Every few days some smartass or another sends me an email asking if I rent. The implication is clear. Garth tells you to do as he says, not as he does. I thought I might clear this up. Then we can get back to remarking only on my sexual proclivity.
Real estate is an asset class. One of many. Unlike Apple stock or bars of silver, however, you get to shower in it and keep a dog. So it offers us a home as well, which has immense value because you gotta live somewhere. Owning a home (as opposed to renting one) offers long-term stability, normalizes housing costs and can turn into a forced savings plan. Besides, it impresses women. So there are reasons to have one, not least of which is you can act all superior around your renter-reject friends. And it always goes up. Plus you can decorate.
See what I mean? This is, like Jenna, one confusing asset.
When houses cost as much as they do now and people buy because of peer pressure, evil mothers or envy (more than to obtain shelter) they usually try to justify it as an ‘investment.’ Then we get into trouble, because real estate is a notoriously wonky place to put money, especially in times of low inflation and flat economies. Were it not for cheapo mortgage rates and our weird fearlessness in the face of debt, house prices would have stayed flat, at best, since the GFC of 2008.
This underscores the intensely emotional nature of housing. It’s why we think a cool place to live is a great investment – because other people will covet it. For a time, that may be so. But eventually the laws of economics take over again. That’s a big reason why real estate in the States crashed and burned (and smolders still) just a few years after it was 100% of most people’s investment plans.
When real estate cools, it freezes. The more values go up, the greater the danger in the markets, since buying it involves taking on a fat mortgage for most people, plus paying substantial closing costs. So housing tends to be hot, or not. And when it’s not, it turns illiquid. Every day this blog is cayenned with stories of people who cannot sell, can’t cash in, can’t move. Right now they’re coming mostly from the West. Soon, it will be everywhere.
Being trapped in a house is no fun. Having to pay a mortgage worth more than your real estate is agony. Not being able to sell for a few years, without relentless price reductions and until all the nice smiley people at showings are replaced by the yawning jaws of vultures, really sucks. Once you’ve lived through one of these experiences, you know how nasty a house can get.
The argument on this blog, so awesomely made and boringly repeated, is that those days will return. Count on it. We’ve heaved and grunted our way into a massive credit bubble and in the process made houses unaffordable in way too many places. It won’t take much anywhere to change that – tighter rules, higher rates, fewer jobs or just the winds of caution. Remember always that fear is a stronger emotion than lust. At least in you mortals.
The odds are that credit will never again (in this lifetime) be so cheap or available. Governments desperate to stave off deflation after the financial crisis knocked the struts out from under the economy dropped rates to absurd levels and turned a blind eye to deteriorating lending standards. Any horny young couples who think 2.99% mortgages, 5% down payments, cash-back bankers or instant loans are the norm will be shocked at the years to come. Coupled with that is a demographic tidal wave as nine million Boomers move from houses to financial assets, because they have no choice.
It doesn’t mean a US-style crash turning Vancouver into Phoenix. But just a 15% decline in prices, followed by years of flat or declining prices is enough to begin a real estate down-cycle that could screw up countless Boomer retirements and spank equityless virgins. For everyone else, it’ll just mean your house is worth less. As it should be, it seems.
Which is okay if you think of it as one asset class among many that you own. By not having all of your net worth in just one thing, you drastically reduce risk and increase your options. Odds are if your house falls in value, for example, your TFSA full of juicy ETFs will increase. This is why I have been saying (ad nauseam) that smart people value diversity and liquidity. If there ever was a time when stuffing your wealth into one asset was dumb, this is it.
So, my diversified portfolio is a quarter real estate and three-quarters financial assets. Of the financials, 20% is a collection of bonds (government, corporate, high-yield, real return), a fifth is made up of preferreds in banks, insurers and utilities, while 60% is full of REITs, trusts and a bevy of long exchange-traded funds.
The real estate, I own. And live there.
With a Hummer full of Amazons, is there a choice?
191 comments ↓
Only 15% down would be extremely generous. Canadian loans, being either overnight loans, or of very short term nature, tend to behave just like those ARM loans in the USA that caused 50%+ or larger declines. Canada is basically the USA housing market on steroids, on the way up, and on the way down.
Garth, where does the hummer and the harley fit into this portfolio? Just curious.
Garth, if I plan to move to a no tax jurisdiction in 4 years, would it make sense to max out my RRSP contributions for the next 4 years? I don’t plan to return to Canada.
Probably so. They will continue to grow while you are gone, and withdrawals will be taxed at 25%. — Garth
Can’t resist… ffffffirst.
Foist?
I always look forward to a new read before going to sleep….. It comforts me to know I’m not alone with our line of thinking…….
Cow Tail
A foursome was on the last hole and when the last golfer drove off the tee he hooked into a cow pasture. He advised his friends to play through and he would meet them at the clubhouse. They followed the plan and waited for their friend.
After a considerable time he appeared disheveled, bloody, and badly beaten up. They all wanted to know what happened.
He explained that he went over to the cow pasture but could not find his ball. He noticed a cow wringing her tail in obvious pain.
He went over and lifted her tail and saw a golf ball solidly embedded. It was a yellow ball so he knew it was not his.
A woman came out of the bushes searching for her lost golf ball.
The helpful male golfer lifted the cow’s tail and asked,
“Does this look like yours?”
That was the last thing he remembered.
A fifteen percent correction would leave prices at, about where they were 9 months ago? (Two years after you started warning about a big correction
We live in a penthouse condo purchased for $800,000 in 2007 which we’d have trouble selling for $600,000 today. Who cares? I intend to leave here in horizontal mode. This place siphoned off less than a fifth of our estate, in cash. With no mortgage to pay and regular dividends flowing in, we can afford to gaze at the snowcapped coastal mountains and try to invent ways to spend money. Live is good, and we earned it by saving every spare penny during the first half century of our lives. Living below your means is the key to lasting happiness. Debt is slavery.
Garth, don’t know why you keep saying things like “It doesn’t mean a US-style crash turning Vancouver into Phoenix”. Vancouver isPhoenix, only worse. Phoenix’s population was growing at 4.5% per annum. Vancouver’s is an anemic 1.25%. I don’t think Phoenix’s price to income ratio ever got to 10x median. They have an enormous population, many head offices, over the top growth and a very desireable climate. Shiller himself called Vancouver the “bubbliest market in North America” a couple of years back during a G&M interview. 15% isn’t even a downpayment to where this puppy could go for a list of reasons you could write another book about, and have often articulated here. Why sugar coat it?
FURST!! Yeah boi!
Garth, i’m sure you wrote you also have investment properties. Did i misread?
Liquidated. — Garth
Great post Garth. I’ve enjoyed your blog since its beginnings, though never posted, and it always amazes me how so many people either don’t understand or just can’t accept the idea that diversification is the key for building net worth. Why so many people go all in to just one asset class whether it’s housing, PMs, or the orange guys shorts and then try to justify why they can’t lose, rather than being invested properly in all of them just seems so short-sighted to me. I would really hate to see how things will turn out for them in ten years. Keep up with your message, the point has to sink in sooner or later!
hahahaha….I knew your ego couldn’t take a spelling correction. Thanks for stealing my thunder though since I see you changed ‘nauseum’ to the correct ‘nauseam’.
Hey, who will ever know since you censor your blog right?? lol
I always correct typos. Get over yourself. — Garth
Looking at the Vancouver area MLS, it seems the city is just loaded with multimillionaires. How is it that anything under a million dollars is a dive? Even if prices continue their climb to the moon, will folks with 30 year high ratio CMHC-backed loans be able to save for any kind of retirement while keeping up with the monthly payments? Additionally, I think the illegal drug trade is a very under-rated contributor to the inflation of RE prices around the LM. Sure enough – stats aren’t going to exist on this metric but I bet this economic influence likely gets confused and muddled up with the fabled money bags from the “rich foreigners”. Driving around the area it’s pretty clear the spending party is still on. I’ve noticed many sold stickers on lawn for sale signs in some of the more prime Vancouver areas. This party certainly isn’t anywhere near over yet. I’m merely a spectator ready to cash in when the alcohol runs out.
JR left an open italics tag – nothing against Italics except maybe Francesco Schettino – he pays the price.
Mark Hanson is warning about real estate paralysis – no buying no selling – it hasn’t happened yet. In the US 35% decline in prices isn’t so terrible. Is the glass ⅓ empty or ⅔ full?
oh yeah pay the Italian.
Garth, would investing 4 or 5 percent of my portfolio into a silver bulion etf be prudent at this time?
I’m no metal head. I have no metals in my holdings and I think gold is too expensive. Silver seems cheap in comparison.
Purely speculative. Better to buy into companies that pay you to own them. — Garth
I agree with a 10% – 15% correction in Canada, but mostly affecting condos. Canada is a growing country and Toronto RE is still cheap compared to Vancouver prices.
So what? They’re nuts. — Garth
is the glass &8531; empty or &8532; full?
“At least in you mortals.”
That made me laugh…no disrespect Garth but there just may be others on this blog who have advanced beyond the realm of mere mortals; who also are able to launch off their hogs in full leather attire; and liquify their financial assets in the presence of panting Amazons; it’s not impossible.
I think that the “it’s different here” mantra does apply to the Canadian housing bubble — but in a whole new way: this is the first bubble where the majority of experts have eventually predicted/noticed it.
We have our Central Banker (Carney) calling the bubble, most Bank Economists (Sherry Cooper & friends) calling it, and most MSM outlets have run at least a few stories on it — at least in between RE pumper ads posing as journalism.
I know that many RE bulls would say that this make RE a “contrarian” play (i.e. if everyone is calling a bubble, then it can’t actually exist), but given that the market hasn’t corrected this seems like an empty argument. Contrarian plays happen at the BOTTOM of a cycle — not when home ownership is at record levels.
Compare this to the U.S. situation, where Greenspan, Bernanke, GW Bush, and the entire MSM were onboard with RE fever and the “American Dream” of home ownership in 2006. No one seemed to notice that debts were soaring, Fannie/Freddie were out of control, and people without money were driving the final top as the last of the greater fools piled into the market via liar loans (like Canada’s stated income mortgages) and HELOC financing (which, until recently, was fully backed by our CMHC).
The market has most certainly been correcting. Look beyond the GTA. — Garth
when interest rates go up, it will also hurt the returns on REITs
Incorrect. — Garth
I’ve subscribed here via RSS, I’ve been reading for almost a month, and I’m still not really sure if I should be concerned or relaxed. I bought in the beginning of 2009 on a place that had been “marked down 25%” in the whole MAC Bulk thing that happened post-crash. I put 20% down, and I’ve been increasing my payments incrementally to match my pay raises and such as I’ve gone along. I have about 60% of the price left on my mortgage.
I’m not buying and flipping, I just thought it’d be a good time to get a place. It was cheap, big, and close to the SkyTrain. Should I be freaking out or is this the same sort of thing my parents did?
David Rosenberg, the Chief Economist & Strategist at Gluskin Sheff has stated that real estate in Canada is over valued thirty five percent.
It seems to me that the historic norms for mortgage rates are about 8%.
Now, let’s assume the FED and the BOC raise the prime rate to 6% to 8% (and this will happen within the next twenty years) it’s impact on housing would be interesting.
America will eventually settle it’s massive debt problem by inflating their way out of it (my opinion).
I remember getting a car loan in 1986 at 12.5% from the Royal Bank, and I was so thrilled I called by Mom and told her what a great rate I got.
Imagine mortgages at 12.5%.
Let’s have this talk in 2025.
Bubbles crash. I hope to god it is not only 15% or that we all make 100k a year. If it is 15% then there will have been a huge increase in the proportion of our salaries going to housing and associated financing costs. I am going to have to get very creative about housing. There is no way I am going into debt for a house, never mind at these obscene prices.
PS. I am talking averages.
#18 Frank on 04.09.12 at 10:52 pm
I agree with a 10% – 15% correction in Canada, but mostly affecting condos. Canada is a growing country and Toronto RE is still cheap compared to Vancouver prices.
…………………………………………………………………
MINIMIZATION of the greatest real estate bubble and its conclusion. Plain and simple minimization. Saying 15% is simply adjusting the vultures expected price point at which to trigger a buy. I say that there is no support for the simple assertion of 15% and it is merely an attempt to precondition us to accept this magic number as the point at which to begin buying houses again. TO THE BUYER. YOU WILL SET THE FUTURE PRICE OF HOUSES. IF YOU DO NOT BUY, HOUSES WILL CRASH IN VALUE AND BUBBLES TYPICALLY END IN MASSIVE CRASHES IN VALUE. There is no reason to expect otherwise in this possibly the largest of all real estate bubbles.
I say 15% will turn out to be a bear trap in a huge CRASH.
Cory, could you be any more of a douche?
excellent post Garth.
My wife and I and spent a couple of hours last weekend touring the latest ( greatest ? ) Kelowna housing developments that are currently getting the most exposure in the media. Don’t believe a word DA is spouting folks. Kelowna’s housing market is dead, with a forest of ‘for sale’ signs, and few buyers.
Tomorrow we should get the CMHC housing starts for Kelowna. I expect it to be bleak.
House = Bunker, in this case.
“In Soviet Russia, bunker houses you!”
7eaglebay – Parksville on 04.09.12 at 10:06 pm
I highly doubt this is a boomer joke blog.
Mr Buyer. I agree. A 10/ 15% decline is not the time to start lowballing as one blogger here from yesterday suggested. If people be patient the 15% will become 20% and so on down.
15%. What data is there to support this? This is a bubble. It is not economics as usual. All bets are off in a bubble and they end the same, there is data on that. They CRASH. We saw what has happened and is happening the world over yet we are different. Unless the government steps in to re-inflate the bubble at this 15% point then there is no reason to expect this magnitude of a decrease.
According to Royal LePage, Vancouver East condo prices are down 20% and the West is down by nearly 5% y/y. http://i40.tinypic.com/14ccv9u.jpg
>>when interest rates go up, it will also hurt the returns on REITs
>Incorrect. — Garth
I disagree, Garth. Real estate is a capital intensive business. REITs have done well in recent years largely due to low cost of capital (i.e. low interest rates). Higher interest rates translate into higher costs for REITs, especially so for those with maxed out leverage, which is most of them since that is the typical REIT business model.
Smart REITs (the ones to buy) have used a low-rate environment to lock in long-term stable funding and reduce leverage. Besides higher rates will come gradually and not impact cash flow. Think. — Garth
#33, Unless the government steps in to re-inflate the bubble at this 15% point then there is no reason to expect this magnitude of a decrease.
Governments don’t tend to have a lot of luck in re-inflating bubbles, but they certainly can ignite new bubbles. I’m thinking the precious metals sector is due for one.
Garth, how can RE fall if the developers won’t concede? Seems like everything has to be in the resale market before the fall starts. I wouldnt mind seeing some bug time developers take a hit because they are flogging RE just as much as any realtor.
@18 Frank:
…. Canada is a growing country and Toronto RE is still cheap compared to Vancouver prices….
—————
I’m frankly sick of this focus on Vancouver whenever there is a discussion on real estate. The situation there is an aberration of Canada housing prices – way out of the accepted variables in the Canadian landscape. It is by no means some kind of benchmark to measure against. Canada is a huge country with many large cities and towns, that have more to do with average prices (high or low) than Vancouver.
And yes Toronto is getting weird also but nothing like VanTown.
Interesting RE stats from China:
On one hand, crashing and burning…
http://www.china.org.cn/business/2012-04/10/content_25103474.htm
– Price/sqft on new homes in Beijing down over 20% year-over-year
– Sales down 14% year-over-year
On the other hand, for the 2nd biggest developer in Beijing, the party keeps going…
http://www.chinadaily.com.cn/bizchina/2012-04/10/content_15011965.htm
– Home sales rose 6%+ year-on-year
Who’s lying? (hint: the head of another property developer in China was just arrested for fraud)
How is that for a political hand grenade. Dear bubble profiteers, we you ruling government bought and paid for your votes in the form of this real estate bubble (notice real estate bubble, not credit bubble) you have profited wildly from. Unfortunately the level at which houses are selling at presently is becoming a bit of an embarrassment on the world stage and frankly the great unwashed are becoming a little irritated with having to borrow so much money to buy food each week. To clarify, the unfortunate bit is the number of the great unwashed is considerably higher than you the bubble profiteers and while their apathy can be relied upon at election time, such will not be the case if we continue to pay lip service their concerns while otherwise completely ignoring them. Our actuaries have gamed it out and a 15% decline in prices will likely restore the required level of apathy in the general population. In short we will allow prices in this real estate bubble to deflate 15% before stepping in to re-inflate them. Have a nice day : )
#31 TurnerNation on 04.09.12 at 11:40 pm
“I highly doubt this is a boomer joke blog.”
Our host accepts a wide variety of posts — I’m sure that if he didn’t approve he would have made his feelings known.
And it lightens the mood here. Thanks E-P (although I recall having read this joke before, and maybe even on this very blog…)
On the topic of RE agents and the non fraud things they do.
Today on my ski out after a great day on the slopes I have seen A place for sale on the edge of the ski run just a few hundred yards up the slope from Dusty’s. A large for sale sign, nice yard , big sun deck and then ………… In the window was some people sitting inside Or so I thought. My wife and I looked a lil closer…… fake people…….. dummies….. storefront manekins . On display to make people think this place was alive. Anyone else ever seen this before?
Okay Garth. Level with me. My close friends were in the Conservative (Canadian Alliance / Reform) government you were part of before being ousted.
They told me the reason you were pushed out wasn’t because you are a free thinker, and not because you didn’t toe the party line, nor because you are a proponent of digital democracy.
No, they say it is because your proclivity towards posting photos of a questionable nature underscored that you are likely more of a hebephile or an ephebophile than a fan of Amazons.
The Conservatives were afraid of why a not so young guy like you was posting photos of young girls and boys that most people would never have come across otherwise (like the photo of the young babysitter with a boy looking down her blouse).
So Garth… Why all the odd photos like that over the years? Which sites do you visit to get them? Surely not the Amazon sites. Are the Amazons a front for a dark secret?
Had dinner at a friend’s last night. He had a printout of an MLS listing in the Kelowna South quadrant and proceeded to try to convince me to buy this place as an “investment”. I patiently explained the single-asset concept and the fact that RE in Kelowna is point farther south than Sherri Cooper’s tats.
Blank look from friend. “Kelowna South will always be attractive, so there’s no danger of falling prices here”. I still patiently told him about a few properties that I’ve been tracking and whose asking prices have been going down steadily, while some have just given up and de-listed altogether.
Friend in utter, hopeless denial. He owns a house in the area, so I might as well be telling him to abandon his religious beliefs. Kelowna as a town has been so brainwashed by the DAs of this world that only a crash will wake up the zombies.
If I had a penny for every time I’ve heard the “sunshine tax” pablum… Come to think of it, I guess the pennies won’t be worth anything soon, much like those now infamous foreclosed McManses all over town.
Can’t say I’ll shed any tears, except for the poor devils who fell for the pathetic realtor lies.
The hidden threat of home ownership
Monday, Apr. 09, 2012
How naive I was in writing a month ago that buying a house can wreck your retirement.
I thought the downside of buying a home in an over-priced big city like Toronto or Vancouver was that mortgage payments and other housing-related costs would leave no room for retirement savings. Then I heard from Ernesto Salvi, an investment adviser with Edward Jones in Vancouver who showed me things are worse than I thought.
“This my 15th RRSP season,” Mr. Salvi wrote in an e-mail he sent back in February. “I have never seen so many couples under financial stress.”
Couples in their 30s through 50s are having trouble contributing anything at all to their registered retirement savings plan, he said recently in an interview over the phone. And then he talked about how buying a house these days won’t just put you at risk of having to ignore saving for retirement. You might also find that you’re forced to dip into your retirement savings just to get by.
http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/the-hidden-threat-of-home-ownership/article2396551/
“Young adults today will line up to get the first iPad but they will not line up to take control of their lives.”
Randman has spoken!!
#24 Mark W
2025? That’s a long ways off and many things can change from now until this summer, never mind 2025.
As Wayne Campbell once said, “LIVE IN THE NOW!”
in a matter of 2 years i’ve been priced out of the GTA housing market! Me and my wife make 2x the Toronto average income and still we cannot find anything that its a big piece of crap for a $500K price range! Think about it $500K, half a million dollars will not get you a decent house! We are saving a boat load of money but that is a catch 22 because the more we save the more the wife says we can afford it! i know a bad investment and right now RE is not a good investment. Too many dumbass speculators buying and that never ends well. Correction will come. The question is when and how deep. 25%+ at least is my guess since prices have gone parabolic. Look at the US! When people making $10/hr are buying homes you know we are in trouble!
http://www.bloomberg.com/news/2012-04-03/home-prices-seen-dropping-10-in-u-s-on-foreclosures-mortgages.html
15 percent correction seems a little low for Vancouver. It’s not just housing itself that is overvalued but that overvaluation is creating jobs that will disappear as fast as housing valuations and that will further decimate the economy likely creating a negative migration of residents. It’s a nice place to live but not when you are unemployed. Pogie only goes 10% as far here as it does in small town Ontario or Nova Scotia. I would love to see stats on how many jobs are tied to construction here. All I see are cranes and big holes in the ground and massive highway projects to make room for all the new residents. Where is the innovation that makes an economy sustainable? If The resurgence of American manufacturing takes place we’ll see far less need for Vancouver ports (hauling in that cheap crap from China)as well as a resurgence in Ontario pulling more residents back home. It seems that Vancouver has been riding a perfect storm of positives for a decade now and when that all gets withdrawn its going to be ugly here.
Lets entertain worst case scenarios for a moment…
http://realestate.msn.com/slideshow.aspx?cp-documentid=27437326#1
We are playing with fire…
In the summer of 2010 we listed out lake view Okanagan home, it was professionally appraised at $619K. We listed for $597K and after six months we sold…..For $497K.
At the time there were 15 lake view homes for sale in this small community and to this date most are still for sale. We came down more than we wanted to but are so glad to be liquid and renting.
We will own another home because we like houses and property that we can work and play on but are taking our time(no mortgages) Maybe in the fall or winter. The area where we want to be on Vancouver Island can be best described as “stagnant” at this point, a few homes that are priced right are selling but not many.
In the past we had mortgages on two homes and 1 condo , interest rates were 12.5% to start and we were happy when we renewed for 11.25%. There are going to be a lot of disappointed people when rates normalize.
This is what a very wise man once said to me.
I have not yet followed his advice but I am seriously considering it, and if I ever get my savings up to $1 Million, I think I just might do what he says, all except that 3 rd part about Escorts, I’m not sure about that, its sort of freaks me out just thinking about such a thing as that.
Here’s his advice:
1) HOUSE: Once you reach a $Million, buy a house with a 25% down-payment using 10% of your net savings. So that means placing $100,000 cash down on a $400,000 house, something just NOT POSSIBLE in the GTA area.
– And sell that house and move to a new one every time your investments DOUBLE in value.
2) CAR: Every 4 years buy a new car with cash. Find out what your AVERAGE income from your career and assets were over the past 4 years, take 25% of that, and that is what your new car should cost BEFORE taxes. (so an average of 188 K income means you should be looking for a new car around $47,000 before taxes and freight.)
3) WOMEN: Marriage is a death trap for men these days, don’t do it ! Listen to the YouTube wisdom of Tom Leykis and avoid marriage as if your life depends on it, because it does!
Enjoy life more and live life more by simply spending 2% of your previous year’s income on Escorts. So if your income was $188 K, spend $3,800 a month on “Professional Ladies’. God knows all too many men who are stuck in loveless / sexless marriages, you will be one of the few men who actually ENJOY life !
—-
Interesting tidbit here – note the logarithmic chart for new listings this past week..
the red pin.com
How about worst case scenario Ireland. Here is an old link because they stopped tracking prices in this manner (likely too much bad news). Anyways a 38% decrease has been cited (looks like national but I am not sure)
http://www.esri.ie/irish_economy/permanent_tsbesri_house_p/
Hey I know I am full of it most of the time and I am likely missing some important information that makes things different for us but I can not help scratching my head on the 15% decline number (which in and of itself would be a catastrophe)
Central Okanagan (Kelowna area)
Last 30 days, 299 new residential sales.
Same time in 2011, 525 sales.
Same time in 2010, 574 sales
Two weeks ago I advised all my followers to sell SSO at $59.
Well, now with the latest move down I see value there and I advise everyone to place buy orders on SSO at $56, I think this is the bottom and prices will now move up.
Back in 2000, nearby very….very small fixer-upper WW2 houses in my Vancouver neighbourhood were valued at $330 K, and now in 2012 they can sell for over 1 million. This is a 300 % increase in 12 years ! These mildew infested homes are not even worth 50 % less or $500 K. Can I also mention how compromised the workmanship is on the leaky condos around here, It’s a joke.
The bottom line in my mind is that easy credit of the last decade has brought out the worse speculative greed I’ve ever witnessed in this city. Looks like if you were a careful hard working saver like me, you’ve been punished “BIG TIME” !. It sucks being disciplined and responsible.
I’ve tried Garths methods of investing and so far I’ve lost about 10% of my cash….. Thanks dude!!!!
Then learn to do it correctly, or hire someone who can. — Garth
I am thinking far enough out from city taxes yet not too far so as to facilitate cheap transportation. Likely a smaller urban center with some sort of vitality may have this configuration. I will start looking on mars. I will build a Japanese style rabbit hutch (so much for resale) that costs pennies (probably hundreds of pennies but it is my fantasy) to heat daily with a 6 or 12 volt main lighting system, a wind and solar generator as well as a gravity based potential energy backup along with a hook-up to the grid for the worst case scenario. Outdoor fireplace (home made at a fraction of the usual 10k cost) but forced air heating or non-in floor radiant heating (big pipes not the dinky small ones, and used okay, can not stand the idea of water pipes embedded in concrete just sounds like trouble in Canada, antifreeze or not). I am surprised how little house our family of five can get by on comfortably. Refrigeration is not well thought out yet, along with water and sewage concerns.
Any links to quality inexpensive house designs DIY or otherwise would be appreciated. I am also of the mind that I could go the other way and form a co-op with a bunch of others whose shelf life is 75% expired. Spartan concrete style multi-unit solidly built. No baloney until well after everyone is gone. Wide doors, easy access for when we revert to crawling again. Family sized units (maybe 2 or 3 bedrooms)…
Question for the real estate guys – why is it that I often find houses with ‘for sale’ signs (sometimes for months) by recognized RE services that are never listed on MLS online? Aren’t agents required to list the properties they represent on realtor.ca?
Minus 15%? In Calgary? Never! Some parts of the city might see 5% “correction” but when it comes to desirable neighbourhoods than expect 5% price increase by April 2013. How do I know? 25 years of buying/selling RE in Calgary.
Here’s a funny joke from Vancouver, BC.
Real estate stand up comedy is hot around here…..
Knock, knock!!
Who’s there?
Realtor friend from high school sending a “friend request on facebook”
Realtor friend who I haven’t spoken to in 20 years who?
Realtor friend – just keeping in touch.
Now if a Realtor friend like that pops up out of the blue, is it no different that Religous people knocking on your door on Saturday, trying to save you? They’re both providing a service??
Ok, back to the news….
Here in the greatest place on earth – Vancouver, where they sell condos with Cam the Man using Groupon. 2 blocks from those condo’s someone was stabbed yesterday – awesome
http://www.cknw.com/Channels/Reg/NewsLocal/Story.aspx?ID=1682890
and someone hit by a car at bar closing time…
http://www.cknw.com/Channels/Reg/NewsLocal/Story.aspx?ID=1682889
Point is, if Groupon and Cam Good can’t save the Quattro in Whalley, they should turn it into a gated community, and fly people from Toronto out here, I heard they love real estate.
Tomorrow’s story – two tier health care in BC – Realtors create bidding war for organ donors!!!!
The Stats for the Greater Vancouver Region, haven’t made headlines. I’d say things have changed a lot March 2012 over March 2011. There were 4,080 sales in March 2011 and only 2,874 in March 2012. This represents a decline of 29.6 per cent. March 2012 Detached Sales were 1,183 and in March 2011 they sold 1,795, making them down 34.1 per cent. The prices are still up 5.3% year over year though! Interesting stats, that certainly aren’t reported.
Also, check out Yatter Matters blog: http://www.yattermatters.com/2012/03/west-vancouver-where-has-the-cozy-gone/
Lets see what happens in April!
Once the general price of a house (presumably to live in!) starts to obviously decline, then the opposite mindset to the present “buy now or you’ll be forever unable to buy” mentality becomes established – along the general lines of “why should I buy this month when it’s more than likely a) the price of this property will be less next month, and b) there will be more properties on the market, so I’ll have more choice.”
As for those who are “prepared to wait out the current blip, and not sell until prices rise again” you may be in for quite some wait. Prices in Japan have fallen for 20 years straight, and although this is just one, maybe extreme, example, it certainly hints that “a new normal” in rising prices may not be just around the corner!
Aussie Update
Migration will save the bubble – Canada & Australia?
Not helping here as prices continue to slide, but gee, we are trying hard.
Twice a year, one of Beijing’s largest convention venues, perched on the same east-west thoroughfare as Tiananmen Square, holds a large-scale international property fair.
Developers and agents spruik property from all over the world – the United States, United Kingdom and Singapore all have a large presence, as does Australia. Touts thrust leaflets into every open hand they can find.
The drawcard, it seems, is more than property. One booth, which advertised property from all across the Australian east coast, prominently boasted: “Invest in property; speedy migration”.
Advertisement: Story continues below
Over at the Sunland Group’s booth, a sign read: “Buy Australian real estate; free migration.”
http://www.theage.com.au/business/world-business/for-sale-australian-homes-with-views-to-residency-20120410-1wm87.html
TL;DR
Short form: I’m not a renter. Renters are suckers.
You are a very patient man Garth. Taking the time to explain in detail your personal portfolio, and your asset distribution. So patient, as I know from reading your blog on a regular basis, you have only mentioned in bits and pieces, like about 1,000,000 times your philosophy on asset distribution, and not having more than 30% of ones net worth in their house. Soooo, I will say this as you are much to polite to do so:) “Hey, fools, before you ask stupid derogatory/insulting questions of Garth, why don’t you take the time to read more than 1 of his blogs?
Thanks Garth……I feel better now:)
Ok, here are the YTD stats for Single Family Residential (SFD) sales this year and the same periods for the 5 years prior pulled directly from the OMREB MLS database…
2012 January 01 – May 31
sales volume 439 SFD units avg sale price $465,000
2011 January 01 – May 31
sales volume 455 SFD units avg sale price $486,000
2010 January 01 – May 31
sales volume 507 SFD units avg sale price $498,000
2009 January 01 – May 31
sales volume 290 SFD units avg sale price $435,000
2008 January 01 – May 31
sales volume 590 SFD units avg sale price $525,000
2007 January 01 – May 31
sales volume 746 SFD units avg sale price $468,000
Oh the horror!
From my point of view the market is doing about EXACTLY what it should be doing and that can not be described as “dead”. A forest of for sale signs? Maybe – most however are just fishing, some are taking Garths advice and trying to bail – but at 2008 peak prices and yet others are realistic, motivated and selling to the reasonable and consistent levels of buyers who are indeed still out there.
But Garth you missed the most important point of all and that is that a house you live in is not an investment.
Punting on a house because you think its value will go up is no different to buying a future, particularly when you consider the leverage most buyers use. Leverage is nice when an asset is appreciating but it is extremely painful when an asset is falling and can completely wipe out your equity.
A house you live in should only be purchased if you intend to stay for a long time, can put down a very substantial downpayment, and your lifestyle will not be adversely affected if real estate prices crash or if interest rates nomailse (i.e. 6% is about right). But don’t call it an investment.
Houses involve substantial ongoing expenditures because you still have to pay property taxes, upkeep, insurance etc every single year. What kind of investment is that?
Yes Form Man I expect you may be right and CMHC will report bleak housing start stats affirming that your industry (construction) is in the doldrums after having exuberantly overbuilt based on the mistaken assumption that peak 2007/08 market activities were here to stay. My industry (real estate marketing) is currently busy working through that excess inventory, yours greedily, gleefully and mistakenly built in anticipation there would be a continued steady stream of greater fools, that someday you too can get back to work building to a real and unsatisfied demand. You’re welcome Form Man – you are welcome my friend. };-)
Form Man you of all people must know how your industry started building sloppy construed product during the exuberant times and continues to do so to this day. Think about it… as Garth once said, “Ice cream melts from the outside in”. That which your industry built then is now in the “melt” zone. The market has indeed changed – it has not disappeared but simply changed. Few recognize the change for what it is, few see the demographic movements in our city and the shifting demand and evolution of housing styles. Build smart my friend – build smart and you can compete handily against all that ill construed, excess product built to an unsustainable market of greater fools.
All boats float at high tide.
Congrats on the home ownership thing but you refer again to flat job growth yet the Canadian economy produced over 80,000 jobs last month alone with no mention of that good news in your blog.
If inflation is low, why do the things I need to stay alive keep going up in price?
I am becoming a blow hard again. I bore myself when I am like this.
Congratulations on the first step. — Garth
Garth,
In your argument about how nasty a house can get you forgot to mention all of the things that can go wrong which YOU have to fix if you want to keep that roof over your head. Roofs can and often do fail, exterior coverings must be kept up or you will have water infiltration, eavestroughing has to be maintained or ditto, sometimes little critters find their way into your home and you have to get rid of them, plumbing .. oh don’t get me started on plumbing … etc..
Ownership is not for the faint of heart and if you cannot afford it, don’t do it !
HHHW
Nice quote from a financial advisor:
Mr. Salvi has seen what happens when people buy houses they can’t really afford and find that debt rules their lives. “It’s a new form of slavery,” he said. “That’s how I see it personally.”
http://www.theglobeandmail.com/globe-investor/personal-finance/rob-carrick/the-hidden-threat-of-home-ownership/article2396551/
1. Last week it was noted that Best Buy was reducing its big box stores and that this is a trend. 2. In Toronto, the last place in North America for change to arrive, but the first in Canada. they opened a vertual store with no need for real estate. 3. Chapters now sells stuffed toys to fill its store with merchandise as more books are sold on line. I guess we have found the solution to high gas prices to go shopping. Are businesses far behind?
I’ve seen a large house with a significant amount of land near Ottawa drop 13% in their asking price over the past few months….I think things are starting to ‘happen’ in this region….
Somethng fishy today Garth with your post.
Quote ” So my diversified portfolio is 1/4 in real estate and 3/4 in financial assets”
Then in Gypsy kids post #12 you said that you had liquidated all your rental properties.
Hmmnn..
You home in Caledon gotta be worth a prince’s ransom then . No?
Just saying
At least a billion. — Garth
Looks like there is enough talk about a “significant” correction coming up in the financial markets on BNN.
The talk is “significant” enough to possibly cause the correction..self fulfilling prophesy.
If financial markets go down again for the umpteenth , countless time this past decade, RE will increase in price well past the redline.
when interest rates go up, it will also hurt the returns on REITs
Incorrect. — Garth
Higher interest rates will make borrowing more expensive for REITs.
That’s why most good managers have locked into long term (10 years) financing at historically low rates, plus retired debt. Seems like the guys who run REITs are as smart as blog readers. Who would have imagined? — Garth
#60 in calgary
You wrote “Minus 15%? In Calgary? Never! Some parts of the city might see 5% “correction” but when it comes to desirable neighbourhoods than expect 5% price increase by April 2013. How do I know? 25 years of buying/selling RE in Calgary.”
Umm…bold statements like this are surely an indicator of near baseless hubris and perhaps a sign that things will begin to fall apart shortly. I mean, who in their right mind would use absolute terms like ‘never’ in their predictions based on mere 25 year samples?
Not to mention that you probably bought in a different market. Buy low sell high. That’s all I know.
Very well put, Garth
One of your best, methinks
Rgds
Munch
T.O. Bubble Boy, great article, thanks.
DA, you might want to take another look at this year’s sales figures for the central Okanagan.
According to OMREB, there were 399 residential sales in the first three months of this year, with an average price of $439,745, which is substantially lower than the 439 SFD units with an average price of $465,000 that you posted.
That’s why most good managers have locked into long term (10 years) financing at historically low rates, plus retired debt. Seems like the guys who run REITs are as smart as blog readers. Who would have imagined? — Garth
so none of these “good managers” locked in for 10 years in 2004, 2005, etc? or did they all go out and lock in yesterday?
retired debt? you are kidding right?
anyways, back to the topic of real estate, Global News was reporting last night about how real values have gone up on an average across Canada.. go figure.. guess they haven’t check the Okanagan..
Wow, after years of telling people to get out of the real estate market you own a house? I’m gob-smacked. You have chumps on here that sold there house years ago partly on your advice and are suffering because of it, some being dragged down into a lower socio-economic class forever.
Regarding “The odds are that credit will never again (in this lifetime) be so cheap or available.” Japanese interest rates have been near zero for over 20 years. There is no basis for saying that interest rates will go up any time soon.
(a) I never tell people to sell unless they have put all of their net worth in a single asset, their homes. Then it’s the right course of action. (b) This ain’t Japan. Good luck. — Garth
I think there is an element of blackmail when it comes to real estate. In this world alot of stuff is linked to residency or a place to live. your relationship with government and its services, banking, traveling across a international border. A person with out a place to live is deemed to be nothing or worse a potential criminal or enemy. Add in peer preasure and that of the under attack human breeding cycle and there is alot of pressure to buy or rent. On the other hand investments
like stocks, bonds and precious metals are alot closer to being a matter of free choice purchases or investments. Your life in society doesn’t depend on you having them where as having a place to live is almost an absolute priority. Therefore the threat is that with out a residence you can not function economicly in society and that puts pressure on people to buy or rent. Having an address to be more precise.
This is just the sort of thing needed to justify any price the real estate market would charge for a roof over your head. Can you say its a real life monopoly game that has become an all consumming mania?
#87 DA
you are showing stats to May 31 2012……….? seem to be getting a bit ahead of yourself
While there are many Kelowna builders who put up garbage, some of us build quality. You do seem to finally be admitting the market is a disaster. Just started a $13 million commercial project in the Kamloops area which will take 2 years to complete. The money these days is in mining my friend, not in the trickle of Albertans moving to the Okanagan to die……..
When I want to check out the statistics I go into the password protected MLS system as a licensed user of it and ask specifically for what I am looking for. In the case above I specifically filled out the “Sold Date” field with “01/01/2012-03/31/2012” (and subsequently the same period for the previous 5 years) the “Major Area” field with “Central Okanagan” and the “Res Type” field with “Single Family Residential”. The result is that every sale which matches that criteria is reported back to me. Doing so provides me, I would think, with about as raw, unfettered and reliable statistics as possible wouldn’t you agree? But you should continue doing what works for you and if that includes doubting my honesty – so be it.
#46 Suede…”As Wayne Campbell once said, “LIVE IN THE NOW!”
And that would explain why nobody knows who Wayne Campbell is… or… was?
No, Suede. One of the greatest awakenings of the soul occurs when that soul realizes that it is an eternal, immortal, limitless, mind-like consciousness. The only prisons are the ones we make for ourselves through our cultural programming. Escape it.
[…] “We live in a penthouse condo purchased for $800,000 in 2007 which we’d have trouble selling for $600,000 today. Who cares? I intend to leave here in horizontal mode. This place siphoned off less than a fifth of our estate, in cash. With no mortgage to pay and regular dividends flowing in, we can afford to gaze at the snowcapped coastal mountains and try to invent ways to spend money. Life is good, and we earned it by saving every spare penny during the first half century of our lives. Living below your means is the key to lasting happiness. Debt is slavery.” – David at greater fool.ca 9 Apr 2012 10:16pm […]
#85Alpha_Bear on 04.10.12 at 8:57 am
Additionally, it was not this year’s specific numbers upon which I was trying to enlighten but rather the year to year change since the market peak in 2007/08. I am confident that if you go to your source you and look at the historical numbers over the same period you will note a very similar year over year trend since that peak although the numbers may not be exactly the same.
I think you may have missed my intended point as you neglected to “see the forest for the trees”.
Again, it’s not so important what you say as what they hear. That being said I’ve said what I had to say and now leave you with it.
The truth is the real estate market is cooling slightly, helped by a modest tightening of lending regulations. It’s true that a rise in interest rates from current, historically low levels would put some homeowners in distress, but they’d have to spike a long way before the damage grew widespread — a concern, sure, but nowhere near as frightening as, say, the return of Hitler.
http://business.financialpost.com/2012/04/10/harbingers-of-doom/
sorry, my post should have referred to #67 DA
I’m going to make a very clear statement here – Canada as a collective housing market will correct in excess of 35%, more than the U.S. correction. Cities such as Vancouver are going to correct in excess of 40%, guaranteed. Toronto will correct more than 25%. Most economists are now stating Canada’s housing market is overvalued in excess of 70%. Yes, more than 70%!!! You can safely and EASILY shave half that amount and still be considered overvalued. My numbers are conservative. The market corrects over years of devaluation – not months as Canadians in years past have experienced. This is an incredibly long adjustment period.
First of all, all existing owners have already lost 15% equity the moment CMHC changed the refinance policies to max out at 85%. So even without a change in value you automatically reliquish 15% borrowing power.
Lets look at the reality with even numbers, if you house is worth $ 100,000 the maximum mortgage you can access as a refinance is $85,000. Even 1 day after you buy it, your maxumim mortgage drops to 85K.
Now lets introduce Garth’s 15% drop in value… So now your $100,000 house is only worth $85000. So now your maximum mortgage you can put on your existing home drops to 85% of $85K which is now $72,250. Your $100,000 house just lost 37.75% of its borrowing power with a mere 15% drop in value.
This is what is going to “POP” the Bubble.
#51 North o’ TO
LOL.. Works like a charm to scale the 15,000+ new condo listings coming online this year. Toronto C01 will be ground zero.
Garth,
The unit price of all REIT’s will adjust with rising interest rates. So will shares and bonds. Rising rates does not mean that there will be a major sell-off, but to state REIT’s will not adjust to higher rates is incorrect. The TISK/Return model dictates this. Furthermore, would unit prices not adjust when the underlying asset declines in value? Disclosure: I have never invested in the REITS, always prefered the pipelines.
@#60 …
You’ve been riding the wave after the ’82 crash, so you’ve seen 25 good years and don’t think that it can ever end.
Wait until you see a crash, or correction of more than 20% – then you’ll know it can happen. You’re the type of person that only learns by mistakes.
Sales figures vary wildly depending on which areas are included(or not included) The 30 day ones are for the entire Central Okanagan from”Interface Express”
2011 January 01 – May 31
sales volume 455 SFD units avg sale price $486,000
2012 January 01 – May 31
sales volume 439 SFD units avg sale price $465,000
—————————————————————-
Central Okanagan (Kelowna area)
Last 30 days, 299 new residential sales.
Same time in 2011, 525 sales.
Same time in 2010, 574 sales
#86 AACI Okanagan,
REITs use a healthy combo of long and short financing. You’re right, REITs interest expense will rise if rates rise (they say so themselves in the MD & A section of their statements).
Don’t waste your energy on a blog debate over it.
#73 Mr Buyer on 04.10.12 at 6:32 am
I’m getting my second wind, pass the torch buddy!
(Conversely I don’t bore myself when inflated… doh!)
Its easy enough to find this info for readers but just for the sake of comparison, the link below provides current 5 year rates:
http://www.ratehub.ca/best-mortgage-rates/5-year/fixed
Compared to 10 year rates:
http://www.ratehub.ca/best-mortgage-rates/10-year/fixed
PC and BMO are the places to go with a 1 percent spread between 5 and 10 year rates (note, Bank of Nova Scotia is a full 2 point spread) so mortgage holders have to shop to reduce costs and if they can find or negotiate a one point spread using BMO as a bargaining chip, the gamble here that makes a 10 year term pay off is if interest rates are more than 2% higher than the rock bottom rates we see today 5 years from now which from what I’ve seen is a certainty, its well worth it.
My sister attended a talk by none other than “mean Dragon” Kevin O’Leary.
Someone in the audience cut to the chase and asked him what he holds in his personal portfolio.
He said only stuff that pays divs and distributions. ‘Nuff said?
All Kelowna, West Kelowna, Rutland, Mission etc…Not including Peachland, Lake Country or Big White.
2,586 active residential listings.
Last 2 weeks, 68 “new sales”
It is hard to get accurate figures with so many sub districts but this looks pretty flat. I don’t think anybody is wilfully submitting “bad” sales numbers, just so many variables.
in-Calgary.
Guess what? 25 years is a little too short a period. Try extending your view to 30 years and you’ll just catch the massive collapse of 1982/83. It took near 20 years for those who bought in the late 70’s/early 80’s to get their prices back. If you include the lost opportunity cost on all that equity, plus the 10%+ mortgage costs, nobody ever got that money back. Gone. Wiped out. Why do you think there’s so much animosity in Alberta to Trudeau’s NEP?
32 AprilNewwest on 04.09.12 at 11:44 pm
Absolutely right. If buyers are looking for a true bottom, the wait could be 5 years away in some regions. Take for example, the market in Calgary. It topped out in 07′ and the true bottom there could be 5 years away.
I think overall, whats been a big driver to people wanting to own homes is not just the freedom of making changes to your dwelling or the simple reality that everyone has to live somewhere or that renting leads to more moves due to places being sold or social pressure or “envy” as Garth so accurately points to the pcychological traps we face… values have gone up at least nationally for what, 17 years or more now so tradititionally speaking so historically its been a great way to build equity and credit while providing a cheaper place to live but thats all changed.
Valuations have soared so high that they’ve become reminicent of March 2000 IPO high flyer’s. Where are they now? (where where these same stocks in April of 2000)
My point is and I’m sure you would agree, is that history can’t repeat itself here and it really does come down to simple math. This long, long, long bull run in housing, driven by deregulated fiscal policy in a cheap interest rate environment has literally mortgaged all of Canada’s future development, construction jobs and higher valuations for today. Some can argue all they want about how our elected government had nothing to do with this and that all crown corporations are bad (i.e. the BoC) or how its monetary policy “only” thats created the problem or simply argue because they don’t like or can’t except being wrong or not coming up with the answer first or because they have some if not all the traits of a narcissistic profile nurtured by a “I am superior” environment (really, its isn’t always their fault, once you meet the parents…) lol, in short, such arguments are put forth by a self limiting narrowed point of view but at the end of the day a certain reality of this market will not change.
Buyers entering into this market are buying at or near the top of the market overall which is poised for so many reasoned reasons… to go down and it really is simple math! The most “cock sure confident” way to go broke is to buy high and sell low. We are dealing with an illiquid asset here. Its not like dumping a stock when one see’s obvious signs of fear entering the herd mentality here (which is happening in equities now) and the stakes are dramatic because real estate is so often leveraged! The signs of a bloated RE/credit bubble are everywhere and at most risk is the middle class so… buyer beware, go for 10 year terms and don’t make debt your friend.
#50 Brad – most bizarre advice ever. And only applicable after you’ve saved 1 million AND make $188K/year. Okaaay. The car is in cash but the house carries a mortgage? Why? Plus, that’s $3800/year for escorts, not per month. Works out to… um, well, at least you’ll have lots of spare time to focus on your $188K job.
Some interesting data we’ve collected for you. Out of province plates are going up here in Calgary, a number of places I work have recently hired from out of province, so I think this explains our difficulty in finding a good rental house, its been really tough, but we remain strong (I think!) not to try and find a small bungalow close to downtown at a reasonable price (LOL reasonable)
So we wait another year! and hope it comes through. This is probably the most painful rental time I’ve had yet, quite a few of the houses we’ve looked at , were JUST purchased by early 30’s late 20 somethings, greedily rubbing their hands together at the house renting for some 15% higher then last year.
Our friend in edmonton that bought a really nice raised bungalow last year for 360 said today its probably lost 20k. Other friend with downtown condo purchased like 3 years ago, can’t sell for anything close to what the mortgauge is.
Foreclosures is still busy as a bee, processing foreclosures on people who bought at near peak times, and that is NOW, I can’t imagine a bit of a downturn.
You’d think people who lived through so many boom-bust times in Calgary would question that oil and natural gas will always be worth a ton. The prevailing belief out here is that Calgary will always be special, oil will always be worth a Ton and never decline, it will always be the land of milk and honey, and buying property in a place such as this will always be a safe bet.
1 trick pony-town had a correction in 2008, my job at Petro Canada was to shut down users accounts as they slashed all their project spending, 1200 we did, before we shut down our own accounts a few months later. Not to mention all the people from other provinces that will flee this suburban wasteland (its not a bad city actually) when the jobs disappear, how many empty houses then?….
And so we wait, Keep up the good work Garth, we all really appreciate it!
#50 Brad on 04.10.12 at 1:20 am
Marriage is fine. But get a prenup. Look what happened to Francesco Aquilini. His wife now owns half of the Canucks.
#67 };-) aka DA
It seems that you and Market Bull are the same headline monkeys who can’t read or calculate anything beyond what’s posted on your MLS screen.
Can you see the developing pattern below?
2012 January 01 – May 31
sales **439** x avg sale price **$465,000**= $204,135,000 total dollar vol.
2011 January 01 – May 31
sales 455 x avg sale price $486,000= $221,130,000 total dollar vol.
2010 January 01 – May 31
sales 507 x avg sale price $498,000=$252,486,000 total dollar vol.
2009 January 01 – May 31
sales 290 x avg sale price $435,000= $126,150,000 total dollar vol.
2008 January 01 – May 31
sales 590 x avg sale price $525,000= $309,750,000 total dollar vol.
2007 January 01 – May 31
sales **746** x avg sale price **$468,000**= $349,128,000 total dollar vol.
The average price for 2012 is a feeble figure compared to 2007 because it is calculated from less sales (sample size), indicating a very weak market.
#92 DA
it is also important to rely on what you see, not only what you hear. Data shows Kelowna’s housing prices have dropped about 20% on average since the market peak in 2008. Prices and sales volumes are continuing to decline. MOI is well into buyers market territory.
When one actually goes out onto the streets and looks around, the reality backs up the data. Tons of ‘for sale’ signs, empty sale offices, bored and frightened realtors……..
just saying DA…………
re brad’s jackass comments about women and marriage; fyi dude, these days marriage benefits most men far more than it does women. The women hankering for fairytale weddings are brainwashed by the crap they read/watch in pop culture media. In canada about 40 percent of women now earn more than their hubbies so plenty of men getting a free ride. But i don’t come to this site to police sexist comments so please just respect that women also read this blog. Other than that, i enjoyed your other advice!
Thank-you Garth for returning me to the land of the sane. I tell everyone who even mentions RE to read your blog. Fortunately, I am not easily offended.
I recently opened a TFSA and have only $2000 so far. Is this enough to actually invest in something?
This market is getting ridiculous, fretting over a single mediocre data point while Canada quietly created over 80k jobs last month. That’s the equivalent of a 740,000 non-farm print. Seven hundred and fourty THOUSAND people. But real-estate in the most sought after metropolitan areas of this country is going down big time, riiiiiiiiight. Nothing but buyers at the margin, everyone that I talk to is a buyer… waiting… and getting frustrated. I think what a lot of people on this blog fail to understand is that in cities like GTA the averages are heavily skewed by dual income households, professionals making upwards of 200-300k annually. They exist and they are everywhere, I can assure you. Garth knows this because he babysits their assets. So that semi in Riverdale @ 800k, while on the surface may look like it’s trading at 10x median household income, but it’s actually closer to 3-4x when you look at who’s actually buying the place. Small potatoes for some, large for most. For RE to correct upwards of 25-30% like some of you are predicting, that means all the doctors, lawyers, dentists, consultants, accountants, financial professionals and executives have to collectively experience some type of broad based circumstance that is prohibitive to their income. That just ain’t going to happen, sorry. Rates aren’t going back to 6% anytime soon either.
#43 Peter — I am reminded of a line from Forrest Gump: “Are you stupid or something?”
This is so bad, it’s beyond awful . . .
*
A papa mole, a mama mole, and a baby mole all live together in a little mole hole.
One day, Papa mole sticks his head out of the hole, sniffs the air and said,
‘Yummy! I smell maple syrup!’
Mama mole sticks her head out of the hole, sniffs the air and said,
‘Oh, Yummy! I smell honey!’
Now baby mole is trying to stick his head out of the hole to sniff the air, but can’t because the bigger moles are in the way.
This makes him whine,
‘Geez, all I can smell is …. MOL ASSES!!
(Today is International Disturbed People’s Day. Join me in celebrating all of our disturbed disturbances!
Please send an encouraging message to a disturbed friend … Just as I have done).
*
Absess make the fart go Honda, to be relayed in a quiet, yet ultra-rich, deep masculine Clark Gable manly voice (or Ava Gardner), covered with white, milk and dark chocolate, then fermented in a barrel of Port and Brandy for a couple of decades. That’s fer breakfast!
Last week, I was AWOL during which time I re-discovered The Riders Of The Purple Sagebrush. ‘Twas a great time traveling thru the Etheric Plane (last of the lower psychic regions).
L8r, as I’ve still stuff to unpack.
Genworth sees the housing market glass half full. Wonder why.
Here is a peak at their latest survey.
First-time homebuyers will drive the housing market
First-time homebuyers (FTBs) and people intending to buy a home (ITs) in the next two years lead the pack when it comes to financial fitness and confidence. According to a national survey conducted by Genworth Financial Mortgage Insurance Company Canada (Genworth Canada) in conjunction with the Canadian Association of Credit Counselling Services (CACCS), 43 per cent of first-time homebuyers say they are in good or great financial shape.
Homeownership contributes to self-fulfillment: Additional survey results
The survey found there is an increased awareness among first-time homebuyers of the importance of financial responsibility and of the rewards of homeownership:
94 per cent say even though it means more work and effort, they’d rather own a home than rent;
94 per cent say owning their own home provides a greater sense of emotional well-being and security;
60 per cent say they have a long-term financial plan for retirement they are working towards;
58 per cent say their goal is to pay off their mortgage as fast as possible, even if it means scrimping and saving and foregoing a lifestyle and activities that their peers enjoy;
36 per cent say they were able to pay off all their bills and save money in the past year;
72 per cent say they expect their financial situation to improve in the next year, whereas only 54 per cent of Canadians who do not own a home say they are expecting any improvement in their financial fitness in the next 12 months.
The 2 main questions I have are: If 43 per cent of first-time homebuyers say they are in good or great financial shape, what about the other 57 percent? And what would this number look like with stagnating or falling home prices?
#50 Brad: “This is what a very wise man once said to me.”
He isn’t anywhere close to wise.
1) HOUSE — as you recognize, the advice is based on historic values unrelated to current markets. Not wise.
2) CAR — why buy new every 4 years? Why not buy near-new and save a bundle? Why not keep it longer? Why pay 25% of annual income? Why not 20%? 30%?
3) WOMEN — sure, pay hookers for mechanical sex with a condom and still risk Hep C, herpes or the clap, and otherwise be alone, not having anyone to make love to nor share life’s great moments with. Idiocy.
Why not marry a hot, smart woman with a decent income, so together you’re richer than either of you would be alone. Take your time, make sure you really know her and love her before rushing into marriage, and don’t turn into a selfish dick yourself afterward — all that will lower the odds of divorce substantially. If you’re still worried, get a pre-nup.
Your friend’s advice is a bunch of arbitrary nonsense that’s the opposite of wisdom. You need to wisen up.
@96 refinow:
100,000 – 72,250 = 27,750, which is 27.75%, not 37.75%
right about real estate investment g man…..rule of 90 should be applied…..it’s just too bad that a majority will never get the ratio below 99.
ownership should be enjoyed…not 30 yrs of slavery with nothing at the end except a reverse mortgage…..thats insane.
#51 North o’ TO
BTW, here are Red Pin stats for condo projects scheduled for 2012. https://docs.google.com/open?id=0ByrPFSoPLahJcEd1OFRfMlA2VTQ
To all those pre-con speculators who thought they’d get rich when everyone and their mother has the same investment strategy, my prayers are with you.
#114 Learning the hard way… $2000 will buy you a good start in many stocks on sale today… XIC, XIU, RMM.UN, REI.UN, CSH.UN, ZDM, ZUT… these all pay good dividends/distributions. CSE.UN pays 16% and it’s below $4. Load up…
#47 Pricedout.
So what? Why not rent a nice place for half the cost of ownership and continue to bank those savings. Jesus, dude.
Seeing Tom Leykis name on this blog, really made me smile. He doesn’t just say don’t marry, but also, do not get involved with single mothers, unless you want to burden yourself paying for kids that are not yours for years to come if the relationship sours.
OK this is like the 13th time in 18 months that the IMF has come out swinging against the Cons economic policy of driving up personal debt and raping the savers…..will this be the one that sticks…..i doubt it
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/imf-debt-study-a-wakeup-call-for-canadians/article2397170/
living overseas much of the time has taught me that the media hype in Canada is so persistent that Canadians are misled by the advertisers spin to an ungodly stupid extent. I have never seen such a propaganda driven country as Canada.
Over in another pimp sheet….A Coyne…crack reporter says the opposite of the IMF’s scathing report……..keep buying he says….nothing to worry about……..who is paying for his mouth to move you wonder?
meanwhile syndicated shows like the Vaz woman show that Canadians are so far in debt that they have become oblivious to the fact that they have been reduc ed to feeding their kids pig slop.
I have been keeping an eye on this blog over the past several months. I also keep a close eye on home prices in the rural GTA towns and have noticed a trend of stagnant listings. For example, Uxbridge homes over $400,000 have been sitting longer than usual on the market and many that were priced above $400,000 have been price reduced to 399,900 or below. Let the slow decline in prices begin!
Most REITs have soared since Oct 11. So is now a good time to buy some?
The American #96
“I’m going to make a very clear statement here – Canada as a collective housing market will correct in excess of 35%”
I think this is a reasonable assumption. It might take years (or not…) to get there but I also think eventually we will.
To sustain current home prices in Canada you need a very strong economy but it simply isn’t there, innovation is lacking, productivity also, cost structures (in part because of housing…) much too high. Sure this country has resources and that will help, but it’s not nearly enough.
Worse, the economy has been structurally weakened by this very bubble as is has for a decade consumed capital normally destined to productive investments, we are now over dependent on housing and housing related activities from which we can’t get out without passing through a painful “creative destruction” cycle.
This process is taking a long time to unfold, at first it is very slow, apparent for example in the value of the TSX relative to DOW (which the general public don’t see) or some layoffs in manufacturing, plants moving from Canada to the US. The ship is taking water but it doesn’t show, yet.
But in time things will get noticeable and will start to roll out more quickly. More jobs will be lost in construction, retail and finance. Governments already stretched and watched carefully by rating agencies won’t be much help this time, worse they will have their own crisis to deal with, such as Ontario’s deficit and Quebec’s catastrophic debt.
At that point things really get going, the market has slowed dramatically and home prices are declining in most places at rates which can no longer go unnoticed and the whole thing starts to accelerate like a giant snowball. From a more homes / more growth virtuous circle we are now in reverse, in a vicious circle and gaining speed. As you may have noticed by watching markets these recent years fear in a more powerful stimulant than greed, so this has the potential of becoming very ugly. Malls may close, store chains will go bankrupts, there will be layoffs all over and the youth is going to get hit hard. Yet many of them will be stuck in their condo boxes, unable to relocate… Vancouver might become an economic disaster zone as everybody, including foreign investors are rushing for the exit.
At that point the $CAN gets hits as the world finally takes notice and suddenly realizes that Canada is not the safe haven they had figured. Of course it’s too late to rebuild our manufacturing base, but it sure drives up inflation to hit household purchasing power even more… Interesting what that might do to interest rates and to public and private debt serving… As you know the $CAN is no reserve currency and we can’t print our way out of this to the extent the US could.
At the same time you have millions of boomers approaching ever so close to retirement, wanting to save (and sell) at once, a declining work force dragging down productivity, public finances is disarray, etc…
At that point a 35% correction is more than possible.
I don’t know, it may not become that bad, but frankly that’s what we aimed at, if we miss the target it will be pure luck.
I stand corrected those stats are for January to March in each of the years I posted.
Beyond that error gentlemen, I still stand firmly behind my intended point. Where the real capitulation is taking place is the strata market where builders, as I mentioned, “greedily, gleefully and mistakenly built in anticipation there would be a continued steady stream of greater fools”.
Those stats I provided did not include the recent strata market. That market (strata) I personally consider to be an anomaly better analyzed for and in the context of that which it truly represents and demonstrates – greater fools at the supplier end. Just because you build it does not mean they will come. That you did is in no way a reflection on the market in general but rather that of your own stupidity. As proof I offer that the single family housing market starkly contrasts as a bastion of stability in compare.
67 };-) aka DA on 04.10.12 at 3:29 am
Ok, here are the YTD stats for Single Family Residential (SFD) sales this year and the same periods for the 5 years prior pulled directly from the OMREB MLS database…
2012 January 01 – May 31
Yup, no doubt about it DA, you’re a certified genius of unparallelled abilities, including the ability to publish sales figures clear through the end of next month. Be assured that I’ll be buying all my properties from you as you have an extreme competitive advantage over your peers. Ooops I guess with your precognitive facilities you don’t have any peers.
#43 Peter on 04.10.12 at 12:32 am
So your “close friends in the Conservative government” booted Garth out because of supposed moral turpitude?
Talk about the pot calling the kettle black.
I suspect you must be a card-carrying member of the CON party, sent here to try to discredit Garth’s message using the tried and true CON tactic of personal attacks. Just when I think you guys can’t sink any lower, there you go…
What’s next — a treatise on Intelligent Design?
I thought it was funny. — Garth
Thanks Garth for a decent blog entry for once. Not a hint of disgust or fear-mongering, which is a nice change from your usual. More of these would be appreciated.
Garth, a very insightful view of housing and how unfortunately there are those who have lost their compass on navigating the world of debt and commitment for instant gratification. One point that nearly every blogger seems to either wilfully forget or does not admit too – there are legions of mortgage bowers, who have seized this opportunity and are financing their homes with historical low rates.Reducing the number of years remaining. Why are the masses in here not realizing that rates today are saving me tens of thousands of dollars in interest. Just 3 weeks ago when Royal temporarily lowered their 4 year rate, just by chance we were in the process of renewing early and locked in a 5 year @3.14 %…. and by my calculations we will be mortgage free within 3 ½ years and still under the age of 40.
What really shocks me, most that rent in here claim that all those who hold a mortgage are locked in for the full amortization period to begin with. That those buying in last week’s Kleinburg site were newbie’s plunking down $800K, maybe they are 2nd or 3rd time homeowners who have cashed in on their property and want to fulfil on a dream that costs them next to nothing. If all goes according to plan – we will have finished our mortgage in 12 years – and in my circle of friends, I am the one with the longest time line…yep, they are teasing me why I continue to hold a debt while making others fat and rich off my hard work.
In Hebrew school, no one talked about granite tops, stainless steel fridges – but who could pay off their mortgage the fastest. Debt in all its forms it destructive, maybe when the masses start asking themselves how they can pay off their mortgage in under 10 years – that’s when prices will adjust to levels that makes if affordable to the masses to begin with. Forget the 25 – 30 – 35 or that 40 year thing – but view it as a 7 -10 or 12 years and you are now living what is what it all was intended to be.
And on a final note, Garth made a very interesting post a few months back on comparing a renter and a mortgage holder and based his calculations on a 25 year amortization term. I could only sigh, because his numbers are true, but the real numbers would tell a compelling story if they were based on my view.
Maybe what they teach in Hebrew school should be taught in all schools, a fool and his money are always parted, and there are those who will always cash in on others stupidity or misfortune .. all what is happening didn’t happen in error – and someone always gets paid!
It appears that condo prices are declining out west. Winnipeg is still on fire, though???
http://docs.rlpnetwork.com/rlp.ca/PressReleases/120405_HPS.pdf
#126 truth hammer on 04.10.12 at 2:18 pm
IMF’s household debt story made headlines on BNN as well and could make Garth’s next theme going forward. Its pretty hard not to ignore:
http://www.bnn.ca/News/2012/4/10/Household-debt-casts-long-economic-shadow-IMF.aspx
Garth, I humbly suggest you change it up and do a post on mortgage brokers. They are interesting creatures and complicit in our RE bubble are they not?
Most folks would be interested in knowing how mortgage brokers were created, how they’re compensated, who they broker for, how they are intertwined with RE agents?
The way OSFI has things lined up mortgage brokers are likely calling their old bank branch bosses to ask for their jobs back.
Nothing ever happens in Canada. No one ever raises their concerns. We are self oppressed as a society and avoid any confrontation in any way possible. We are well educated slaves that say thank you to everything and anything. Even when the gov ‘F’ tells us to bend over, and steals our hard earned money by means of increasing taxes every year. Selling us lies on real estate or economy included.
#67 };-) aka DA on 04.10.12 at 3:29 am
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Thank you, DA. Good stats.
Tales from Dumbcouver. 5 condos for sale within same block here in the West End. One sold in last 4 months. Noted today, coming back from Esso, ( paid $1.55 a litre, btw) and two condos proudly displaying new price.
Oops.
Neighbor (renter) is a gas passer at one of the big Hospitals. Moving out today. We are not buddies or anything, but have enjoyed friendly chats, on occasion.
I wished her a smooth move and innocently asked where she was locating.
” Nova Scotia” – I can’t afford to live here in Vancouver anymore.
When a specialist tells me she can’t afford to stay here, you can bet there are a ton of people in a world of hurt, or soon to be.
At the Esso Station, I was next to a guy in a Bimmer. He was putting ten bucks worth of gas in the tank. He smiled and said “wanna buy my car?” – he looked like he was scared. I demurred.
Oy vey.
DontCallMeShirley: Most folks would be interested in knowing how mortgage brokers were created, how they’re compensated, who they broker for, how they are intertwined with RE agents?
I would
#51 North o’ TO
-Nothing to be concerned about. Happens every spring.
No Canadian cities in the top 10 most popular for the ultra rich ? BPOE$, where are you now ?
http://247wallst.com/2012/03/30/the-most-popular-cities-of-the-ultra-rich/
Maybe there is another list, the top 1000 cities and Vancouver is on that ?
#91 Disciple
Wayne Campbell = Wayne’s World
Party On
I believe someone told me that the U.S. could simultaneously have bond yields rise and the stock market rise. Only to be cautioned that that isn’t possible and the stock market would be sacrificed in order to bring yields back down. Well well well. The 10 yr couldn’t even get to 2.4% before the market started turning over. Now the 10 year is under 2.0% in a little more than 2 weeks. A huge move. The Stock Indices are turning over. Spain and Italy are flaring up again in the Euro which isn’t “fixed” and the only thing in solid green territory on the day is Gold. That said, this isn’t the 400-500 Dow point drop that I am expecting to happen to trigger the real selling. Nor do I like Gold going up because I’d like to get more when it gets to $1,000 ounce. That will have to wait until the second half of the year.
Tempus Fugit…
accounting
iWatch News that Wells Fargo’s audit had turned up accounting errors in nearly every loan file it reviewed.
Monday, April 9, 2012
Judge Rules Wells Fargo Engages in “Reprehensible,” Systemic Accounting Abuses on Mortgages, Hits with $3.1 Million Punitive Damages for One
http://www.iwatchnews.org/
http://www.scribd.com/webber3292/d/88494700-In-Re-Jones
=====
http://www.nakedcapitalism.com/2012/04/judge-rules-wells-fargo-engages-in-reprehensible-systemic-accounting-abuses-on-mortgages-hit-with-3-1-million-punitive-damages-for-one-loan.html
====
China’s shadow banking in focus as ‘Rich Sister’ faces execution
http://factsanddetails.com/china.php?itemid=1880&catid=8
#47 pricedout
“Correction will come. The question is when and how deep. 25%+ at least is my guess since prices have gone parabolic.”
—————————————————–
Excellent question. You’re the only one in the past three days to take a stab at it. I asked our host a few days ago what % drop/correction (we’re talking national average) would vindicate his claim that we are in a bona fide bubble. 10%? 20%? 30%? 40%?
I got nothing, until your -25%+ call.
As an increasingly impatient patient vulture, what worries me is a slow-bleed scenario — and slow bleeds are not really what bubbles are all about. Bubbles burst and pop, they don’t deflate manageably, which seems to be what the powers-that-be are trying to orchestrate.
Is this a bubble or isn’t it, ffs? Only hindsight will say. I hope it is but suspect the BPOE crowd might be right for *years* yet…
#132 John G. Young on 04.10.12 at 2:47 pm
“I thought it was funny. — Garth”
Well I think we can say with confidence that you have a much tougher skin than I.
Reminds me to never, ever go into politics — or hosting a blog!
Oops I meant “thicker”, not “tougher” :)
Accusing Garth of “not taking his own advice” would be like accusing a scuba-diver of not taking his own advice for telling you to wear a lifejacket.
Garth is rich. You and I aren’t rich like that. That’s why this blog is relevant to us.
29 Form Man
My wife and I and spent a couple of hours last weekend touring the latest ( greatest ? ) Kelowna housing developments that are currently getting the most exposure in the media. Don’t believe a word DA is spouting folks. Kelowna’s housing market is dead, with a forest of ‘for sale’ signs, and few buyers. Tomorrow we should get the CMHC housing starts for Kelowna. I expect it to be bleak.
—————————————————————–
Form Man is correct, Kelowna is in big trouble. I have spent a fair bit of time in Kelowna in a condo I rented a for the last few months. In the first week I was there, two of my neighbours had foreclosure notices posted on their exterior door. In another situation, a young couple who speculated on a very nice new home with a pool have vacated the home and moved back to Calgary and are desparately trying to sell. Every day I find more stories like the above as many are hanging on by their fingernails in Kelowna . . .
Gee, and a year ago it was different there. — Garth
”
Why not marry a hot, smart woman with a decent income, so together you’re richer than either of you would be alone. Take your time, make sure you really know her and love her before rushing into marriage, and don’t turn into a selfish dick yourself afterward — all that will lower the odds of divorce substantially. If you’re still worried, get a pre-nup. ”
HA, youre userID sure is perfect, BETA.
#140 Bill Gable
Filled up at the Co-op $121.9 at noon today in Victoria. But there’s been this Costco ‘fueled’ gas war going on in Victoria for a couple months now. “We all own the Co-op”
;-)
Should read 121.9 cents. Ha!
Brad @ 50,
Right on About point number 3…and to all you suckers who think a pre-nup will save you think again, a judge can throw that sucker right out at their own discretion.
So harvest their yield but don’t marry them – they will utterly destroy you financially.
If you must have a women in the house for chores and other services do like I do – rent out the basement suite and work out a little deal on the side for them to get a break on their rent – that works and keeps you in the clear – you get to have your cake and eat it too…
Oh, cut it out. — Garth
new wave of foreclosures hitting now after brief ‘moratorium’ lapses. this will be the big one folks….bigger than the sub prime….here come all the ‘jumbo’s’ and ‘alt-a’s’ . and you thought it was time to vultch in the US?………..the recovery was just pimp hype.
http://www.montrealgazette.com/business/Next+foreclosure+wave/6423749/story.html
ps…….are you keeping an eye on the balls? what about the shadow inventory still held by the banks……stop watching titanic……look for a real sinking.
134 Just Park It
“In Hebrew school, no one talked about granite tops, stainless steel fridges – but who could pay off their mortgage the fastest. Debt in all its forms it destructive, maybe when the masses start asking themselves how they can pay off their mortgage in under 10 years – that’s when prices will adjust to levels that makes if affordable to the masses to begin with.”
—————————————————————–
I agree, however, this would mean that people think rationally, which they don’t . . . unfortunately the vast majority of people are motivated by emotions not rational thought. They are motivated by greed, envy, fear etc. As long as the confidence game “that real estate always goes up” is the dominant force in collective psyche of the masses, the ponzi will continue . . . but when the confidence & greed turn to fear, and debt begins to take it’s nasty toll as people begin to feel the pain of over indebtedness (already begining to take place in cities like Kelowna) and which appears to be coming to a neighborhood near you. . . watch out below . . .
Was this posted?
Fitch cuts outlook for Home Capital
Amid concerns about housing prices and household debt levels, Fitch Ratings has revised its rating outlook on mortgage lender Home Capital Group Inc. (TSX:HCG) to negative from stable.
The rating agency affirmed its existing ratings on the firm, but, at the same time, it lowered its outlook on the firm, saying the move, “is based on emerging concerns regarding home price valuations and household debt levels in Canada, which given HCG’s focus on non-conventional borrowers could potentially translate into increased credit costs.”
“These risks could potentially be magnified by HCG’s concentrated business model,” it adds, noting that over 80% of the company’s total lending portfolio is in the Ontario market. “HCG’s geographic concentration, narrow product mix, and limited franchise continue to present rating constraints,” it says. As does the fact that the company places a significant reliance on relatively high cost brokered deposits and securitization for funding.
Nevertheless, in affirming the current ratings, Fitch says that the firm has “consistently robust earnings supported by a strong niche franchise, solid asset quality and stringent cost controls.” It also notes the company’s strong liquidity and capital levels.
The firm focuses on borrowers who do not qualify for prime mortgages offered by the major Canadian banks, including the self-employed, small business owners, individuals with weak credit histories, and new immigrants to Canada, Fitch notes. Yet these “seemingly higher risk borrowers have not so far translated into higher credit losses for the company”, it says, pointing to the company’s robust underwriting procedures as the key to maintaining solid asset quality.
© 1998- 2012 Transcontinental Media Inc. All rights reserved.
http://www.businessinsider.com/the-internet-somebody-here-is-wrong-2012-3
“Don’t you love reading all that good news about the the Phoenix real estate market’s recovery? Guess what? You’re being lied to — as always.”
press and realtors lie? say it is not so…..
http://www.nfib.com/nfib-on-the-move/nfib-on-the-move-item?cmsid=59825
“After six months of gains, the Small-Business Optimism Index fell by almost 2 points in March, settling at 92.5. After a promising start to the year, nine of ten index components dropped last month, most notably hiring plans and expected real sales growth each taking a significant dive”
high oil and gasoline prices can do wonders in a sluggish recovery.
#133 Just Park it on 04.10.12 at 2:50 pm
You make a strong point with mortgages financed at record low interest rates. However… you bought your home 8 1/5 years ago. Values have ballooned since then, so has credit and most don’t speak Hebrew or macro economics and many struggle with micro evidenced by the numbers who have overextended themselves. It’s all a matter of record here at greater fool.
Check this out Garth, Spain is making headlines as predicted due to higher yields with bond maturity rollovers and the spotlight shines on their economy in turn. This is worth checking out readers, a taste of what happens when bloated RE bubbles blow out of control. Check out the video on Spain.
http://www.bnn.ca/
Any wild guesses as to how many macro economists are pricing these domino’s (Spain, Italy, France) into their crystal ball?
145 neo on 04.10.12 at 4:36 pm I believe someone told me that the U.S. could simultaneously have bond yields rise and the stock market rise. Only to be cautioned that that isn’t possible and the stock market would be sacrificed in order to bring yields back down. Well well well. The 10 yr couldn’t even get to 2.4% before the market started turning over. Now the 10 year is under 2.0% in a little more than 2 weeks. A huge move. The Stock Indices are turning over. Spain and Italy are flaring up again in the Euro which isn’t “fixed” and the only thing in solid green territory on the day is Gold. That said, this isn’t the 400-500 Dow point drop that I am expecting to happen to trigger the real selling. Nor do I like Gold going up because I’d like to get more when it gets to $1,000 ounce. That will have to wait until the second half of the year.
NEO…….Since you gave your crystal ball a good polish and figure gold might be down to $1,000.00 an ounce later this year,how large an order can I lock in with you now for Canadian Maples at that price? I’ll even pay for postage and insurance….along with a 5% commission of course… Thanking you in advance…
Mel in Victoria
#87 eggy on 04.10.12 at 9:03 am…Japanese interest rates have been near zero for over 20 years. There is no basis for saying that interest rates will go up any time soon.
………………………………………………………………………
Japan this, Japan that…….As a whole, people in Japan see debt as a plague. Yes Japan carries a huge national debt but it is mostly owed to the Japanese people. Many of the parents put their kids through school and these kids go out after graduation and buy cars with cash. NOBODY buys a kitchen table on credit. On top of all that a house is considered a depreciating liability and if you wanted a mortgage, most times you have to have 30% down. Not a massive demand per person to borrow but the shear number of people kind of make up for it a little bit. As for interest rates they got us into this mess but they are not going to get us out. You could charge 0% and all that will do is magnify the crash. The party is over. THE BUBBLE HAS TOPPED. SALES ARE FALLING ACROSS CANADA. BUYER BEWARE. Work and save.
Again 15% nationally initially. 30-40 TO, 40-50 VAN.
132John G. Young on 04.10.12 at 2:47 pm
#43 Peter on 04.10.12 at 12:32 am
“So your “close friends in the Conservative government” booted Garth out because of supposed moral turpitude?
I thought it was funny. — Garth”
***********************
It was so stupid and disgusting, I’d be contemplating legal action.
–
1:36 clip Bernanke says US economy far from well; US$7 / gal. gas in California; SwitzHouston’s Problems Something is happening there; Gold – Silver Manipulation? Ummm, yes; Spain to ECB Die, you lecherous old bastards! Viva l’Italia! Stocks markets crumbling; 12:37 clip Hyperinf. vs. deflationary depression; Dishonest Debt The amount of suckers is increasing; Corporations subscribe for post middle-class America. No wonder profits are so high; Warren Buffett’s dark side; Obloodyhell’s Jobs Act could legalize fraud in the stock market; 3:29 clip RE crash and economic melt in Hudson, FL; Trading Volume hits four year low; Iran cutting oil supplies to Spain and other countries.
*
ussia flattening Georgia if Israel attacks Iran, and Russia Just in case anyone has forgotten about Iran; The Withdrawal Method “The attorneys all but buried Zimmerman at the press conference, further strengthening the impression that this whole affair is nothing more than a scripted PR campaign to arouse passions on both sides of the issue, to trigger racial discord for Obama to run on.” wrh.com; Fukushima is the cause, the effects are not nice, and Nuke Plants and GMOs Natural remedies are better; Japan Poisoning other countries; US Army Stocking up on anti radiation pills; CCTV Lucrative future; NAFTA Increasing trilateral ties; New Microchip knows all about you; Peru Decade-long ban on GMO foods.
#151 PATIENTLY WAITING: “Form Man is correct, Kelowna is in big trouble…”
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Gimmie a break. Yes, there are people in trouble — newbies and speculators — but not everyone. I’ve been here for 36 years and the world is NOT coming to an end in Kelowna/West Kelowna…
#164 Daisy Mae on 04.10.12 at 7:50 pm
“It was so stupid and disgusting, I’d be contemplating legal action.”
Glad to read that somebody else thought that too — I thought it was libelous.
Daisey Mae @ # 164,
Your comment epitomizes what is wrong with Canada today… thin skinned politically correct crybabies filing frivolous lawsuits because their tender feelings have been bruised…
Grow up Lady…
#9 David on 04.09.12 at 10:16 pm
We are, each and every one of us, the authors of our happiness and well-being. Magic happens later, when one lives below ones means early in life….
Bravo! Well done.
The American: Canada as a collective housing market will correct in excess of 35%, more than the U.S. correction.
well average price in the US is down 34% but not uniformly. Dallas dropped 11%, New York 25%, Washington DC 28%
Your URL
http://mcaf.ee/dw50y
so say Calgary corresponds to Dallas
Toronto to New York
Ottawa to Washington DC
Montreal to Boston
Vancouver to Portland Oregan
that would be very bad news, but every one of the American cities has advantages over its corresponding Canadian city
so I would say that if you have a correction of only 20% you would be fortunate
Oh no…so Garth was turfed over his proclivity for posting pictures online?
Heavens! AT least he’s not like THE REST of those Tories…
Chronologically; some of them decide once assuming power that all journalists who displease them or write stuff they don’t like, must be retired. Or that the Canadian public really is the enemy, & must not be allowed to embarrass them in front of all the world’s leaders…after spending 2 billion dollars to put them up in a style to which they have been accustomed…who cares if civil rights get shredded?
Some, who while sitting in Parliament (or shortly afterwards) appear confused about whether taxes are due on large cash payments passed underneath a restaurant table…
Or others, who after spending 27 years employed on the public dole (and only after utilizing a government provided-taxpayer subsidized post-secondary educational system to gain that employment) get elected & decide that “free enterprise” is the way to go…translation: make everyone else pay, & manage to spend several billions that don’t actually exist.
And yet others, who distinguish themselves by making certain that every single member of their provincial governments’ cabinet (except the premier, of course…he knew nothing) enjoys the wrath of provincial court & the subsequent charms of a medium-security jail because of their collective confusion over the meaning of the word “ethics”. As well, at the conclusion of their governments tenure, it transpires that 15 billion dollars was spent that they didn’t have! Damn…
(hey, isn’t one of those dudes in the senate?)
What else? Being remembered for handing over the country’s soveignity to a foreign power is no slight feat, especially while slipping & sliding in sleaze for almost a decade…let alone reducing a political party from a solid majority to…um, TWO seats!
Now that’s an accomplishment!
I shouldn’t mention the LAST tenure the PC’s enjoyed at the behest of the Canadian Voter that resulted in the everlasting achievement of committing the largest technological & manufacturing genocide in our history, & pretty much relegated us to the backseat of the industrialized world. But I just did…ooops…and then signed a “secret” agreement promising NEVER to do it again…wow!
Wish I had some stories about Mr. Klein’s tenure, but for as closed & dictatorial as this regime has proven to be, I’m not surprised…hopefully, most of the sordid details will leak out in the future.
I truly wish more conservatives had Mr. Turner’s “proclivities”…we would all be far better off.
At least his pics are fun to look at…and he writes pretty good too.
OK, DA has posted on this thread 10 times already!
What happened to the ban?
Garth, you are the Gary Bettman of Blog’s.
Yeah, 15% as a potential correction seems really low. In just a moderate scenario 40% would be more likely. And the global factors that Canada depends on in order to sustain it’s complex investment options are anything but moderate.
An overpriced house in Vancover ….now sitting at 1,000,000 dollars could easily go to 600,000 dollars. Many of those houses are still really expensive with 40% off.
Going up on steroids, and going down on steroids…as was posted today. That sounds about right.
Today’s clear development that it’ll be Romney vs. Obama spells problems for Canada. A far larger contingent of people in the US are feeling disenfranchised, and they now know they don’t have a voice. “Yes we can” and a “black president” were pretty strong sizzle. We have none of that now.
These dynamics, and what they will mean, could really impact Canada’s economy.
#134 Just Park it on 04.10.12 at 2:50 pm
Even if the interest rate is 0% when the housing price correction occurs you still lose. If you bought and paid off a $1,000,000 house today and it drops 20% in value when the market corrects you just threw away $200,000.
I guess us 99 percenters cannot understand how you 1 percenters can easily throw away money at a depreciating “asset.” Must be nice to be rich..
Maybe that is why i only buy and drive used vehicles.
Oh, yeah right, “there are those who will always cash in on others stupidity or misfortune”, they must have seen coming a mile away….
#168 Westernman on 04.10.12 at 8:28 pm
It must be scary to be part of a group that’s becoming extinct.
Actually six… now seven.
And you’re out. — Garth
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143 Vic guy – a link to the report at the bottom LHC of
this page:
http://www.thewealthreport.net/
Vancouver isnt even on the list for expensive real estate
if you put it in dollar per square ft or square metre. They show London as $4500/sq ft – yes thats $4.5M for 1000 sq ft.
Hi Garth,
I stumbled upon your blog off gawker.com. Thank you for saying what I have been thinking for a while. I’m from the US originally and this feels like déjà vu.
What me the most shocking to me was my canadian fiancée was preapproved for a mortgage with less than stellar history, without even asking for a mortgage! (he was looking at a car loan)
Right now were comfortable renting at 1650 plus utilities for a post war whole house on 2 city lots. I wonder what are landlords paid for it a few months ago considering the frenzy over that bungalow.
At 25 I have ignored the herd, I didn’t rack up 50k-100k in debt for school loans and I’m not buying a house now.
Life lessons:
1) numbers don’t lie – do the math
2) your house is a liability, not an investment
2) when people keep on repeating “don’t worry about”, it’s time to worry about it
John G. Young,
I don’t know what “group” you mean Mr. Fruitcake – I guess you must mean normal people who can somehow get through life without filing lawsuits everytime someone looks at you sideways.
I guess if I was like you and had absolutely nothing of value to market to society I’d be looking for free money in every morally bankrupt manner possible…
#182 Westernman on 04.10.12 at 10:57 pm
Do not go gentle into that good night
Rage, rage against the dying of the light
–Dylan Thomas
I’d say that just about sums you up.
#184… John G. Young… This can be interpreted conversely to the popular notion; that is, the adjective “good” used to describe the “night” is contradictory and may be a clue. If the night is good, why rage against it?
Also, the popular interpretation can be unhinged on the premise that the “dying of the light” is not describing the end of life; instead, it may be conjuring up the idea that light is our way of apprehending eternal truth. So, Dylan Thomas is not speaking here of physical death, but something much more profound. Loss of one’s soul.
Which, of course, would make your assessment of Westernman’s character ultimately correct.
#184 disciple on 04.11.12 at 10:32 am
Wow! Interesting. Thank you.
an informed rebuttal:
“Concern about foreign Chinese buyers in Vancouver based on facts”
http://www.vancourier.com/Reader+Soapbox+Concern+about+foreign+Chinese+buyers+Vancouver+based+facts/6442525/story.html
John G. Young & Disciple @ # 183, 184 & 185,
What a giant heapin’ helpin’ of left wing counter culture bullshit! Maybe you two should link arms and sing cumbya together in a candlelight ceremony…
Garth-this is stupid…..what do u belive in?? There’s no point of thinking like this….you know we only have that long to live pls don’t waist it cause it’s stupidity:(
But thanks for the effort that u put into this I really appreciate It!
#187 Westernman on 04.11.12 at 6:17 pm
“What a giant heapin’ helpin’ of left wing counter culture bullshit! Maybe you two should link arms and sing cumbya together in a candlelight ceremony…”
Seriously? That’s the best you’ve got?
And he had to consult with his livestock to come up with that. — Garth