Act your age

Yesterday I told you how, for a decade, we’ve built 40% more new homes than there were new families. It’s the stuff housing bubbles are made of. The usual collection of realtors and landlords dropped by to call me an idiot. Of course, they’re just envious of my pecs and abs. Because they know I’m right.

Hours later came the word. Housing starts ballooned last month to an annual rate of almost 206,000, way above expectations and a direct result of condomania in places like Toronto. To put this into context, if all the new households formed in Canada this year bought a house, then we’d need about 180,000 of them. But we already have a large national inventory of unsold homes, so adding 206,000 is a recipe for trouble.

(By way of comparison, the US has ten times the population and is building just 602,000 houses annually.)

But this is not a blog about construction. Rather oxygen-sucking, house-horny old Boomers who should know better.

Turns out these withering hunks of humanity may be leading the charge when it comes to sucking up all this new real estate inventory. As a Capital Economics report noted this week: “We suspect that higher housing prices and investor expectations of further capital gains are driving apartment sales and thereby multiples housing starts. Our main concern is therefore that investors will suddenly lose confidence at some point soon, resulting in falling house prices and significant knock-on effects for the economy.”

You bet. That’s exactly what happened in the miserable US of A. But the economists now say it won’t take much to turn things. “Although there are many potential economic ‘triggers’ for a housing slump, we also stress that a negative shock, say, to unemployment, is not strictly necessary. Instead, a shattering of the blind faith in ever-rising house prices might be sufficient.”

Now, this brings us to Team Depends. A major bank this week confirmed what this pathetic blog has been arguing for some time – most Boomers are out of their minds. People in this age group have been accumulated debt at three times the rate of folks who still have pulses and their own knees.

The logic of this is baffling. People about to retire, or newly into it, no longer have years of employment income with which to pay back bank loans and mortgages. That means they assume a hell of a lot more risk than thirtysomethings, since if interest rates rise or pension funds wither, they’re screwed. So why are they on a borrowing orgy?

Says the bank: real estate. In the past nine years (just as housing starts have swollen), these people have doubled the amount of property they own. Like their house-lusty kids, the geezers have been unable to resist the allure of cheap money and turned into speckers.

“Like others, older Canadians have been lured by the attractive combination of low interest rates and home price appreciation. And for those in or close to retirement, low returns on interest-bearing securities and sharp equity losses in recent years have provided an added incentive to diversify portfolios into real estate,” the bank says. Worse, a large number of the Viagra set are borrowing to buy houses with lines of credit, perhaps unaware these are just demand loans in drag, whose rates rise with every Bank of Canada uptick and utterly callable.

News like this should make those little hairs on the back of your neck, and elsewhere, stand on end and vibrate. Boomers do not need more real estate, for goodness sake. They need money for defibrillators, Hair Club memberships and penile implants. Any downturn in residential real estate (and it’s building) would cause these folks – who have the greatest need for liquidity and the shortest time to get it – to bail en masse. Then, wave adieu to a chunk of your equity.

In fact, imagine what happens when interest rates start inching higher and real estate values notch lower (they’re correlated). Suddenly losing money every month on your ‘investment’ condo, compared to rising yields on safer, fixed-income products, sucks. And yet as property values fall, it actually gets harder to find a buyer – in part because we’ve overbuilt our housing stock. Too many homes. Too few greater fools. And a nation of shocked Boomers.

And to think these people invented love beads.

Shocking news! Global TV discovers... renting.

181 comments ↓

#1 vyw on 10.11.11 at 9:53 pm

the data is for starts
did you guys factor in demolitions?
also you need to look at demographics – household size has declined over the last few years => more households.

Demos too few to count. Household size is 2.7. — Garth

#2 Smell The Coffee on 10.11.11 at 10:02 pm

If you have a mortgage… your renting money.

If you can’t pay cash for a house …. and need to borrow from anyone, like the bank of mom & dad … your renting money.

A house is valued against what it can rent for, in a healthy traditional economy. Houses (other than those for rent which produce income for the landlord) used to be considered a consumable … like cars, roller skates or lawn furniture.

All real estate are really monetized as a from of perpetual rents. Taxes are ‘government rents’ in perpetuity.

We all rent in one form or the other. Time to get over the own-versus-rent delusion because they are the flip side of the same coin.

Dear Canadians, you own nothing in reality … but only use it for a time. Then you move, or die. Sometimes both at the same time.

#3 vatoDETH on 10.11.11 at 10:03 pm

Two Thumbs Up!

#4 Cory on 10.11.11 at 10:05 pm

Garth,
I agree with all of your real estate analysis. We are definitely on the same page. But until (if?) interest rates rise, the madness will continue. Vacancy rates are dropping in Calgary, jobs are fairly abundant in the O&G world and condo buildings that were bankrupt or put on hold in 2008 are now being built.

I can’t believe any of it but it is what is happening.

#5 Habbit on 10.11.11 at 10:09 pm

Hi Garth. When you say line of credit loans are callable does that include HELOCS? What do you mean by callable? Thanks

#6 vyw on 10.11.11 at 10:11 pm

Before the bubble pops, we need to see a final speculative phase.
Perhaps the current turmoil in the equity markets will move $$ into real estate. The low interest rates are enticing for boomers with equity. in yr 2000, NASDAQ went up by 33% in two months before crashing.

We need to see realtors, doomers, pizza delivery folks, MILs, etc speculating.

Also there might be a bear trap of sorts on the way down if BoC crash the rates to try to “prop up” the market.

An external shock might be a scenario as well. Say commodity prices fall and crash the TSX. People will stop borrowing. As they de-lever and credit demand falls…real estate prices will start to fall. People who are highly leveraged may pile on the listings…prices fall, well you know the story.

#7 T.O. Bubble Boy on 10.11.11 at 10:11 pm

There’s the irony for you — Boomers causing their own investments to lose money!

Follow the logic… all of these Boomers are buying “investment properties” because they believe:

A) The price will always go up.

and

B) They can rent to someone who can’t afford to buy to pay the mortgage and other costs

However, since the barriers to buying a home are so low, prices have continued to rise, but with 70% of households now owning homes, B) is not holding true. AND, as more and more Boomers realise that they have purchased too many investment condos (and they see their $$$ dissapearing into properties that are not occupied and/or where rent doesn’t cover costs), they start to unload these properties — which will cause the prices to drop significantly and make assumption A) no longer true either.

Herd Mentatlity loses again!!!

#8 Happy Jack on 10.11.11 at 10:13 pm

Bernie Madoff said, “the whole government is a Ponzi scheme.” He would know.

#9 Axehead on 10.11.11 at 10:18 pm

Awesome Video Garth…especially the 60iesish video with the twinkling piano, big cars, housewives in dresses, and bespeckled idiots watering dead grass – like the couple has come to realize – those times just ain’t here anymore, at least not in Vancouver like it is in Weyburn SK or Bently AB. I rent, love it, walk to work…but will buy again…someday…maybe.

#10 LS on 10.11.11 at 10:22 pm

On my run home tonight I ran up Yew and past this absolute beauty in the global piece.

It’s uglier in person. But only an even million and it’s yours!

http://www.realtylink.org/prop_search/Detail.cfm?areatitle=&ARPK=&ComID=&agentid=&MLS=V912328&rowc=1&rowp=1&BCD=GV&imdp=9&RSPP=5&AIDL=26&SRTB=P_Price&ERTA=False&MNAGE=0&MXAGE=200&MNBT=0&MNBD=0&PTYTID=5&MNPRC=200000&MXPRC=99900000&SCTP=RS

#11 Axehead on 10.11.11 at 10:24 pm

I can’t stop looking at today’s pic…

#12 Chaddywack on 10.11.11 at 10:29 pm

Listings rising, Global doing stories about significant increases in renters, a 30% cheaper situation to rent vs buy………folks I think the worm has turned….

#13 T.O. Bubble Boy on 10.11.11 at 10:33 pm

Is today’s pic an example of a Boomer trying to buy something that he can’t afford, and that will spend every dime of his savings until the day he dies?
(much like an investment condo)

Or, am I being too cynical — and it is a picture of true love?

#14 T.O. Bubble Boy on 10.11.11 at 10:40 pm

@ #5 vyw

Before the bubble pops, we need to see a final speculative phase. Perhaps the current turmoil in the equity markets will move $$ into real estate.

Overheard at Thanksgiving Dinner from a relative putting massive $$$ into home renos, and who is in disbelief that my family rents our house (paraphrasing):

“Houses just keep going up, and there are always going to be new buyers, so how would prices ever decline? My investments have done nothing this year, but my house keeps going up in value — that’s why I’m putting more money into the house be renovating. And how long can you really rent for? Eventually you *have* to buy somewhere, and prices will always go up with the demand for homes in Toronto, so what are you going to do except buy?”

#15 Ozy - Unfortunatelly on 10.11.11 at 10:42 pm

1. Unfortunatelly, because Garth is running this blog for years, aI would say aproximate 10% of buyers market has waken up, thus taking top presure from the bubble (especially people with large downpaymnets)
Should he stop this campain and let dreamy canadians bite the RE sweet BAIT harder, the bubble would accelerate incredibly and burst in less than 6 months.

2. Regardless, Blue Condo Buble in Toronto will bust anyway, since city approved them like mushrooms everywhere (to get more tax) . When that happens, it will be a disaster for banks, whose CEOs will propose to be nationalized en-gross at no more or less than 200 dollars a SQF and made proud social housing, which Toronto less-favorized class and newest immigrants can use. How beautiful! At least it saves the banking system at the expense on Mcguinty Government which would also be happier to increse taxes. Ontario will then bypass federal govt and issue new 200000 immigrant visa with no requirements for projected low-labor needs by university-graduates, to ensure all downtown condos are finally put to work. Hoorey!

#16 R on 10.11.11 at 10:51 pm

So basically we get to inherit a giant, steaming turd. Thanks mom.

#17 Timing is Everything on 10.11.11 at 10:56 pm

#12 T.O. Bubble Boy

It’s a rental.

#18 Mountain Girl on 10.11.11 at 11:05 pm

Yay Rentgeek!
So nice to see coverage of two happy successful people who do not define their lives by their real estate status!
We’ve rented for years and are very happy with our choice. We’re far far richer for it and never ever have to be bothered with home repairs! :)
Suits us!

#19 Onemorething on 10.11.11 at 11:05 pm

Garth is now feeding us information in line with the slow melt theory.

They know how to play us, side step chaos and take our wealth away a little bit at a time. Drop 10% in RE, then give a us time to adjust, drop another the adjust and so on. This is what is called a orchastrated downturn!

It’s like lowering your expectations on Nortel stock from $110 down to $90 down to $50 and so on.

Way too tough to call the market swings, think this out logically and the answers will come. IF YOU HAVE ENOUGH WORKING BRAIN MATTER TO DO SO!

#20 Malik on 10.11.11 at 11:06 pm

My Friend
I have been reading your blog for a while and cannot praise enough about your insight and knowledge. I have a question to ask you.
I am 41 yr old, single income family of 4, currently renting (1500 / mon), been here for 2 yrs. We have 77K in cash (saved for down payment) and 70k in rrsp,tfsa. Another 15K (emergency fund).
Total income 100K /yr. We try to live within our means. so we can save some money ( 500 to1000) every month. People around us call us losers because we have no debt (at least right now)
We want to buy home but we find it a losing game right now. What is your advice?
People say if you buy when interest rates are up you will lose too because you will end up paying more money in interests. If you buy now at higher prices but low rates, you will end up paying less because interest rates here are not going up soon, by the time they go up you will have too much of equity build up towards your house. I am not sure what to do. Please reply

Rent. If you convert all your wealth into a home you vastly increase your risk. Wait. — Garth

#21 John Doe on 10.11.11 at 11:10 pm

#14 – What ae you talking about? “at the expense of Mcguinty Government”? As usual the taxpayers will pay! Do not spread misinformation please.

#22 mississaugasold on 10.11.11 at 11:11 pm

OMG at the video; I’d never thought I’d see the day. Good for that couple!

#23 nothing selling on 10.11.11 at 11:13 pm

RE sales in the gta seem to be halted. countless empty condos in my buddies building for sale or rent sometimes both. You also see many empty homes for sale and even more for rent. Glad i sold in July to a stupid young couple. Just rented a home in the annex for 2500 4 bedroom 2 bath(owner asked $2800). to buy this home it would be 900,000+ . stupid money buys and smart money rents today.

#24 nonplused on 10.11.11 at 11:17 pm

Another great post Garth.

Like the picture too. That guy has his health care plan all thought out: “Die in bed.”

#25 LeftVancouverAndHappy on 10.11.11 at 11:19 pm

Renting is as much as 30% lower? Haa!
You can rent a ‘$1M condo’ in Vancouver for $3K/mth or so. Your mortgage and other carrying costs on the same property would be about $6000+/mth.

So, the real discount on renting higher end condo’s in Van is around 50%. It is pure lunacy to purchase a condo in Van at current prices.

Rent, save and be happy.

#26 Dave on 10.11.11 at 11:20 pm

A TD Economist speaking on BNN today agrees with you Garth. She also said that we have overbuilt in Canada and predicts a decline in house prices.

#27 BPOE on 10.11.11 at 11:28 pm

I was waiting in my car outside a restaurant on the west side of Vancouver tonight. I made not of the vehicles coming in and out of the parking garage. Mercedes, Mercedes, BMW, Maserati. You get the picture. The American will tell you otherwise but anyone from Vancouver knows this is FACT. Baby boomers will have NO EFFECT on Vancouver whatsoever. There’s a new kid in town FOLKS and they’re BUYIN

#28 Mean Gene on 10.11.11 at 11:36 pm

Had a gander at the video… Rent Geek gotta love it!!!

#29 Young Old Fart on 10.11.11 at 11:38 pm

Dog gone it Garth…. Stop posting pics of me and the Missus!!!

#30 CoreyMC on 10.11.11 at 11:44 pm

Wow! Looks like the house horny Vancoverites are running out of Viagra. And I can’t believe my ears Global Tv is actually doing some news reporting. Wonder if CREA cheque bounced?

http://canadabubble.com

#31 Jane on 10.11.11 at 11:45 pm

Wow, and on Global, too! Thanks for posting this one Garth. Keep up the great blog!

#32 Aussie Roy on 10.11.11 at 11:46 pm

Aussie Update

Thank goodness, the housing market is fine, vested interests says “prices will be up 20% soon. – LOL

http://www.news.com.au/money/property/sydney-perth-house-prices-to-rise-by-20-per-cent/story-e6frfmd0-1226164489185

Boomers – loaded up on debt – Gen X not far behind, I know lets encourage the young.

More delusional.

http://www.news.com.au/money/property/start-young-for-property-profits/story-e6frfmd0-1226164503373

Queensland dad’s failed eviction bid lets son stay rent-free

http://www.news.com.au/money/property/dads-failed-eviction-bid-lets-son-stay-rent-free/story-e6frfmd0-1226163562232#ixzz1aXGgRQp3

Its all good, house loans are up. Oh wait not for buying houses just using your house as an ATM is up.

http://www.macrobusiness.com.au/2011/10/refinancing-boom/

#33 HAM Sandwich on 10.11.11 at 11:50 pm

It’s not “Hot Asian Money” driving real estate in Vancouver, it’s “Hot Pot Money”. It’s a simple scheme really:

1. Take seed from Columbia or Mexico.
2. Plant it up a hollow down Copperhead Road.
3. Make a lot of money.
4. Of course, now you have a trunk full of stacks of 20’s and 50’s (the government won’t let people use 100’s freely, and you can’t put it in the bank or you’re busted).
5. Set up a network of associates of the gang to look legit. They can deposit up to $10,000 per month cash without tripping the alarm. Some sort of trade or a restaurant is good cover. Even a tow truck business.
6. Have said associates buy your inventory of “crack shacks” you used to use to house the gang’s prostitutes and associates for a million dollars each, complete with CMHC financing. Thank Dog the gang had that inventory!
7. You now have millions of dollars tax free or under capital gains in the system laundered.
8. Maintain the associates as long as possible to make the system look legit. No selling by associates until the word is given, in which case if they get out with a profit that is their “teaser”. And the sale is probably to another associate.
9. Associates are free to refinance and pull money out as additional “teaser”.
10. When TSHTF, CMHC gets all the crack shacks.

It’s so simple I am surprised that even the police, a slow thinking crowd if there ever was one, can’t figure it out. And it’s no coincidence that the biggest bubble is in BC, where the economy is all about pot. And a bit of natural gas up north, but that ain’t worth $hite right now. The trees aren’t worth anything and the tourists are all heading for Montana.

#34 Smokanagan on 10.11.11 at 11:51 pm

Wow, that was one of the worst Global clips I’ve ever seen, mind you I avoid their news like the plague. Funtioning adults renting is something “we haven’t heard too much about.” I loved renting in Kits in my student daze, Pretend money (house horners) rubbing shoulders with No money (students), oh the scowls we would collect…

#35 LH on 10.11.11 at 11:59 pm

Just received your book, freshly signed and posted from Caledon, ON!

A first rate publication, and worthwhile reading even for this veteran blog dog.

Thank you!

#36 Tom from Mississauga on 10.12.11 at 12:00 am

Some realtors, builders, banks and other companies making a fortune on real estate in Vancouver better pony up some money for Global quick or they will have to report the truth again soon.

#37 City Slicker on 10.12.11 at 12:00 am

Garth but if there is a jump in housing starts doesn’t that mean there are buyers for them? I would imagine they are building because there is demand….
Thx

#38 Snowboid on 10.12.11 at 12:02 am

Thanks to Prof. Turner, there are some boomers that have sold their massively over-valued homes and are sitting debt-free.

The benefits of a balanced investment strategy, along with renting in BC until the timing is right to buy back in, can provide a secure, worry-free retirement.

Keep it up Garth, we will miss your posts for a few days as we transition to our winter abode – but will check in regularly once we are there!

#39 The thing in the basement on 10.12.11 at 12:06 am

“A major bank this week confirmed what this pathetic
blog has been arguing for some time – most Boomers are
out of their minds. People in this age group have been
accumulated …..”

OK where is the link and what is the data source for this?

I’m not your librarian. — Garth

#40 Harlee on 10.12.11 at 12:10 am

I really like that young couple in the Global video. They got their heads about them and talk real sense. Something this whole country could use more of these days.They some what renew my faith in the “younger generation”… Ah,it’s going to be an interesting winter…

#41 Aussie Roy on 10.12.11 at 12:18 am

Aussie Update

The capital growth stuff is for the punter / speculator who wants to make small short-term profits trading blue-chip stocks… or big medium- to long-term profits from small-cap stocks.

And as it turns out, the same approach should be used for the property market too.

Forget capital growth.

Housing investors need to realise that income is now more important.

http://www.moneymorning.com.au/20111010/queensland-housings-100-year-slump.html

#42 palebird on 10.12.11 at 12:21 am

#12 Oh but he will have had a good time, lot more fun than buying a house

#43 DaBull on 10.12.11 at 12:23 am

#2 Smell The Coffee on 10.11.11 at 10:02 pm

If you have a mortgage… your renting money.

So having a mortgage at 2.15% right now and lending it out at 10-12% (which is invested in a bunch of 1st mortgages with less than 60% loan to value ratio just in case things go south) is renting money? I’ll rent my money via a mortgage any day, thank you very much.

#44 Carp on 10.12.11 at 12:39 am

You don’t have to be a boomer to be RE crazy. I had an associate (42 years old) offered me, for him, to buy a townhouse so I can rent from him. I asked the rent amount and for 500 bucks more I get a castle and 3 acres of land and the landlord agreeing that we should not waste mother earth and have a 1/2 acre garden + landscaping and snow clearing is included after my negotiations … ha ha ha ,,, Castle it is … I hope in the process I save my friend from himself.

#45 Nostradamus Le Mad Vlad on 10.12.11 at 12:52 am


“Act your age (Freedom 55). Of course, they’re just envious of my pecs and abs. Because they know I’m right. Rather oxygen-sucking, house-horny old Boomers who should know better. Team Depends. A major bank this week confirmed what this pathetic blog has been arguing for some time – most Boomers are out of their minds.”

Easy to name them as sheeple-idiots, but that is unfair on the true idiots (such as politicos) who actually stand up in the firing line.

Labeling them under different monikers really doesn’t accomplish anything. Better off to lay low and, if possible help out where able. Through no fault of their own, there are lots of hungry kids out there. They don’t have debts to pay, but they haven’t got much in their stomachs either.
*
3:30 clip Keep The Change. Hank Williams Jr.’s response to FOX and ESPN.
*
Obombination’s Depression I realize Garth doesn’t care for the D word, but for a great many folks, it can’t be called anything else; Wake-Up Call The other 99% just woke up; High Frequency Traders Someone is on to you; 7:01 clip Kevin O’Leary nailed on TV; Naationalize the banks? Not sure H – F would be jumping over the moon at the idea; EU leaders scared as rabbit poop; Behind Euro debt crisis lies an untimely large Wall St. bailout (again); Mayhem is not a new month.

US Navy X47B war-shaped UFO; Iran Propaganda “Oh my GAWD; they’ve built… they’ve built… they’ve built… TOOL SHEDS! They’ve built GARAGES! They built a friggin CAFETERIA!!!” wrh.com; Big Brother German style; Verisign “VeriSign is essentially demanding that all blogs be subject to the censorship limits of every other country on Earth, a limitation the corporate media does not have to live with!” wrh.com; Opium The Taliban had all but wiped this out, so it has to be profitable for US companies to let it continue; Three fast food ingredients (everything’s good); Syria Paying the price before Yemen, Algeria, SArabia and Iran are taken on. By then, China, Russia, India and Pakistan may have joined the party, albeit uninvited.

#46 Zamphir on 10.12.11 at 12:54 am

Garth, I work with a number of people who have “invested” in rental properties, and many of them are near retirement. They acknowledge their HUGE debt loads, but are not concerned…they say “So what? I’ll go to the grave with debt if I have to”. So a couple things:

First, what legal course do banks have in getting their money back from people’s estate. Can they go after your pension money? Can they go after your wife/husband’s money?

Second,
At what point do banks call in their loans?

Thanks. Great blog.

Debt survives death and is the responsibility of the estate. LOCs are demand loans and callable any time. — Garth

#47 dd on 10.12.11 at 1:02 am

…In the past nine years (just as housing starts have swollen), these people have doubled the amount of property they own….

These cheap interest rates are sending the wrong signals to the market place. Wow … homes are overbuilt by 40% in Canada compared to 29% (just before the fall in the US). I see nothing but a bloody mess in 5 years time.

#48 questioning on 10.12.11 at 1:02 am

anyways, somebody has to pay for the buble price…

#49 Mean Gene on 10.12.11 at 1:08 am

Someone once asked the Dalai Lama what surprises him most. This was his response:

“Man, because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future; he lives as if he is never going to die, and then he dies having never really lived.”

#50 syd on 10.12.11 at 1:10 am

interest rates are not going anywhere. at least for another 2 years.. until then …. zzzzzzzzzz zzzz zzzz

Mortgage rates increased yesterday. Try to keep up. — Garth

#51 dddd on 10.12.11 at 1:25 am

#9 LS on 10.11.11 at 10:22 pm
On my run home tonight I ran up Yew and past this absolute beauty in the global piece.

It’s uglier in person. But only an even million and it’s yours!

————————–
1m for a lot in kits? – without question the cheapest freehold piece of land on the westside of van. it is a pretty sweet location – fixed up (expanded?) could get 5k/mo rent or 60k/yr. wouldn’t this cover 1m mtge?

#52 AB Bust on 10.12.11 at 1:35 am

So who’s on the hook if downpayment is greater than 20% and loan defaults, bank or CMHC?

#53 dddd on 10.12.11 at 2:01 am

like most renters in van, however, there is about a 50 chance that these nice folks will be asked to move out in the next year or 3 if they are renting in a house.

rentals made up ~65% of the houses in this part of van (not westside) 15 yrs ago – now it’s about 15% and dropping

if you want to live in a sfh in the city renting is not really an option anymore, the stock is simply vanishing

condos are a different story , always be lots to rent there.

#54 Suede on 10.12.11 at 2:04 am

For the first time ever (..well since data has been collected in 1972), BC had it’s first quarterly net international migration OUT of the province.

http://www.urbanfutures.com/Q4%202010%20Migration.htm

We just lost 727 people that could’ve bought some condo’s or maybe have been/were renters that were paying carrying costs for their landlords.

One piece of data doesn’t make a trend of course, but worth consideration if it’s never happened before…

#55 Aussie Roy on 10.12.11 at 2:26 am

Aussie Update

Its all good, house prices WILL go up !

Why?, because thats what house prices do – LOL

HOUSING’S STATE OF PLAY

City 2011 median price 2014 forecast per cent change

Brisbane $435,000 $505,000 +16.1 per cent

Sydney $644,700 $770,000 +19.4 per cent

Melbourne $590,000 $623,000 +5.6 per cent

Darwin $515,000 $600,000 +16.5 per cent

Canberra $525,000 $565,000 +7.6 per cent

Perth $470,000 $565,000 +20.2 per cent

Adelaide $410,000 $440,000 +7.3 per cent

Hobart $370,000 $395,000 +6.8 per cent

http://www.couriermail.com.au/life/homesproperty/sydney-perth-house-prices-to-rise-by-20-per-cent/story-e6frequ6-1226164654378

#56 diharv on 10.12.11 at 2:52 am

Only Global would run a story about renting and make it sound like a newly discovered phenomena. You mean you don’t have to buy to live in the unfriendliest uncultured place on Earth? Who woulda thunk ! Sarah Daniels must be doing a slow burn abou now.

#57 paulb on 10.12.11 at 3:03 am

Is that Bono?

#58 I'm stupid on 10.12.11 at 6:13 am

I believe, just like the last housing bust, condos will be the first to go. They will be like herpes, if you have it you can scratch all you want but they will not go away. Nice post.

#59 MarcFromOttawa on 10.12.11 at 6:52 am

Garth,

It is insecere to compare anything to US New housing starts at this time since it is coming off lows not seen since the Great Depression.

http://forecastchart.com/chart-housing-starts.html

I’ve read that in some places in the southern States you can buy re-sale for 1/3d the replacement cost.

I agree that overbuilding, if it continues unabated, will contribute to a correction and slow melt to Canadian RE. Most of this new household creation is people my age (Gen Y) moving out from mommies basement (and we want that status house right now damnit).

#60 AP on 10.12.11 at 7:01 am

You talk a lot about the amount of construction in Toronto. It is the same in Winnipeg. An insane amount of condos being built (a lot of senior’s complexes). If the senior’s move into condos who is going to buy their houses and the new housing developments?

#61 live within your means on 10.12.11 at 7:12 am

OT – Says it all.

http://thechronicleherald.ca/editorial-cartoon/editorial-cartoon-2011-10-12

#62 Moneta on 10.12.11 at 7:45 am

A house is valued against what it can rent for, in a healthy traditional economy. Houses (other than those for rent which produce income for the landlord) used to be considered a consumable … like cars, roller skates or lawn furniture
———–
Yes. And a chair is to sit on unless there is still music.

#63 DonDWest on 10.12.11 at 7:49 am

Garth, you’re forgetting one thing, and that’s the stubborness of your own generation. Home prices won’t go down; what will happen is we’ll have many overpriced abandoned houses by boomers who refuse to sell at a diminished price. Seeing that boomers have several houses (thus already have a place to live), they can wait this out until they die. This is currently what’s going on in many Canadian cities. There are tons of abandoned property in just my area that’s been that way for years. Boomers refuse to adjust the prices; mean while my generation struggles with low wages and rent. Unfortunately, contrary to popular belief, sellers dictate the market, because sellers have the final say on whether or not a property is sold. I’m afraid the bubble will finally burst (in biblical proportions) once the boomers die. Unfortunately, I’ll be just as old as the boomers now when that happens, making the much anticipated wait rather pointless. Good news for my own kids though (if I could ever find a way to afford having them); they’ll be living it up!

Try not to sound like such a loser. You might do better. — Garth

#64 Moneta on 10.12.11 at 7:51 am

Follow the logic… all of these Boomers are buying “investment properties” because they believe:

B) They can rent to someone who can’t afford to buy to pay the mortgage and other costs

——–
BAOE (best argument on earth). LOL!

If people can’t afford to buy, they surely can’t afford the rent to be very profitable… unless the place is “bas de gamme”.

#65 Moneta on 10.12.11 at 8:00 am

Man, because he sacrifices his health in order to make money. Then he sacrifices money to recuperate his health. And then he is so anxious about the future that he does not enjoy the present; the result being that he does not live in the present or the future; he lives as if he is never going to die, and then he dies having never really lived.”
————-
Money and materialism are great at distracting people from the big moment. The more you focus on them, the easier it gets to forget about your own mortality.

#66 C on 10.12.11 at 8:03 am

Global, you just discovered the hidden gold mine of renting!

Renters are not the poor people home owners like to think, we are actually quite well off and have more cash in the bank than you might think (and easily more than the typical home owner).

Renters “get-it”, why pay 30-50% more to “own” vs “rent”. It’s just a material object no different than a car.

If you could lease a Ferrari for the same as buying a Fiesta, wouldn’t you?

#67 timo on 10.12.11 at 8:09 am

http://www.calgaryherald.com/business/Calgary+housing+starts+rise+CMHC/5537230/story.html

catchphrases in the spin

upswing in activity, back to levels, rebound, healthy, stable, modest.

To the end of September, 3,767 single-detached units broke ground, 20.5 per cent lower than the 4,737 starts from the previous year.

Single-detached starts reached 417 units in September, an increase of 13.3 per cent from the 368 units started a year earlier.

Multi-family starts, which include semi-detached units, rows, and apartments, totalled 393 units in September, declining 8.2 per cent from 428 in 2010

keep those advertisers happy

#68 Bobo on 10.12.11 at 8:13 am

“we’ve built 40% more new homes than there were new families”

Care to explain this? Starts have averaged 208k over the past decade vs. household formation of 180k – that’s 16%, and that follows 10 years of underbuilding during the 1990s.

I explained it in the previous post. — Garth

#69 allister on 10.12.11 at 8:18 am

We have a family friend whose husband died about 6 years ago – she is 75 yrs old. She sold her house last year to move to another town 2B closer to her kids.

Guess what she did @ 75? She bought a 1960s house. She called the other night to ask renovation questions, seems the house needs some work.

I don’t know how long she expects to live, but after the renos and the cost of selling the house at some point, she will probably lose money.

#70 penpal on 10.12.11 at 8:23 am

@ # 5 vyw

“…we need to see a final speculative phase…”

What do you think you have been witnessing, especially in Vancouver and Toronto?

Foreign buyers (always last in and least well informed and least discriminating)!

Insanely bullish zeitgeist!

Seniors borrowing their brains out to buy leveraged RE at the top of a frothy market!

Record debt ratios!

Record ‘ownership’ ratios (over 70%)!

Dancing with the Stars!

Ever look at a chart plotting the price increases of the past 10 years? Especially against our worsening economic backdrop?

Did you just learn something about bubbles yesterday?

I guess you are waiting for the Martians to bid on Toronto condos.

There is nobody left to buy.

#71 Ron on 10.12.11 at 8:24 am

Garth, I believe everything you are saying but it seems that governments are poised to squeeze the savers of the world into spending through higher inflation.

Renters will be hit with a 3.1% increase in Ontario for 2012 (not sure how it works in other provinces). If renters face these increasing rates every year, there will be a point where it will not make sense to rent.

It’s lunacy, but as you pointed out, the Boomers see they have no choice but to buy RE to protect their wealth. With 2 large market dips since 08, and 1% Orange returns, they have little choice.

Maybe we won’t either.

My 2 cents.

#72 penpal on 10.12.11 at 8:26 am

@ # 5 vyw

Also got news for you, the Realturds are chest deep in their own properties and the pizza guys and taxi drivers bought a couple of years ago.

The country is “all in”.

Sheesh!

#73 realitybytes on 10.12.11 at 8:29 am

That guy in the pic must have a HUGE plot of real estate to keep a girl like that.

…someone had to say it.

#74 penpal on 10.12.11 at 8:34 am

@ #11 Caddywhack

Global is full of sh&t.

Renting is generally 50% to 75% less than owning if ALL COSTS ARE FACTORED IN.

Those idiots are comparing mtge payments to rents and any owner will tell you that there is a hell of a lot more expense to owning than merely the mtge payment.

#75 penpal on 10.12.11 at 8:44 am

@ # 26 BPOE

Yeah and I guess you got out and asked every single driver if their car was paid for.

They are all leased buddy and you’ll soon find out what that means.

Geez, you are a pathetic individual and unfortunately probably representative of the general populace of Vancouver.

And another reason for not wanting to live there.

#76 Stevenson on 10.12.11 at 8:58 am

CMHC came out with this report. So now they are accurate?

I wonder if the the builders and the banks that borrow to these builders who construct these multi units subdivisions or condos are stupid. According to where the market “should” be going why take the risk? Risk can be minimized with research and I am sure they have done their research on where the market is heading. It’s not exactly chump change for these projects.

Okay so we are at 40% more new homes then new families and apparently are past the stage of when US bubble burst? Our debt is at record high also beyond the US stats when it’s RE burst. Then what are doing wrong? why is our bubble not bursting? I am sorry are not different yet?

We have a “large amount” of unsold “national” inventory. Not that they don’t exists but where are they in comparison to where the bubbles are?

The US is building 602,000 annually with 10 times the population. Great but they are flat lined now how about before the bubble burst? Wouldn’t that be a better comparison?

Also people who are about to retire(not only old folks) and have no solid income besides their pension and old age get approved for mortgages? If anything it would be something they “could” afford. If not every old folk should get one and take the gamble on it inflating. They could just walk out claiming bankruptcy and it wouldn’t affect their daily life anyways.

Ultimately besides all the buzz and hype properties are still appreciating. If you don’t hold RE as primary resident in the proper locations you losing. That is all until the bubble that maybe exists pops soon, later, never?

I agree with the balanced portfolio part, but if 400K can’t be part of your balanced portfolio you shXt outta luck.

#77 penpal on 10.12.11 at 9:03 am

@ # 53 Suede

Never mind the out-migration numbers.

What about all the people that have gone elsewhere to migrate to, finding Vancouver / BC too pricey or too obnoxious to consider moving there.

I mean, can you imagine meeting BPOE or Stevenson and still wanting to locate there?

I mean, really!

#78 Moneta on 10.12.11 at 9:05 am

Care to explain this? Starts have averaged 208k over the past decade vs. household formation of 180k – that’s 16%, and that follows 10 years of underbuilding during the 1990s
———–
Without a real estate bubble, household formation might be closer to 150K.

200K-150K=50

50,000*10=500,000

500,000/1,500,000= 33%

And don’t forget that this 150K also includes second homes that will get liquidated when boomers realize they can’t take care of them.

Another point never aknowledged is the fact that most of our immigrants which come from hot countries, are not very attracted to our cottages and country homes. So chances are the demand won’t be very large for these second homes when they come on the market.

In the 90s, housing starts matched household fomation so it was healthy not lacking.

#79 eddy on 10.12.11 at 9:13 am

Keiser Report: Bank of NY Mellon Defrauding Pensioners

http://www.youtube.com/watch?v=qra_sEg12VA

#80 eddy on 10.12.11 at 9:14 am

Keiser Report: Bank of NY Mellon Defrauding Pensioners
http://www.youtube.com/watch?v=qra_sEg12VA

#81 sue on 10.12.11 at 9:14 am

“…these are just demand loans in drag…” brilliant.

#82 Aussie Roy on 10.12.11 at 9:18 am

Aussie Update

Professor Steve Keen was one of the few economists to predict the financial crisis. While the OECD and the US Federal Reserve foresaw a “great moderation”, unprecedented stability and steadily rising wealth, he warned that a crash was bound to happen.

Now he warns that the same factors that caused the crash show that what we’ve heard so far is merely the first rumble of the storm.

http://www.watoday.com.au/opinion/politics/think-the-gfc-was-big-you-aint-seen-nothing-yet-20111011-1litt.html#ixzz1aZa6MXB7

#83 vyw on 10.12.11 at 9:23 am

#69, #71
Dear Penpal:
You’re right with the analysis but the timing is off IMO
we still need to see that parabolic move up like the Aug 2011 Gold chart or 1981 Vancouver real estate or 1989 Toronto real estate or 2000 Nasdaq.
I believe there’s still another big move up in the Vancouver market before it tops. The reason – low interest rates and low or negative returns in other investments and the CMHC put.

#84 DonDWest on 10.12.11 at 9:30 am

“Try not to sound like such a loser. You might do better. — Garth”

Whether or not I’m a loser is irrelevant. The reason why the big price correction hasn’t happened is because boomers, for the most part, refuse to sell at a lowered price. As in debt as they may be; they’re holding the slots in property because they came before me, and so far they refuse to budge.

They may concede their position one of these days, but I can’t help but feel we’ll be waiting a long time. Expect 5 years of stagflation (minimum) until the bust.

Care for a tissue? — Garth

#85 Stevenson on 10.12.11 at 9:33 am

#76 penpal

I don’t own Vancouver RE anymore. I have lived there for 10 years and it is beautiful BC. Beachs, ocean, sea to ski highway, and Whistler. You could Surf and Snowboard on the same day if you wanted to. That is why it is a very desirable place to live. I would move back in heartbeat if I was not happier where I am at now. Canadian Tax system is a bit too brutal for my preference. I am tired of supporting poor lazy bastards who choose not to work.

The reason people are moving out of Vancouver is simply because they can’t afford to live there. That is normal for any desired city and the same thing happened to places in California. Not all of California but the better parts of it.

There is no free lunch. Make more money or figure out how affect your other variables. I.E. don’t have kids or something.

#86 Mike Rotch on 10.12.11 at 9:41 am

@ #70 Ron RE Rent increases

It’s been a while since I rented from a faceless corporation, but I believe that 3.1% reflects the allowable rent increase to an existing tennant for the upcoming year.

That does not mean that everyone gets tagged with 3.1%. If your landlord tells you your rent is going up, you have three options:

-Swallow it,

-Negotiate (with lots of rental stock available, they surely don’t want to dump a good tennant for the “right” to chase a new one who may not pay rent as frequently or as timely ), or,

-tell them to take a flying leap, and negotiate market rent at at a different place .

#87 Bobo on 10.12.11 at 9:43 am

“In the 90s, housing starts matched household fomation so it was healthy not lacking.”
_____

From 1992 through 2002, starts averaged 146k versus household formation of about 165k. There’s no question starts have outpaced formation for 7 years (up to 2008), but part of it is catch-up, and then a few years of it is overbuilding. But certainly not a decade worth. None of this considers replacment of the existing stock either, which only dampens the overbuilding idea.

The years 1992-5 were recessionary, while mortgage rates touched 14%. You have a convenient memory. — Garth

#88 disciple on 10.12.11 at 9:44 am

TD Bank says it’s good that the age group 65 and older have accumulated debt at 3 times the pace of the average because they’ve invested it in Real Estate, a relatively safe investment. *** Sigh ***. Since debt remains with the estate, it’s the posterity of the boomers that will pay the ultimate price. Thanks but no thanks. There is only one scenario in which the banks do not win. It may involve guillotines.

#89 pessimist on 10.12.11 at 9:54 am

#36 City Slicker
Garth but if there is a jump in housing starts doesn’t that mean there are buyers for them? I would imagine they are building because there is demand….

You would think so, but it does not really seem to be the case.

The best explanation that I have ever received on this particular phenomenon goes like this:

Builders build houses because that’s what they do.

That is their business, that’s how they make money, building houses then selling them. They are not master economic forecasters, they are master planners, carpenters and masons (and some would argue on that point, but that’s another post altogether).

Housing starts are more a function of the ease with which municipalities issue permits, availability of credit and interest rate levels than demand. These three factors all point to builders building far more houses than are necessary.

Don’t forget, housing demand can turn on a dime. It takes literally years for a housing development to come online.

#90 Bobo on 10.12.11 at 9:58 am

“The years 1992-5 were recessionary, while mortgage rates touched 14%. You have a convenient memory. — Garth”

No doubt about that, but underbuilding regardless…

#91 Kris D. on 10.12.11 at 10:01 am

A bit off-topic, perhaps..
Last weekend I was in Pennsylvania, place called Grove City defined by a huge Outlet Mall. The place was so packed, had to drive around half-hour just to find a parking spot – And it’s bigger than most malls I’ve seen. People drowning in their purchases, and long line-ups in every store. License plates from Penn, NY, Ohio, all over.
My point – People spending a lot. Didn’t seem like a country in financial trouble.

#92 fancy_pants on 10.12.11 at 10:03 am

you can act your age and still go down in flames. Just ask anyone working for the city of Harrisburg, PA

http://ca.news.yahoo.com/harrisburg-pa-files-chapter-9-bankruptcy-report-133048545.html

#93 Junius on 10.12.11 at 10:10 am

#75 Stevenson,

You asked, “I wonder if the the builders and the banks that borrow to these builders who construct these multi units subdivisions or condos are stupid.”

As we have seen in the US, UK, Ireland, Spain, etc. they certainly aren’t smart all the time. However the developers are usually smart enough to ensure that the development is financed with a single purpose corporate entity to ensure limited liability. As for the banks, well we both know they are insured by the CMHC so they aren’t on the hook for much either.

My father was a general contractor. At one point he and his business partner saw a storm coming in the market and stopped construction projects. They were the only company in the area to do so. Everyone else laughed at them and gladly took on more projects and more debt. Within two years most of these companies were out of business as the market turned south very quickly.

The point is that the people closest to the market often can’t see the forest for the trees. This obviously includes you.

#94 Bobo on 10.12.11 at 10:13 am

“Without a real estate bubble, household formation might be closer to 150K.”

Except that it’s not… Household formation represdents fundamental underlying demand. 180k

A silly statement. Demand ebbs and flows. — Garth

#95 Moneta on 10.12.11 at 10:20 am

#86Bobo on 10.12.11 at 9:43 am
——
I checked those numbers more than 5 years ago and what I rememebred of it was that by the end of the 90s household formations and housing starts were in balance.

So I just wnen t back to refresh my memory. Yes housing starts were somewhat lower in the 90s than household formations but during the 90s were were working through the over supply of the 80s where housing starts were higher than houshold formations.

Therefore, in the last decade we built too many houses and this oversupply will need to be worked through.

What will make this tough is the fact that the boomer bulge is not 30-40 anymore and on the verge of upgrading. It’s on the verge of dowsizing.

On top of it, a lot of this housing stock is rural however our immigrants are not too keen on living in the country.

#96 Moneta on 10.12.11 at 10:22 am

#93Bobo on 10.12.11 at 10:13 am
“Without a real estate bubble, household formation might be closer to 150K.”

Except that it’s not… Household formation represdents fundamental underlying demand. 180k

——-
Of course it’s not right now. That’s why we have a friggin bubble!!!

I guess you are one of those who just can’t see past the next quarter.

#97 The American on 10.12.11 at 10:34 am

At #26: BPOE, here’s some more FACTS for you. Happy reading! :-)

Vancouver now the Poverty Capital of Canada
http://www.freerepublic.com/focus/f-news/2789834/posts

Canadian income gap widening faster than in the U.S.
http://thetyee.ca/Blogs/TheHook/Health/2011/09/13/income_gap/

By the way, 16thBPOE, rented/leased Maserattis, Lambos, Ferraries, Porsche, Mercedes, and BMWs in Vancouver are not impressive at all. You act very much like someone who is nouveau riche – tacky, misinformed, uncultured, and uneducated. You obviously have forgotten the audience you are attacking as Seattle has the highest concentration of luxury and exotic car sales in North America, per capita. I have two of these named brands sitting in my parking spots in my garage downstairs right now, but who really gives a damn. All of these brands and then some, including Audi, Lexus, Aston Martin, McClaren, Spyker, Bentley, and Rolls are in there as well in neighbors’ parking spots. Whoppity do. So what? NOT IMPRESSED. 16thBPOE, what a sad little way to measure a man’s worth.

Can I ask what you’ve GIVEN back to society in charitable contributions and your time? This is a better way to measure a man’s wealth.

#98 BPOE on 10.12.11 at 10:40 am

Penpal the latest bitter renter to show up on the blog. A financial lesson for you. Cars depreciate so you lease them. Vancouver houses appreciate so you buy them. Yours is a typical story, a dream of owning and living in Vancouver but you can’t afford the ticket to heaven.Your welcome in advance.
***************************************
penpal on 10.12.11 at 8:44 am
@ # 26 BPOE
Yeah and I guess you got out and asked every single driver if their car was paid for.
They are all leased buddy and you’ll soon find out what that means.

.

#99 Devil's Advocate on 10.12.11 at 10:53 am

People love crowds… ever notice how many show up for them.

#100 Pr on 10.12.11 at 11:07 am

Garth; First they ignore you, then they laugh at you, then they fight you, then you win.
– Mahatma Gandhi

#101 Rt Honorable S Harper on 10.12.11 at 11:13 am

we need some financial guidance. anyone feel free to throw in your 2 cents on what we should be doing.
age – 41 and 32, no kids
currently rent – $1,600 month
dual income – $120,000 yr
RRSPs – $70,000 TSFA – none
cash on hand – $2,000
rental property 1 – bot 10 years ago in oakville. townhouse. worth $340,000 mortgage $140,000
rental property 2 – bot 8 months ago in oakville. townhouse. part-ownership, amount invested $40,000

#102 brainsail on 10.12.11 at 11:15 am

#90 Kris D.

I think what you saw were many people taking advantage of sales and cheap prices. People trying to leverage their purchasing power as much as they can.

Grove City, PA Outlet Mall is one the top US 20 outlet malls in size. Majority of stores in outlet malls are clothing related and PA has no sales taxes for clothing and shoes.

Look at some of the sales at Grove City in October.

http://www.premiumoutlets.com/outlets/sales.asp?id=85

#103 live within your means on 10.12.11 at 11:21 am

#64 Moneta on 10.12.11 at 8:00 am

Money and materialism are great at distracting people from the big moment. The more you focus on them, the easier it gets to forget about your own mortality.
……………..
Tho I confess to having been materialistic at times, I always made sure that I could travel & meet people of different cultures, without going into debt. I’m totally aware of my own mortality!! I’m a Stage IV 9 year cancer survivor. My wonderful travel memories help to sustain me. We’re looking forward to spending Christmas in Mtl with my BIL’s, my sis’s family and a very old g’friend of mine (her Mom, now 92 and still going strong, was my 2nd Mom growing up – German refugees).

#104 bill on 10.12.11 at 11:29 am

#9 LS on 10.11.11 at 10:22 pm

over the last few weeks the owner had some upgrades like a tile pavement and cleaned up the junk ect hasnt looked as good for 10 years .
its usual state was decrepitude and guess who doesnt shovel his walk when it snows? actually that whole row of houses between 7 and 6 has a snow shoveling problem……
yup you sure can tell who the good landlords are.

#105 disciple on 10.12.11 at 11:30 am

Moneta said “friggin”. She must be really, REALLY mad.

#106 Moneta on 10.12.11 at 11:40 am

disciple on 10.12.11 at 11:30 am
Moneta said “friggin”. She must be really, REALLY mad
——
Not angry. I’m friggin’ frustrated!!!

I had the same friggin’ arguements with US analysts from 2001 to 2005.

They kept on saying that affordability was high… yes as long as mortgage rates did not reset and people had jobs.

They kept on sayong that subprime was less than 5»% and FICO score were going up… yes until prices collpased, equity disappeared and people stopped making their payments.

They kept on saying that there was a lot of equity… yes until is disappeared.
They kept on saying that the 3 months’s supply was low… yes as long as buyers were buying.

They kept on saying that there was no overbuilding… yes as long as buyers were buying.

It’s déjà vu all over again.

#107 disciple on 10.12.11 at 11:53 am

My family shared Thanksgiving turkey dinner with a survivor of prison torture in a Communist regime. It happened in his younger days many years ago, but the whole story got started when we were talking about the growing gangs in our subdivision.

His daughter recently got mugged for her cellphone at knifepoint. He hadn’t told anybody but me at that point, even his wife hadn’t told my wife and they talk all the time, so it was a sensitive issue as you can imagine.

He showed me the scars on his ankles when they put him in a stretching machine, and the scars on his body from all the other beatings. I turned to my wife and remarked how compared with this, how silly it was that she complained about mustard in her hot dog the other day when I should know she hates mustard. She wasn’t amused.

I remember thinking that after being chained, escaping, being recaptured and enduring horrendous torture, he arrived in Canada only to now be chained by debt, working 30 hours overtime to pay for his overpriced suburban castle. He knows we’re renting and probably looks down on us, but… if only I could advise him of what is coming.

Nonetheless it was one of the better Thanksgivings we’ve had in a long time.

#108 Bailing in BC on 10.12.11 at 12:14 pm

#36 City Slicker

Yes of course there’s demand and it’s coming from baby boomers who have saved no money for retirement and need a get rich quick scheme. All they need is a couple in their 30’s with two toddlers and a sky high daycare bill to buy their investment and all will be well. How could this possibly end badly?

#109 meslippery on 10.12.11 at 12:15 pm

#9
That million dollar house generating $38,000.00
Less taxes and other cost.
Or one million @ 5% generating $50,000.00

Garth
LOCs maybe callable at anytime, call if you want
dont mean I can pay you. Now what?

#110 Fan of Faber on 10.12.11 at 12:17 pm

The state of affairs by the one and only Marc Faber from yesterday, Oct. 11.

http://www.youtube.com/watch?v=Tj7P-Zbu_8M

#111 BPOE on 10.12.11 at 12:19 pm

The selling price of new homes dropped by 0.4 per cent in Metro Vancouver in August, according to the monthly new housing price index, released today by Statistics Canada.
*********************************************
Folks nothing goes straight up or straight down. No big deal. All properties in Vancouver will be scooped up and remember this figure is for Metro Vancouver. How long are you willing to wait for the big correction – 1 year – 5 years – 10 years? What would bring prices down? Higher interest rates. The carrying costs for a Canadian would be the same. Folks, maybe you can’t afford Vancouver and its time to move along. For many the DREAM is over. For the rest of us we march into the future to a level only which can be imagined by renters and their ilk

#112 JSS on 10.12.11 at 12:23 pm

“borrowing to buy houses with lines of credit, perhaps unaware these are just demand loans in drag, whose rates rise with every Bank of Canada uptick and utterly callable”

Garth – Please tell me you are lying.
What does “callable” mean???

#113 Ron on 10.12.11 at 12:27 pm

#85 Mike Rotch

Agreed, but I think you’ll concur most apartment buildings are run by corporations so there is little choice other than moving to a basement.

With the demand for renters increasing, I find it only natural that rents will increase.

Add on the CPI as an excuse to raise rents for hydro, property taxes, and heat, and eventually you will have a situation that will alter the rent/own balance.

If RE doesn’t become affordable soon in large cities, I see an eventual shift of people moving back to the burbs.

#114 Moneta on 10.12.11 at 1:18 pm

With the demand for renters increasing, I find it only natural that rents will increase.
——
Not if homeowners start feeling tight and decide to rent out a room, an ensuite or a second home which is sitting empty most of the year.

I think many out there do not understand how much pent up supply there truly is out there.

#115 Stevenson on 10.12.11 at 1:21 pm

#92 Junius

You said “The point is that the people closest to the market often can’t see the forest for the trees. This obviously includes you.”

Well we could also say there people who are lost and think that they are not the fool that follows, but who are you following? Some people believe big foot exists and they have their statistics and proof too. I could see you as a believer.

This is like a religion to you isn’t it? If the market doesn’t adjust you’ll just wait for the return of “junius” forever. A society does need weak individuals to function after all.

#116 The InvestorsFriend on 10.12.11 at 1:23 pm

OVER-BUILDING U.S. HAS BEEN THERE, DONE THAT

Stevenson at 75 asks:

“The US is building 602,000 annually with 10 times the population. Great but they are flat lined now how about before the bubble burst? Wouldn’t that be a better comparison?”

Exactly Stevenson, Exactly, and Warren Buffett has talked about this many times. During the boom the U.S. was building about 2 million houses per year (10 times what Canada builds now) and had household formations of 1.2 million per year.

How’d that work out?

P.S. How ’bout dem stocks today?

#117 Observer on 10.12.11 at 1:26 pm

I think that global piece is still real estate propaganda.

IMO the purpose of that still serves global’s advertising clients. What it says is “buy a rental property because there are more people who can’t afford to buy, or don’t want to or just sold, so more are renting”. Damn the debt damn the math. That’s why 30% difference not the reality of 50-75% difference.

Notice how the house was featured in the story with the for sale sign easily visible.

On the other hand – great couple in the story. Very smart – not concerned with “If you don’t own you are a loser ” mentality. Gives me some faith in our younger folks.

Also #42 DaBull – Folks , anyone? how do you lend out your mortgage and make 10-12% .

I don’t see any signs in my little corner of the lower mainland of a slowdown.

Neighbour just listed his house for $1,098.000.00 and there is a flurry of activity.

#118 Van guy waiting on 10.12.11 at 1:30 pm

Garth:

When is this bubble popping in Van? This is stressing me out. Sales are still pretty decent here

Move to Hope. — Garth

#119 Timing is Everything on 10.12.11 at 1:34 pm

Act your age – Garth

A lot of men never grow up. It’s genetic. My dad wants a Harley.

BTW…A lot of women grow-up….too fast.

#120 BPOE on 10.12.11 at 1:34 pm

Won’t be happening. A bank can take back a credit line if you are not using it. Banks do not “call” credit lines back if you are making your monthly payments on time. Baby boomers are more buying fancy cars, stainless steel and granite with their home lines of credit. Remember the banks need you to borrow money to stay alive
******************************************
JSS on 10.12.11 at 12:23 pm
“borrowing to buy houses with lines of credit, perhaps unaware these are just demand loans in drag, whose rates rise with every Bank of Canada uptick and utterly callable”
Garth – Please tell me you are lying.
What does “callable” mean???
.

#121 refinow on 10.12.11 at 1:41 pm

#111 (What does callable mean?)

Just as it sounds…. The Bank can pick up the phone and regardless of your payment history at any time demand you payoff the line of credit in full, or reduce the limit, if the value of the security has officially reduced, since CMHC no longer insures credit lines, they can not have the limit/balance exceed 80%.

It also means at any time they can change your rate… There is no term associated with a credit line so really they are only agreeing to the rate until they decide if they want to change it. Sec credit lines all used to be at Prime, and back in 2008 they all flicked a switch, and bingo bongo…everybodys rates changed to Prime plus 1.00%… now lenders are offering prime +1/2%, but only if you ask to change….

But if there is even the slightest of reductions in values, the Banks all have a interestng decision to make about credit limits if you were previously approved for a maximim 80% of the current value credit limit….

Likely if values start to officially drop, (ps i think they already have)… we will likely see the maximum credit limits be scaled back to 60 -65%….

Bank givith…. and Bank taketh away…

A mortgage has a term, ie 5 years… so even if values have changed the bank cannot change your rate or demand full payment for the duration of the term, as long as you continue to make your contactual payments…

#122 Junius on 10.12.11 at 2:07 pm

#114 Stevenson,

My “religion” is trying very hard to live in reality. What is your excuse?

#123 Hashnugs Inthebong on 10.12.11 at 2:09 pm

Move to Hope. — Garth

I am thinking of pulling the trigger and buying a house in Mission B.C. Can get nearly 1/4 acre with a nice move in ready house for about 380K. I have 100K to put down so my monthly mortgage would be a workable $1200 per month, or $600 bi weekly. Regarding FTHBP would I be wise to put 25K of my 100K down payment into RRSP and pull out 25K of the 50K I have in RRSP currently? It would drop my income to under poverty level, thereby saving me 1 year of MSP premiums, drop my fairphamacare costs from 4% annual income to 3% annual income for 1 year, as well as get me a tax refund in the 7K range that would go either into mortgage, or partial repayment of the FTHBP 25K as well as a contribution for next year. Thanks for any help.

Smart boy. Leave VanCity to the delusionals. — Garth

#124 Pepper's Friend on 10.12.11 at 2:26 pm

#38 Here is the TD report on Seniors taking on debt:

http://opinion.financialpost.com/2011/10/11/elderly-growing-debt-loads-faster-than-the-young/

#125 Bobo on 10.12.11 at 2:32 pm

#95 Moneta on 10.12.11 at 10:22 am

Of course it’s not right now. That’s why we have a friggin bubble!!!

I guess you are one of those who just can’t see past the next quarter.
___
Housing demand from household formation is real fundamental demand (ie: new families that need a home). Let’s not confuse that with speculative or investment demand that you see in a bubble.

No doubt we got some overbuilding by the back half of the 2000s, but seriously, we can’t compare it to the U.S. where starts outpaced formation by almost 50% for a full decade.

#126 poco on 10.12.11 at 2:40 pm

#109 fan of faber——here’s another one from Faber on BNN yesterday—he even gives a guarantee on the Van housing market (6min in)

http://www.bnn.ca/News/2011/10/11/World-should-prepare-for-Chinese-slowdown-Faber.aspx

#127 Nostradamus Le Mad Vlad on 10.12.11 at 2:42 pm

7:31 clip Utterly spectacular — advertising at its best. LG on a building in Berlin.
*
#18 Onemorething — Excellent post. TPTB are unraveling the world all around us, using unexpected FF’s (such as Iran yesterday), getting sheeple all steamed up at something they can’t do anything about, all the while nitpicking at us and separating us from our wealth.

RE is a problem? I don’t think so!

#23 nonplused — “Die in bed.”

Good plan, but who with? That is the question!

#32 HAM Sandwich — Further to your post, our original neighbors (they moved to Vancouver Island a few years ago) — he was an undercover RCMP drug buster.

Told us the best investment we could ever make is two return air tickets to Thailand, get set up with contacts and keep the coca-cola flowing freely. Not our lifestyle of choice, ‘tho!

#48 Mean Gene — Good quote. It is quite amazing how pathetically stupid we’ve become in search of the almighty dollar.

#102 live within your means — “Tho I confess to having been materialistic at times . . .”

Hi LWYM. Nothing wrong in being materialistic, it’s just not to be attached to temporary things, and that is what a lot of people don’t take into consideration — the only thing that does last forever is nothing.

The world is just a passing show, that’s all.

#105 Moneta — “It’s déjà vu all over again.” — The only difference is that now, a few of us are better prepared and riding out the storm. Most, however aren’t.

#128 Tony on 10.12.11 at 2:56 pm

It’s probably 30 percent cheaper to rent if the person puts down 25 percent of the value of the house when he/she takes out a mortgage. Without the down payment it’s probably closer to 40 percent cheaper to rent depending on what city. Of course you’d have to have a strong dislike for money if you’re thinking of buying a home today.

#129 DonDWest on 10.12.11 at 2:56 pm

Care for a tissue? — Garth

Act Your Age – Garth

Maybe you should follow your own advice.

Take two. — Garth

#130 penpal on 10.12.11 at 2:59 pm

@ 97 BPOE

Do you never stop displaying your ignorance?

You know nothing about me, but fantasize away like you do about everything else it would seem.

Bitter, no.

Retired and very happy much more like it.

Sucks to be you.

#131 penpal on 10.12.11 at 3:04 pm

@ #96 The American

Right on brother.

I’m in the same ‘garage’ as you, makes no difference, just personal preference at this point in my life.

Funny how the guys with no wealth are so easily impressed by the “trappings of wealth”, isn’t it?

#132 45north on 10.12.11 at 3:15 pm

Kris D: from your post yesterday:

my friend called the agent and bid 600k – The agent said they already had multiple bids

I was sceptical but I think that Burlington will hold up better because it’s on the Go Train. Also it’s a nice town.

Last weekend I was in Pennsylvania, place called Grove City defined by a huge Outlet Mall. The place was so packed, had to drive around half-hour just to find a parking spot

in May I was in Syracuse NY at the Carousel Mall. There was absolutely no trouble finding a parking spot.

Junius: My father was a general contractor. At one point he and his business partner saw a storm coming in the market and stopped construction projects. They were the only company in the area to do so. Everyone else laughed at them and gladly took on more projects and more debt. Within two years most of these companies were out of business as the market turned south very quickly.

builders build until they go out of business

Moneta: They kept on saying

There are a lot of people that believe that housing only goes up. Once they realize it doesn’t they are going to be looking for someone to blame.

My brother-in-law (the other brother-in-law) just bought an old house in Gananoque ON. Apparently the joists are logs, not even squared timbers. He’s going to fix it up. Glad I’m not him.

#133 disciple on 10.12.11 at 3:24 pm

We can only live as human beings as long as the quality of humanity lives in us. For those who are beholden to the fear of death, I say, fear not, for you are already dead. The qualities of humanity are innocence, goodwill, communication, seek and discover, not seek and destroy; trial and error, willingness to make mistakes, and transparency. There are those who walk among us who eat, breathe and excrete; yet, for them, humanity has already ended, being anti-human.

Cybernetic, artificial, inorganic, these are the qualities of the anti-human. Our ancestors warned us of these entities, who, having failed to hybridize or become like us, are now conspiring with the walking dead traitors, to get us to become like… them.

Yes, folks, are true rulers …… are not human. Not surprised? Me neither. Consider SIRI, the new iPhone 4S app:

http://cryptogon.com/?p=25289

#134 penpal on 10.12.11 at 3:29 pm

# @82 vyw

“…. like the August 2011 gold chart…”

You do realize that gold / gold futures can be sold with a click of a mouse don’t you?

You do realize there is a lengthy buy / sell process with residential RE don’t you?

You do realize that buying RE involves significant leverage, and said leverage is dependent on personal cash flow, don’t you?

You are comparing apples and oranges here with respect to the fundamentals of asset class and the inherent effects on market and pricing dynamics those fundamentals impose.

But, hey, everyone is entitled to their opinion!

Btw, you do realize that the fastest (and therefore the biggest time-adjusted returns) occur during the parabolic phase of a bubble, don’t you.

Perhaps you can trade it by flipping a property or two and benefit from your insights.

#135 Habs 76-79 on 10.12.11 at 3:37 pm

It’s been a while since I posted here but if I may.

As to those here who pump the RE story just remember these exact words were spoken in the first part of the 2000’s say 2000-2007 in the USA and in other places like the UK. The pumping of RE was rampant. The same sort of rhetoric as the Canadian RE pumpers do here. “Best Place On Earth” type nonsense. RE always goes up, Get in while you can, was spoken of places like Florida, Nevada, Arizona, So. Cal. etc.

The best place on Earth is really where ONE makes a go of it and hopefully enjoys more rewards/benefits than back steps and pit falls. So B.C. and more so Greater Vancouver can stick it where the sun don’t shine with such arrogant banter. I live in B.C., lived most my life here but I never bought into the crap that it was the Best Place on Earth. It’s a nice place for the most part but is nothing extraordinary. I’ve traveled enough in my life to know it’s all just rhetoric. But for many B.C. and the GVRD may be THEIR PERSONAL best place on Earth and who am I to argue? But do not use it as a way to pump RE or quality of life. There are many other places just as good and IMO some better than B.C. and the GVRD in not just in Canada but North America and even other parts of the world.

As to people talking that they are made to feel as if they are somehow losers for not buying into the RE game (err in recent times RE delusion) or by being just satisfied as a renter. WHO CARES WHAT OTHERS SAY?!? Other people are good at telling you how to spend YOUR money. They have nothing on the line. Many of them also are good at inflating their success. Nobody wants to appear as fools so they twist their stories of success, money, income and investments. You only hear what they say and it’s not always as so. They may appear to be the picture of success, but for all too many of these and IMO those who talk the loudest of personal success often are the ones who should draw the most suspicion. They are likely in debt up to their eyeballs, one pay cheque away from disaster, have ulcers or other health issues due to this stress, may have drinking problems, if married have marriages near the breaking point etc.

No, not all as some people do have a knack of getting it more right than wrong. Most people though do not and most of us slush around the middle. We all can’t fit on the top of the mountain. So IMO don’t care about what others say about you and yours over YOUR MONEY and what you do with it. It’s not a sin to rent and one can get wealthy as a renter too as Garth and others have made quite clear on this blog.

BUT! if you want to buy RE the advice often given here is do not buy more than you can afford. Do not buy only into any one area unless your career or business is so foundationed in that area. Do not buy RE to make a real investment. Many times here it’s been made clear RE is not a true positive investment but is a costly asset that may not return what you want in the future. RE as prime residence is a PLACE TO LIVE IN!

Now if you are one to have the capacity and will to buy additional property to lease/rent out well maybe it can return you some positive cash, maybe not once you factor in all costs, geography, local economy and taxes due. But it’s not for the faint of heart. Rent to the wrong people and you may have oh a drug house/grow op house and the authorities will make YOU pay to repair and/or destroy that house once found out. No lender will lend you money to do such. But your primary residence IS NOT and never will be a true positive cash investment.

Today’s journalism is very weak at giving credible facts. Often most are bought and paid for and often most journalism/news is just editorializing. READ BETWEEN THE LINES! especially when it concerns things like RE, banking/financing and the economy in general especially if the govt. is spinning numbers.

#136 Devore on 10.12.11 at 3:45 pm

#93 Bobo

Except that it’s not… Household formation represdents fundamental underlying demand. 180k

Household formation is affected by many factors, and not some physical absolute, like rate of universe expansion. Some of those include economic conditions, availability of desirable housing, availability of credit, jobs market, cultural attitudes, future outlook, demographics. Like many things, household formation is a slave to the economy, not a driver of it.

Cart before horse.

If economy worsens (perhaps due to deflating housing bubble), household formation will not drive a recovery, it will slow down in response. People must feel optimistic about their future to undertake major life changes, such as moving out of the house, getting married, having children.

Production must take place before consumption. Production creates demand.

#137 Moneta on 10.12.11 at 3:54 pm

#124Bobo on 10.12.11 at 2:32 pm
—–
I’ve been looking at both US and Cdn real estate since 2001.

On a 10/1 basis, housing starts vs. household formations have been nearly equal in both countries. Households shrink in bad times and get created in good times.

US housing starts peaked at 1.9 million annualized. Canada is now at 209K or 2.01 on a 10X basis.

US home ownership peaked at 69%. We’re at 71%?

Real estate mortgages peaked in the US at 10 trillion, we’re now over 1 trillion.

Australia is now imploding. Canada is now the only one left standing.

Frankly, I have a very hard time believing the sum of Canadian households can stay richer than the US over the long term when we are playing the same game, by their rules and they have the reserve currency.

#138 Moneta on 10.12.11 at 3:59 pm

No doubt we got some overbuilding by the back half of the 2000s, but seriously, we can’t compare it to the U.S. where starts outpaced formation by almost 50% for a full decade.
——-
I will concede there are 2 major differences: We know who owns what and we did not CDO like in the US.

However, debt is debt and we’ve got the same amount the US had at its peak. And we’ll have even more by the time this bubble bursts. Why? Because I am still arguing with way too many people about whether or not it’s a bubble.

#139 jess on 10.12.11 at 4:01 pm

jargonator –

Innovation Process Facilitators

Telegraph.co.uk – 3 hours ago
By PA Nigel Cranswick, 47, was a director of Ideas 2 Go (I2G), which he ran from a small office in a Sheffield business park, and claimed to have bought and …

Paul Rooney, the HMRC assistant director for criminal investigation, said: “This was a sophisticated fraud designed to steal hundreds of millions of pounds of tax. HMRC investigators unravelled a complex web of fake business transactions fabricated to conceal the massive financial fraud.”

=====

generation HOW???? Life Edit
Graham Hill Less stuff more happiness
http://www.ted.com/talks/graham_hill_less_stuff_more_happiness.html

funny -John Maeda on the simple life
http://www.ted.com/talks/john_maeda_on_the_simple_life.html
http://mitpress.mit.edu/catalog/item/default.asp?ttype=2&tid=10933

#140 detalumis on 10.12.11 at 4:04 pm

#68, you are as bad as Garth with his constant harping on older people being geriatric wastrals and all that good stuff and then lumping 48 year old boomers into the equation. The 75 year old lady in question could have been married to a cheap bstrd who never let her spend a dime in her entire life and this is the first time she ever had to have something nice – ever. My neighbour didn’t get her first house until she was 70 – she is now 91 and still going strong in her 1960 bungalow.

Any senior that is 75 and still interested in renovating shows that she is still interested in LIVING and should not be denigrated for doing so. There is a reason why communities full of seniors do so poorly economically and that is because of attitudes that many people share and that is that older people should not be concerned with consumption, that they are passed it and will be dead soon anyway.

#141 APM on 10.12.11 at 4:06 pm

@ #96 The American

Nice response. No matter how rich you are, why draw any attention to yourself. The guys that have real money don’t need to prove anything to anyone. Even with their charitable donations or volunteer work…why tell anyone. You do it because you want to do it.

#142 BPOE on 10.12.11 at 4:12 pm

And here comes the bankruptcies. America = pathetic.
*******************************************
http://ca.news.yahoo.com/pennsylvania-state-capital-declares-bankruptcy-151551121.html

#143 Stevenson on 10.12.11 at 4:21 pm

#121 Junius

Excuse? Why would I need one. I am living the reality, but you’re the one waiting for something to happen. Maybe the return of the almighty, “market tank” god?

#144 Harlee on 10.12.11 at 4:30 pm

#68 Allister
“I don’t know how long she expects to live…” No,and at 75 your family friend probably doesn’t have any idea how long she is going to live either. At one time people retired at 65 and pretty well died 10 years later. Now thanks to a health system of improved medicine and transplants ,etc.and more awareness of genetics women can easily live to 95. My grandmothers lived to 90 and 98 . The 98 year old was still living in her home (bought in 1955) when she peacefully died in her sleep. Your family friend could easily be living in her 1960s home for 20 years. That’s practically another generation. What used to be “old age” is now “middle age” and what used to be “death” is now “old age” ! As people live longer,life gets more complicated. And it gets more complicated to know how to plan for life to.For everyone.
Kris D.
“People spending a lot”. They’re being patriotic. George W. Bush told them to “spend,spend,spend” and fight the evil terrorists. And Obama told them to “Buy American”.Sheeple do what they’re told to do. Stupid yes, but….what else do you expect from the masses ?

#145 Mr. Lee on 10.12.11 at 4:40 pm

The fact that Canadians are over leveraged more so now than ever before coupled with and over capacity in dwellings should be enough to cause some pause in the thought processes of us as a nation. Mr. Turner spoke of the supply and demand structure as it pertains to housing construction and supply to the population growth factor. Add to this debt servicing, even at historic low levels, one is left with a witches brew of financial reality that few of our citizens will be able to hide from.

Good luck

#146 Timing is Everything on 10.12.11 at 4:48 pm

It’s all Trudeau’s fault anyway… ;)

“Was Trudeau a disaster? Yes
It has taken nearly 30 years to recover after he nearly bankrupted and split up the country” – David Frum

http://tinyurl.com/3c6o7r8
———————————————-
#120 refinow – said “Bank givith…. and Bank taketh away…”

…But mostly taketh…from most of us.
Good points on the HELOCs…They are useful, but always, always, read the fine print…Indeed they are not like a mortgage. The banks can (and will) change the rules at anytime.

#147 Westernman on 10.12.11 at 5:15 pm

Axehead
” I can’t stop looking at today’s pic…”
A dollup of silicon sitting on a 500 lb. pile of whale blubber… man you must be hard up. You must flip your lid when you visit porn sites. You should sit down and re-think your life.

#148 Grimbot on 10.12.11 at 5:25 pm

Seniors in Canada are piling up debt at record levels…and reverse mortgages pose serious risks….

http://yourmoney.ca/advice/savings/seniors_adding_debt_at_faster_pace_td_bank/d52a89ce

#149 Nostradamus Le Mad Vlad on 10.12.11 at 5:26 pm


#132 disciple — “. . . fear of death . . .” — Hah! No fear at all! It’s a truly gorgeous experience to be free of one’s sack of clothes, then to move back into the other worlds.
*
Thought For The Day! — “Increases in prison spending [in the U.S.] average twice as high as increases in education spending.” — National Criminal Justice Commission, February, 1996. wrh.com. Harper is going the same route while crime stats are down. Why?
*
OWS “If Obama thought a coerced confession and a call to war with Iran was going to get the American people to abandon their fight against fascism, salute the flag, and throw their money and their childrens’ lives onto the bayonets of yet another of Israel’s many enemies, he was tragically mistaken.

“Re: Fast and Furious: Same comment.” wrh.com; Uh-Oh Airport doesn’t connect to the runway (sort of) — US$36 mln. toasted; 1:42 clip And here they are — the Agents Provocateurs (from the FBI and CIA) who join an occupy movement, then claim that violence is necessary to achieve their goals. It isn’t, and those aren’t; Interesting My better half has mentioned on a couple of occasions now, that bank employees are sounding a little more wary, they know something is up; OShitama Guess that’s the new jobs bill gone; 3:34 clip Putin’s right, but soon the feeding frenzy will be over; 5:51 clip The Euro Fail-Out; Inside Looking Out Mirrors, reflectionsm rotten to the core.

Buckle Up The same goes for here; Bankrupt Harrisburg, PA; Brewing Beer or trouble? Chart Company profits vs. employee wages; Iceland’s on-going revolution.
Harper Cdns. voted for him and this is what we’ve got (dubya #2); Black Plague “I sure hope they don’t drop that test tu…(CRASH) Oh shit!” wrh.com; Iran The US is desperately trying to goad Iran into another fake war (like Iraq); 6:49 clip If the US decides to take on Pakistan and Iran at the same time, this would guarantee China and Russia taking an opposing view, as they have both built nuke power plants and have too much to lose; Double Standard US blah blah blah; Iran US wrong? “Is Israel and the US desperate enough for war with Iran to stage a major false flag attack inside the United States? Hell yeah they are!” wrh.com; Bachmann “Can’t God write you a check, Michelle? He has lots of cash; I see the guys in the funny robes raking it in every Sunday! I’ve been to the Vatican; I know what it costs to heat that pile of rocks. He’s gotta have something left over for you!” wrh.com.

#150 City Slicker on 10.12.11 at 5:27 pm

Homes lose 31%, worst yet to come:

http://www.moneynews.com/StreetTalk/4-Reasons-Housing-Will/2011/10/07/id/413626?

#151 Alex on 10.12.11 at 5:42 pm

BPOE you idiot: If America = pathetic and if Canada relies on America for, well, just about everything (protection, commerce, entertainment, etc, etc), what does that make Canada?

#152 Devore on 10.12.11 at 5:48 pm

#111 JSS

What does “callable” mean???

Pay it off now, or else… we send Guido.

#153 Waterloo Resident on 10.12.11 at 6:01 pm

Garth said: ( “Boomers do not need more real estate, for goodness sake. They need money for defibrillators, Hair Club memberships and penile implants. Any downturn in residential real estate (and it’s building) would cause these folks – who have the greatest need for liquidity and the shortest time to get it – to bail en masse. ” )

== Yes, Garth, I TOTALLY AGREE with you on those point !!!

The only thing is “WHEN?”

I’ve just taken a trip to the East Coast this long weekend and I was totally amazed at how many ‘FOR SALE’ signs I see everywhere, I was counting one sign every minute or two when I was traveling through the towns and cities there. I stopped in at a Tim Hortons along the Cabot Trail and the donuts were all sold out; seems that they cannot find anyone to hire to make new donuts to meet up with the demand. In the lineup everyone seemed to be over 70; TONS of gray / white hair, seems like everyone was wearing Depends diapers.
The funny thing is that here in Ontario a local Tim Hortons who was trying to fill a job had over 621 applicants from University/College grads who still cannot find a job month later !!!
Maybe they should all move to Nova Scotia, they seem to have lots of jobs in Tim Hortons there?

When the old crap begins to retire here in Ontario then THAT is when we will see home prices slowly begin to fall, and I don’t think this will happen for another 24 years still.

#154 Herb on 10.12.11 at 6:02 pm

Westernman @ #146,

you are dead wrong. The picture is Smoking Man’s “secet of happyness” that Garth censored a couple of days ago:

You let your hair grow, sit on a beach, and wait until a nymph jumps into your lap …

#155 Timing is Everything on 10.12.11 at 6:07 pm

#150 Alex

Ummmm….A parasite?…But a really nice one. Just a minor inconvenience. Right??

#156 APM on 10.12.11 at 6:08 pm

Hi Garth,

What are your thoughts on the impact that the new Spadina Subway Extention will have on the value of residential real estate north of Steeles? From a very micro perspective this may somewhat offset any decline in value around this area.

http://www3.ttc.ca/About_the_TTC/Projects_and_initiatives/Spadina_subway_extension/index.jsp

#157 disciple on 10.12.11 at 6:13 pm

I really like her smile. But the malfunctioning belt she’s wearing as a top is just a tad too small, wouldn’t you say?

#158 somejerk on 10.12.11 at 6:22 pm

#108 meslippery
LOCs maybe callable at anytime, call if you want
dont mean I can pay you. Now what?

they hound you for awhile & you take out a second mortgage at a rate higher than your LOC, eventually realizing you have to sell your house, and other things to pay for both just about the time when everyone else is in the same boat…

or you can’t pay and they foreclose on your house (faster than you think it takes), and your still eventually selling even more stuff to pay both…

You end up renting which you should have done in the first place, and sold when the times were ‘good’…

which is your slow decline the writer of this blog has been talking about

#159 Ben on 10.12.11 at 6:52 pm

He’s renting in the pic, smart old guy!

#160 Ben on 10.12.11 at 6:56 pm

Smart ol boy renting his toy!

#161 Dan in Victoria on 10.12.11 at 7:00 pm

Hashnugs in the bong (LOL) @122

Re -outlying areas this is up island a bit, but these types of houses and prices are plentiful. The sale date was end of May.
Values have dropped considerbly since then.
We just viewed one even closer to Victoria on one acre for well under 400K .
I calculated it out and I could not buy the lot and build for the list price.
Was out looking yesterday and found a few more.
As noted before on this blog price drops start further out and move in.
Its a good time to be waiting with cash, the slow season is coming.

#162 Timing is Everything on 10.12.11 at 7:07 pm

OK, maybe it’s not ‘all’ Trudeau’s fault… ;)

“Was Trudeau a disaster? No, he is beloved because he liberated Canada from old men, old thinking, narrow traditions and colonial caution…” – Lawrence Martin

http://tinyurl.com/6z9qzfb

Sorry Garth, off topic…just kinda found these [Trudeau] articles interesting.

#163 timo on 10.12.11 at 7:38 pm

http://www.azcentral.com/business/foreclosures/index.php

watch the Phoenix area come alive with colour.

#164 Min in Mission on 10.12.11 at 8:20 pm

Glad to see that Dad is enjoying himself!!

#165 Smoking Man on 10.12.11 at 8:21 pm

#153 Herb on 10.12.11 at 6:02 pm

Now if I only had hair, see thats why mother nature took it away from me, level out the playing feild, and give the rest of you dudes a chance. :)

#166 vyw on 10.12.11 at 8:43 pm

Penpal – gold, like other commodities are in a bubble. Also private debt, also housing – both made-in-Canada bubbles. That’s all. They will have their own unique qualities but the pattern is similar. Most of us (including me) can only speculate on timing.

#167 Moneta on 10.12.11 at 9:28 pm

#102live within your means on 10.12.11 at 11:21 am
———
I think we all fall into the trap of materialism. They do say that experiences bring more happiness than stuff. Obviously, you’ve gone that route. Good for you!

#168 The thing in the basement on 10.12.11 at 9:28 pm

Thank you to those that supplied links to articles regarding the report. Here is the report itself

http://www.td.com/document/PDF/economics/special/dp1011_debt.pdf

160 Dan – here is latest sales figures up-island. Though generally I still think it’s pricey, it is only around canadian average. As you point out, supply of new homes will drop when existing homes sell well under replacement.

http://www.vireb.com/assets/images/pdf/09-sep_11_sales_summary.pdf

#169 Kris D. on 10.12.11 at 10:12 pm

#146 Westernman
A dollup of silicon sitting on a 500 lb. pile of whale blubber…

I think you mean silicone. Silicon is the primary element used to make electronic chips – So your statement would be appropriate if the boomer in the photo had a laptop in his lap :)

#170 VicBC on 10.12.11 at 10:29 pm

#111 (What does callable mean?)

I have a secured line of credit with RBC @ prime 3%. My mortgage is coming due in Jan. and was thinking of rolling it into my credit line. We will be able to have it payed off within ten years. The flexibility of the credit line appeals to me whereby all excess money goes to paying down the CL, but if need arises I have access to funds.
Can anyone poke holes in my thinking?

Your LOC rate will rise automatically with any BoC increases. If you do not have capacity on the LOC now to absorb the mortgage principal, it could well be bumped to a higher rate, since it is unsecured. And a LOC is callable at the bank’s discretion. Finally, you may be charged a quarter point penalty for not knowing how to spell ‘paid.’ That’s a big item with bankers. — Garth

#171 meslippery on 10.12.11 at 10:38 pm

#157 somejerk
Who said my house was not paid off?
LOCs in my case, are unsecured and then what?

I really dont know thats why Iam asking.

#172 meslippery on 10.12.11 at 10:54 pm

Dont worry too much about spelling Garth #111 said
secured. Not unsecured.

la la la

#173 VicBC on 10.12.11 at 10:58 pm

#169 VicBC

Funny guy!

I do have room to move the mortgage into the LOC so my current rate of 3% sticks (checked with bank)and will stay at prime so even if rates went up 2 to 3% I’d still be in the ballpark of a 5yr mortgage. The total would equal about 1/3 the value of my home. We both have good jobs plus a rental suite. Another reason I don’t want a 5yr is our parents are in their 80’s and odds are……

Thanks for you comments.

#174 meslippery on 10.12.11 at 11:19 pm

Or #169 sorry.

#175 meslippery on 10.13.11 at 12:16 am

Beach girl is smokin hot…

#176 somejerk on 10.13.11 at 12:24 am

meslippery – unsecured but I think when you sign the paper you said you would pay it back…they hound you for awhile and then go to court depending on the amount get a judgment, they go after your salary and hound your employer until you’re embarrassed

or

not working? they hound you until you pay, take you to court if you don’t go after your ass’ets… can’t really walk away… I’m sure they will get you one way some day…

btw, this is all guess work… didn’t want to sound so snippy the first time through… just kinda erks me, thinking peeps might just just walk away from obligations… this leads to a continued death spiral for everyone…

#177 Marc L on 10.13.11 at 9:08 am

Who can talk about money, houses, RE, stocks, etc when Garth posts a photo of a freaking hot babe like that!! Where did you dig up that photo stock? She has a great asset diversification.

This is a serious financial blog. Shame on you. — Garth

#178 MM on 10.13.11 at 10:58 am

The guy got lucky, really lucky btw:

http://www.gossipcenter.com/jenna-bentley/jenna-bentley-maui-bikini-babe-363027

#179 bill on 10.13.11 at 11:57 am

hashnug
you are aware of the air quality problems in the upper valley?
mind you convenient to get out of town and enjoy nature ect.

#180 Daisy Mae on 10.13.11 at 12:02 pm

First, “companies are profitable..the economy is expanding.”

Then, “BC’s economy is sputtering; more people are leaving than arriving; the construction business has collapsed; commodity prices have nailed forestry while tourism’s bled out since that sports thingy last year.”

How can it be both?

#181 morry on 10.13.11 at 2:37 pm

re #3 ‘Two Thumbs Up!’

actually i think he has one thumb up and she has two pointers