $60,000

Total cost of home ownership over 30 yrs= $642,299.48
This also assumes that interest costs stay at historic lows of 3.5% for the entire 30 yrs.

Cheers

#170 Timing is Everything on 08.30.11 at 9:02 pm

#164 Daisy Mae

I think Ottawa has been getting their portion of the HST collected in BC so far. So, BC will (should) get that part back. Some back room deal with be done and back to square one.

I don’t trust any of ’em though. Never have. I’m still waiting for a ‘none of the above’ choice.

—————————————–
Smoking Man…

You should not be self medicating with alcohol. Especially, with your brain. You’ll ruin what you have left. Go see your family doctor and get sorted out. S(he) will have more appropriate ‘medication’ if needed.

#171 Onemorething on 08.30.11 at 9:04 pm

#158 pablo on 08.30.11 at 7:19 pm

Yeah Garth; Freedom 85, I can hardly wait !! I’ll be lucky to live that long.

YES SIR – Freedom by death you mean! It’s going to feel that way for many! Unless your sold, properly invested and living within your means.

It is never to late to start, just means the later you sell, the longer to freedom.

Quite simply folks, there will be a rush to sell, started already but you’re hidden from the numbers by the Ponzi’s.

What happens when everyone’s selling and knowone’s buying and houses go under water? The owner must move out, bunk with someone else and rent it or walk away which in recourse Canada, you cant just walk away – – – – chained to a deflating asset.

So the market is flooded with home owners under water! CMHC backs the banks, your services by goverment go south, taxes go north and so potentially your job.

Us renters who are in demand (more houses to rent than rentors) can call our price as well. Picture paying $2K per month for a house that was worth $2.5M in VAN but now worth $1.25M?

Possible? Probable! When, 3-5 years!

That property sold at $2.5M buys 1250 months of rent, that 104 years of rent! No extra costs, taxes, maintenance, insurance and future pain. Liquidity only to the law of the contract but let’s face it, you can likely negotiate month to month anyhow…YOUR THE BOSS!

You dont think there is extra time/money available here to live a sweet retirement!!! Your dont think even the dumb ass investor can live on the dividends!

Garth, worth a topic I think!

#172 45north on 08.30.11 at 9:35 pm

hosehead: poco is right

but that doesn’t mean you have to change your mind

Echo: I used to repo lux cars like that on a regular basis in the early 90′s. What’s coming is going to make the early 90′s look like a cake walk.

Here’s a post from Utopia: I asked her casually if things were really as bad in the States as we see in the news. “Worse” she said in a thick Southern drawl “you really have no idea”.

http://www.greaterfool.ca/2011/03/31/grow-a-set/#comment-93218

how in the world are housing prices going to go up in light of the latest news: “mortgage refinancing have dropped by 40% over last year”?

obviously they’re not, they’re going down

#173 Porsche Guy on 08.30.11 at 9:40 pm

I get a kick out of the Porsche comments. Most of these brand new Porsches are on lease. Mine is a 25 year old one and paid for, but guys I know that have the new ones on lease are the guys that look down their noses at mine.

I can take mine apart with a swiss army knife and fix it if it breaks while their’s take a trip to Stuttgart and a major drawdown on their HELOC when it gets a sniffle.

I know I’m a real Porsche guy… them? Not so much.

#174 Killer Chicken or Imploding Boomer? on 08.30.11 at 9:52 pm

160/161 Squid – too many assumptions I think squid. Not sure where we assume $1200/mo equates to a $432K house. Not in my town anyway. Maybe a sub $300K house 40 years old.

7% average over life of mortgage sounds OK. Property
tax varies greatly between communities and is bound to
rise along with maintenance. But so are rents. After 30
years, the renter still rents. Even at todays prices,
houses could easily be pricier than today. Way more variables to consider.

#175 Snowboid on 08.30.11 at 10:05 pm

#95 B on 08.30.11 at 10:32 am…

In your response to #65 Moneta (whose figures are pretty close)

I must admit your comments confused me, talking about EU but quoting meal prices in pounds sterling. It has been 5 years since we were there and spent nearly 3 months in various countries as noted below (with US and Canada for comparisons).

Supermarket prices in England were close to what there are here, but we couldn’t find any restaurants or pubs that came close to £2.99 for a meal, especially one including sides – maybe you are outside of the London area and talking about places like Crown carveries fall specials?

In any case, most people use store bought food when talking about prices and other countries were quite a bit higher as these stats from 2010 show:

USDA Economic Research Services

Percent of household final consumption expenditures spent on food consumed at home.

United States 6.4%
United Kingdom 9.7%
Canada 9.8%
Ireland 10.2%
Germany 11.0%
France 13.2%
Czech Republic 16.0%
Poland 20.2%

Also for comparision Australia came in at 10.7%.

#176 Robert Dudek on 08.30.11 at 10:08 pm

But about 50% of all the people living in Vancouver have $1 million in their homes – at least for now.

No! Maybe 50% of home owners, but there are a lot of people living in Vancouver that don’t own.

#177 Smoking Man on 08.30.11 at 10:12 pm

#170 Timing is Everything on 08.30.11 at 9:02 pm

Ya doc appt on friday….. but you should see my next post

Ya beby

#178 Robert Dudek on 08.30.11 at 10:17 pm

Of course Nortel was something people couldn’t ride out, but you’re not saying a kitsilano house for 1.5 million is going to be worth zero someday, are you?

Only if a nuclear bomb explodes near it.

#179 waterloo Resident on 08.30.11 at 10:19 pm

#173 Porsche Guy :
((” I can take mine apart with a swiss army knife and fix it if it breaks ” )):

COOL !!!

#180 Echo on 08.30.11 at 10:22 pm

#168 Junius:
Not so, statiscally or otherwise. Do you have any idea how tiny that place is compared to Toronto? I’ve lived in both places, actually pay attention, and the peole you know must not be tapped in to the real happenings of Toronto (aka mini NYC).

To each his own but to give the impression that Toronto doesn’t have a world class restaurant sector is just wrong.

#181 Echo on 08.30.11 at 10:28 pm

#163 Smoking Man:

Geez, you really are looned out. God Bless Ya. LOL

#182 waterloo Resident on 08.30.11 at 10:31 pm

#121 (Live under your means)
You said :

(“Hubby told me the other week that a colleague is seriously considering declaring personal bankruptcy. Another already has. …………..
We have a friend who owes more on his home now than when he bought it 10 years ago …………..He’s in his late 40′s, is a mechanic with a big car dealership. ………… They just replaced their carpeting upstairs w/wood flooring and did other renos. Suspect they did it with another HELOC. What a screwed up society we live in……..
We will replace the 30+ YO carpeting in our bedrooms this winter but it will be with cash. “)

Well, let me give you some insight into the world that we are currently living in, this might help you to understand EXACTLY what is happening here.

People will borrow and borrow and borrow, using the cash to live it up like a millionaire, and then once they cannot meet the payments then they declare bankruptcy and walk away from everything. Unfortunately that also means that the mechanic will lose his business and all his personal savings/investments / toys too.

But really, think about it, what’s the downside of living like a king for 10 years all on borrowed money, then being able to begin again from scratch after you declare bankruptcy?

#183 Echo on 08.31.11 at 1:00 am

#183 Waterloo:
Bankruptcy doesn’t actually work like that. Again, an educated opinion would be best…

#184 Kevin on 08.31.11 at 8:11 am

@squidly (161): There are so many problems with your analysis, it’s hard to know where to begin.

How about the fact that you cherry-picked the loan interest rate. 7% Seriously? Who’s paying 7% these days? Nobody. Try 3.5%. 5 years from now, maybe rates will have normalized back to 5 or 6%. But to see 7%, our economy will have to really be humming. And guess what that means? Inflation. Which brings me to my next point.

You’ve completely ignored inflation. You really think your renter is going to pay the exact same rent for 30 years? No increase at all? Gimmie a break.

Next is intangibles. Sure, renting an apartment in a high-rise is cheaper than owning your own house. Because it sucks. I’ve been there. I’ve laid awake at night, trying to block out the noises of my drunk neighbor screaming at her kid. I’ve sat in my living room sweating in July, because the landlord controls the thermostats for the whole building. I’ve heard of other tenants getting attacked in the parking garage, and hoping my wife isn’t next. I’ve gone downstairs to do laundry to find all the machines in use, even though several clearly finished their cycles hours ago.

All those things have a value. But to bring it back to a quantifiable mathematical realm, you’ve also cherry picked your time period. Sure, during the 30 years that the mortgage exists, the renter has better cashflow, especially in the beginning. But how about the next 30 years? The owner’s expenses drop off a cliff, while the renters’ just keep climbing.

If you’re going to do a comparison, at least do an honest one.

#185 Kevin on 08.31.11 at 8:15 am

@squidly: Oh, and you also forgot to consider that the home will appreciate in value over the 30 years. So take that $432,000 purchase price and double it (assuming an extremely conservative appreciation roughly matching inflation).

#186 disciple on 08.31.11 at 9:46 am

#184 Echo…how does bankruptcy work? Seems like a relevant question because I am hearing of this as a viable back-up plan for many people. Also, I am wondering how it usually plays out versus how it will play out on a grand scale, which appears more and more likely each passing day…

#187 Beach Girl on 08.31.11 at 8:25 pm

I myself drive a 2000 red Cavalier. All my friends laugh at me. They drive Boxsters, Escalades, etc. Now, I am aware that my car is worth a buck 98 ($1.98). But she is affordable. They call it a cigarette lighter and a rice rocket. But it is paid for. And my insurance is only $78 a month.

Sadly my ex-husband, who I dumped in 1995 has resurfaced. He was actually very successful once. Even the Prime Minister sent him a letter, thanking him for his income tax.

He is going to be homeless in 2 months. Could he rent a room from me on his welfare. I said sadly, you owe me untold dollars in back child support for the two idiots. I doubt you would pay me rent.

I am not a vindictive person. But my dear departed mother, told me, do not take the man’s licence away as he will drive himself into a ditch anyway. European people have there own theories. No I never chased the retard down for cash. But he certainly is not getting any of mine.