Rough choices

For some reason, Trev and Anna started reading this blog after they bought a house in Vancouver. “We paid $1 million,” he says, “for a place near Main Street.” Sadly, it was unrenovated, so they must spend $150,000 to make it livable. “We plan to stay here 10 years,” Trev adds, “and we were fortunate enough to put down 50% (but perhaps that was a mistake after reading your blog).

So, what else will you have besides a house and mortgage?

“We’ve set aside an RESP for our kid maxed out to the level the government will contribute. I have a limited partnership investment of $50,000 which is projected to provide us with a 7% return. Our combined income at the moment is 120k per year. The house has a separate suite which will provide us $900 per month income. If times get tough then we can rent a spare bedroom to a student for $700. So, we will have $50k after renovations to invest which from what I have read on your blog may be best invested in a TSFA. Also should we seriously consider selling the house when the renovations are complete, rent for a while and then re-invest? The concern after reading your blog is that we will be house rich. If we are planning on staying there for 10 years does this still apply?”

The scorecard: $1.15 million house, $500,000 mortgage and $100,000 in liquid assets (half of it in an LP, which is probably completely illiquid). Net worth is $750,000, of which 87% is in a single asset, the house, and $50,000 is tied up. You spent almost 10 times your income to buy and reno the place, which is absurd. You can only afford to live there, it sounds, if you share the house with other people. And renting out a bedroom to a student? Is this why you spent a million bucks?

So, your questions: sell when renovated, rent then buy again? Or stay?

The best move would have been to discover this pathetic site months ago. Not only did you pay property transfer tax of $18,000 when you bought the place, but it’ll cost another $40,000 in commission (plus HST) to sell – almost $60,000, which means a year after the purchase you need $1.2 million to break even (adding in mortgage and property tax payments, but not the mortgage break fee).

Is that a reasonable assumption, given the market, the economy, and the state of Canadian house horniness?

Not a chance.

Look no further than the recent numbers. Wages and salaries have fallen below inflation, which means people have less actual money to spend. Mortgage debt and lines of credit have exploded. Families have never owed this much, so  imagine what happens when interest rates recover. More jobs are being lost than created. Governments are deeply in hock, which means austerity and less spending. China’s property bubble is deflating fast, while the US economy sputters and Obama may lose his job to a Mormon protectionist.

Why should real estate rise in value in an environment like that? As I’ve pointed, there’s nothing supporting house prices in Vancouver (or Toronto, or piteous Calgary) but new buckets of debt. There are myriad examples of what happens to real estate when jobs wilt and wages sag. They get slaughtered.

But is it different in Van these days?

Nope.  Sales in November will be below those of last year by about 10%. Average prices are declining, and will be off about 7% from the peak. According to my realtor buddies, “there have been two inflection points this year. The first was in late Spring when listings took off and the second was in mid-October when momentum in sales shifted down.” Anyone trying to sell a property in the last three weeks knows this well. Crickets.

The first half of this year was hot, the second half will show a dramatic cooling. Tons of sellers have given up, and will flood the market with renewed listings in the Spring. Says one broker (who wishes to remain anon): “The market will come off the rails in Vancouver next year.   We’re seeing some China buying reductions but there will always be some Chinese money, however smart money does not chase a falling asset no matter how much they want their kids to go to the “best Schools”. Give me a break – they are not so great that Vancouver is better at education than other cities, that losing 500K is not noticed. Spring will be a disaster out west – as soon as the mainstream media pick up on this – it may self-perpetuate.”

The real question, Trev and Anna, is how much equity do you want to lose? You can try to flip now, and lose a hundred or so; dump it reno’d, and lose two hundred or more; or hang on for three years and lose a ton. Ten years? With endless luck and horseshoes departing your rear end, it might be worth what you paid.

Now, are there lessons here for those fortunate enough not to own Vancouver real estate?

You bet. The implosion there will vibrate the nation. In hindsight, it will seem so patently obvious we screwed up. That we thought the laws of economics no longer applied to Canada. That assets could rise in value just because we wanted them to. That debt had no consequence.

People like Trev and Anna have a stark choice. Live in their mistake, watching equity hemorrhage and listen to their boarders grunt through the walls and the joists. Or admit stupidity, sell, and eat an immediate loss.

Of course, the second option’s the best. With half a million tucked away they can let investments pay their rent, escape the realty storm, and buy a better house in a few years with less debt.

Only hubris stands in the way.

144 comments ↓

#1 Ron Mendelson on 11.27.11 at 6:06 pm

100% right on with this post.

The market is set to decline dramatically.

I do not believe even these crazy low interest rates can save the Vancouver market now.

10X annual income for a home is simply unsustainable.

Those who are smart are out of the market already!

#2 anon on 11.27.11 at 6:19 pm

FIRST BITCHNEZ

#3 JC on 11.27.11 at 6:26 pm

Looks like the the forces of reality have broken through the final defensive line @ Seelow Hts and all that awaits the “true believers” of the economic fantasy is the final battle for hearts and pocketbooks.

My next move: parabolic (uber-absurd) spin by the real-estate industry.

#4 robert james on 11.27.11 at 6:31 pm

To buy a house for a million bucks and have to share the house with renters is mind numbing stupid even by Vancouver standards.. If the house increased in value every year who on earth would want to live like that ????Wow !!!

#5 E.G. on 11.27.11 at 6:38 pm

Yup. Lots of for sale signs around here lately. Not quite looking like PEI yet, though…

#6 smartalox on 11.27.11 at 6:39 pm

Excellent post! My wife and I lived this same scenario (well,, 20 %of the same scenario) 18 months ago. We sold, invested and have been renting ever since. We will buy again one day, but not before the market resets. In the mean time, we will pay as we go, living well beneath our means, renting more space as we need it.

#7 Okanagan Renter on 11.27.11 at 6:39 pm

I wonder how many other regretful moneypit…er…home buyers like Trev & Anna wish they could jump into a time machine after finding this blog. I was fortunate enough to have decided to keep renting before joining Turner Nation, but the blog has given me the theoretical and spiritual underpinning to strengthen my resolve. It’s also given me plenty of hellfire ammo to rain upon my house-horny friends & family.

It should be an interesting family Christmas dinner this year, assuming they don’t drown me in the lake if the conversation turns to RE…

#8 Victor on 11.27.11 at 6:46 pm

First?
Nice article!

#9 Pr on 11.27.11 at 6:53 pm

Everything is in their: http://www.youtube.com/watch?v=9eRooYZJL-E&feature=player_embedded

#10 Unistar38 on 11.27.11 at 6:57 pm

Ten years? With endless luck and horseshoes coming out your rear end, it might be worth what you paid. – Garth

The operative word is: might.

The only pity is that we do not have a simple, direct way to short the s**t of the RE in Canada!

Does anyone know a builder who is public?

Sigh

#11 Marc L on 11.27.11 at 6:59 pm

You’d think they would consult with friends, investment adviser or parents on that move… Not very bright.

Maybe they did and that got them in this crisis.

#12 Ozy - Scaremonger but true on 11.27.11 at 7:02 pm

Guys you are toast, if there wil be a surprise (for the non-informed) 2% raise in 5 years mortgages starting Jan 2012, stoks, bonds and real estate both residential and commercial will tumble big.
Guys you are toast.

#13 Spot The Speculators #68 – Main Street SFH Buyers – “Trev and Anna paid $1 million for a place near Main Street. They must spend $150K to make it livable.” | Vancouver Real Estate Anecdote Archive on 11.27.11 at 7:07 pm

[…] story of ‘Trev and Anna’ is relayed and discussed at greaterfool.ca by Garth Turner, 27 Nov 2011, a must read for Vancouverites. Here is the core anecdote: Trev and Anna paid $1 million for a […]

#14 In God, I Mean Garth We Trust on 11.27.11 at 7:08 pm

# Robert James

“To buy a house for a million bucks and have to share the house with renters is mind numbing stupid even by Vancouver standards.”

Amen brother! I can see lower end homes with owners that have modest incomes renting out part of their homes to make ends meet but a million dollar home??? Of course I realize a million dollar home in Vancouver doesn’t get you much.

#15 Mr. Lahey on 11.27.11 at 7:12 pm

Garth with December only days away, isn’t it time you sent out your Christmas party invitations at the bunker for all your loyal blog dogs? Don’t worry Randy, Barb and I will bring our own booze and we promise to leave Ricky and Cyrus out of the loop. Bubbles may tag along with a couple of his kittens. We and the rest of the blog dogs await our invite…

#16 Walter Safety on 11.27.11 at 7:20 pm

They will be ok. Trev and Anna had 50 % down and their prepared to live with a little inconvenience – and their young they can take the punishment. They may not even notice if they have been living like students.
They don’t have to take the hit , they don,t need to be liquid ,in ten years hard assets could be exactly the right place to be. # 11 what crisis ? Second guessing yourself is not a crisis.

#17 vreaa on 11.27.11 at 7:21 pm

Great story Garth, thanks for relaying it.

We have archived it as #68 in our ‘Spot The Speculator’ series, where regular folks who superficially appear to be buying Vancouver RE for personal use are actually shown to be gambling on future price appreciation:

Spot The Speculators #68 – “Trev and Anna paid $1 million for a SFH near Main Street. They must spend $150K to make it livable.”
http://wp.me/pcq1o-3lj

[BTW, minor issue: By our calculation we’d say that these folks have 153% of their net-worth in RE (Home value $1.15M; Net-worth $750K). Isn’t that the correct way to interpret their figures?]

Yeah, Vancouver RE appears to have stalled.

#18 Fleabitten Monkey on 11.27.11 at 7:32 pm

I’m only assuming Trev and Anna are youngish, 30s? Where do people that age get a $500,000 down payment from anyway? Just curious.

#19 maxx on 11.27.11 at 7:34 pm

#4 robert james on 11.27.11 at 6:31 pm

“……. If the house increased in value every year who on earth would want to live like that ????Wow !!!”

-not to mention the horror if this monumental debt burden declines in value in the same circumstances?

#20 jess on 11.27.11 at 7:37 pm

rough choice indeed
Oh the humanity!

http://www.wbtv.com/story/16120690/caught-on-tape-riot-over-2-waffle-maker-in-walmart

#21 sam.i.am on 11.27.11 at 7:44 pm

Lahey will you be sporting the traditional white beard?

#22 Not 1st on 11.27.11 at 7:44 pm

Garth, didn’t you once claim the “shadow banking sector” was for tin foil hatters and doomers? got news for you – its black swan time buddy. Hope you got your genset running.

“$707,568,901,000,000: How (And Why) Banks Increased Total Outstanding Derivatives By A Record $107 Trillion In 6 Months”

#23 Mister Sanity on 11.27.11 at 7:47 pm

#2 anon

Crawl back into whatever hole you came out of – you’re a waste of space.

#12 Ozy

Dream on.. The government won’t allow rates to rise – they’re not blind and know what will happen if they raise them.

#24 Claire on 11.27.11 at 7:47 pm

I live in Burnaby, BC. For the longest time houses have sat around here with For Sale signs, nothing moving. This past weekend, they all had Sold signs on them.

I’m just shaking my head with disbelief. It appears that very few people have any sense at all.

#25 Double Trouble on 11.27.11 at 7:47 pm

Will the bubble reinflate or delay its pop even with extra, extra low rates? Or will it pop despite the lowest rate ever seen in history? Only 2012 will tell.

http://www.cbc.ca/news/business/story/2011/11/09/bank-of-canada-interest-rate-cut.html

#26 HouseBuster on 11.27.11 at 8:13 pm

Make no mistake, housing will drop by 50%.

#27 Tim on 11.27.11 at 8:29 pm

After housing has had its biggest run up in history, far beyond yearly average increases and it is definitely cheaper to rent, who would pay a million for a house? Upon any cursory analysis, it should be evident that housing is overvalued. If it continued to increase at the same pace, people would all rent, as it is so much cheaper and you don’t need a Chinese grad student in the basement to subsidize your place

#28 karl hungus on 11.27.11 at 8:30 pm

Since when does HST apply to the resale of houses?

It applies to real estate commissions, which was the reference here. — Garth

#29 Tony on 11.27.11 at 8:56 pm

Rule of thumb today seems to be 3X combined income. Back in the 1970’s it was 3X the husbands gross income. The maximum they should spend on a house is $360,000. Of course if what should happens does happen the couple in the future should watch the house value fall in half (or maybe more) and kiss their whole down payment good-bye if they were to walk away from it.

#30 AG Sage on 11.27.11 at 8:59 pm

A 150k reno is often a 300k reno by the end of it. Best of luck to the both of you. I have no advice, just best wishes.

#31 Waterloo Resident on 11.27.11 at 9:05 pm

Don’t worry, with the results of the CRAZY SPENDING of typical Canadians this ‘BLACK FRIDAY’, your $1 Million dollar house will soon be selling for $2 Million in no time, I would say 2-3 years EASY !!!

You’ll be rolling in dough, just relax and let the good times roll in.

#32 Waterloo Resident on 11.27.11 at 9:07 pm

Want to make a TON of MONEY on the stock market?

Well, just do what I do, follow this guy’s FREE market timing signals:

http://www.decisionmoose.com/Moosignal.html

#33 Renters Revenge on 11.27.11 at 9:08 pm

What will Trev and Anna do when their flop house is only worth $250k? $1m house on a $120k per year income? They deserve to lose it all, I have no compassion for fools like this.

#34 Canadian Watchdog on 11.27.11 at 9:12 pm

Some charts for this post.

Residential Renovation Loans http://i42.tinypic.com/505ftg.png

Construction Loans http://i42.tinypic.com/2cxb95l.png

#35 Nostradamus Le Mad Vlad on 11.27.11 at 9:34 pm


“Or admit stupidity, sell, and eat an immediate loss. With half a million tucked away they can let investments pay their rent, dump it reno’d, and lose two hundred or more. . .”

With 1/2 mln. invested, they can afford to get their renos done, then sell it. Why on earth anyone would think of buying an illiquid investment is beyond me.

Circumstances, likes / dislikes do play a role, but once the two illusions of ‘safety’ and ‘security’ are thrown overboard, it becomes a lot easier to rent and let the owner take care of the maint. + taxes.

There is also an option to transfer the home (similar to inheriting), with no money changing hands, except for the notary’s / lawyer’s fees involved. Don’t know what happens with land transfer tax or anything other taxes, what it involves or how much the final cost would be.
*
Wot a delightful day. Lots of freshly baked apple crumble (crisp) and pumpkin pie with fresh whipped cream. Is there anything better in life than to enjoy good friends, good food and indulging in health food of the highest quality? Methinx not!
*
The Twelve Days Of Crisis Lyrics and art in link; Comfortably Numb Sheeple living in bliss; GD2 Parasitic banxters, deluded economists and politicos loyal to themselves; UK Troops at airports during general strike; CTA and the FTA “Nasty Free Trade Agreement Between Canada and the European Union in Final Stages of Negotiations” (except the EU is horse manure); Increasing Derivatives $707,568,901,000,000? Pocket change!

The Artful Dodger Family’s billions; 11:12 clip m$m keeping true EU debt / deficit figures quiet; Unemployed At least 25 mln. un- and underemployed, possibly a few mln. more; 3:18 clip What if the Euro collapses? Iceland “What happened to Iceland is clear: its banks ran amok.”; Zombies “An old grandfather, was beaten into a bloody pulp, for suspected shoplifting, because he was trying to save his grandson from being crushed.”
*
6:53 clip Iran blames the US and Israe; for false papers; Ski Season starts Ts’giving Wkd! Revolting Scientists against GW; WW3 won’t stop another American Revolution; Medical Mafia “Big Pharma’s only recipe for health”; Man-made flu Anthrax doesn’t even come close; Intern Citizens No lawyers? That’s a start.

Syria Russia (and China) have an equivalent to greater amount of nukes than the US and Israel; US scrambles to repair damage with Pakistan (no chance); 4:06 clip “Note to Egypt – be careful whom you vote in… democracy is a double edged sword.”; Russia – China NATO – US – UN open fire on Syria which draws the Russians in; NATO – UN – US – Oz targets China. WW3 alright; Turkey – Syria “Possibly for the first time in the life of the Turkish republic, a Turkish government has adopted a policy of open, unprovoked confrontation with a neighboring country. The citizens of that country, Syria, are flabbergasted.” HAARP, delivering two ‘quakes to Turkey, and being threatened by the US and Israel could be another reason; 8:19 clip CFR thinking about creating a false scarcity to drive up demand for flu virus.

#36 T.O. Bubble Boy on 11.27.11 at 9:43 pm

If they are lucky, maybe that renter will be studying to become a financial advisor, and they can get some guidance on how not to buy a million dollar house just to turn it into student housing.

#37 thinktank on 11.27.11 at 9:47 pm

great post … really good … I cant believe that a couple of what I will assume “some intelligence” to aquire $500,000 as a downpayment and then sink 85% + of what “appears” to be their net worth into a single asset class – truly blows my mind. Hate to be blunt (I am a little more subtle than Garth) .. but shake your heads – SERIOUSLY shake them .. you BOUGHT at the HIGH folks … I suppose if you are not looking for an ROI anytime soon .. 10 years later you may be ok … but a question for ya .. did ya really feel the urgent need to buy NOW !!?? Ya couldnt wait a year or two with that type of cash on hand ??? wow … tell me again how you amassed $500,000 as a down payment ?? sorry .. but the math doesnt add up with these kind of stupid decisions … did ya win the lottery or something … “you can take them out of the country but ya can’t take the country out of them” … best of luck … seriously .. and heed Garths advice and sell … take a little pain now while you can …

#38 Good to be out on 11.27.11 at 10:00 pm

Okay, so we already have lots of young people suckered into nightmare mortgage scenarios, and lots of middle aged people who have their entire net worth tied up in one asset. And now add to that elderly home owners taking out reverse mortgages.

What do all these groups have in common?

1. They currently can still afford to live in their homes and have been deluded into thinking ever rising house prices will save them, even though warning signs are everywhere.

2. They did not do their homework and are about to burned very badly the coming RE collapse.

That leave the rest; the debt free renters, the home owners who sold and became renters as part of a defensive strategy, and of course those (the truly wealthy) who have enough wealth in other financial assets and savings that a 20-30% (or god forbid 50%) haircut on their home value will not bankrupt them.

I know which group I belong to (hint: sold this year in Kits at a big fat profit, invested the proceeds, renting somebody else’s $1M house for <2k/mo for the next 2 years, travelling). Am I just lucky, or smart, or a bit of both?

Question is which group are you, and where do you want to be in 2, 5, 10 years?

#39 Onemorething on 11.27.11 at 10:03 pm

Biggest Mistake of your Life…So Far Kiddies!

Turn the house now, take the 100K loss and come back in when your mortgage will be only 10% of your outlay. Ie. Put 400K down on a 550K house!

The critical thing here kiddies is what is now happening in the USA as you now need A JOB to get a mortgage and 3x income to support it.

JOBS are the next bubble to burst in the USA driving RE down another 15-18% nationwide. Even if there are claims that it’s cheaper to buy then rent, that’s BS as any rent that exists like this is artificially high due to all the hangover foreclosures. RENT IS ANOTHER BUBBLE!

This is a 10 year slow melt in the GREAT GLOBAL RESET, USA is only 5 years into it, Canada just entering the race!

#40 Unistar38 on 11.27.11 at 10:03 pm

Who fixes the interest rate?

The wrong answer to this question have led and will lead a lot of people to their financial ruins.

In the short term, yes, FRB and CBs can have great power to influence/manipulate the interest rate, particularly the short end of the curve. But this power stops here. Nothing more and nothing less.

Ultimately it is the market forces that sets the interest rate. This is nothing different from a basic law of physics.

The current low interest rate can stay here forever if the market says so. But it could also abruptly ends here, again if the market decides so.

When, one day, the interest rates in the U.S. and Canada relentlessly goes higher, then one of the last few mythical power (believe me, there are not many left) Ben Bernake or Mark Carney enjoys will finally bust once for all, and for good!

That day will come, sooner than most people here think!

#41 TheFirstRick on 11.27.11 at 10:12 pm

Another point omitted is Vancouver ‘just off Main’ is basically scuzzville. Right from the skids, south to Marine.

Oh, and good luck with the tenant. There are many, but rest assured any willing to rent your basement are young, eager Van newbies. First months rent will be ok, as will the second, maybe even the third, but wait until your tenant realizes that flipping lattes isn’t quite the portal to a lucrative living with a future.

Then again, you could just start a grow op.

#42 Jsan on 11.27.11 at 10:22 pm

In the world of investing, there is “Smart” money and there is “Dumb” money. During any hype driven asset bubble such as the Tech/Internet stock bubble of the late 90’s and any and every real estate bubble including Canada’s own gargantuan real estate bubble;

– The “Smart” money has already sold into the peak, the “Dumb” money continues to chase the peak to the top…….and than all the way down to the bottom.

– The Dumb” money is standing in lines snapping up condos at peak prices falling for the hype hook line and sinker foolishly believing it is a “GOOD” investment.

– The “Smart” money is patiently waiting on the side for the inevitable bubble crash and the bargains that come up when the dust settles. Look at the “Smart” money people in the US. They very patiently over a few years waited for their bubble to collapse and are now reaping the huge rewards with fire sale prices in many regions. Prices they could only dream of a few years ago as their bubble looked as silly as our own bubble.

– The “Dumb” money is impatient, not willing to wait for the bubble to collapse but instead “Want it and want it NOW” and buys at the peak expecting prices to keep climbing to even more absurd levels. They are probably getting little messages from the common sense part of their brain whispering to them that buying at these prices is a really bad move, unfortunately, the easily swayed and significantly more foolish part of their brain listens to the realtor and real estate industry hype and very biased media and throws caution and good sense to the wind and the result is a financial mess.

How many times have we watched the real estate industry rag HGTV where the new home buyers justified taking a mortgage 2 or 3X larger than they ever should have based on the very poor reason that they can rent out the basement?

#43 Min in Mission on 11.27.11 at 10:38 pm

There was a house for sale “up the street”.

It was for sale for nearly twice what we purchased ours for. Didn’t sell yet (about 6 months). The couple has split and “needs” to get that price to get clear, and get their down payment back. One is willing to sell just to get out, one refuses to sell until they get “their” price.

I wonder if the financial strain of ownership was a contributing factor in the split?

#44 Jimbo on 11.27.11 at 11:41 pm

Garth, what do you see in store for Saskatchewan. House prices here continue to increase with no signs of slowing down anytime soon. It has become very frustrating trying to wait this bubble out.

Don’t get me started. — Garth

#45 DonDWest on 11.27.11 at 11:41 pm

#36T.O. Bubble Boy

“If they are lucky, maybe that renter will be studying to become a financial advisor, and they can get some guidance on how not to buy a million dollar house just to turn it into student housing.”

Are you kidding me? Have you seen what stupidity universities are churning up these days? This hypothetical freshly minted financial advisor will most likely tell them to buy a 3 million dollar resort mansion in Kelowna because of retiring HAM.

Don’t believe me? I phoned up my bank to ask about global bond indexes; instead I was pitched this line from a lovely young lady. “I see you have one hundred thousand dollars in assets with us. Have you ever thought of buying a house? I don’t know your income, but at 5% down you could potentially buy a two million dollar home. I have checked your date of birth, you’re still quite young.”

Immediately I hung up. Let’s face it, with “professional advice” such as the following, we’re doomed. As for Trev and Anna, your goose is cooked!

#46 RM in Oakville on 11.27.11 at 11:58 pm

Garth, you’ve blogged at length about how people have used emergency interest rates to get themselves into mortgage debt up to their eyeballs. I happen to agree.

So what conditions do you expect to occur that will cause an increase in interest rates and when do expect this to start to happen? I don’t expect a pithy comment here but I would like to see this as a main topic in a near-future post. I suspect many others would as well.

In the meantime, keep up the good work! I’m a long time daily reader. Thanks in advance.

#47 BPOE on 11.28.11 at 12:11 am

To buy at a substantial lower cost in “a few years” would mean interest rates rising. The Conservative Government has made it perfectly clear this will not happen. Sales on new homes have slowed due to the HST debacle. 2011 at the end of the day was another WINNING year. 2012 is looking even better

#48 debtblues on 11.28.11 at 12:17 am

The government simply can’t rase the rate. If they do it will create economic and social problems which they won’t be able to handle. They simply do not know HOW to handle them as there is no mechanism for that within the existing monetarist model. And the big brother from the south won’t allow them to experiment. They will stubbornly keep the low interest rate door open as there is no any other doors for them to manage.

#49 Maya on 11.28.11 at 12:17 am

“And renting out a bedroom to a student? Is this why you spent a million bucks?”

Exactly!

Who would buy a million dollar house as a primary residence only to share parts of it with the very poor from whom it sets out to separate itself via property ownership?

When the pursuit of home ownership has long ceased to be a rational economic decision, yet continues to be so overwhelmingly popular among the financially illiterate masses (who also seem to have never read any history books either), we have to ask: Why?

Because it is seen as the very essence of social respectability. This is all that is going on here. Nothing more, nothing less. But most of these “greater fools” are not honest enough to admit that, even to themselves.

#50 Not 1st on 11.28.11 at 12:59 am

Garth, what do you see in store for Saskatchewan. House prices here continue to increase with no signs of slowing down anytime soon. It has become very frustrating trying to wait this bubble out.

Don’t get me started. — Garth

Speaking of Sask, I am sitting on a $350k plus gain on a new build I did in Regina. I assume by Garths comments, its time to take it off the table.

#51 Okanagan Renter on 11.28.11 at 1:13 am

#42 Jsan: Loved the “Smart” vs. “Dumb” money.

Last night, a friend told me very excitedly that he’d bought a new condo, “much fancier than [he’d] imagined.” I congratulated him on his new home, but I think he sense my lukewarm reaction to his dream-come-true folly.

This was a Dear Abby moment for me, so I’d appreciate any responses: What do you do when someone close to you has just sold their soul to a realturd and sunk their life savings into a gilded cage? If he’d told me before buying I would have advised him to read Garth’s blog, but now that the deed is done I think I’d be an a**hole if I told him the truth. Should I just play along and show up at the housewarming with the requisite Merlot?

Thoughts?

#52 TheRealTruth on 11.28.11 at 1:14 am

I’ve been coming to this blog for a few years now… an observation..

Why do All these emailers have university level grammar etc. and at the same time seem to have a problem with numbers?! Something doesn’t add up.

#53 TheRealTruth on 11.28.11 at 1:17 am

On another front…

If house prices were to crash in Canada, I’m sure H et al. will instite a policy where a $600,000 residential RE investment buys you a pr card. Say 50,000 a year given out.

could happen.

#54 Mr Buyer on 11.28.11 at 1:19 am

We may (or may not) be moving back to Canada next fall. I have been surveying the rents and they are simply shocking. Hopefully some sanity will return to the rental market by the time the housing bubble deflates. I am guessing the logic is “my mortgage is this much so rent will be this much” it will be interesting to see how the rental market plays out. We will need a financial advisor and tax specialist around the same time. We are not prepared to jump into the markets until the turmoil in real estate becomes obvious next summer (or the next). We are hoping to offset the cost of rent with investments but we have almost zero tolerance for risk. While they put up with a ton of stuff, there is one sure way to get a Japanese wife to divorce you, and that is not bringing home the bacon. I am one of those teachers that have been not so well loved on the blog. I am actually trained and certified as a high school science teacher. It is going to be a long while until I secure a position as a supply teacher let alone a permanent position. My wife’s grandfather was a professor and her family would rather have a son in-law as a teacher than a salesman (I enjoy sales, but unfortunately I have to believe in what I am selling). Fortunately I enjoy discovery, innovation, molecular biology, biotech and biochemistry as well so the wife won’t mind me picking up a master’s degree while I try to secure a teaching position provided we do not haemorrhage too much money. I will need the time for the first few months to help my kids as they adjust to English schooling. I see my kids for like 3 hours a week presently. It takes a day to grow accustomed to the whining and arguing, by the time I get used to them it is time to get back to work. I have been an adventurer all my life but it is very hard to close down my business and return home (even temporarily) given the evolving state of affairs in Canada presently. I will make things okay. I always have, but the stakes are much higher now and the challenges maybe even greater.

#55 young & foolish on 11.28.11 at 1:27 am

We sooo love real estate … that’s why we come here!

God loves renters …. amen

#56 Property Manager on 11.28.11 at 1:32 am

Two forms only last week, one refinance, and one listing. No sales

#57 Felix Seto on 11.28.11 at 1:40 am

My parents are loaded and they plan to buy me a 1.5 million dollar house on Main street. I like to ride my parents gravy train!

#58 April on 11.28.11 at 1:45 am

Where are you Poco? “Blow out sale” on Rochester St, Coquitlam. Asking $199. Too much for a 500 sq ft concrete box built during the leaky period 1998. One can get 945 sq ft in New West [closer to down town for those who aren’t familiar with this area of BC] a concrete building 35 yrs old and no leaks, asking $129 and been on the market for must be nearly 4mths now. 5 others [apt] in same area of New West recently taken off the market or else expired. However high-rise and low-rise are still being built in New West. I understand it takes the process about 2yrs before the builder can even start with a hole in the ground. Maybe all or most of these units were pre- sold many months ago but these high-rises won’t be ready for occupation for another yr or more. Surely the developers must be worried by now unless their very confident that there’s still enough fools itching to jump in to a brand new apt.

#59 Nostradamus Le Mad Vlad on 11.28.11 at 1:47 am


Markets pricing in end-game for Euro, and Govts. running scared; Financial Flu Deadlier than H1N1 and any derivatives thereof; The UK is as nutty as a frootcake; Double Dipstick Yes, here is this week’s hands-down DD winner; LAPD Turning solely to computers to deal with crime, so officers are laid off; Currency Wars could lead to other consequences.

Drachma Testing, testing 1 2 3; EFSF and IMF Bailing each other out; 12:20 clip J.H. Kuntsler; 46:36 clip Value investor Seth Klarman; Euro has ten days; Italy and world close to reaching Ground Zero.
*
Seven reasons not to attack Iran; DSK Remember him? You bet he set up. With DSK out of the way, Sarkozy doesn’t have anyone left to beat; El Hierro Live webcams; New Solar System Good fer banxters, politicos and lobbyists.

No Cluster Bombs US loses appeal; Ron Paul wins GOP security debate; The Cold War is back; Smart Move SAmerican countries consider legalizing marijuana and cocaine; Dump Of Epic Proportions Lotsa links in.

#60 from kits on 11.28.11 at 1:56 am

Real estate becoming more affordable: RBC

http://www.torontosun.com/2011/11/25/real-estate-becoming-more-affordable-rbc

talk about spin selling

#61 Joseph [Original] on 11.28.11 at 2:09 am

Nobody really knows what the price of real assets will be in 10 years time with all the money printing going on. Inflation can take hold and then run amok and the prices of real estate would then sky rocket. The latest news is that “Central banks across five continents are undertaking the broadest reduction in borrowing costs since 2009 to avert a global economic slump stemming from Europe’s sovereign-debt turmoil.”

What does this mean? Borrowing costs drop even further in the years ahead, coupled within an environment of trillions and trillions of dollars of newly printed money. It reads:

“Monetary easing will push the average worldwide central bank interest rate, weighted for gross domestic product, to 1.79 percent by next June from 2.16 percent in September, the largest drop in two years, according to data and projections from JPMorgan, which tracks 31 central banks. The number of those banks loosening credit is the most since the third quarter of 2009, when 15 institutions cut rates, the data show.”

This scenario can go either way.

#62 Rana on 11.28.11 at 2:16 am

Funny Pic.

So Jebus Garth, your scriptures have recruited followers to save them from the evil depths of firey debt. I have chosen to follow you and your teachings- sold about 2 years ago and now rent with my family- which is Ok.
My question is to other Jebus Garth followers- what do you tell people when they ask if you have bought and where etc. Then you say “no I am renting” and you get the look of puzzlement. And I say I am waiting for the market to “stabilize”. And they look at you as if you have three heads and they say “well interest rates are low- its a great time to buy!” followed by the usual crap that spews out that has been regurgitated by other demon realtors.
Do you nod and smile politey thinking whatever, or do you start spewing off what are all the reasons you choose to rent and wait? I have had this happen to me a few times and the times that I choose to explain myself I was met with disbelief, absolute non sense and pity. So I stopped- I felt like I was being seen as a ranting, non sensical crazy Jebus Garth follower.

#63 Spot The Speculators #68 – “Trev and Anna paid $1 million for a SFH near Main Street. They must spend $150K to make it livable.” on 11.28.11 at 2:25 am

[…] story of ‘Trev and Anna’ is relayed and discussed at greaterfool.ca by Garth Turner, 27 Nov 2011, a must read for Vancouverites. Here is the core anecdote: Trev and Anna paid $1 million for a […]

#64 Okanagan Renter on 11.28.11 at 2:34 am

Extra! Extra! Lowest Housing Turnover in 40 Years in the UK!

“”An expected 840,000 sales in 2011 is almost 50% lower than in 2007 and equates to the average private sector home changing hands every 26 years….This is creating a scarcity of housing and is acting as a support to pricing levels.”

http://www.guardian.co.uk/money/2011/nov/28/hometrack-survey-lowest-40-years

Can the UK RE catastrophe be too far off for Canada?

#65 NorthOf49 on 11.28.11 at 2:49 am

Wow. A million dollar house on $120K income and still needs $150K to fix up, and $500K of liquidity kissed away. I can’t fathom the logic. But wait, I just watched My First Sale on HGTV. This show makes it seem perfectly normal to be underwater and sell for a loss. Scenario: Couple buys 2-bdrm Miami condo for $249,000 some years back, currently owe $200,000 on mortgage. Expecting their first baby they decide to relocate to Kansas City to be close to parents (no one raises their first born in Miami by themselves apparently). They list for $185,000 and nearly 100 days later they accept $165,000 offer. After closing costs, realtor fees, etc., they need to bring a $60,000 cheque on closing day. Says the new dad “Totally worth it to lose $60,000 for wife to be with family and new baby”. Now they live with her parents in KC and make payments on the $60,000 closing loan. Yikes!!!

#66 April on 11.28.11 at 2:49 am

Correction at #46. Asking price for NewWest condo should read $229 not $129.

#67 Nickolaos Vlittas on 11.28.11 at 3:29 am

DonDWest @45
You the type of guy who’s the easiest to sell to. They always think they’re the smartest person in the room.

Can’t talk, I’m getting Christmas gifts with my bonus.

#68 kc on 11.28.11 at 3:41 am

A little light reading for the anti propaganda machine. (if you can’t keep focus for over 2 thousand words, don’t bother)

“American’s Comfortably Numb on the Highway to Economic Collapse”

If I may…

“The disgusting exhibition that Madison Avenue maggots have coined Black Friday is the ultimate display of consumerism. In a nauseating display of senseless spending driven by retail conglomerates, Americans act like Pavlov’s salivating dogs by lining up for hours to stampede over and pepper spray other consumers to get the ultimate deal on that Chinese made toaster oven, Vietnamese made laptop, Korean made HDTV, or Mexican made tortilla maker. They don’t seem to grasp the irony of going deeper into debt buying cheap crap made in foreign countries by the workers who took their jobs.”

http://www.marketoracle.co.uk/Article31784.html

And for desert… Did anyone catch this on 60 minutes tonight?

Hard Times Generation: Families living in cars

http://www.cbsnews.com/8301-18560_162-57330802/hard-times-generation-families-living-in-cars/

Canada in 2012 is going to be a whole new ball game….

cheers

#69 new-era on 11.28.11 at 4:18 am

Main Street houses:

God I can’t think of any school around main street which has a decent school. Mind as well send your kid to a mental institute.

Unless you want to teach you kid some street sense!
Or have a huge wad of cash to send them to private school.

BC education suck, they are miles behind other countries and most schools miss huge portions of the provincial ciriculum. Your kid will spend more times on holidays and pro-v days.

The teachers are way too busy taking holidays, striking then actually spending time teaching your kids.

#70 new-era on 11.28.11 at 5:18 am

re:
=========================
Don’t worry, with the results of the CRAZY SPENDING of typical Canadians this ‘BLACK FRIDAY’, your $1 Million dollar house will soon be selling for $2 Million in no time, I would say 2-3 years EASY !!!

You’ll be rolling in dough, just relax and let the good times roll in.
======================

Why stop there in 10 years each vancouver house should be worth 15 trillion dollars. We can sell one house and pay off the complete US debt.

After all we do produce more that the US, Euro Zone and China combined.

Yep Canadians are on POT

#71 Off the River on 11.28.11 at 5:22 am

I’m still waiting for an article on your views of the East Coast of our country. Why does everybody forget about the East Coast?

And currencies. I’d love to hear your views on currencies too Garth.

#72 MarcFromOttawa on 11.28.11 at 9:05 am

Is it wrong that I use Garth’s picture of each blog post as a desktop background?

Creeps me out. — Garth

#73 MarcFromOttawa on 11.28.11 at 9:21 am

#51 Okanagan Renter

You buy it off of him for 60 cents on the dollar in 4 years.

#74 T.O. Bubble Boy on 11.28.11 at 9:24 am

Is this stimulus, or just predictions of the Fed spending $545B trying to clean up the Fannie/Freddie mess?

http://www.bloomberg.com/news/2011-11-27/bond-dealers-see-fed-buying-545-billion-of-home-loan-debt-in-third-easing.html

#75 sam.i.am on 11.28.11 at 9:51 am

Mr. Buyer… I can relate to your dilemma, been thinking same thing for a while. In my opinion, ‘now’ is not a good time, economically speaking, to return home. If possible, try an extended visit to get a better idea what life would really be like. Groceries, transportation, energy, insurance and housing, are all very high. With two professional incomes, it is probably ok, but one breadwinner only would be tough.

#76 Hammer1 on 11.28.11 at 10:00 am

#15 Mr. Lahey
Garth with December only days away, isn’t it time you sent out your Christmas party invitations at the bunker for all your loyal blog dogs?
======================================
I know..I told Garth that very thing a couple of weeks ago.He said his Amazonians were on it…I think they forgot..or still fine tuning the guest list.

#77 Joe on 11.28.11 at 10:01 am

Garth, show me those cheap houses. No statistics from here or there. I remember 3-4 years ago one could still buy a house for $300,000. Now, when they are cheaper according to you listing for a half decent house start at$400,000. Thanks for great advice.

#78 disciple on 11.28.11 at 10:07 am

This article on Carl Jung by Rev. Ed Hird attempts to paint the psychologist as a child of the devil; nonetheless, it is insightful, and if you can distinguish fact from opinion, the author actually succeeds in promoting Jung’s work. Ironic.

http://www3.telus.net/st_simons/CarlJungPaper.pdf

#79 sam.i.am on 11.28.11 at 10:18 am

Off the River…re East Coast, like everywhere else, overpriced in my opinion. Even places in central NL, without any real job prospects in the local area, are selling for too much. St. John’s market is more than ridiculous although they’ve got oil so some of it might be justified. Basically, the small towns are dying off and population is getting concentrated into larger towns and cities. Not healthy growth in my opinion, try getting a doctor – in many areas you can’t. Same goes for NS outside HRM.

#80 disciple on 11.28.11 at 10:19 am

We have pirates in Somalia who have managed to involve themselves at the highest levels – without any invitations – when they captured a ship in around 8/8/8 which was destined to start off WWIII by ACCIDENT. The ship was a dirtynuke and the pirates that got near the three containers were severely irradiated. If you never saw Blood Diamond and Hotel Rawanda you’ve got to know. So now they steal a big oil tanker and suddenly they are a “global problem.” Soon, if not already that pirate base will be completely obliterated because they weren’t invited and the stakes were so high. So who are the real baddies here, the pirates who stole the ship, the oil tankers owners or the club of baddies themselves?

Also significant and not unrelated is the involvement of the prince in coming to the aid of poor dying suicidal farmer victims of corporate field bio contamination scandal in india – the farmers are dropping off at something like 20 or 100 a day from suicide because monSatan(spellcheck knows) has patented their seeds.

But omg blah blah blah don’t forget about in Iraq when they stormed the palace and Saddam wasn’t even there the biggest and most significant news was the looting of the BAGHDAD MUSEUM when it occurred to me that this is what the war was really about.

311 911 77, I mean pattern and schedule. Make no mistake, it’s the club of baddies and they are in your neighborhood too, omfg. The pattern is unmistakable and the results in the end are the real clue as to the owners of responsibility.

Connections. That is what memory and ‘real’ news is about. The television’s main purpose is to bypass our natural defense mechanisms. Just do a little research into mind control, hypnotism and propaganda, consciouness or advertising, memes and memetics, sales techniques including ‘how to pick up women’, self help gurus like Anthony Robbins, stage hypnotists like Derrin Brown, the list goes on…any one of those examples shows how susceptible people are to these things – you know? Mind control, hypnotism and consciouness manipulation at a distance. Turn off the TV, folks…

#81 disciple on 11.28.11 at 10:34 am

They’ve got passive MRI on radio towers in every local community, a technology which allows “them” to positively identify any passersby by the digital image of the brainwave.

Your secret rulers studied Indian yogis in the 1800’s and measured their bio markers during trance-like states, proving that oxygen-starved, artificial near-death narcosis will release endorphins producing people who become mediums, easily swayed, and inducing complete amnesia through manipulation of the temporal lobe. Temporal lobe receives sense of time. Time is stolen from you also by cellphone frequencies that affect the temporal lobe. The military industrial complex had perfected the science of mind control LONG before you and I had access to this information in books and/or on the web…

Will you wake up!

#82 disciple on 11.28.11 at 10:35 am

You do not realize how completely influenced you are by media, even when you think consciously you are not.

http://www.youtube.com/watch?v=uOgx8GtVgi4&NR=1

#83 45north on 11.28.11 at 10:36 am

Mr. Buyer: I am one of those teachers that have been not so well loved on the blog.

we love you Mr. Buyer.

Congratulations on learning Japanese. For me, Japanese is too much to learn. I can count to 20 in Japanese. I go to Ichiban’s Bakery (in Ottawa). The wife is teaching me a few Japanese expressions. Ma-ten-ay means how’s it going.

#84 45north on 11.28.11 at 10:55 am

NorthOf49: first of all you’re not. Well maybe in some spiritual sense you relate to the geography north of 49 ° but you live somewhere around Burlington. There used to be a sign on Highway 11 saying 45 ° north, halfway to the north pole.

On your topic of a couple selling their house in Miami:

“Totally worth it to lose $60,000 for wife to be with family and new baby”

that could well be, grandparents make good baby sitters, their rates are good and they don’t get bored

#85 disciple on 11.28.11 at 10:58 am

You have a rough choice today. You can laugh or you can cry. disciple is presenting to you a fork in the road. You have no excuse. You don’t have to continue in the same sorry state of servitude any longer. Will you hearken unto Eishenhower?

Eisenhower, a highly decorated five-star general, was the Supreme Commander of all allied forces during World War II. It was Eisenhower’s leadership during the Normandy invasion that ultimately freed Europe from the Nazi scourge.
Incredibly, in his farewell address, this great American hero did not warn the nation of the budding communist threat or the horrors of nuclear proliferation. No, not at all! Instead, this career military genius poignantly and soberly declared:
“… We have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.
“This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every state house, every office of the federal government. We recognize the imperative need for this development. Yet we must not fail to recognize its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.
“In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or our democratic processes.”

Silent Sound Spread Spectrum. The real reason for HD conversion on Feb 17, 2009, subsidized 90% by the FEDS. Why Iraqi troops surrendered with white flags without firing A SINGLE SHOT. Google it NOW!

#86 Kilby on 11.28.11 at 10:58 am

Sales in Victoria for the last 7 days. Includes Esquimalt, Oak Bay and Saanich.
1,516 listings
46 new sales.
Anybody know how many realtors there are in Victoria?

#87 blase on 11.28.11 at 11:01 am

Disciple…time to get back on your meds.

#88 Kurt on 11.28.11 at 11:02 am

@Mr. Buyer: consider a position in rural Canada. The rents are lower and the teaching jobs are easier to get. It’s a different life, but it might suit your present needs.

#89 disciple on 11.28.11 at 11:04 am

Last post for today, I promise… your minds can only take so much information overload…

Lyrics to the pop song ‘The Sound of Silence’
By Paul Kane (aka Paul Simon), 1963, completely missed by the boomers… is about suburbanites (tenement dwellers) watching TV…

… Paul Simon, whose family was part of the military-industrialist complex, was very likely a product of the early 1960s military experimentation in Silent Sound mind control, which is clearly what the lyrics of “The Sound of Silence” convey to those “in the know”.

#90 45north on 11.28.11 at 11:07 am

correction Ma-ten-ay means “see you”

#91 Harlee on 11.28.11 at 12:10 pm

No Jimbo (@44),don’t get Garth started on conditions in Saskatchewan. He’s made in plain in former posts that he hates the province.Considers it a “vast wasteland”,etc. etc. I actually had someone born & bred in Ontario ask me once if there were any FISH in Saskatchewan…..I then had to inform them about the hundred of lakes (especially in northern Sask.) were the fishing is mighty fine indeed. “Sigh….”
Although I think the new student housing being built on Cumberland Ave. ,near the university in Saskatoon is a good idea I do think all the condo construction that is going on is just a bit out of control now. Back in the mid-1980s when condos first started to appear in Saskatoon the prices were still fairly reasonable.Now, with more on the market and more being built the speculation just gets more intense.Saskatoon keeps growing in population(one of the fastest in Western Canada) and is considered the most entrepreneual centre in Canada,but even so ,the speculation is bound to slow-down eventually. If it hasn’t already started -going to be an interesting Winter & Spring here…. (I’m currently watching the high-end “Vestral” condo building on 8th Street,currently asking $300 – 400,000 per box. Prices bound to decrease….).

SK is a fine place. I just wouldn’t buy a house there. — Garth

#92 fancy_pants on 11.28.11 at 12:17 pm

A special acknowledgement is in order to the great Canadian party in power.

Hats off H, F and MC. You have accomplished your goal! Your dog and pony show worked great. You have managed to get society addicted to low rates and debt. What is your next scheme to postpone the pain? …No! You losers cannot speak. Shut up. You are not in power of this forum. You jacka$$e$ really screwed up didn’t you? No. Sarcastic question not requiring a response so again, shut up.

What a wonderful legacy you leave. Sure you morons managed to postpone yesterday’s pain to tomorrow – however the intensity of pain we look forward to will be multiplied exponentially.

Not surprisingly, you goons will likely hand off this mess in 4 years to the opposition just as the nasty withdrawal symptoms really take hold and shake us up, only to turn around and point fingers at how badly the opposition is managing the mess.

#93 Living in AB on 11.28.11 at 12:59 pm

Thing about interest rates….. a normalizatio isnt coming until the US economy is back on its feet (not only GDP growth but normal employment numbers). This could take a decade.

#94 Sean on 11.28.11 at 1:08 pm

these guys just lost 500k, it’s as simple as that… they won’t sell now, b/c it is too scary to think about the loss… and they won’t sell when Van r/e hits 50% losses, b/c they still can’t bear it.. and then they’ll be stuck… doesn’t matter the market, “investors” always act the same way… like a deer staring into the headlights

#95 Canis on 11.28.11 at 1:21 pm

#93: But while we’re waiting all those years for the US economy to get back on its feet, real estate on both sides of the border will be hot, hot, hot?

#96 Alan on 11.28.11 at 1:32 pm

Been reading this blog off and on for year. The imminent housing collapse is getting so tired and old. At one time it was the retiring baby boomers with no one to sell to then it was the fall in real estate due to the economic collapse of the US. Later it was the appocalypse of HST, then it became the change in mortgage requirements for amortization, higher interest rates and on and on.

The only way real estate can fall in any significant way would be a huge increase in interest rate or a world wide recession which will hurt more than your real estate investment. In fact one could argue that real estate may be a safe haven in the most difficult times assuming your are not too heavily mortgaged.

Thanks for the Re/Max perspective. It was sadly lacking. — Garth

#97 Realitybytes on 11.28.11 at 1:33 pm

Good one by the MSM…

http://www.moneyville.ca/article/1091881–is-home-ownership-really-a-smart-investment

Actually, to me it speaks more to degraded earning power than the downside of real estate.

We have way more toys and junk to buy, and that gets cheaper, but the real neccessities of life have been inflating fast than incomes for a long time… at the speed of debt…

#98 JohnnyBravo on 11.28.11 at 1:40 pm

Article from the Star on houses vs. stocks; and owning vs. renting. Offered without prejudice.

http://www.thestar.com/article/1091881–is-home-ownership-really-a-smart-investment

#99 Deliverator on 11.28.11 at 1:57 pm

“To buy a house for a million bucks and have to share the house with renters is mind numbing stupid even by Vancouver standards.”

Replace “mind numbing stupid” with “very common”, and you have a picture of the reality in Vancouver. It’s been that way for at least 20 years.

#100 TaxHaven on 11.28.11 at 2:12 pm

Two quibbles:

“I have a limited partnership investment of $50,000 which is projected to provide us with a 7% return.”

(?) Question I always ask Garth: WHO or WHAT is so desperate for money, even in these days of a dead economy and 1% interest rates, that they are willing to pay 7% for it? The paying entity MUST be gambling with your money.

“Our combined income at the moment is 120k per year.”

Some REAL people, please! These are so filthy rich they don’t even know it…$120K a year is approximately ten times my income, or that of many people I know… Take a look around you. Anyone who imagines that is somehow “normal” or “average” is living in lala land

#101 Devore on 11.28.11 at 2:12 pm

#4 robert james

To buy a house for a million bucks and have to share the house with renters is mind numbing stupid even by Vancouver standards.

On the contrary, it is perfectly normal and common. It’s the only way young families can afford any sort of house in the city; they have to share it with strangers, and not just the basement, but also their bedrooms, with arrangements such as homestays and other students.

I’d also like to know the details of how that couple managed to amass half a million cash between the two of them, highly unusual for a house-horny Vancouver pair. Probably a gift from family.

#102 curious! on 11.28.11 at 2:15 pm

Japan was able to maintain low interest rates for a long time in an attempt to kickstart the RE market there…Why can’t Canada go down the same path of maintaining low interest rates?

What enabled Japan to maintain low interest rates?

#103 Renter in van on 11.28.11 at 2:23 pm

#72

If that creeps Garth out then this should really give him the willies. Pic of him as my desktop background.

#104 betamax on 11.28.11 at 2:25 pm

#99 Deliverator: “you have a picture of the reality in Vancouver. It’s been that way for at least 20 years.”

Typical pumper nonsense. Yes, Vancouver has always carried a premium, but nothing remotely like the bubble of today.

#105 gtrz4peace on 11.28.11 at 2:28 pm

Disciple: … Paul Simon, whose family was part of the military-industrialist complex, was very likely a product of the early 1960s military experimentation in Silent Sound mind control, which is clearly what the lyrics of “The Sound of Silence” convey to those “in the know”.

LOL! You are a riot. Next time our friend who sings backup with Paul Simon when he tours Chicago sees him, I will ask her to relay your analysis of his famous song.

#106 Nostradamus Le Mad Vlad on 11.28.11 at 2:47 pm

#47 BPOE and #96 Alan — “2011 at the end of the day was another WINNING year. 2012 is looking even better”

Agreed. As noted earlier, pigs do fly in formation, polar bears can’t swim, leprechauns and fairies are now running the show. A credible post! “Thanks for the Re/Max perspective. It was sadly lacking. — Garth”

#80 disciple — “Turn off the TV, folks…” — Other than UEFA Champions League and Europa League soccer, Barclays Premier League and South American soccer, Wheel of Fortune and Jeopardy! and the occasional local news, I haven’t bothered with the goggle box in years.

Interesting weekend in soccer. A Welsh player, now manager, Gary Speed — very successful on and off the pitch, 42 years old — just finished a stint on a BBC soccer show, went home and hung himself in the garage.

Didn’t show any outward sign of suicide. Two weeks ago, a referee in the German Bundesliga slashed his wrists just prior to a game, and this weekend a linesman in the second tier of the German league tried the same thing.

At the same time, a young Brazilian winger was jailed for rape. There is something of a much darker force overtaking humanity of all sorts.

#89 disciple — Be still and know or The Sound of Silence. Listening to The Sound Of Silence (there is a sound) is a great method to offset the worthless garbage of this planet.

#107 Bobby on 11.28.11 at 2:52 pm

For #86 Kilby

There are about 1100 realtors in Victoria. I met one who hadn’t sold a house in over a year. He was getting frustrated as the realtors were undercutting each other for whatever business there was.

#108 Devore on 11.28.11 at 3:02 pm

#102 curious!

Japan was able to maintain low interest rates for a long time in an attempt to kickstart the RE market there…Why can’t Canada go down the same path of maintaining low interest rates?

The path of what? Kickstarting the economy and real estate for 20 years? Japan still looking for the bottom.

#109 scared on 11.28.11 at 3:08 pm

#96 Alan
“The only way real estate can fall in any significant way would be a huge increase in interest rate or a world wide recession which will hurt more than your real estate investment”

I understand that a world wide recession may pretty soon be underway. Obama is in Europe and they are fearful that the Europe may go into a recession which in turn will most definately affect the US, etc. It may be more real than you think. The 2012 prophecy?

#110 Dorothy on 11.28.11 at 3:12 pm

When prices and interest rates were high, renters complained they were “priced out of the market”. Now that prices and interest rates have fallen, renters say “they’re waiting till prices fall even lower”.
But the bottom line is that a lot of these folks can’t afford to buy a house, now or ever, and it has nothing to do with prices or interest rates. It has to do with the fact that they don’t have enough self discipline to save the necessary downpayment.

A home is not an investment, and never has been. It’s a place to live and, if you so desire, to raise a family. For as long as I can remember, it’s always been cheaper to rent rather than buy, but it’s not as much fun. You don’t get the same sense of satisfaction that you get out of fixing your place up, and making it feel more like your own.

If owning your own home isn’t your thing, then that’s perfectly OK. Just don’t constantly criticize those of us who do prefer to own. Because your constant harping is begining to sound a lot more like jealousy than good, sound financial advice.

Prices HAVE come down quite a lot in certain areas, and interest rates are at all time lows. In face, the “Financial Post” is reporting that interest rates may go even LOWER over the next 12 months. So if you really are serious about wanting to own your own home one day, as opposed to being a perpetual renter, now may very well be a good time to start looking around.

Nobody is suggesting you buy without having a good look first to get a feel for current prices, and then making an offer that is reflective of the current market. In fact that is what you should always do when making a big purchase of ANY kind, do your homework and negotiate a good price. It never ceases to amaze me how many people refuse to negotiate and consequently end up paying far too much for big ticket items such as cars and furniture. I’ve saved thousands of dollars over the years by haggling over prices on everything from home renovations, to vehicles, to houses.

In ANY market (good or bad) and on ANY item (house, sofa, RV, car or new windows) you can negotiate the price you pay. So instead of sitting around waiting for prices to fall even further, get out there, check out what’s available, and then start making offers that are in line with what you think the house you want is worth.

NOBODY can make you pay more than you want to pay. If the vendor won’t negotiate with you, move on to another house and try again. There are plenty to choose from, and sooner or later you’ll find someone willing to make a deal.

But don’t stop there. Shop around for EVERYTHING you need to purchase that home, from mortgage rates to legal fees. ALL are negotiable if you try hard enough.

What I’m trying to say is that if you really want to own your own home, you can do so in ANY market if you play your cards right. Save a good downpayment, shop around and choose wisely, negotiate both a good price AND a good mortgage rate, and call several lawyers for quotes on doing the legal work (they don’t all charge the same). The other item you should shop around for is House Insurance, because prices for that can vary widely as well. Even quotes from the same company can vary depending on which brokerage you use.

On the other hand, if you simply cannot afford to buy a house (no matter how low the price) or, if you prefer the mobility that renting offers you, then that’s fine, but you need to admit that’s the issue and stop blaming other factors for your lifestyle choice.

Garth’s message is for people to stop buying houses they cannot afford, with little or no down payments. And he warns those that may find themselves in financial difficulty if interest rates rise while real estate is selling for less than they paid for it, that they would be wise to sell and get out now while they still can. And I echo that sentiment.

But for the rest of us, if you can afford to stay put and like where you live, then don’t panic and sell into a down market. Because there is no need to do so. Remember why you bought your house in the first place, and enjoy what you have.

#111 scared on 11.28.11 at 3:12 pm

#72

You mean it’s weird that I have glued a likeness of him on my nightlight?

Feeling ill. — Garth

#112 Nostradamus Le Mad Vlad on 11.28.11 at 3:51 pm


Demolition Derby Will the demolition of the financial system lead to a NWO? IMF saves the day! Why don’t they turn over money printing to the respective govts.? The IMF is the greatest beneficiary of this scam; 4:30 clip Financial history repeats; Retailers in UK face falling sales and job losses; Japan bailing Selling bonds. Look for when they start selling US bonds; Fees Hike Applications drop; Last Legs Euro It’s been a blast!

Psychopaths Corporate ones; US$8 tri. Where’s our share? But should the US Fed save Europe, esp. when the US can’t even save itself? 11:15 clip Greece falls, all fall; No Laws Were Broken The gap is increasing; Not Just Here “With Britain’s households now owing £1.5 trillion in mortgages, overdrafts, loans and credit cards, the day of reckoning nears, warns Jeff Randall.”
*
1:39 clip Ron Paul is a direct threat to the establishment; Spoiler China’s navy; Russian warships head for Syria; Kuwait cabinet resigns; Iran Stuxnet, Stuxnet 2 or sabotage? CC “Neither snow nor ice nor frostbite (let alone Climategate 2.0) will deter us from building a socialist global New World Order on the myth of global warming!” — Official White Horse Souse (wrh.com); Scientists behaving badly. At least it’s better then men behaving at all; Bill Moyers Is he ever right with this; GoM First live dolphin found since spill; Five min. clip “This is a MUST WATCH!” wrh.com.

#113 BPOE on 11.28.11 at 3:53 pm

You betcha. Disagree that Real Estate has been a good investment the last few decades and the American and his posse are all over you
*****************************************
.#96 Alan on 11.28.11 at 1:32 pm
Been reading this blog off and on for year. The imminent housing collapse is getting so tired and old. At one time it was the retiring baby boomers with no one to sell to then it was the fall in real estate due to the economic collapse of the US. Later it was the appocalypse of HST, then it became the change in mortgage requirements for amortization, higher interest rates and on and on.

The only way real estate can fall in any significant way would be a huge increase in interest rate or a world wide recession which will hurt more than your real estate investment. In fact one could argue that real estate may be a safe haven in the most difficult times assuming your are not too heavily mortgaged.

Thanks for the Re/Max perspective. It was sadly lacking. — Garth
.

#114 Humpty Dumpty on 11.28.11 at 3:59 pm

Rough choice… try a New Start treaty….

http://www.zerohedge.com/news/russia-retaliates-against-us-puts-radar-station-combat-alert-prepares-take-out-european-missile

The PRICS are getting their house in order…

#115 sam.i.am on 11.28.11 at 4:05 pm

Wow, 500k down on a 1000k house. That 500k earns a rate of return equal to the prevailing mortgage rate. I think people need to think about the opportunity cost of capital a bit more. Garth already touched on this topic re the wpost lady wearing pearls.

#116 Fran on 11.28.11 at 4:06 pm

Hi Grath,
We are frustrated couple who sold our 1bd condo in North york Toronto just recently. Now we are looking for a house in toronto area with $250 k down payment but getting disappointed by seeing the battle over the houses (some end up with 13 offers and the price up by $15o K). We are looking in the market for almost and even it is getting worst…
Just wondering what to do at this point?

#117 bcpaul on 11.28.11 at 4:11 pm

#103 Renter in van on 11.28.11 at 2:23 pm

How much do you have to pay to live in a van?

Sorry, couldn’t resist.

#118 Ian Ottawa on 11.28.11 at 4:16 pm

I was actually in a condo office in the westboro condo area of Ottawa west. Trendy area, which is now abundent with wealthy mortgaged home owners, coffee shops and more baby stores than I can throw a rock at! (Never Enough Rocks BTW). I was just seeing what the units were going for, and for some added sales pressure the two sales men talked amoungst themselves at the visual floor plan at some units. “Oh Bob, you forgot to mark those units sold!.” “Oh yeah, here let me get a sticker”. See they are really selling, he says to me. I like how they pitch No condo Fees for 2 years too, lol.. Buy this place, we’ll under fund your reserve fund so you can get F&*%ed in 2 years with triple condo fees. Great Blog Garth. Suggest renaming Garth’s World!

#119 young & foolish on 11.28.11 at 4:32 pm

There is no escape from the following:

1. Elites (they will always be 2 steps ahead, no matter
who they are, or what methods they use …
they will always make the rules … some deny
their relevance and instead yield to the
mighty Mr. Market)

2. Illusions (the elite use this method to ensure
our culpability)

3. Tin Foilers (they will always point their fingers and
shout that the Emperor has no clothes)

4. Navigators (those who try to get ahead of
trend/rule changes so as to avoid
getting creamed)

#120 OnlyTheBankersLaugh on 11.28.11 at 5:15 pm

Fran on 11.28.11 at 4:06 pm
We are frustrated couple in North york Toronto … blah… getting disappointed by seeing 13 offers and the price up by $15o K). Just wondering what to do at this point?

Heck, Franny, first, take the needle out of your arm. Then, if you still want to buy after you come back to reality, call any Toronto realtor and ask them about the ever successful Bully Bid. Bid 30% over list price, then smile, wave and move in. You guys will be so happy.

And then … Only The Bankers Will Laugh.. at you.

#121 Westernman on 11.28.11 at 5:26 pm

Re: Saskatchewan
Here we go again with the special needs group ( you know who you are ) extolling the “virtues” of the frozen wasteland known as Saskatchewan…
I say to you ( you know who you are ) please, please PLEASE take a trip to somewhere…anywhere so that you can see what a complete and utter waste of space Sakatchewan really is.

#122 Peakoilist on 11.28.11 at 5:43 pm

#80 Disciple
I have to watch TV. Does CBC qualify? You don’t wanna be near me if I miss a Survivor episode. OK is there anything we can do to resist these signals? I don’t want to have to do this…
http://www.youtube.com/watch?v=xvfnqr6qOps, though I love SCTV.
I’m so depressed…. :( pass me the remote !

#123 Alan on 11.28.11 at 5:54 pm

Garth, I’m not a real estate agent but for what it’s worth, you should at least have the dignity to own up to the fact you’ve been preaching a catastrophic decline in real estate for over a decade. Since that time, people have made money on paper. Let’s let the evidence speak for itself. You’ve been wrong so long that it’s almost time for you to be right. Like a clock you are right at least twice a day.

Lastly, it may serve you well to distinguish different types of real estate react differently and in some cases are not good investments in difficult economic times like vacation properties. But, if you want to know how to do well or weather a financial storm, try property that can grow vegetables, house chickens and feed your family. Now, there’s an inflation proof investment all your weird family and friends will want to get in on.

Cute, but wrong. I’ve actually been predicting a modest correction on average, about 15%, with more declines in markets that pose more risk (we all know them), followed by a multi-year slow melt. Hardly a catastrophe, unless you are a newbie homeowner with no equity or a Boomer with no diversification. I guess that would include you. Hope you like chickens. — Garth

#124 sam.i.am on 11.28.11 at 6:12 pm

Y&F 1. Elites (they will always be 2 steps ahead,

Quite literally so in the case of N. Rothschild:

===
His four brothers helped co-ordinate activities across the continent, and the family developed a network of agents, shippers and couriers to transport gold – and information – across Europe. ***This private intelligence service enabled Nathan to receive in London the news of Wellington’s victory at the Battle of Waterloo a full day ahead of the government’s official messengers***.[2]
===

#125 Kilby on 11.28.11 at 6:35 pm

#102 Curious.

Japan keeping low interest rates for all these years did NOTHING to kickstart anything. I have a nephew working in Tokyo who bought an 8 suite apartment building, not sure what he paid but it was not much. When rates move around 1%, movement a bit either way doesn’t accomplish much….Unless you are in Vancouver wanting to borrow 16 times your family income to get that mouldy house ‘Off Main”

#126 Junius on 11.28.11 at 6:42 pm

#61 joseph [original],

You said, “Nobody really knows what the price of real assets will be in 10 years time with all the money printing going on. Inflation can take hold and then run amok and the prices of real estate would then sky rocket.”

Deceptive by omission. If we enter into a period of high inflation we will see lots of things rise in price including interest rates and salaries. The only thing that would matter would be relative rises in values including a comparison of alternative investments. In other words, yes Re could continue to rise but still end up a bad investment.

#127 Reasonfirst on 11.28.11 at 6:43 pm

#110 Dorothy

“You don’t get the same sense of satisfaction that you get out of fixing your place up, and making it feel more like your own.”

All those words and this is the only statement you came up with as to why someone should buy.

I have better things to do than to spend time and money in Home Outfitters or whatever…

#128 Timing is Everything on 11.28.11 at 6:56 pm

I say to you ( you know who you are ) please, please PLEASE take a trip to somewhere…

…like Alberta, because their frozen wasteland is better.

#129 Joe on 11.28.11 at 7:07 pm

#126
if real estate goes up it is the best investment generally for people. Not only does it provide a physical asset that people can enjoy it also provides leverage and special tax benefits (No capital gains on principal residence).

Obviously there are exceptions like the current price and in which market the real estate is in etc.

#130 Devore on 11.28.11 at 7:13 pm

#123 Alan

Lastly, it may serve you well to distinguish different types of real estate react differently and in some cases are not good investments in difficult economic times like vacation properties.

You are wrong, and you should know this because you claim to be a realtor.

Vacation properties underperform in down markets, because they overperform in hot markets (ie credit bubbles). This is because:

1. Vacation properties are generally cheaper, so if you want to “get into the market” they are easier to get.
2. The supply is much less flexible.
3. Buyers are less discriminating. A vacation property is a status symbol, so having one is more important than which one you have.
4. They are the last thing to be bought and first thing to be sold off. As such, this market tends to telegraph down trends.

Look at places like Banff, Whistler, Kelowna, Canmore, Muskoka, they are all telling us something: people are running out of money.

In a down real estate market, there are no good investments to buy, in the sense that they will continue to decline in price, unless you’re in the highly unlikely position where returns outstrip declines. For each local market you have to determine its future based on local economic conditions and demographic trends, national ones, as well as credit availability, demand and affordability.

Your point about vacation properties is just a specific case of a general fact: each market is local. Vacation properties tend to be clustered together, so they move together and separately from other markets. Outlying areas are usually in lower demand than core areas. SFH is better than condo. View better than no view. Quiet street better than busy street. Eventually, general national trends get reflected in resilient areas previously thought to be “immune”, such as San Francisco and Seattle to use an example next door.

Finally, it is extremely hard to gauge the direction of the market from aggregate statistics. You really need to look at individual properties. This is where an experienced realtor specializing in the area and property type you are interested in can be invaluable. If one month the average price is $400k, and next month the average is $400k also, it is tempting to say it’s a flat, steady market (aka “balanced”). But if in the first month the houses are 1600 sqft with 80s decoration, and in the second month the houses that sell are 2500 sqft and renovated, it’s quite obvious the market is actually in decline. (This was Victoria for the past 2 years.)

#131 Popeye the sailor man on 11.28.11 at 7:16 pm

I successfully stopped a coworker from buying a condo in Whisler, they decided to rent one for 6 month fully furnished, and they have thanked me.

I feel happy for them.

#132 Bill Gable on 11.28.11 at 7:32 pm

Italy Bond auction bomb – is this a significant tipping point in the Eurozone?
Germany is in a furore.
Sarkozy now embroiled in the Strauss-Kahn scandal, and his countries bonds are zooming too.
Mr. Turner you must admit this sure is “interesting”.

Now about the 70 TRILLION of SIV’s off books of major institutions

#133 YEG Reader on 11.28.11 at 8:03 pm

I had a ringside seat for the housing bubbles in Ireland and Florida–and in both cases, I knew it wouldn’t last. In Edmonton in 2006 for the first time someone I offered a job to turned it down because of Edmonton housing prices. Yet when I started reading Garth’s blog 2 years ago, I had not figured out that when interest rates drop, real estate rises–meaning that someone like me, planning to sell a house and buy a condo with the proceeds, would be paying a price pushed upward by the cheap financing others were using. The problem is the time lag–the inconvenience of finding somewhere satisfactory to rent while waiting some indeterminate time for the bubble to deflate.

#134 InvestorsFriend (Shawn Allen) on 11.28.11 at 8:06 pm

123 Alan, the real estate agent says:

But, if you want to know how to do well or weather a financial storm, try property that can grow vegetables, house chickens and feed your family.
*****************************************

This laughable. A hobby farm is okay for a few interested people.

The rest of us will NOTnot be abandoning the efficiencies of the division of labor any time soon. We (everyone except the committed hobbiest and the lunatic fringe) will NOT be growing our own food anymore than we will be making our own cloths and shoes or building our own houses out of straw, sticks or bricks. You will never compete with the super-cheap food at the supermarket. Just calcualte how many (how few, actually) hours of work it takes to buy groceries and then compare that with the hours to grow/raise/prepare the food yourself. The hours of work needed to buy groceries have declined drastically for many decades and will continue to do so.

And as far as health, there ARE healthy choices at the supermarket and despite the rhetoric average life spans and average health are still on the rise. Why else would 50 be the new 40 etc.

#135 Westernman on 11.28.11 at 8:12 pm

Timing is Everything,
Where did I say anything about Alberta…? Expand your mind boy, the world is a hell of a lot bigger than Canada.

#136 deja view? on 11.28.11 at 8:27 pm

I renovated and sold 4 houses between 20 & 30 yrs ago when I lived in Vancouver. Three in the vicinity of Main & 15th and one in upper Kits. Total value then, $770K.
Now worth between 5 & 6 mil??
At the time I was paid fair market value.
People buying today should be packing a chute.
It’s a long ways down.
And our inflation rate is ‘zip’ according to gov!
uh-huh..

#137 BPOE on 11.28.11 at 8:44 pm

Simply the best. Mainstream starts discovering Vancouver
http://www.businessweek.com/printer/magazine/chinas-superrich-buy-a-better-life-abroad-11222011.html

#138 Westernman on 11.28.11 at 9:43 pm

A tip-of-the-hat to InvestorsFriend(ShawnAllen)
One of the few on this blog that have a grasp of how things actually are as opposed to the average Canadians disneyworld view of reality.
Perhaps he makes his living in the private sector where actual competition rules the roost – unlike a great many on here who obviously have taxpayer subsidized government mules in which to ride upon.

#139 bankrupt in brampton on 11.28.11 at 9:51 pm

walked away from my debts and home a few months ago and it was not very hard . those who are broke and need to walk from there house and debt should plan ahead and borrow from LOC and credit cards to have enough to pay bankruptcy lawyer and have enough to rent a place for a few months. Canada is a stupid country and the best advise is borrow until you go bankrupt and walk away. Thanks canada.

#140 Math is Fun on 11.28.11 at 9:51 pm

Ahh yes, a Vancouverites financial plan B: Get a student. 30 years ago, they were called BOARDERS. Only in Vancouver – where a ‘millionaire’ needs a boarder to pay the mortage.

Rest easy Trev and Anna this is Vancouver. There is always plan C: grow-op.

#141 Timing is Everything on 11.28.11 at 10:11 pm

#135 Westernman – Where did I say anything about Alberta…?

Good point. They should go somewhere more hospitable.

#142 Okanagan Renter on 11.28.11 at 10:43 pm

#110 Dorothy

Oh boy, here we go again. Another delusional home/moneypit owner. The fact that you have the gall to cite the historically low interest rates as “evidence” that this is the right time to buy a house goes to show how misguided you are.

Praising Carney’s criminally irresponsible move on interest rates is like praising a crack dealer for offering the first hit for free. Once the future addict is hooked and the price of crack begins to hurt the wallet the junkie will even sell their mom to buy more crack. If analogy isn’t your forte, let me explain to the level of a 5-year old:

Low interest rates encourages the non-thinking public (I assume the hat fits you well) to take on more and more debt. After all, it’s so “cheap” to buy debt, ain’t it? Low rates don’t last forever, while the average mortgage lasts 25 years. You don’t think interest rates will increase between now and 2036? Great, then I have a bridge to sell you for a special price, since you’re a special (needs) person.

#143 TheRealTruth on 11.28.11 at 10:44 pm

#137 BPOE

Great article that tells it like it is. Same thing happening in India as astronomical Real Estate prices make many normal people into multimillionaires! …and they too want to go abroad.

The farmers who own land around our ancestral village abroad almost hit the jackpot… an international airport was to be built near it but gov policy magically changed the location at the last minute. The farmland fell back down to pre-rumour levels; about $40,000 an acre. At the height of the hysteria, it was going for about $220,000 per acre. Since we have some land, people started looking at me differently here thinking i was a potential multi-millionaire…lol

Now several notes:

The average daily salary is $3 for a general labourer. Too much population, too few jobs (which country is headed in this direction?) pushes wages down down down!

Average yearly salary to RE price ratio. You do the Math ;)

No such thing as mortgages. Cash Transactions only.

Would not want the majority of people of my ancestral village immigrating here…why? moral values are different. Ex. I would stop and buy a starving person a meal. They won’t…believe me. Been there and saw it. However, they all want to emigrate here. Had one old man begging at my feet saying law says i can let one person into Canada (his grandson).. i was like WTF!

These peasant farmes are income poor but asset rich (land prices). Yet no one sells unless for emigrating purposes. In the past, land was usually aquired by llicit means…rarely did anyone have land they willingly wanted to sell.

This will not end well.

#144 disciple on 11.29.11 at 10:49 am

#143 TheRealTruth… nobody has the cash to buy $40,000 an acre farmland in the Punjab or U.P. except for the corrupt Indian government or Korean venture capitalists looking to exploit. It’s an illusion, just like here in Canada.