Endangered species

Middle class is a state of mind. Like being a cowboy. Or a babe. More than anything else, it’s the hope and expectation life will get better, financial security will materialize, and you’ll support a family, a house and a retirement. In most people’s minds the rich are few (the now-infamous 1%), the poor are largely unseen, and the rest of us muddle in the middle.

But this is a myth. Or soon will be. As this nasty blog has pointed out, 53% of Canadians now have no savings, over 70% are without pensions and four in ten can’t pay their monthly bills without borrowing. Mortgage debt and lines of credit are out of control, while wage growth is less than one half the inflation rate. Unemployment seems structural at 8% and the government’s about to launch an austerity kick. Savings accounts pay two per cent at best and everybody’s living longer. This is not good. The greatest risk the middle class faces is running out of money.

This past weekend the Huff Post did a piece on Toronto’s inner-city neighbourhood of Cabbagetown, once a working-class area, then a 1950s slum, now a community of 6,000 families where houses sell for between $750,000 and $1.4 million. The median family income there is $52,833. So how do people making fifty grand buy million-dollar homes?

Same as in Vancouver. They don’t. In Cabbagetown about a quarter of families make over $100,000, and a fifth live below the poverty line – with incomes of less than $20,000. Needless to say, it’s the wealthy who own the homes and the poor who rent or live in subsidized housing. The middle is essentially gone.

Interesting to note the same observation’s being made in the country’s most delusional city, where real estate is busy destroying the mobility of middle-income earners. One of the Van dailies ran a piece last weekend detailing the flight by people who can no longer afford to live in a place where the average SFH costs a million.

The story ended: “Have you fled Vancouver because of its high real-estate prices? Are you sharing housing because of it? Are you taking other steps to cope? Tell us how you are managing in the country’s most expensive real-estate market.” Suddenly the house-pumping media realizes the dark side of real estate porn.

What happens when a middle class starts to evaporate? Well, look south. Millions of American families live in houses worth less than their debts, but cannot afford to move. Consumer spending failed, leading to the firing or laying off of 14 million workers. As the real estate industry crumbled in house-nuts places like California and Florida, the local economy tanked so much cities are selling off police stations and road graders.

There are three reasons the destruction of the middle is happening here.

First, most people haven’t got a clue how to cope, save, invest or manage. They stuff money in the orange guy’s shorts then wonder why their finances stagnate. They fear risk to the level of paralysis. They open TFSAs and actually keep cash in them. They buy GICs. They get advice from the woman who cashes cheques. They never heard of a preferred or a REIT. They listen to their mom. They buy mutual funds. They pig out on cheap debt. They don’t trust.

Second, of course, is our real estate addiction. House horniness has allowed prices to rise even though incomes have not. Irrational fear (and ignorance) of financial assets has driven the bulk of net worth into bricks and mortar. Now most people are massively undiversified, and blissfully unaware they’ve mushroomed their risk. Housing is a cult. Values have been driven by emotion, competition, peer pressure and social convention. By reaching for home ownership, millions have traded stability for debt. As in the US, this paves the way for a massive transfer of wealth from families to financial institutions. Because after home prices fall, the debt remains.

Third, through stupidity or design, governments are greasing this race to the bottom. As emergency interest rates go into their third year, for example, credit is out of control. And there’s no denying that government has allowed banks to create a Canadian subprime culture.

This ad was published on Craigslist over the weekend, the same junk that’s being stuffed into apartment building mailboxes across the nation:

Tired of renting – want to own your own home with no downpayment?
You can. One of the top 5 Canadian banks is offering an incredible “cash back” program. There are no catches to this plan – it is straight forward and I would love to explain it to you in detail.

In fact, this is how Re/Max agent and mortgage broker Lesly Wagstaff explains it on her come-hither web site:

  • You will be given 5% of the borrowed amount, so if you buy for say $400,000.00 your mortgage amount would be $380,000.00 (plus insurance fees), so you would receive $19,000.00. So you have to come up with just $1000. towards your down payment.

Ownership of a four hundred thousand dollar home, for just a thousand bucks. That’s 99.75% financing, all legal, with lender risk guaranteed by the taxpayers of Canada, facilitated by one of the Big Five banks who regularly send their CEOs out into the microphones to warn against the excesses of consumer debt. Look up ‘hypocrisy.’ They’re all there.

Erasing the middle class may be accidental. It may be suicidal. But it’s real. From condo-lusty young couples to market-fearing Boomers clinging to GICs, so many are on the wrong path. The consequences should be obvious. But so is the cure. Diversify what you own. Be liquid. Trash debt. Cure horny.

Finally, I leave you with these inspiring words from Ms. Wagstaff, the woman who would enslave our youth with debt beyond their wildest desires. She loves you.

As a realtor for over 25 years, I have learnt many things about our area and our market, but I have especially have learnt alot about my clients. The cool thing about having been a salesperson for such a long time is that I don’t have a client base…I have a friend base. I love all of my clients. I love hearing from them, getting caught up in their news and seeing the changes take place in their lives. One of the things I say to all of my first time clients is ” Choose a realtor you like, trust and enjoy their company.” This is the most important financial commitment you are going to make you have to have someone in your corner who you know is working in your best interest.

216 comments ↓

#1 Phoeey on 01.22.12 at 7:33 pm

1st this time? I doubt it.

#2 Mr Buyer on 01.22.12 at 7:34 pm

Here is a news piece about a REIT…
http://ca.finance.yahoo.com/video/canews-22424922/renters-beware-27939346.html#crsl=%252Fvideo%252Fcanews-22424922%252Ftwo-b-c-mill-workers-still-unnacounted-for-27954221.html

Sorry for the huge link but tiny url did not create a redirect for some reason.

#3 Randy on 01.22.12 at 7:35 pm

It kinda insane that this situation continues in Toronto and Vancouver….

#4 Mr Buyer on 01.22.12 at 7:37 pm

Okay the link was too the wrong story…hopefully this is the story about the REIT….
http://ca.finance.yahoo.com/video/canews-22424922/renters-beware-27939346.html#crsl=%252Fvideo%252Fcanews-22424922%252Frenters-beware-27939346.html

#5 Phoeey on 01.22.12 at 7:39 pm

Nice post Garth. Just reading this blog makes me feel like I “have someone in your corner who you know is working in your best interest”.
Don’t be jealous of those realtors Garth. We love you too!

#6 Mr Buyer on 01.22.12 at 7:40 pm

Now the story about the REIT defaults to no volume (you have to turn the volume up if you can not hear it)

#7 Paul on 01.22.12 at 7:44 pm

DA is going to be pissed at being called a “salesperson” by a comrade.

Kelowna is # 3 for home ownership.

http://www.castanet.net/edition/news-story-69967-1026-.htm#69967

#8 Bill Gable on 01.22.12 at 7:44 pm

You wlll never go broke underestimating the fiscal stupidity, of a portion of our neighbours.
99.75% financing – and you and I have to back this, with our tax dollars?
I wonder how some people sleep at night.
Incredible!

#9 LJ on 01.22.12 at 7:45 pm

The BC throw-offs seem to be ending up in Alberta, namely Calgary. There are BC plates all over the place and I fear that they may bring their house lust with them – considering we are priced waaaaaay below them: but, still on the expensive side of the tracks…

#10 The Original Dave on 01.22.12 at 7:46 pm

despite all the bad news, people in Toronto are still bullish on real estate. That’s what I’m hearing from the street. Everyone has ruled out the opinions of the IMF, Carney, and anyone else that matters.

It’s like Soros said, “ride the wrong trend but make sure to get off before it ends”. I’ve never seen people this obsessed with a single asset. Maybe I’m wrong, but there’s not a lot of listings, and people still have the idea that real estate can’t fail and that you have to get in at all costs

#11 TurnerNation on 01.22.12 at 7:50 pm

Junius: how is your pet monkey doing these days?

#12 mattymatt123 on 01.22.12 at 7:56 pm

Yup! I totally agree! Middle class is a goner.

#13 F on 01.22.12 at 7:57 pm

Good read

#14 Dan from Richmond Hill on 01.22.12 at 7:59 pm

One question Mr. Turner: why do you think that Bank of Canada does not raise the interest rate? Maybe because it has to chose between something wrong (low rates) and something even worse (rising the interest rate)? Or…?Thank you!

#15 T.O. Bubble Boy on 01.22.12 at 8:01 pm

I don’t have a client base…I have a friend base. I love all of my clients.

Sounds like someone has gotten to at least 3rd base with some of those clients.

#16 Onemorething on 01.22.12 at 8:01 pm

Yes Ms. Wagstuff, the devil in sheeps clothing!

Well done G, that summarizes where we are going precisely over the next decade.

I’m ready!

Sitting tight in my South East Asian Fort! Ranked 5th from the bottom on the Big Mack Index!

#17 Stevenson on 01.22.12 at 8:02 pm

four in ten can’t pay their monthly bills without borrowing? Where are you getting this?

#18 Randy on 01.22.12 at 8:03 pm

Bye…Moving to Australia…Always wanted an oceanfront property now that I found out Al Gore was lying about the rise in the seas and oceans….

http://globaleconomicanalysis.blogspot.com/2012/01/australia-roundup-oceanfront-homes-for.html

#19 mattymatt123 on 01.22.12 at 8:06 pm

I love that the middle class is disappearing! Soon I will be able to hire labor in my machine shop for a $1 an hour and bring back some of the work that has gone to china! hahahahahahahahahahahah!

#20 Out of the Shadows on 01.22.12 at 8:06 pm

Although this agent is doing nothing technically wrong, it’s astounding that the real estate agency business is as unregulated as it is. Client are likely investing more in their homes than they do in their investment portfolios, yet these agents run amok while the financial industry is tightly regulated (as it should be).

It’s also funny to note that this particular agent doesn’t know the difference between “top right” and “bottom left” on her site, in reference to contacting her. Maybe she needs to “access” her own understanding of left vs. right.

#21 TurnerNation on 01.22.12 at 8:09 pm

Bingo!! We spend 15-25 years in (paid) school to learn narrow topics, and to become tax farm slaves.

****”First, most people haven’t got a clue how to cope, save, invest or manage. They stuff money in the orange guy’s shorts then wonder why their finances stagnate. They fear risk to the level of paralysis. They open TFSAs and actually keep cash in them. They buy GICs. They get advice from the woman who cashes cheques. They never heard of a preferred or a REIT. They listen to their mom. They buy mutual funds. They pig out on cheap debt. They don’t trust.”****

#22 Helpful Advise on 01.22.12 at 8:12 pm

FIRST!!!!!

#23 Spazmogen on 01.22.12 at 8:13 pm

On a recent vist to Hudson Florida, it became obvious that the middle class are boomer/retired Snow Birds; they leave in the spring. There is no local middle class anymore. There is the working poor. There is the destitute. Of course there are the 1% which seem to be doing just fine.

Picking up the real estate flyers was interesting. Plenty of nice looking properties, cheap.

#24 Trademark Needed on 01.22.12 at 8:13 pm

You need to trademark this:

“The greatest risk the middle class faces is running out of money.”

#25 Duncan on 01.22.12 at 8:14 pm

Greetings from Australia, it’s different here, we have kangaroos!

#26 Observer on 01.22.12 at 8:15 pm

Garth – just want to say “thanks for the blog”. You are a voice of reason in a sea of “debt is wealth” criers.

I personally think that here in Vancouver there will be an explosion of listings with very slight price reductions resulting in a buying frenzy in the spring.

No doubt the banks reduced rate mortgages will help in spurring this on.

It is too bad nothing is taught in our “schools” about
finance, investing and the real cost of home ownership.

#27 tran, Calgary on 01.22.12 at 8:20 pm

Queensland real estate prices dropped by up to 70 per cent.

http://www.couriermail.com.au/life/homesproperty/investors-snap-up-coastal-property-bargains-in-queensland/story-e6frequ6-1226250615239

#28 John G. Young on 01.22.12 at 8:23 pm

Sadly, in the photograph the endangered species is the one on the right.

#29 Renter In Van on 01.22.12 at 8:28 pm

sooooo tempting to say it

Still enjoying the reading of this blog from the westside of vancouver where I rent a 4 million dollar property for less than $4000/month while the proceeds from the sale of our house continues to throw money at us. Maybe going against the herd is the way to preserve or even rise above middle class status. It is deeply comforting compared to owning a depreciating asset that sucks all your time and money but it took a large leap of faith in the beginning.

#30 Robbie on 01.22.12 at 8:36 pm

My firm, a professional services firm in Vancouver, is having terrible problems retaining experienced workers. Sure, we have an endless supply of new-grads who earn 40k/yr while cutting their teeth. Once they are credentialed, they’re gone. We have to fly in people from Calgary for simple assignments.

I don’t find living in Vancouver all that expensive. I have zero desire to buy and rent downtown. No cars needed, which saves bundles.

#31 Seven Stars and Orion on 01.22.12 at 8:44 pm

I would just die to have Lesly “access” my situation.
Come hither indeed. I wonder about the psychological angle in all this. Germany 1930’s seems like the apex, but the current obsession with Real Estate will surely rate a chapter in a future digital textbook on mass societal brainwashing.

#32 Joe Q. on 01.22.12 at 8:50 pm

“There are no catches to this plan” — is that so? My understanding is that mortgage rates are higher for cash-back mortgages, and that credit rating cut-offs are also somewhat higher, but I would welcome corrections if I’m wrong.

#33 cxcroney on 01.22.12 at 8:55 pm

learnt?

#34 Loan money to anyone on 01.22.12 at 8:56 pm

Given that mortgages are now available at 2.99%, it would be wonderful if the feds would legislate stricter mortgage rules in their upcoming budget. You can be sure some people will borrow all they can and overpay for their properties. The high price they pay then becomes the benchmark that everyone else has to pay as well.

#35 salonist on 01.22.12 at 8:57 pm

something i read.what does it mean?

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all

#36 Cowtown Lover on 01.22.12 at 9:05 pm

#9 LJ on 01.22.12 at 7:45 pm

The BC throw-offs seem to be ending up in Alberta, namely Calgary. There are BC plates all over the place and I fear that they may bring their house lust with them – considering we are priced waaaaaay below them: but, still on the expensive side of the tracks…

++++++++++++++++++++++++++++++++++++

Don’t worry about the BC refugees. They don’t have any money. The real estate boom took it away from them and now they need real jobs.

Personally, I welcome them. Calgary has always been a place to re-invent yourself after a train-wreck.

#37 Ronaldo on 01.22.12 at 9:08 pm

“Ownership of a four hundred thousand dollar home, for just a thousand bucks. That’s 99.75% financing, all legal, with lender risk guaranteed by the taxpayers of Canada, facilitated by one of the Big Five banks who regularly send their CEOs out into the microphones to warn against the excesses of consumer debt. Look up ‘hypocrisy.’ They’re all there.”

Ever since the fall of 2009, I have been reading about the CEO’s of the big 5 making like they were concerned about the increasing debt being taken on by the citizens of this country.

You are being polite Garth when you call what is going on Hypocrisy. It is absolutely scandalous. These people have absolutely no scruples whatsoever and are constantly pointing the finger at each other as being the problem and none have the gonads to do anything about this coming financial mess that they’ve created.

The Gov of the BOC says its not his job to control mortgage rates and passes the buck to F. The banks plead with the government to tighten the rules so that people don’t get themselves into financial trouble in the lust for houses.

Yet, if the government does tighten up, they find a way to circumvent the rules. Like one loans officer at a credit union I deal with said when I asked, “what will you do about mortgage rates if the gov’t increases the prime rate?” He said, “we could simply go back to the “prime minus” as we did before.

They simply do not give a damn as they are only concerned about the spread they are getting and market share. They have other ways of increasing their profits by increasing LOC rates and fees. So now, they offer 5 yr and greater rates at the lowest rates in history so that they can lure those that got in with VRM’s back before the 2008 crash when the game back then was “prime minus”, into locked in mortgages.

Those were the teaser rates back then and now we have the Two Point Nine Nine. The game goes on. It’s bloody disgusting and I commend you Garth for keeping the heat on these buffoons. When this thing finally blows, it will be worse than anything we have seen in the last 40 years.

#38 Dux Magnus on 01.22.12 at 9:10 pm

Does anyone have an opinion of the Niagara real estate market, particularly the Grimsby-Beamsville area? I just recently purchased a very nice 2200 square foot, 3 bed 4 bath home in Beamsville with a very nice finished basement. Do you think it was a mistake? I was against the idea but you gotta please the wife!

Like it matters now. — Garth

#39 Dux Magnus on 01.22.12 at 9:11 pm

Edit: I paid 363k

#40 truth hammer on 01.22.12 at 9:27 pm

Carney and Flaherty….two guys educated in the 50’s who can’t seem to understand why the traditional economic models of the thirties won’t work in the 21st century.

http://www.theglobeandmail.com/report-on-business/commentary/barrie-mckenna/stalled-on-the-road-to-economic-recovery/article2310824/

Keynsian theory was debunked when written and the resurrected after the 2nd world war when huge amounts of ‘magic money’ was needed for war reconstruction. Of course the greed attached to easy money was addictive and a ‘whole new society’ was built on money that didn’t exist.

Now……..C & F are gobsmacked at why debt is no longer working……except of course if you’re an indexed leech with a DB pension.

Well……Keynes theory was to perpetually increase the money supply ( the old M3) by 2% every year to grease the wheels. Keynes never imagined ( apparently he couldn’t understand the 6 functions of a dollar) that he would live to see his zant theory in practice on a global scale….so he never designed an exit strategy after his ‘theoretical 2%’ breached the 100% threshold. We are now at that 100% threshold where every penny of revenue is accounted for and it is not enough !!!!!

Time to print a new textbook fellow’s……one where the economic politics of the fourties and fifties are put to rest and the ‘traditional Canadian models’ are engaged with globalization.

#41 DUI on Money Road on 01.22.12 at 9:38 pm

It’s sad that someone with grade 4 English skills is responsible for ‘helping’ people buy $400,000 homes.

#42 I'm stupid on 01.22.12 at 9:40 pm

Why would I cure horny? The little blue pills ensured I will stay horny forever.

#43 Mr. Lee on 01.22.12 at 9:51 pm

People should review this article:

http://www.canada.com/business/decades+later+inflation+looms+again+economic+threat/6003465/story.html?id=6003465

Although one opinion, it is still very telling.

#44 Basil on 01.22.12 at 9:56 pm

Garth I’m sure you will slay me for this, however you are sounding, may I say, doomerish. The writing is obviously on the wall in Canada, the US and Europe, that the middle class is being eradicated. Canada has lost 500,000 manufacturing jobs and current government policy is to bypass secondary processing and ship raw resources to cheap labour locals, while privatizing public assets. In the US 100 Million people are at or below the poverty line and their manufacturing base is decimated. The third world model appears to be our destiny.

#45 TurnerNation on 01.22.12 at 9:57 pm

Fair comparison?

Realtors are like an appendix: you don’t notice them until one day they go toxic on you, are removed, and you move on with your life.

#46 TurnerNation on 01.22.12 at 9:58 pm

Today’s protagonist must be friends with [email protected]

#47 charles on 01.22.12 at 10:00 pm

Went to a party yesterday, spoke with a guy who was proud of buying a 1.1 M. house outside of GTA with just 2.5% down. Best of all it is not his primarily property, it is just ” an investment”. He was telling me as well how this is the BEST time to buy a property with no money down because banks are giving money away for FREE. Telling me how he knows people with 4-6 properties with little down on each of them. I said nothing to the guy, I was just astound.

#48 Outtahere on 01.22.12 at 10:05 pm

So real estate always goes up? We FINALLY sold our Squamish townhouse last week for 10k more than what we paid for it 6 years ago! BC Assessment on the place was down 30k from the previous year. So according to my detailed, trusty spreadsheet, after 6 years as a landlord we lost approx. 15k.

Now I can breath easier, lesson learned, and plan better from now on.

#49 East Van on 01.22.12 at 10:06 pm

Garth is absolutely wrong about the destruction of the middle class. Debt is a symptom not the cause.

The middle class has disappeared because corporations worked with governments (they are now inseperable) to destroy organized labour, move production to low wage countries, and shift wealth from the middle class to the corporate class. The richest 1 percent of Americans now own 40 percent of the nation’s wealth. The bottom 80 percent own only 7 percent. Wealth disparity has been increasing exponentially since the 1970s.

#50 Valyrian_Steel on 01.22.12 at 10:06 pm

Those savings rates that Garth posted are just plain ugly. Yet, it certainly doesn’t reflect my reality. In one of Garth’s earlier topics I detailed how my wife and I manage to save 4k or more every month while holding a mortgage in Vancouver. This elicited some smart ass comments about how we must have a grow op or have gargantuan salaries. Nope. Fairly average incomes and living below our means…. that simple. We could have a McMansion with granite countertops and a nice Bimmer in the double car garage and struggle to break even every month… yet we have made a CHOICE not to live in this manner (although we admit to periodic flare ups of house lust). We prefer to sleep well at night, despite our unsightly vinyl countertops, and our 10 year old Camry in our condo underground parking lot. The thrill I get watching our net worth rise and watching REIT distributions and ETF dividends roll in more than makes up for some of the “luxuries” that we do without. Sometimes I think the Entitlement Complex has run amok in Canada…

#51 Ronaldo on 01.22.12 at 10:10 pm

#9 LJ and #36 Cowtown Lover

” #9 LJ on 01.22.12 at 7:45 pm

The BC throw-offs seem to be ending up in Alberta, namely Calgary. There are BC plates all over the place and I fear that they may bring their house lust with them – considering we are priced waaaaaay below them: but, still on the expensive side of the tracks…
++++++++++++++++++++++++++++++++++++

Don’t worry about the BC refugees. They don’t have any money. The real estate boom took it away from them and now they need real jobs.

Personally, I welcome them. Calgary has always been a place to re-invent yourself after a train-wreck.”

Actually, these are the former Alberta refugees that
Ralph Klein kicked out a few years back and sent them packing on the bus, compliments of the gov’t of Alberta. Remember?

#52 Marcel on 01.22.12 at 10:19 pm

Whats wrong with Mutual Funds? I hold some within my TFSA. The reason so, is I am a rookie investor and needed professional help.

#53 Canadian Watchdog on 01.22.12 at 10:20 pm

#9 LJ

Lots of people fleeing to Alberta from Ontario and BC.

http://i42.tinypic.com/2iiir8n.png

#54 Nostradamus Le Mad Vlad on 01.22.12 at 10:21 pm


“. . . 53% of Canadians now have no savings, over 70% are without pensions and four in ten can’t pay their monthly bills without borrowing. Mortgage debt and lines of credit are out of control, while wage growth is less than one half the inflation rate.”

Now, this may be incorrect, but I’m assuming that the Middle Class Endangered species you speak of is this ghastly renegade, wretched bunch of wimps, muddling in the middle reading 2day’s missive, caught between a rock and a hard place. Then again, some of us have listened and heeded your outrageously expensive Amazonian advice, and have adequately prepared ourselves. We may not be in the top 1%, but we are self-sufficient.

“. . . California and Florida, the local economy tanked so much cities are selling off police stations and road graders.” — This leads to lawlessness, where cops and crooks have lost all sense of reality — they have become one and the same, as it’s everyone for themselves and damn the torpedoes. That’s the society we have created for ourselves, and are living in it, whether we like it or not.
*
#203 Mike Rotch — “Also, while I’m here, can one of the e-Savvy blog dogs give me a tutorial on how to format text in my posts with bold, italic, etc. HTML or other markup tags??” — Hi Mike. Either Google html and hyperlinks instructions or try these — here, here and here. This should give a basic understanding.

#45 TurnerNation — Good comparison!
*
Make what you will of this report; Car Insurance doubled? In the UK (and possibly here), this is where it goes; India joins the Asian exchange; Keystone Pipeline “Between this, and turmoil in the Middle East and Africa, watch for gas prices to go through the roof this year.” wrh.com, and this is another tool TPTB are using to separate us from our savings; It is clear what the NDAA is for; Gold Standard Not gonna happen. Until it does.
*
FFs Old carriers don’t die, they are accidentally attacked as used as provocation to justify a false war; 6:01 clip US carrier to deliver blunt message to Iran (Might makes right? Don’t think so); Aluminum + fluoride = Alzheimer’s and Dementia. There seems to be a connection; CC Time to live with reality, and Jan. 19, 2012; Ron Paul The National Security candidate, but he still won’t win (TPTB don’t want him); 15 min. clip Inner rage. Like war, what is it good for? Police State USSA and the NDAA. What a combination; China – Russia alliance The US has allied with NATO, the UN, WTO etc.; 12K troops in Libya FYI.

#55 T.O. Bubble Boy on 01.22.12 at 10:30 pm

Carney and the Bank of Canada must have writer’s block… they avoided the fuzzy crystal ball game and simply came out and said it this time:

Some Canada property markets likely overvalued: BoC

#56 45north on 01.22.12 at 10:32 pm

Erasing the middle class may be accidental. It may be suicidal. But it’s real.

So where are the political parties? MIA.

The political parties have to be engaged on this blog. It’s long standing, has a measure of fairness and is relevant to the discussion.

#57 Randy on 01.22.12 at 10:32 pm

If you live in Ontario, don’t worry about the 300,000+ manufacturing jobs that we lost during the recession….Over the past 8 years we have added 330,000 jobs in the public services…and added them to the debt…..McGuinty…the big Thinker….Next week it will be Don Drummond’s fault as he shoots the messenger, when the Drummond Report is delivered…

#58 Ralph Cramdown on 01.22.12 at 10:35 pm

It isn’t hypocrisy. Hypocrisy would be if bank CEOs preached debt paydown, yet were each personally up to their own eyeballs in consumer debt pissed away on toys, vacations and riotous living.

They’re bankers. If they have the balance sheet and the clients, they lend if the spread more than compensates for the risk. If the CMHC guarantees the loan, it’s a great risk, and their respective boards would fire them PDQ if they weren’t making the loans. BLAME FLAHERTY.

“A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him.” — John Maynard Keynes, 1931

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” — Chuck Prince, Citigroup CEO, July 2007

“The reality is it’s not like we don’t offer 25-year amortization mortgages or 20-year amortization mortgages. People can pick their amortization periods. But if you offer them a choice, overwhelmingly they will choose the longer period, and so the question is would one bank say, ‘Well, I don’t care what you want; we’re only going to offer 20-year amortization mortgages,’ while everyone else offers 30-year amortization? We know what would happen — TD would no longer be issuing mortgages and everyone will go across the street. That’s what the public has said by the way they act.” — Ed Clark, TD Bank CEO, December 2011

#59 Keith in Calgary on 01.22.12 at 10:36 pm

“Investing” in the con game known as the stock market is just as stupid as buying real estate. It has been on government funded life support for the last 4 years……just like the RE market.

#60 Phil on 01.22.12 at 10:37 pm

“ALOT” IS NOT A WORD! Nor is “learnt”! It doesn’t offend me so much that she is abysmal at spelling and grammar; it offends me that she doesn’t have the common courtesy to have someone proofread for her!

#61 BC Bring Cash on 01.22.12 at 10:42 pm

The Global deleveraging only just beginning. The debt that Canadians for eg. have accumulated over the recent past will have to rolled back.
http://whispersfromtheedgeoftherainforest.blogspot.com/

#62 Ronaldo on 01.22.12 at 10:48 pm

#52 Marcel – perhaps this may be of assistance to you as a rookie investor.

http://investors-aid.coop/general/about-us.html

#63 BC is not Vancouver on 01.22.12 at 10:50 pm

Not everyone in BC lives in Vancouver/Kelowna. I can buy a nice home in northern BC for 2X earnings, if I rented it I could get $800/ month. There is not much crime and fresh air and water. We have plenty of jobs in mining and forestry. Why would anyone want to live in Vancouver to begin with! Check out Mackenzie BC on the MLS see for yourself. And no we are not moving to Calgary.

#64 RetiredBoomer2 on 01.22.12 at 10:51 pm

Garth if you have proof of this happening I’m sure your local opposition MP would like to see this stuff.
this is upsetting…illegal, dishonest. and not in your interests either.

my MP francis scarpaleggia thinks you know your stuff so I have forwarded this to him. he told me sometime this summer he has people in the party to look into these things.
I know you have a passion for finance midget minister F ..

#65 Snowboid on 01.22.12 at 10:56 pm

#41 DUI on Money Road on 01.22.12 at 9:38 pm…

Sadly that’s a higher standard than most of the agents that frequent this blog!

#66 Jon B on 01.22.12 at 11:04 pm

Really good post GT. The termination of much of the middle class will change our society in many ways.

#67 a prairie dawg on 01.22.12 at 11:08 pm

Blog dog C is starting to believe…

Some Canada property markets likely overvalued: BoC

http://ca.news.yahoo.com/canada-property-markets-likely-overvalued-boc-200956075.html

#68 Victor on 01.22.12 at 11:09 pm

Some Canada property markets likely overvalued: BoC

January 22, 2012

TORONTO (Reuters) – Some parts of the Canadian real estate market are “probably overvalued” and policymakers are monitoring to see if further steps are needed to cool it, the head of the country’s central bank said in an interview broadcast on Sunday.

It was the second time in recent days that Bank of Canada Governor Mark Carney voiced concern about property prices, which surged after the financial crisis as borrowing costs tumbled.

“We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they’re probably overvalued. So there are risks there. We’re watching it closely. We’re working with our partners, the federal government, the superintendent of financial institutions,” he said in an interview on “Question Period” on CTV.

“Measures have been taken. They’ve been effective. We’ll keep up that vigilance. If more needs to be done, I’m sure the appropriate authorities will take those measures.”

http://ca.news.yahoo.com/canada-property-markets-likely-overvalued-boc-200956075.html

#69 Adrian Wapcaplet on 01.22.12 at 11:34 pm

“I was against the idea but you gotta please the wife!” – Dux Magnus

Was it a mistake? Who knows?

Perhaps a more interesting question would be: since when did “pleasing the wife” become a catch-all excuse for selling yourself into debt slavery, in spite of knowing better?

But never mind all that. It just goes to show that we can sell anything!

#70 Chris scott on 01.22.12 at 11:36 pm

@#33 cxcroney

Yea, apparently “learnt” is technically valid but it always sticks out in a bad way to me too.

“past participle, past tense of learn (Verb)”

#71 Lisa on 01.22.12 at 11:37 pm

“Third, through stupidity or design, governments are greasing this race to the bottom.”

By design? You are entering into conspiracy theory territory here, Mr. Turner. Would love to hear you elaborate further on this point.

It’s too scary. — Garth

#72 tran, Calgary on 01.23.12 at 12:05 am

Some Canada property markets likely overvalued…

http://ca.news.yahoo.com/canada-property-markets-likely-overvalued-boc-200956075.html

He might cause a price avalanche.

#73 Canadian Watchdog on 01.23.12 at 12:06 am

Why do most believe the BoC will respond to overvalued home prices and household debt? Carney consistently states that home prices and household debt is one of many variables used to monitor the health of the economy, but will not act on it alone.

Central bank policy is to keep the USD/CAN pegged and provide liquidity if needed, that’s it folks. If you expect someone to address the debt and inflated market, turn to the people you voted for, not the BoC.

It really does have to get worse before people understand what’s happened and who’s responsible, even though we have two perfect examples (US/Europe) unfolding before our eyes.

#74 Valkyrie on 01.23.12 at 12:10 am

RE. Dux Magnus

There are better ways to “please the wife” than retail debt therapy to the tune of 363K. Some of the best things in life are free……………..Enjoy your “very nice finished basement”.

#75 Boomer on 01.23.12 at 12:12 am

Good Lord, are there any real estate agents out there who have any command of the English language? Learnt, alot! Come on people didn’t you at least go to grade school before you obtained your agents licience? Sad, sad, sad! Oh well I guess you get what you pay for.

#76 Kelvinator on 01.23.12 at 12:14 am

In the Globe today:

WTF?

Mr. Carney also echoed warnings from Ottawa that measures could be taken to reduce risks of a housing price bubble in Canada.

Last week, federal Finance Minister Jim Flaherty warned that he could take action to prevent prices from skyrocketing, particularly in the Toronto and Vancouver markets.

#77 a prairie dawg on 01.23.12 at 12:27 am

Not to mention C has this revelation on a particular Sunday, when half of North America is watching AFC and NFC championship football games.

Trying to slip it in under the radar unnoticed?

Fail…

#78 DebtToDeath on 01.23.12 at 12:28 am

The government should tax the capital gain in real estate as they do in any other investment. This is not only fair, also it will curb the evil desire to make quick and big bucks in housing by speculation and dramatically reduce the risk of US style housing bubble explosion.

#79 disciple on 01.23.12 at 12:35 am

Lisa – I have three words for you: Gulf of Tonkin. Governments lie as a form of policy. What are you, ten years old?

#80 Onthesidelines on 01.23.12 at 12:38 am

You’re all over the board with this post. You talk about the a-holes like the realturd who will be your friend for life and the bank that will get you a 400k mortgage to suck you in, and then you decry that there’s “no trust.”
Duh…. hello? Incredible that after what’s been going on in the world….. you still don’t get it.

You also don’t seem to get why the middle class is getting wiped out everywhere in the western world. Your focus is much too narrow to see the overall picture. Disappointing.

If investing is the only cure, god help us all.

#81 Not Wondering Anymore on 01.23.12 at 12:39 am

“Third,through stupidity or design, governments are greasing this race to the bottom.”

By design? We aren’t going to let you slip that innocuously telling comment in without expanding upon it, Garth.

Are you inferring governments,including Canada’s, in their bailouts of corporate & financial entities (including the 70 billion dollar injection into CMHC),their various quantative easing measures and manipulation of interest rates, PROVES that they have been exclusively representative of these specific interests, rather than representative of the citizens who supposedly elected them? Are you saying that in doing so,the democratic process and democracy, as we understand it, has failed?

From such “innocuous” comments, the truth, and necessary anarchy and evolution, begins.
Bravo.

#82 FTP - First Time Poster on 01.23.12 at 12:51 am

Probably the most well thought, cogent posting you’ve made during the short lifespan of this blog Garth. Truth is, Scotiabank’s tagline has been what Canadians have thought for nearly a generation.

No need to blame 1%’ers, big corporations or anyone else -WE did this to ourselves! The root of the problem is lack of self-accountability and impulse control.

#83 Canadian Watchdog on 01.23.12 at 1:31 am

Canadian Public Sector Debt Clock http://www.cfib-fcei.ca/debt-clock-en.html

Canada $1,122,966,897,811
Total Debt Per Person $32,413

Ontario $487,072,473,980
Quebec $314,007,211,967
British Columbia $121,842,943,830

Tick Tick Tick….

#84 Alberta Ed on 01.23.12 at 1:34 am

“learnt”? Apparently, not how to spell.

#85 Van guy on 01.23.12 at 1:34 am

I’m not sure how we are not headed for a recession. In Van, it feels like we are in one. My workplace has been hit hard. Volumes running below GFC levels. I’m not sure how the other provinces are doing, but this is scary. I’m glad I’ve cut back in the last 3 years as others get sucked into massive debts. Im glad I sold at a small loss but less headache now.

Garth, do you think BC is more screwed than other provinces? I see nothing good for BC as RE is a huge part of our economy.

#86 TheRealTruth on 01.23.12 at 1:35 am

WATCH what happens to prices in the low end in the next 60-90 days with these low rates.!

So, here I was thinking that variable rates are at Prime or at best 10 basis points less. Boy was I wrong!

Friend got it for Prime – 0.60 = 2.4%

2.4% Five year variable!!!

Guess what, I didn’t believe him and called it Bullsh**!

He finally showed the papers to me… apparently HSBC has an Elite Client mortgage program. WTF? Never heard of it and guess not advertised. Apparently thy look at assets etc. What was more surprising was well off clients from the far East are securing 2.1% variable rates TODAY for mortgages in Canada. He was upset that he didnt get the Prime-.90 in todays world.

Who says the world is fair? One rate for the masses and another for the 1% and those in the ‘family’! No wonder they get richer.

#87 Junius on 01.23.12 at 1:38 am

#11 TurnerNation,

He is out at an open house now. What would you expect?

#88 TheRealTruth on 01.23.12 at 1:39 am

If I can secure the rates above somehow (2.1%), I’m moving to Southern Ontario and buying multiplexes adjacent to Garth’s properties!!

#89 TheRealTruth on 01.23.12 at 1:39 am

And then root for massive increases in our immigration levels.

#90 Al Gore's Lies on 01.23.12 at 1:44 am

to: #18 randy

yeah, a few years back a british court actually found that gore’s film “an inconvenient truth” contained around 10 major factual errors concerning global warming.

since it isn’t even close to factual, showing it in classrooms now requires a “disclaimer”.

of course, this happened after it was shown religiously to millions of impressionable young brains.

#91 Expat on 01.23.12 at 1:45 am

Hey, why so glum little camper?

Kids just getting out of Midel School right now have a great chance to get just a heck of a good deal on housing by the time they enter the market post-correction, when they save 20% down of course, with loans likely no greater than three times annual income, and have a good credit score. No rocket science required to figure out what a reasonable loan is.

The current perky young things buying at ten times annual income with one percent down will be older, saggier, and likely broke. However its a free country, they can start again. There are no debtor prisons, if necessary declare bankruptcy and move on, call it personal “restructuring” to get out from under an unsustainable business model, just as any actual business would.

Not painless for these individuals or the country (CMHC) for sure, but not the end of the world either.

#92 Nostradamus Le Mad Vlad on 01.23.12 at 1:48 am


#76 Kelvinator — Good post. Can anyone see austerity measures here? Well, conspiracy theories are now the accepted norm, as six individuals control 96% of the m$m, so their drivel is junk.
*
Choose Wisely Obomba must choose a side in housing; Crotia Another country succumbs to the money junkies. Unlike Ireland, who rejected the EU vote first, then Sarkozy forced a re-vote. Now look at them; Links in Iceland declares freedom (from the money-junkies); Cdn. Coupon Sites For us not-so much elite; Ending? If it does come to an end, something else will replace it. One crisis leads to another, but There are always two sides to every story; Oz 4 Sale Any buyers? Irish journalist ticks off an ECB wingnut; Slavery Still Exists; NWO and Global Collapse; As per Garth’s latest post; US deflation like Japan’s; Greece Getting uppity? Yen peaking.
*
Japanese Oysters Growing rather quickly; Libya Seems the civil war is not so civil; 1,000 Missiles Nothing like trying to pull a fast one on a bear; Ozone Hole Like a Black Hole, it absorbs all the garbage down here; Agenda 21 ain’t Mr. Rogers Neighborhood; Odearyme Headline is straight to the point; NWO Shill Curious how looks can deceive.

#93 Van guy on 01.23.12 at 2:06 am

Richmond sfh total sales so far in January, 29 units. Not bad eh? Only 800+ sfh listed and growing. My prediction, should close out the month at around 50-60 sold and listings at around 850+. Moi around 12 months. And for condos, I’ll make u sick BPOE if I tell you. Keep pumping the market with your foolishness, cuz you and your buddies are toast.

#94 Aaron - Melbourne on 01.23.12 at 2:56 am

http://www.heraldsun.com.au/news/more-news/foreign-buyers-rorting-grants/story-fn7x8me2-1226250791118

FOREIGN investors are being lured into the Melbourne property market with false promises of taxpayer-funded grants.
The Federal Opposition has called for a crackdown on potential rorters after revelations new-home grants are being offered to Malaysian buyers whose adult children are permanent residents.

An advertisement that appears in Malaysian newspaper the New Straits Times, spruiks properties in Whittlesea as an “exclusive release to Kuala Lumpur”, adding: “Hurry get the AUD $13,000 Australian Government Grant.”

The $13,000 First Home Bonus is given on top of the $7000 First Home Owner Grant and both are only available in Victoria to Australian citizens and permanent residents.

Monica Quaresima, from Lloyd Meridian Legal in Melbourne, said foreign parents would typically buy the homes for their children living in Australia as gifts.

“If they want to purchase the property and their children actually reside down here, (then) they’re buying it for their children, under their children’s names for them to keep,” Ms Quaresima said.

But she stressed most applicants were ineligible for various reasons.

Despite this, the ad targets investors with seminars on “What foreign investors need to know”.

Under state law, foreign investors may buy new homes, but cannot apply for government grants.

Jamie Briggs, Opposition spokesman for government waste, said the Government had to ensure the scheme was not abused.

“It’s a scheme funded by Australian taxpayers for the benefit of Australian residents, and clearly the Government has to keep a close eye on it to ensure it isn’t abused,” Mr Briggs said.

Planning Backlash convener Mary Drost said foreign buyers were exploiting a legal loophole.

“The Government, I’m sure when they started, they were trying to help the young people of Australia to be able to buy a house,” Ms Drost said.

State Revenue Office spokesman Darren Joyce said there were strict requirements for the grant.

“You do have to move in to the property as your principal place of residence for a consecutive six months, starting within 12 months,” Mr Joyce said.

Minister for Housing Robert McClelland said if an applicant proved they were a permanent resident and satisfied all criteria, they were entitled to the grant.

[email protected]

***************************************************************
17 comments at the time i posted this and all bar one slamming the politico housing complex.
Interestingly for anyone who has a print copy the Vox pop is about this issue.
“Should foreign investors be able to exploit a loophole to take advantage of the first home owners grant?”
One ignoramus states in reply:
“I think its actually a good thing because they are investing in Australian homes and benefitting our economy”

#95 Blacksheep on 01.23.12 at 3:13 am

Lisa #71,

“Third, through stupidity or design, governments
are greasing this race to the bottom.”

“By design? You are entering into conspiracy
theory territory here, Mr. Turner.”

“It’s too scary. — Garth”
————————————–
It’s no longer a conspiracy.

Straight goods from Former Assistant Secretary of Housing under George H.W. Bush Catherine Austin
Fitts blows the whistle on how they have deliberately imploded the US economy and transferred gargantuan amounts of wealth offshore as a means of sacrificing the American middle class.

The first 2 min. tells all. From a four part video series. Very enlightening.

Link: http://www.youtube.com/watch?feature=endscreen&NR=1&v=LhIgvkc5CoQ

take care,
Blacksheep

#96 Arshes on 01.23.12 at 3:19 am

#78 DebtToDeath

Unless the residence you sold was your primary residence, you are required to capital gains tax on it.
But some people try to get away with not claiming it on their taxes, best to my knowledge, gov’t doesnt keep track of who has sold what. So it can slip under thier radar.

#97 The Dividend Yield Investor on 01.23.12 at 3:30 am

something i read.what does it mean?

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all

Dear #35 Salonist,

Around the year 1994 the technological engine of the USA, Canada and central Europe has embarked upon a super industrial revolution and global out sourcing. For every 1 job that is out sourced 1.5 to 1.8 jobs are lost to automation. Out sourcing makes headlines, however automation is making history. China’s FoxConn has as of a year ago decided to move head strong for massive automation in order to lower their cost futher.

This phenomenon of automation will drastically drastically change the amount of workers needed in the next fifty years. This is why the world wide birth rate is dropping first in the mature economies, then emerging countries and lastly the developing areas of the world.

Parents simply do not need large families to survive in this world. Since education is the passport to success, parents are electing for one or two children so that they can properly afford their education.

Constant education is the key to staying employed and making a decent living.

I hope this helps.

The Dividend Yield Investor
Atlanta G.A.

#98 rw on 01.23.12 at 3:37 am

I think those BC plates in Calgary are from ex-Albertans.

#99 Chubster on 01.23.12 at 3:40 am

It is exactly why govts should not be backstopping banks, at all. It is not needed. It concentrates power, creating potential and incentive for abuse. Above all it is a violation of private property rights.

#100 eagle eyes on 01.23.12 at 3:44 am

I heard a rumor that one buyer from Mainland China purchased 49 units of a presale condo in Vancouver, and another such buyer purchased 12 entire floors of another presale in downtown Vancouver. I want to share with you a recent letter-to-the-editor that was published in Richmond Review. The writer very eloquently put his thoughts on this matter.

The rise of the affluent ghost town

Editor:

Re: “The real problem with housing affordability,” Letters, Jan. 11.

Victor Godin’s response to your editorial about housing affordability in Richmond is selective and essentially superficial in its analysis of situations in our community. For one thing it fails to account for the huge number of out-of-scale houses, perhaps 50 per cent or more of the newly-constructed ones, that sit empty, sometimes for years.

These houses (they cannot be rightly called homes) are not owned by “newcomers” (a term which implies immigration, settlement, and assimilation), but by citizens in other countries looking to find shelter for their wealth and make a profit. These empty edifices contribute to the devolution of neighbourhoods—lifeless, dark edifices that contribute absolutely nothing to the vitality and life of the neighbourhood.

They bring no children to play, no neighbours to interact with and get to know, no gardens or greenery to add beauty, and their property footprint is unnecessarily excessive and obnoxious. The owners of these perpetually empty pseudo-mansions have no interest in contributing to the workings or welfare of the community. They are, however, responsible for creating an entirely new concept in community/town planning: the affluent ghost town.

The perception that low wages are the reason young families cannot afford to buy houses in Richmond is shallow and insulting. My son and his partner, both with extensive post-secondary educations, bring in healthy professional level wages and they cannot afford to buy a detached house in Richmond. The townhouse they could afford has become too small to contain a two-children family and the complex they live in is filled with young families that are struggling with the probability that they will have to move far afield and abandon their lives in Richmond if they are ever to have a detached house to call home.

On our street, modest split level homes are being replaced by monsters that block out the sun, cause the cutting down of countless mature trees, and raise the taxes of the remaining home owners to obscene levels. Older residents like us, who have lived and invested in our community for many years and do not want to sell out or move, are being literally bullied into making difficult decisions by builders and contractors who are rabidly exploiting ineffective, preferential, and inadequately policed building codes and bylaws. And did I mention the large number of empty houses?

Like most politically loaded terms, “affordable housing” is most definitely relative and ambiguous. The $1.5-million houses that are taking over our street are obviously affordable to a particular demographic, but when that demographic becomes the only one represented, then you end up without the diversity (cultural, economic, and architectural), that makes a community attractive, inclusive, vital, livable, and enriched.

The British have a saying: “I’m allright Jack!” In its most polite interpretation in means “I have mine and to hell with the rest of you!” There is an unpleasant whiff of that sentiment in Mr. Godin’s comments.

Ray Arnold

Richmond

#101 rp1 on 01.23.12 at 3:47 am

Love your clients, but don’t *love* your clients. This offer does not look like tender loving ;)

#102 villain? on 01.23.12 at 3:57 am

“I don’t have a client base…I have a friend base”.

Funny, this is the third Realtor, in just as many months, from which I have heard this statement of.
Must be more than just business, it’s a “bond of friendships”. ;))

#103 Freedom first on 01.23.12 at 4:34 am

Through “stupidity or by design”…..love your choice or wording Garth! I really enjoy your bravery in “pushing the envelope” with some of the ways you make some crystal clear statements on your nasty daily blog!. I am positive you are hitting the nerves of many people. In Some countries I could go as far as saying you would be arrested and jailed, even with your writing being devoid of anger, and never anything written without tact, diplomacy, and great humor……which is fully enjoyed by the majority of your readers…..that is…..the ones who “get it:)”……Keep em coming Garth:)

#104 CHANGES on 01.23.12 at 5:12 am

To “Richmond Sinking” regarding your sold house on 10266 MCLEOD CT.
How loud are the planes that fly over your neighborhood and can you ever taste the jet fuel ? This example does not mean anything. If your house was on the west side of Richmond that would be more interesting. I personally do not see any price reductions at all any where on the west side.

#105 Bilbo Bloggins on 01.23.12 at 5:17 am

”Choose a realtor you like, trust and enjoy their company.”

Catchy line. Too bad time and time again, the entire real estate industry is set up such that conflict of interest is everywhere. Even an honest realtor can’t remain honest.
It’s an industry organized like a pyramid and where information is controlled.
“Agents” with the minimal of training get to preside over the largest of transactions.
They screw more old ladies than a game of Bingo.

#106 the Phantom on 01.23.12 at 7:24 am

Hey Garth and bloggers…

This is the most important financial commitment you are going to make you have to have someone in your corner who you know is working in your best interest.

Just a couple of short comments here tonight. Is it me or does her blurb contain a number of grammatical errors (like this one, a run on sentence):

“This is the most important financial commitment you are going to make you have to have someone in your corner who you know is working in your best interest.”

Notwithstanding that, I absolutely love her altruism. One gets the impression that she is here to serve only the good of humanity and that none of this is governed by her desire to earn an income. For my part, I haven’t seen such selflessness since the days of Mother Theresa.

It might bring a tear to my eye were I not so jaundiced by my experiences with RE agents and the overwhelming pressure I once felt that was exerted to conclude a sale even though the offer I was presented with was an outrageously low one at the time and this RE agent called me to solicit whether or not I would be open to allowing a prospective buyer look at the place. My counter offer conceded very little.

It wasn’t even listed at the time but I had mused about selling when we spoke a few times. Accused of “frustrating the deal”, I merely replied, “Well, let the deal be frustrated.” I sensed that this agent was unimpressed with my reluctance to make substantive concessions but I certainly wasn’t about to take a bath on my property when I wasn’t even motivated to sell at that time, simply so he could earn a commission representing both the buyer and the seller.

Equally suspicious was his frequent, nay, his almost sickening use of the phrase, “with respect to”. Any lawyer will commonly use this phrase in concert with a host of other “legalisms”, including, but not limited to other ones like “inculpatory”, exculpatory, etc”, they won’t wear them out.

Anyway folks the lesson learned this evening is to wary of RE agents who overuse one or two legal phrases or terms and who also lay claim to having your best interests exclusively at the forefront of every deal they consider for you. It may be true but my instincts and experience suggest otherwise.

the Phantom

#107 young & foolish on 01.23.12 at 7:48 am

Hmmm …. it seems the government is deliberately propping up the RE industry (guarantees on mortgage loans) while bad mouthing excessive debt (covering their behinds).

Since jobs are quickly disappearing in other sectors (think manufacturing, and soon public service), RE is becoming a kind of “propping up the middle class” initiative. Are they just buying time until “new growth” takes hold, or as Garth seems to suggest, greasing the pole towards serfdom?

Either way, it’s no time to be drinking the kool-aid. It’s always better to own the debt than to owe it.

#108 GregW, Oakville on 01.23.12 at 8:13 am

Hi #52Marcel, FYI, invest $20 and read G’s book! You’ll be glade you did.

#109 Aussie Roy on 01.23.12 at 8:15 am

Aussie Update

Australia’s national unaffordability ratio sank from 6.1 times in 2010 to the still ”severely unaffordable” ratio of 5.6 times, helped by sinking home prices, according to analysis by a US research group.

”Australia exhibited the worst housing affordability of any national market outside Hong Kong,” the eighth annual Demographia International Housing Affordability survey of 325 markets concluded. The unaffordability ratio is derived from dividing the median house price by the median household income.

Advertisement: Story continues below Demographia considers a median multiple rating of three times or under to be ”affordable”.

http://www.smh.com.au/business/property/prices-drop-but-houses-still-up-on-global-list-20120122-1qc99.html#ixzz1kHaBokKU

Demographia international report – inc Canada

http://www.demographia.com/dhi.pdf

BARGAIN hunters are snapping up holiday homes in coveted beach locations up and down the Queensland coast as desperate owners slash their prices by up to 70 per cent.

Investors – LOL

http://www.couriermail.com.au/life/homesproperty/investors-snap-up-coastal-property-bargains-in-queensland/story-e6frequ6-1226250615239

Japanese Banks on their way to Australia – LOL

ACA Interview

http://www.youtube.com/watch?v=eIWHjDLG2zs

Japanese banks could snatch $100 billion of the Australian home loan market

http://www.news.com.au/money/banking/japanese-banks-could-snatch-100-billion-of-the-australian-home-loan-market/story-e6frfmcr-1226250893565#ixzz1kHbC5FvI

China’s economy will slow in 2012, prompting policy makers to reduce interest rates and loosen lending restrictions, said Nouriel Roubini, the economist who predicted the 2008 financial crisis.

http://www.bloomberg.com/news/2012-01-20/roubini-sees-significant-slowdown-in-china.html

#110 GregW, Oakville on 01.23.12 at 8:19 am

Hi #54Nostradamus, re: you’re Al+_ link. Can you find another link for it, to add to you’re next collection of links? It comes up for only a second and then is not seeable?

#111 Mingeford on 01.23.12 at 8:34 am

#75 Boomer

“………..Come on people didn’t you at least go to grade school before you obtained your agents licience? ….”

…………………………………………………………………………

Must have gone to the same grade school as you.

#112 Bigrider on 01.23.12 at 8:36 am

2.5% average MER’s on a mutual fund portfolio as opposed to a 1.15% to 1.8% average cost of an ETF and preferred managed portfolio of an independent advisor.

Really, a 1% per year or so differential in additional cost is going to be the downfall of Canadian investors and savers?

I would argue that not saving enough, not being properly diversified and most importantly ,investor behaviour is going to be the downfall of Canadian savers, not the extra 1% or so in fees.

I would argue that the restrictions that come from mutual funds as opposed to ETF’s may be a blessing in disguise. Save people from themselves..clue..buying and selling at the exact wrong times.

Laughable.

The difference between 1.15% and 2.25% is 1.1%. If you don’t think that makes a huge difference in a low-yield world, when you also get a financial advisor to watch over you and actively manage your assets while you concentrate on your job and your family, then there truly is something to laugh at. — Garth

#113 Bigrider on 01.23.12 at 8:42 am

Anyway, Ninth line and Don cousens way, NE of Markham, outskirts. Cars were parked there Friday night, all through the night waiting for the sales office of a small builder I know well to open and release the 80 townhomes and small detached new homes to the public.

Luckily, no fender benders this time as cops did a good job managing traffic. Builder raised prices that morning as sales went along. Sold out by the end of the day, basically as quick as the photocopier could copy the completed deals. The dim sum was free(ok just joking about that one).

Correction in RE ? When ? 2020 ?

#114 Victor on 01.23.12 at 8:43 am

Vancouver among world’s ‘least affordable’ housing markets

Published Monday, Jan. 23, 2012 7:15AM EST

Vancouver is the world’s second-least affordable major city to buy a house, according to an annual survey of global housing markets.

The Eighth Annual Demographia International Housing Affordability Survey covers 325 metropolitan markets around the world.

It measures the markets using something called the “median multiple,” which is the median house price divided by gross annual median household income.

The study comes as Canadian banks worry about the state of the market and economists suggest prices could drop by as much as 10 per cent in cities such as Vancouver and Toronto.

http://www.theglobeandmail.com/report-on-business/economy/housing/vancouver-among-worlds-least-affordable-housing-markets/article2311279/

#115 Victor on 01.23.12 at 8:48 am

Connect the housing bubble dots: There could be trouble on CMHC’s horizon

Published Monday, Jan. 23, 2012 6:00AM EST

…The biggest risk is likely with mortgage holders who only put 5 per cent to 10 per cent of equity down when buying a property. The reason I say this is that if house prices drop by over 10 per cent, everyone in this group will have negative equity in their homes. According to CMHC, 9 per cent of their loan book (or $49-billion) is connected to mortgages with under 10-per-cent equity based on current home prices. Remember all of CMHCs equity value is $11.5-billion (Canadian). Another 18 per cent of their loans are connected to mortgages with between 10-per-cent and 20-per-cent equity based on current home prices. This is another $108-billion of loans.

What happens if Canadian houses hit their ‘proper’ value, according to the Economist magazine, and decline by 25 per cent of their value? Every one of the $157-billion of mortgages noted above will be guaranteed by the Canadian taxpayer, and every one of those mortgages will be on homes with negative equity value.

When we connect the dots and look at the real risk, the time has come for the federal government to do the prudent thing and raise the minimum equity payment from 5 per cent to 10 per cent, and at least minimize the hit from the riskiest segment of mortgages insured by CMHC.

We can’t say we didn’t know, when the dots were right in front of us.

Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He has an MBA from the Schulich School of Business and is a certified financial planner. He was vice-president of business strategy at a major Canadian brokerage firm.

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/connect-the-housing-bubble-dots-there-could-be-trouble-on-cmhcs-horizon/article2310132/singlepage/#articlecontent

#116 househornyhousewife on 01.23.12 at 9:09 am

Garth,

Your statement about most people not having a clue about how to cope, save, invest or manage IS the one and only reason, I think, that our world economies are in this state.

I have been saying since the dawn of time that these are things that should be taught in school, like any other course such as math, english, geography and the like.

When I was in school we had a course called “Home Economics” and part of this course was how to run a household. Unfortunately, it did not include the financial aspects such as budgeting or balancing your cheque book, nor did it include how to change a washer on your faucet. The girls learned how to sew and cook and the boys took a similiar course called “Shop” where they learned about tools and building things. At the time, I commented on the sexism and the missing financial aspects of the course (at home we were well versed on budgeting and saving). All I received were nasty looks from my teacher. Home Economics was only about flitting around the house making curtains and cooking potroasts as far as she was concerned.

Managing your household through responsible budgeting and proper debt management are obviously considered private things in our society, like using the toilet and having sexual intercourse. And yet, personal finances, bowel regularity and a healthy sex life are three things that elude a large portion of our population.

Perhaps if we taught our young not to be ashamed of the human condition and insisted on teaching them the value of healthier life habits (eating, drinking, sleeping, budgeting, saving etc..), we would be in a much better position overall.

Money is not something dirty never to be mentioned in good company. It is an essential part of our lives and it should be discussed within families and definitely discussed within learning institutions. Once children become adults, spending habits (like eating habits) are difficult to change.

You really hit the nail on the head today with this statement, Garth.

HHHW

#117 disciple on 01.23.12 at 9:45 am

From last blog… This is a shout out to #246 jess… Exceptional work, sir! This gives rise to a great idea for a social science project for one of my kids. Thanks again.

#118 kilby on 01.23.12 at 9:49 am

#91 Expat.
Midel school? Do you mean Montessori ?

#119 Cindi Meyers on 01.23.12 at 9:52 am

All this talk about Real Estate crumbling, government folly, and a need to not follow the herd when it comes to investing has changed my life. All the money I HAD been saving for a down payment on a house will now be put toward something much more lucrative and full of potential.

A guaranteed investment that pays dividends in spades.

A boob job.

Screw REITs and Preferreds. My new breasts will get me a better paying job, a richer boyfriend, and a sense of self that is nothing less than priceless.

Thanks for setting me on the right track, Garth!

Love,

Cindi “(Soon to be) Double D” Meyers

#120 Bigrider on 01.23.12 at 10:07 am

#112 Garth to Bigrider-” The difference between…truly something to laugh at”

Mutual fund portfolio managers are no better nor worse than financial advisors at looking after investor portfolios. I would say that having several mutual fund portfolio managers might, just might, trump one financial advisor, especially if he turns out to be a bad one.

As for the additional 1.15% fee per year, your assumption that a mutual fund cannot add more value over and above that additional cost is not fact. The likes of Sprott, front street and many others long term performance over the indexes are not mere accidents, please stop reading Rob Carrick and Ellen Roseman.

I’m all for ETF’s. I own them as well as managed product and very ‘expensive’ hedge funds. Let’s just not make the fee issue bigger than it actually is. Saving more and investor behaviour much, much more important.

#121 Herb on 01.23.12 at 10:11 am

#90 Al Gore’s Lies,

is eating the propaganda spoon-fed by one side your comfort food or your complete diet?

#122 Beach Girl on 01.23.12 at 10:15 am

How low can interest rates go?

Am I in a bad movie? Don’t need to borrow. I am financially set for my life (no one elses’).

Jesus, sweet Jesus. When I walk into the bank, everyone is saluting to me. I am feeling very pressured. I am quite sure no one likes me this much.

It is like when the 2 idiots come to visit. Low interest rates, Mom. You have the best credit rating in the world.

This does not make me warm and fuzzy. I think they want to club me over the head like a baby seal.

Oh, totally in agreement with the person who mentioned new home sales in NE Markham. Asians are weird people. Not in a bad way, just a complete different mindset. Had to move from there when my 2 idiots were in junior school. They just couldn’t compete with children who work all day at school and come home to play the violin for fun.

Herb, on a much lighter note. my intended is here for dinner twice a week and he takes me out twice a week. Nothing going on past the equator. How you doing?

#123 Beach Girl on 01.23.12 at 10:19 am

Going to buy one of those devices for seniors, HELP I have fallen, and the bastard won’t get of my back. In reference to my lovely sons.

#124 cxcroney on 01.23.12 at 10:26 am

#70 Chris Scott. I stand corrected and learnt something new! And more Scrabble ammo too!

#125 disciple on 01.23.12 at 10:28 am

Onthesidelines…Did you enjoy a hot or cold beverage this morning? Did you brush your teeth? Did you use any water or put on some clothes? How about turn on the TV or radio to catch the news or weather? Did you flick a light switch, or rev up an engine? Well then, guess what?

You are an investor. You unwittingly placed your “trust” in the system. Congratulations! You are now morally obligated to help that system run more smoothly than yesterday did. Any alternative would be hypocritical.

You earn money. You give money. You need money. You worship money. You bleed money, because YOU ARE MONEY. Use it wisely. Use it ethically. Don’t harbour intentions of hoarding it indefinitely, let it flow. Let go of it with style and goodwill, and it will come circle to find you, because without YOU, it has no meaning, and money always flows from a place of higher concentration to one of lower concentration. And it does this through portals of existential meaning. Like electricity, if there is not a point of lower potential where it can die into another dimension and be reborn into the previous dimension in another form, it will not flow. Just like water in the great Water Cycle on this planet. This is the secret that no one else can or will tell you. And why millions remain impotent financially.

It is the FLOW of money that we need to nurture at all costs because the bankster families will continue to simply divert that flow and use it for their nefarious purposes involving all types of evil you can imagine. So, take a risk, people! The Gods are watching and will reward you.

#126 eaglebay - Parksville on 01.23.12 at 10:56 am

#59 Keith in Calgary on 01.22.12 at 10:36 pm
““Investing” in the con game known as the stock market is just as stupid as buying real estate. It has been on government funded life support for the last 4 years……just like the RE market.”
———-
Obviously you don’t have any investments.
If you did you would be invested in the stock market directly or indirectly.
How does it feel to be broke and owe a bunch of money.

#127 Stevenson on 01.23.12 at 10:56 am

Vancouver among world’s ‘least affordable’ housing markets….. So what?

http://www.theglobeandmail.com/report-on-business/economy/housing/vancouver-among-worlds-least-affordable-housing-markets/article2311279/

If your purely correlating what the income to RE prices is of course its going to be whacked. There isn’t much of a industry in Vancouver yet there is practically 2 Starbucks at every intersection. People who live in Vancouver don’t need to work or their income is not from Canada. If they relate concept of Hong Kong to Vancouver its very easy to understand why Vancouver RE is so expensive. No one cares if broke fella can’t afford housing as long as there is demand at those prices. What they need to do is start building cheap shelters and portables for those willing to sacrifice living conditions in return for Vancouver. Those people can do the min. wage jobs and serve the ones who can afford. Or pounced at the opportunity when it was affordable at low rates.

#128 disciple on 01.23.12 at 10:57 am

Most of us know absolutely nothing about who really makes the decisions that affect your life. You know virtually nothing about your real rulers. But rest assured, THEY know almost every detail about you.

They brand you with a number the moment you are born, and your monetized vessel becomes property of the State and your Certified Record of birth begins trading. You will never see the original document only the copy, because like a head of cattle, you will not understand it anyway, so they think.

They have thousands if not millions of years of accumulated data on your every move calculated to the nth degree. They have entire schools dedicated to the pursuit of forecasting trends based on events they have introduced as “news”. Don’t for a second believe that they have left anything to chance. The Gov’t Stats you have access to are merely the discarded and hopelessly out of date numbers they no longer need.

So, then, what do we do? First thing is… be free! Do something today that you don’t normally do. Make it a habit. Produce hiccups, generate disruptions. Throw their forecasts for a loop. Escape your cultural programming. This is the primary reason why people are inspired by my very presence. I am not afraid to stand out, raise my voice in public, say something that no one is expecting.

That guy in the grocery checkout line criticizing what the state government issued news media is talking about today (Bachelor Canada and the psychotic couple who leave babies in stairwells) instead of how housing is a big bubble, that’s probably disciple.

#129 refinow on 01.23.12 at 10:59 am

I think the “love” is of the commission cheques she gets from her “friend’s list”. She loves it “ALOT”.

#130 Ret on 01.23.12 at 11:06 am

Some guy at Hayman, Kyle Bass, just called. He wanted to know where he could get some cheap insurance policies on Canada Mortgage Bonds (CMB) issued by CMHC.

This Kyle Bass guy is worse than a telemarketer at supper time. He wanted policies on only $125-150B so I told him to call Golden Slacks.

#131 Victor on 01.23.12 at 11:55 am

Up to 68,000 jobs to vanish under federal public service spending cuts: report

The Canadian Press – January 23, 2012

OTTAWA – Federal government spending cuts could chop between 60,000 and 68,000 jobs from the public service in the next few years, a report from a progressive think-tank estimates.

The conclusion stems from a review of three separate rounds of restraint since 2007, and it suggests once completed in 2015, the federal public service could be trimmed to the lowest staffing levels since 2000.

Already, about 6,300 salaried positions are in the process of being eliminated as a result of department reviews launched between 2007 and 2010, designed to save $1.8 billion.

But that is the “tip of the iceberg,” says the report from the Canadian Centre for Policy Alternatives. The major impact on jobs will derive from the $2-billion departmental spending freeze announced in 2010, which is only now being put into effect, and the $4-billion Strategic and Operating Review that will be part of the coming budget.

In total, the three waves of cost cutting are intended to yield the government $7.8 billion in annual savings upon completion in 2014-15.

Government ministers have yet to reveal how they will apportion the cuts, but have conceded jobs will be lost through attrition and likely also layoffs.

Report author David Macdonald, a senior economist with the Ottawa-based think-tank, said he does not expect all savings will come from jobs and salaries inside the public service, although the majority will. Consulting firms, maintenance companies, non-profits who depend on Ottawa funding, may be impacted as well.

“But no matter how the cuts take shape, the job losses will be significant,” said Macdonald.

http://ca.news.yahoo.com/68-000-jobs-vanish-under-federal-public-spending-050801398.html

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

Harder to pay a mortgage when you lose your job…

#132 Van guy on 01.23.12 at 12:01 pm

#104 CHANGES on 01.23.12 at 5:12 am

Bridgeport area has had 3 sales in 6 months. And for west Richmond, I’m not at my computer now, but I’ve seen huge price reductions on sold homes. Dude, listing price means nothing, it’s sale price. And if you read my post above, it’s very quiet for sales but listings exploding. Sorry Richmond owners, like Bertuzzi once said “it is what it is”.

#133 888realtor on 01.23.12 at 12:03 pm

The crisis was growing, deflation was coming, now, the middle class is evaporating but the home prices are still going up, regardless…, and there is no end of this in the visible future.
The government will be kicking monetary system until it’s dead and monetary system can only exists when people are able to borrow. So, there will be more tricks coming from the government to lure people into more debt. At this stage, the big brothers will favor borrowers. They are aware that, theoretically, for the sake of healthy economy, it would be better to favor savers but practically they simply can’t afford it.

#134 Smoking Man on 01.23.12 at 12:06 pm

#116 househornyhousewife on 01.23.12 at 9:09 am
Said:
I have been saying since the dawn of time that these are things that should be taught in school.
………………………………………………………………..
I know I am starting to sound like a broken record but School is not about educating, it’s about conditioning and behaviour science. The making of dumb consumers and obedient tax farm slaves.

At first we were called slaves, then employees, then associates, then resources, now west jet calls them Partners. Ba hahahahah. Dumb ass slaves is all you are.

I was just a Starbucks, incredible how the tax farm slaves take extreme joy out of having the Starbucks drink lingo down pat. Yet I bet 90% are up to their eyes in debt, who when reading a paper on the train skip the news and business and go right to the celebrity gossip section.

These people are ripe for exploitation, how many slaves to you want to own, should be the question.

It’s never been easier.

#135 Smoking Man on 01.23.12 at 12:13 pm

#68 Victor on 01.22.12 at 11:09 pm

I have said it many times that the market will get talked down when conditions are primed for a spike, like low rates forever.

#136 torontorocks on 01.23.12 at 12:19 pm

all the youngsters with their 5% down have only realized property appreciation over the past 7 years, so in their world, prices never go down. most never lived through the late 90’s and early 2000’s. that said, those days there was a good plug of equity so when rates were cresting 12%, you had an erosion. these days we don’t need 12% rates to crush the 5% equity in the houses. that said, I’m very confused now.

Carney says watch out. Flaherty says chill out. Banks say knock yerselves out with 5% 10 year mortgages (or 2.99% 5 years), GUARANTEED to keep housing prices frothy and bidding wars ongoing because money is cheap. And who cares about the zero down mortgages, cash back machinations. Its ALL CMHC backed, meaning taxpayers, and Canadians are such sheep that they 1) always pay their mortgage and 2) if not, your taxpayers will support the CMHC via tax dollars.

the only fools are those that didn’t get into the market at 5% down 5 years ago. they missed the appreciation, they were backstopped by their fellow taxpayers and they had a good go of it instead of sitting here waiting for a 10% drop to join the market at the levels it was at 3 years ago.

wasted time. this market is going to flatten and nothing else is going to happen. I hope I’m wrong but I feel its never going to change. Even with all the forthcoming condos, people are still listing their existing condos at crazy prices – old ones approach the prices of new ones, which was never supposed to be. and any changes to the CMHC are punitive on us who held out, or who are diligent. we should have got in like the rest and spent freely and lived a bit, who cares, my brother the taxpayer gots my back!

#137 Smoking Man on 01.23.12 at 12:22 pm

#97 The Dividend Yield Investor on 01.23.12 at 3:30 am SAID:
Parents simply do not need large families to survive in this world. Since education is the passport to success, parents are electing for one or two children so that they can properly afford their education.
Constant education is the key to staying employed and making a decent living.
………………………………………………………………………………………
The above is so completely wrong he values success as staying employed and making a decent living, Where do I puke…..

Success is having obediently educated work for you for poverty wages.

#138 new-era on 01.23.12 at 12:26 pm

China’s housing market is set for a hard landing

http://finance.fortune.cnn.com/2012/01/23/china-real-estate-crash/?iid=HP_LN

For all that thinks HAM money will also flow into Canada. Once they face their own Real estate Decline, a shift of real estate momentum will occur, much like the USA. Also all the real estate tycoons who leverage to the max, will be poor asses and will not be able to gamble on Canadian real estate

#139 aj on 01.23.12 at 12:32 pm

#86- TheRealTruth

I renewed my variable this past fall with RBC. Prime minus .85, my rate right now is 2.15. it was under an unadvertised preferred customer rate. I shopped it around and no one could even match it. money is pretty much free right now, so who cares how much you owe right?

#140 Realtors in a panic on 01.23.12 at 12:35 pm

Sales are slow in January and this with warm weather. Bankers , Realtors , BOC all know Canada is in the mother of all housing bubble that has never been seen before. They don’t know how to stop the housing crash which is grossly overvalued. Canada’s housing bubble is more of a ponzi and everyone in the industry knows it. Why else would realtors and other vested interests post night and day on this blog if the RE market was doing well? The obvious answer is RE is falling in Canada and they need suckers to help stop the RE ponzi from crashing back down to economic reality.

#141 Marina on 01.23.12 at 12:39 pm

Garth, you posted three reasons of the middle class destruction, but non of them is really true. The only reason of the middle class getting poor is poor canadian economy. And it is getting worse, much worse and very tough time is coming for this country. Canada is almost a bankropt as well as USA.
It is better if you tell the truth instead of promoting your “investement package”.

#142 888realtor on 01.23.12 at 12:40 pm

In Canada, Consumer Price Index (CPI); main inflation gauge that rate the monthly consumer’s price change for services and goods, is due to reduce from 0.1% on the last month down to-0.1%now. And similar decrease we see in the Core CPI (not included food and energy) from 0.1% on December down to -0.2% this time.

http://www.forexcrunch.com/forex-daily-outlook-january-20-2012/

#143 Shane on 01.23.12 at 12:41 pm

Garth, when will you post a blog on what to look for a
when trying to find a good financial advisor?

Shane

#144 Smoking Man on 01.23.12 at 12:41 pm

The Dividend Yield Investor

look at this guys post

#19 mattymatt123 on 01.22.12 at 8:06 pm
I love that the middle class is disappearing! Soon I will be able to hire labor in my machine shop for a $1 an hour and bring back some of the work that has gone to china! hahahahahahahahahahahah!

That’s success.

Litmus test to see if you’re a Master or a Slave

Master = He/She decides when and what to pay CRA
Slave= CRA takes their cut before you cash your check.

#145 Ogopogo on 01.23.12 at 12:43 pm

#7 Paul
DA is going to be pissed at being called a “salesperson” by a comrade.

Kelowna is # 3 for home ownership.

http://www.castanet.net/edition/news-story-69967-1026-.htm#69967

Good window into Kelowna smugness, except that the article does it for all the wrong reasons. The writer dares to compare K-town with a cosmopolitan powerhouse like Montreal: “Take Montreal as an example, only 34% of residents own their own home. So be happy when you wake up in the morning that you live in such a fruitful community that welcomes growth, culture and opportunity”. What a joke! It makes me almost ashamed to live in this hick, insecure backwater. Still, this caught my rentin’ eye:

“The study also reflected that 12% of households cannot afford to own their own home and 16% can, but would rather rent.”

It’s great to know I can now put a percentage on my smug renter’s smile. After dropping “Okanagan Renter” from my alias I should replace it with “The 16%”, but some desperate homeowner would no doubt try to occupy my sweet rented pad.

#146 Waterloo Resident on 01.23.12 at 1:08 pm

Garth, please explain to me what is so wrong with getting WAY OVER YOUR HEAD in debt if you are a young person with next to no savings?

Here is how I see it for a mid-to-late 20’s couple:

– They borrow that $400,000 with ‘NO MONEY DOWN’ and they buy a condo.

– if the condo price goes up at the end of 5 years then they are happy.

– If the condo price comes down and they need to move to some other place for work, they simply declare personal bankruptcy and all their personal debts are wiped away, CLEAN !

– And if that couple somehow buy 2 more investment properties doing the same thing, then they simply walk away from everything if their properties simply become worth less than what they owe on them.

Am I wrong or correct about this?

I ask this because I have a lady friend who earns $60,000 per year as a government auditor, she has no savings but a really great secure job. I have lots of savings so I cannot buy a house / investment properties as if i need to declare bankruptcy then I lose everything I have, so my plan is to give my lady friend the $10,000 she needs to buy a $550,000 townhouse in Toronto and then if it goes up in value we split the profits, if it goes down in value then she declares bankruptcy and i simply lose my $10,000 (not a whole lot lost).
Each year she buys another $600,000 townhouse and rents it out to cover the mortgage, with me giving her the cash to buy it, but its up to her to provide enough cash per month or rental income to cover the carrying costs. After 10 years we have 10 townhouses, and we sell them for double the price we paid for them.

Now, is this a great plan or what??
—-

And about Hudson Florida places being cheap: If you are a Canadian then just remember that your property taxes in Florida with be from 10-times to 15-times what others are paying because you are considered a NON-RESIDENT of Florida and therefore you are put into a much-higher property tax bracket ! That is why so many Canadians are selling their places in Florida because you will pay in property taxes in 7 to 9 years what your house is worth.

#147 disciple on 01.23.12 at 1:10 pm

I was trying to find a pair of 0.5ct diamond earrings for my wife. I stumbled upon Joyalukkas “The World’s Favourite Jeweller” (they spell favourite the Canadian way) and because their headquarters are in Dubai, I looked at the map, located the Strait of Hormuz, and found an island called Siri. I’m sure it’s just a coincidence…

#148 jess on 01.23.12 at 1:17 pm

private equity – extraction
http://www.newyorker.com/talk/financial/2012/01/30/120130ta_talk_surowiecki
=

‘Retirement Heist’ Part 3: Ellen Schultz replies to GE
http://www.forbes.com/sites/stevedenning/2011/10/22/retirement-heist-part-3-ellen-schultz-replies-to-ge/

#149 Bailing in BC on 01.23.12 at 1:18 pm

To those of you who are aghast at the usage of the word “learnt”, it is you who are showing your ignorance. It is absolutely a word, unless of course you speak ‘Merican ;-)

#150 Abitibi Doug on 01.23.12 at 1:24 pm

Garth;

You are right about the 3 reasons the middle class is shrinking, but there are external reasons (beyond what people have unwisely done to themselves) at work also. Writer Doug Coupland summed it up when he said: have you seen many travel agents lately? That’s what’s happened to the middle class. In short, many middle class, middle income jobs have disappeared due to computers and automation in general. It’s been especially prevalent in places with a lot of manufacturing, like Ontario and Quebec. What’s left are the higher paid professional jobs where a higher education and/or training are required (that can’t be filled by just anyone) and lower paying McJobs which are essentially unskilled labour. There’s more to this problem than meets the eye, it’s going to persist for many years to come, and will require more than just the quick fixes politicians talk about.

#151 Canadian Watchdog on 01.23.12 at 1:24 pm

#19 mattymatt123 #143 Smoking Man

This is already in the works as Canada’s Action Plan set the ground work to flood the country with cheap labour. This will benefit the corporate and manufacturing sector, but mostly the government as it cuts jobs and re-hires its workforce with immigrants that will work for less. Brilliant.

http://i44.tinypic.com/6f2uyd.png

#152 harden on 01.23.12 at 1:29 pm

Who is “The BC Real Estate Convention” ??

“Chinese will most definitely push the demands in Vancouver’s real estate market up to new heights in 2012.”

http://www.vancouversun.com/entertainment/Savvy+buyers+from+Asia+find+attractive/6036598/story.html

#153 Canadian Watchdog on 01.23.12 at 1:35 pm

#129 Ret

Care to expand on that?

#154 Mr. Lee on 01.23.12 at 1:49 pm

is the orange guy referring to ING?

#155 Linda on 01.23.12 at 2:03 pm

Some interesting input with regards to the debate over the use of the word “learnt”:

http://www.urch.com/forums/english/9214-learned-vs-learnt.html

Also, just wanted to add that over the weekend, my husband and I had lunch with some acquaintances. Out of the blue, one of the women (early 30s, single and works for the feds here in Ottawa) announced that she was sick of renting and looking to buy a house very soon. Right now, she rents and has 2 small dogs. Her apartment backs onto an off-leash park and is conveniently located. Everything she needs is easily within walking distance, despite the fact that she lives in suburbia (Kanata).

I couldn’t help but say that perhaps she should hold off on buying right now, considering that house prices have never been higher. She looked at me like I was speaking in a foreign tongue. I then tried the tactic of saying that it might be a worthwhile move if she had a healthy downpayment of at least 20%. Again, she looked at me incredulously. She did a quick tally in her head and laughed when she realized that would mean $40K. (She is interested in one of the more inexpensive condo-stratas that abound in these parts.) She shook her head and said that was crazy.

This is a woman who has a well-paid goverment job, owns a car, eats out regularly and goes on vacation every 6 months. In fact, just before announcing that she was thinking of buying, she was telling us about the cruise she’d been on over Christmas. She also rents a cottage on a lake every summer and thinks nothing of spending money on braces for one of her dogs and getting the other one’s DNA tested because it was a mutt from a shelter.

We tried to enlighten her about all the other added costs involved that no one really talks about: insurance, utilities, upkeep, furniture, lawncare, etc. Again, she just shrugged, like it was inconsequential.

However, the best part was when I finally just said that if she was hell bent on buying right now, at least low ball the seller and try and get a good deal. What did she do? What you’d expect someone totally brainwashed by all the real estate shows on tv right now to do. She gasped and said she’d be afraid of offending the sellers and possibly losing the house.

Offend the sellers? This mindset enrages me. Having sold a house a couple of years ago out of necessity (career relocation), I can tell you that we got lowball offers. We simply countered and began the negotiating process. Why would a seller be offended? If the sellers are eager enough for a sale, a low ball offer just might be accepted, so what is the harm? Any real estate agent that uses that line should be immediately dismissed and shunned.

The only thing I can say to our acquaintance’s credit is that she didn’t mention wishing for granite countertops or stainless steel appliances. Then again, we steered clear of that topic, so she may well be. Who knows. Well, good luck to her. I am sure she’ll go ahead and buy and suddenly realize that all the disposable income she obviously enjoys right now will get sucked into the mortgage and maintenance vortex that home ownership generates. I guess we’ll be seeing less of her in our social circle, but that’s not necessarily a bad thing.

#156 MoreThanJustHouses on 01.23.12 at 2:03 pm

Re: #119 Cindi Meyers:
Can I take you out for a drink after ur operation?

Re: #142 Shane
Read the last chapter of Garth’s book

Garth – great job.

#157 FullofFear on 01.23.12 at 2:05 pm

Who is the orange guy and what are you doing in his shorts?!

#158 Genghis on 01.23.12 at 2:08 pm

China’s housing market is set for a hard landing

http://finance.fortune.cnn.com/2012/01/23/china-real-estate-crash/

The buyers are the same people who have been driving up Vancouver prices in recent years.

#159 45north on 01.23.12 at 2:11 pm

Victor: the time has come for the federal government to do the prudent thing and raise the minimum equity payment from 5 per cent to 10 per cent

you got my vote

#160 crashing yuppy on 01.23.12 at 2:16 pm

If you buy in 2012, you are making the financial mistake of your life. Mortgage pimps are pulling out all the stops as they know this is going to be a trainwreck.

MSM know has several articles a week on bubble.

This spring will be the time the party starts. it will be ugly

#161 CTO on 01.23.12 at 2:22 pm

#56 45north on 01.22.12 at 10:32 pm

“So where are the political parties? MIA.”

“The political parties have to be engaged on this blog. It’s long standing, has a measure of fairness and is relevant to the discussion.”

I’v been asking the same question for some time now myself. I can only conclude that this is a political suicide issue that they are staying well clear of, until the Canadian voter gets it, which is nearly always the “too-late point”. At that momment they will step in with full force and blast the existing government on their lack of resposibility.

#162 SRV on 01.23.12 at 2:29 pm

Thank you for this post Garth… the pain that will be imposed on those least able to cope with the impending financial stress is one of the most sinister (and least publicized) elements of the ill conceived PC home ownership strategy.

… and not a word about end of the world gold doomers… well done… lol!

#163 JB on 01.23.12 at 2:55 pm

My uncle lives in cabbagetown… he bought his place during a bidding war, gutted it to bare bricks and rebuilt the home from the ground up, figures he has about 1.2M into the place, paid it off in under four years… of course they combine to bring in 500k a year…

#164 Hicksville Alberta on 01.23.12 at 3:04 pm

In the process of buying some farmland with no buildings as is usually the case.

Bank wants one-third cash down and 5% fixed mortgage.

Bank says that if i build a house on the farmland then they only need 5% down and interest is 3% as they can get CMHC insurance on the loan so it is no risk for them and they will finance the whole deal that way.

This is the New Canadian Way thanks to H, F & C. which is simply stated that they will finance consumption but if one wants to invest or develop a business to create real GDP then one has to go their own way.

In the meantime Bank is paying 1% on my special savings account as it does with other depositors so at the “cheap” 3% loan they get a 200% mark up on interest spread and at the 5% loan they get a 400% mark up on interest spread.

I think i would definitely take a bullet before ever ever considering or being forced to be in business in this environment.

Eff ’em.

The farmland will be purchased but no house will be built on it.

#165 Bill Gable on 01.23.12 at 3:12 pm

#146
You cannot wipe clean mortgage debt in Canada, except in Alberta, I believe.
Look up recourse and non-recourse loans.

People assume this is just like the States.

Nope.

#166 eaglebay on 01.23.12 at 3:17 pm

Sometimes it seems we’re so focused on the negatives that we haven’t noticed

In 2008 it was a sure thing the bursting of the real estate bubble, the collapse of the sub-prime mortgage market, the freeze-up of the banking system, the ravages of the ‘Great Recession’, collapse of the auto industry, bailout of mortgage- insurance giant AIG, bankruptcy of General Motors and Chrysler, etc., would wind up with the economy in the next Great Depression.

It was then a sure thing that the massive stimulus and bailout efforts would not work, and the costs would bankrupt the country and drop it into third-world economy status.

There was no chance the banks or the U.S. auto industry would ever pay back the bailout loans. The assets the Federal Reserve was also putting on its books to help the banks clean up its balance sheets, by exchanging Treasury Bonds for some of the toxic assets on the books of banks, was just further money down the drain.

The way the banks seemed to be using the bailout loans to expand, buying out competitors, expanding into Asia, rather than using it to make loans, was going to make the ‘too big to fail’ problem even worse for the future.

Even since the recovery began, it has been derided as just an illusion, as could be seen by the housing industry still being mired in depression-like conditions, and no progress being made in the terribly high unemployment situation.

Sometimes it seems we’re so focused on the negatives that we haven’t noticed the unexpected positive surprises in the recovery

For instance, how many realize that most of the government loans made to the banks and auto industry have already been paid back, with interest.

Or that the U.S. auto industry has bounced back dramatically. Global auto sales recovered sharply in 2011 and the U.S. led the way, with sales up 9.2%, topping even the 6% auto sales growth in China.

Thursday it was reported that General Motors has bounced back from its bankruptcy three years ago to a degree that it has regained its crown as the top-selling car-maker in the world.

Meanwhile, the Federal Reserve is making surprising profits on many of the assets it put on its books in the bailout process, $79.3 billion in 2010, which it turned over to the Treasury. And it recently estimated it made another $76.9 billion on those assets, and the Treasury bonds it bought in its two rounds of quantitative easing, and will be turning that profit over to the Treasury Department for 2011.

Regarding the employment picture, we sometimes forget it was a global ‘Great Recession’ and the rest of the world has also been struggling to recover since the recession ended in 2009.

In that struggle the economic recovery in the U.S., as anemic as it has been, has apparently been leading the way.

The Financial Times reported on Wednesday that manufacturing employment has grown faster in the U.S. than in any other leading developed economy since the start of the recovery, and has added more net manufacturing jobs since the start of 2010 than the rest of the Group of Seven developed countries put together. Only two other major economies, Germany and Canada, have increased factory employment at all.

That’s not to say that the employment situation in the U.S. is great, still two million jobs below pre-recession levels. But it is apparently heading in the right direction and recovering better than most of the rest of the world.

The fears that the financial industry was going to wind up even more in the realm of being too big to fail in the future, are also potentially turning out to be unfounded.

Banks closed operations and laid off 230,000 employees in 2011, and estimate another 220,000 lay-offs in 2012. Almost every week brings news of a major bank selling off or closing a division. Just a few days ago it was that CitiGroup is selling its consumer operations in Belgium. A few months ago Bank of America sold its stake in the China Construction Bank. Both giant banks have been cutting back drastically, and recently Bank of America told regulators it may even downsize further by retreating from some parts of the U.S., possibly selling branches and operations in a reversal of its aggressive expansion of the previous 15 years.

Putting it all together, the U.S. recovery from the recession not only continues, but has been producing some unexpected results and surprises that were certainly not foreseen three years ago, not the least of which has been a substantial bull market that has the Dow 95% higher than three years ago.
ABOUT THE AUTHOR
Sy Harding

Sy Harding is president of Asset Management Research Corp., editor of Sy Harding’s Street Smart Report, and has been consistently ranked in the Top-Ten Timers in the U.S. since 1990 by Timer Digest. Sy publishes the financial website http://www.StreetSmartReport.com and a free daily Internet blog at http://www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beating the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

#167 disciple on 01.23.12 at 3:19 pm

Radiation causes cancer. This is a fact. Cannabis kills cancer cells. This is a fact. You are the endangered species. The gov’t DELETED this fact from the leaked news story of last week:

Here is the ORIGINAL post from the NIH. Read carefully.

“Cannabinoids may cause anti-tumor effects by various mechanisms, including induction of cell death, inhibition of cell growth, and inhibition of tumor angiogenesis and metastasis. Cannabinoids appear to kill tumor cells but do not affect their nontransformed counterparts and may even protect them from cell death.”

…The potential benefits of medicinal cannabis for people living with cancer include anti-emetic effects, appetite stimulation, pain relief, and improved sleep. In the practice of integrative oncology, the health care provider may recommend medicinal cannabis not only for symptom management but also for its possible direct anti-tumor effect.”

#168 Fady on 01.23.12 at 3:23 pm

I think RE is a serious problem, I was talking to some friends about our RE state in Canada, their reply was ” it isn’t bad, how many foreclosures you see in Canada, non or near non”
So basicly we are better than our cousins in the south because they have high foreclosures and we dont!!!!

#169 disciple on 01.23.12 at 3:35 pm

With the following link, there may be veiled calls for disciple to leave this forum. I am ready. Are you?

http://vimeo.com/34714039

There is nothing offensive about it, but this video is banned on youtube. It documents how trained actors are used in the media that you are familiar with, to control your mind.

#170 triplenet on 01.23.12 at 3:38 pm

#75 Boomer

Are you an English teacher?
I hope not!

#171 First to last on 01.23.12 at 3:44 pm

Article in the Globe connecting the housing bubble dots:

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/connect-the-housing-bubble-dots-there-could-be-trouble-on-cmhcs-horizon/article2310132/

#172 Blacksheep on 01.23.12 at 3:47 pm

Househornyhousewife # 116,

“Garth,

Your statement about most people not having a clue about how to cope, save, invest or manage is the one and only reason, I think, that our world economies are in this state.”
—————————————————————-
“The one and only reason”

Disagree.

Definitely “one of” the reasons, but not the only.
A financially ignorant public was/is needed to allow this, decimation by design, of the middle class. This is not an unfortunate accident.

take care,
Blacksheep

#173 Arshes on 01.23.12 at 3:50 pm

#146 Waterloo Resident

Omg Waterloo, your reasoning for your supposed proposal is LOL.

Bankruptcy is for UNSECURED debts, when you have a mortgage, thats a secured debt. It doesn’t go away when you file for bankruptcy.

And as mentioned in this post: http://www.greaterfool.ca/2009/09/26/your-mortgage/ the bank can sue you if the situation arises, where you cannot make your mortgage payments and the a sale of the property is forced. If the property is sold for less than its worth, they can come after you/her for the difference.

#174 cam on 01.23.12 at 3:50 pm

Does $100,000 a year household income make you rich now? Sounds like middle class to me?

#175 Van guy on 01.23.12 at 4:14 pm

I thought UK RE was in trouble? HAM continues to spend?

http://globalbriefing.knightfrank.com/post/2011/08/01/Prime-central-London-house-prices-hit-new-high-in-July.aspx

#176 lookoutbelow on 01.23.12 at 4:26 pm

And how did we get here when we allow (actually encourage) massive leverage ratios. Well, we gotta keep the economy moving, the only way is more debt with the Governments being the biggest culprits, setting the example. All of them hoping for the Holy Grail of Growth. Gotta grow at all costs even with more debt. Have they heard of Greece?

So what are the Great Minds of Flaherty and Carney to do? They are slaves of American Monetary Policy which in the past decade led to the Great Sub-Prime crisis, under the leadership of Greenspan keeping interest rates low, very low, for years and years. Sound familiar?

If as Mr. Carney says, our Banking system is much more secure, what does he really mean? In the housing context the Banks are about as secure as the “Taxpayer Funded CMHC”, who are also massively leveraged but no problem because the taxpayer will bail them out when the **it hits the fan.

But wait, we are talking about the taxpayer, the middle class, the majority of the taxpayers in this country are, you guessed it, massively leveraged. Maybe they have a plan to squeeze them even though the big Carney admits that Consumer Debt will continue to increase over the next couple of years.

I don’t see it, we are truly “doomed”. But Mr. Carney did put forth a wonderful, almost original idea on CTV Question Period. Let’s look to the growing ecenomies of Asia, well Mr. Carney, here is some news for you, they are slowing as well. And by the way, the Chinese property market is CRASHING fast.

Hmmmmmm.

#177 harden on 01.23.12 at 4:56 pm

Vancouver realtors, media, and local so-called “experts” sure figure a blitz of Chinese buyers is imminent, automatic even… like salmon returning to spawn? With the listings growing, everyone has their fishing line (aka big fat property assessment based on july peak) in the water, ready to reel’em in! The Vancouver Sun has a big real estate insert today with lots of mandarin translations in the margins.

It would start to get pretty interesting if these Chinese buyers didn’t materialize??

#178 I'll do anything for a listing on 01.23.12 at 5:09 pm

In the second most expensive city in the world, Vancouver now has fake IPADs at future shop made of clay – AWESOME!!!!

Now all I have to make some condo’s out of clay, some McMansions out of clay and hmmmm, some Rolexs.

Must be a realtor behind this brilliant “repurposing” of Apple products.

http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/20120116/bc_steele_clay_ipad_120116/20120116/?hub=BritishColumbiaHome

Back to bubble related topics:
Found this great chart showing Vancouver – the Plunge o Meter
http://www.chpc.biz/vancouver_chart.html

#179 Devil's Advocate on 01.23.12 at 5:20 pm

#170triplenet on 01.23.12 at 3:38 pm
#75 Boomer

Are you an English teacher?
I hope not!

Ouch, the spelling police are back at it. I’d best lay low for a spell. };-)

#180 BPOE on 01.23.12 at 5:22 pm

Eagle eyes now you get it. You can see. The American and Junius, don’t get it. They are blind, asleep, unconscious. Unaware of the world around them they live in a hypnotic sleep of how the world used to be and what they think it should be. You have woken up. Congratulations
*****************************************
I heard a rumor that one buyer from Mainland China purchased 49 units of a presale condo in Vancouver, and another such buyer purchased 12 entire floors of another presale in downtown Vancouver. I want to share with you a recent letter-to-the-editor that was published in Richmond Review. The writer very eloquently put his thoughts on this matter.

The rise of the affluent ghost town

Editor:

Re: “The real problem with housing affordability,” Letters, Jan. 11.

Victor Godin’s response to your editorial about housing affordability in Richmond is selective and essentially superficial in its analysis of situations in our community. For one thing it fails to account for the huge number of out-of-scale houses, perhaps 50 per cent or more of the newly-constructed ones, that sit empty, sometimes for years.

These houses (they cannot be rightly called homes) are not owned by “newcomers” (a term which implies immigration, settlement, and assimilation), but by citizens in other countries looking to find shelter for their wealth and make a profit. These empty edifices contribute to the devolution of neighbourhoods—lifeless, dark edifices that contribute absolutely nothing to the vitality and life of the neighbourhood.

They bring no children to play, no neighbours to interact with and get to know, no gardens or greenery to add beauty, and their property footprint is unnecessarily excessive and obnoxious. The owners of these perpetually empty pseudo-mansions have no interest in contributing to the workings or welfare of the community. They are, however, responsible for creating an entirely new concept in community/town planning: the affluent ghost town.

The perception that low wages are the reason young families cannot afford to buy houses in Richmond is shallow and insulting. My son and his partner, both with extensive post-secondary educations, bring in healthy professional level wages and they cannot afford to buy a detached house in Richmond. The townhouse they could afford has become too small to contain a two-children family and the complex they live in is filled with young families that are struggling with the probability that they will have to move far afield and abandon their lives in Richmond if they are ever to have a detached house to call home.

On our street, modest split level homes are being replaced by monsters that block out the sun, cause the cutting down of countless mature trees, and raise the taxes of the remaining home owners to obscene levels. Older residents like us, who have lived and invested in our community for many years and do not want to sell out or move, are being literally bullied into making difficult decisions by builders and contractors who are rabidly exploiting ineffective, preferential, and inadequately policed building codes and bylaws. And did I mention the large number of empty houses?

Like most politically loaded terms, “affordable housing” is most definitely relative and ambiguous. The $1.5-million houses that are taking over our street are obviously affordable to a particular demographic, but when that demographic becomes the only one represented, then you end up without the diversity (cultural, economic, and architectural), that makes a community attractive, inclusive, vital, livable, and enriched.

The British have a saying: “I’m allright Jack!” In its most polite interpretation in means “I have mine and to hell with the rest of you!” There is an unpleasant whiff of that sentiment in Mr. Godin’s comments.

Ray Arnold

Richmond

#181 fred flintstone on 01.23.12 at 5:25 pm

she doesn’t love you, but the commission cheque she will get from fooling you—-

#182 Ronaldo on 01.23.12 at 5:56 pm

#174 Cam – “Does $100,000 a year household income make you rich now? Sounds like middle class to me?”

Let’s see Cam. If we go back exactly 40 years from today an old 1920’s style house, say around 22nd and Main in Vancr would have gone for around 27,000. An average single person (not family) income would have been about 9000 per year or 1/3 the value of that house. At 10% interest rates, the cost to own would have been around 25% of income for that one person.

Today, that same house goes for 1,200,000. So, 100,000 today represents 1/12 of the value of the house. And that is family income, not one salary. If we take the equivalent salary today of around 60,000 for the same job, that represents about 1/20 of the value of he house.

Now, if interests rates were 10% today and not 2% when some of these houses were bought, the cost to own assuming a mortgage of 1,000,000 (geeze, those are big numbers), would be about 100,000 just for the interest. That represents all of the 100,000 family income just to pay the interest.

So, if 100,000 of family income makes you middle class today, what class would that individual back in 1972 at 9000 be?

#183 Harry Palms on 01.23.12 at 6:04 pm

163 JB on 01.23.12 at 2:55 pm
My uncle lives in cabbagetown… …..figures he has about 1.2M into the place……

Anyone who’ll pay big bucks for Cabbagetown must really like running the gauntlet of pushing crack dealers, actively soliciting prostitutes, and other miscellaneous begging lowlifes.

Maybe they enjoy chasing rock smokers off their porch as well, or consistently finding their car opened and ransacked….

Downtown East has some expensive real estate, but it’s really not all that nice a place. If you don’t believe me, check out the brewers’ retail outlet at Gerrard and Ontario on cheque day!

Anyway, if I were aiming that much towards a residence, I’d probably look to a more genteel neighbourhood, but that’s just me. Cabbagetown is close to the core, and that’s important to a lot of people.

#184 Cato on 01.23.12 at 6:18 pm

The western middle class is the architect of its own misfortune. The housing bubble is one of the consequences brought on by unsustainable economic policies developed over a generation. We’ve lived under this economic regime so long we think its normal, just need to take a step back to realize how twisted our economies have become.

We believed we could import deflation from the factory floor of emerging economies and ship our productive capacity overseas with no negative consequences. Trade imbalances simply didn’t matter, the east would produce cheap goods for the west to consume in perpetuity. It was a ludicrous proposition that juiced the world economy and allowed a small percentage of elites to become far wealthier & powerful than would have ever occurred under a sustainable economic model of balanced trade.

Not sure what this means for western democracy. This crisis has exposed a potential fatal flaw in our political system. Political motivation will always favor what it expedient rather than what is prudent. We witnessed it happen in Canada and now we get to witness the repercussions. There is a heavy price to paid. Emerging economies are now demanding power and control over world financial institutions like the world bank and IMF in exchange for financial commitments. These are institutions we once completely controlled for our benefit, not any longer.

There are no messiahs, no there will be no easy fix. The solution rests in the hands of the individual, not the state. It means greater political and community awareness along personal responsibility and financial literacy for anyone wishing to be middle class.

The world is changing and most Canadians won’t like their new allotted place in it. Tough. We’ve been living in a fantasy world far too long. The world doesn’t owe us anything, regardless how special we think we are.

#185 rob on 01.23.12 at 6:20 pm

Not sure if this has been posted yet:

Bargains in Australia’s Real Estate Market: 70% off oceanfront homes!
Bloodbath to hit Australian real estate?

According to the Courier Mail, bargain hunters are snapping up holiday homes in coveted beach locations up and down the Queensland coast as desperate owner slash their prices by up to 70%…

While prices soar in some coastal towns close to mining centres, astute buyers are managing to secure ocean- front homes in traditional tourist locations for $500,000 or more off peak prices as vendors cave after years of trying to sell.

One buyer scored an oceanfront unit in a marina development at Cardwell, halfway between Cairns and Townsville, for $157,000 – almost $300,000 less than it sold for in 2006. The unit had been on the market for three years.

A penthouse with ocean views in the same development sold for $570,000 less than its 2007 sales price.

RP Data senior analyst Cameron Kusher said buyers of the most affordable seaside holiday homes needed to be prepared for a long commute. But he said coastal market values had fallen across Queensland, meaning bargains could even be found in popular locations.

In another piece, a real estate advisor sounds bearish on Australia…
“The market has slowed substantially but residential prices are likely to fall up to 60 per cent, possibly even more, within five years.”

The outlook is even grimmer for land investments, which Mr Wirsz said are more speculative and will plummet by as much as 80 and 90 per cent in value.

Commercial property will also take a hit in line with the residential sector shedding at least 50 per cent of its value.

Mr Wirsz pointed to artificially low interest rates, high loan-to-value lending practices, overinflated property prices, unrealistic vendor expectations and Australia’s large number of second mortgages.

#186 triplenet on 01.23.12 at 6:28 pm

DA

Correct sentence structure was the main point of my last comment.
A sentence is a group of words that express a complete thought.
Praktis!!!

#187 Macrath on 01.23.12 at 6:31 pm

David Stockman shares details on how the courtship of politics and high finance have turned our economy into a private club that rewards the super-rich and corporations, leaving average Americans wondering how it could happen and who’s really in charge.

http://billmoyers.com/segment/david-stockman-on-crony-capitalism/

Electromotive Vs. Caterpillar Corporate Greed – London, Ontario
http://www.youtube.com/watch?v=W7bBQaO-7oM

Yes its by design and they are not trough with us yet.
This will not end well !

#188 T.O. Bubble Boy on 01.23.12 at 6:32 pm

BPOE and other Vancouver Pumpers… are you seeing an influx of HAM this week?

http://vancouver.24hrs.ca/News/local/2012/01/22/19279166.html

#189 Junius on 01.23.12 at 6:33 pm

#180 BPOE,

You read that article and your take away is that the world is changing? You think that points to a sustainable economic future?

More of your snake oil.

#190 sellers in a panic on 01.23.12 at 6:33 pm

Many sellers are looking to cash out before they go bankrupt. BIL was talking about selling and renting since the bills are never ending. This from a guy who bought in 2005. My neighbour who sold in December was telling me a few days ago they sold since they could not afford the payments. They even bought in 2006. They also plan to rent.Many are looking to off load their debts before they fall themselves.

#191 Junius on 01.23.12 at 6:36 pm

#177 harden,

You said, “It would start to get pretty interesting if these Chinese buyers didn’t materialize??”

I predict they don’t arrive in any significant numbers.

It will be like watching a kid on Christmas morning come out to find that Santa Clause has not arrived. Lots of tears and crying.

BPOE will get coal as usual.

#192 Herb on 01.23.12 at 6:48 pm

#122 Beach Girl,

thanks for the update. I was wondering how you were making out.

There is nothing wrong with friendship. Like a comfortable pair of shoes, it will take you a long way. But if your heart is set on stilettos, you won’t be happy with low heels for long. As a wise, old Mop&Pail columnist (Richard Needham) once wrote, “There is no such thing as an innocent flirtation. There are only flirtations that don’t work.”

If you have really tried the come hither and he has not, you may have found that rarest of beasts, a man who is not interested in sex. In that case, buy/make your own meals and forget about him. But if your efforts have been half-hearted, turn up the heat and see what happens. He could be a true gentleman who does not wish to impose his attentions until he’s sure they’d be welcome.

As for me, thanks for asking. I’m hanging in there – the alternative does not look attractive.

#193 Nostradamus Le Mad Vlad on 01.23.12 at 7:09 pm


#110 GregW, Oakville — Hi Greg. Was it this — http://ppjg.wordpress.com/2012/01/21/icleis-murder-meters-and-spy-grid-turning-mr-roger-neighborhood-into-electronic-internment-camps/ or this.

#115 Victor — “Connect the housing bubble dots: There could be trouble on CMHC’s horizon”, and #131 Victor — “Up to 68,000 jobs to vanish under federal public service spending cuts: report”

Here come the unintended consequences. By shifting banks responsibilities onto CMHC (the taxpayer), it has given the banks carte blanche to continually lower their rates, which would be a perfect excuse for H – F- C to bring in austerity measures, and bring us in line with other western countries. Meanwhile, the CPC get to rule the roost over us because of their majority.

#125 disciple — “The Gods are watching and will reward you.” — I was led to understand that The Gods Must Be Crazy. Maybe they will reward me, too?!

#134 Smoking Man — Best education is life itself. See earlier link, where Sweden is doing away with some of its schools, and teaching kids via the ‘net, text and e-mail.’
*
Briefly contemplated on the fast and furious sexual escapades of The Pillsbury Doughgirl and Betty Crocker in drag, but I thought better of it.

#194 tkid on 01.23.12 at 7:25 pm

#60 Phil, learnt is the past tense of learn, and perfectly acceptable usage. There is more to the english language than the american dialect. Try googling ‘learnt’ and ‘definition’ if your household dictionary is too heavy for you.

#195 Devil's Advocate on 01.23.12 at 7:29 pm

#186triplenet on 01.23.12 at 6:28 pm

Kinda partial to fragments myself. Or verbatim expression of thought as I prefer to call them. Why go through the effort of breaking the code when the ensuing misinterpretation leads to such entertaining banter? } ;-)

#196 Onemorething on 01.23.12 at 7:30 pm

#193 Nostradamus Le Mad Vlad

Here come the unintended consequences. By shifting banks responsibilities onto CMHC (the taxpayer), it has given the banks carte blanche to continually lower their rates, which would be a perfect excuse for H – F- C to bring in austerity measures, and bring us in line with other western countries. Meanwhile, the CPC get to rule the roost over us because of their majority.

YUP – see where we are going!

The Federal Reserve and the Federal government have attempted to boost the housing market’s demand and valuations by introducing moral hazard on a vast scale and by making it impossible for the open market to discover the price of housing, mortgages, and risk. Prudent lenders and buyers have been forced by this systemic risk to withdraw from the market, even as artificially low mortgage rates, near-zero down payments, and government-backed mortgages have created generous incentives for the most reckless buyers and lenders to take their chances. After all, if you can’t lose more than 3% by buying a spot on the real estate roulette wheel, and all mortgage losses will be made good by the taxpayers, then why not gamble?

In this manipulated market, the reckless have nothing to lose, while the prudent cannot possibly assess the real risk or price of assets and debt. The grand irony is that in attempting to “save” the housing market by suppressing mortgage rates and the market’s discovery of the price of homes, debt, and risk, the Fed has systemically crippled the housing market.

There is a subtext to the Fed’s fervent intervention in the mortgage and housing markets: By propping up housing prices, it also props up the sagging balance sheets of its favored (and politically powerful) “too big to fail” banks. From this perspective, we can see that the Fed’s public concern for employment masks its real concern, which is keeping the “too big to fail” banks from a market recognition of their insolvency.

When will the housing market “recover”? Housing can only find solid footing if the market is freed to discover the prices of property, mortgages, and risk. Until then, the market will drift along in a haze of moral hazard and official support of the imprudent and reckless.

#197 Blacksheep on 01.23.12 at 7:41 pm

BPOE # 180,

“Eagle eyes now you get it. You can see. The American and Junius, don’t get it. They are blind, asleep, unconscious. Unaware of the world around them they live in a hypnotic sleep of how the world used to be and what they think it should be. You have woken up. Congratulations”
—————————————
I usually skip your posts, but read today’s and you’re kill’ in me!
You are, one…funny…. dude!!!

take care,
Blacksheep

#198 BPOE on 01.23.12 at 7:53 pm

YES OH YESSSSSSS. We are the Champions my friends
Genius Tsur Somerville . Read it and weep American, China slowing Vancouver will BOOM
************Somerville added these homebuyers are primarily wealthy immigrants with enough money in the bank to pay for properties immediately.***********

Metro Vancouver will receive an influx of businessmen from mainland Chinese this week, intent on spending their two-week Lunar New Year holiday with family, as well as scooping up significant amounts of real estate.

Julia Rowell, sales manager at downtown Vancouver’s Maddox development, said this phenomenon has been going on for over 25 years, but 2012 looks to be especially busy.

“We expect to see an increase in interested buyers, especially from mainland China. I guess because of the year of the dragon,” she said. “It’s a lucky year for them to purchase, and to see family, and travel and invest.”

University of B.C. Sauder School of Business professor Tsur Somerville said there are other reasons this Chinese New Year looks to be a particularly active period.

“There’s a sense in China that the property market there is slowing down, so that can play out here in terms of people who are looking to perhaps invest someplace else that’s more attractive.”

Somerville added these homebuyers are primarily wealthy immigrants with enough money in the bank to pay for properties immediately.

“They’re not going to be able to get a loan here for it and they can’t get a loan at home for it.”

#199 Habbit on 01.23.12 at 8:03 pm

#62 Ronaldo Do you use their services? If so what if any comments. Thanks

#200 R C on 01.23.12 at 8:11 pm

I’m a first time buyer-in-waiting in Toronto, saw another $400,000 sh!t pile this afternoon. No doubt it will sell in the next week. My realtor tells me there are still daily bidding wars in the east end of the city. In the West end I’m trying to get into the market at under 400 – some people say it’s impossible, but I’m holding out because I honestly believe this market is unsustainable and people are delusional. R

#201 TurnerNation on 01.23.12 at 8:15 pm

134Smoking Man on 01.23.12 at 12:06 pm

I have always refused visiting Starbucks. Would be embarassed to line up paying $4-5 for coffee, and as you said hanging with the cubicle metrosexuals and fashionista girls. All look alike, all talk alike. Marketing dream.

#202 Steven Rowlandson on 01.23.12 at 8:16 pm

The median family income there is $52,833. So how do people making fifty grand buy million-dollar homes?

They take foolish risks at a time when the world has rock bottom interest rates and is overburdened with debt. Sounds like a big financial disaster looking for a place to happen.

#203 R C on 01.23.12 at 8:18 pm

p.s. – just to clarify – $400,000 in Toronto near Landsdowne and St. Clair will get you a decrepit semi-detached place that needs a new roof, furnace, windows, bathroom and kitchen (the tiles were falling off the wall.) The ceilings on the 2nd floor were patchy brown with water damage and were falling down in places. There are holes in the wall where the owner tried some do-it-yourself electrical work and didn’t bother re-drywalling. The floors are all mis-matched, the yard is non-existent. The basement is a complete gut job, and the owner is a chain smoker so you’ll be enjoying nicotine infused drywall for years to come. “The best place we’ve seen for 400 in a long time” my realtor said to me after the visit. I could go on. Needless to say I’ll pass on this one, thanks.

http://realdealto.tumblr.com/

#204 Nostradamus Le Mad Vlad on 01.23.12 at 8:18 pm


Dodging A Bullet, or skipping town; Hide and Seek Fun and games with TPTB; Sheiks in love with Remnibi, so will the Yuan be pulled? Breakdown of the incompetents; JPM gets free pass from USA Today, which is controlled m$m; Gold and Silver Iran banned from trading, but Iran survive a US oil embargo (because China will buy their oil instead).
*
Libya “I guess the Libyan people don’t like their new puppet ruler, or their new private central bank and its debt-based currency that replaced the gold dinar.” wrh.com; dubya and Iran Bad idea; TEPCO It’s a blast; 3:12 clip England pours scorn on Scotland’s self-rule position; The Next War Somewhat curious, because the CIA runs the drug operations there; Music Piracy? No. Poorly run? Yes.

1:46 clip Rand Paul, Ron’ son detained by TSA; Hacker says pay attention to coming FFs; Last Chance at the OK Corral; Democracy has become an illusion; Agenda 21 “. . . exposing Agenda 21 for what it is: a disregard for American freedom, private property rights, and a key player in the Leftist move toward a one world government.”

#205 disciple on 01.23.12 at 8:27 pm

Nostra! Gods Must Be Crazy 1 and 2 are classics!

It turns out Richard Branson is actually David Icke. Allan Lengel is Glenn Beck. And one of the prominent Occupy protesters is Maurice Strong’s great grand-son. (Ex-CEO of AIG)! Astounding!

http://wellaware1.com/

#206 Roland on 01.23.12 at 8:41 pm

Most people in North America’s so-called “middle class” were never actually middle-class to begin with. They were merely a working class with unusually high wages, which enabled them to buy many of the things associated with the real middle class, e.g. higher education, foreign travel, private vehicles.

But as this unusually well-paid proletariat was exposed to post-Cold War global wage competition, their real wages fell.

Unfortunately, having convinced themselves that they were not working class, and having been constantly told by their political leaders that they were middle class, they tried to maintain that middle class status when they could no longer generate enough income to do so. How? They borrowed.

They went deep into debt rather than accept a visible decline in their social standing. Easy credit slowed their downfall, at the cost of making that downfall permanent.

Particular investment choices aren’t the big picture here. The bad investment choices are really just symptomatic. The real story is declining real wages and loss of progressivity in the tax structure which took place after the end of the Cold War.

#207 The Dividend Yield Investor on 01.23.12 at 8:58 pm

#137 Smoking Man on 01.23.12 at 12:22 pm
#97 The Dividend Yield Investor on 01.23.12 at 3:30 am SAID:
Parents simply do not need large families to survive in this world. Since education is the passport to success, parents are electing for one or two children so that they can properly afford their education.
Constant education is the key to staying employed and making a decent living.
………………………………………………………………………………………
The above is so completely wrong he values success as staying employed and making a decent living, Where do I puke…..

Success is having obediently educated work for you for poverty wages.

Dividend’s response:

The primary shift in the mature economies is what I have termed the “super industrial revolution.” These technologies are termed disruptive and they are game changers to many industries. The list is almost endless so here are a few examples:

Book sellers such as Borders [now gone] and Barnes & Noble is being torn to shreds by e-readers. If their management doesn’t get up to speed on their Nook product they will be toast as a corporate entity. The brick and mortar book sellers in ten and no later than 15 years will be gone. What will happen to all of those employees?

Push this down the food chain of the publishing world as this industry becomes more and more electronic. Job loses will be disrupted permanently for most of these workers in this field.

Let me close this out by going back to manufacturing to where computers and micro hydraulics have automated and will continue to automate the assembly line. The question is who will be employed and who will make a decent [middle to upper middle class wage]??

First it will be the clever engineers who design the labor saving machines. They will be in the middle to upper middle class.

Second will be the technicians who keep these machines up and running. Their pay as you may have guessed is lower to middle class.

Third is what jobs that are left over that still require manual work on the line. They will not be in the middle class but the working class. If they have a very and I mean very strong union, lower middle is about the best they can hope for.

Place this into the context of a global economy and you have a “race to the bottom” for wages. Not a very pretty picture I must admit for wages. However the over all INCREASE standard of living for the masses in the past 100 years has been and will continue to be a sight to behold.

Why? The cost of products and services over this time frame has been going down and down. Those individuals who want a piece of the action, then constant never ending education and training is the name of the game.

I’ve gone on way too long. Hope this is of some clarification.

The Dividend Yield Investor
Atlanta G.A.

#208 poco on 01.23.12 at 9:28 pm

#190 sellers in a panic on 01.23.12 at 6:33 pm
Many sellers are looking to cash out before they go bankrupt. BIL was talking about selling and renting since the bills are never ending. This from a guy who bought in 2005. My neighbour who sold in December was telling me a few days ago they sold since they could not afford the payments. They even bought in 2006. They also plan to rent.Many are looking to off load their debts before they fall themselves.
____________________________________________
exactly–more and more condo listings coming on the market in the tri cities which were purchased in 2006 and 2007 and now the owners are lucky to break even upon selling—many who bought since the peak in 2008 are going to be in a losing proposition–like these bought in 2006

http://www.realtor.ca/propertyDetails.aspx?propertyId=11363801&PidKey=-1633747742

http://www.realtor.ca/propertyDetails.aspx?propertyId=11209653&PidKey=-1686569614

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=11459303&PidKey=-545871533

#209 45north on 01.23.12 at 9:33 pm

Roland: North America’s so-called “middle class”

Here’s my heroine Elizabeth Warren “The Collapse of the American Middle Class” She is analytical and intellectual but at the same time she passionately identifies with the middle class.

Unlike you Roland.

http://www.youtube.com/watch?v=akVL7QY0S8A&feature=related

#210 sam.i.am on 01.23.12 at 9:42 pm

The declining middle class in NA is being replaced by a growing middle class in other places. If personal observation and glassdoor.com reviews are any indication, my own company (a s/w tech giant) has not given raises to its North American workers since 2005, despite quarter after quarter of record earnings since that time. New hires are all in India, and Mexico is now the new frontier due to favorable timezones for interacting with NA customers. It’s all about the race to the bottom and globalization.

I think the danger for Canada is the divisiveness of resource vs manufacturing. Already seeing it vis the EMD lockout, and paper mill troubles. Gonna be tough to formulate economic policies that balance the needs of both groups.

#211 Homer on 01.23.12 at 10:09 pm

#60 Not so Fast, Phil
#75 Back off, Boomer (bonus points – licience)
#84 Easy there, Alberta Ed
(#179 D.A. – no worries, we’re just funnin’ with the english police wannabes..)

learnt

Both learned and learnt are alternative spellings of the past tense and past participle of the verb learn.

Learnt is more common in British English, and learned in American English.

In addition, there are a number of verbs of the type -ed ~ -t:

burned, burnt
dreamed, dreamt
kneeled, knelt
leaned, leant
leaped, leapt
spelled, spelt
spilled, spilt
spoiled, spoilt

All are irregular verbs.

alot

From Wikitionary
Usage notes
This spelling of ‘a lot’ (in the adverbial senses of “very much or many” and “often”) is frequent in informal writing but not generally accepted by arbiters of English usage. Others view it as a legitimate contraction. Some occurrences of alot in print may be typographical errors.

1993, The Columbia Guide to Standard American English calls alot “substandard” and notes that it is “increasingly found in Informal correspondence and student writing” and “has as yet received no sanction in print except on the op-ed and sports pages.” [4] [5]

1996, The American Heritage Book of English Usage states that “alot is still considered an error in print” but notes that standard words have formed by fusion of the article with a noun, such as another and awhile, and suggests the possibility that alot may like them eventually enter standard usage. [6]

2004, Jack Lynch Guide to Grammar and Style (entry dated 2004) flatly states this to be a two-word expression. [7]

2004, The Cambridge Guide to English Usage also compares alot to awhile. It states alot to be “still regarded as nonstandard” and notes 50 appearances in the British National Corpus, “almost entirely from three sources: e-mail, TV autocue data, and TV newscripts.” It suggests that some usages of alot in typewritten use are to be considered merely typos of the standard a lot though its appearance in handwriting and typescript is “more significant, as the shadow of things to come.”

#212 CHANGES on 01.23.12 at 10:43 pm

Does anyone know who has the power to put restrictions in place so that this bubble does not continue or happen again ? Could British Columbia have its own restriction apart from the other provinces ?

#213 GregW, Oakville on 01.23.12 at 10:43 pm

Hi #193Nostra, That wasn’t it, but that’s ok. It was the article/graph from http://farmwars.info/?p=7791

#214 TurnerNation on 01.23.12 at 11:34 pm

disciple I appreciated your link. I checked his website out.
Pause for thought. I was kind of lucky, had a grade 6 teacher who taught us to think and do exercises such as counting the frame refresh rates on TV and how they grab our attention. Analysing sayings and ads, too. Of course today the TV is a non-stop flickering program(ing). The trauma stepped up in the early 90s with Iraq live, and horror movies for kids (Freddie, Haloween(.
As you say, every detail of human action/reaction is known and scientifically documented. Nothing is left to chance. Our leaders lead us around by the nosering…

#215 disciple on 01.24.12 at 12:06 am

English is 75% OTHER LANGUAGES. English is a hybrid language. Actually, all languages are hybrids. They are all imperfect anyway; actually, some forms of English that are pooh-poohed by the ignoramuses are actually more precise than the Oxford variety. It doesn’t matter how you spell anything. Who cares? As long as you’re understood and you respect your audience. Did any of you catch my proper use of the semi-colon just there? Ah, but you would be the first to criticize, wouldn’t you?

#216 disciple on 01.24.12 at 12:13 am

Turnernation, thanks for the feedback. I am still learning just the same as you. To whom much is given, much is required. There will be many who simply will have lost that opportunity today that I, as merely a vessel had provided, to escape their programming.

But to those who get a second opportunity through this post, I recommend the 0:40:00 mark of my first link today. You will not ever regret it…11:11.