Lucky

Tom’s a lucky guy, even though he says he lives in a ‘wasteland burb’ of godless Toronto. “I got turned onto your blog by a colleague of mine and must say it’s a bit of an eye-opener.  Ever the skeptic, however, I’ve been scratching my head over your predictions that higher interest rates could doom those of us with high debt ratios.”

Tom’s mortgage is $350,000 and he figures the house is worth $700,000 (paid $550,000 for it ‘a couple of years ago.’). His household income is $175,000 and the mortgage costs two grand a month on a fixed-five-year mortgage of 3.5%.

“Now let me assume a bad scenario – interest rates skyrocket to 10%. My biweekly payments increase by $600 biweekly, or approximately $1200 monthly.  End of the world?  Not really.  At our income, there are other sacrifices we could make – less frequent new cars, cut back vacations, etc., but in no way would it make us default on our mortgage.  Perhaps I’m living in a relatively sheltered area, but my coworkers are mostly in the same boat – most have combined family incomes of $150k-$250k and own homes valued between $500k and $800k.”

“It’s highly unlikely that rates would go as high as 10%, but even if they did, I couldn’t see a debt load of 150%, or even 200% in my case, become a real estate armageddon…  That said, I do realize that the economy may suffer as a result of less money finding its way to other areas (like those cars and vacations I mentioned), but if that happened, the rates would come down again, equalizing the whole story.. What am I missing?”

This is called the isolation effect. It’s when people feel they’re isolated from external factors by their own smarts, good fortune or unique circumstances. It explains why people in expensive houses keep on spending. Why a million delusional people in Vancouver think it’s different there. It’s why the affluent American middle class never bothered jumping off the Titanic when they had a chance. And it’s why so many commuters in $700,000 GTA houses will be so surprised.

Tom makes the mistake of thinking the only risk of rising interest rates in his hood is that legions of people would default on their mortgages, go under power of sale proceedings and screw up the resale market. This comes from equating what happened in the US to the Canadian scene. But a wave of foreclosures is not in the cards, no matter what happens to rates.

Of course Tom won’t quit paying his mortgage even if his monthly costs more than double. As he rightly says, he’ll just adjust his spending habits – and stop buying new cars or going on trips. Him and nine million other households. This causes consumer spending to slide, which is not sexy news in a country where 66% of the economy depends on it.

So, that leads to job loss. But already the unemployment rate is over 7% – which is just 2% away from the disaster now unfolding in the US. Fewer people working has a direct impact on even more spending, and it doesn’t take long for a vicious cycle to emerge. Consumer confidence takes a hit, and folks feeling less secure about the future are not prime candidates for real estate purchases.

So if rates did rise, housing would fall. Sales first, prices next. As sales volumes diminish and values stumble, more people decide to list their homes (it always happens), hoping to catch the top of the receding wave.

So, Wasteland Tom, the danger isn’t that you couldn’t afford a mortgage rate hike. You can. It’s not that the big-house folks around you would default. They won’t. The danger which higher rates would pose is to the value of your property in a slacking market. You’d be surprised how fast that $700,000 pile of bricks can once again be worth $550,000. Or less. Your loss of net worth would be $150,000 or more.

This is why a third of all US families with houses and mortgages are now under water. They continue to make their mortgage payments and carry on – because there’s no choice. Housing values fell so precipitously there’s no buyer willing to pay more than they owe, which means they’re trapped in an illiquid property.

But, of course, this can’t happen here, right? We’re isolated.

And it won’t. At least, not because mortgage rates go to 10%.

But that’s not the threat. In case you missed the news, Tommy, the IMF this week warns that Canada is part of a dangerous world. Unemployment next year will go up, and growth down. Even Brother Carney just upped the odds of a US recession. And every major bank economist is forecasting a tough 2012 for people with the bulk of their net worth in a house. Listings are rising and in some large or prime markets (Victoria, swaths of the GTA, SW Ontario, the Okanagan, Annapolis Valley) streets are littered with weathering For Sale signs.

So, rich guy, it matters not how much your house is worth, how upscale the neighbourhood nor how many BMWs are parked on Brussels block-encrusted driveways. It’s irrelevant whether you can pay your mortgage twice over or not. You can’t beat the market. The value of your home will be determined by others, not you. It is the buyers who always end up setting prices, not the owners or the sellers.

You think you’re isolated? Then why read this pathetic blog?

Punked.

213 comments ↓

#1 HouseBuster on 09.20.11 at 9:29 pm

Garth, Even if this dude’s house went to ZERO it wouldn’t matter. Look how much coin they’re bringing in.

I guess it would matter if they lost their jobs.

#2 Helicopter Ben on 09.20.11 at 9:29 pm

Occupy Wall Street — America’s own Arab Spring?… Good Video…. http://www.youtube.com/watch?v=rWoWZO3nqOY&feature=feedu_more

#3 Seven Stars and Orion on 09.20.11 at 9:39 pm

I work with half a dozen “Toms”. At best, I’m labelled a pessimist. When I’m not around, I’m called a half-wit, or worse. In my family we walk to work, rent a house, save and invest a fifth of our gross. Apparently I should “live a little”, because I can’t take it with me. Residential real estate stop being a great investment? Never happen they say. Financial geniuses, every one of ’em.

#4 Jetfixer on 09.20.11 at 10:01 pm

Garth, they should of called you for the roast of Charlie Sheen.

#5 Marco from the bestest place on the smallest part of earth on 09.20.11 at 10:04 pm

A funny story… I’m in VanMental where I’m renting a 2m home for 3k a month. Been here for a year and took it because the owner spent 200k (she’s HAMoney launderer) to make it an execute home rental. I just negotiated another 18 months AND a 10% rent reduction for that time, making my 2.5 years here in excess of the average tenancy of home buyers in this neck of the woods.

I have a personal (liquid) net worth of $700k (3/5 invested in a well managed portfolio and 2/5 in a new venture I’m a founding partner of in the green energy sector), no debt or depreciating assets masking for real assets on my balance asheet.

I recently arrived to Canada from europe btw with all my funds and pay taxes against my global earnings here.

My partners are a multi millionaire ex. Goldman investment banker and a local guy.

The Goldman guy is also renting despite being able to buy $10m homes in cash. He’s renting a 4k sqf home in west van from a school teacher driving a BMW M6 (clearly well paid), but had to move and downsize as the rent she pays to the bank for her home is too much (owns two homes and has now moved to a 1 bed condo).

The local guy lives in Shaugnessy (a block away) with a $2m mortgage on a $3m home justifying is as “prices will never go down as everyone wants to move here”…

What’s wrong with this picture? Wealthy savvy foreigners, financially well educated and from contries where Canada’s future is the past, renting from locals who think millions of dollars in debt is nothing…

Am I the only one who thinks this is a weird scenario? Our local partner jokes about his “renting” co-founders, almost as if embarrassed (though we could stump up cash where he needed a secured loan)…

This is weird, we clearly did not read the instructions to how to best integrate in the Canadian economy and it’s immutable insulation from the world’s problems.

I’m getting ready to buy our “local” boy out for pennies to the dollar and bring him back in as an employee… His bank is twitching at the application for the secured loan (CIBC who we know is the first in line to struggle if it all goes pear shaped)…

We’ll see how it goes….

#6 Parry Sound—Muskoka on 09.20.11 at 10:11 pm

“… As he rightly says, he’ll just adjust his spending habits – and stop buying new cars or going on trips. Him and nine million other households. This causes consumer spending to slide, which is not sexy news in a country where 66% of the economy depends on it.”

As households begin to repair their balance sheets, they will borrow at slower rate and will perhaps go into a net saving position.

Assuming F, Tony C, and the rest continue to cut spending (and borrowing) at the Federal level, the only thing that can prop up the economy during the downturn are the provinces/municipalities and the rest of the private sector (less households).

By prop up I mean borrow, borrow, borrow. Add in a little foreign direct investment as a potential mitigating factor. Otherwise…deflation.
—–
Oh and as for real estate, the signs for realtors may outnumber the election signage here in cottage country.

#7 Sean on 09.20.11 at 10:14 pm

HouseBuster,

There are other risks that come into play with a sliding economy. The household income might stagnate or worse fall if a member loses their job. Then it gets ugly because an illiquid house means they cannot move to where the jobs are. This is what is happening in the U.S.

#8 cata on 09.20.11 at 10:28 pm

If house goes to 550K, how come his loss is going to be 150K if he bought it for 550????…..Aren’t gain or loss real once you sale?…..I think the big losers or big fool-idiots are the one who bought in the last 12 months!

See now and make 150K. Sell later and lose it. — Garth

#9 InvestorsFriend (Shawn Allen) on 09.20.11 at 10:29 pm

But I think Tom is saying that a loss in value on his house has no impact on his life. Yet it sucks and all, but with no plans to sell, he is still okay.

The only real danger is as Garth says, if he loses his job. Always a possibility…

#10 neo on 09.20.11 at 10:31 pm

On the Eve of The Fed announcing more stimulus to a limp economy and adding more debt which effectively pushes on a string. I’m reminded of my younger days.

We’ve had “stimulus” non stop for 3.5 years now with no payoff. You know what that is the equivalent of in adolescent terms…..blueballs. However, there won’t be a happy ending…

#11 penpal on 09.20.11 at 10:33 pm

@ # 1 HouseBuster

Maybe Garth can help us here, but $ 175 K gross (before taxes) equates to what, maybe $110K after tax?

That’s about 9K per month – not exactly “major coin” in my books in today’s world.

Once you take off minimum $3K for mortgage, taxes, insce, repairs, utilities, renos, decorating, etc. , leaves $6K, divide by 4.36 weeks per month equals $1376.00
per week.

$1376.00 for a family per week, less;

car purchase payments or lease payments
car insurance
car fuel
car maintenance
household savings,
RRSP contributions,
contingencies,
women’s clothes,
entertainment,
alcohol or cigarets possibly,
dinners out,
cell phones,
vacations,
sports equipment,
hobbies,
kids expenses
etc.,
etc.

Near Toronto?

Are you kidding me?

You are left with peanuts!

#12 Dan on 09.20.11 at 10:33 pm

They would definitely think twice about paying their mortgage if their house was worth $500k … plus there are probably a lot of people on his street with mortgages of 700k – 800k, they can’t afford a drop at all until they start unloading, or severely cutting back.

Many people on his street are also thinking of taking out some equity for cars, trips etc., probably many people on that street with debt equal to the current price of their house.

#13 T.O. Bubble Boy on 09.20.11 at 10:38 pm

Hey – it’s a picture of Rob Ford and that new Quebec NDP MP who hid in Vegas (Ruth Ellen Brosseau)! Nice to see different political parties getting along.

#14 dmitri on 09.20.11 at 10:44 pm

What tom is failing to realize is that CAN economy is tied at the hip to RE. Failure in one will lead to resession , then Tom looses his job and then, interest rates do not have to rise at all for him to default.

if rates rise and people start spending less, chances are again that toms job could be on chopping block as demand for his business/sevices whithers away.

#15 T.O. Bubble Boy on 09.20.11 at 10:48 pm

Hello Vancouver — next time anyone says there is a land shortage, get more creative:

http://www.smartplanet.com/blog/cities/china-expanding-its-cities-by-building-massive-artificial-islands/940

#16 Tim on 09.20.11 at 10:50 pm

Come on, who in their right mind would pay $700,000 to live in Toronto? Traffic, smog, commutes from hell, humid summers…

#17 Tim on 09.20.11 at 11:00 pm

Who would pay $700K to live in Toronto?

#18 T.O. Bubble Boy on 09.20.11 at 11:02 pm

I found some GTA-area houses in Tom’s $700k range:

$700k on the dot
$701k
$708k, and
$709k

Who says this won’t end well? These all show lots of promise as tear-downs.

#19 JohnnyBravo on 09.20.11 at 11:05 pm

IMO, the greatest threats to home values are a long-term decline in affordability and a high chance of a generational revulsion to home ownership. (Not to mention the biggest credit bubble in history, but I won’t go there.)

Affordability will decline due to stagflation. Whether we have general deflation or inflation, the gap in the growth rates between incomes and costs will likely continue to widen. Thus, whether prices go up or down, it will feel like stagflation. This will be the result of much higher taxes, insurance, energy and utilities costs. Also, more and more costs that were once covered by taxes will be increasingly borne directly by individuals, along with those higher taxes, already mentioned.

It is also likely that the younger generations will value mobility above stability (which they will get used to not having) and many will not want to take on the responsibilities that home ownership demands. Other demands on their time will be too great and they will place a high value on their free time; they will not want to spend it repairing cracks in a concrete wall.

Also, the fact that we are at or near all-time highs in home ownership means we are running out of buyers. A decline in buyers relative to sellers means lower home values. Many boomers will be retiring to lofty concrete boxes, leaving their lots and lawns for other to tend. If you are against immigration, this may change your mind—until, that is, they come for your job as well as the home you are trying to unload.

This may not happen suddenly. The deflationary collapse that would have occurred in ’08-’09 was slowed by massive money printing. But it is not over. They simply managed to turn a collapse into a slow burn in order to keep the banks from going bust. Thus, barring any sudden deflationary shocks (Europe, anyone?) real house values will likely slowly (and perhaps imperceptibly) erode over a long period of time; and with them the bulk of the wealth of most Canadians.

#20 young & foolish on 09.20.11 at 11:06 pm

yeah, insular … like oblivious
great post again …. another clear example of how one can be so detached from reality

so, a street full of $175K earners will not be affected by an economic contraction? I hope Brother Carney and F read this pathetic blog ….

#21 Waterloo Resident on 09.20.11 at 11:09 pm

MY PREDICTIONS till the end of this year:

– Mark Carney will be dropping interest rates by 0.5%, perhaps as much as a full 1%.

– This will result in Real Estate prices in Toronto and Vancouver rising between 12% and 28% over the next 12 months.

#22 Young Old fart on 09.20.11 at 11:10 pm

Dammit Garth, I never thought you would actually POST the picture of me and the missus that I sent you….

;o)

#23 jimboyyc on 09.20.11 at 11:11 pm

reply to #15

The referenced article indicates that Chinese municipalities get 40% of their revenue from selling land for development; which gives the government a huge incentive to keep their real estate bubble going

#24 Waterloo Resident on 09.20.11 at 11:27 pm

That woman’s name in the photo is ‘Natacha Peyre’ (she’s Swedish).

If you want to find more photos of her, go here:

Nope. — Garth

#25 not 1st on 09.20.11 at 11:29 pm

People are too stupid with debt. Instead of running for the exits and selling your home where you kids are being raised and renting a place you hate, set up some protection for yourself with the easy money banks are giving out.

Tap the top of your market with a HELOC. A HELOC can be obtained for 2.5% Next set up a trading account with margin. Margin rates are usually around prime or prime plus 1. Now invest the sucker in a real dividend paying stock, not those sh*t ETFs paying 2 cents per share. Look at some of the Canadian utilities like Enbridge or TCPL. Their dividend yield is 6-7% not including capital gains. Then let debt arbitrage be your friend. 6-7% less 3-4% on gains of $250k with margin leverage will give you another $1000 per month against your mortgage. Then just let the sucker ride and stay in your nice shack while other panic and bail.

#26 Waterloo Resident on 09.20.11 at 11:38 pm

The guy says that his household income is $175,000 per year. That is about $90,000 each of both of them.
Garth said: ( “So, rich guy, ……”) Who’s ‘RICH’ ? For Toronto an income of $300,000 year is standard. That guy is actually one of the ‘Working Poor’, right?

#27 disciple on 09.20.11 at 11:57 pm

Gobeki Teple (Go-becky-tep-lay), has turned history books…well..into history. This 12000 year old civilization was buried deliberately for some reason. Like I say, humanity has been here for millions of years, that should put a little context into your day…

http://www.dailymail.co.uk/sciencetech/article-1157784/Do-mysterious-stones-mark-site-Garden-Eden.html

And History Channel has picked up on the ramifications:

http://www.flixxy.com/12000-year-old-unexplained-structures.htm

#28 disciple on 09.21.11 at 12:06 am

US Special Forces discover that long hair confers the power of a sixth sense:

http://tinyurl.com/3ggpezv

#29 Mackie on 09.21.11 at 12:19 am

Where I live, those 700k homes in Toronto can be had for maybe 150k. 200k tops. And I’m all of an hour from that God for saken stink hole they call the big smoke. Lol.

#30 Confucius on 09.21.11 at 12:23 am

Tom has figured out that the future of real estate is safe because a couple people he knows making 200k a year wouldn’t be affected by even 10 percent interest rates. I guess nobody has told him that the average family makes a lot less and they also own these average 700k homes. These average people mortgaged up the their necks would surely drown with even the slightest increase in interest rates, let alone price inflation pecking away at them. Tom’s fairy tale will come crashing down around him. Well, at least he did his due diligence and asked a couple people around him whether he was dreaming or not. Unfortunately, they were just characters in his dream. When he wakes up, reality will be worse than a nightmare.

#31 Nostradamus Le Mad Vlad on 09.21.11 at 12:26 am


“Lucky. What am I missing?” — The conomee’s at the top of a roller coaster ride and is about to gain speed rapidly, as per Europe sending blood rushing towards a pinkie (duzzent matter which one), then exploding with delight.

“We’re isolated.” — At least we’re not in a melting cesspool of heaven like the Eurozone. With that place heading south real quick, riots and wars will be very good bedfellows, followed by us.
*
#13 T.O. Bubble Boy — Right hand doesn’t want to know what the left hand is doing!
*
Horsefeathers and Put Options “. . . are the cork in the bottom of the barrel.” Evidently, it appears the Euro in in the process of doing a Hindenburg; More taxes on American ex-middleclass; China Putting France and the Eurozone in its’ place; Central Banks and gold. What do they know that we don’t? Greek Citizens Follow Iceland’s lead — f#&k the IMF and banxters! EU debt crisis being used to consolidate control, which is why PIIGS (and everyone else) should ffollow Iceland’s lead, and let the banxters pay their own debts off; ESF (Exchange Stabilization Fund) Series of clips. Seems the ESF is behind the US Fed, Treasury Dept. and Malwart; Warp 12, Mr. Scott Point of no return, Three worst states to do business in, and Cold Winter Yup, it ain’t money but people will still be sleeping outside; Soros “Globalization Floats on a Sea of Lies and Ignorance”.

3:44 clip Critical info. Larry the Cable Guy on GW; 0:29 clip Cat On A Hot Tin Printer; From the You can’t make this stuff up dept.; Rumsfeld He approved torture on others, now the tables are turned (good); Typhoon headed straight to Fukushima and Plutonium coming to a west coast near us; No, the MEast will never be the same, but when the cycles have finished changing shortly, neither will the west; Space One and Space Two. So, earth’s not good enough for them, eh?

UK — Snow in October, BC — Pina Coladas in January; Jackal vs. Vultures No, it’s not about Wall St. infighting; Turkey vs. Israel No NATO office for Israel; Russia and China; Brzezinski Further to the link posted Monday, a rebuttal; Harper Video clip in — “There is going to have to be global governance . . .”

#32 GTA Girl on 09.21.11 at 12:30 am

Normally I’d agree with you. However, if everyone jumps and sells their home, then we have a bigger problem.

Those that have huge debt, small percentage invested and feel job security is an issue, then selling may be a great idea.

In last few years If you bought a cookie cutter by a builder in vast tracts of GTA land w/thousand other homes and paid stupid money, say $600k may want to re-evaluate your budget and consider options.

Let’s just say that everyone should look at their investment portfolio, debt and income. Make certain you can weather a storm…and have a emergency plan of action.

#33 Carlyle on 09.21.11 at 12:46 am

Tim you are in a sheltered area as you guessed. The average CDN salary is 43k a year last I checked, with the average family pulling in between 70 – 95k combined. Many of those families have mortgages far in excess of what they could afford should rates go up.

You might be ok, but there’s a large portion of Canadians that won’t be. And their misfortunes will translate into problems for everyone as the economy suffers.

#34 wtf????? on 09.21.11 at 1:09 am

Yup, I still these types will ‘upgrade’ and drive prices higher with the BOC stating that rates will stay low for years to come. We are barely into the sixth inning of the current recession with plenty of bad news in the mix and surely the worst is yet to come as governments have decided to ramp up spending again instead of cutting back and letting the market stabilize itself. This is exactly why prices have risen consistently since the Greenspan miracle took hold when the tech bubble burst in 2000…..government intervention.

We already know that prices are driven by payments not price. Your example shows that a great many still have a lot of room to grow debt before ‘situation critical’ arrives. The RE boards and sales orgs/developer community all know this and will drive asking prices higher based on the open ratio.

In my scenario RE prices have nowhere to go but up as long as government spending is an open tap. Its like this……higher prices equate into higher tax revenue for the expanding spending of government…the BOC will keep rates low to increase taxation revenues on rising prices. They get a lot more out of a million dollar home than a quarter mill…right?

#35 nonplused on 09.21.11 at 1:21 am

Nice post Garth.

One thing I wonder about sometimes is why nobody has suggested further limiting immigration until the jobless rate falls back to more manageable levels. Don’t get me wrong, I’m all for immigration, and with our declining local population we will likely need it in the years ahead, but doesn’t it make sense to balance the immigrants with the natural rate of job growth in the economy minus local new entrants to the work force? Unemployed people eventually get desperate, whether locally born or not.

Or is the government trying to front run the baby boomer retirement forecast? You know, load up the country with immigrants whether employed or not so they can acclimatize and thus stand ready to replace retiring boomers? First of all I don’t think the government has that much foresight, and second I don’t think it would work. Acclimatizing immigrants to long term unemployment isn’t getting them ready for anything but discontent and potential social unrest.

Won’t work in the US though, because there is always a Mexican willing to do under the table for $10/hour what an American won’t do above the table for $20/hour (cost to the employer, both employees get $10/hour in the end after taxes and compliance), and that border is impossibly porous. Our southern border is impossibly porous as well, but there won’t be a rush of Americans coming north for a 2% difference in the unemployment rate, and the Mexicans have all found under the table jobs in the US by the time they get this far north.

I also wonder how many unemployed Americans are actually receiving 99 weeks while working under the table for $10/hour. In Canada and the US, labour laws combined with taxes make hiring above the table prohibitively expensive. Remember, employers pay all of their employee’s taxes. Sure, the government makes it look like you paid your income tax, but you did not. Your employer “source deducted” it, and all you’ve ever had or got was your “take home pay”. If the government lowered your personal tax rate to zero and your employer reduced your wages to exactly what your take home pay was before, guess what? You’d still go to work. It would make no difference to you. However, it would make a big difference to your employer. They might actually hire more workers.

Income taxes are like a GST on employees. That’s why unemployment is so high. Businesses cannot afford to hire more workers when each worker has a 50% marginal tax attached to him or her. Lower income taxes, permanently not just for some set period, and wages will stagnate or fall (but take home pay will remain where it is or increase), and employment will increase.

But of course taxes cannot be lowered. The banksters, in search of profit, convinced everyone that we could have Big Government using borrowed money, borrowed from them, which they printed out of thin air. But now they expect to be paid back and the economy cannot shoulder both the Big Government and the Big Debt at the same time.

Property taxes are a bit of a different thing. They are more like a residual rent the government charges you for maintaining your exclusive access to a certain piece of land and building(s). But even there we find a limit, where the rent can be raised to a point where the taxes are no longer worth the “ownership” rights.

Remember: The larger the government compared to the economy, the slower the growth rate, and there is a point where the growth rate goes negative once the government is too large, and gets more negative as the government gets even bigger. Government is always a cost. And beyond law and order, never a profit. (Some would argue basic law and order are a profit best achieved by government, but I doubt this even holds true beyond the locally hired sheriff and judge. Some would also argue that national defence needs to be done by the government. But all major wars are fought mostly by people who were not in the army when the war broke out. The army merely holds the line until the militia arrives, even if you want to call them conscripts or “draftees”.)

#36 Timing is Everything on 09.21.11 at 1:40 am

And speaking of subsidized ‘housing’…

“The bill will also see a marked shift from rehabilitation to the punishment of offenders….A key component of the Conservative’s [The Harper Government’s] tough-love platform involves building more prisons to accommodate the expected surge in occupancy rates.” – Huffington Post

http://tinyurl.com/4xgfpa8

http://www.youtube.com/watch?v=x_Mn9SY8Ls8&feature=related

#37 BobtheHunter on 09.21.11 at 1:46 am

I’m have some real trouble finding a home in Toronto in my price range of $500K in the neighbourhood that i want that is in and around that range. So not sure what ‘weathering for sale signs’ you are dreaming about but in my neighbourhood for sale sign are up longer with the Sold banner then the original For Sale sign. I guess at one point prices will come down a bit and you will be patting yourself on the back saying ‘I told you so!”. Good luck with that. I do admire your consistency even though you have more pie on your face than a fat lady has in her fridge. Unemployment not interest rates is what dictates supply and demand for goods. Dude that is basic economics! So far that massive 7% unemployement rate hasn’t cooled the real estate market and probably won’t. Prices will go up and down but i guess you haven’t bothered to look at a chart of home prices for the past 50 years. Tell my dad that bought his $750K home for $50K 25 years old that prices are gonna crash.

#38 TheFirstRick on 09.21.11 at 2:10 am

Livin’ in a shed in Vancouver. LOL!!!!!!!!!!!!!!!

http://vancouver.en.craigslist.ca/van/apa/2609138377.html

#39 Carp on 09.21.11 at 2:18 am

I’m teaching my kids a home is the people in it, not the wood, plastic and stones that make it. All under 6, they understand they get 5 bucks a week, invest 2 bucks and can accumulate 3 per week for legos. Seems to work since every time they say they want something, I get a price for them, they go to their “to be spent” pile and understand opportunity cost of not getting the next lego set.

From what I see Canadian’s don’t get that. They just credit their life away to the banks.

#40 Aussie Roy on 09.21.11 at 2:22 am

Aussie Update

Pop science: predicting the end of Australia’s property bubble

Besides, herding seems to be a core element of how our brains are wired: the most social animals are also the most imitative. But when this instinct attaches to matters monetary, problems quickly emerge.

These problems are exacerbated by another human trait that can be both good and bad: optimism.

The expectation that all will be well in the future, combined with an in-built desire to jump on passing bandwagons, can lead to bubbles of many kinds, the most damaging of which involve finance.

http://theconversation.edu.au/pop-science-predicting-the-end-of-australias-property-bubble-754

Should we be bracing for an inevitable housing bubble bust?

By now it should be obvious to anybody who is not a banker or a real estate agent that Australia is in the grip of a substantial housing bubble.

The greatest housing-price rise in the history of Australian residential property represents an inflated bubble – one that is ready to burst.

Perhaps unsurprisingly, only a handful of economists accept this view.

http://theconversation.edu.au/should-we-be-bracing-for-an-inevitable-housing-bubble-bust-2588

Are economists ignoring Australia’s property bubble?

One aspect of housing and stock market bubbles continually repeats: the vast majority of economists either miss or deny their existence.

In recent years, enormous asset bubbles have burst in many countries.

The most notable have been in the United States. The first was a US$10 trillion stock market bubble, popularly known as the Dot-com bubble.

Worrying indicators ascended to astronomical heights in the late 1990s, but the mass popular delusion of ever-rising prices kept the economics profession, investors and the public from seeing that a bubble was forming. We know what happened later – the Dot-com bust.

This was followed by an US$8 trillion housing bubble, which saw an 86% run-up in housing prices between 1996 and 2006, climaxing with a spectacular crash that nearly bought down the entire banking and financial system in the US.

Again, economists either missed or denied the existence of a housing bubble, though many fundamental indictors clearly pointed to this reality.

In Australia, our $2 trillion housing bubble has seen prices rise by 127% from 1996-2010, and every fundamental indicator is off the chart.

http://theconversation.edu.au/are-economists-ignoring-australias-property-bubble-3268

#41 Peter B on 09.21.11 at 2:53 am

How would a default by Greece effect things? Would their be a domino effect with bond purchasers demanding higher risk premium from all heavily indebted European nations leading to multiple defaults?

#42 C on 09.21.11 at 3:13 am

Tom’s not alone in his thinking. Last week I read a story from the Globe and Mail about how Canadian’s know there is a massive debt problem for the majority of Canadians, but, according to the story and poll, the MAJORITY feel it isn’t them or their problem!

The economy in T.O. is tied into the economy in New York, which is tied into the economy of North America and thus the world. Without being a doomer here, it makes you wonder if everyone stuck their heads in the sand does that make the situation go away?

#43 Dreadmonton, Hellberta on 09.21.11 at 5:47 am

I think everyone is so defensive that they just don’t want to admit how much their property could plunge in price. One good example is the Heritage Area in Inglewood south/Westmount Edmonton just a 5 minute drive West of DT, close to some premium shops & great Restaurants along 124 st. In 2006-2007 the average house sold in less than two week for over $550,000. Now the average selling time is 2 months with every second unit being taken off the market before it’s re-listed again. And the prices? Two stoies 1480 sq ft. Heritage House starting at $249,000!
In Edmonton I can see for sure the real estate market is going into a very slow depression we never ever did recover to the 2007 prices like they di in Cowtown or Van! http://www.mls.ca/PropertyDetails.aspx?&PropertyId=11132763&PidKey=-1794018235

#44 Led on 09.21.11 at 6:13 am

when rates rise? Not gonna happen. ZIRP is here to stay for a long time, anything rate increases will bring us to depression. We are in a Japanese style low growth era. get used to it.
But also get used to this kind of stimilis not having much of an effect – kind of like a drug – it used to get us high but now we need it just to get by.

#45 mofo on 09.21.11 at 7:00 am

Cuz you like dividend-paying stocks: 3 Cheap High Yield Oil Co’s
http://seekingalpha.com/article/292891-3-cheap-high-yield-global-oil-companies-worth-considering-now

Could we see Hyperinflation?
http://seekingalpha.com/article/293312-hyperinflation-and-the-fiscal-case-for-gold

Should Americans Sell their Gold to Buy a House?
http://seekingalpha.com/article/291365-sell-gold-to-buy-house

#46 neo on 09.21.11 at 7:14 am

Garth,

Have you noticed that almost every major stock index in the world is down 10-20% YTD. Except for the DOW which is only down 1.46% and the S&P 500 down 4.42%. How can the U.S. be pricing in anything close to chronic slow growth much less a technical recession with such a paltry correction?

There is a reason retail investors have left the US markets in droves and it is being run by HFT. Perhaps that is part of the problem. The rest of the world is pricing in something the U.S. is either oblivious to or some form of market manipulation is taking place.

Simple answer: US corporate profits, with a significant portion from global operations. — Garth

#47 blase on 09.21.11 at 7:23 am

Garth,

If the bond market determines interest rates, then why have Japan’s rates been at near zero for forever? Just wondering why the Japanese model wouldn’t be replicated here.

Don’t confuse bond market yields and central bank rates. — Garth

#48 David B on 09.21.11 at 7:28 am

Breaking News ….. Well kinda of as I and other said this a few short years ago!

Home Forecast Calls for Pain
Prices to Stumble Through 2015, Economists Say, W

BY NICK TIMIRAOS
Economists, builders and mortgage analysts are predicting the weakened U.S. economy will depress housing prices for years, restraining consumer spending, pushing more homeowners into foreclosure and clouding prospects for a sustained recovery.

Home prices are expected to drop 2.5% this year and rise just 1.1% annually through 2015, according to a recent survey of more than 100 economists to be released Wednesday. Prices have already fallen 31.6% from their 2005 peak, as measured by the Standard & Poor’s Case-Shiller 20-city index.

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

So Canada are y’all really safe with your Canadian Shield?

#49 Moneta on 09.21.11 at 7:29 am

Arseneau of National bank say Americans have to pay 20% of their incomes for private health care.

Correct me if I’m wrong , but in America isn’t interest on a mortgage tax deductible?

Seems like a wash to me.
———–
Baloney! More than 40% of Americans are not paying for any health care whatsoever… medicaid and medicare.

Just another analyst grasping at straws. Just another proof that the bottom 90% of the population does not exist for bankers.

When they start to look for far fetched arguments, you know things are not looking good.

#50 bigrider on 09.21.11 at 7:37 am

#123 Maxamillion from yesterday- I couldn’t agree with you more. My question to renovate or not was simply to ellicite reaction from the blog which, seems to have been successful given the large number of responses. I have no intention whatsoever of renovating my home simply because someone tells me it’s “dated”. And by the way, arborite counter tops are strong enough to hold up any kind of plates, pots and pans..stone not required.

#125 penpal from yesterday (I think). yes 52 cents on the dollar return on a reno sounds about right..that’s why I don’t do it, like I said colossal waste of money.

#51 Aussie Roy on 09.21.11 at 7:42 am

BobtheHunter on 09.21.11 at 1:46 am

I’m have some real trouble finding a home in Toronto in my price range of $500K in the neighbourhood that i want that is in and around that range. So not sure what ‘weathering for sale signs’ you are dreaming about but in my neighbourhood for sale sign are up longer with the Sold banner then the original For Sale sign. I guess at one point prices will come down a bit and you will be patting yourself on the back saying ‘I told you so!”. Good luck with that. I do admire your consistency even though you have more pie on your face than a fat lady has in her fridge. Unemployment not interest rates is what dictates supply and demand for goods. Dude that is basic economics! So far that massive 7% unemployement rate hasn’t cooled the real estate market and probably won’t. Prices will go up and down but i guess you haven’t bothered to look at a chart of home prices for the past 50 years. Tell my dad that bought his $750K home for $50K 25 years old that prices are gonna crash.

…………………………………………………………………

Compare house prices to incomes during the past 50 years and you to will realise current prices are not in line with historical averages, presuming you can look at 2 data points at the same time.

A chart of prices alone means nothing, try doing a value matrix based on rental yield, annual HH income and then compare this to current average prices. Its called Math.

Dude, historical value versus current price is basic asset price analysis. Not sure your understanding of economics is much of a basis to support your claims.

…………………………………………………………………..

I have an open question to all.

Why is it so many refuse to see the link between house prices and household income?, when all known bubbled markets could have be identified before they burst by using this simple measure.

My gut feeling is that over the past 10 years or so incomes have not kept up with house prices so many think this time period is the only one relevant today and into the future. Even though history shows us prices are supported by wages and do return to an affordable multiple. Some still bet the house on this disconnect between prices and wages won’t stop but continue to grow.

To the delusional – History is important and the out come will not be different this time. The only question is when and how long it will take for people to say, “House prices are supported by wages, not emotion and debt”.

#52 Moneta on 09.21.11 at 7:42 am

Linear thinking at its best. A reflection of our me, myself and I society. Or better yet, the self made mantra.

Considering that most of the added value consumer spending is being done at the top 10-20% of the population, a tightening of their purse strings would be disastrous for the bottom 80% as most are just making ends meet.

This would mean a lot of Canadians not being able to make their mortgage payments.

For some weird reason, most people at the top just can’t seem to grasp how tight people really are.

#53 yorel on 09.21.11 at 7:52 am

#27
“humanity has been here for millions of years”
Ah, no.

#54 penpal on 09.21.11 at 7:59 am

@ #5 Marco

Great post! Thanks for taking the time to inject some objective reality into this discussion.

Contains similarities to my situation and like you, I can do math and understand the importance and signiigance of having unencumbered capital.

Your ‘owner’ partner is typical, I think, of Canadians that have some equity in a now expensive home due to the RE bubble inflating (unreasonably quickly) and swelling their net worth.

However, I think a great number of these folks have already spent this ‘faux windfall’ thru home equity loans or refinanced to liberate this ethereal value to spend or maintain liestyle (read spend).

This has also boosted economic activity on which their own good fortune (read higher home prices) rests in a kind of circular economic fashion.

But, as Garth points out, the market “giveth” and now is about to “taketh away”.

Tom’s smugness and myopic “sense of isolation” from events external to his own personal small world, is typical of most Canadian households, especially in his income bracket, IMHO.

Again, thanks for a real-world example of the delusion.

#55 penpal on 09.21.11 at 8:08 am

@ 326 Waterloo Resident

With assumptions like that (avg income $300K in Toronto), no wonder your “predictions” are so outlandish.

Do a little research before you post and couch your opinion in that reality.

As a Realturd, your credibility is already almost nil.

Your post / rants further adjust that credibility substantially downward.

#56 tomohawk on 09.21.11 at 8:11 am

@37 BobtheHunter
“…Tell my dad that bought his $750K home for $50K 25 years old that prices are gonna crash. …”
Okay, let’s say it doesn’t crash. Over the last 25 years inflation has roughly doubled prices (i.e. $1 in 1986 is worth roughly $2 in 2011). So in 1986 dollars his home went from $50K to $375K. Maybe he was smart and got a fantastic deal, but if he didn’t … Do you think this is sustainable? At the very least can we agree that the house is unlikely to go up another 15x over the next 25 years? That would make it over $10,000,000 and who is going to be able to afford that?

#57 jess on 09.21.11 at 8:25 am

ethical oil ads

All the extractive industries should be more transparent. Why are so many of these in secrecy jurisdictions?

“Cardin-Lugar provision or Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that extractive companies listed on U.S. stock exchanges publish the payments they make to the U.S. and foreign governments. U.S. implementation of EITI will extend that coverage over non-listed companies who are drilling or mining in the United States. The European Union is expected to propose similar legislation for listed and non-listed companies next month.

“This strategic and timely commitment demonstrates that mandatory oil and mining reporting rules and EITI are a complementary package to ensure accountability in the oil, gas and mining sectors,” said Munilla. “Not only does this package cover listed and non-listed companies, the EITI process will ensure that the data is communicated to the public on a regular basis. We salute the United States’ leadership on openness in the energy and minerals sector and call on other resource rich developed countries like Australia and Canada to make similar commitments.”

Piping profits: the secret world of oil, gas and mining giants
19 Sep 2011

Ten of the world’s most powerful Extractive Industry Giants with declared revenues of $1.8 trillion control 6,038 subsidiaries, with over a third (2,083) incorporated in Secrecy Jurisdictions.

WASHINGTON, D.C. — The international civil society coalition Publish What You Pay welcomed today’s U.S. commitment to participate in the Extractive Industries Transparency Initiative (EITI) to increase transparency in oil, mining and gas revenues collected from U.S. federal lands.

President Obama made the commitment at the formal launch of the Open Government Partnership (OGP), an initiative of governments and civil society to advance open government around the world:

“We are continuing our leadership of the global effort against corruption by building on legislation that now requires oil, gas and mining companies to disclose the payments that foreign governments demand of them,” said President Obama. “Today I can announce that the United States will join the global initiative in which these industries, governments and civil society all work together for greater transparency so that taxpayers receive every dollar they are due from the extraction of natural resources.”

More than 35 countries participate in EITI, which requires companies to publish payments made to governments in exchange for oil, gas and minerals, and governments, in turn, to publish what they receive from companies. However, the U.S. is the only G8 country to commit to joining the initiative, and with Norway, only one of two developed countries.

“At a time when budgets are tight, a U.S. Extractive Industries Transparency Initiative will shed light on billions of dollars that belong to U.S. taxpayers,” said Isabel Munilla, Director of Publish What You Pay U.S. “This landmark commitment will build on the Cardin-Lugar provision of the Dodd-Frank Wall Street Reform Act and deliver transparency on the approximately $10 billion in annual revenues collected by the U.S. for oil, gas and mineral development on Federal lands and offshore.”

Last year, the Cardin-Lugar provision or Section 1504 of the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated that extractive companies listed on U.S. stock exchanges publish the payments they make to the U.S. and foreign governments. U.S. implementation of EITI will extend that coverage over non-listed companies who are drilling or mining in the United States. The European Union is expected to propose similar legislation for listed and non-listed companies next month….

http://www.publishwhatyoupay.org/resources/publish-what-you-pay-welcomes-us-pledge-adopt-domestic-oil-and-mining-transparency-initiat

#58 Live Under Your Means on 09.21.11 at 8:27 am

#38 TheFirstRick on 09.21.11 at 2:10 am
Livin’ in a shed in Vancouver. LOL!!!!!!!!!!!!!!!

http://vancouver.en.craigslist.ca/van/apa/2609138377.html
……………….
Several yrs ago a very young chap looked at our shed out back and said it was bigger than his lodging.

#59 Mr. Lahey on 09.21.11 at 8:36 am

I find it hard to believe that Tom’s neighbours are making from $150-250k a year and live in homes that are valued between 500-800K. This price range will barely buy you a tear down in most decent Toronto hoods. A decent home is north of a million in any sought out neighbourhood. $500k is entry level in almost any neighbourhood in Toronto that is not considered a ghetto. Something about this tale strikes me as strange…

#60 BrianT on 09.21.11 at 8:53 am

#53Tom-No point getting into the math on this one-buying a TO house for 50 in 1986 and selling it for 750 in 2011 is very far fetched-maybe he could tell us the address (or at least the street). The huge run up was from 1972 to 1989, not from 1986 on.

#61 househornyhousewife on 09.21.11 at 8:55 am

Garth,

Speculation aside about how much he could get if he sold his house now vs later etc.., I don’t think that Tom is in a dire situation simply because he owns a home.

He has a $350,000.00 mortgage and a household income of $175,000.00. Absolutely nothing wrong with this. What Tom doesn’t realize is that there are many other home owners (some of whom live in his neighbourhood, I’m sure) who have no equity built up in their home and who can barely make their mortgage payments. These are the people who may have to default on their mortgages, forcing us taxpayers (who indirectly insured them through the CMHC) to bail them out.

Tom needs to realize that just because HE won’t have to default on his debt it doesn’t mean that the rest of the world is in the same situation. It definitely isn’t and as you say, he is not isolated so when others begin to flounder, it will come back to him in the form of higher income taxes and municipal taxes, less government services, more layoffs at his workplace, general strikes and service interruptions .. you know, all of that recession stuff … HELLO !

HHHW

I did not suggest he is in dire straights – just naive. BTW, I do not anticipate a wave of defaults in Canada, but a lot of forced selling. The inevitable result will be the same – falling valuations, which is where Tom’s surprise will materialize. — Garth

#62 Smoking Man on 09.21.11 at 9:02 am

Why am I such a prolific predictor of things?

I observe things that most people never see till of course it’s point it out.
Example why is it that whenever we look at ourselves on an elevator mirror we look horrible compared to a regular mirror. Why is this? Lighting I guess but we all feel the same way, and unless it was pointed out you never even think about it. Other than on an elevator looking at the mirror you think to yourself I like sh!t today

Garth will like this link http://www.YouWalkAway.com

#63 Stevenson on 09.21.11 at 9:04 am

#17 Tom

You asked who would pay 700K to live in Toronto? Where else would you pay 700K to live at? A cardboard box in Vancouver or simply somewhere in the timbaktoo. There is a reason why people pay good money for the Cities farmer Tom.

#64 Stevenson on 09.21.11 at 9:11 am

People keep on bringing up the idea of Real Estate slowing down, prices falling, and listings sitting on the market forever. Houses in downtown are still being sold left and right with multiple offers in September. Houses downtown are still having multiple offers and bidding wars that drive prices 150-300K over asking price(which was fair to begin with)

The construction of new condo properties is endless and they are selling like hot cakes. These are 500 million dollar constructions taking place…. What kind of idiot would you have to be to assume that they did not do their research on the future of the real estate market?

So, buy one. Tell us how it works out. — Garth

#65 Keith in Calgary on 09.21.11 at 9:12 am

I “blew up” the housing bubble of one of my employees last night over a cup of coffee in the office. He said that he and his wife were really happy with their new condo they took possession of 3 months ago, and that it felt good not to have to throw money away on rent anymore.

So, being the pragmatist that I am, I asked him to further explain as I “didn’t understand”…….as I am just a stoooopid renter like he once was……heh.

Said he paid $1,100 a month in rent for 3 years and got nothing back, just threw that money away, so I asked him his interest rate (3.85%), principal amount, amortization (30 years), and plugged everything into the RBC mortgage calculator, as he watched me in amazement, like I was some rocket scientist discovering the moon. Apparently he didn’t know that you could figure this stuff out for yourself and that realtors and mortgage brokers knew it all and were really the only experts that you should trust.

Turns out that his principal balance after 3 years of payments declines by $6,000 as his payments were the same as rent…….so he thinks he is ahead by $6,000……then I asked him what his condo fees are…..OOOPPSSS…..turns out he is now $5,000 in the hole after 3 years……then I asked him what his taxes are……now he is $9,000 in the hole…….”what is your insurance” I say……now he’s$10,000 in the hole…..heh…..so then I add, now what about utilities ?

He said “stop I get it”…….

Then I said who do you call if you need to fix something………..

Ever seen the bloood drain from someone’s face after you’ve just kicked them in the nuts with a steel toed boot ?

#66 Moneta on 09.21.11 at 9:14 am

Right now I’m reading the Book There’s No Place Like Home.

It describes LTC in Ontario today. We are currently at the peak ratio of 5/1 workers per retiree and CCAC is already suffering from underfunding. Imagine when that ratio falls to 2.5 workers per retiree. A lot of people don’t seem to grasp that there is no extra money. It has gone into real estate and cars that will depreciate.

Forget it, you can’t expect the young ones to pay more CPP to fund your retirement, pay more taxes to pay for your LTC facilities, pay for rising tuition fees and buy your overpriced houses. It’s not going to happen.

Government is already trying to force families to become caregivers and will probably push this on us in the form of tax breaks. Of course, this will make it harder to have 2 breadwinners and women will probably more often than not end up caring 24/7.

So when I see so many households buying luxury homes as their ticket to a great retirement, I cringe. 30 year old houses with 30 year old kitchens sell at a 30-50% discount on square footage. So if you intend to live long term ion your home, your new kitchen and other renos will have completely depreciated and will not help fund your LTC.

I just don’t understand how so many people in their 50s can be tacking on so much debt at a point in their life when they should be mortgage free and planning for not so fun things to happen. It’s pure delusion. It just seems like they are refusing to look at what is in store for them in the future. Foreger clinging to their youth.

Good luck Canada!

#67 Steven Rowlandson on 09.21.11 at 9:22 am

You can’t beat the market. The value of your home will be determined by others, not you. It is the buyers who always end up setting prices, not the owners or the sellers.

This is most definitely a tail wagging the dog scenario!
Based on the above doctrine any looter mascarading as a buyer could buy anything for next to nothing and the vendor / owner would have no say in the matter.
A market must be a two way street with owners deciding what they want for their property and buyers deciding what they want to pay and a financial tug of war between the two until a deal is done or not on terms both can live with.
When I go into a store to buy a pair of blue jeans for 19.99 I don’t tell the cashier that I am only going to pay 5.99 and you have no choice in the matter. I would be told to leave the blue jeans on the counter and to leave the store. When I purchased a few silver maples did I tell the vendor that I would only pay the face value of the coins? No! I asked how much and or paid the specified price if I wanted to buy the coins. That is not the buyer dictating the price, that is the buyer respecting the rights of the owner of the goods that is for sale. If I thought the price to be too high I would shop around, wait ,save up the extra funds or go with out.

Real estate pricing is wholly subjective. Houses fluctuate in value, determined more by emotion than economic reality. What buyers are willing to pay, not what sellers ask, ultimately determines pricing. Sounds like you need a little more experience. — Garth

#68 Just(not)AnotherSheeple on 09.21.11 at 9:28 am

Will be nice if Garth can provide Tom’s (or any other future subject) employment – even only like private sector or public sector.

According to Stats Canada here – http://www40.statcan.ca/l01/cst01/FAMIL106A-eng.htm
in 2009 they were 1,072,990 families with family income above $150k

And according to this – http://www.statcan.gc.ca/daily-quotidien/110909/t110909a2-eng.htm
in Aug. 2011 they were 3,540.800 people employed in the “public sector”

So I wonder how these two numbers overlap (the millions of teachers, health care workers, police, hydro and all other government employees) and will die to know if Tom’s family is sucking from the public t…?
As he and his coworkers are so invulnerable!

#69 fancy_pants on 09.21.11 at 9:32 am

you think MC gives a rip about this?
http://www.cbc.ca/news/canada/story/2011/09/21/inflation-canada.html
no way. it’s all about the exchange rate for the puppet master.

#70 cory on 09.21.11 at 9:33 am

#59 Mr. Lahey

Garth said that Tom lives in a “wasteland suburb” of Toronto not actually in Toronto. If that was say Mississauga that 700K house would be quite decent.

#60 Brian

Good point Brian. My parents bought a new build house in 1982 in Mississauga. Only about 1650 square feet. That house is now selling for about $475K. So I don’t know where you would have found a house for $50K that is now worth $750K.

#71 Moneta on 09.21.11 at 9:35 am

Forget it, you can’t expect the young ones to pay more CPP to fund your retirement, pay more taxes to pay for your LTC facilities, pay for rising tuition fees and buy your overpriced houses. It’s not going to happen.
——
They are going to squeeze the lemon but it won’t work.

#72 cory on 09.21.11 at 9:35 am

#59 Mr. Lahey

Garth said that Tom lives in a “wasteland suburb” of Toronto not actually in Toronto. If that was say Mississauga that 700K house would be quite decent.

#60 Brian

Good point Brian. My parents bought a new build house in 1982 in Mississauga for 96K. Only about 1650 square feet. That house is now selling for about $475K. So I don’t know where you would have found a house for $50K that is now worth $750K.

#73 Moneta on 09.21.11 at 9:37 am

Tom needs to realize that just because HE won’t have to default on his debt it doesn’t mean that the rest of the world is in the same situation.
——–
He also assumes that he’ll always have the same income and won’t be forced to take something offering 50% less or losing his job and being more than 52 weeks unemployed.

#74 Live Under Your Means on 09.21.11 at 9:38 am

We had a smaller Steffes’ ETS installed yesterday upstairs. So far it has costed us about $8K (including a new electrical panel. In NS, homeowners cannot take advantage of ‘time of day rates’ unless you install an ETS or, IIRC, a heat pump system (is that the correct term?).

We paid cash for all & expect our ROI will be 4 years.

#75 penpal on 09.21.11 at 9:41 am

@ # 18 T. O. Bubble Boy

Perhaps you could expand on the quality of the neighborhoods these properties are located in.

To my knowledge they are all formerly working class / middle class areas, and are essentially pricing for land value (need to pay to demolish and haul away, tipping fees, double land transfer tax in GT, etc. totaling another 60K easy).

To my mind, patently absurd.

#76 timo on 09.21.11 at 9:43 am

http://amvona.com/newsstream/investing/24288-euro-bank-run-shifts-to-insurance-companies-as-lloyd-s-of-london-pulls-cash-from-european-banks.html

Lloyd’s of London has decided to pull peripheral Euro bank deposits.

But I thought things were looking better?

http://www.bnn.ca/News/2011/9/21/Canada-August-inflation-up-to-31.aspx

Prices grew by 0.3 percent in August from July, greater than the forecast 0.1 percent advance.

Damn prices up but will wages follow? It will be interesting to see how many exporters start crying the blues at the higher cost of doing business in Canada.

#77 penpal on 09.21.11 at 9:48 am

@ # 64 Stevenson

So you were the guy buying Nortel at CAD $ 124.00 I guess?

Your post was a joke right?
Please tell us you were being sarcastic.
Please….

#78 penpal on 09.21.11 at 9:51 am

@ #65 Keith in Calgary

You are a mean bugger, aren’t you?

I like your style.

I’ll bet the silence was deafening.

Did he faint at all?

#79 jonni on 09.21.11 at 9:52 am

# 43 Dreadmonton

Golly Geeeeeee …. I remember that area … Inglewood /Westmount. The Sahara Theatre, Westmount Shoppers Mall …. now a Heritage Area you say …… shesssssssssh .. guess that makes me an OLD Fu … FU … Fu …. Fu …. FOSSIL

#80 Jared O'Neil on 09.21.11 at 9:53 am

Tom, cutting back on family vacations and cars will result in one thing: divorce. Maybe not right away, but your wife will be unhappy that her perfect world is gone, and blame you. first, you’ll get a little less action when the lights go out, then none at all. She won’t blame the money, but she’ll find other parts of you to blame. So, you’ll go on vacation, buy a new car… and default on your mortgage in 4-5 years.

#81 disciple on 09.21.11 at 9:55 am

The peak has been reached, perhaps slightly breached,
Real estate insanity knows no bounds, but F and C have no more rounds.
For the idolatry of simple shelter, the indebted masses ensnared in a huge welter,
Of broken hope and shattered dreams, families have lost their vision it seems.
But I have hope and I have belief, I have confidence that the truth will eventually bring relief.
And the prophecies we share together here, will guide us to the other side without fear.
Where trusted rooftops and welcoming walls, decorated with windows and little girls’ dolls,
Will once again contain bright young minds, and magically wonderful ideas of all kinds.
I will be what I will be. This is the true meaning of the name of God.

#82 penpal on 09.21.11 at 9:56 am

@ # 66 Moneta

I hear ya.

I cannot believe that people are this deluded either.

Maybe it’s a corollary to the “Keeping up with the Joneses”, whereby an “if they can do it, so can I” mentality presides.

I guess when the [email protected] agrees with and facilitates your delusion, it somehow becomes real.

“Living the dream”, indeed.

#83 disciple on 09.21.11 at 10:11 am

The year was 1984. I still have the image burned into the retina in my third eye (arrogant minds like yorel take note) My dad, in his late thirties, just returning from the bank, laid down his briefcase on the kitchen table, and announced to us that he had just paid off the modest shelter in a Toronto suburb we called home. Only took 5 years! Original cost was roughly $50,000. Wages were roughly what they are today. Even with no debt or mortgage, those were rough times for our family, as plant closure after plant closure signaled vast changes in the industrial landscape and the onset of life-changing technologies were on the horizon. 3-day-old leftovers were “normal” for me. That’s probably why now I don’t even eat 1-day old leftovers…it’s a psychological thing, and it’s a good thing my wife is not the type to Tupperware anything, freshly prepared daily rations for me now, unless it’s spaghetti or lasagna or a casserole which actually tastes better after a day or two in the fridge.

Anyways, that 50K house in Toronto in the 80’s is not that far off. You just have to be old enough to remember.

#84 Brodie on 09.21.11 at 10:30 am

Garth, I completely agree with what you’re saying. What I’m not sure about is what you’re not saying. The thing that’s missing is “what’s old Tommy-boy to do?” Sell his house and rent? Stop spending? Take the kids out of piano, ballet and karate lessons?

I would love to hear some foolish advice from you that Tom could follow instead of you just ‘punking’ him (as amusing as it is).

#85 Mr. Lahey on 09.21.11 at 10:44 am

#62 Smoking Man

Why am I such a prolific predictor of things?

Hey Randy, the oracle has spoken again…

#86 disciple on 09.21.11 at 10:45 am

I think that the biggest obstacle for most in understanding the inevitable and imminent carnage in the overall Canadian RE market (I know there are local variables) is the immensely popular belief that house prices will always go up. It is a simple fact of mind control. You have been conditioned to believe this, even though it is far from true. They don’t. Repeat. They don’t. Repeat. They don’t. Not when you compare with real wages. Time to wake up to reality. You will not escape. But you can prepare.

#87 Young Old fart on 09.21.11 at 10:49 am

#39Carp on 09.21.11 at 2:18 am
….I’m teaching my kids……. they understand they get 5 bucks a week, invest 2 bucks and can accumulate 3 per week for legos…..

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

There is proof of rising costs right there. 40 years ago my siblings and I received an allowance of 5 CENTS a week. We saved all of it (mostly ;) for our holidays in the tent trailer in Penticton once a year….

#88 BrianT on 09.21.11 at 10:53 am

#70Cory-In the Niagara region (St Catharines, Welland, NF) houses are no more valuable than they were at the 1989 peak-many quite a bit less. This was 22 yrs ago-no one at all would have predicted this in 1989.

#89 Kayak Freddy on 09.21.11 at 10:53 am

Garth – your providing an incredible insight into “what” may transpire. Advising those to take actions with a veiw towards caution – noble of yeah!

What I don’t understand is why some in here go ape over someone else’s financial decisions. It’s all relative – paper gain – paper loss, you still need a roof over your head. Who determines what is the “right” price. Most in here have a fixed value and can’t see outside the box – so a $5 burger may seem absurd to some – while others will always view it as a better burger and they are worth it!

And what’s with the “I need to move at a drop of a hat, so renting makes sense”. What are you people, hobo’s? Gotta catch the next train out of town. You can live within 80-100km of your work and that is a normal part of life (renting or buying).

I rented – and in those 6 years I never desired to move just because I could – but I did spend $86,400.00 to a slumlord who was only good at picking his nose.

Bottom line – we need shelter, plain jane.

My final beef is when those in here claim that co-workers, friends state that real estate only goes up – BS! I have never-ever come across anyone making such a bold statement. And why does that come up – who cares if you rent – own – sqwat – I find that bizzare as if a co-worker asked me what my account balance was – buzz off is all I would have to say – end of story.

There are more important things in life then worry about some stranger holding onto a bunch of lumber and bricks. And if you claim markets will crash and burn – this may just be the once in a lifetime to purchase scads of homes for pennies on the dollar and build your own wealth. The old saying goes – one person’s loss is anothers gain!!

[rolling eyes as I sign-off]

#90 george Klein on 09.21.11 at 10:55 am

LUCKY? Yea we are real lucky. I was at Board of Trade seminar yesterday. Heres what I heard.
Canadian Govt. says we are in good shape comparewd to the rest of the world. The speaker said of course we are.
Canadian taxpayers pay the following. Municipal Tax, Provincial Tax, Federal Tax, hst on everything in Ontario, 200% tax on liquor, beer and wine, +39% tax on gasoline for a vehicles, capital gains tax on investments. We are the highest tax burden nation on the planet. Are inflation just went up to over 3.5% while our wages have flat lined. PEOPLE WE ARE SCREWED.

#91 dddd on 09.21.11 at 10:56 am

#74 Live Under Your Means on 09.21.11 at 9:38 am
We had a smaller Steffes’ ETS installed yesterday upstairs. So far it has costed us about $8K

We paid cash for all & expect our ROI will be 4 years.

——————————————————-
as a mech eng i often an very skeptical of many of these systems…

8k over 48 months is 167/month clear SAVINGS
unless you are spending over 500/month on hydro EVERY month i highly doubt you will come close this level of savings

my parents (in ns) paid dearly for a heat pump and storage etc., 20k, in their new house and when i ask if there power bills have gone down they say “a little, i think”

remove heating and power bills are 50-90/mo for a house in van (5 comp always on,big tv etc) – no nat gas for you bluenosers? – tip fing a tree cutter guy who needs to unload wood and heat is free

#92 Mr. Lahey on 09.21.11 at 10:59 am

#83 Disciple 50k homes in the GTA in the 80s?? I am old enough to remember and I don’t remember 50k homes in the GTA. You must have been on the extreme fringes of the GTA at best. Can you give us the neighbourhood per favor. You do mention that the original price was $50k and that it had been payed off after 5 years which put the buying date in 1979.

#72 Corey My bad, Tom does say it is in a “wasteland burb”.

#93 Moneta on 09.21.11 at 11:00 am

We saved all of it (mostly ;) for our holidays in the tent trailer in Penticton once a year….
——
5 cents 40 years ago?

You saved it because you couldn’t buy anything, LOL!

#94 Kilby on 09.21.11 at 11:39 am

#87 Young Old Fart.
50+ years ago we vacationed in Penticton in a tent trailer. Got 50 cents a week allowance from our very practical parents. Sure the 5 cents isn’t a (used to walk 20 miles to school every day memory?)

#95 O.R. on 09.21.11 at 11:41 am

“You’d be surprised how fast that $700,000 pile of bricks can once again be worth $550,000. Or less. Your loss of net worth would be $150,000 or more.”

I keep thinking your thing about a paper loss also applies to gains. He paid 550k for the house, if it drops back to 550k, he didn’t lose money, he simply didn’t make any. It’s virtual, if the prices come down and you haven’t sold, not having crystalized a paper gain doesn’t make that a loss.

Most of the “networth” that people risk loosing by not selling their RE is networth they never really worked for, just profiting from stupid over-appreciation in this deplorable RE bubble. Of course, buying today is crazy, but that’s another story.

I’m in a similar situation. I paid my less than half what people would pay for my condo today. I’ve been thinking of selling, renting, and re-buying something (maybe better) after the prices return sanity. I’ve been considering this option despite the fact that I’m comfortable where I am, have no need to move and would do fine without inflating my networth by harvesting this bubble. And say what you want about RE, there are also risks to selling: Never finding something “as good”, that bubble inflating another 5 years to pop while you rent, shelter insecurities, pricing inflating another 50% before hitting this fabled “very harsh correction of 30%”, etc.

In the end, selling to inflate your networth despite reasons one might have to not sell is just… greed. Assuming the correction comes somewhat soon, that greed make total sense mathematically, but I’m still on the fence whether it’s worth the hassle (for me personally at least).

#96 KT604 on 09.21.11 at 11:43 am

Hi Garth. I know this isn’t really your thing, but is it possible to somehow connect me with #5 Marco? I’d like to talk to him about his green energy venture.

I can even arrange a room. — Garth

#97 Wasteland Tom on 09.21.11 at 11:46 am

Wow – cool – my story got posted :) Lots of great opinions and comments, all valuable, and I definitely take the comments about a myopic view to heart – I admit I don’t know what position others in our $500k-$800k home markets are in, but I don’t think it’s that much different than where we are. My neighbours are ALL working professionals in banking, insurance, engineering, medicine, etc.

As some have pointed out, $175k combined income is NOT a lot in Toronto. In my line of work, after a 4 year degree, starting salaries are ~$70k. Two income earners in this field make $140k right out of school. I smile at Garth’s comments that I’m a rich guy.. Definitely not. We drive 2 and 6 year old domestic cars, not BMW’s (though admittedly some neighbours do have those – there’s a Z4 and X5 on the street) and don’t have a ton of extra cash. We save around 30% of income and put the majority of raises towards additional savings.

Would I be upset if the housing market drops to $550k, or $400k, or lower? Who wouldn’t! But life will go on – we didn’t buy the house as an investment – we bought it to raise our family, in a nice, quiet, safe area. A senior colleague in 2002 told me I was crazy to buy a 2700 square foot house on a 45 foot lot in Markham for $320k (our first home), but since then what’s happened? I got to enjoy almost 10 years over living in a house while he’s still living in a rental 1000 sq.ft. condo. You can’t put a value (well, you could try..) on this – sure, RE could crash and burn this year, next year, or next decade, but we all have to live our lives and not defer things indefinitely due to fear.

That all said, if I was graduating today, I’d be renting. But since I already have the house, can afford the payments, & have a secure job that’s relatively immune to downturns in the economy, I’m staying put, and accelerating my mortgage payments whenever I can.

BTW GTA doesn’t imply Toronto proper – we’re about 20 minutes north of city limits, where a $700k house still gets you something half-decent (I admit we’re lucky that our jobs are also north of the city, meaning 20 minute commutes).

Thanks again for all the comments, and Garth – for opening my eyes to what events would transpire if this realmaggedon comes to pass. I know you’ve been preaching this for several years and I’m not discounting the possibility of this happening – there is a lot of data supporting it, particularly in some of the big cities. Let’s home the government wakes up and can somehow engineer a soft landing out of this!

#98 Stevenson on 09.21.11 at 11:55 am

The Great fool is also the fool who DOES NOT follow. If everyone is running one direction there must be a reason. Don’t stand around, look stupid, and get trampled over. Opportunities don’t come around all the time and it looks like some of you missed it.

Garth – I did buy one 2 yrs ago pre construction at the Ritz Carlton Toronto and you know what? I have covered all my costs and able to take in a hefty amount of tax free income if I sell today. I won’t though because unless they decide to tear down the city hall you can’t buy my location.

If I did listen to things from people here with wishful thinking…. I would still be forking out money to cover for someone else’s mortgage and lose on the opportunity costs too.

#99 wtf????? on 09.21.11 at 11:58 am

#35…np…..here here…well said!

#100 Stevenson on 09.21.11 at 12:01 pm

House bought in 2008 – 690 000

House sold in 2011 – 970 000

Damn…. That worked out really bad for them didn’t it? Did I mention it’s tax fee gain? and with Canada’s tax system… needless to comment more.

Where else can you make that kind of money in 3 years? Oh wait they could of rented and made payments to 0 equity instead.

#101 Dontcallmeshirley on 09.21.11 at 12:04 pm

ZWB is a covered call selling, bank shares ETF run by BMO. Pays monthly. Annual yield is 10%+.

#102 Mr. Lahey on 09.21.11 at 12:13 pm

#54 Pen Pal

A great encapsulation of the state of affairs in many Canadian homes. I particularly like your word liestyle. Great post(s).

#103 Mr. Lahey on 09.21.11 at 12:16 pm

#63 Stevenson

There is a reason why people pay good money for the Cities farmer Tom.

Correction in order Stevenson. No #17 was farmer Tim…

#104 morry on 09.21.11 at 12:18 pm

@Marco from the bestest place on the smallest part of earth

You’re smoking too much BC Bud, bud. Your fantasies betray you to be someone who wastes too much time in wireless coffee shops nursing 3$ coffees.

Back in Feb in this pathetic blog of Turner’s I voiced the opinion that I thought and hoped that there would be a correction of 20-25% in the housing market in the GVRD. It didn’t happen. It has gone up by 25%. Luckily my son, who ignored my predictions, put a down payment of 25% on a 329K town home. (2 bdrms + a den). They moved in on the weekend. His two neighbours bought in 4 months after he did. They paid 359K. My son is smiling big time! If there is to be a near term correction of 20-25% he is still ahead, and if it steadily rises all the better!

Oh – his mortgage to the bank? $841.00. ( includes ppty. taxes) His previous rent for a dingy 1 bedroom basement suite … 990.00!

And you know what his landlord said when he had heard about the town home… “Congratulations Kevin, you got a great deal and you are no longer giving me the money, but you are now building EQUITY.” He gave him an expensive bottle of Bordeaux as a going away present and for being such a great tenant.

I enjoyed the wine.

PS One of the town homes is being rented out for: $1650.00 a month. Probably to a wise guy like Marco.

#105 morry on 09.21.11 at 12:27 pm

… Bernanke’s “Operation Twist.” will most likely insure that my sons will enjoy very low mortgage rates for then ext 5 years. During which time their properties will continue to rise rise rise. Who would have predicted this?

You have much to learn. The beneficial effect of low rates is gone. — Garth

#106 neo on 09.21.11 at 12:29 pm

Neo wrote:

Garth,

Have you noticed that almost every major stock index in the world is down 10-20% YTD. Except for the DOW which is only down 1.46% and the S&P 500 down 4.42%. How can the U.S. be pricing in anything close to chronic slow growth much less a technical recession with such a paltry correction?

There is a reason retail investors have left the US markets in droves and it is being run by HFT. Perhaps that is part of the problem. The rest of the world is pricing in something the U.S. is either oblivious to or some form of market manipulation is taking place.

Simple answer: US corporate profits, with a significant portion from global operations. — Garth

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

That’s sort of my point. All this time we have been told that the domestic situation doesn’t matter because American Corporations earn 50-70% of their profits overseas. Now that overseas markets have dropped 10-20% YTD in anticipation of a recession or at the very least anemic growth, what is the excuse now? You can’t have it both ways. The US Stock market has decoupled not only from their own economy but from the economies of the rest of the world. There isn’t a rational explanation for that.

#107 prairie gal on 09.21.11 at 12:34 pm

Yeah, our household income is over $200,000 (gross). Do we feel rich? Nope. This is in Regina. We rent. No kids. Don’t plan on having any.

A job change will shift our hh income to north of $300,000 by early 2012. Will we buy? Nope. Rent is still $1200 per month. Plenty for the frozen prairie. Don’t plan to stick around Regina past four years so what is the point?

#108 jess on 09.21.11 at 12:39 pm

Assassination Deals Blow to Peace Process in Afghanistan
Burhanuddin Rabbani, head of Afghanistan’s peace process was assassinated on Tuesday

#109 dddd on 09.21.11 at 12:50 pm

markham tom,

In my line of work, after a 4 year degree, starting salaries are ~$70k.

70k w zero experience – Do you work with ricky and julian??? seems high but it’s been a while since i started off in ont and i may just be out of touch (in 1990 engineers started at about 36k)

what 4yr degree pays like that?

#110 TaxHaven on 09.21.11 at 12:52 pm

So our economy depends on people taking frequent vacations and buying new cars…is that sustainable?

#111 Robert Dudek on 09.21.11 at 12:56 pm

The construction of new condo properties is endless and they are selling like hot cakes. These are 500 million dollar constructions taking place…. What kind of idiot would you have to be to assume that they did not do their research on the future of the real estate market?

What kind of idiot are you? Do you know how many construction projects were underway in Vegas when the bubble burst?

#112 Devore on 09.21.11 at 1:00 pm

#67 Steven Rowlandson

That’s a lot of words to express your economic ignorance. Buyers set the price. That is the power of demand. If a seller marks a price, and buyers buy, that’s the price. If buyers don’t buy, the price goes down. It is the buyer, the receiver of something, who sets its price, because he chooses to pay for it. (There are obviously exceptions where demand is inelastic, but those are the exceptions.)

In the market, money is the most marketable commodity (and that’s one of the biggest economic lessons). Sellers want your money. Therefore you have power sellers do not.

#113 Daisy Mae on 09.21.11 at 1:05 pm

More job losses….

CBC: “One hundred people are losing their jobs in the closure of the Cascades Inc. containerboard mill in Burnaby, B.C.”

#114 Devore on 09.21.11 at 1:11 pm

Put another way, it is the buyers who signal to the seller that he must reduce his price. It is the buyers who signal to the seller that he may increase his price. The buyers determine what something is worth to them, and choose to buy it. The seller may withhold a good/service at a lower price, but it is the buyers who determine whether it sells or not at that price, thus sending a signal that is must be lowered to clear. Sure, the seller gets to put a sticker with a price on it, but it is the buyers who determine how much it sells for.

What is the value of something if there are no buyers of it at the seller’s price? That’s what we call “mark to fantasy” (as opposed to “mark to market”) in the accounting world.

#115 Euro Girl on 09.21.11 at 1:17 pm

I have a complicated relationship with houses, loving taking care of them and decorating but resenting the long hours of “invisible” labour that go in housekeeping. I love houses with character and owning them fills a void ( having been cheated out of an inheritance home in several occasions. No I am not stupid; I just have criminal relatives) So while I think a roof over one’s head and a shelter from the storm ( physical or otherwise) is a great thing, is not worth the agony of being in debt and losing sleep over. When work is secure, prices reasonable and interest rates more or less stable, buying a house may be the best option, no cranky landlords, no surprise moves, no dragging the family from school to school. To buy a house under the brainwashing of HGTV, the pressure of the in-laws, or the narcissistic notion that ” I am worth it” is irresponsible at best and a call for disaster at worst.
Thanks, Garth, for shinning a light in the darkness and pounding some common sense into the readers of this ( sym) pathetic blog.

#116 overly imaginative user name on 09.21.11 at 1:19 pm

@ #97 Tom’s wasted

With that post you just proved the point of the day.

“$175k combined income is NOT a lot in Toronto. In my line of work, after a 4 year degree, starting salaries are ~$70k. Two income earners in this field make $140k right out of school. ”

I’m terribly sorry to burst your isolationist bubble, but $175k is actually more than double the 2010 median household income in Toronto (~$ 78K)
[ref.: http://www.trra.ca/en/reports/TorontoGenDemo.asp%5D
I’m not sure where you think that most households have two university educated income earners [ref. (2007)] http://conferenceboard.ca/hcp/Details/education/university-completion.aspx, or that most households have 2 cars in the driveway [ref. (2008)] http://oee.nrcan.gc.ca/publications/statistics/cvs08/chapter2.cfm?attr=0.
“…and don’t have a ton of extra cash. We save around 30% of income… ”
30% of post-tax on $175k is still over $30K a year, and you’ve owned a home for ~ 10 years. Did you say you still have a mortgage?

Dude, get some help before you decide to upsize again.

#117 Devore on 09.21.11 at 1:36 pm

Here in Richmond we just had a seller who tried to set a price. Listed at $1.5M, sold 6 months later $800k. Did he really live in a $1.5M house? No. Buyers told him to reduce the price, until he found one willing to pay $800k.

#118 Aussie Roy on 09.21.11 at 1:44 pm

Stevenson on 09.21.11 at 12:01 pm

House bought in 2008 – 690 000

House sold in 2011 – 970 000

Damn…. That worked out really bad for them didn’t it? Did I mention it’s tax fee gain? and with Canada’s tax system… needless to comment more.

Where else can you make that kind of money in 3 years? Oh wait they could of rented and made payments to 0 equity instead.

……………………………………………………………………

You are right that kind of gain is almost too good to be true, or should I say sustainable?. Personally those 30% pa price gains convinced me to sell all my investment properties in 2008/9.

Isn’t this cashing out the equity built up in your house one of the points of this blog?. Yes the winners are those who cash in not those who pour more and more money into 1 asset class, thinking its perfectly safe.

As you point out those who cashed out have done nicely but what does the future hold?.

Many countries seem to be dealing with the following senario?.. Why not Canada or Australia in the near future?.

House bought in 2009 – 970 000

House sold in 20?? – 690 000

Damn…. That worked out really bad for them didn’t it? needless to comment more.

Where else can you loss that kind of money? Oh wait they could of rented and made payments to 0 equity instead of -$270 000.

#119 Wasteland Tom on 09.21.11 at 1:50 pm

@109 dddd

You guessed it :) Granted, jobs aren’t as plentiful for new grads as they used to be,

@116 imaginative

You’re may be taking some statements out of context:

1) $175k may be more than the median income, but unless you already own a home, it doesn’t go far. Both statements can be true: $175k can be significantly over median income, and it can be not a lot of money; ie. it won’t buy you much in Toronto (ie. I’m not trying to say we’re not *relatively* comfortable compared to the median, but rather that in *absolute* terms this income doesn’t let us live like royalty by any stretch of the imagination, and I think other commenters are tending to agree).

2) I never said most families had 2 incomes – I was merely making an observation about my area, where a full 100% of the families on my suburban street are dual-income families. There are no single income earners in my area, nor would I expect there to be many, based on the price of housing vs average incomes. I also never said they all had 2 cars in the driveway – where are you extrapolating these statements from?

3) Yes, NOW we’re able to save 30% of post-tax income. When we first bought earlier in our careers we were saving zero. Salaries go up and we try to not increase our expenses, but rather putting away any additional income that comes our way. Also, we upsized, true – but we moved further out of the city – meaning that bigger house cost us the same as the one we sold (give or take fees, etc.). We’re staying put – no upsizing from here on out – so that’s good advice.

#120 Steven Rowlandson on 09.21.11 at 1:51 pm

Real estate pricing is wholly subjective. Houses fluctuate in value, determined more by emotion than economic reality. What buyers are willing to pay, not what sellers ask, ultimately determines pricing. Sounds like you need a little more experience. — Garth

Garth I do not need more experience . I am grateful for not having the experience of buying or selling real estate. If I was a seller I would not want to be dictated to by non owners and middlemen and as a buyer I also could do without the hyperinflated prices which I can not afford.
I Just don’t approve of the idea that owners or producers of anything have no say in the price of their product or property.
As a former stair builder I’ve worked for too many non profit businesses that were non profit because customers tried to dictate prices to their suppliers.
This is part of the reason why my pay couldn’t go up.
Lack of financial resources to make it possible to raise pay rates for those who do the work. Do you really think that if businesses can’t make healthy profits that they can pay their workers good incomes? Do you really think that poorly paid workers can afford the luxury of living in the country they work in?

#121 Stevenson on 09.21.11 at 1:53 pm

As the article in globe and mail states. It will take a “combination” of factors to turn this real estate market in the opposite direction. We can rule out interest rates, what should we wait for now?? Or maybe stop waiting cuz you missed you boat already and you may not want to miss the bus. Or maybe you just wanna stay in the same place and let your cash make negative return.

#122 wtf????? on 09.21.11 at 2:07 pm

Another nail in the coffin of the bogus claims of ‘global warming’

http://www.nationalpost.com/opinion/columnists/Deep+sixing+global+warming/5433152/story.html

‘Global Warming’ came out as a result of the political argreement amongst Liberal’s in Canada and Europe that tax dollars should be raised in the west and shifted to the east ( read 3rd world economies/dictatorships) to achieve what was then called ‘sustainable development’. Global warming theory was created as the boogey man that would frighten western socieities into paying for the scam…it ( global warming)never actually existed except for the few super-governmental theorists who controlled the flow of published scientific research and the politically correct Liberal basket cases who suck up anything thats advertised with a picture of a bunny , panda or polar bear on it.

Hey did anyone else notice that in all the video reporting out of the Horn of Africa on the ‘famine’ that there isn’t a single teenaged or adult male in the pictures or background who isn’t working for the aid agencies? This is because the ‘El Shaabab’ religious nutjobs are concentrating their dwindling financial support on the ongoing war against ‘whitey west’ and refuse to feed their fellow Somali’s. They have sent all the women and children to be fed in the camps by the western charities so that that arms can be purchased with the excess caopital saved from not having to supply food, fertilizer, men or equipment into the countryside. It also serves to concentrate the number of fighters/pirates who would otherwise have to work the fields.

We’re stupid for falling into this phony crisis and supporting the El Shaabab/Al Queda war against our society. They are using every means possible to bring religious war to the west…including the mass immigration of ‘refugee’s from the ranks of the people that they refuse to feed. While these so called refugee’s are here in Canada and elsewhere in the west collecting social benefits they are also sending huge amounts of our cash back to El Shaabab etc to continue the war against us. We saw the Liberal’s getting sucked in the same way by the Tamil Tigers…will our politicians never learn that Liberalism is anti-Canadian?

#123 Beach Girl on 09.21.11 at 2:10 pm

Funny, but I know several couples that are named Jones. They are going broke quickly. With overvalued houses. She buys 300 dollar jeans, he is not allowed a few beers. He is frightened of her. Average working people.

On the other hand I know 3 couples who appear quite rich. And are spending money like there is no tomorrow. I asked, what are you doing. She said the economy does not affect rich people. And interest rates are low. She says this only affects people making 30 to 50K. Superior attitude.

Had lunch with a divorced friend. She says she got the house. It is worth 880K. I said, you have a nightmare. She said he was a loser, I told her he got out lucky. The she admitted, she doubts she will be able to sell, as the taxes and utilities are through the room. It might have to into foreclosure. She is losing weight. Stressing out. I wonder who got “F” ed here.

I married once, in 1982. we were yuppies, bought a mini Mansion in Unionville in 1985 for 155K. In 1989 the house was peaking out at 450K. I said to my beloved, lets dump this sucker. 3,600 of unfurnished house. We stayed and lost out. Not as bad as many others. I told sweetheart, if Olympia & York go down, what chances do us 2 idiots have. Sure enough, he lost his job 3 months later. Divorced in 1995, house was worth 275K. I bought a house from a real estate person, for 178K, that he had bought in 1990 for 269K. He lost out.

The bank forced the sale of his house in 2009. It was still not furnished.

These times seem worse. Living frugally, this is freaking me out.

#124 disciple on 09.21.11 at 2:11 pm

#89 Kayak Freddy…denial is the first stage, ridicule is the next, rolling your eyes like you knew all along is where you currently are, next is action. Your “move”.

#125 EdmontonJim on 09.21.11 at 2:13 pm

I’m not a doomer. I don’t predict any revolutions that will overthrow governments and banks, or cause masses to panic or wars to start.

But I do predict a sort of societal revolution akin to the industrial or agricultural revolution. What I can’t predict is what way it will go.

In a way it is something that has been going on since the industrial revolution. As technology makes workers redundant, the market has to invent new things for people to do. To do that, we have to invent new things for people to want.

But that peaked in the 1980s. Since then, people don’t really want stuff for the sake of having stuff. So now what?

The truth is, there is a growing population of individuals with no valuable skills. Not to say people don’t have skills. But if a person is tha 11th best baker in a town that only needs 10 bakers, the skill has no value unless the first 10 decide they want to share.

And it’s been that way for a long time. The market for useless skills has been propped up by public spending and a wasteful society, but that seems to be coming to an end.

So the question is what is the next step?

In a Randian world, the useful will rise up to rule the useless (meritocracy) – and the useless will be inspired to become useful and humanity will prosper.

In an Orweillian world the ruling elite will manipulate and control the useful and engage in never-ending warfare to suppress the useless.

And in a Dysonian utopia people will develop trancendant technologies that remove the need for human labour entirely. People will be free to pursue science, art, and philosophy without restriction and humanity will enter a new golden age.

I don’t know which one is most likely – but I think we should push for door #3.

#126 Victoria on 09.21.11 at 2:30 pm

Beach Girl,

I used to take the dogs to the groomer – stopped – do it myself.

I don’t get my hair cut as often as I used to.

We have not eaten out in 2 years. I am really into cooking these days.

Kids are out of private school. (I am very happy with public in this neighbourhood).

Used to have a trainer – don’t – I just walk now for exercise.

I buy most of my clothes from Costco – same with the kids clothes.

Would still love to sell the house but my husband won’t budge.

I know what you mean though. We used to be big yuppies back in the 90s. Our life has changed. I am worried for the future.

#127 Dad on 09.21.11 at 2:34 pm

Avoid marriage son they are all parasites out for your equity

#128 Devore on 09.21.11 at 2:35 pm

Fun (or lack of) with numbers: a dismal picture of American “main street”:

http://www.propublica.org/article/our-sputtering-economy-by-the-numbers-poverty-edition

#129 jess on 09.21.11 at 2:48 pm

The case marks the SEC’s first insider trading enforcement action involving ETFs.

SEC Charges Former Goldman Sachs Employee and His Father with Insider Trading
FOR IMMEDIATE RELEASE
2011-188
Washington, D.C., Sept. 21, 2011 — The Securities and Exchange Commission today charged a former Goldman, Sachs & Co. employee and his father with insider trading on confidential information about Goldman’s trading strategies and intentions that he learned while working on the firm’s exchange-traded funds (ETF) desk.

#130 BPOE on 09.21.11 at 2:49 pm

BREAKING NEWZZZZZZZZZZZZZZZZZZZZ. Load up FOLKS!!

The Federal Reserve pulled the trigger Wednesday on a widely anticipated stimulus move, a policy involving the sale of $400 billion in short-term Treasuries in exchange for the same amount of longer term bonds.
The goal is to push down interest rates on everything from mortgages to business loans, giving consumers and companies an additional incentive to borrow and spend money.
“This program should put downward pressure on long-term interest rates and help make broader financial conditions more accommodative” the Fed said

#131 Cookie Monster on 09.21.11 at 2:50 pm

#112 Devore on 09.21.11 at 1:00 pm
Speaking of economic geniuses yesterday, you and Garth are proving there is no such thing, just varying degrees of economic idiots.

Prices are set by the market, full stop. What is a market? A market is buyers and sellers competing with one another who each bring something of value to a transaction, money prices are the measure of the exchange value.

If government subsidizes prices for buying houses, this is good for sellers, prices rise. If lending dries up, prices will fall. Pretty simple. The market sets the price, many and all factors have affect on prices.

If someone sells a product or service, there are many factors that influence the price; political, currency exchange, demand, supply, competition, outlook, weather, mood, PMS…

#132 Thankyou on 09.21.11 at 2:50 pm

Bought a condo in ’03 for 95k. Paid it off last year and sold for 210k. Bought 550k 3 story home in the burbs (3500sqft). Renting out the top two floors while I live in the basement suite. The suite is huge upgrade over my previous condo. When I eventually settle down I will move upstairs. My mortgage is $1450 per month while the renters upstairs pay $1900 + two thirds utilities.

I earn roughly 95k per year in my job. I’m doubling my mortgage payment every month. Mortgage will be paid off before i’m 35.

Who is the fool?

#133 disciple on 09.21.11 at 2:54 pm

#118 wtf?…I’m not falling for anything.

200 billion is spent on advertising every year, 13 billion of that is aimed at children. It costs 250K to produce a typical ad you see on TV, and another 250K to air it. This is very telling in itself. The brightest and most talented humans on the face of the earth work for ad agencies. The shorter the ad, the better as only 8% of the ad’s message is received by the conscious mind, the rest is worked out emotionally by the deep recesses within the brain where the product is positioned and repositioned within a cognitive framework it has created. Like an executable computer program, or more accurately, a digital virus.

Most ads are designed to elicit a response from the billions of receptors on the retinal surface which receive AND ANALYSE and interpret the message within milliseconds forming an emotional opinion BEFORE the info is transmitted to the cortex. This is why one can retain a totally separate emotional cognitive awareness quite independently apart from the conscious rational mind. Have you ever been driving and realized you were not consciously driving for the last few minutes?

The unconscious mind has no conception of time, and hence, no temporal defense against this psychic assault. The shift from left to right brain activity through certain verbal triggers releases endorphins and explains why very few people are able to kick the TV habit.

There has been more secret research done on this process than anything you can think of. That’s how important it is to your real rulers…

#134 BrianT on 09.21.11 at 3:15 pm

Nobody can top USA politicians when it comes to slinging B/S-you gotta see this onehttp://www.youtube.com/watch?v=8EL5Atp_vF0

#135 cory on 09.21.11 at 3:15 pm

#126 Victoria

How do you groom your dog? We have a labradoodle that I would love to groom myself too. I hate dropping $70 per cut every 3 months.

It’s good to be frugal. We have an expensive house and even though it’s paid for I often still worry about the future especially for our kids.

#136 Aaron on 09.21.11 at 3:16 pm

But he will only lose money if he has to sell “turning a paper loss into a real one” and it sounds like he won’t have to sell – right?

#137 cory on 09.21.11 at 3:23 pm

Speaking of kids.

My 13 & 14 year old boys are so lazy it’s unbelievable.

Only the best will do. They were complaing about their cellphones the other day. They don’t want them any more as all their friends either have I Phones or Blackberries. No shopping at Costco or Winners for them and Wal-Mart is unthinkable. They don’t want to be seen in that store. Much too emberassing.

I really worry about how they will be able to support themselves in the fashion that they have grown accustom to.

#138 Moneta on 09.21.11 at 3:26 pm

The truth is, there is a growing population of individuals with no valuable skills. Not to say people don’t have skills. But if a person is tha 11th best baker in a town that only needs 10 bakers, the skill has no value unless the first 10 decide they want to share.
——–
That’s why we let the 11th lever up to make up for the lack of wages. But now the 10 baker savers are pissed because the 11th baker won’t be able to keep on buying their excess bread and make them rich. LOL!

#139 Thetruth on 09.21.11 at 3:46 pm

QE3 OFFICIALLY HERE! $400,000,000,000

Rates will stay low a long, long time…we will inflate our way out….Canada will let our currency suffer rather than raise rates…Vanc and Toronto RE will be saved by concentrated immigration demand ;)…not so for other areas of Canada that will experience a slow melt.

QE4 at a later time.

Responses? If your emotions are stirred by this, it means that must not be false, otherwise you would have laughed it off.

#140 Betty Danin on 09.21.11 at 3:48 pm

The U.S. Federal Reserve operation twist will fail and the U.S. real estate and Canadian real estate market will be operation twisted with a 25%-40% average price decline.Some areas will fall Japanese style 75% price declines. Job cuts will follow shortly with 11%+ unemployment good luck big income earners your luck is running out!

#141 Pat on 09.21.11 at 3:55 pm

#100 Stevenson on 09.21.11 at 12:01 pm
House bought in 2008 – 690 000
House sold in 2011 – 970 000

Where else can you make that kind of money in 3 years?

In Vegas, in 1 hour.

#142 Norton72 on 09.21.11 at 4:03 pm

Did anyone (Garth?) catch BNN’s interview with Richard Cookson, Chief Investment Officer for Citi Private Bank this afternoon?

Sorry, no link yet. Very gloomy outlook for banks (globally) and equities. Yet very interesting. Believes long term corporate bonds should carry a heavy weight in a portfolio, citing credit spreads. Research on this will be worth my while – fully understanding bonds and I don’t get along.

Terms like “Mammoth banking crisis”, and developed countries in a “Japan like zombie state” kind of chilling.
Interviewer interjecting “potential” when too scary.
These Euro defaults and resulting spread of trouble could be something.

Recently aided my retired Mom’s (66) financial future (with a fee only advisor), where for tax and income reasons, a percentage of her wealth is to be invested in dividend paying equities. She’s long term with these, but sheesh, I don’t want her to get screwed.

#143 Joe on 09.21.11 at 4:04 pm

#51 Aussie Roy

In regards to your question, I don’t really have a good answer. I’m not too sure of the question though. You’re asking why people aren’t seeing the disconnect between incomes and house prices? I agree, there is a disconnect.

In Vancouver and the Fraser Valley rental suites are popular. You boost your “income” and the amount of house you can afford by getting a suite. I have friends with two suites they rent to relatives (Blech, imo) and they basically have no mortgage payment. That’s how they afford it. So their paycheques are essentially disposable income. I’m green with envy, btw. But the downside is that “It’s a lot of cleaning,” according to them. Sniff sniff. Hard life.

When I was a teenager I thought you had it made if you were making $100,000 a year. Now a lot of people are marrying and finding that they are making more like $150,000 combined, like dude in Garth’s email, so they feel rich, but like someone else pointed out, it’s not a lot by the time you’re done paying for everything. $200,000 is the new $100,000, and $100,000 is a modest family income now, $150,000 and above is quite comfortable.

The availability of credit has made people feel like they earn more. I don’t know how anyone else manages their daily expenditures, but if we didn’t use jars for our monthly expenses we’d be so screwed. Using a credit card and not keeping track of what’s already gone out, it’s like a guessing game. Unless everyone’s sitting down and looking at those bills every month and going, “Holy crap, we spent $800 on groceries and $400 on eating out this month, we need to get a handle on that,” then it’s just money in, money out. If you’re not sure there’s enough money to put it on debit, put it on the VISA. I imagine when inflation hits it will just creep up and eventually the credit card doesn’t get paid off, or it gets paid off with the LOC.

And it’s so easy to consolidate your debt! Friend consolidated his $40,000 truck onto his house because “It’s only at 2%.” Guess the bank didn’t tell him that that’s still more expensive because you’re now paying for your truck over 25 years instead of 3 or 5 years. House prices go up, we get a bigger HELOC or use the equity in your house to pay off your cards. There are so many ways that credit makes you feel “rich.” And the banks actually use terms like, “managing your money,” “managing your finances,” “making a smart move,” you feel like you’re the next Buffet because you “manage” your money so “prudently” by consolidating, taking “advantage” of a lower interest rate. But really you’re saving nothing.

Lastly, as one friend put it, “I just don’t think people are going to stop buying houses.” Or my other friend often says, “But it’s the land. It’s the land you’re buying,” as we drive through what was a corn field 12 months prior. Yup, acres prime “land” surrounded by nothing but more prime land.

I think I’m rambling. I don’t have a better answer for you other than the availability of credit filling the gap between what we can afford and how we want to live. I mean, really, who can actually afford those $5,000 patio sets at Home Depot? Those outdoor livingrooms cost more than all the furniture inside my house put together!

#144 Herb on 09.21.11 at 4:20 pm

Son of #127 Dad,

descending from that father, what could you possibly have to offer besides equity?

#145 Norton72 on 09.21.11 at 4:23 pm

Here is the interview in two parts:

http://watch.bnn.ca/business-day/september-2011/business-day-september-21-2011/#clip536173

http://watch.bnn.ca/business-day/september-2011/business-day-september-21-2011/#clip536221

#146 Worried Realtors on 09.21.11 at 4:27 pm

Worried realtors like Stevenson have all the free time in the world and post on Garths blog. Why? Why would a realtor come to this blog and spread propaganda? If the housing bubble was doing so well realtors would not be here. The housing ponzi is starting to crumble as sales and prices have continues to drop all summer long. Listing are up + falling sales = Canada housing ponzi going down.

#147 HouseBuster on 09.21.11 at 4:43 pm

@#122 wtf?????

WTF? Have you lost your mind?

#148 Waterloo Resident on 09.21.11 at 4:51 pm

#127: DAD

Yes, that is why I had a pre-nup BEFORE marriage. When my ex-wife cheated on me she was not able to grab ANYTHING from me.
But I have a kind heart, I didn’t want her to suffer, so I SIMPLY GAVE her $50,000 and a brand new car so that she could take care of herself. Its been 4 years now and she still depends on my financial support just to survive.

When I married her I promised to help her for life if needed. I had a pre-nup agreement because I didn’t want to be forced into something I didn’t want to do, I wanted to make sure that I wasn’t ‘LEGALLY’ trapped, that’s all. Its nice to help someone because you ‘WANT TO’ as opposed to be FORCED to do it.

So if anyone you know is getting married, have the sign a pre-nup, it will make EVERYONE feel more happy after the divorce happens.

#149 Dad on 09.21.11 at 5:21 pm

Son,

How funny that a herb would mewl about his wife, a product of our house horny happy wife happy life loser society. Does she let you watch or do you have to leave the house when her buck is over?

#150 Dad on 09.21.11 at 5:27 pm

Waterloo Resident:

Be mindful of the reality of prenuptual agreements before reccomending them, as in many cases they are little more than make-work projects for junior articling lawyers. Child support for instance cannot be determined via prenuptual if I recall correctly, and in many cases, depending on how “englightened” the judge is, she will toss out your agreement.

Translation: If you strike gold, prepare to share the mine, whether you have an agreement or not. Cupcake can and will destroy you in court with one, simple, word:

Abuse.

#151 neo on 09.21.11 at 5:29 pm

#139Thetruth on 09.21.11 at 3:46 pm
QE3 OFFICIALLY HERE! $400,000,000,000

Rates will stay low a long, long time…we will inflate our way out….Canada will let our currency suffer rather than raise rates…Vanc and Toronto RE will be saved by concentrated immigration demand ;)…not so for other areas of Canada that will experience a slow melt.

QE4 at a later time.

Responses? If your emotions are stirred by this, it means that must not be false, otherwise you would have laughed it off.

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

For a name like the Truth you don’t seem to understand what is QE is. This is not QE3 because it isn’t introducing NEW dollars. It is only recycling the old ones out the curve. The problem is, flattening the yield curve is actually detrimental to the banks, pension funds and the economy in general. It also doesn’t address risk that is still inherent in the system meaning just because the 30yr is 3% doesn’t mean mortage rates will decline because the appetite for risk in the banking system is still not there and can’t be repaired through Fed action. If anything, it does the opposite. So you and BPOE have no idea what you are talking about. We cannot, I repeat, cannot inflate our way out of it anymore than Japan has “inflated” there way out of it with decades long low yields and endless stimulus/money printing.

#152 T.O. Bubble Boy on 09.21.11 at 5:30 pm

#75 penpal on 09.21.11 at 9:41 am @ # 18 T. O. Bubble Boy

Perhaps you could expand on the quality of the neighborhoods these properties are located in.

To my knowledge they are all formerly working class / middle class areas, and are essentially pricing for land value (need to pay to demolish and haul away, tipping fees, double land transfer tax in GT, etc. totaling another 60K easy).

To my mind, patently absurd.

Most of those tear-downs that I linked to are in a decent neighbourhood (fairly close to subway, definitely not the boonies) but by no means in prime Toronto hoods like Rosedale/Forest Hill/Bridle Path/etc.

The fact that you’d be paying $700k plus other closing costs (land transfer tax etc.) BEFORE you even start to tear the thing down is still ridiculous in my mind. You’ll be well into the $1M-$2M range by the time your house is complete, and as I said – you’re really not in the prime areas of Toronto.

#153 GTA Girl on 09.21.11 at 5:48 pm

Stevenson: Did the Ritz Carleton get the problem with their kitchen supplier worked out? Heard builder went cheap and dumped the high end Canadian (world famous) kitchen manufacturer and after trying to lowball other companies, went with snap together stuff made in China?

Pre-builds nowadays, always screw the buyer. Builder has all the power, poor sap who buys never knows what he’s going to get, when or if its quality.

I wouldn’t have touched the Ritz/Trump or ShangraLa. There are better, higher quality deals in existing properties. Those new ones are like a new car, drive it off the lot, you take a 20% haircut.

#154 Nostradamus Le Mad Vlad on 09.21.11 at 5:50 pm


. . . and the worms ate into his brain. But enough of F, and my travels into the other worlds. Further to the IMF and Armies, this.
*
#42 C — “The economy in T.O. is tied into the economy in New York, . . .”

According to Mish and his research, New York, Illinois and California are the three worst states to do business in, so if The Big Smoke is tied to NY, NY tanks then smoke out, TO!

#83 disciple — “. . . the image burned into the retina in my third eye . . .” — The third eye (Tisra Til, or pineal gland just between the eyebrows) is the easiest way to leave the physical body, which we all will do at our best by (expiry) dates.

“Only took 5 years!” — Nice! We paid ours off in three in 1982, when homes were realistically priced and mtgs. 22%, both of us worked and we pretty much put all of our income into killing the debt beast. Awesome feeling!

#130 BPOE — “The Federal Reserve pulled the trigger Wednesday on a widely anticipated stimulus move . . .”

So QE3 is here in all its glory. Even ‘tho everything is preplanned — Eurozone and Euro going to heaven in a straw basket, Lloyds of London pulling coverage of Euro banks (see Timo’s link earlier), it stands to reason that we are next.

However, all universes are unfolding as they should, and all works in perfect symmetry. Just get outta debt mighty quick, don’t invest in bricks and mortar — get a balanced portfolio then rent instead! Thanks, BPOE!

#148 Waterloo Resident — Good to take the high road, even if helping out costs a bit. What a person puts out is what they get back.

#155 penpal on 09.21.11 at 5:53 pm

@ # 132 Thankyou

“Who is the fool?”

I don’t know, but you are the one living in a basement.

#156 penpal on 09.21.11 at 5:58 pm

@ # 152 T.O.

Exactly my point as to why it is ‘patently’ absurd.

Construction /landscaping / taxes / fees/ permits, etc. at least another $800k to $1 million on top of lot costs and clearing off the old structure.

Those areas do not carry that value of home.

Total lunacy.

#157 Herb on 09.21.11 at 6:04 pm

Son of #150 Dad,

see what I mean?

#158 worried realtors on 09.21.11 at 6:14 pm

BPOE is an idiot. Why do you think the markets crashed after the fed twist? You have no idea whats coming. Canada housing ponzi is going to fall.

#159 ballingsford on 09.21.11 at 6:15 pm

#93 Moneta

We saved all of it (mostly ;) for our holidays in the tent trailer in Penticton once a year….
——
5 cents 40 years ago?

You saved it because you couldn’t buy anything, LOL!

********

Moneta, I can relate to what #87 Old Fart is saying. I’m probably around the same age as him or her.

Forty years or so ago, I used to get 35 cents allowance and that would get me into the Saturday movie and provide snack food. Fifteen cents for the movie and twenty cents for junk food; 5 cents for a bar, 5 cents for a bag of chips or popcorn and 10 cents to buy 50 candies because at that time you would get 5 candies for a penny.

I also remember another time during that period when my sister gave me twenty cents to pay the late charge on her book from the library when I returned her book and she got angry at me because I didn’t take the change home. I just gave it to the librarian and left without getting the change.

#160 jess on 09.21.11 at 6:27 pm

“The $25 million Aquatic Species Program was set up in 1978 by the Carter Administration to investigate high-oil types of algae that could be grown for biodiesel. The project, run by the National Renewable Energy Laboratory”
============
Dynamic Fuels plant in Geismar, Louisiana which is America’s first commercial scale (75M gallons per year) advanced biofuels facility
===========

U.S. invests $510 million into biofuels
By David Worthington | August 17, 2011, 7:10 PM PDT
The Obama administration has announced a major initiative to expand biofuel production, pumping much needed capital into the sector.

A coordinated program between the U.S. Departments of Agriculture, Energy and Navy will invest up to US$510 million over the next three years to support biofuels for U.S. commercial and military transportation.

#161 bigrider on 09.21.11 at 6:29 pm

#100 Stevenson- “house bought 690 sold 970, where else could you have made that return”

Probably nowhere. That is a 40%+ gross return. 280k great.

Are you implying that new buyer will also enjoy that same 40%+ over three years..so he is selling for 1.358 mill in 2014 right?

Here is what I think..buyer in 2008 won 280k while buyer in 2011 will lose that same 280k.

690k a good price for that house in 2014

#162 bigrider on 09.21.11 at 6:37 pm

#132 Thankyou-

Boy are you ever an Italian…LOL

#163 Live Under Your Means on 09.21.11 at 6:46 pm

Shoot – Just called my DR. Got an appt. Friday. On my right side of my butt I’ve got a hard tennis ball size lump. Hurts to even sit on it. Just happened within the last few hours. I wish my bottom was larger. Can’t find a pair of jeans to fit me properly

#164 bigrider on 09.21.11 at 6:50 pm

#150-Dad.

Is it really that easy to defeat a pre-nup in court? I mean whats the point of having one if all she has to say is ‘he abused me’.

Doesn’t she have to prove abuse? Why would abuse be grounds for nulification of a pre-nup anyway? irelevant is it not?

I am not a lawyer at all so my questions are honest and open for you or anyone else to answer

#165 Bast on 09.21.11 at 6:55 pm

Wow – the Calgary real estate market just gets weirder and weirder…buy a house, get $1,000 worth of beer on possession day. Smells kind of desperate to me…

http://www.calgaryherald.com/business/Beer+being+offered+incentive+Calgary+home+purchase/5438277/story.html

#166 BPOE on 09.21.11 at 6:56 pm

My prediction still stands from 2 months ago. Interest rates lower by end of September

#167 Smoking Man on 09.21.11 at 6:56 pm

I just saw Daltons last add, where he says last month Ontario Created more jobs than the entire USA. Ba hahahah

Ontario would need to create just 1 job to beat the entire USA.

I hired a part time code smith to help me last week, so I can say my company haired more people than all the USA…

What is wrong with Hudaks people don’t they want to win, how about an ad showing everywhere clips of Daltons lies and make his nose grow a bit bigger.

Or even better take a camera crew out to the Windsor area where they have all those wind farms and film, as anytime I drove by maybe 3% of them are spinning cause when we make to much power we need to pay the USA to take it off us……

Because he can’t get a carbon tax off you at the fed level he is going to do it provincially

If he wins the election I may turn into a real estate Bull again cause it would tell me that people are just to stupid for their own good.

On a darker note for you anarchist it’s starting.

http://www.youtube.com/watch?feature=player_embedded&v=jYaA-34c-vI

#168 ballingsford on 09.21.11 at 7:00 pm

Dumb Me or Smart Kid

A month ago I was using bus tickets instead of a bus pass because of vacation and stuff and it was cheaper to use tickets instead of a bus pass. Dumb Me forgot to get some bus tickets one day so I needed bus fare in coin to get to work. I laid out 3 loonies and 8 quarters on the bench and then went to take a shower. I wasn’t sure how much the cash fare was (I know now that it’s $3.25).

Anyway, after the shower and getting dressed, I came upstairs and my almost 4 yr old son said that the money was gone. I said “Where did the money go?”. “In my piggy bank he said.”

Luckily I was able to find some other coin to cover the bus fare. Once it’s inside his piggy bank, it’s not recoverable. :)

Lessons Learned!

#169 Thankyou on 09.21.11 at 7:00 pm

@ # 155 Penpal

Ouch. I cry myself to sleep, but then I remember I only have to cash a cheque to make the month’s mortgage payment. Left over rent money pays property tax + my share of the utilities. It took me 7 years to pay off a 100k condo + student loans (rented second bedroom). In the same amount of time this house will be paid off free and clear.

I will buy a second house and use the rental income of this home to pay that one off.

#170 Live Under Your Means on 09.21.11 at 7:02 pm

#93 Moneta on 09.21.11 at 11:00 am
We saved all of it (mostly ;) for our holidays in the tent trailer in Penticton once a year….
——
5 cents 40 years ago?

You saved it because you couldn’t buy anything, LOL!

………….

Think we need a sarcasm font. BTW Moneta, I remember 1 cent candies & babysitting at 9 or 10 yrs of age New Yrs. Eve with no TV.

#171 Alister on 09.21.11 at 7:03 pm

The guys says – “His household income is $175,000 and the mortgage costs two grand a month on a fixed-five-year mortgage of 3.5%. Now let me assume a bad scenario – interest rates skyrocket to 10%. My biweekly payments increase by $600 biweekly, or approximately $1200 monthly. End of the world? Not really”

He’s so dam sure that both jobs will always be there – never can anything hurt him. Well fella- I bet theres alot of Irish, Icelandic and Greek guys who felt the same way, and that includes government employees.

Never say never.

#172 LoyalFollowerandBeliever on 09.21.11 at 7:07 pm

I have been following this blog for a year. Decided to comment tonight. This has been an interesting thread. #142-Norton 72 – excellent post. #132 – it is not all about you. Look deeper..you are not the “fool”.

#173 Bill Gable on 09.21.11 at 7:14 pm

Anecdotal evidence of Vancouver style stupid – bike lanes on a main artery like Burrard, and also on Hornby…walking to meeting this am, and cars are backed up to Mr. Turner’s bunker – I counted 2 bikes in 10 blocks.
Along Hornby and springing up like weeds I have started noticing business’ closed. Lots of retail places have closed.
Doh – I wonder why.

This brilliant plan was crammed down business owners thrats. Now, no tax revenue from no more business….ooops.

#174 Moneta on 09.21.11 at 7:23 pm

ballingsford on 09.21.11 at 6:15 pm
—-
Big difference between 5 cents and 35!

5 cents was like giving enough for a bag of chips today!

#175 Mike Rotch on 09.21.11 at 7:27 pm

Re: Morry, No. 104:

Morry sez:

“……… Luckily my son, who ignored my predictions, put a down payment of 25% on a 329K town home. (2 bdrms + a den)………Oh – his mortgage to the bank? $841.00. ( includes ppty. taxes) ”

New math? Forget to carry the 2?

With the traditional way of calculating mortgages, if you take out $247K or so at 3.5%, for 35 years,you’re looking at a payment of a cool $G-note, P&I only.

Even if the genius got the loan for 2% and am’ed over 35 years, the payment is $820-ish……before the property tax bill.

You sure the payment you calculated isn’t the bi-weekly??

#176 DM in C on 09.21.11 at 7:29 pm

Realtors in Calgary now giving away BEER with purchase. You know, cause incentives are needed, and why not cry in your free beer?

http://www.calgaryherald.com/business/Beer+being+offered+incentive+Calgary+home+purchase/5438277/story.html

#177 Chuck D on 09.21.11 at 7:37 pm

Big kudos to Wasteland Tom for handling the comments to his letter by the wack pack on here with such grace. He didn’t lower himself to the level of the angry dudes who love to criticize blindly and can’t handle voices of moderation.

#178 Cookie Monster on 09.21.11 at 7:49 pm

Devor and Garth, sorry for using the word idiots earlier today, I was a bit cranky, various levels of confusion would have been more polite.

Further to prices of houses, all factors affect the price, such as the prices of other things like; interest rates, wages, cars, fuel, taxes, fees, insurance, food, booze, entertainment, supply, demand, seasons, politics, inflation, fx etc…

Basically, the price of houses has to compete with the prices of all other things people want, as well as other houses and other buyers, so the price is set by the market, many buyers, sellers and all other factors. The market is definitely influenced by government programs and incentives, but they’re still only factors in an overall complex picture.

So you can’t simply say that buyers set the price of anything, because they don’t, they’re only a factor.

#179 alex on 09.21.11 at 7:54 pm

“Ben Bernanke and his band of economists gave the market what it expected, announcing a fresh effort to keep long-term interest rates low that echoes the Operation Twist launched in the eraly 1960s.”

re ##105 Morry’s comment enlighten us Garth…

#180 TurnerNation on 09.21.11 at 8:05 pm

“Whack! Thank you Fed – may we have another? :-( ”

Where is blog dog Carney these days??

#181 bigrider on 09.21.11 at 8:14 pm

With stock markets as gruesome as these ones, good luck Garth or anyone, me included, of convincing people that house humping in the GTA is not the better way to go.

Just saying.

If they can’t see the connection, good luck to them. — Garth

#182 Echo on 09.21.11 at 8:17 pm

#5 Marco:

Brilliant post!

Just keep doing what you’re doing and continue to ignore the ignorant. In this country, getting through to them is pretty much hopeless.

#183 Echo on 09.21.11 at 8:27 pm

Here’s Tom’s thing ~ clearly many of you still don’t get it:
(even you Garth baby)

Tom’s not very bright. Tom just wants to “own” (yeah, right) that “thing” called a “home”. Tom doesn’t equate a drop in equity with a $100,000+ loss that he otherwise could have put into a smart, liquid portfolio. Again, Tom just isn’t very bright. Like most people.

Tom is not an investor. Tom “thinks” he’s an investor. Now, if Tom owned $700,000 worth of stock and was told that it would be likely go down appx $150,000 in value would Tom sell that stock? Hmmm, yes. Why? Because he wants to MAKE A PROFIT.

But the “home”? Oh no, we can’t have that. lol Everyone knows that if you RENT a house is CANNOT be a “home”. Oh yes, it’s much better to “ride out the ups and downs of the “home’s” value then it is to let it go. Oh my. The horror! The horror! lol

Tom, if you’re reading this, you’re a sad thing. But hey, if you want to risk losing $150,000 CASH for your children’s future then hey, what the heck! Go for it. : )

So Garth, is it clear? I know that in the back of your mind this information is there, that you don’t always miss the “what investment?” thinking pattern. You have to allow for dolts like Tommy boy to miss the point altogether. Investing 101 is just not for some people. We need to let them think they’re smarter than they are and pretend that it’s all about “riding the wave, I’ll still be ok”.

Shame on you though Tom. If you cared about your family you’d pretend your house was a damn stock. Duh.

#184 Westernman on 09.21.11 at 8:31 pm

Nonplused @ # 35
You make too much sense. Remember-the Canadian government is, has been and always will be full of do gooder bleeding heart liberals ( no matter which banner is in Ottawa they are all liberal at heart ) that are convinced that they should save the world with YOUR tax money. It’s been that way my whole life and my fathers whole life. That’s about 90 years of precident. They will NEVER change even if the ship is going down. Cover your own rear end and wait for it because it is coming. The goverment of Canada CAN not and WILL not change.

#185 Nostradamus Le Mad Vlad on 09.21.11 at 8:34 pm


Downgrades Three US banks, plus the ones from the Eurozone earlier; SEC and GS GS charged with insider trading; Whacknut Yep, hyperinflation (never happen, just as WW3 won’t); 3:077 clip Pay China back? Let’s have WW4 instead! Crisis 2.0 Bloody hell, we need new crisis’ every day! Ponzi Poker Smoking Man, watch your dollars; 4:25 clip Plunder — The Crime of our Time.

Job Centres But the hungry go to charities, because there are no jobs; The men who crashed the world.

Perpetual War Next are Yemen and Somalia, by drone. This is how messed up the economy has become plus here; O’bomba I don’t think so! Talk about bloody arrogance; Hmmm. “Palestine is not the only nation presently under occupation …. America is being $trangled by the very same de$pot$ (see banxters).”; Solidarity Remember Lech Walesa and the Solidarity Movement? It caused the communists to fall, and now the same is happening on Wall St.; Lockerbie Next one to be set up as a patsy; US crackdown Won’t tolerate dissension, dammit! Libya NATO’s blood-fest to continue another three months. Translation: They still haven’t got Gadaafi!

REM For anyone who enjoys music (unfortunately); UN “You know, like the way Great Britain and the colonies worked things out peacefully to create the United States!” wrh.com; More drones, more war = less soldiers and less employment; NAU – SPP “The U.S. and Canada are very close to unveiling a North American perimeter security deal that would promote greater integration between both countries.”; Six Things Horrific foods.

#186 Echo on 09.21.11 at 8:36 pm

p.s.

And Tom, don’t give the excuse that you think “maybe” the value won’t go down. I’d say “what if it doesn’t? Why are you still refusing to realize the profit??? Do you ACTUALLY think that the value will continue to rise??”

Of course you don’t. So, in other words, the profit is sitting there and there’s only one way for it to go. Whenever that may be in your mind, the equity is still at the max today. Today is when you sell.

Oh, and btw, the housing market IS going to tumble. Slowly, and painfully. And the scenario that Garth described? I’ve been talking about the “domino theory” for ages here. I just don’t bother anymore.

Put your seatbelt on, and I sure hope the ride with your family is in a lovely new “home” that happens to be a rental.

#187 Echo on 09.21.11 at 8:38 pm

Ego vs. profit.

Pride vs. (see #5)

Wow, what a tough choice eh Tom?

#188 jess on 09.21.11 at 8:41 pm

common things

that beer thing
Extinction hoaxSee also: Disappearing blonde gene
see sperm bank rejects redhaired men
ethical ads aimed at the saudi’s

although, …those turks using the soccer games as a “ladies night” no men allowed is interesting.
http://www.spiegel.de/international/europe/0,1518,787627,00.html

….” violent fans are far from being their only problem. The club is the focus of an investigation into betting and match-fixing in Turkey . In total, 30 players and officials have been arrested in the past few months over the allegations, with the club’s president Aziz Yildrim being remanded into custody.

#189 Westernman on 09.21.11 at 8:48 pm

Regarding Beach Girl at #123
See men? THIS is why you don’t get married!

#190 Smoking Man on 09.21.11 at 8:51 pm

#187 Nostradamus Le Mad Vlad on 09.21.11 at 8:34 pm

Re the clip, Im blushing, I got some of that money.

#191 Smoking Man on 09.21.11 at 8:55 pm

Garth you might want start telling some of your loyal readers that perhaps they should unload some stock, I know you don’t believe in shorting and many think the bad news is already priced in, but, you anit seen nothing yet………done done, babababy you just aint seen nothing yet….:)

#192 Echo on 09.21.11 at 8:56 pm

#123 Beach Girl:

They are worse. Too many factors are in play at once for the coming slide to be anything else. Add to that the general stupidity of the herd and wow, it’s going to be spectacular. Then add the general pace of the Canadian mentality in a crisis and you’ll have wtf? soup everywhere you look.

I’ll be renting for at least another 5-8 years, investing in the Garth special, and living debt-free. Now there’s a soup.

#193 Chuck D on 09.21.11 at 8:59 pm

#185 Echo: You came along to perfectly illustrate my point of the kind of lunatic that comes on here and feels it’s their job to educate the “ignorant” with extreme comments. “if you cared about your family” “you’re a sad thing” etc. A little respect, using some moderation and avoiding grand proclamations might go further in being taken seriously.

#194 God on 09.21.11 at 9:24 pm

I dunno Garth..

I am on tour in T.O. …..which thou claimest is “godless”

This blog is a reasonable effort to atone for thy sins ( unpaid parking tix….lust for NDP Federal gov’t……outlawing Davidian slingshots….and evangelical promotion of house porn etc etc.)

Tell you what….Blue Jays and Leafs win it all in 2012…if thou repent( and continue this godless pagan degenerate Eastern -based goat- horned blog )

Me and my lightening bolts await thine decision…

#195 Smoking Man on 09.21.11 at 9:35 pm

#196 God on 09.21.11 at 9:24 pm

When I die be carfull Im coming up to take over, you better hide Mrs God…..

#196 gladiator on 09.21.11 at 9:37 pm

@169 ballingsford: stick a knife blade into the piggy bank slot, turn it upside down, shake it a bit, and see the coins rolling out ;)

#197 penpal on 09.21.11 at 9:44 pm

General Comment

I find it absolutely amazing that the idea of a housing bubble and its eventual ‘fallout’ upon bursting is even being debated.

It should be so glaringly obvious to anyone of even average intelligence that extremely cheap financing and extremely lax lending standards have combined to create a RE bubble, regardless of what you choose to call it.

Anybody arguing to the contrary has a vested interest in seeing this mania continue. Period. Full stop.

Good nite and good luck!

#198 dddd on 09.21.11 at 10:03 pm

re the stocks tanking – combine the ideas of garth and smoking man – ETF’s and bet on downside w no need to short anything..

INVERSE ETF
– reverse moves for tsx ps dow fincal energy etc
it seems a dead simple way to profit on the way down
http://balancejunkie.com/2010/07/14/inverse-etfs-pros-cons/

#199 neo on 09.21.11 at 10:14 pm

#165anjing bau on 09.21.11 at 6:53 pm
dumb statement dumb answer award…..# 46 Neo…

the DAX topped out Jan 12 th…..its been heading down ever since…. hence the large YTD correction… now lets look at the SPY….that didn’t top out until may with a retest in July…back in january it was at the 1260 level and was still rising ( tacked on another 100 points)

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

I said EVERY major index in the world is down 10-20% YTD and you just randomly bring up the DAX? Sorry YOU made a dumb statement. Let’s list the major indexes YTD I was referring to:

Australian ASX -16.25%
Shanghai SE -11.13%
Heng Seng -20.69%
India Mumbai -16.79%
Nikkei -15.86%
Taiwan TSEC -17.94%
England FTSE -10.37%
France CAC -22.84%
German DAX -21.41%
Swiss -14.93%
Brazil – 19.22%
Mexico – 11.75%
Canada TSX -11.82%
US Dow Jones – 3.91% (was -1.46% yesterday I quoted)
US S&P500 -7.23% (-4.42% yesterday)

ALL the indexes are going down susbstantially except for the US. Which is why I raised the point. The US has a lot more to the downside. The S&P should be anywhere from 950-1000 right now. What’s your excuse for the other 12 indexes I listed by the way? Now quit throwing stones when you live in a glass house.

#200 TurnerNation on 09.21.11 at 10:19 pm

133 disciple on 09.21.11 at 2:54 pm

Facinating. I recall back in grade school having a rare teacher who taught us how to think. For example he had us count and make note of the TV frame change rates. E.g. how often did the picture change.

These days the TV flickers like lightening. Transfixing, programming, shocking. Makes it easy for us to accept the message. Surely we do not wonder why it’s named Program(ing)?
Yes, battle for our minds.

#201 Echo on 09.21.11 at 10:26 pm

#195 Chuck D:

I disagree. A guy like Tim needs some tough love and a wake up call. His entire bent is fundamentally about financial security and caring about his family. Well, if he truly did he’d get himself educated with a formula that most 10 yr olds would understand and not risk losing an opportunity to sell, profit, and invest the proceeds for the next tier of his family’s FINANCIAL SECURITY.

It’s passive people like you that don’t care enough to try to help when help is needed. I can’t sign up for that. Helping a guy like Tom takes EXACTLY that kind of approach, or haven’t you been reading his rationale manifestos.

#202 Echo on 09.21.11 at 10:29 pm

* errors, such as saying Tim instead of Tom are due to my iPhone, not my feeble mind, FYI. ; )

#203 dddd on 09.21.11 at 10:43 pm

echo – damn you’re touchy, you sound like a few i know who sold their van shacks a few yrs and 35% ago and will need a epic crash to re enter if ever

you sound cold and harsh – renters in east van are facing evictions faster than your head can spin – the kids who leave our school do so for one primary reason – their rental place sold it sucks for the kids.

#204 Echo on 09.21.11 at 10:55 pm

I rented in Arbutus, even the thought of owning one of those cardboard shacks disgusts me.

As for your attitudes about rental homes, in every city in this country there are lovely, well maintained, houses in great neighborhoods. Well, except Vancouver. There are no great neighborhoods and the weather is … beyond description.

Just a final thought- how is it even possible that someone could be so ignorant about what’s actually out there re rental homes? Perhaps you’re just guessing. Could that be it ? A lot of people who need the truth read this blog. It isn’t prudent to guess.

#205 Morry on 09.21.11 at 11:03 pm

If they can’t see the connection, good luck to them. — Garth
You make me laugh!

Just got off the phone with OB financial advisor. Surprising numbers are now coming out re US Housing sales.

positive for YVR house prices as feel…

#206 Cookie Monster on 09.21.11 at 11:39 pm

#201 neo on 09.21.11 at 10:14 pm
The answer is US dollar inflation. All the other indexes use different currencies, non-USD. The value of the USD is falling, so profits measured in US dollars are rising in nominal terms.

#207 Dan Tohatan on 09.21.11 at 11:42 pm

@Keith in Calgary
“I say……now he’s$10,000 in the hole…..heh…..so then I add, now what about utilities ? …”

Your formula makes sense. I just calculated I will save $7060 by owning, over 3 years, IF I make no prepayments on my 35-year mortgage. I guess I’m lucky.

My stats:
$194,000 mortgage

After 3 years…

Mortgage balance outstanding: $185,500

Total $8500 equity built up
Minus $30,100 mortgage payments
Minus $13,860 condo fees
Minus $6,480 property taxes
Minus $1,400 utility bills
Equals $43,340 in the hole

Equivalent rental unit cost: $1400/month including utils
Equals $50,400 in the hole

I save $7060 by owning.

But I must say, it’s misleading, because the more you’ve paid toward your property, the more your payments will contribute directly to equity (and less to interest). So it may seem depressing at the beginning, but over time the hole shrinks.

The best strategy is to make large prepayments early on in your mortgage (first 2-3 years). Then you’ll be paying less in interest over the duration of the mortgage.

Given inflation – the fact that mortgage payments remain the same while rents go up, and the fact that property values tend to appreciate over the long term (10+ years) and I can’t see any real benefit to renting.

#208 Wasteland Tom on 09.22.11 at 8:30 am

@echo – numerous posts

A home is NOT an investment. It’s thinking like that that is drive this craziness where people think the underlying value of their home makes a lick of difference. My house is not an investment to buy and sell to try to make money. My house is my HOME and it could lose $300k in paper value and it wouldn’t impact me at all. I certainly hope your children are not relying on your timing of the real estate market to support their upbringing and education. That’s what RESPs are for. Real estate CAN be an investment, but your primary residence should NOT be. Idiot.

#209 disciple on 09.22.11 at 10:29 am

#170 Thank you…in a decade and a half, you will have shelled out about 3/4ths of a million bucks on housing, mortgages, property taxes, repairs, dis and dat fee, and only God and you know what else.

Wouldn’t it have been a more productive use of your time to build a wealth-producing business? Why do you feel wealthy when your only major asset is a pretty pile of bricks, lumber, glass and concrete? You have simply been mind-controlled into enriching the bankers, living off the buying and selling of others, rather than building the world in which you were destined to create.

You have failed. Try again. Hopefully in this life and not the next.

#210 Echo on 09.22.11 at 1:15 pm

#210 Wasteland Tom:

I didn’t say that it would impact you, I said that it would impact your family’s financial future. If you’re willing to watch that money flutter away because you’re so secure about your job and your RESP’s that’s fantastic. How you see a large influx of cash in what will be forever (in your lifetime and likely part of your chikdren’s) a more difficult economy (be it education, food shortages and subsequent cost increases, as well as a significant increase in the COST of your mortgage, you know, the mortgage on the house you think you “own”) then hey, just be sure to explain your choices to your family at the
dinner table tonight. If they seem logical to you it should be easy. : )

You should hear yourself though darlin’. Your “home” is actually owned by a Bank, is about to cost you a great deal more (money that could have otherwise been invested and paid YOU money to own it), the cash sitting there is going to just disappear (can’t even imagine teaching my children that in a declining market, wtfudge?), and best of all???>>>>

You could sell it, pay off the MONSTER debt, have a pile of cash to add to your children’s future (and you and your wife’s retirement plan, I. E. Garth special), very, very likely rent a similar home in the same neighbourhood, the kids wouldn’t give a hoot if the love, cozy bed, Mom & Dad, same school and their friends are
around, and finally, let’s see>>>

The rent will be paid by the dividends you earn, the principal will remain untouched, you’ll be mortgage free, (debt free altogether if you’re really smart) all of your income aside from cost of living expenses (but without property taxes, maintenance owner’s insurance), can go into that glorious portfolio that you can’t lose on even in the worst of times, and you can go to sleep at night
knowing 3 things. You’re financial future is secure no matter what happens, you’ll be in a very advantageous
position to buy any home you like when the picking is plentiful in about 5 years time, and that you’re actually teaching your kids how NOT to be an idiot.

Yup, this is about ego and image, nothing else. Know why? Because everything I just wrote here is accurate. (except that it may take more than 5 years to see the bottom-irrelevant to the point).

So. other than ego, image, peer pressure, ignorance, you got nothin’. There’s only one “idiot” in the room and it isn’t me. Oh, and just like Garth. I won’t charge you for trying to help. ; ) Everyone who reads Garth knows that I’ve said here everything that he’s been trying to teach people for years, and he feels the same way about your choices. I’m just a lot more direct, and am doing thus to try to wake up some families with the same image issues and illogical thinking patterns. Someone has to do it. ; ) Thanks for the canvas.

In conclusion, do what you want. Ya think? But maybe, just maybe, someone else in your exact same shoes actually appreciated it, and maybe even woke up. : )

#211 Steadie Eddie on 09.22.11 at 3:31 pm

It’s not the end of the world, but it can be the end of the system.

#212 morry on 09.22.11 at 5:42 pm

@Mike Rotch No new math. He actually put down >30% he tells me.

His payments are 861$ per mnth & includes Property Taxes. He is making bi-monthly payments and will be paying 10K per annum lump payments to get his mort. paid down even faster.

The prospects of Interest Rates rising in the next five years is zilch. Look at the bond market in the US and how their plans to keep IR way down.

Positive Housing numbers coming from the US side also bodes well.
Having a town home in the suburbs of YVR and building equity is a no-brainer. History lads. History.

#213 Live Under Your Means on 09.22.11 at 6:54 pm

#127 Dad on 09.21.11 at 2:34 pm
Avoid marriage son they are all parasites out for your equity

…………..
Ever thought you may be the problem?