How the hell?

“How the hell can a bank morally let two kids of 24 owe $740,000 in loans at the pinnacle of real estate valuations? It’s absolutely mind-boggling.”

That’s Jim, talking about his boy and his young wife and their baby. They live in a town of 14,000 people in northern Alberta, where they owe $100,000 on a mobile home bought two years ago, now rented, plus another $300,000 on their six-month-old home. Now they’ve been approved for full financing on another $320,000 property being bought as a second rental.

One income family. Three properties in a single hick backwater. Mortgages equaling seven times annual gross cash flow. Interest rates at low tide. House values never higher. It would scream risk, even if we didn’t know what comes next.

Today a barrel of oil’s worth about $125 (Brent). The last time we neared this level was in 2008. In fact, it was May of that year crude hit an all-time high of $147, helping to trigger the global financial crisis. If the Israelis fry Iran’s nuclear installation in the next few weeks, oil will be at $150 and gas pushing $2 a litre in some cities. There are even estimates of $200 oil within five years unless, of course, we fall into an energy-induced coma. Like last time.

In the summer of 2008, the economy was booming as oil swelled. On May 20th, the TSX surged past 15,000 for the first time ever – before losing 50% of its value by 4 pm on March 9th, 2009. Housing values were at record levels – before plunging as the winter set in. Real estate bloated in Calgary, with the average house changing hands at $505,000 – a level not seen since, despite four years of all-time cheap mortgages.

Is it reasonable to expect runaway energy prices to do what they did last time? Or will the impact be worse on families which have, since 2008, blown their brains out buying houses? Last week we learned mortgage debt is now $1.11 trillion, plus families owe another $487 billion in consumer debt.

That means we’ve increased household debt by $300 billion in three years. Most of that’s real estate-related. And all of it was borrowed at interest rates which, as F told us last week, “have nowhere to go but up.”

Hmmm. Oil shock. Slow economy. Record debt. Bubble house prices. Rate risk. And Jim’s 24-year-old kid being showered with loans. Is anyone paying attention?

The US experience should tells us what happens when an economy takes a hit at the same time almost 70% of families have the bulk of their net worth in one asset. America’s been flirting with deflation ever since because of residential real estate. Soaring energy costs ended growth, trashed jobs and overwhelmed households already saddled with fat mortgages. The demand for housing fell fast, and prices followed.

And what’s changed here?

To Pete, not much. He came north from California, which has a bigger economy than Canada, and in 2006 was as dependent on the real estate biz as we are now. He just sent me this:

“In the US in 2005 all the talk was real estate, you couldn’t go to a party without someone talking about how much “money” they had made on their home purchase.  People in their early 20s with no jobs and no assets owned numerous houses and were flipping them, using them as leverage to buy more property.  By 2006 most of my friends who had great jobs out of college owned homes, although many were helped by their family.  As 2006 lead into 2007, the pressure on many of my friends who were lower earners became intense, and many made the plunge after getting married, again in most cases with major family support.  Most had big payments and didn’t understand how much having kids cost. We all know the story.  Then the crash happened.  Some lost their jobs, most are underwater now.  One friend bought a condo at $300k and had to short sell at $180k because his job had him going to another city.  This was a nice condo in the equivalent of, say, Coquitlam.

“The tragedy in this is that the people who could least afford to become so underwater on an asset they couldn’t afford in the first place take the biggest hit.  This is the lower middle class, which is sadly the largest section of the population.  I hear Canadians want to be different than Americans.  Well they are.  In the US you can walk away from a home right now with little recourse.  My friend mentioned above walked away with hundreds of thousands in assets (retirement etc).  My understanding in Canada when you are foreclosed on you declare bankruptcy and they take everything.  You are left with nothing.

“So what I fear is going to happen here, is that many young hard working people are going to be left on the street with nothing, and will be moving in with their parents or friends trying to rebuild their lives.  They have no money to spend, which drags on the economy.  So while in the US home prices were dragged down by people being able to walk away easily, here it will be dragged down by a total collapse in consumer spending with a large housing surplus as everyone is either over-borrowed or broke living with ma and pa. I hope I’m wrong.

Me, too. But I doubt it.

Oil’s just the latest risk, as if there weren’t enough already for those who have pigged out on property. In a volatile world, the worst thing you can do is have everything you own in one asset, whose value is 100% dependent on how other people feel about it, and isn’t traded on any liquid public exchange or market. And if you bought it with leverage, like Jim’s boy, you’re even more hooped.

So here’s the deal. Forward this blog to every horny twentysomething you know. Sons. Daughters. Co-workers. Friends.

Most won’t listen. A few, however, will owe you their lives.

221 comments ↓

#1 zman on 02.26.12 at 6:43 pm

first, finally

#2 Dave on 02.26.12 at 6:43 pm

First!

#3 Ian McLellan on 02.26.12 at 6:44 pm

Please. Morality and Banking are mutually exclusive. Only the Balance sheet matters.

#4 Oceanside on 02.26.12 at 6:49 pm

Great video, Rick Mercer has a gift for saying what most Canadians are thinking…Not all, but most.

#5 pathcontrolmonk on 02.26.12 at 6:54 pm

Harper himself could go on the 6 oclock news paraphrasing the above and people still would still gaze on with a 1,000 yard stare.

#6 Third on 02.26.12 at 6:57 pm

Eohoo. Garth goin out tonight? You wrote this way earlier today.

#7 Kalergie on 02.26.12 at 6:58 pm

So Garth,
Is Canada going to go under? Why would I invest in this economy now?

Where did I say we’re going under? Just invest in the right places. — Garth

#8 Abitibi Doug on 02.26.12 at 7:08 pm

You can’t solely blame the bank for these young couple taking on so much debt. They CHOSE to take on this debt, and have themselves to blame for any bad consequences that may follow. How much debt did I have at age 24? Zip, zero, zilch, the null set, nothing.

#9 Shane on 02.26.12 at 7:10 pm

Garth,what are the right places

Shane

#10 Van guy on 02.26.12 at 7:10 pm

Another commodity bubble or is this the real deal?

#11 Observer on 02.26.12 at 7:12 pm

“So what I fear is going to happen here, is that many young hard working people are going to be left on the street with nothing, and will be moving in with their parents or friends trying to rebuild their lives.  They have no money to spend, which drags on the economy.  So while in the US home prices were dragged down by people being able to walk away easily, here it will be dragged down by a total collapse in consumer spending with a large housing surplus as everyone is either over-borrowed or broke

So is anyone “at the wheel” over at the Finance Ministry and the Bank of Canada? Surely they must see this coming…..and if they have, then this would be nothing short of scandalous?

#12 not 1st on 02.26.12 at 7:23 pm

Don’t worry Garth, the powers that shouldn’t be will just flood the system with liquidity (aka money printing) should the economy stumble. They want as much money in the system as possible. They don’t want it sitting in your bank account. They would rather see large consumer debts than idle cash. In fact, much of our GDP has been a debt fueled mirage which will eventually spill over into equities as well.

#13 T.O. Bubble Boy on 02.26.12 at 7:23 pm

So, don’t buy houses heated with oil?

#14 LJ on 02.26.12 at 7:24 pm

Actually, it is not oil that drives the Calgary/Alberta economy. It’s natural gas. The heady days of $15 Nat gas are behind us right now and the local economy is flatlining.

Oil is secondary for Alberta, although we all feel the pain at the pumps currently. Especially since the entire province is covered in huge pickup trucks and gas guzzling SUV’s. And, lord forbid if that threatened $200/barrel ever happens….

#15 Thomas on 02.26.12 at 7:26 pm

Garth, in St. John’s, NL we are having an oil boom. However, wages are not growing fast enough. What multiple of gross household income to home price is acceptable? It was always 2 – 2.5 x here and now is 5 x.

#16 MB on 02.26.12 at 7:29 pm

12th!!!

What’s so bad about going bankrupt when you’ve got your whole life ahead of you? We’ve got to keep the ever-expanding economy going somehow… no?

Talk about diminishing marginal returns :(

#17 Willa on 02.26.12 at 7:29 pm

Some economists talk about recessions as part of the “business cycle.” But it doesn’t take a genius to notice that these recessions are occurring far more frequently than in decades past.

The truth is that recessions are caused by oil shocks, not by business cycles. Everything in our economy is based on oil, so the ups and downs of its price determine everything. If you want to know if a recession’s coming, watch the price of oil. Then watch the panic.

This is how peak oil ends — not with a bang, but a whole lot of whimpers.

#18 Mark on 02.26.12 at 7:31 pm

When banks just throw money at people like this there seems to be something far more fundamental and scary here.
A truly gross over extension of the core money supply.
Too many dollars out there.
Multiple dimensions of stupidity here.
Stupid people who ask for this kind of debt.
Stupid banks that give this kind of debt.
Hyperinflation at some point??

#19 Popeye the sailor man on 02.26.12 at 7:33 pm

I remember trying to get a loan when just out of college it was tough.

I just finished a three year diploma in Marine Engineering which the Navy paid for, they even paid me a salary while there so I had been employed with the military for three years and my income was around 35,000. My new wife and I were renting and wanted a buy a car. We had a loan while in college for the wedding and it was paid off and closed because I posted to Victoria. So steady Job, good credit history, full time with the military, wife just got job 2 months before as an LPN and we want to by a 2 year old car and finance it at the bank (RBC) which I been a customer since grade 10. And they wanted me to get a parent to co-sign. After a few days of complaints and having a good talk with the branch manager we got the loan @ 7-9% (cant remember) but was lower than the dealer.

Point is young people have no clue how hard it was to get credit, people in general have a expectation now that they can finance anything and get approved in under 20min. The tide will change and a credit drought will be a shock to a whole generation or more.

#20 Tripp on 02.26.12 at 7:35 pm

Although I do not believe HAM will have a significant impact upon the mass RE insanity that takes place in Canada, here is an interesting article from one of Europe’s most repected magazines:

http://www.spiegel.de/international/world/0,1518,817092,00.html

#21 Willa on 02.26.12 at 7:37 pm

H is an economist, so he would have been aware that dumbing down mortgage rules + lending rates would create a run on houses and that prices would rise. So why did he do it?

Partly it was a way to trick Canadians into thinking our economy was healthy and that Canadian were smarter than Americans. This, he surmised, would translate into smug little Canadian votes for a Tory majority (plus or minus a few robocalls for good measure).

But he may also have seen a housing bubble as a way to ride out the US recession. Create a false economy in Canada during the US’s bad times, then let it crash as the US economy starts picking up. Sure, it would leave a lot of young Canadians in debt, but maybe he was counting on the US economy pulling us out of it.

Okay, maybe that’s too generous. But jeez, we know H is smart, so there must have been a reason to do this…

Mr. Harper never worked as an economist. — Garth

#22 ff on 02.26.12 at 7:42 pm

This boom has gone on a lot longer than any of us have thought. We know incomes are not rising substantially anytime soon. Is there any scenario where this goes on for another five years? How long can people keep gorging on debt with little consequence?

#23 40+ on 02.26.12 at 7:43 pm

I know alot of people in thier 40’s just as blind, and about to be wiped out.

#24 Pr on 02.26.12 at 7:46 pm

This no cash for buying realestate and interest rate so low for so long, LOOK LIKE, a giant Shylock operation. I don’t say it is , but it looks like. May be interest rate, 0.25-2% will the new norm for decades to come. And a house will be in the millions to buy. Thank you central bank for stable economy’s.

#25 coastal on 02.26.12 at 7:47 pm

The wife and I are thinking of upgrading our rental digs so we went looking last week at what seemed like a very well looked after townhouse complex in a suburban family area near the university which is always in high demand. We were shocked to find out that in late February(the high point of school semester) there were very many vacancies plus quite a few for sale too. Something is clearly amiss, they can’t all be renters turned owners. My feel is Victoria is beginning a drain on it’s youth and young families like back in the 80’s and 90’s busts.

For the money they were asking and even with the half assed reno’s, these places were not worth the extra $500 a month from our current rent. These units I was looking at will stay empty well into August which means 6 months of lost rent or around $10,000. What investor can stomach that kind of loss on annual basis ? The evidence is there for a very nasty spring correction in Victoria. The interesting part is they were open to offers, not the usual you see from a management company who act on behalf of owners.

Even when you look at the alternative to own at a similar monthly payment, the houses in half decent shape nearby are well into the upper $500 K range and need a $75 – $100 K gut job. After seeing this I have no doubt the abyss is near, look out below.

#26 Amazed on 02.26.12 at 7:51 pm

We watch and for years now keep saying that it just seems impossible…. All the “easy” money people have made “flipping” homes. People with no idea about anything… Except the fearlessness to buy sell buy sell. Whenever I mention to someone I think it’s going to crash, they laugh at me. Real estate is the best investment they tell me… Nothing can go wrong. Interesting that an agent I know is looking to sell some of the properties he’s been collecting and renting out. I thought he was keeping them forever… Not so… He’s also working overtime trying to get those elusive sales. Important to note… He was a top agent for many years until now. Does he know something he isn’t sharing with others, does he finally think the market is tanking? Hmmm and Mount pleasant… I don’t get the desirability at all… But I guess when the tide of prices downturns there and Rosedale etc… Forest hill is already down… We know we are on our way down. Hubby and I are in a higher income bracket with a paid for house… We haven’t felt moving as the prices seemed ridiculous not just for the sale price but the future property taxes etc. I think the economy should have reset years ago 2008… It will be ugly for some… But everyone around me
Is living the dream… Vacations, minimum payments, large loans, designer clothes, cars… And I am just constantly amazed every day. The question is when…

#27 robert james on 02.26.12 at 7:58 pm

Lets not be too hard BPOE just because he a realtor in Vancouver..There is worse in Vancouver believe it or not.. This guy takes the term “dog lover” to a whole new level.. Didn`t say if he a realtor or not but this sure as H*ll will not look good on his resume`.. Poor dogs will need counselling after this… http://www.cbc.ca/news/canada/british-columbia/story/2012/02/26/bc-vancouver-bestiality.html

#28 TurnerNation on 02.26.12 at 8:08 pm

A co-worker, mid 20s, newly married, openly says he’s up “30k” on the used condo bought one year ago.
Went on massive spending binge during past year: wedding, honeymoon costs; kitchen appliance reno, used car, another tropical trip or two, expensive Xmas gifts, and the lists goes on. Monthly condo fees are north of $600. Also said, if variable rates rise he is in trouble. Canny.

Quoting Floyd (this weblog’s sound track?): “We’re just two lost souls Swimming in a fish bowl, year after year”.

Ps. if you receive a Robocall stating – in both official languages – that this pathetic weblog will be shut down…it’s likely true. Earlier database attacks bear all the hallmarks and fingerprints of Al-Harper regime.

#29 Ralph Cramdown on 02.26.12 at 8:09 pm

You can’t solely blame the bank for these young couple taking on so much debt.

Really? I thought bankers were supposed to be prudent. We know that anyone lending money will be approached by many poor risks who want to borrow a lot and have a high likelihood of going bust. That’s why bankers look at Capacity (to repay), Collateral (in case you DON’T repay), Character and Capital (your skin in the game).

Oh, wait, the bankers just insure with CMHC and then it’s ultimately the government’s Capacity, Capital and Character on the line? Well, then I guess the banks are lending to a safe risk!

#30 Sebee on 02.26.12 at 8:10 pm

I really want to believe. I want some sense of normalcy to return to the market because the risks are huge as you point out daily. Reckless borrowing and lending has obviously done harm, but with the enormous risks we are well aware of what possible reason would F have to do anything to harm it. He is doing everything to realize the balloon scenario. It is what he must do. Everyone involved in this game is working from the same playbook. What chance does normalcy and averages stand?

#31 The BioTech Guy on 02.26.12 at 8:13 pm

Another day of open houses in GTA as we continue our property search despite the oncoming gale. Situation on the ground: chaotic. RE agents clueless or in denial. Overpriced shacks but also underpriced solid properties. Some sellers stick to unrealistic pricing for months. No blink.

Wonder if we end up any better than Jim’s boy once the dust settles.

#32 City Slicker on 02.26.12 at 8:23 pm

Garth maybe indeed there is some cosmic force our government is using to keep RE permanently propped up. How did you know officially in 89′ the market correction has arrived.
What was the sign of Jonah?

I witnessed an apparition on the side of a Tim’s. — Garth

#33 NewWorldPartyDotOrg on 02.26.12 at 8:43 pm

“How the hell can a bank morally let two kids of 24 owe $740,000 in loans at the pinnacle of real estate valuations? It’s absolutely mind-boggling.”

The bankers are likely homeowners and speculators as well, with multiple properties. They benefit by pushing prices perpetually higher, even if it’s at the expense of the younger generation.

Housing is the most manipulated market in the world.
http://www.newworldparty.org/2011/04/housing-most-manipulated-market-in.html

“CMHC has nine directors on its board. Seven directors make or made their livelihood from real estate. …is it possible that they own more real estate than the average Canadian and therefore would benefit from ever increasing prices? These directors are:”

#34 Ralph Cramdown on 02.26.12 at 8:45 pm

#19 Popeye the sailor man,

I remember trying to get a loan when just out of college it was tough.

Yeah, that was the old days. The Bank of Canada just put out a paper studying how consumer lending in Canada has changed. Fewer branches and less reliance on ‘soft’ data (e.g. assessment of character), more reliance on hard data (income and credit score), more credit granted and more defaults. But maybe the money saved on branches and loan officers makes up for the losses, so it’s all good!

#35 TurnerNation on 02.26.12 at 8:52 pm

#28TurnerNation on 02.26.12 at 8:08 pm

“Quoting Floyd (this weblog’s sound track?)”

No, this weblog’s sound track is one of a Harley’s intermittant exhaust note.

(Slow night, replying to my own post ;-) )

I think the crank is at 260deg. offset, or something like that.

#36 Ozy - will laugh all day long on 02.26.12 at 8:53 pm

Will laugh all day long once the CRASH arrives, I hope this will lower the snobism and arrogance of many otherwise suckers and suckeresses.

Bring it on baby! 2012 2012 2012

#37 Just Say No on 02.26.12 at 9:14 pm

10 years ago all the major banks were doing surveys…asking everyone if they would be buying a home in the next year or two and down the road…all the information was all they needed to get this bubble started…time for another survey?

#38 neo on 02.26.12 at 9:18 pm

“If the Israelis fry Iran’s nuclear installation in the next few weeks, oil will be at $150 and gas pushing $2 a litre in some cities.” – Garth

Not if Garth, when. The MSM pump is being primed.

http://www.youtube.com/watch?v=_d8C4AIFgUg

#39 Steven Rowlandson on 02.26.12 at 9:24 pm

“How the hell can a bank morally let two kids of 24 owe $740,000 in loans at the pinnacle of real estate valuations? It’s absolutely mind-boggling.”

If the politicians are about as sane as the bankers, realtors and home buyers then I would say the world in general and Canada in particular is in big trouble.
The train wreck should be entertaining as long as one keeps a safe distance.

#40 Freedom first on 02.26.12 at 9:34 pm

Garth……I too have always believed in being diversified. What you have been saying about 70% of Canadians being in one asset class, and many of the leveraged, real estate/housing is their only asset. Very,sad……tragedy in the making. Could you answer a question for me please Garth? I am debt free, liquid, well diversified, I believe as you do. Question: do you believe that real return bonds, the Canadian equivalent of the U.S. -t.i.p.s, deserve a place in ones’ portfolio? Thank you Garth…..whether you answer my question or not….I am a fan…….I believe you help many people with your blog:)…..keep on keepin on…..

RRB bonds have been greater performers of late. They normally add an important element to the fixed income portion of a balanced portfolio. — Garth

#41 45north on 02.26.12 at 9:38 pm

amazed: an agent I know is looking to sell some of the properties he’s been collecting and renting out.

I am still thinking of your friend who wants to take a $600,000 line-of-credit to buy commercial property. I assume that she doesn’t have an appraisal, building inspection. What is the condition of the roof, the electrical? Best thing would be to fake a nervous breakdown just as she is about to sign.

#42 Ret on 02.26.12 at 9:38 pm

If one property is good, 2,3, or 4 properties would be better. Buy suckers buy!

Ah yes. I recall in the late 1980’s lots of people were blowing about how many condos they “owned” in Toronto. Sound familiar? Close your eyes, it’s 1989 all over again.

By 1991-2 the buyers of multiple investment condos had a big problem. Basically they had to decide which one of those condo balconies to…well, you know.

SF home prices also crapped out for a decade. Every RE boom (or bust) strives to ultimately return to the mean price or value with respect to incomes in that market. Ditto for coffee prices, oil, potatoes, gold or tulip bulbs.

#43 TRT on 02.26.12 at 9:41 pm

Ummm… The oil price graph you put up shows that the price has been more or less stable in the last 10 months … Sheeple hahaha.

Also, why start quoting Brent. What happened to West Tex Intermediate???

As much as I want to believe your hypothesis, things like these make my stomach churn. On the other hand, it is difficult to a write an essay on the same hypothesis day in and day out with the same impact.

Brent pricing is pivotal to Europe. Oil is now at an all-time high in euros. This should worry you. — Garth

#44 noodles 79 on 02.26.12 at 9:42 pm

I’ve been reading this blog for a few months now,and it is apparent that you feel having all your eggs in one financial basket is the kiss of death.Divesification is key. You have stressed this point may times.
Unless I missed it while I was on holidays,I have heard no mention of trades people.A lot of homes are being purchased by trades people.
Now, lets talk about having all your eggs in one basket.A lot of people are going to crack.In more ways than one.Another piece of experience Id like to pass on.

#45 Arse on 02.26.12 at 9:45 pm

Very highly likely that the Israelis will bomb the Iranian nuke plants this year. Right after that their will be a big spike in crude that takes out the previous all time high. Then the world economy takes another hit and prices will come down to around $90 and settle above $100 again before the end of the year. I don’t expect the price of crude to come down to around $35 like the last time.

Amount of crude oil is finite, like every tangible thing in the universe. The world has used up around one half of the economicaly recoverable crude oil, and to extract the other half takes progressively more money to do so. Also the world population is booming and the countries with the most populations, China and India, continue to increase their use of crude oil. All of this leads to increasing demand and decreasing supply, which in turn leads to higher crude prices and increasing overall price inflation.

This in turn will lead to cycles of weaker growth spurts and stronger economic busts.

#46 TRT on 02.26.12 at 9:46 pm

With respect to Gas prices, I look at the spread between Vancouver prices and those on Seattle.

A little research shows the currency fluctuations between the US and CDN dollar has no effect on this spread. Amazing!!!

It used to be a 30 cents spread but it is now at 40 cents. What gives?

Oligopolies. Welcome to Canada. Err 1940’s Italy.

#47 zman on 02.26.12 at 9:48 pm

Realtors, mortgage brokers and economist keep saying that there is very little subprime lending occuring in canada. i know that many of the home owners in scarborough and parts of markharm live in a house that is over 700k while working at tims or at a gas station….this is happening a lot in these areas….to pay for these mortgages the entire family works two jobs and they end up renting the basement if finished or a room in the house…this is our subprime mortgages

#48 Retired Boomer - WI on 02.26.12 at 9:51 pm

DEFLATION in the United Snakes? Wonder what you’re smokin’ there, boy? I WISH we would suffer a good bout of deflation. Healthcare costs, commodities, even the value of our fiat currency to keep with the inevitable slide in the Euro.

Ever see the way Greece is run? Hardly a country, that one. If they get the money be sure to come next year for the 3rd annual “Greek Bailout.”

Maybe by then we can have our 2nd one, as we gave the banks all our credit, and they’re making good private profited with public money.

Canada will get its turn on that treadmill, right after CHMC throws a bearing.

Oh wait, they just created a lot more money to stave off these problems, not to worry, buy a house!

The greatest deflation of our time has been US real estate – $6 trillion equity loss. — Garth

#49 Elmer on 02.26.12 at 10:05 pm

I’m a 20-something and I’ve had it with renting and living under some landlord’s rules, I’m thinking of buying a house. But not in the GTA, I don’t wanna spend 700k. Maybe Keswick. I could buy a newer detached house there for about 4.5x my income, which I deem acceptable. I would raid my RRSP for 25k, and the 23k in my TFSA would remain untouched, as would a few grand I have in an unregistered trading account. The mortgage would be about what I currently pay for rent. This is dependent on me being moved to a different department where they allow people to work from home and only come in to the office once a week. Otherwise I will have to keep renting in Toronto as you’d have to be insane to commute from Keswick to Toronto daily. I think the advice on this blog is only relevant to people in Toronto, Vancouver, and a few other cities with overpriced real estate. In most Canadian towns a single person can comfortably buy an average house on an average income.

Yes, home ownership is just like paying rent, except with debt. And property tax. And big insurance. And fixing stuff. And less savings. And maybe being wiped out. Otherwise, same. — Garth

#50 NoName on 02.26.12 at 10:06 pm

You just added fuel to the fire… now bad situation looks lot worse…

#51 T.O. Bubble Boy on 02.26.12 at 10:12 pm

Let’s say you’re a local government in China, and you’ve taken out billions of dollars in loans for building ghost cities and unnecessary infrastructure of all sorts… now, you can’t pay back those loans, because the massive spending you’ve done since 2008 produces no actual tax revenues for you.

Well, no problem! The government will just sweep it under the rug:
http://www.marketwatch.com/story/china-local-governments-may-dodge-debt-deadlines-2012-02-26

#52 Canadian Watchdog on 02.26.12 at 10:14 pm

#46 TRT

It’s called currency debasement.

#53 jwkimba on 02.26.12 at 10:20 pm

I came here from Los Angeles area in 2005. I can vouch for the accuracy of Pete’s statement. I sold everything at the right time, but 95% of people, like my old neighbours, hung on and got hosed.

I had a 2bedroom in this complex – bought for 165k in 2003, sold for 320k in 2005. That’s normal, right?

Now the 2beds list for 125. Here is my old neighbour, listed at 99k since last May…

http://www.realtor.com/realestateandhomes-detail/120-Alamitos-Ave-10_Long-Beach_CA_90802_M18167-79250?ex=CA525310900

Toronto has no idea of the scale of the collapse that is possible. Every lame brained excuse I have heard about why it is different in Toronto I already heard about Long Beach/LA! It’s not different!

#54 Bubble 'n fizzle on 02.26.12 at 10:21 pm

Mortgages are seven times cash flow? That’s a recipe for profitability! That means the gross rent is 15% of the mortgage amount. Let’s see, mortgage interest 5% (or less), taxes and maintenance 5%, that leaves 5% before-tax profit.

Family cash flow, not investment. They are sunk. — Garth

#55 Preciousss on 02.26.12 at 10:24 pm

I will be the contrarian here.

Euro will strengthen relative to $US and no nukes in Iran.

Canadians will be financially pummelled by inflation, taxation, and high cost of living.

#56 };-) aka DA on 02.26.12 at 10:27 pm

#36 Ozy – will laugh all day long on 02.26.12 at 8:53 pm
Will laugh all day long once the CRASH arrives, I hope this will lower the snobism and arrogance of many otherwise suckers and suckeresses.
Bring it on baby! 2012 2012 2012

Are they snobs or are you just jealous? Your wishing an ill fate to befall upon your fellow man is probably a clue…

People tend to get what is coming to them. I am sure you will get yours. };-)

#57 XYZ on 02.26.12 at 10:28 pm

Idiot uses Garth Turners name to propagate stupidity…

http://www.youtube.com/watch?v=Rb8Gzx4bqs4&feature=fvst

#58 Junius on 02.26.12 at 10:35 pm

My Monkey tells me F will be announcing new mortgage rule changes this week.

Stay tuned. And get yourself a pet monkey – you’ll never sleep better!

Junius

#59 45north on 02.26.12 at 10:37 pm

Elmer: This is dependent on me being moved to a different department where they allow people to work from home and only come in to the office once a week.

Elmer my strong feeling is that any kind of downsizing is going to hit the work-from-home people the hardest. They send you an e-mail.

#60 amazed on 02.26.12 at 10:39 pm

@45north – I know…. she has absolutely no idea what she is getting herself into. She didn’t even question the financial aspects. Her father told her it was a good idea. I guess dad can bail her out when things don’t work. According to them, real estate is the best investment. I always thought real estate was a money pit… at least that’s how I feel about my house. Constantly fixing, replacing things… You have to live some where I guess… but I’m pretty sure she could do better with her money then this commercial investment. Every other commercial property seems to be for lease or sale in the GTA. Timing.. seems off… maybe she will get cold feet. She has cancelled some of her vacations lately… who knows.

#61 View on 02.26.12 at 10:41 pm

“How much debt did I have at age 24? Zip, zero, zilch, the null set, nothing.”

Back then, we didn’t have an **established** credit rating, remember???

#62 Keeping the Faith on 02.26.12 at 10:52 pm

Stevenson … where are you!?!?!?
common out so I can mock you some more, please, we’ve lost our ‘RE Pumpers’ of late and it’s the converted speaking to the converted.

We need to dumb this down a bit with your comments …

#63 Reality check on 02.26.12 at 10:53 pm

Elmer, #49

Do not whatever you do buy a house in the current conditions. You will regret it for the rest of your life. In your twenties you have huge variety of options to go places and move jobs to climb your career.

Do not get tied in to the debt trap most of Canada are now stuck in. There is plenty time for you to buy a house and pick up a bargain in a few years time.

#64 Worried realtors on 02.26.12 at 11:02 pm

Realtors, bankers and sellers are in a panic as the housing crash in Canada continues to take hold and get worse. Diving in the annex and through Forest hill and into north york all you see is for sale signs as Nothing is selling. Seen a couple of sold signs but one was from two months ago. You also have a shadow inventory as houses do not have a for sale signs but is listed on mls. Realtors are in a panic as they do everything including hiding inventory from the public to see the truth. Canada has a housing bubble which is bigger then the US bubble. Canadian homes cost two times more then a US home. It’s going to be a nasty crash.

#65 TRT on 02.26.12 at 11:05 pm

#52 Cdn Watchdog

The relatively stable spread with respect to huge currency volatility over a 10 year term. Look it up. Not currency debasement but suggests total market control. Same spread when Cdn dollar (vs USD) at 65, 1.00, or 1.10.

#66 GregW, Oakville on 02.26.12 at 11:07 pm

Hi #38 neo, thanks for the link.
Starting a war with Iran would be bad for every one, every wear!!! Bombing a running nuclear power plant is beyond criminal. Iran will take action in self defense, action beyond there own boarders if bombed. WW3 will start. But the MSN news won’t be telling the masses that, That is if they have time too??? We human think we are so smart. The inmates are running the insane asylum it seems. That’s what we all need more of, nuclear fall out, chemical and biological weapons released onto the global population. I hope cooler heads are in charge and stop Iran from being bombed? Given they have not attacked anyone! Iran is going to stop using the USA petrol Dollar in March. Wars have been started over that issue before, but with less well defended/armed countries. That movie Dr.Strange Love comes to mind and the war room.
If Iran has EMP weapons or biological weapons on some ballistic missiles or planted agents we are all going to be in bad shape if they are bombed! Are you ready to feed your self? Do you have clean water that doesn’t need electricity to pump it up? Is your generator and car shielded for EMP? What about heat for you home? I hope you have a horse for transportation. I know I’m not ready! And I’m not ready to die yet. I hope Iran is not Bombed.

#67 Condos houses and commercial properties on 02.26.12 at 11:12 pm

All three in the GTA are cash flow negative. Can any realtor find and prove a cash flow positive property? Been looking for over two years and NOTHING is cash flow positive. With 80 % of condo buyers flippers and from what mortgage broker buddy tells me the numbers are high for housing and commercial Properties you have a housing bubble or balloon as the spin doctors like to call it since the facts and numbers clearly point to a grossly over leveraged, overvalued and over gambled on “commodity”.

#68 amazed on 02.26.12 at 11:14 pm

No shortage of listings in South East Oakville, Rattray Marsh, Mineola West, Lorne Park… all desirable areas. How long can these people keep putting these homes on/off the market. Some people have relisted this year with higher prices then a year ago… red dots everywhere. I guess everyone is still drinking the koolaid… but we all know how this ends eventually. The million dollar question is .. will it be 2012? I will be patiently waiting.

#69 45north on 02.26.12 at 11:16 pm

amazed: Constantly fixing, replacing things

tomorrow morning I’m going to call Faucet Fix to fix the tap in the kitchen. These one arm faucets are tricky. I figure $150.

#70 View on 02.26.12 at 11:25 pm

“Fewer branches and less reliance on ‘soft’ data (e.g. assessment of character), more reliance on hard data (income and credit score)”

Someone commented about buyers in sweatpants. It doesn’t matter anymore as long as you have the right data.

#71 kabloona on 02.26.12 at 11:30 pm

#53 jwkimba, just wanted to say thanks for sharing that anecdote and posting a link to your former condo complex in LA.

Long Beach would be a pretty nice place to live….although I did note the place asking $99k is on the 1st floor and that might scare off some people worried about crime and break-ins.

#72 };-) aka DA on 02.26.12 at 11:37 pm

#57 XYZ on 02.26.12 at 10:28 pm
Idiot uses Garth Turners name to propagate stupidity…
http://www.youtube.com/watch?v=Rb8Gzx4bqs4&feature=fvst

5.0% down or 0.0% down what’s the diff? Like he says if the rate goes through through the roof their both screwed. But I gotta admit his argument, in my opinion, is sound – people budget on their actual expenses. I’ve always thought the you get this rate but have to qualify on the basis of this rate was absurdly flawed on so many levels not to mention a convoluted backhanded approval of little difference. Political BS.

But the bottom line is the market goes up, the market comes down but never is it easy for First Time Buyers to get into the market and especially difficult for them to save a down payment while paying rent. For a young twenty something starting out high ratio is typically the only option when buying their first home. Who are you to deny them that option. Who are you to say they can’t do it responsibly. There are a lot of 26 year olds I know smarter and more responsible than some twice their age.

The price of homes is not going to fall enough that these first time buyers will suddenly be able to get in that much easier. As far as such programs as zero down being a new thing I call BS… there have always been programs aimed at making the entry of First Time Buyers into the market under adverse conditions easier. I remember some 30 years ago they were offering First Time Buyers a $5,000.00 forgivable grant toward down payment. That was then equivalent to about $30,000 in house dollars now.

#73 dddd on 02.26.12 at 11:40 pm

tricky? just one hex bolt takes it apart

#74 Fifty Percent Correction Predictor on 02.26.12 at 11:47 pm

#56};-) aka DA on 02.26.12 at 10:27 pm
aka DA,

Question for you:

Who is more evil as of today?

The flipper/investor/developer who are exploiting the last few greed +stupid suckers for $500-600/sf condos, or

#36 Ozy who will Will laugh all day long once the CRASH arrives?

Please kindly anwer.

#75 View on 02.26.12 at 11:49 pm

“Ah yes. I recall in the late 1980′s lots of people were blowing about how many condos they “owned” in Toronto. Sound familiar? Close your eyes, it’s 1989 all over again.”

I graduated in Toronto in 1990. 60% of my professional peers were laid off in 89 – 90. I don’t have to close my eyes… Recall Norma the Condo Queen?

#76 Devore on 02.26.12 at 11:50 pm

#26 Amazed

We watch and for years now keep saying that it just seems impossible…. All the “easy” money people have made “flipping” homes. People with no idea about anything… Except the fearlessness to buy sell buy sell. Whenever I mention to someone I think it’s going to crash, they laugh at me.

The good news for the real economy is that all those real estate winnings have been mostly poured right back into more real estate, so it will all go poof together.

#77 James M on 02.27.12 at 12:12 am

Garth

There’s another good article on the Canadian bubble on MacroBusiness Australia:

http://www.macrobusiness.com.au/2012/02/canadas-bubble-goes-mainstream-leith-van-onselen/

Nothing we don’t already know, but there’s a good summary of the BofC’s recently released papers.

James

#78 Mr Buyer on 02.27.12 at 12:17 am

#49Elmer on 02.26.12 at 10:05 pm … I think the advice on this blog is only relevant to people in Toronto, Vancouver, and a few other cities with overpriced real estate. In most Canadian towns a single person can comfortably buy an average house on an average income.
…………………………………………………….
Most every town across the country has undergone at least a doubling of real estate values recently with a decline in jobs and little or no increase in pay. The bubble raged across the country. Toronto wages in my home town MAY allow for some sort of existance providing intrest rates do not rise as well as property taxes but you will have to commute 6 or 7 hours one way, daily. BUYER BEWARE. THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY. DO NOT BUY INTO A FALLING MARKET.

#79 I was Subprime on 02.27.12 at 12:21 am

72 aka DA – Our first house (in BC) was in ’91. We only
needed 5% down. The standard for CMHC was 10%, but
I think there was a deal with the BC govt. It wasnt a
grant, just a lesser down payment. Can you recall?

#80 45north on 02.27.12 at 12:22 am

dddd: just one hex bolt takes it apart

same thing happened 5 years ago, the guy came and fixed it in 5 minutes. I’m going to let him fix it again.

#81 Mr Buyer on 02.27.12 at 12:23 am

#55Preciousss on 02.26.12 at 10:24 pm
I will be the contrarian here. Euro will strengthen relative to $US and no nukes in Iran. Canadians will be financially pummelled by inflation, taxation, and high cost of living.
…………………………………………………..
I was preparing myself for the typical contrairian babbling that ends with continued sunshine and infinite rounds of doubling of house prices but was met with a contrairian pummeling. BUYER BEWARE. THE BUBBLE HAS TOPPED. DO NOT BUY INTO A FALLING MARKET. NOW IS NOT THE TIME TO BUY. BUYER BEWARE.

#82 Shirley's Bay on 02.27.12 at 12:24 am

Given what now seems to be a rather volatile period, I think the blog dogs would benefit, Garth, on your views in a future post about how much of our pathetic holdings should be in cash. I ask because lots of investment advisors advise all in all of the time. This request is in addition to your previous posts on ‘Risk’.

#83 Ozy - What Buyers Need to Know before comitting financial suicide on 02.27.12 at 12:25 am

==> *** Suckers Be Aware *** posts should be installed at every corner in Toronto and GTA suburbs. The message is:

The Real Estate generally goes up in average 5% a year in Canada due to hidden inflation promoted by government on purpose.

So after years and years of speculation abuse, where Real Estate have gone up 10% (instead of 5%) – what happens next in the following years is a minus 5-10% CORRECTION for 3 years or so. The more the correction is delayed, the more severe and abrupt the crash will be.

So, real-estate folks does NOT always goes up. Watch when exactly in the cycle you buy, or you are guaranteed to loose your shirt to the desperate speculators that bought on margin (0 down, 40years amortization) and are selling you today knowing what’s guaranteed to come next (I know these people are unloading as we speak)

*** Suckers Be Aware *** posts should be installed at every corner in Toronto and GTA suburbs. The message is above <==

#84 Ozy - Responses to AKADA and FPCP on 02.27.12 at 12:32 am

#56 };-) aka DA
#74 Fifty Percent Correction Predictor

Obviously, every man or women with good sense humor should laugh from all heart! This was a scam for history books! Even greater fools should have the guts to laugh and move on to bankrupcy with a fat RRSP lenders can’t touch (talk with a lawyer). Don’t make me started, as I can’t stop laughing when I think of it

#85 Mr Buyer on 02.27.12 at 12:34 am

I myself could not make heads or tales of this lunacy of a housing bubble perpetrated by an at least rained economist if not employed especially with the US debacle readily apparent. I like to assume a few perspectives when pondering things and one of many is the “everything is working as intended, I just do not know the intention.” Then I try to guess the intention. It came to me awhile ago that the bubble cultivators my well have been relying upon a recovering American economy to provide the never before seen soft landing at the end of a bubble. Well there will have to be years more of delaying tactics if America is going to be providing the cushion for this monstrosity of a bubble which has topped I might add. BUYER BEWARE. THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE. DO NOT BUY INTO A FALLING MARKET. BUYER BEWARE. IT IS NOT LIKE ANY OTHER REAL ESTATE CYCLE. BUYER BEWARE.

#86 Terra No-more on 02.27.12 at 12:39 am

Garth what’s your thought on drawing CPP early at sixty and directly reinvesting in TFSA (right mix) before retiring later with re-evaluation?

#87 Ozy - I own RE but wish for a crash on 02.27.12 at 12:40 am

A crash is good for everyone, it will bring a lot lower property bills and therefore less money waste by municipal government (and better service)

Plus, after the crash, usually banks and insureres panic and panic again, and offer even lower rates e.g. 1%

Bring the real-estate crash baby!!!!!!! Shares will also be worth buying then.

#88 GLK on 02.27.12 at 12:41 am

Still in denial about the bursting real estate bubble/ballon? then check this from BC:
http://www.rew.ca/articles/187

GLK

#89 I'll do anything for a listing - please on 02.27.12 at 12:53 am

I really enjoyed this video explaining “A Planned Economy for the 1%”. In 24 hrs it has over 60,000 views. It echo’s everything that the blog dogs talk about here, how nothing productive is being done, yet people are getting rich. Enjoy…

http://www.youtube.com/watch?v=InQ7l4Nv1YE

Meanwhile, I did a calculation…..
If I pay my Vancouver property tax on my home for the next 50 years (if I live that long till 90), and property taxes don’t rise ( unlikely due to the Olympic Village scandal), then in the last 25 years of my life, I’d owe $100,000 after tax income to the City of Vancouver, in Property tax alone.
From this point forward, if I live 50 more years, I’ll have paid $200k in property tax.

How can anyone retire?
Guess I’ll be saying ” welcome to Wal-mart”…..

#90 Al on 02.27.12 at 12:54 am

It’s still a feeding frenzy in York Region with most homes selling for more than asking.

#91 The Real Jimbo on 02.27.12 at 12:55 am

#49… “I’m a 20-something and I’ve had it with renting and living under some landlord’s rules, I’m thinking of buying a house. But not in the GTA, I don’t wanna spend 700k. ”

So many of the young people I know just don’t get it. All they’ve ever known is that you can’t lose at real-estate – often taught to them by their Boomer parents who bought cheap and rode the prices to the stratosphere. And they are brainwashed into thinking that the goal of life is home ownership.

Wake up to the risks. Do you appreciate that Canadian real-estate is insanely overpriced by any measure?… price-to-income, price-to-rent, price-to-US markets, etc. And this is happening at a time when mortgage rates are at 30+ year lows. Can you see that a bloodbath may occur when rates rise? Do you know that real-estate is CYCLIC? Study history!

Do you understand that real-estate could comfortably fall by 50% and still be overpriced? I witnessed real estate crash in Vancouver by 50%+ in 1980/81. I saw my first condo fall in value by 50% in the 1990s. Believe me, it is no fun paying a $400K mortgage when your place is valued at $200K. You will hate your life.

I can somewhat understand when married-with-kids people in their 30s+ consider buying a house in this market. They want to “nest”. They want to provide their kids with stability in terms of friends and schooling.

But WHY would someone in their 20s even want to partake in this madness? GO TRAVEL INSTEAD, WHILE YOU ARE YOUNG, HEALTHY, AND FREE. Go take up amazing jobs in amazing places. Pursue higher education.

In 10 years you will suddenly find yourself married with kids and loaded down with responsibilities. And you’ll look back and wished you’d taken the opportunity, while in your 20s, to seek adventure and better yourself.

And, funny enough, your friends who don’t buy in this real-estate madness and instead pursue these amazing adventures will likely end up way better off than you. Just around the time you are declaring bankruptcy, wondering why you blew your 20s working as a debt slave to your money-pit that you grew to hate, and wishing your could, for once, afford a nice holiday, your friends will be returning home. They’ll have amazing stories of exotic adventures… Traveling in Australia, going to school in North Carolina, doing volunteer work in Dominican Republic, meeting someone special while backpacking through Europe, taking on a job in London and being transferred to the Vancouver office.

And to add insult to injury, they’ll buy your foreclosed condo for 1/3 the price you paid.

#92 Rabbi O'Reilly on 02.27.12 at 12:57 am

Tis a foin day to invest in Middle East condos

#93 };-) aka DA on 02.27.12 at 1:06 am

#74 Fifty Percent Correction Predictor on 02.26.12 at 11:47 pm
#56};-) aka DA on 02.26.12 at 10:27 pm
aka DA,
Question for you:
Who is more evil as of today?
The flipper/investor/developer who are exploiting the last few greed +stupid suckers for $500-600/sf condos, or
#36 Ozy who will Will laugh all day long once the CRASH arrives?
Please kindly answer.

That is a pretty tough one to answer. Push come to shove I would have to say Ozy as his ill intent is definite and of malice. I do not think that the flipper/investor/developer is of such desire for the failures of others nearly so much as just trying to do the best they can for themselves.

#79 I was Subprime on 02.27.12 at 12:21 am
72 aka DA – Our first house (in BC) was in ’91. We only
needed 5% down. The standard for CMHC was 10%, but
I think there was a deal with the BC govt. It wasnt a
grant, just a lesser down payment. Can you recall?

I can not recall specifically at any point in time other than there have more often than not been such programs aimed at helping First Time Buyers enter the market.That these more current fall at a time of economic capitulation is their only failing in the eyes of the Blog Dawgs. But the reality is it is not these people who are falling into foreclosure and hard times nearly so much as those who took out LOCs against their homes with which to play the condo flipping game.

It is not fair to the First Time Buyers that they be painted with the same broad brush that the speculators, who deserve their fate, are. Comparatively First Time Buyers are doing a LOT better than the Speculators. First Time Buyers bought “homes” they intended to keep long term. Speculators were gambling and taking risks.

It quite frankly pisses me off that First Time Buyers who responsibly entered into the dream of “home” ownership are lumped into that swath of “Greater Fools”. They are not. By and large they bought homes with responsible foresight and even thought they may be in a negative equity position are enduring and paying their mortgages intent on continuing to do so confident that the market will eventually during their intended period of ownership return them to a positive equity position and eventually they will have their home paid for.

#94 View on 02.27.12 at 1:13 am

Banking… My grandfather told me he lived in the most modern city in the WORLD! Heated garage at the opera house, office tower, and residential penthouse. They had a house too but didn’t like to shovel the sidewalks. Oh Canada!

#95 View on 02.27.12 at 1:15 am

Iran, Chicago, Energay,
Which hotel do you stay at?

#96 View on 02.27.12 at 1:16 am

President.
Obama Bombing!

#97 };-) aka DA on 02.27.12 at 1:22 am

I get Garths advice that one should have no more than 40% of their net worth in any one asset class but that is advice for old men like him and me. You tell me how a young person starting out today is to buy a home without some form of assistance be it the option of a high ratio mortgage or what ever…

The average First Time Buyer can’t possibly expect to pay rent and save for a down payment. Most have and will continue to rely upon some form of relief that eases the barriers to home ownership.

I don’t care what Garth says the real estate market is and will always be a most important component of the economy. If the real estate market fails the whole economy fails. Consequently we need First Time Buyers and we need to make “home” ownership a real and attainable dream.

#98 View on 02.27.12 at 1:24 am

Darling Preston:
Can you get a mortgage?

#99 View on 02.27.12 at 1:25 am

Gen X. We happen to be different.

#100 neo on 02.27.12 at 1:26 am

#68 amazed

Cruise down Balsam Drive in Oakville. I think I drove past 7 multimillion dollar homes for sale just on that small street. There are listings alright.

#101 View on 02.27.12 at 1:28 am

woulda done dat in de 1960s –or even now,” Phyllis

#102 neo on 02.27.12 at 1:31 am

#66GregW

War World III would be 10 times more profitable than housing bubbles to global financiers. That and those pesky Iranians giving the finger to the installation of a Central Bank. One of the few countries left who don’t have one. That and it is the last major oil interest up for grabs and it is nothing but a foregone conclusion. The U.S. has been getting their ducks in a row for some time now. I posted this before but here are the 45 military bases surrounding Iran. Of course, none are in Iran…That comes after occupation…

http://1.bp.blogspot.com/-SQFT77KZEHw/TzktFD8LSlI/AAAAAAAAFZk/2BUQ8FQIhD8/s1600/45+US+Bases+Surround+Iran_+each+star+an+US+base_.jpg

#103 been there done that on 02.27.12 at 1:50 am

I was in San Diego before, during and after the bubble working in construction for flippers, realtors, contractors etc.

When we left for BC in 2009 we thought we’d left the madness behind. Little did we know we were moving to a province with negative savings rates, flat wages and $650000 houses. It was stupid of me to not look into it before we came here but we’re not dumb enough to pay bubble prices now that we’re here.

We rented in Cali and we’re renting now. Pete is exactly right. Everything we saw down there is happening up here, right down to the “It’s different!” mantra recited by those too young to have seen it before.

#104 househornyhousewife on 02.27.12 at 1:54 am

#49 Elmer

Garth is right. Be absolutely SURE that you can afford a house before you buy one. Being able to make the mortgage payment because it is the same as your rental payment is not very sound reasoning for buying a home.

A house definitely costs more than renting, DEFINITELY. It is the price that you pay for not having that landlord on your back (and believe me I understand this but I still put up with landlords in my twenties because I knew I could not afford to own).

Before buying, work out ALL monthly payments with the house and make sure that they will fit into your budget (along with food, clothing, utilities, vacations etc..). This means that in addition to your mortgage payments you have to add the property & education taxes, house insurance, any maintenance costs (such as furnace maintenance, gutter cleaning, snow clearing, grass cutting etc., if not doing this yourself), any water payment if you have this in your area, and a nice cushion for repairs or house emergencies (these are too small to file a claim for but are large enough to be a burden .. also keep in mind that even when an insurance company pays for damages, they will often not pay to fix the cause .. ie. a leaky roof for example .. you still have to pay for the roof and they will cover any damages caused by the roof .. that is provided you took good care and the roof was in reasonable shape to begin with otherwise they will pay nothing).

Also, owning a home is not at all like renting in another way. If you rent and you want to move, you simply refuse to renew your lease and take up another one somewhere else. Moving from a house costs money in commissions and legal fees AND it may take some time to sell. Therefore, you must be sure you want to live where you buy for long enough to make it worth your while.

I have recently just purchased a house (after two years of looking) and am selling my current home. I can afford to do this but I still constantly check my numbers because I know damned well what’s coming over the next year (renos on the new place, closing costs, welcome taxes, commission costs, carrying two homes for a while while we sell etc..). It won’t be cheap and my husband and I had to be damned sure that we wanted to go through all of this hassle and expense.

Also, I would NEVER consider buying a home that is 4.5 times my income (don’t care what the bank says). This is too expensive and I would never go past 2.5 to 3 times, especially if you have a choice and are not buying in one of the big cities. But then again, I am very conservative and hate taking too much financial risk. I suppose if you are young, you can spread a mortgage over a much longer period (if you don’t mind paying lots of interest to the bank).

Think a bit longer on your decision and plan it out carefully before taking the plunge. It is a big decision and the bank does not care about you but about your money so just be sure you know what you are doing. When we bought our first house in our thirties, we were complete novices and ended up learning a lot of lessons the hard way, unfortunately.

Take care and I hope you eventually get what you want.

HHHW

#105 martin9999 on 02.27.12 at 2:28 am

jim is a loser – that’s what you tell him

#106 martin9999 on 02.27.12 at 2:48 am

Oil’s just the latest risk —

than you can easy short sell it at future’s market

#107 Anonymous on 02.27.12 at 3:37 am

Very well and done, but what exactly will be the trigger that stops the current mad stamped of house hunters to turn into ‘sellers’ instead of ‘buyers’?

Its fine to keep talking about how the ‘sky is falling’ but you have to wake up to reality and realize that the sky is not falling.

In the same way, you have to look around you and see that people are not worrying, they are happy and they are buying; this does not lead to a downturn in prices when people are content with their position in life.

#108 Basil Fawlty on 02.27.12 at 5:49 am

The falling US realty market is not deflation, it is a collapsing asset bubble.

#109 Timbo on 02.27.12 at 6:10 am

http://www.telegraph.co.uk/news/politics/9107485/George-Osborne-UK-has-run-out-of-money.html

The Uk is out of money?

http://www.cnbc.com/id/46533739

The Uk is out of money and Oil prices are threatening a recovery? This should help with Canadians record debt levels. I can see the ads now… Free gas for a year with every condo purchase.

#110 House on 02.27.12 at 6:13 am

I promise to help reduce consumer debt. I’ll pay off the $47.59 I owe on my Credit Card next month.

By the way how else do you value anything except by how much someone else is willing to pay for it?

#111 Kip on 02.27.12 at 7:00 am

“And all of it was borrowed at interest rates which, as F told us last week, “have nowhere to go but up.”

Interest rates will not rise in Canada at least until the US presidential election is over. To raise rates here and increase the spread between US and Canadian rates would hammer Canadian manufacturers who already complain of a sky high loonie.

#112 I'm stupid on 02.27.12 at 7:23 am

#110

By the way how else do you value anything except by how much someone else is willing to pay for it?

That’s exactly how to value something. The problem with housing is that it’s very emotional so things can get over valued very quickly and illiquid just as fast. Property lust is equivalent to sexual lust or a drug addiction. Everything is good until you realize the hot woman is a bitch or the drugs are preventing you from functioning normally. Then of course it’s over just as fast as it started.

#113 dd on 02.27.12 at 7:23 am

energy …

Overall consumption has fallen in the states by 6%
The eurozone is in a recession
China struggling with demand.

Why the high price. QE. We pay the price for saving the banks.

#114 dd on 02.27.12 at 7:36 am

#25coastal on 02.26.12 at 7:47 pm
late February(the high point of school semester) there were very many vacancies plus quite a few for sale too.
My feel is Victoria is beginning a drain on it’s youth and young families like back in the 80′s and 90′s busts.

……………………………………………………………………….

Coastal … Students drop out by midterms. Happens every year.

Victoria has never been a place for the young to stay. Job posting become avaliable when people die.

#115 dd on 02.27.12 at 7:41 am

#43TRT

Also, why start quoting Brent. What happened to West Tex Intermediate???


Maybe 600 million people pay oil by WTI. The other 5 billion pay by Brent. Brent is world wide.

#116 dd on 02.27.12 at 7:45 am

#109Timbo

The Uk is out of money?

…………………………………………………………………………
Timbo,
Massive intervention coming in the next couple of months. Watch the bailout of the system with paper dollars. Of course this will be offset with inflation (a lot more to come).

#117 dd on 02.27.12 at 7:52 am

#48Retired Boomer –

Deflation – in the things we own
Inflation – in the things we need

#118 Freedom 55 on 02.27.12 at 8:16 am

#61 View on 02.26.12 at 10:41 pm
“How much debt did I have at age 24? Zip, zero, zilch, the null set, nothing.”
………………………………………………………………….

Me either, at 22 years old when I got my Journeymans Ticket after 4 years of apprenticeship I quit my job.

I sold my Trans Am for $5000 bucks and back packed around the world in 720 days. (At the half way point I worked in the Australian Outback for 3 months and made another $5,000 bucks)

It was the best time/experience/memories of my life.

#119 John on 02.27.12 at 8:43 am

We’re at the liquidity table, ready to think the same way. Ready to ignore fundamentals. It’s just human nature.

An economy without consumer spending and plugged into a maxed derivatives market will net 2, 5, 10 and even 20 year returns. There are exactly no “investments” not deeply ingrained into derivatives and exportation of first world manufacturing sectors. This reality must be on the balance sheet, or we’re moving into denial territory. The same all-to-human character defect present in all bubble ecosystems.

It’s all house-drunk thinking. Nothing changes, if nothing changes. The issue was, is and will be about a systemic change. The “lessons of the house” are lost without understanding and preparing for this.

#120 };-) aka DA on 02.27.12 at 10:05 am

#103been there done that on 02.27.12 at 1:50 am
I was in San Diego before, during and after the bubble working in construction for flippers, realtors, contractors etc.

When we left for BC in 2009 we thought we’d left the madness behind. Little did we know we were moving to a province with negative savings rates, flat wages and $650000 houses. It was stupid of me to not look into it before we came here but we’re not dumb enough to pay bubble prices now that we’re here.

We rented in Cali and we’re renting now. Pete is exactly right. Everything we saw down there is happening up here, right down to the “It’s different!” mantra recited by those too young to have seen it before.

So what you are saying is now you are some 2,000 Kilometers from where you left your troubles behind and yet you don’t feel any different. You brought with you the one thing that is the cause of all your troubles – yourself. It was not what you left which was the problem nor that which you met. The problem was then and is now in your mind. “As a man thinketh in his heart, so is he.”

There are a lot of people doing just fine in this economy. You can be one of them. But you have to want to be. There are still houses being built, bought and sold. There is still money being earned by those willing to work. “When the going gets tough the tough get going.”

#104househornyhousewife on 02.27.12 at 1:54 am
#49 Elmer

Garth is right. Be absolutely SURE that you can afford a house before you buy one. Being able to make the mortgage payment because it is the same as your rental payment is not very sound reasoning for buying a home.

A house definitely costs more than renting, DEFINITELY…

Today yes. Tomorrow who knows.

There have been many times when home ownership was no more, or less, expensive than renting. This is in great part what drove prices at the onset of this most recent bubble. I remember it well when in 2002/2003 many a renter came to me to buy a home as it just made logical sense then to do so as the cost of ownership was not much, if at all, more than renting. On top of which there was the security of controlling your own home. The increased demand spurred house prices to rise. I remember it well as we were buying long term rental holds at the time- why? Because they could then be bought at a price they could in turn be rented and show a profit at the end of the day. These days will return but it will not necessarily be due to falling real estate values alone.

Things will change – I think they already are. I know well what it costs to rent a home and, despite what is said on these blogs, it is getting more expensive not cheaper.

#121 Kris on 02.27.12 at 10:21 am

I think it’s pretty clear (now that even MSM agrees!) that the fundamentals are pointing to a slowdown. But apparently many in the GTA don’t agree, judging by high prices and line-ups outside model homes. No matter what governments and economists say, the attitude on Main St is what ultimately matters.

Reminds me of a Buddhist story –
Student: I need a blessing to overcome my addiction to , Master.
Master: Well, the Buddha’s blessing is on you, and my blessing as well. Only YOUR blessing is missing :)

#122 OneMoreThing on 02.27.12 at 10:25 am

Debt Deflation will return!

#123 OneMoreThing on 02.27.12 at 10:25 am

But wait, did it ever leave!

#124 };-) aka DA on 02.27.12 at 10:32 am

You attract not necessarily what you want but more of that which you are.

There is a reason the predominant thought on this blog is shared by it’s participants because they attract more of the same.

There is a reason I offend you all so and that is because I am of different thought than you. You despise that I do not affirm your beliefs. You come here to gather more justification for the way that you feel. When you read my writings you are taken aback.

That I tell you something you do not believe it is because it is something you DON’T WANT TO BELIEVE.

“As a man thinketh, so he is.”

#125 blase on 02.27.12 at 10:34 am

“Warren Buffett on CNBC: I’d Buy Up ‘Millions’ of Single-Family Homes If I Could”

http://www.cnbc.com/id/46538421

“Warren Buffett says along with equities, single-family homes are a very attractive investment right now.”

-I’m guessing he doesn’t mean condos in Toronto, crack shacks in Vancouver, or 1,500 sq. ft $600,000 homes in Regina.

#126 Ralph Cramdown on 02.27.12 at 10:35 am

By the way how else do you value anything except by how much someone else is willing to pay for it?

Well, if it’s a baseball card, that’s about all you’ve got. If it produces an income stream (rental property, bond, dividend paying stock), you can compare the risk-adjusted value of that income with those of alternative investments. If it’s a depreciating but useful asset, like a used car, you can compare it with prices for similar items (like a similarly reliable car with similar features in similar condition), or for equivalent services (like the cost to rent a similar house).

As soon as you get sucked into giving up on objective valuation, you end up buying too high (Internet stocks that don’t make profits, and never will), and selling too low (your older but reliable used car).

Successful professional investors, be it in real estate, stocks, bonds or whatever, have come up with valuation metrics. Usually all it takes to learn is a trip to the library.

#127 Kaganovich on 02.27.12 at 11:10 am

dd

You are right

#128 Bailing in BC on 02.27.12 at 11:11 am

104 househornyhousewife

I don’t know how the market is where you live but don’t you think its pretty risky buying your next house before selling your current one at this stage of the market cycle? Even hot markets can turn on a dime. Are the two houses you own more or less than 4.5 times your income?

#129 truth hammer on 02.27.12 at 11:28 am

The young couple can borrow twice that and more as long as we have CMHC bailing banks out of any risk. The banks are just intermediaries that enjoy a risk free cash flow. In the event of default…the CDN taxpayer picks up the shortfall….why wouldn’t the banks loan everybody who walks in the door 740 K? Of course they will continue to do it…you would to…..no risk….all profits secure……biggest scam ever perpetrated on the CDN taxpayer.

#130 Daisy Mae on 02.27.12 at 11:36 am

American on 02.26.12 at 4:03 PM
At #204: “Splitbongwater, we would welcome strata fees as low as $400/month on the West Coast here in the States.

We are paying $1,245/month for our 1,729 square foot 2 bed 2 bath in Seattle. Yes, it sucks.”

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

Strata fees? Actually, it’s criminal.

#131 NoName on 02.27.12 at 11:38 am

Interesting article, from cppi, article probably has bias too, but it explains gasoline prices us Canada, and compare them to prices in usa, and in some of EU countries. I hate when they don’t post a date to see when article is published but it looks like that is an about 1 year old, it does not show HST, but with little bit of imagination we can see tax on tax very easily.

http://goo.gl/UtfFy

I saved this pie chart years ago, it was interesting for me to see how different we are for our neighbors down south, probably in 2009 not that much, but now…

http://i43.tinypic.com/35lb7rk.jpg

#132 JIM on 02.27.12 at 11:57 am

#126 Ralph Cramdown
Everything , and I mean everything , in this world is worth precisely what someone else is ready, willing and able to pay for it, at any moment in time. So, if you can get someone to pay you $1.5 million for your crack shack in West Van, then that’s what it’s worth – at that moment in time.

#133 P F Murphy on 02.27.12 at 12:04 pm

I agree with Pete (in article) “the total collapse of consumer spending” is the ultimate calamity that will affect us all. Just Garth and 128 leery commenters to keep the economy going. Yah, we’re done!

#134 };-) aka DA on 02.27.12 at 12:13 pm

#128Bailing in BC on 02.27.12 at 11:11 am
104 househornyhousewife

I don’t know how the market is where you live but don’t you think its pretty risky buying your next house before selling your current one at this stage of the market cycle? Even hot markets can turn on a dime. Are the two houses you own more or less than 4.5 times your income?

If you re-read househornyhousewife’s post I believe you will find her a most deliberate planner who has thought it through.

That she can afford to do so, as can many more with similar forethought and planning, should tell you something about your inability to even conceive of such a plan.

Whether you think you can or whether you think you can’t you are probably right.

#135 coastal on 02.27.12 at 12:14 pm

Coastal … Students drop out by midterms. Happens every year.

Victoria has never been a place for the young to stay. Job posting become avaliable when people die.

dd,

Guess you haven’t been to Victoria lately, there are more young people here than ever before. Who do you think rents all those basement suites ? It aint old rich people. Young people come here and don’t want to leave and will do anything to stay until they have no choice, and I smell a big change happening.

A normal rental market in all of Victoria in February is extremely tight, looking at all the listings it tells a far different tale from the norm.

These suites I viewed clearly hadn’t been lived in for a couple of months and won’t be til fall semester. That’s alot of investor pain trying to be a Trump wannabe.

#136 Uh Oh Canada on 02.27.12 at 12:16 pm

I’m trying to quell my addiction to this blog and live like an optimist. But I can’t find anything positive about this whole housing debacle. I’ve changed my view of the bubble from being a 15% deflation to being worse than the US. When it does pop, yeah, I can outright buy a house, but I know many folks who will be doing the opposite- foreclosing.

#137 Foggy on 02.27.12 at 12:19 pm

@ 49 Elmer
“I’m thinking of buying a house… Maybe Keswick. I could buy a newer detached house there for about 4.5x my income. The mortgage would be about what I currently pay for rent. This is dependent on me being moved to a different department where they allow people to work from home and only come in to the office once a week. Otherwise I will have to keep renting in Toronto… you’d have to be insane to commute from Keswick to Toronto daily…”

My company moved to Hwy 404 and 16th Ave in the early 90’s so I started looking north to buy my 1st house. Keswick was perfect. Nice 3 bedroom (new) for 165K. The daily commute was 35 minutes of highway with 3 traffic lights encountered. In the GTA it was 30 minutes and 20 traffic lights of stop and go gridlock. And I actually lived in a neighbourhood where people talked to you. And you could get into boating (Simcoe) if you wanted.
If you buy there your house will go down a bit – but not much. It’s fairly low to begin with. I stayed there for 17 years. Never did I contemplate moving back to congested, smoggy, overpriced Toronto.

#138 Buy Low Sell High on 02.27.12 at 12:20 pm

On Sunday, there was a train wreck a little west of Toronto. Maybe that is a harbinger of things to come in GTA real estate.

#139 Jasonturbo on 02.27.12 at 12:27 pm

I dont understand what the big deal is with housing collapsing. The government will at some point bail people out that are way over there heads. just like the states. I say buy, what happens happens, bankruptcys not a big deal because there will be about 3 other million canadians in the same situation. Governments will bail us out, they will at some point admit that there responsible for this. Taxes go up, old gen helps bail out the younger by moving CPP to 70 year old. Besides this whole mess were in now is a direct result of the babyboomers

#140 Kilby on 02.27.12 at 12:37 pm

Central Okanagan. 4,177 active listings.

Completed residential sales last two weeks.
109 sales, last year same time 116 sales.

#141 Tiny Bottoms on 02.27.12 at 12:46 pm

LOAN HUNGRY Canadians to drive Bank Profits

Many Canadians blithely ignored warnings about record debt levels and kept borrowing this winter and that should underpin a strong performance by the country’s banks, with quarterly profits seen in line with blockbuster results a year earlier.

http://ca.finance.yahoo.com/news/loan-hungry-canadians-drive-bank-153258381.html

#142 Pat on 02.27.12 at 1:02 pm

#104 househornyhousewife on 02.27.12 at 1:54 am :

“A house definitely costs more than renting, DEFINITELY. It is the price that you pay for not having that landlord on your back… ”

Actually, in a normal market renting should cost more – a premium for having a landlord to take care of the property instead of you.

#143 Roial1 on 02.27.12 at 1:05 pm

#69- 45north on 02.26.12 at 11:16 pm

amazed: Constantly fixing, replacing things

tomorrow morning I’m going to call Faucet Fix to fix the tap in the kitchen. These one arm faucets are tricky. I figure $150.

They are NOT hard to fix at all.
Find the hex head screw under the Hot/cold symbol and remove or loosen it. this removes the handle.
The rest just presents itself to you.
You do not have to buy any new parts as the major manufactures have lifetime waranties on their fixtures. Just take the defective parts in to your retailer and he will give you the new parts.

There. Now you owe me $150.00 I’ll invoice you asap.

LOL

#144 };-) aka DA on 02.27.12 at 1:06 pm

“Besides this whole mess were in now is a direct result of the babyboomers” – #139 Jasonturbo

Sadly you are righter than you are wrong. And I be one of those “babyboomers” although at the very tail end of it which is a bitch in and of itself.

But don’t think for a moment that your generation won’t make its fair share of mistakes too.

The lessons of the past are ignored and obliterated in a contemporary antagonism known as the generation gap. – Spiro T. Agnew

#145 Roial1 on 02.27.12 at 1:07 pm

OOPS! forgot to mention TURN OFF THE WATER FIRST under the sink

#146 Ralph Cramdown on 02.27.12 at 1:11 pm

#132 JIM

Everything , and I mean everything , in this world is worth precisely what someone else is ready, willing and able to pay for it, at any moment in time.

I agree completely. But I didn’t get to where I am, and I’m not going to get to where I want to be, by buying high and hoping to sell higher. Just because some fool thinks Amazon is worth 130x earnings or a house is worth 400 months’ rent doesn’t mean I have to nod at the wisdom and efficiency of the marketplace.

#147 terces on 02.27.12 at 1:21 pm

I thought that last year the government put a cap on the number of imigrants who could buy their way into the country. Is this not the case? Does anyone know how many HA are coming in now on a monthly basis.

Are all of the asians lining up to buy condos in TO new immigrants?

#148 Dorothy on 02.27.12 at 1:27 pm

#139 – I’m sick and tired of all this bullcrap about the housing crisis (and everything else that’s wrong with society these days) being the fault of the Baby Boomers. But I guess it’s just easier for people to find someone else to blame, rather than looking in a mirror.

I’m a Boomer, and when it comes to housing, when I was young and about to get married housing costs did indeed rise. The main reason being there were so many of us Boomers looking to get married and start a family who wanted to get into the housing market, and not enough houses available. So the generation that came ahead of us Boomers, my parent and grandparents generation, made a fortune selling us their houses at inflated prices, and were able to enjoy Freedom 55 retirements as a result.
Note I say the generations PRIOR to the Baby Boom enjoyed this privilege.
The Baby Boomers were left paying inflated prices for their homes, and with the resulting high mortgages. Not long after interest rates soared to around 20%, so many of us lost our homes at that time.
Now, many Boomers (those who either managed to keep their homes back then, and those who have bought again since) are trapped between having to look after the children they had (either later in life when they could afford it or boomerang kids that just won’t move on and start their own lives) and trying to look after elderly parents. All of this at the same time as trying to juggle their own jobs and financial commitments with planning for their own retirement.
For the most part, it wasn’t Baby Boomers who bid house prices up to ridiculous levels. It isn’t Baby Boomers who are lining up to buy overpriced, sometimes unbuilt, condos. Yes, there are some, but they’re not the majority.
Most of the people behaving that way are young property virgins, who are the irresponsible children of the Baby Boomers.
If the Boomers are to blame for anything, it’s for failing to teach their offspring financial responsibility.

#149 JIM on 02.27.12 at 1:28 pm

Well, actually it -is- different here. In the US most mortgages were non recourse, meaning essentually that the owner who found himself underwater could simply ‘return the keys to the bank ‘ and walk away free and clear. Not so here in Canada where most mortgages are recourse, meaning your lender can come after you for the balance! You can’t walk away. Consequently, Canadians are much more likely to stick it out and pay off theri mortgages.

Coupled with that is the difference in mentality. An American had no problem taking out a huge HELOC and then walking away , Canadians do have a problem with that!

Where it is the same, is govenment intervention. The US stepped in to stop ‘robo-signing’ thereby preventing mass foreclosures . And also , in the process, allowing defaulters to remain in their houses rent free for years. Here in Canada , I can’t see any government allowing mass foreclosures and resulting evictions. That would be political suicide! Trust me, the Feds are doing everything now, and will do what ever it takes, fair or unfair, to prevent a US style melt down.

#150 jshum on 02.27.12 at 1:29 pm

Unfortunately I think people like the ones above are in the majority so they will be bailed out. The ones with no debt, the tax payers, will be paying for the bail out

#151 Canadian Watchdog on 02.27.12 at 1:34 pm

Demand gap in the next 2-5 years will have a massive effect on home prices.

U.S. Student Debt Is Stifling Home Sales
http://www.businessweek.com/magazine/student-debt-is-stifling-home-sales-02232012.html

Canadian students upon graduation hover around $27,000 debt
http://fullcomment.nationalpost.com/2012/02/22/matt-gurney-university-students-borrowing-their-way-into-unemployment/

#152 eaglebay - Parksville on 02.27.12 at 1:45 pm

#139 Jasonturbo on 02.27.12 at 12:27 pm
“Besides this whole mess were in now is a direct result of the babyboomers”

BS. You did it to yourselves.
A little math and common sense could have saved you.
Responsibility and a bit of thinking on your own could have done magic. Duh…

#153 Bailing in BC on 02.27.12 at 1:49 pm

#134

Devils Advocate, you have become rather pissy of late. What’s wrong, business down.

Yes I got that HHHW has gone through all the numbers and can afford the house she has purchased. She may well be in a position to hold both houses long term. For all I know one of the properties may have potential to cash flow as a rental. I am asking for her thought process behind it. From reading HHHW for years(?) I got the impression that while HHHW feels financially secure, she was not a high roller that could lose money flippantly. In the event of a down turn she will be doubling her exposure, and may well be in a situation where she is forced to lock in that loss if she can’t afford to hold both properties long term. Perhaps she can, perhaps she feels that a down turn or being unable to unload the first property is unlikely and a risk worth taking. Perhaps the value of both properties is less than her 3x income threshold. I don’t know, that’s why I’m asking. It’s not an attack, it’s a question. HHHW perhaps you can weigh in?

As for my inability to concieve of such a plan, you obviously know nothing about me. At one stage I owned property at 10x my income. Of course back then the prices were going up 10%, 20% and even once 30% per year. Good times!

#154 Bailing in BC on 02.27.12 at 1:51 pm

For the spelling Nazis “conceive”

#155 oslec on 02.27.12 at 1:59 pm

“108 Basil Fawlty on 02.27.12 at 5:49 am

The falling US realty market is not deflation, it is a collapsing asset bubble”

Inflate de Balloon, Deflate de Balloon…..

It is all semantics, bottom line is what is left in your wallet that matters…

#156 Sticky on 02.27.12 at 2:05 pm

#113 dd

“we pay the price for saving the banks”
…well said.

#157 Lostinthewilderness on 02.27.12 at 2:05 pm

Another example of the rampant greed gone mad.Leduc Alberta , new condos condemned. Who’s responible? The bankrupt contractor?. The negligent inspectors who allowed occupancy permits.Mortgage compamies and lawyers who advanced the funds . Realtors who sold these substandard units.It all works until one person stops paying , then it backs all the way up the sewage pipe.Soon to come to other neighborhoods near you.Feed the greed !

http://www.edmontonjournal.com/entertainment/Leduc+condo+residents+forced+leave+answers+meeting/6212840/story.html

#158 reasonfirst on 02.27.12 at 2:06 pm

#124 };-) aka DA

DA – wake up! You don’t offend people with what you say – you offend them with how you say it.

#159 oslec on 02.27.12 at 2:08 pm

“#148 Dorothy on 02.27.12 at 1:27 pm
Most of the people behaving that way are young property virgins, who are the irresponsible children of the Baby Boomers.
If the Boomers are to blame for anything, it’s for failing to teach their offspring financial responsibility”

Sooooooo….. You agree it is the boomer’s fault???
LOL

#160 Bailing in BC on 02.27.12 at 2:10 pm

Oh, and DA – I’m sure that there were a lot of people in Phoenix who read “The Secret” and thought they were going to get rich from RE. Their positive thoughts went out into the universe and the universe repayed them by taking a big dump on them, just the same as those with bad attitudes. Life’s a bitch like that.

#161 $3 per Liter on 02.27.12 at 2:14 pm

I can’t wait to see how Israelis burn Euroabian investment in Persia. It is long time overdue. I believe it is Obama fault that Ahmadinedzhad – this neo-Hitler in Teheran was allowed openly and without shame to delegitimize and threaten with annihilation another UN member, Israel. I prepared to pay 3$ per liter of gas if necessary just to send this theocratic neo-Nazi regime in Iran to long awaiting virgins.

#162 disciple on 02.27.12 at 2:27 pm

So, can I mention Iran, since it’s the accompanying subject in the post for today, or would that be “off-topic”? I will assume yes to both questions above, and continue…

What type of foolish lemming would be mind-controlled by the MSM into believing that Iran is a threat? Name the only Middle Eastern nation that possesses a “secret” nuclear weapons program, and has a monopoly on “security” firms worldwide, and is stirring up trouble everywhere. Do you know? Demonic Dimona. The new cold war has started in Syria, according to Robert Fisk. The “solution” to the impending global credit contraction, no doubt. Let’s expend more of our future on machines of death and destruction, what a great idea! Pure genius. And you support it everyday through your silence and apathy. Good job. Well done.

When Harper or the next banker puppet asks for your support to sacrifice your sons and daughters in the pursuit of this mind-numbing ritual, what will you do?

#163 Canadian Watchdog on 02.27.12 at 2:34 pm

Anybody wondering why stocks have been rallying? Two words: Low Volume http://i41.tinypic.com/mj3l0i.png

#164 disciple on 02.27.12 at 2:34 pm

Wow. Alleged electoral fraud in last federal election. I guess the media had to cover someone for a payoff somewhere. I told you so. Where is Chaddywack gone to? With his “official” vote count numbers… I am doubly saddened that poor Jack isn’t here for the good news. Not a coincidence, IMHO.

#165 The American on 02.27.12 at 2:45 pm

At #130: Daisy Mae, I don’t necessarily disagree with you. However, I actually sit on the Board of Directors in my condominium association as the Treasurer. I inherited the budgets from the previous board. I was shocked as I thought our dues were outrageous. What is interesting is every penny is accounted for from staffing salaries and benefits, insurances (including earth quake, flood, fire, catastrophic, etc.), cleaning of all common spaces, window washing, capital replacement reserves (which account for about 25% of each months’ dues, our reserves are funded at 100%), maintenance contracts, high-speed elevator servicing each month, utilities (except you pay for your own electricity, cable, and phone in your own unit), vendor contracts, landscaping, etc. It is all there indeed, and it adds up very quickly to everyone’s surprise even though the building is only three years old. What is actually concerning is that reserves in many places in Canada are so incredibly low for the most part. What that means is that big trouble is ahead for the owners when replacement of items and such begin in the next few years. Developers notoriously understate the strata dues at the very beginning to entice buyers to buy as the developer is the decadent and has the “right” to create the first budget in the declaration and public offering statement.

I’ve visited many building, for example, in Vancouver. Fairmont Pacific Rim residences comes to mind. Although the dues seem high to most buyers (and it isn’t cheap, mind you), there is absolutely no way the dues can remain where they are as they are operating a five-star building with five-star service to the residents. If ever you see dues less than $0.55/square foot in a glass-curtain high rise, full-service building, BUYER BEWARE. You’re going to get nailed with a special assessment. I’ve never seen it not happen, in fact. My advice is to accept initial higher dues and contribute to a very healthy reserve account, if condo living is your thing. You’re going to need it. Trust me on this.

If anyone is going to buy or already has bought a condo, PLEASE read the entire declaration, public offering statement, AND THE BUDGET. So often consumers bypass the budget al together. Once you’ve reviewed the budget and determine what the monthly portion of your dues is allocated to the replacement reserves, you must then ask this, “Is this portion of replacement reserves meeting 100% funding of the required reserve study that was performed by and INDEPENDENT reserve study consultant?”

The only way to know the answer to that is to ask the Board for a copy of the reserve study itself. It will be very clearly spelled out what a 50%, 75%, or 100% reserve requirement would be each month. Anything less than 100% or more will almost always mean a special assessment is forthcoming in the future. Special assessments can range from very little, like $1,000, to hundreds of thousands of dollars for each home owner. Use caution and always have an real estate attorney review these documents. Just my advice.

#166 };-) aka DA on 02.27.12 at 2:49 pm

#153Bailing in BC on 02.27.12 at 1:49 pm

Devils Advocate, you have become rather pissy of late. What’s wrong, business down.

Your opinion.

#158reasonfirst on 02.27.12 at 2:06 pm
#124 };-) aka DA

DA – wake up! You don’t offend people with what you say – you offend them with how you say it.

Your perception is my only deception.

#160Bailing in BC on 02.27.12 at 2:10 pm
Oh, and DA – I’m sure that there were a lot of people in Phoenix who read “The Secret” and thought they were going to get rich from RE. Their positive thoughts went out into the universe and the universe repayed them by taking a big dump on them, just the same as those with bad attitudes. Life’s a bitch like that.

I have actually never read “The Secret”. I’ve heard of it but never read it predominantly because I consider the title BS and understand the concept form other aspects of my life’s learning – experience. It’s no secret. On the other hand I guess the reality eludes some like you. Yes, life is a bitch like that.

Those people in Phoenix you speak of… might they have failed for reasons other than what they might blame their failures on? There are a lot of people doing just fine; homes are being built, bought and sold. People who are willing to “work” for it are “earning” a good living.

#167 };-) aka DA on 02.27.12 at 2:55 pm

#153 & #160 Bailing in BC

You – just – don’t – get – it – do – you?

You are your own worst enemy.

#168 disciple on 02.27.12 at 3:00 pm

Mr. Market. A neglected icon of Mammon-ic holiness. Praised widely but not really followed by anybody. Mr. Manipulation has stolen his thunder. In truth, markets are created artificially, all of them. Look at pasteurized milk. If the masses knew that it causes all kinds of health problems, the market for it would disappear overnight, but most of you wouldn’t know it if disciple wasn’t here to show you. Ridicule me all you want.

http://www.anh-usa.org/healthy-milk-what-is-it/

#169 edmonton mortgage broker on 02.27.12 at 3:13 pm

sub prime in Canada is alive and well….

http://campaign.r20.constantcontact.com/render?llr=w79rwqhab&v=001y4Ou-PBFbAaxaQoxVlwYyNkFcpK4lPET-51PZmqyOtvWVbD_sHVXbuhRCnkvjHzoZBFFX7gWzJsggKZSk8uz5pbwZ7l5gzkrQOi6EUWm8-aQqi5FWt0lCXNzUMeHgi10N6fyExoUV-LNvGKy7fC-hG-NCSvsLbNimk_fBNRChQQ%3D

#170 Silver on 02.27.12 at 3:15 pm

For me its simple…

All second properties should be considered a fully market taxable investment.

No secondary properties should be able to get CMHC backing in any form period.

Let the market determine the mortgage rate… not the taxpayers…pockets.

Any property flipped in two years is subject to full tax rate as an investment.

If it was CMHC guaranteed… they owe the subsidy with market interest back… to the Crown pockets.
That’s called free market capitalizm guys.
Properties that flip… they should be left out from the Assessment Role List Averaging… as they cause blips in the market evaluation, driving the appearance of artificial market value and growth.
Allowing pump and dump schemes.
Which is where we are now………

Silver

#171 Ralph Cramdown on 02.27.12 at 3:21 pm

#149 JIM,

Well, actually it -is- different here. In the US most mortgages were non recourse, meaning essentually that the owner who found himself underwater could simply ‘return the keys to the bank ‘ and walk away free and clear.

Nope. Look it up. Even in most of the states where the “Purchase Money” mortgage (the one you gave when you bought the house) was non-recourse, subsequent refis weren’t, and EVERYBODY refinanced as interest rates dropped.

But I’m sure you know a few other reasons why it’s different here. It always is, isn’t it?

#172 Bill Gable on 02.27.12 at 3:25 pm

“More American households are falling back into the debt hole, this time without the safety net of home values to help bail them out, the New York Post reported Sunday.
Last year, total US consumer debt reached its highest point in a decade, according to a credit card industry observer.
“Now more than ever, families need to work at saving and paying off any outstanding debts,” said Howard Dvorkin, a certified public accountant and founder of the credit counseling service Consolidated Credit.
After a few months of reducing credit card debt levels, Dvorkin said, Americans are starting to return to their reliance on debt.
“People made some progress in reducing card debt earlier in the year, but in the last few months, as the stock market started to rise, they started to return to their old ways of charging things,” he explained.

>>Canadians are doing the same thing – PLUS – using their homes as ATM’s.
When the Bank starts calling HELOCS, all heck is going to break loose.

This is looking bleaker than last nights dreadful Oscar Show.

Read more: http://tinyurl.com/7en5zvw

#173 Two-thirds on 02.27.12 at 3:28 pm

Concerning the correlation between oil prices and real estate prices, here is a good analysis using Toronto and Edmonton as case studies:

http://edmontonhousingbust.com/2010/09/blast-from-the-past-oilberta/

Conclusion? At best, inconclusive, at worst – myth.

#174 reality on 02.27.12 at 3:31 pm

@81 – Real Jimbo

While I generally agree, you should realize that for first time buyers, there really isn’t much of a point timing the market. Waiting for 24 months for prices to go down, the ftb will have to pay higher interest rates/rent during that time, so in the end will lose out.

Ownership only makes sense if you have a 10 year horizon. If you have that horizon, now is always a good time to buy.

#175 Preciousss on 02.27.12 at 4:03 pm

#163 Watchdog

Further to your volume observations:

1.Low Volume & contracting,
2.Low Volatility & shrinking,
3.Contracting Margin,
4.Contracting Short Positions,
5.Historically elevated Overbought readings.

#176 John G. Young on 02.27.12 at 4:04 pm

#124 };-) aka DA

You despise that I do not affirm your beliefs.

Well unlike you I don’t flatter myself by presuming to know what other people think/feel, but speaking for myself I can tell you that what I despise is that everything you write suggests that you think that you are better than everyone else here.

You are not.

#177 a prairie dawg on 02.27.12 at 4:15 pm

@ #154 Bailing in BC

‘I before E, except after C.’

Sieg Heil

#178 Kris on 02.27.12 at 4:26 pm

Went to see a 2600sqft home listed at 640k outside GTA. Curiously the same home sold for 20k less last year. Two new appliances and 2k worth landscaping – to justify the markup. How did the mkt respond? Sold in a day.

Point being, it’s gonna take a lot more than an economics lecture to turn this mkt around. The Average Joe’s gotta feel the pinch in his wallet, i.e., rates gotta rise, or unemployment, or taxes, or costs of food/energy. None of these factors are about to change significantly in 2-4 months, are they? May be yet another over-heated spring/summer in the GTA.

The buyer of that home paid $12,000 in closing costs and then another $25,000 in commission, plus investing $3,000 ion improvements. Looks like he lost $19,000. — Garth

#179 eagle eyes on 02.27.12 at 4:39 pm

I will be looking to buy in Vancouver this coming June. I am not a greater fool. I have a very good strategy. I am going to cross my fingers and my toes, jump over any cracks in the sidewalk, and avoid any black cats between now and June. Hopefully this will help in my purchase power.

#180 Kris on 02.27.12 at 5:07 pm

#178 Kris
The buyer of that home paid $12,000 in closing costs and then another $25,000 in commission, plus investing $3,000 ion improvements. Looks like he lost $19,000. — Garth
———————————-
You mean the seller, Garth.. I agree. They said it was a job transfer, and I tend to believe them (The numbers don’t support a flip, as you showed well)
My point was about the buyers.. People still buying at more than last year’s prices, in a hurry too.

No, I mean the buyer who became the seller. He was gored on both ends. The massive transactional costs of real estate are too often overlooked. — Garth

#181 Amazed on 02.27.12 at 5:31 pm

@kris… This is exactly my point, people talk as if they are making money, but they are actually losing money when they sell… And this is just the beginning. I’ve seen people flip and talk about making money, but they don’t factor any of the legal fees, carrying costs, land transfer etc. at the end of the day, they would have been better off working for minimum wage for the year versus flipping homes. They are just fortunate to have a second source of income via the spouse and these losses are hidden. Many people had homes appreciate just as a result of time and not doing any work to the home. These people had a better chance of coming out and breaking even. The 6% lost on real estate fees alone makes it difficult to make money. Let alone land transfer, legal, government and taxes you will pay. Math is key. If you can teach people the math, you might be able to reason with them.

#182 villain? on 02.27.12 at 5:32 pm

#56};-) aka DA on 02.26.12 at 10:27 pm

Are they snobs or are you just jealous? Your wishing an ill fate to befall upon your fellow man is probably a clue…

People tend to get what is coming to them. I am sure you will get yours. };-)
—————————-

Well said! You only forgotten one thing, it goes both ways!

People who live beyond their own means, and have this “better than others ego” also will get what is coming to them.

Goes both ways, don’t you think?

#183 };-) aka DA on 02.27.12 at 5:37 pm

#176John G. Young on 02.27.12 at 4:04 pm
#124 };-) aka DA

You despise that I do not affirm your beliefs.

Well unlike you I don’t flatter myself by presuming to know what other people think/feel, but speaking for myself I can tell you that what I despise is that everything you write suggests that you think that you are better than everyone else here.

You are not.

I don’t know that I am better than everyone else who posts on this “pathetic” blog. We all have within us each capacity to be what ever we want to be none more none less. It never ceases to amaze me how little intelligence matters and how much attitude does.

With that being said all I know for sure is that I am glad I am not of such mind as the majority who post comment here which divulges their mindset every bit as much my posts do mine.

#184 Mr Buyer on 02.27.12 at 5:48 pm

#178Kris on 02.27.12 at 4:26 pm … Went to see a 2600sqft home listed at 640k outside GTA. Curiously the same home sold for 20k less last year. Two new appliances and 2k worth landscaping – to justify the markup. How did the mkt respond? Sold in a day.
……………………………………………………………
What was the MLS number. Without an MLS number I am begining to think that these stories are mere hot air. Sorry. BUYER BEWARE. THE MARKET HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE. DO NOT BUY INTO A FALLING MARKET. BUYER BEWARE.

#185 neo on 02.27.12 at 5:57 pm

This market is giving itself blueballs trying to get to DOW 13,000.

#186 Preciousss on 02.27.12 at 6:09 pm

Study claims that wealthy people are more likely to lie, cheat, and steal.

http://www.wired.com/wiredscience/2012/02/income-and-ethics/

#187 Mingeford on 02.27.12 at 6:22 pm

#177 a praire dawg

‘I before E, except after C.’

Sieg Heil
…………………………………………………………………

How weird

#188 VICTORIA TEA PARTY on 02.27.12 at 6:29 pm

“SELECTIVE DEFAULT”: THE GREEK GOES ON!

CNBC reported after the US markets close that S&P has driven a stake into the heart of Greece’s so-called chances of an economic “recovery.”

The words “selective default” were waved about in a detailed report from the giant ratings agency.

Specifically the complaint is that Greece has not been following its fiscal marching orders as issued by Germany et al. Therefore there’s this downgrade that puts Greece “paper” at a level somewhere below junk status. What a revelation!

Should that be a SURPRISE?

No! Greeks have a marvelous history of not paying their taxes while their political masters have forces a sucession of defaults.

Can’t teach that tricky ol’ Greek dog new tricks, eh? Why should they change? Things are as good as they’re gonna get, to them, for a long time to come. Maybe they’re right.

ARE WE ANY MORE FISCALLY RESPONSIBLE HERE IN CANUCKISTANLAND?

Before we start feeling superior to those most indebted of all European wretches, a little reality.

A lot of young floppy-eared Canadian mutts, and a few cranky boomer dogs are still not hearing the clarion call of the onrushing coal train of our very own made-in-Canada economic disaster, as they dally about in our real estate so-called industry.

THE GREAT STEWING POT OF ENDLESS DEBT

Greeks, Canucks, Yanks, whatever. Here’s why we’re all done like dinner: Our betters keep on printing money, in all industrialized countries, to bring back prosperity.

There’s so much currency crap floating about out there that it’s choking off all of the traditional conduits of business and enterprise.

Led by the Obama-ites, and their sniveling cohorts in the rest of the G-20, “government” apparently knows best and the shaft is what we’ve been getting since 2007.

Six years on in this world wide great depression, or however you wish to describe this ongoing mess, the debts keep piling up and STILL economic growth averages less than 2 per cent per annum world wide!

It’s like borrowing 10 bucks in order to “expand” your enterprise by 2 bucks, then borrowing another ten and so on into infinity.

That’s why poverty is now the world’s fastest growing so-called “industry.”

PROPAGANDIST STITCH-N-BITCH

The terminally-conflicted conflating gnomes of Wall Street, City of London, Frankfurt and Bay Street appear on TV every day to flog yesterday’s story about how good things are now are how much better things will be in 2013.

And every Saturday morning for the last six years CNN’s economic shills have been asking some of those same shameless priggs this question: “What will it take to improve the US economy this year?” The real answer is “nothing” because “nothing” has improved in all that time.

Do they not understand the big picture here? That’s a cruel trick question, because: THERE IS NO MORE BIG PICTURE. It’s lights out on this economic template.

THEREFORE…

Never in the field of human endeavour has so much money printed by so few to royally screw so many.

Sorry about that Sir Winnie!

#189 };-) aka DA on 02.27.12 at 6:35 pm

#182villain? on 02.27.12 at 5:32 pm

#56};-) aka DA on 02.26.12 at 10:27 pm

Are they snobs or are you just jealous? Your wishing an ill fate to befall upon your fellow man is probably a clue…

People tend to get what is coming to them. I am sure you will get yours. };-)

—————————-

Well said! You only forgotten one thing, it goes both ways!

People who live beyond their own means, and have this “better than others ego” also will get what is coming to them.

Goes both ways, don’t you think?

I absolutely and emphatically agree! I would also like to caution, don’t confuse confidence and conviction with arrogance.

What moves me is neither ethnocentric pride nor sectarian arrogance. I make no claim that Jewish culture is superior to other cultures. But it is mine. – Theodore Bikel

In other words; be proud of what and who you are.

#190 jess on 02.27.12 at 6:39 pm

Wenzhou Model
Cherkizovsky Market shut down. And what happened to the billionaire’s 1.65 billion hotel in Turkey

“Chongqing” model versus the “Guangdong” model.
http://www.economist.com/node/21540285
====================
strategic default
The Mortgage Forgiveness Debt Relief Act of 2007 (under Bush) protected homeowners who restructured their mortgages, short-sold their homes or lost their homes to foreclosure by protecting them from having to pay taxes on the amount of debt that was forgiven.

The tax break will not continue past the end of this year unless Congress reauthorizes it, and some Republicans may be loathe to do so. Deficit hawks point to the price tag of renewing the legislation—$2.7 billion over two years—as reason for ending the mortgage help.

Congress May End Program Allowing Tax Relief for Mortgage Modifiers
Saturday, February 25, 2012
A key piece of the federal government’s mortgage-relief strategy is set to expire this year, leaving thousands of Americans at risk of getting hit with a large tax bill.

#191 betamax on 02.27.12 at 6:39 pm

#120 };-) aka DA: “You brought with you the one thing that is the cause of all your troubles – yourself. It was not what you left which was the problem nor that which you met. The problem was then and is now in your mind.”

Right. I once saw a storm in BC and once in Alberta, but according to you, there was no storm in either place; it was all in my mind. There’s a line between positivism and empty sophistry; you have crossed it and traveled some distance.

#192 Snowboid on 02.27.12 at 6:49 pm

#165 The American on 02.27.12 at 2:45 pm…

I agree with your statements. What has changed in BC is the requirement for stratas bigger than 5 units to prepare a depreciation report (or continue to vote against one every 18 months – red flag!).

When we are ready to buy (into a larger strata) we will expect to receive a copy of the depreciation report along with budgets, minutes etc. If there isn’t a report then that would indicate the strata is hiding something.

Give the scope of the ‘leaky’ condo crisis throughout BC, we would also expect that a report had been done on the building envelope and that would be available to a buyer as well. We know too many people that lost a bundle on $ 30-60K special assessements for repairs.

We have to be especially vigilante in the Okanagan, because the condos we like are all in the high water-table ‘sink-zone’ close to the lake.

Since we feel a condo is the right style for us, it may make sense to continue renting and let these potentially major financial risks sit with the landlord!

Or buy a houseboat?

#193 Bailing in BC on 02.27.12 at 6:50 pm

DA #166 & 167

Is that why my life is so sucky? ;-)

Thank you for your well thought out retort. I will respond right after I reply to someone who said to me “Twinkle twinkle little star, what you say is what you are”

#194 tkid on 02.27.12 at 6:55 pm

Read “Currency Wars” by Rickard

#195 John G. Young on 02.27.12 at 6:57 pm

#189 };-) aka DA

…don’t confuse confidence and conviction with arrogance.

Back at ya.

#196 };-) aka DA on 02.27.12 at 6:58 pm

#191 betamax

I’d rather push the limits of positivism to the point of empty sophistry than limit myself as so many of a negative mind do to themselves.

#197 };-) aka DA on 02.27.12 at 7:01 pm

#191betamax

Oh and btw… I love storms, really I do. All manner of storm in any place or time. Too many calm sunny days can be so boring. Change is good.

#198 worried realtors on 02.27.12 at 7:02 pm

Realtors in a panic as sales have stalled and many realtors haven’t made a sale for months. Drive anywhere in the GTA and see countless for sale Signs as buyers have dried up and sellers start to panic with the realtors. Realtors hiding product by not putting for sale signs up for fear of showing the flood of desperate sellers. It’s going to be a nasty crash. Why else are realtors here posting on garths blog.

#199 Herb on 02.27.12 at 7:15 pm

#161

are you dumb enough to actually believe the ‘strategic’ conclusion you have presented, or do you just hold your nose and pass it on in the service of the greater American cause?

#200 ANONYMOUS on 02.27.12 at 7:33 pm

Its very interesting to see how all of this will play out.

#201 live within your means on 02.27.12 at 7:35 pm

#152 eaglebay – Parksville on 02.27.12 at 1:45 pm
#139 Jasonturbo on 02.27.12 at 12:27 pm
“Besides this whole mess were in now is a direct result of the babyboomers”

BS. You did it to yourselves.
A little math and common sense could have saved you.
Responsibility and a bit of thinking on your own could have done magic.
………………

I don’t normally agree with you, but do with you on this.
…..

#202 Kilby on 02.27.12 at 7:57 pm

My wife says we should be grateful that economic problems like the real estate bubble are all we have to worry about.

In many countries the governments spend all their energy controlling everything…..spying on citizens, rigging elections, buying expensive military equipment and building huge prisons and here we just have a few economic glitches to worry about…..

#203 Brad on 02.27.12 at 8:12 pm

Anyone know of any similar Canadian hedge funds that guarantee 20% Plus per year to their investors?

( I just invested into a local startup that does. )

#204 };-) aka DA on 02.27.12 at 8:38 pm

#193Bailing in BC

Sarcasm: the last refuge of modest and chaste-souled people when the privacy of their soul is coarsely and intrusively invaded.

#205 TurnerNation on 02.27.12 at 8:41 pm

Gah! Just learned, one of my co-workers (married, owns a GTA house, no kids) is finally taking posession of a pre-build condo. Condo is non-descript, so-so crowded condo area. Frantic to rent it out.

Everyone’s a condo trader!

#206 Freedom first on 02.27.12 at 8:42 pm

Thank you Garth….for answering my question at #40, on Real return bonds. I value your insight.

To the many people who write comment on Garth’s Blog, I thank you too. The sane comments shine through like a light beam in a darkened room…..and I applaud you, for taking the time to reply to the posts from the people who are still living in insanity. For myself, I long ago ceased arguing with insanity, as you can see what goo it did in all of the other countries who have been devastated by their housing market crashes. I do know, from reading this blog, that their is people being saved, so I applaud you, as well as Garth:)………Garth gives a simple, yet profound message…….in not letting any asset be more than approx. 30% of your net worth. With proper diversification, this works……regardless of income. Keep in mind…….debt is always a monster…..patiently waiting to financially destroy you. If one person can be saved every day by this site, that, in itself, is fantastic! Good luck to all:)……..

#207 Toronto12343 on 02.27.12 at 8:46 pm

Check this out.

http://www.realtor.ca/propertyDetails.aspx?propertyId=11597043&PidKey=-336476957

This unit was sold for $286,000 in September 2011.
$25,000-$30,000 worth of renos, and six months later it’s back on the market at $359,000 (the listing was posted 2-3 days ago).

There were several offers today, and the unit will be easily sold at or near asking price. It is very likely it will go above asking price.

Thoughts? :)

#208 $3 per Liter on 02.27.12 at 8:50 pm

#199

The conclusion that you should have is that your Real Estate, Investment, RRSP, Business or Job will be last thing that you will care about if Israel allows Iran get nukes. Why Israel? Because United States of Obama has neither brain nor balls to do the right job…

#209 45north on 02.27.12 at 8:55 pm

Update on repairs to kitchen faucet. Faucet Fix came over this afternoon. Instantly they figured out the problem – the filter between the flexible tube and the faucet itself was blocked because the anode in the hot water heater is corroding. Time to fix 3 minutes. Cost $96.54. However had I taken the thing apart I probably would have had a very frustrating day. The hot water heater is a rental, so tomorrow I’ll phone Direct Energy and tell them to replace it. My cost will be zero.

tomorrow I’ll talk about US commercial real estate.

#210 Canadian Watchdog on 02.27.12 at 9:11 pm

#175 Preciousss

Yes it’s going to be bloodbath come the end of Q1 when earnings print negative as volume surges in a bid-less market. I miss shorting those -400 point days.

#211 cxcroney on 02.27.12 at 9:15 pm

#202

Good one!

#212 Cowpoke on 02.27.12 at 9:23 pm

Suicide bankers, suicide corporations and suicide public all on a suicide mission of consuming ourselves right out of existence.

Don’t worry, be happy, it will all be over soon.

#213 The Thing in the Basement on 02.27.12 at 9:29 pm

I prefer the old DA. Lesser of two……

#214 SaggyBottomBoomer on 02.27.12 at 9:29 pm

#202 Kilby
I’m assuming you meant to use the sarcasm font for your post.

#215 Pr on 02.27.12 at 9:34 pm

Most won’t listen. A few, however, will owe you their lives.
100% correct! I hope anyone reading this, will do it, its a national emergency!

#216 };-) aka DA on 02.27.12 at 10:18 pm

#214SaggyBottomBoomer & #202 Kilby

A collection of guidelines for Internet communications, includes a warning to be especially careful with the use of sarcasm as it “may not travel well”.

#217 Kevin H on 02.28.12 at 12:46 am

Hey Garth, love your blog.

When you can could you please explore the future of the rental market once the housing market starts melt/dissolve? At the moment Im renting a large one bedroom in the lower mainland for under 1000.00 a month- given what’s coming, how do you see the residential rental market unfolding?

Thanks Garth!!

#218 villain? on 02.28.12 at 1:10 am

#195John G. Young on 02.27.12 at 6:57 pm
#189 };-) aka DA

…don’t confuse confidence and conviction with arrogance.

Back at ya.
——————-

I second that!

#219 ReadyToSell on 02.28.12 at 3:57 pm

So,

I have finally convinced the wife to sell the condo in the city (bought for $180k 8 years ago, $100k mortgage remaining, stand to gain ~$150-$170k if sold soon), and rent until the market stabilizes. Yay!

We’re both in the highest tax bracket, early-30’s, recently married and would like to move in to a SFH near work (Fin District). Ideally Leslieville, Leaside, Beach, etc.

Question is how long, at a minimum, should we be planning to rent? I need to set her expectations ;)

Thank you kindly!

#220 Linda on 02.28.12 at 6:05 pm

My sister bought a townhome in Oakville back in 1997 for $180K. Just a couple of months ago, a neighbour sold the identical townhome for $340K.

My sister’s neighbours tried to pressure us into buying it when it went on the market. (They know we are renting and hoping to buy…one day, when it is within our budget.) They all acted like their lives depended on us buying into the idea that it was worth that much now.

Their behaviour proved to me that not only are they delusional about their own properties, but the mob mentality is really at work and trying to convince non-owners that they are missing some great party or something.

I actually really like my sister’s home. She has put a lot of time, money and energy into fixing it up over the years, and the neighbourhood is conveniently located, safe and friendly. BUT…and it’s a big but…there is no way we’d pay that price for a row house in suburbia.

Dream on.

#221 TurnerNation on 02.28.12 at 10:08 pm

In summary of today’s comments: the economy is doomed due to an Keneysian-Austrian Zimbabwe affect on the leveraged fiat metal system, with inflationary hints towards a de-leveraging of derivative hypothacation. All reflected by the shadow bankers’ deflationary inflation staglfation numbers released today. Did I get it all?

Thank you and good night. — Garth