Fool me once

When Facebook shares went on sale a little more than a week ago, about 25% were allocated to retail investors. The rest went to banks, underwriters, options holders, asset managers and hedge funds. Most bought the stock in private trade months or years before it went public, presumably at a fraction of the IPO (initial public offering) issue price.

But Mr. & Mrs Front Porch got no such luck. The media whipped them into a frenzy of greed, arousal and anticipation. Hype and patina were more important than plans and profits. So, Facebook shares were snapped at a stupid $38 a piece.

A week later, they closed 18% lower. Facebook insiders could care less. But the retail investors lost $630 million. Slaughter of the innocents.

This post is not about FB, but what happened in past days is instructive about human nature and the manipulation of it. Some things never change. People buy on perception and hope, then sell on fear and surprise.

They do no market research. They believe what their brother-in-law told them he heard from a friend who works with a guy who knows stuff. They make up justifications for their actions (“we need a house because we’re going to get pregnant”). And the last buyer in – whether for Facebook stock or a condo in a downtown Toronto pre-build – is always the greater fool. You can bet the brokers and the agents cashed out way before.

One of the few things this pathetic blog manages to accomplishes is to share words of people who have something helpful to relate. It might be an instructive experience. Or just an emotion. Nobody here sells anything. No stocks or houses. No banners, click-throughs or word ads based on invading your privacy.

By the way, I told you to take a pass on Facebook. It was a seven-day microcosm of real estate.

Now, something useful:

Garth: We’ve lived through a bubble, and survived, but barely. We happened to live in California for a few years, where we bought a house for $500K a few years ago.  Ended up walking away from it when the value dipped to the low $200’s only three years later.  This is not a typo.

You cannot image the stress of watching your home value decline by about $10,000 every month, for months and months and months, and years and years.  You lose sleep.  You drink.  You start putting numbers into spreadsheets trying to make sense of it all.  You hear rumours of neighbours disappearing in the middle of the night, And then you start to google strange things like “how to walk away from your home”.  You become very familiar with terms like “strategic default”, “recourse vs non-recourse”. “foreclosure timelines”, etc.

You do more math, fill out more spreadsheets.  The numbers always work out the same, and they’re not pretty.

You bought the house for $500K.
You put 10% down ($50K).
You made three years of payments (mortgage + taxes, etc), to the tune of $120K
You replaced the flooring, put in some landscaping, spruced up the kitchen, painted the entire joint.  Another $30K.

There are other things, but I’ll spare you the details (I have the spreadsheets). The punchline is, that it at the end of year three, we had put in about $200,000 into a house that was now worth maybe $220,000, but that we still owed about $430,000 on.  Feel free to read that last sentence one more time.

And so we walked away.  Just like that. The silver lining?  We were in California, a non-recourse state.  So we were able to just walk away.

We’re back in Canada now.  Our families and friends here tell us it’s different here.   They’re urging us to buy a house.  My mother-in-law sends us weekly listings of homes she thinks we would like.  Some are lovely and shiny and new, but a little pricey.  Others are a bargain at only around $500K — all they need is just some new flooring, a little landscaping, perhaps a little work in the kitchen, and a paint job.  – Fool Me Once

Garth: New to your blog.
Fascinating.
Husband recommended I read it as I wanted to start investing in condos in Montreal………
We are in our fifties. Our friends are buying up condos. Flipping. Making money.
I am confused.
Save me. — Susan

Hi Garth: Just heard about your blog from a realtor…I won’t mention his name…as he’ll get ostracized by his colleagues…one that actually has the integrity to confirm what I suspected…Canadian, and Vancouver real estate prices seem on the edge of a ‘perfect storm’.

Wish I’d known about your blog some months ago….was trying to gently dissuade my daughter (her Mother, my ex, is a realtor) from buying a Vancouver Condo at this time…suggested that the combination of… (1) The ageing baby-boomers dramatically increasing the supply of existing housing, together with (2) The prospect of an NDP government, (3) The reality that the Chinese have been buying to ‘off-shore their wealth’ in an anticipation of their bubble bursting, and (4) The likelihood that interest rates weren’t gonna stay at Zero for ever… could lead to a very serve decline in residential real estate prices in Vancouver. I failed to dissuade her.

“And let’s bow our heads for a moment in memory of the virgins who scarified their young lives in the holy name of “It’s Different Here.” At least half of all the horny kiddies who bought condos since 2008 would be under water if they sold today. It’s big news. After four years of owning, they have no equity to spend moving up the property ladder – wiping out an entire pool of buyers and eventually dragging down all prices.” — Garth

There’s no “plankton” left. — Albert

Hello Garth, I find your website one of the last bastions of blogging sanity online and I’m a loyal daily reader.

I live in an area of Toronto that has experienced outrageous price increases (e.g. fixer-uppers now 900k+), with almost no Chinese millionaires in sight. The houses are old, run-down and semi-detached, meaning they cannot be easily demolished like the ubiquitous willowdale or richmond hill bungalow. Instead, we are at the epicenter of what you like to call “Hot Anglo Money.”

I’ve come to understand that actual on-paper income has almost nothing to do with the cost of these houses. I don’t even think lax mortgage requirements play in that much. What matters far, far more is what my wife and I call “the north york connection,” (or alternatively “the oakville connection”). To wit: there is simply a near-endless stream of transfer money coming to people our age (early 30s) from their wealthy suburban parents.

We know many couples who own $800k+ houses in the neighborhood. For the most part their professions are middle-class modest: grade 9 teacher, social worker, part-time actors, non-profit workers. No tech millionaires, corporate executives or MDs.

To simply look at these people’s income and say the house is too expensive is to miss the point. Their incomes are just fun money on the side. The real money comes from the north york connection – their empty-nest parents who are uniformly doctors, bankers and corporatelawyers. The down payment, the reno costs, the daycare for the kids, the car… it’s not coming out of the monthly budget of people making 4-5k/month each pretax. It’s paid in full by the parents. And that money isn’t going to run out, or leave town, or even really depend on economic downswings. It’s already been earned and socked away for exactly this eventuality.

My wife and I can go toe-to-toe with people our age in the arenas of education, thrift, saving and earning. We earn plenty with no kids and almost no debt, and an ample amount in savings and registered accounts, plus our modest pensions. But we cannot ever go toe-to-toe with the millionaire parents of our peers – it is an unwinnable fight, and one we will sit out for years or maybe even decades to come.

As much as I hate to say it, I think inner Toronto prices can stay permanently high. Not because of irresponsible banks (although I completely believe they are doling out terrible loans hand over fist), not because of irresponsible borrowers, not even because of offshore  millionaires. Because the north york connection is there, and it’s strong, and it’s not going anywhere. It is one of the true recession-proof parts of the economy, transfers from rich boomers to their (relatively) poor offspring.

The reckoning is coming for some, I’m sure, maybe the people in Upper Unionville or the “estate castles” sold out by Uxbridge. But there isn’t really anything that could break those with the north York connection, and downtown and the inner neighborhoods are increasingly populated by this clientele.

What do you say? Is there hope for those of us in the suddenly-desirable semi-detached inner neighborhoods? Like many readers, I have patiently waiting for the correction, only to see some houses in the area go up $350k+ in a year or two, with little end in sight. I don’t think mortgage rates or down payment requirements matter very much to the buyers, the money flows from the parents and there’s always a little more if needed.

Keep the faith. — Keith

226 comments ↓

#1 TurnerNation on 05.27.12 at 6:15 pm

I’m speechless…

#2 Prepmonkey on 05.27.12 at 6:19 pm

Our window company in the Lower Mainland BC is scheduled to close in July. People who have gone to another window plant are on a work share program working 4 days a week, waiting for the building boom to continue.

#3 J.I.M. on 05.27.12 at 6:21 pm

Keith- interesting take on HAM (h—-y Anglo Money) . Trouble is, when mommy and Daddy’s North York or Oakville palace suddenly drops in value, will the money keep flowing to the kids.?

#4 Scalgary on 05.27.12 at 6:23 pm

Great comparison of FB Vs RE. The only thing is that RE will melt down slowly (your expection of declining prices), since all those ‘extra’ houses are owned by individual investors. Govt, Banks, Real Estate Agents already made money out of you…

On other news, I was reading EI reforms. How come Mr. F & Ms. Finley can be silent on thier plans for the savings that they make out of this reform?

#5 TheHardWay on 05.27.12 at 6:38 pm

Yep that sucks alright.

I have friends that go from one parental or other windfall to the next.
Completely financially and otherwise illiterate.
It really sucks, that little green god sits on my back.
Hmmm, maybe I should grow up.

#6 George on 05.27.12 at 6:39 pm

lived in Orlando 2005 – 2007 – market tanked 30%

lived in Charlotte 2007 – 2009 – market tanked 30%

I get the sense the GTA bubble is on steroids….

#7 50% correction predictor on 05.27.12 at 6:40 pm

Am I the first 50% correction predictor?

#8 Too funny on 05.27.12 at 6:42 pm

Keith you really think that if the part of Toronto that doesn’t have this North York connection undergoes a correction that the ‘connected’ neighbourhoods will be immune? Think again. No pockets are immune. If Yonge/Finch corrects, you think Yonge/Eglinton won’t? Of course it will! If it didn’t, nobody would buy at Y&E and that would drive prices down, fulfilling the prophecy. North York doctors and lawyers aren’t stupid enough to shovel money in just because they have it. Geez…

#9 TurnerNation on 05.27.12 at 6:43 pm

“”Instead, we are at the epicenter of what you like to call “Hot Anglo Money””

Whoa – I think I coined this term? :-)

Google site search says…yes. All listed references are mine.

http://tinyurl.com/75yvd3q

#10 TurnerNation on 05.27.12 at 6:44 pm

Oops this is the correct google search link:

http://tinyurl.com/d7425h6

#11 bcc on 05.27.12 at 7:09 pm

no more “first”??

I somehow see the connection between those “first” posters and those who participate in a RE bidding war. one just has to open up a competition and people will think they have to win. Maybe it’s the feeling of winning proves one is smarter and better than the rest. All the logic behind the act becomes irrelevant.

#12 T.O. Bubble Boy on 05.27.12 at 7:19 pm

I agree with the “Hot Anglo Money” hypothesis… There are WAY too many $1M+ houses with 10 year old Honda Civics in the driveway – the whole North Toronto vibe is pretty much upper-middle class types who shouldn’t (on paper) be able to afford the over-priced houses they are in.

#13 Freedom First on 05.27.12 at 7:21 pm

Garth, yes, I too watched in horror as the retail investor once again got fleeced. Wall Street……..enough said..

Keith, Keith, Keith! Let go of that thinking! Look at the stats Garth has posted regularly from confirmed sources all over the place! The average baby boomer is not in position to bail out their house horny offspring. The majority of boomers, who are able to offer any help at all, only contributed enough, which really, is a small amount, to open the door to their kids 1st RE property. In short, they gave them just enough rope to hang themselves. Many boomers are heading into retirement with: debt, no…or small savings, and no work pension. Go back into Garth’s archives, and the horrifying stats are all there. To sum it up, Keith, you are wrong in your ass-u-me-ing:)……

#14 T.O. Bubble Boy on 05.27.12 at 7:22 pm

#11 Greed:

That article smells like a Harper smear to me. I would think that the majority of the wealthy people in this country take out HELOC-type mortgages to invest and have tax-deductible interest.

#15 Mark W on 05.27.12 at 7:23 pm

http://www.mapleridgenews.com/business/151774025.html

Bubble, what housing bubble?

Maple Ridge News, BC.

#16 Kathy on 05.27.12 at 7:27 pm

Those people whose parents are bailing them out — the same thing happened in Ireland. When the credit bubble bust there off the back off the European crisis, it was and is catastrophe. There are so many similarities — particularly in terms of house and credit horniness.
They Irish, too, thought nothing would ever change.
http://en.wikipedia.org/wiki/Irish_property_bubble

#17 zeeman on 05.27.12 at 7:29 pm

hi

what are your comments on the “hot anglo money”…..any truth to this
you have always maintained that these old folks have no retirement money and therefore need to sell their house…

#18 Mark on 05.27.12 at 7:31 pm

Those “millionaire families” won’t remain like that for long if they keep malinvesting.

#19 Sp on 05.27.12 at 7:34 pm

I thought going to Daddy and Mommy is a Chinese thing. Hmm… So instead of Lambo, Anglo kids want houses from Daddy and Mommy! Anglo Daddy and Mommy sacrfice their retirement for the love of their kids. Now that is definitely a very classic Chinese melodrama. So kids, the lesson is next time when you consider alienating the Chinese, please first make sure that you are not one of them in heart.

#20 Scott on 05.27.12 at 7:43 pm

while the notions of a housing bubble affecting condos, then suburbs and then older singles is obvious, i am still not sure how this will affect acreages and properties with land. has anyone read anything about that?

#21 50% correction predictor on 05.27.12 at 7:47 pm

Keith,

What if the boomer parents were using illusionary money to help their kids? Let’s use this simplistic yet possible scenario:

Boomer parents own a house in North York valued TODAY at $1 million. Assume it’s paid off, and they have no other debt. Also assume they have no other savings. So their net worth today is $1 million if they sell the house today.

They took out $400,000 home equity loan and passed it to their kids to buy that $1million house in your neighbour.

Now this is when the fun part kicks in:

If in the next three to five years, the RE market goes for 40% correction. Under this scenario, the equity in their kids’ house vaporized. And their own house is now worth only $600,000. Plus, they owe the banks $400,000 in home equity loan. Their net worth has diminished to $200,000.00. OMG!!!

Did they just delay the OAS to 67?

Keep the faith.

(I know a real case very similar to the above)

#22 Balmuto on 05.27.12 at 7:59 pm

Re: that Canadian couple that bought a house in California for $550K, watched the value go down to $220K, then walked away from a $430K mortgage, sticking the bank with a minimum $210K loss. Now they’ve moved back to Canada and friends and family are urging them to buy again. What makes them think they can? While I’m sympathetic to their plight and all, shouldn’t them walking away from such a huge debt just destroy their credit score so that they wouldn’t able to get any credit for a long, long time? Does their credit history in the US not follow them to Canada? If they can still get a mortgage in Canada that’s scary.

#23 Nostradamus Le Mad Vlad on 05.27.12 at 8:04 pm


“Slaughter of the innocents. The media whipped them into a frenzy of greed, arousal and anticipation. They do no market research. Fool me once. But the retail investors lost $630 million. Some things never change. People buy on perception and hope, then sell on fear and surprise.”

Was this the slo-mo action replay of RE, Bre-X, Nortel or any of the preceding? One thing is consistent — Sheeple are Strange.

Encouraging them to o’d on a harmless supply of never-ending stupid pills would give them the impetus to offer a cool seven figures for a tool shed in the backyard. Hmmmm. New strategy? Methinx yea!
*
#221 Piccaso on 05.27.12 at 3:29 pm — “Has anyone ever seen a pic of Vancouver that had blue sky?”

That is a trick question! Last century, when the Penny Farthing was the chief mode of transportation and Expo 86 was held somewhere close to BC, Jim Pattison arranged to have a few snapshots taken and printed on postcards. Fake mountains, fake blue sky and sun were all part of the background. So yes, I have seen a sunny postcard of Vancouver!
*
Floating Down The Euro has no terra firma to land on; 34:46 clip War and Inflation (to finance the economies); Negative Equity in RE Top Ten markets to buy in; California Lying Surplus? Raped by TPTB Same that happened in Iceland, Greece, Ireland etc. about to happen here; Banking Cartels and SS Would Herr Harper allow that here? USPS “BARRON’S: The U.S. Postal Service is about to go insolvent, unless a gridlocked Congress writes a check real soon.” and USPS buyouts.
*
4:02 clip China will launch WW3 with nukes if the US and Israel attacks Iran, and S.2165 “So, the US Congress is obliging the US President in no more than 180 days to give an assessment of Israel’s defense capabilities so the US can maintain its qualitative edge and support it with the latest needed technologies, paid for by billions in US taxpayer dollars, and note there is no spending cap!” wrh.com. By the time 180 days have elapsed, China and Japan will be trading directly, without using the US$, Iran and several other countries will have dropped the Petro-dollar and be using the Renmibi or Yuan. Good enough reason for WW3; War Pigs The empire is crumbling. What is generally seen is only a facade; 5:52 clip Western wars are for assimilation; Bill C-38 ‘Net censorship CPC style; 4:54 clip Pre-emtive nuke strike on Iran? Florida Curious. There has to be a reason for this; Fukushima and TEPCO standing in the way; The Technique of Infamy; McDonald’s As long as profits are good, they wash their hands of responsibility; The Vatican Sex, Drugs and . . . Murder?

#24 Boomer on 05.27.12 at 8:11 pm

Best picture EVER!

#25 ANONYMOUS on 05.27.12 at 8:15 pm

If house prices in Toronto crashed 95%, some might say they STILL would be too high.

#26 Onemorething on 05.27.12 at 8:17 pm

I am confused.
Save me. — Susan

Well Susan, at your age you should have learned a few things by now. If you have read at least 10 Garthy Blog entries and you are still confused, you’ll never get it!

Jump in both feet! Drive the bubble for us waiting to score!

#7 50% correction predictor on 05.27.12 at 6:40 pm

Am I the first 50% correction predictor?

No I was, before you were born!

#27 furst on 05.27.12 at 8:20 pm

FURRSSSSTTT!

#28 thinker on 05.27.12 at 8:21 pm

Hot Rates don’t discriminate btwn Asian or Anglo. Cheap money around, people will reach and buy. How is anyone surprised?

#29 Balmuto on 05.27.12 at 8:29 pm

#18 Kathy

Good link on the Irish housing bubble, I too think it has a lot of parallels with our own. It’s a good recent example of a real estate bubble that happened without a “sub-prime” market, without securitization, without CDOs, etc. The only constant is low interest rates and a buying frenzy and that’s all you need.

#30 Hoof - Hearted on 05.27.12 at 8:31 pm

Total Vancouver Market Inventory
SOURCE:
http://whispersfromtheedgeoftherainforest.blogspot.ca/2012/04/vancouver-price-drop.html
Jan. 3, 2012: 10,671
Feb. 1, 2012: 13,368 (+2,727)
March 1, 2012: 14,912 (+1,544)
April 2, 2012: 16,074 (+1,762)
May 1, 2012: 17,122 (+1,048)
May 2, 2012: 17,243
May 3, 2012: 17,400
May 4, 2012: 17,592
May 7, 2012: 17,727
May 8, 2012: 17,823
May 9, 2012: 17,917
May 10, 2012: 18,073
May 11, 2012: 18,176
May 14, 2012: 18,182
May 15, 2012: 18,274
May 16, 2012: 18,200
May 17, 2012: 18,306
May 18, 2012: 18,419
May 22, 2012: 18,529
May 23, 2012: 18,635
May 24, 2012: 18,667

May 25, 2012: 18,800 (+ 1,678 so far this month)

New Listings 288
Price Changes 174
Sold Listings 78
Inventory change: +133

As I have repeatedly stated: when prices start falling, inventory starts rising. The beginning of a self-reinforcing cycle. — Garth

#31 North York and Canada a house of cards on 05.27.12 at 8:35 pm

Anyone who still doesn’t understand that CHMC and easy lending is The Only Reason why housing prices are where they are now. Take away CHMC and prices crash 50% overnight night. In the US the so called millionaires went bust. Like the real house wives of orange county who are supposed to be upper middle class became poor as the market/house of cards fell. Two of the husbands wives were angry when they found out leverage on the way down can bankrupt a family. The so called millionaires can go bankrupt when the house of cards comes down. Look at the CHMC chart garth posted a couple of days ago and see housing prices increase with CHMC loans. Without CHMC prices would crash 50% in the open and free market since NO BANK would lend to 90% of buyers last 6years.

#32 NFN_NLN on 05.27.12 at 8:37 pm

#24 Balmuto on 05.27.12 at 7:59 pm

…shouldn’t them walking away from such a huge debt just destroy their credit score so that they wouldn’t able to get any credit for a long, long time? Does their credit history in the US not follow them to Canada? If they can still get a mortgage in Canada that’s scary.

Separate system. I have friends that went the other direction (Canada to US) with good Canadian credit and had to effectively start over. You have no credit history, no driving history, etc.

It’s a double edged sword. If you had a poor driving record and bad financial history you could get a fresh start in a new country. I’ve even heard of divorced dad’s escaping obligations by doing the same (to France though). But if you have good credit etc you have to start over in the US also!

I imagine the inverse is true for anyone with bad credit in the US coming to Canada.

#33 Alpha Bravo on 05.27.12 at 8:40 pm

#29 furst

FURRSSSSTTT!

——————–

All hail the return of the invincible, irrepressible, inexorable…… Furst!

#34 TnT on 05.27.12 at 8:42 pm

Keith
You are wrong, there’s no anglo money saving these people. If this could be true then you would have heard or seen this play out in other city centers where crashes have happen in the US. It is NOT different here…..

#35 Seven Stars and Orion on 05.27.12 at 8:47 pm

Anecdotal evidence by definition is poor evidence, but I have to agree with the intergenerational bailout theory. I work with a lot of loose-lipped doctors, (I’m not one), and the bailout money flowing to entitled kids and underwater siblings is bananas. When some doctors start doubting out loud that they can put 7 figures away by retirement, we are well and truly hosed.

#36 Gun Boat denier on 05.27.12 at 8:56 pm

15 FF – watched in horror? Why? Did you buy some?

http://www.businessinsider.com/what-is-facebook-worth-2012-5

Real value $6-7

#37 Observor on 05.27.12 at 8:56 pm

Regarding credit score and walking away from a house in California.

As I understand it there should be little to no impact on a credit score from walking away from a house in a non-recourse state.

The deal with the bank was, we will pay the mortgage or if we don’t want to we have the option to just give you the house and walk away. That was the deal the bank agreed to. The Bank knew the deal and presumably should have charged a bit higher interest as an insurance premium against this walk away option.

Basically this was a business deal. Why should there be an impact on a credit rating of simply exercising your rights under a business arrangement with a bank?

I say in this circumstance, don’t just walk away, run.

Luckily for our Canadian Banks and CMHC we don’t have this walk-away option in Canada.

Canadians would have to declare bankruptcy, which is an extreme step. Not to be taken lightly.

#38 J.I.M. on 05.27.12 at 9:03 pm

The commenters on this story:

http://news.nationalpost.com/2012/05/27/mulcair-has-remortgaged-his-quebec-home-11-times-since-early-1980s/

got it all wrong. Harper and the Cons aren’t busting Mohair’s chops. What they are doing is preempting him. So this time next year, when the first wave of foreclosures hits, and the NDP do their usual wail , the Cons can point to Mulcair and say , he’s just a sore loser trying to get bailed out!

#39 furst on 05.27.12 at 9:17 pm

#35 Alpha Bravo on 05.27.12 at 8:40 pm

All hail the return of the invincible, irrepressible, inexorable…… Furst!
___________________________________________
I never left. Never fear my loyal followers. I am as important to this blog as HAMs, Amazons, ultra low interest rates and over eager buyers.

#40 John G. Young on 05.27.12 at 9:22 pm

#211 Westernman on 05.27.12 at 12:15 pm

“John G. Young,
DELETED…”

#225 Westernman on 05.27.12 at 4:25 pm

“Re: Last ” deleted ” post…
I guess no one noticed ” … ”
Ya’ll aren’t all that observant, are you? Explains a lot about my detractors on this forum …”

I noticed.
And in light of your followup post, and in the context of your previous posts, I think it’s a threat.

#41 TED23 on 05.27.12 at 9:25 pm

I relative terms prices in Ireland were 4 times what they are in Toronto today as a comparison before they crashed

#42 gladiator on 05.27.12 at 9:28 pm

I can attest: your US credit history is worth nothing in Canada. I lived in the US, had a 775-point credit history and upon coming to Canada had to start from absolute zero – I even got rejections for some credit card applications due to lack of credit history here and started with a limit of 500 CAD.

#43 NotAGreaterFool on 05.27.12 at 9:32 pm

Garth – I was looking at the predictions for 2012. So far, as we near the 1/2 way mark in 2012…not bad at all! The months ahead will be very interesting.

#44 Mark on 05.27.12 at 9:33 pm

I work with a lot of loose-lipped doctors, (I’m not one), and the bailout money flowing to entitled kids and underwater siblings is bananas.

But doctors are what, 1 in 1000 people in Canada? If even. And these sort of transfers have been going on since the dawn of time — so their impact on the market is probably the same today, as it was in the 1990s, 1980s, etc. Hardly market-moving.

What I have heard a *lot* of is construction-worker types giving their 20-year-old daughters downpayments, so they can get into the market (with a CMHC-insured loan). $20k from construction-worker “daddy” might seem like a lot of money, but when “daddy” insists that it be used as a downpayment on a $350k loan for a house that’s really only worth $150k — it’ll really turn out to be somewhat of a ‘negative gift’.

#45 Piccaso on 05.27.12 at 9:36 pm

Even our leaders gorge on debt in Canada

NDP leader has remortgaged his home 11 times since early 1980s

http://www.edmontonjournal.com/news/NDP%20leader%20has%20remortgaged%20his%20home%2011%20times%20since%20early%201980s/6685607/story.html

#46 In the Almighty GARTH not God we Trust on 05.27.12 at 9:38 pm

“Muclair has refinanced his home 11 times since the early 80s…”

You can bet your last nickel that the bearded mystic oracle, all knowing, all seeing financial prognosticator without equal, former minister of all revenues national, denouncer of parliamentarian peckerheads, fearless advocate of financial literacy from coast to coast, lone prophetic voice crying out in the financial wilderness of this great land, did not refinance his home 11 times since the early 80s!

#47 The Original Dave on 05.27.12 at 9:39 pm

Keith is wrong.

As soon as there’s some sort of buying exhaustion and a decline in prices, those wealthy parents will not be giving their children hoards of cash encouraging them to purchase real estate. Prices will come down just like it would in any other place for any other asset.

#48 coastal on 05.27.12 at 9:49 pm

“Am I the first 50% correction predictor?”

Nope, there are many of us who know 50% is totally possible, I’ve seen it. This is going to be worse than 1990 and 1981, the HELOC’s are the final nail, they never existed back then. An interest point or so upward and this baby is cooked.

#49 Narrowgate on 05.27.12 at 10:03 pm

A 40% correction would not be shocking at all, just a return to normal. What’s shocking are the prices out there today. We have nothing to fear.

#50 Balmuto on 05.27.12 at 10:05 pm

#39 Observor

I don’t think the non-recourse condition shields you from the negative credit impact of a foreclosure. It’s still a default, non-payment of a loan. From what I understand short sales that are pre-arranged with the lender can sometimes get reported with no credit impact, but I cant see just walking away from your home not hurting your credit score.

In Canada, of course it’s full recourse to boot so there’s more disincentive to walk away. But if homeowners get underwater enough, it’ll happen. They may seek protection under bankruptcy laws or we’ll have our own version of short sales here. But it will happen here too.

#51 Ydnew on 05.27.12 at 10:10 pm

Keith,
#18. Kathy and #23 50% Correction Predictor have hit the nail on the head.

I wouldn’t describe the financing as coming from Hot Anglo Money, it should be more correctly described as being funded by HELOCopter parents.

We are bemused by the number of our acquaintences who are bailing out their house horny kids. Too many people are focused on how easy it is to carry the low monthly payments while being oblivious to the fact they are deeply in debt.

An observation about those Estate Castles in Uxbridge: about a month ago we drove down Lake Woods Dr at Aurora Rd and York-Durham line. At that time, there were a couple of building plots and a couple of houses for sale. Today, I noticed that the building lots are still for sale, but there are SEVEN houses for sale ($1.2M – $2.3M)

#52 KingBubbles on 05.27.12 at 10:13 pm

Liked the fb comparison.

Link to funny YouTube clip of hitler being caught in the housing bubble posted about 4 years ago:

http://www.youtube.com/watch?v=bNmcf4Y3lGM&feature=youtube_gdata_player

#53 wes coast on 05.27.12 at 10:14 pm

Even if money is flowing from wealthy parents to their adult kids – a general housing crash will have economic effects. Even the ‘wealthy’ suffer loss of profit / income as business cuts back. Its that’s genral shrink in volatile money that cuts off the froth and causes there to be less money floating around in general. I’m guessing California had a greater share of millionaires that cared for their kids than in Toronto – but just like the Titanic – once the ship starts to sink, the 1st class passengers drown just the same as 3rd class. Much wealth is created by leverage and on the way down leverage amplifies the wealth destruction. No one is immune – but the way the bubble bursts will be unique to each area.

#54 John G. Young on 05.27.12 at 10:16 pm

Keith wrote:

“The real money comes from the north york connection – their empty-nest parents who are uniformly doctors, bankers and corporatelawyers.”

ROFLMAO. I grew up in Willowdale. NONE of the parents in my neighbourhood were doctors, bankers or corporate lawyers — it was (back in the 50’s/60’s a lower-middle/middle class neighbourhood. Over the past decade people with more (borrowed) money than taste have bought up the large lots, torn down the bungalows and replaced them with hideous McMansions.

Note to Keith: just because you and your wife invented “the north york connection” doesn’t make it true — even if you do repeat it FOUR TIMES in your email.

#55 bubu on 05.27.12 at 10:24 pm

For those who say the market is affordable.. would you buy a Honda for $250/month for 30 years or one for $600 for 5?
Same with real estate today in Canada.

#56 Karie on 05.27.12 at 10:24 pm

There are some people are being financed by parents but I think it’s not a big percent, on the other hand, have you ever seen the show- “Your House, My Money”?

I do see some out there having parents help with daycare and vacations. Although I wish I had this luck, people who are independent and accomplish things on their own are attaining other skills that will help them to fare well in life!

I have to say I see a lot of my friends paying for their kids post secondary education, car, trips, etc. I am positive they would buy their kids a home or at least a down payment if they have the money. People are very concerned that their children do well as a positive reflection on them.

— I am wondering if and when there will be a day when it comes to real estate that Garth says – BUY!

Of course. But don’t hold your breath. — Garth

#57 VicBC on 05.27.12 at 10:25 pm

Facebook sell off
http://www.cnbc.com/id/47520037

#58 Mama Bear on 05.27.12 at 10:33 pm

HGTV show: My House,Your Money
“My House, Your Money reveals what really goes on behind closed doors as prospective homebuyers turn to their extended family members for financial help in order to land their dream home. Cameras catch all the drama and high-stakes pressure of the classic generational tug of war as families fight for their property pick and struggle to come to a compromise. What could possibly go wrong when the grown-up kids want a beautiful home to live in and the parents want a safe place to invest their money?”

Sounds more downscale than this blog, if possible. — Garth

#59 John G Young actually comments on RE!!!!!!! on 05.27.12 at 10:37 pm

Amazing; a first!

Instead of moaning about how Westernman and others are mistreating him, and how he is always being wronged, he made an actual comment on Real Estate!

Of course, the comment is a personal anecdote and isn’t backed up by any data. But hey, if John G says it is so, then it is so!

Cheers!

p.s. I noticed that you were pretty snide with Keith, I think you should apologize. That’s just the sort of snarky comment that gets you all up in arms.

#60 Fool me once on 05.27.12 at 10:38 pm

To #24…
I’m half of “that couple”…

To answer your question… as others have mentioned, our US credit has no bearing on our Canadian credit history. So we’re “free and clear” so to speak. (Well, minus the $200,000 that we lost during our little adventure.)

To address your other comment, about sticking the bank with a $210K loss…
Here’s the thing – they didn’t lose a cent.
We had home owners insurance, so they got all their money.

Also worth noting is the fact that we didn’t “stick them” with anything. We had a contract (as #39 pointed out), that gave us two options:
1 – pay the mortgage, and, at the end of 30 years, keep the house.
OR
2 – don’t pay the mortgage and give back the house.

Each option was perfect legal, and agreed-to by both parties (us and the bank) when the contract was signed. We simply chose to exercise option # 2.

Now, as #39 very importantly pointed out, the Canadian system (and incidentally that of many US States) is different from California. There is no “Option #2”.

#61 stevenson on 05.27.12 at 10:40 pm

If you looks up the stats for the demographics in the North York area. Over 62% are immigrants. Very likely that the RE property is less then 30% of their weath. Keith has his point and a lot of people have been waiting for a correction. Especially when we tried to predict that this time of the year was suppose to be cheaper then same time last year. WRONG.

Also human nature may sell on fear, but they also need a roof. A stock although may be liquidable, but you can’t live in one.

Yes, you’re right. It’s buy a house or find a cozy overpass. — Garth

#62 John G. Young on 05.27.12 at 10:49 pm

#62 John G Young actually comments on RE!!!!!!! on 05.27.12 at 10:37 pm

“Amazing; a first!

Instead of moaning about how Westernman and others are mistreating him, and how he is always being wronged, he made an actual comment on Real Estate!

Of course, the comment is a personal anecdote and isn’t backed up by any data. But hey, if John G says it is so, then it is so!

Cheers!

p.s. I noticed that you were pretty snide with Keith, I think you should apologize. That’s just the sort of snarky comment that gets you all up in arms.”

Thanks, DA.

#63 thinker on 05.27.12 at 10:51 pm

Why does the source of the money matter? Banks, parents, etc? The fact is that people are taking a risk. They are leveraging personal balance sheets to put an asset on the books. That asset for now has no margin call (rules will change, enforcement not clear) and the servicing costs of that asset are at record lows (sure it can go up) but so can the asset, income, etc. Why are you Garth only focusing on those moving parts, but not the source of funds to pay for that debt servicing? JOBS. Canada is printing record jobs and people must feel secure to take these type of risks. Have a look at canequity.com and the applicants income vs the loan they are asking for, it’s fine. All the other moving parts are an after thought, as long as Canadians are doing well and people are earning a good pay, this will continue.

fyi, great pic ysday

#64 waiting on 05.27.12 at 11:01 pm

Seen today on Craigslist – The agent declares it a great investment … even though similar units started at $369,000 in 2005. So now, they’re 7 years older and the dropping prices still haven’t stopped. I feel for the 2005 buyers …

“$129000 / 1br – 500ft² – Whistler Investment Properties ************** REDUCED

Date: 2012-05-26, 11:04AM PDT

Residential Attached at 230 4220 GATEWAY Drive Whistler

Description:

INVESTMENT ALERT!! New and Seasoned investors looking at revenue generating properties? There are revenue generating properties like this Phase 2 Hotel operation the Blackcomb Lodge in the Whistler village, I am a Buyer’s Agent specializing in Whistler properties working for you in dealing with the Seller’s Realtor, Call Today @ xxxxx
Listing price is well below its 2010 assessed value – this is an investment opportunity not to be missed. These lofted studios were selling at $369,000 at their 2005 launch after the $5 million dollar upgrade to the lodge.

$133,000 – 230 4220 GATEWAY Drive Whistler (Whistler, Whistler) V0N 1B4

#65 Devore on 05.27.12 at 11:05 pm

Garth, #183 yesterday, Janusz has posted something you would not want to publish were it written in English.

Not any more. — Garth

#66 Devore on 05.27.12 at 11:10 pm

Keith, where do you think this “north york” money is coming from?

#67 2centsCdn on 05.27.12 at 11:12 pm

My god! I’ve never seen or heard such stupidity, ignorance and confusion. I don’t think these phantom money sources that everyone talks about are even a smidgen of the issue. It’s just good old fashioned stupid, greedy, “gotta have it now” “keep up with the Jones” people borrowing way too much from smiling lenders who lend way too much (because their loans are gov’t backed) …… and the gov’t sat back and watched it happen for years because the masses were all happy with their comfy little (grossly leveraged) lives. No one can stop the train wreck that’s in place …. not the masses, not the gov’t, not the banks ….. I just hope no one steps in and softens what must happen. It’s awful to say …. but nature must be able to take it’s course. The greedy, arrogant, ignorant, impatient, financially reckless and just plain stupid should pay for their actions.

#68 Mr Buyer on 05.27.12 at 11:14 pm

There it is another bit of fantasy, it has been HAM up until today but now it is the mythic Millionaire parents driving up prices in Toronto. There would have to be a horde of these unicorn type parents with their war chests of millions to spend on their offspring to have even the slightest impact upon the crash in real estate that ALWAYS follows a real estate bubble. The word here is RETAIL in the sense that a huge percent of the great unwashed are involved in the bubble and when the tide turns the 1 percenters will be microscopic flotsam and jetsam swirling around the bowl that is to be one of the most horrendous crashes in Real Estate on planet earth. THERE ARE NOT ENOUGH OF THESE MYTHIC 1 percenters TO KEEP THE MARKET ALOFT (probably by a multiple of 10 to 50 million or so). THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE. SALES ARE FALLING ACROSS CANADA.

#69 2centsCdn on 05.27.12 at 11:17 pm

correction ….. “aren’t even a smidgen of the issue” …. why is my proof reading so much better AFTER I hit the submit button. I’m a little stupid as well I guess : ) ….. but zero mortgage here!” ….. and no mansion.

#70 XKR on 05.27.12 at 11:43 pm

Keith, do the math. Those north TO couples you suspect of being on economic outpatient care are likely earning combined between $150K and $200K. Today, you can borrow nearly 5x family income provided your breathing. So, not too difficult then to get to an $800K plus mortgage. More than likely, if they are getting anything at all, what they’re getting from North York or Oakville is simply the downpayment and maybe some reno. money.

#71 Michelle on 05.27.12 at 11:43 pm

@ #61- Mama bear

Have you ever watched that show “My House, Your Money”?!!!

I usually watch the whole thing with my mouth hanging open at the whiney attitude of the kids on that show.

All I can think of is my half Chinese, half Jewish-Ukrainian mother smacking me on the back of the head and calling me an “un-grateful wretch” if I ever tried to talk to her that way :)

#72 John G. Young on 05.27.12 at 11:44 pm

#72 2centsCdn on 05.27.12 at 11:17 pm

correction ….. “aren’t even a smidgen of the issue”

I think you were right the first time — but in any case your point is well made :)

#73 Network Admin on 05.27.12 at 11:56 pm

re #45:

Have great US credit history I was able to get two things easier than many other newcomers:

– post-paid cell phone with no deposit (Bell actually checked the US credit history)
– regular (not secured) credit card from CitiBank. I told them that I was a their great customer in the US ( I had US citibank credit card) and they gave me regular canadian card (not sure if they checked US credit history or their records)

#74 EJ on 05.28.12 at 12:08 am

“Just heard about your blog from a realtor…I won’t mention his name…as he’ll get ostracized by his colleagues…one that actually has the integrity to confirm what I suspected”

An example of the sad state this industry, and world, has become. The honest salesman cannot be named for fear of reprisal from the dishonest ones.

When did we start punishing honesty? Perhaps since the dawn of man, but it seems to be more prevalent and downright blatant lately.

#75 s on 05.28.12 at 12:10 am

Mortgage Brokers don’t like the new OFSI rules, hopefully all the proposed changes come into effect. They fail to say a housing market that keeps on growing will also ruin the economy, no one would want to live here. Businesses wouldn’t want to pay higher wages for people to buy homes, which would mean fewer jobs.

http://canadamortgagenews.ca/2012/05/23/cmhc-under-osfi-control-another-kick-in-the-rear-to-canadians/

#76 Not So Zombie on 05.28.12 at 12:11 am

Lame excuse to buy a house: CAREFUL THIS IS NOT A JOKE. THIS PERSON EXISTS FOR REAL (this is a real conversation I had a few years ago).
-A – My cat needs a house !
-B You mean a cat house?!!
-A No, a real house ! He needs a back yard, without fence (not a townhouse), and a second story to watch birds.
-B How old is your cat ?
-A 15 years old.
-B How long do a cat live ?
-A 12-13 years old.
-B How long are you going to pay for your mortgage ?
-A 35 years ( for a 498K, not half a million dollars house, income of 65K in a good year, government contract non permanent).
-B Why don t you trick the cat for 1-2 years and just don t tell him it is his nursing home ( town house or rental)?

Once again, even a zombie would not eat that contaminated brain !

#77 John on 05.28.12 at 12:22 am

Scott wrote:

“while the notions of a housing bubble affecting condos, then suburbs and then older singles is obvious, i am still not sure how this will affect acreages and properties with land. has anyone read anything about that?”

——————

The housing bubble has been caused by international dynamics. As it bursts, a whole lot of other things have to happen at the same time. The bubble bursting reflects nothing domestic. “Acreage” will be impacted by the same externals.

#78 Nostradamus Le Mad Vlad on 05.28.12 at 12:23 am


China colonizing America 45 signs it is already underway; If Greece Goes . . . Tumbling Dice? Plus Lloyds of London preparing themselves and Blowin’ In The Windy EZone (anti-austerity); War On Terror Never ending business supply; G8 + 2 These daft psychonutbars think they control us? 6:58 clip Currency wars, leading to the next global rollercoaster; QE To Hell and Back; America Stumbling into third-world status; EZone Part II; Dumb Headline Buy – sell, stay – go; Lloyd Blankfein’s doing more of dOg’s work again; Plenty for Potty The weirdest things for auction; Reckless Spending For the Queen’s jubilee.

Spain All this fiscal stuff will be put on hold anyway. The Euro Soccer Championships come first; RE sales hype vs. reality; Greece Money stuffed in mattresses; HP The cost of cost-cutting; Free Labor in the UK; Germany and the EU What if Germany goes it alone? China Major slump in economy; China Key issues to look at; Bank profits up.
*
Some hairdryer! Four Horsemen plus the CIA and Cocaine drug runners; DNA Humanity is the new computer for storing excess data; Let’s Pretend By using children, govts. can inflict regime change in other countries and cause chaos in their own; Terraforming Alien or human? Last Chance to see alignment of earth, Venus and sun; Vitamin supplements work on specific ailments.

#79 Jenna on 05.28.12 at 12:32 am

I have thought a lot about this and the way I see it is most of them bought back in early 2000s before prices were stupid. There is probably a bit of that buts its also these couples that have kids at 40 so a tiny 1300sq home at 900k is affordable.

#80 Not 1st on 05.28.12 at 12:44 am

Garth, your analysis on people being suckered into facebook is wildly unfair. Most retail investors would have never even heard of that pump and dump if it wasn’t for a scumbag adviser phoning them up and telling them its the next best thing. They also know nothing about who got in first and who they would be buying those shares from. If they knew the truth, that piece of garbage stock would be sitting at $5 bucks right now. The retail investor is totally at a disadvantage in the stock market.

#81 David on 05.28.12 at 12:54 am

The FaceBook IPO was fundamentally over valued from the get go at $38. Losses well earned.

#82 99% on 05.28.12 at 1:15 am

I don’t think you can include the cost of the monthly mortgage payments as part of the cost, ie rent – you’d have to pay for somewhere to live.

Hot Anglo Money – doctors, lawyers are both limited by current Canadian standards. Dramatic increase in Real Estate Prices have been affected by foreign immigration. And when their economy falters, even the local professionals will be influenced. I know that newly graduated MD’s can’t afford to buy the standard doctor’s house, so let’s not claim that Anglo money will save the day for their kiddies. If indeed they were stupid enough to pull equity out of their inflated homes or dip into their savings for their off springs, they will soon regret it. Soon as interest rates and cost of living increases, they will move to Florida and won’t even give their kids their phone numbers.

#83 VICTORIA TEA PARTY on 05.28.12 at 1:16 am

EASY COME, EASY GO; JACK KNOWS, JACK?

Toronto’s Hot Anglo Money connection is a creature of history, I mean demographics.

And its likely already creating a new history:

The squandering of that wealth by the petit bourgeoisie (yuppie) “inheritors” compounded by those always severe, cascading financial after-effects.

Sure, they’ve bought some great digs on the folks’ dime, and have nice public sector sinecures (those blood-sucking zombies). But does that mean these newly wealthy will now covet their salaries and pensions, and leave their real estate free of encumbrances?

YOU’RE KIDDING!

Or will they spend until they drop, then attempt a HELOC, thus sticking a fork in their financial futures?

Of course these numbskulls will!

Hey, there’s cheap steerage class flights to Europe, Mexico, Hong Kong. And there’s new cars, and bling, and sidewalk cafe food and what-the-heck!

What’s not to like when you’ve got the lines of credit beyond those paycheques?

I’m guessing that over a period of about two years following the consummation of any such transactions these newly rich will become the latest newly-minted members of the hand-to-mouth crowd. They’ll be POOR.

As we have all been told by now, Canadian consumer debt levels are somewhere north of 150 percent of incomes.

So WHAT if real estate prices stay high as a result of this transfer of wealth?

It just isolates more and more Canadians from such markets, meaning that at some point Mr. Market will come pounding on those doors and stuff will happen. Those HELOCs will then look very dangerous as will second mortgages, if those are still being flogged.

JACK’S HERE!

Keith & Co. should feel pretty good and steadfast in their knowledge that they’re taking care of their own business and that “they’re alright, Jack.”

Because, it is my intuition, that the spoiled brats of HAM still don’t know Jack.

And they can thank their parents who do know Jack.
Why, he’s Mr. Tax Hikes, and Mr. Inflation, and Mr. Upkeep!

He’s no friend of their’s which is why the parents likely flogged the family ranch in the first place to their know-it-all off-spring.

SO, where would such liberated “old” people then live next?

In a rental, of course!

#84 Industrial Guy on 05.28.12 at 1:29 am

And the hits just keep on coming ….May 25, 2012 … Timken closing factory in St. Thomas. “Iconic employer to close next year, putting 150 out of work”.

http://www.lfpress.com/news/london/2012/05/24/19794181.html

“RIM expected to announce major layoffs this week” … “I think they need to come down to 12,000” I sure home that guy who wrote in the blog a few weeks ago about buying a condo in Waterloo has been slow to act.

http://www.thestar.com/business/companies/rim/article/1197035–rim-expected-to-announce-major-layoffs-this-week

Would the last person with a job in SW Ontario please remember to turn off the lights?

#85 Blacksheep on 05.28.12 at 1:35 am

Daystar #229,

Some observations.

“sadly, our middle and lower class doesn’t spend or invest wisely, pumping all their eggs into one basket (a house) and it shows.”
“Try one income and spend less, couples in their 20′s don’t need everything all today now, built on credit. Renting after all is cheaper, its called living within your means.”

The indoctrinated masses, lack the opportunity to glean the insight required to ‘work the system’.

“travel to some dirt poor nations and then come back and then try telling us how bad we’ve got it”

A ridiculous comparison, meant to make the walking dead, feel fortunate.

“I get no satisfaction from pointing this out because it reminds me of how foolish I was to have expected some kind of growth within you having been here these past few years only to remain, well… stunted”

Display disappointment & vulnerability, making your persona more……caring.

You pen extremely long, overly detailed comments (pbtw?) with the strategic goal being the avoidance of the nasty truths in question. Say much, address little.

Berate Harper and the corporate lobbyists, to bond with the little people, when we both know, the rabbit hole goes much deeper. We get feel good phrases, “us bloggers” or “it’s for the greater good”. Your advanced ‘systemic’ knowledge shows your hand, as ignorance, is not an option.

Your statement is telling:

“This is the consequence of mistrust (more like paranoia) inappropriately placed.”

I have a theory, but one must ask….to what end?

take care
Blacksheep

#86 ydnew on 05.28.12 at 2:26 am

How the Irish can go bankrupt:
http://www.guardian.co.uk/world/2012/may/27/irish-dodge-debts-uk-bankruptcy-tourism

#87 Tony on 05.28.12 at 2:35 am

Re: #7 50% correction predictor on 05.27.12 at 6:40 pm

Maybe, i only see a 40 percent correction coming for Toronto houses but between 50 and 80 percent for Toronto condos and apartments. The rest of the GTA should drop around 35 percent.

#88 a prairie dawg on 05.28.12 at 3:18 am

#72 2centsCdn

Later this year, by law, you’ll have to change your blog name to either ‘free advice’, or ‘5centsCdn’. (sarcasm)

I also predict a future generation of confused children whenever they hear the phrase ‘my two cents worth’… lol

#89 Buy? Curious? on 05.28.12 at 3:20 am

By far, the greatest post, evah! No, I mean it! I’ve posted a few times about a similar topic, (though not often published on this site for some reason) that walking away from your debt, IS A GOOD THING! Sure, your credit rating takes a hit but who cares? Do you really need 5 gold star stickers by your name? They can’t throw you in jail or break your legs! Maybe garnish your wages, but that takes time and effort and if you change jobs, the whole process has to be started from the beginning again. And it’s not immoral either. You’re borrowing from Corporations! They’re not real people! It’s not like you stiffed a friend at a late night diner because you lost your wallet after visiting May-Ling’s Therapeutic Massage Parlour. These are faceless, soulless entities that deserve to be treated with as much respect as a fly in your kitchen. (That’s a real-time metaphor. I just whacked one with a rolled up dish towel)

I think more people should think about walking away from their debt. It’s more of a catalyst for change then voting.

#90 Grantmi on 05.28.12 at 3:23 am

#42 furst on 05.27.12 at 9:17 pm

I am as important to this blog as HAMs, Amazons, ultra low interest rates and over eager buyers.

You’re about as important to this blog as a bad case of smegma!

#91 45north on 05.28.12 at 3:35 am

John G. Young: ROFLMAO. I grew up in Willowdale. NONE of the parents in my neighbourhood were doctors, bankers or corporate lawyers — it was (back in the 50′s/60′s a lower-middle/middle class neighbourhood.

I grew up in North York by the banks of the Humber and it was a middle class neighbourhood. I remember one family on the street whose father was a doctor – LaCroix. I remember the ice man, the milk man with a horse-drawn wagon and the bread man. The street is still there but the place where I grew up is gone.

As far as North York being the source of financing, I don’t think it is to any large extent.

#92 Harlee on 05.28.12 at 3:38 am

Well, it almost 1:30 a.m. in Saskatoon and no reports of any armageddon in the world,not even in Vancouver so I guess there is no “End of the World”….
First Harold..now, Ronald…They’ve both let me down…
Ya know, I ‘m beginning to think these evangelists don’t have a clue what they’re talking about.
Ah well, perhaps it was just a “miscaculation”…Ya, that’s probably it…;-)
The beer and popcorn didn’t go to waste. I work evenings and then stay up to watch old movies.Tonight it’s ‘Captain Newman’ with Gregory Peck and Tony Curtis.

In the morning I can get up and celebrate my birthday !

#93 Canuck Abroad on 05.28.12 at 3:40 am

Garth, would you kindly comment on Keith’s idea? It seems pretty far fetched to me but I’ve been away a long time.

North York, really? Can’t see why anybody with real money would choose to live in North York. Does he mean Bridle Path?

Are these parents leveraging their own properties to fund their kids? This would be very bad and worsen the correction.

Are these the same parents who are planning to sell their own properties to pay for their retirements? Whose going to pay what these people are expecting – the kids being propped up now? Not really seeing how this will work as every ponzi scheme needs further fuel for the fire.

Is there really enough wealth in “North York” (very funny) to save all of Toronto SFHs from Bathurst to the DVP south of Lawrence? Really? I find this astonishing.

I seem to recall that when there was a brief tiny correction in 2008 that some neighbourhoods that I expected would hold up well were in fact particularly badly hit, such as Forest Hill and Lawrence Park. Maybe someone else has the stats? Not sure I could find this now.

#94 a prairie dawg on 05.28.12 at 4:12 am

Hot Asian Money…

Hot Anglo Money…

What about DAM? Dirty Anglo Money…

This pic in the story reminded me of pictures of Miami during the cocaine fueled building craze in the 70’s-80’s.

Add to this the fact that with Canada changing out the paper money for plastic bills, the DAM crowd has to get it converted somehow. Ya can’t just walk into banks with duffel bags full of cash (ie: Scarface, Blow) and expect a rosy reception anymore…. lol

Funneling dirty money into construction worked in Miami decades ago, and I’ll bet a certain amount of it is washing it’s way through our commercial real estate markets right now…

Van and T.O. are great DAM locations for washing dirty cash right now…

http://business.financialpost.com/2012/05/23/lower-toronto-condo-sales-show-market-balancing-out-industry-group-says/

#95 Freedom First on 05.28.12 at 4:16 am

#38

Did I buy some FB shares? I guess you don’t follow my posts. Of course not. And I watch the housing bubble in Canada going the same route as the rest of the world in horror too. Am I vulnerable to the highly probable housing crash in Canada. Of course not. Don’t ask stupid questions.

#96 Buy? Curious? on 05.28.12 at 4:21 am

Garth,

Remember a few years ago when you’d go to parties and people would brag about how much their house was worth or some new upgrade for their house? Well, times have changed. That type of conversation is BOOORRRRRIIIINNNNGGGG. It’s now about how much debt they walked away from. “My MasterCard? Yeah, who’s the Master now? Visa? Here’s my Visa! (rapid karate chops to my inner thighs) I’m Richer Than I Think? I KNOW, I’m richer than I think because I’m not paying you back and I’d like to see you try” Today’s party conversations are so funny!

http://www.guardian.co.uk/world/2012/may/27/irish-dodge-debts-uk-bankruptcy-tourism

#97 Canuck Abroad on 05.28.12 at 4:23 am

Okay, found it. The article is from March 2009, only three years ago. People have such short memories. And the 2008 correction was just a tiny blip.

http://www.torontolife.com/features/less-more/

Another article from the same series (Toronto Life Pillagers Guide to Real Estate)

http://www.torontolife.com/features/under-asking-miracles/

I would be interested to know how Keith can reconcile the experience of 2008 with his notion that North York wealth will save the entire core.

#98 Canuck Abroad on 05.28.12 at 4:35 am

For the grammar police: yes, yes I realise my “whose” should be “who’s”

#99 Deliverator on 05.28.12 at 6:33 am

“I would think that the majority of the wealthy people in this country take out HELOC-type mortgages to invest and have tax-deductible interest.”

Fine. Tell me again why the CMHC was insuring these HELOCs?

#100 Deliverator on 05.28.12 at 6:44 am

“It’s a good recent example of a real estate bubble that happened without a “sub-prime” market, without securitization, without CDOs, etc.”

Without sub-prime? What does 0%down/40 years or, now, 5/30, at interest rates destined to reset higher mean to you? Here’s a hint: any mortgage that needs to be insured by the CMHC is by definition sub-prime.

Without mortgage securitization? Really? You really think that? *sigh*
http://www.cmhc.ca/en/hoficlincl/in/camobo/upload/Introduction-to-the-CMB-Borrowing-Program.pdf

http://www.scribd.com/doc/91831923/The-Big-Banks-Big-Secret-Canada-open-pdf

#101 unbalanced on 05.28.12 at 6:58 am

Happy birthday Harlee!

#102 futureexpatriate on 05.28.12 at 7:09 am

Those rich parents bailing out the kids? Often a dynamic of fighting back and forth in THEIR relationship, and who wins.

When one parent finally dies, the gravy trains usually end because the surviving parent has no power struggle left to feed and it’s easy to cut off adult children, even with guilt grandkids.

And then it’s a very long wait until the next reading of the will.

#103 TurnerNation on 05.28.12 at 7:43 am

Today’s weblog reads like another episode of
the Garth-Files. Debt zombies. They’re out there somewhere!

Firemen with four houses. Retired school teachers flipping urban condos. Young rig hands with acerages and F350s, quads, sleds, two kids.

#104 Kevin on 05.28.12 at 7:47 am

Your first writer, “Fool me Once,” who walked away from the house in California, is a worthless dirty thief. His letter says nothing at all about his ability to afford his payment, or a change in his income. Just, he bought a house, then later other people said, “I’d only pay $220k for it, if you were trying to sell right now, which you’re not,” and he stiffed the bank. Broke his word. Stole.

I have absolutely no sympathy for people like him, and indeed, wish there were a way to prosecute him.

#105 Kevin on 05.28.12 at 8:08 am

@Observor:

“As I understand it there should be little to no impact on a credit score from walking away from a house in a non-recourse state.”

Suffice to say, you do not understand the credit scoring system. I humbly suggest you refrain from additional commenting on the topic until you have at least a basic familiarity with the system, lest you further embarrass yourself.

#106 TurnerNation on 05.28.12 at 8:12 am

#38Gun Boat denier on 05.27.12 at 8:56 pm

Some say newly trading Zynga (FB’s online game maker) will be the next hot shot due to legalized online gambling.

http://news.investors.com/article/612684/201205241856/wynn-zynga-california-eye-legal-online-gambling.htm

I could work in one of those “recovery” boiler rooms. Ring ring. Hello Sir? I am calling on behalf of FB investors who lost money. I am authorized to tell you, you can recoup your money with this next online play…

#107 [email protected]&E on 05.28.12 at 8:21 am

“”Instead, we are at the epicenter of what you like to call “Hot Anglo Money””

Really? Do not get high on your own supply of stuff…
Well, the way I remember it is back in the winter of 2008, all the rich people in the Y & E area were so scared shitless, everyone from the barbers, restaurants and shop owners were complaining about no one buying stuff anymore.

There is no area safe from a real estate/economic correction… and if you really want to know when we enter into a recession/correction you should check out first Hazelton lanes mall in Yorkville. If you see stores closing and 50% discounts, then run for the border.

#108 jess on 05.28.12 at 8:22 am

Frank #204 from the other day

Mr. Romney reframes and says that Bain gives money to OTHER people who make jobs.

bain = toys r us

A Little History of etch -a -sketch

http://www.laborrights.org/creating-a-sweatfree-world/news/11028
halpernhttp://thepoliticalcarnival.net/2012/05/25/video-mitt-romney-slips-tells-the-truth-completely-invalidates-gop-economics-101-says-bain-didnt-create-jobs/
=========
Interesting similarites
From the Chilean Winter to the Maple Spring Solidarity: the Student Movements in Chile and Québec
By Andrew Gavin Marshall, Andrew Gavin Marshall’s Blog | News Analysis
=
7 years later
Swiss Company Accused of Stiffing U.S. for $750 Million Supplying Food to Troops in Afghanistan

#109 furst on 05.28.12 at 8:23 am

#94 Grantmi on 05.28.12 at 3:23 am

DELETED

#110 Daisy Mae on 05.28.12 at 8:33 am

I always appreciate it when you expose the obscene measures used to dupe the innocent. Otherwise we just would not know….

Thanks again.

#111 bigrider on 05.28.12 at 8:41 am

I think that there is a lot of truth in what Keith speaks of.

Afterall, house obsession is most strongest in the GTA, more so than any other part of the world and let’s face it, prices are not falling.

If we are to discount and dis credit all influences on our market, from foreign buyer influence to money transfer from older generations to kids, then we must come up with reasons as to why our RE market prices continue to defy all logic and reason .

#112 maxx on 05.28.12 at 8:43 am

“…..wiping out an entire pool of buyers and eventually dragging down all prices.” — Garth

There’s no “plankton” left. — Albert”

Accurate, on point and most particularly, brilliantly assembled. Garth, you continue to amaze.

#113 TimV on 05.28.12 at 8:44 am

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/home-buying/vancouver-renter-puts-real-estate-search-on-ice/article2412101/

I wonder if there are any advertisers looking for a refund. One of the buyers in G&M’s “Buyer Diaries” has decided against buying. Main reason: not because of own vs rent, a little bit because of the ongoing correction, and mainly due to exhaustion. You have to read the “blog” section, not the main article portion.

I can sympathise. I go to the trouble of talking to neighbours, driving by at night, daytime, rush hour, etc, for any house we are interested in. If you’re a serious buyers, it is exhausting. Fortunately I’m more stubborn than she is (spare me the “cheaper to rent in GTA” spiel – given the small selection of rental homes, we would be looking for a decade before finding the right one).

#114 J.I.M. on 05.28.12 at 9:07 am

It’s not H____y Anglo Money from doctors in North York, It;s LOLM – Little old Lady Money. As in the 35 year old daughter saying , Mommy we have a new kid and need money for a down payment on a new condo. And retired teacher ‘lends ‘ them the down payment.

Trust me, I’ve seen it!

#115 earlybird on 05.28.12 at 9:12 am

#(108)Kevin
There is no thieving going on, it a simple contract….period. Serviceability of the debt has nothing to do with it. It would take a generation to recoup such deep losses, they most definantely made a wise financial choice regardless of credit damage. Cut your losses and move on. The banks received their money via insurance no doubt. There isn’t a morality clause in the mortage document, nor should there be.

#116 Fool Me Once on 05.28.12 at 9:13 am

To Kevin (#108)…

You are misinformed.
We abided by our contract.
Please see my reply #63.

All the best,
Fool Me Once
(aka ‘worthless dirty thief’, in your words)

#117 Frank on 05.28.12 at 9:19 am

bigrider #115

What are you talking about. You sound like a moron realtor unless you are a moron. These realtor stories are to funny. The US had the very same realtor lies and look what happened when reality hit. North york will crash back down to reality much like the rest of the world. These realtors must think people are stupid animals.

#118 robert james on 05.28.12 at 9:22 am

Fool me once with the “HAM” story which seems to have ran out of steam and now it is Fool me once more with the “Hot Anglo Money” story .. What will be the next “Hot Money” BS trip coming from the R/E industry ??

#119 disciple on 05.28.12 at 9:23 am

#93 Buy Curious… It’s funny how something like a dead fly can change the world…you’ve stumbled upon one of the answers to the world’s problems… strategic default.
#95 45north… Good God, man… how old ARE you?
#96 Harlee… Happy B-day, blog dog!
#108 Kevin… Your hand is showing. I raise you and then call your bluff…Did you not understand that option #2 was legal?

Fool me once, huh? Here is the true story of some of your real rulers… My father says that he will find a photo of Marilyn and Jacqueline together to prove me wrong… and he said “Wasn’t Jacqueline present when Marilyn sang Happy Birthday to JFK?” And then my Mom said, “Of course not”. So that’s that.
That indelible night, Kennedy was on his own, as his wife Jackie was visiting friends in Virginia.

“That indelible night, Kennedy was on his own, as his wife Jackie was visiting friends in Virginia.

http://tinyurl.com/7jue7nz
“That indelible night, Kennedy was on his own, as his wife Jackie was visiting friends in Virginia” – yeah, right.

Here is the truth:
http://xdisciple.blogspot.ca/2012/05/true-story-of-roosevelts-and-kennedys.html

#120 Kip on 05.28.12 at 9:26 am

“To wit: there is simply a near-endless stream of transfer money coming to people our age (early 30s) from their wealthy suburban parents.”

Well, that is exactly what this 53 year old Boomer is doing with his 28 year old daughter and son-in-law. They just bought a third house (sold the other two) and it would be all but impossible for them to fail because his Boomer parents are doing well too and we would backstop them as required to make sure they succeed.

Why would we do this? I will invoke my absolute entitlement as a Boomer to answer, because I feel like it!

#121 Realtors in a Panic. on 05.28.12 at 9:28 am

Realtors continue to post on garths blog in a panic as housing has started to crash in Canada. The crash is coming to Toronto as it started in Vancouver. As one poster posted this link which prove price will crash hard! The 2008 correction was just a tiny blip. Keep thinking up stories realtors as you know the crsah will be 40-50% drop in prices.

http://www.torontolife.com/features/under-asking-miracles/

#122 Canuck Abroad on 05.28.12 at 9:46 am

108 Kevin – You are mistaken, and the big banks and mortgages businesses prey on people like you who do not understand that buying a house is just another business transaction and who instead attach some sort of morality to what should be purely business decisions.

Mortgage documents clearly state the consequences of non payment, and the house purchaser has the choice to pay or not pay. Businesses walk away from debts and default all the time, and if makes more financial sense to default, they would be expected by their shareholders to do exactly that.

As long as both parties stick to the terms of the mortgage contract, neither should have any issue. Jingle mail is not an option in Canada anyway, so you will not see people mailing their keys to the bank. However, a home”owner” in trouble should do the same analysis as a business. If after crunching the numbers it makes more sense to declare bankruptcy and walk away, then that’s what they should do. It’s just business.

#123 T.O. Bubble Boy on 05.28.12 at 9:47 am

@ #103 Deliverator

Fine. Tell me again why the CMHC was insuring these HELOCs?

Agreed – this is/was insane policy. All a part of the “economic action plan” from Harper and Flaherty, focused exclusively on household debt and home renos.

#124 disciple on 05.28.12 at 9:48 am

Sorry, Garth, I messed up the cut and paste on my previous post…making you work today…

#125 disciple on 05.28.12 at 9:56 am

Think about how something like this makes you feel, and ask yourself, why does this need to be reported worldwide? Most news is completely faked. Like Syria.

http://www.nydailynews.com/news/national/naked-man-shot-killed-miami-police-allegedly-chewing-man-face-cops-article-1.1085246

#126 Gun Boat denier on 05.28.12 at 10:03 am

110 Turner Nation – a grand idea. Freedom first @99 has volunteered to help these people.

#127 josh on 05.28.12 at 10:34 am

I saw an article somewhere (great source I know) that showed almost every single IPO (the front page news ones anyways) lost significant value over the first year. Of course there was one exception … but do you want to bet your retirement that the next IPO is the one that makes you RICH. Just avoid them, wait til they bottom and then buy in … if you still believe in the company.

It is easy to point out when a market is over valued … it’s much harder to predict when one will crash. Also the higher the market has gone, the further it will fall. Rural areas and smaller cities that didn’t really get a big boom, or have stalled over the last few years don’t really have all that far to fall. Toronto and Vancouver on the other hand … doomed. But it’s hard to say whether it will be 2012, 2013 or longer.

The key is to buy a house for the right reasons (you’re ready to settle in one area for awhile) and for the right amount of money. If you can justify buying a house assuming that it will cost you money in the long run, then you can afford it. If you have to assume that the house is going to make you money, then it’s too expensive.

#128 Kevin on 05.28.12 at 10:34 am

#(119) earlybird:

“There is no thieving going on, it a simple contract….period.”

I’m tired of re-hashing this debate over and over, but in summary, no, it’s not “a simple contract.” It’s a loan with a promise to repay, secured against an asset in the case of non-payment. The fact that the loaner is protected with the security collateral does not obviate the expectation of repayment. The borrower is still expected to repay the loan in full. The forfeiture clause is not some kind of perfectly acceptable option to be taken at the discretion of the borrower. It’s a last-ditch escape hatch to try and protect the lender.

“It would take a generation to recoup such deep losses”

First of all, of course, it’s not a “loss” until they sell. And they were not trying to sell.

Second of all, the fact that the asset has dropped in value is irrelevant. Every car I’ve ever owned has gone to zero in value. Every new car that is driven off the lot with 100% financing is instantly underwater, and only goes down from there. If such “deep losses” were the only factor, then every new car owner out there would be perfectly justified (and lauded) for turning over the keys the day after buying. In reality, it’s not that simple.

“The banks received their money via insurance no doubt.”

And how about the insurance companies then? Who paid them back, hmm? Remember AIG? Fannie Mae? Freddy Mac? Do you really not understand that somebody lost a ton of money? The money didn’t come out of thin air – it was lent to “Fool me Once,” he gave it to the previous homeowner (or builder), then broke his word and decided not to pay it back. Somebody is still out that money (the bank, AIG, CMHC, take your pick). This nonsense about tax writeoffs and faceless corporate entities is just a bunch of moral relativism to try and alleviate one’s own sense of guilt in knowing they’ve done something horribly dishonourable.

At the end of the day, somebody got stiffed. Whether it was shareholders (YOU, if you own any mutual funds invested in any banks or insurance companies with such exposure) or taxpayers, somebody ate his loss so he could get away scot-free. It’s moral hazard at its worst.

#129 Gun Boat denier on 05.28.12 at 10:36 am

99 FF – actually I do read your posts (you are not on the skip list) but unless they contain something really
thought provoking, I will not recall them. So why is the question “stupid”? People lose money in the market
every day. FB was over-hyped, overly speculative and as
result is over-valued. Why is it dropping in price a horror?

#130 Kevin on 05.28.12 at 10:37 am

@Fool me Once (#120):

“You are misinformed. We abided by our contract.”

You broke your promise and displayed dishonourable character. That is why the lending bank completely trashed your credit/reputation when you stiffed them.

If everything was A-OK with the bank, and you were just exercising a perfectly-acceptable option the bank fully expected you to use, then why did they trash your credit? Why did they write a big note in your credit history, warning all other lenders that you are untrustworthy?

#131 Dean on 05.28.12 at 10:39 am

Weren’t there rich parents around before 2000? I think this adds fuel to the bubble, parents providing down payments to kids is no different than banks doing it. RPM money will dry up just as fast in a downturn as any other, maybe faster.

I think what fuels the collapse isn’t necessarily that people can’t afford their monthly payments — they just can’t stomach it. When you’re losing equity, your home is no longer an investment and all your justification flies out the window. Suddenly the mountain of debt is no longer shadowed by the mountain of equity and people get really nervous, especially “rich” people.

Try this experiment on your parents if you can. Ask them for money for real estate, something that’s a fair amount but that you know they could come up with easily. Don’t even tell them what it is if you can, tell them you can’t discuss it right now. Then tell them you’ve changed your mind and want to invest in Apple stocks instead. See what they do.

My guess is that they’ll probably balk (or at least give you more hassle) at investing in the most profitable company on the planet, but willing to give you the same amount of money to invest in almost ANY real estate investment. There is your sign of a bubble.

#132 Kevin on 05.28.12 at 10:42 am

@disciple:

“#108 Kevin… Your hand is showing. I raise you and then call your bluff…Did you not understand that option #2 was legal?”

Of course it’s legal. I’m not saying he’s at risk of being thrown in jail (though I do wish the laws were such that he could be).

Just because something is legal doesn’t mean it’s moral or ethical. Cheating on your wife is legal, too. Does that make it “ok” in disciple’s book?

#133 Kevin on 05.28.12 at 10:45 am

@Canuck Abroad:

“buying a house is just another business transaction and who instead attach some sort of morality to what should be purely business decisions.

Mortgage documents clearly state the consequences of non payment, and the house purchaser has the choice to pay or not pay.”

There is an expectation that you will repay if you are able. That is why if you don’t pay, they trash your credit.

If it were, as you suggest, just a simple business transaction, then they would not trash your credit when you defaulted. They would just say, “He chose option B” and leave it at that. But in reality, they wreck your credit and mark you with a scarlet letter, flagging you as untrustworthy to other potential lenders.

#134 Rent Express on 05.28.12 at 10:54 am

Garth we just tuned into your blog, killer stuff. A bunch of us have similar attitudes. Almost feels like there is another shoe still to drop in some markets. Thanks for the insight. – Rent Express Crew

http://ca.rentxp.com/canada-housing-market-recovering-you-sure/

#135 Balmuto on 05.28.12 at 11:15 am

#104 Deliverator
“Without sub-prime? What does 0%down/40 years or, now, 5/30, at interest rates destined to reset higher mean to you? Here’s a hint: any mortgage that needs to be insured by the CMHC is by definition sub-prime.”

That may be your definition but the term sub-prime is generally used to refer to borrowers with credit scores below 620. I was given a CMHC insured, 40 year variable rate mortgage to buy my condo that I just sold. My credit score is 751. Does that make me sub-prime? It’s true that CMHC guaranteeing a lot of risky loans, I don’t dispute that. But it’s not a “sub-prime” market per se – one that’s exclusively for borrowers with poor credit, like the one that grew to be so big in the U.S. That market was made possible by the repackaging of subprime mortgages into MBS and then into CDOs and CDOs of CDOs, sliced and diced six ways to Sunday so no-one could tell what they were investing in anymore. To you’re next point – it’s true we have NHA MBS in Canada, but the market is pretty simple and transparent compared to what you saw in the US. There are clearly risks to CMHC taking on so much debt, but these would exist with or without securitization – the risk is created when CMHC insures the loan in the first place.

#136 truth hammer on 05.28.12 at 11:24 am

I don’t know why you’re busting Mullah Mulcair for his love of personal debt….debt after all is the socialist mantra….you won’t find a single commie on the hill who doesn’t espouse a increased debt to GDP. Besides….debt is good says the ‘newspaper’…..and if it’s in the ‘newspaper’ is must be true …right?

http://business.financialpost.com/2012/05/26/maybe-debt-isnt-so-bad-after-all/

#137 Piccaso on 05.28.12 at 11:24 am

75 per cent of Albertans in debt

http://www.edmontonjournal.com/business/money/75%20per%20cent%20of%20Albertans%20in%20debt/6689314/story.html

#138 John Jacob Jingleheimer Schmidt on 05.28.12 at 11:31 am

As usual, the US trumps Canada. Keep your free helthcare. I would never want it. I am from The Netherlands, now living in the US in Portland, OR. Canadians are simply the most obnoxious clients we know. Most act like whney four year olds.
http://www.nber.org/bah/fall07/w13429.html

http://www.ncpa.org/pub/ba649

http://www.hoover.org/publications/defining-ideas/article/58971

#139 disciple on 05.28.12 at 11:41 am

#136 Kevin… You just conceded it’s legal, and then you say it’s cheating. Which is it, chump? You don’t fool me, Kevin, whoever you think you are.

#140 disciple on 05.28.12 at 11:42 am

Kevin… widespread default is the answer; in fact, the only solution. It will happen whether you colour it bad or not. That is your mission on this blog, right? Shill.

#141 disciple on 05.28.12 at 11:44 am

Kevin…It is not hard to see who you represent. Why do you even bother?

#142 disciple on 05.28.12 at 11:44 am

Kevin… Give it up. You have been unmasked by disciple.

#143 Keith here... on 05.28.12 at 11:49 am

Finally, my lifelong dream of being published in the greaterfool blog has been realized!

Thanks for all your comments. I think people are misunderstanding what I’m saying though. I am not talking about young people BUYING in North York/Forest Hill. Nobody who grew up there wants to live there, because it’s bland. Instead they want to live in some cool walkable, yoga studio dense, accessible-by-transit-we-never-use, independent-artist-hub area. Yes I rent in one of these neighborhoods and enjoy its charms, even if I don’t do yoga or purchase much independent art.

I know LOTS of people who work in restaurants or some part-time arts profession and own $800k+ houses. They have kids and it is VERY VERY important that junior play in the “right” park and attend the “right” kindergarten, and grandparents are very indulgent/worried about their wee ones, so they dig deep and pony up the six figure down payment so Dufferin Grove/Withrow/whatever is right around the corner.

Check out some of the stats on how much doctors make. The average salary for all doctors is ~$400k, and for some specialties the average is closer to $700k. A family doctor in Ontario makes 70% more than in the US. Doesn’t take many months of work at those salaries to fund a bidding war on a sweet little spot on west queen west.

Yes, yes, most people aren’t doctors (it’s less than 1% from what I recall). But there’s plenty of boomer money here, I work downtown by the major bank towers. The average person in the PATH isn’t young. And they just love the idea of their kids being “smart” and “building equity” to get a little head start. Where do you think bidding wars come from, the parents HATE the idea of their grandkids getting shut out of the right area.

Armageddon is coming for lots of people. Condo owners, exurb residents dependent on gas to go everywhere, speculators. I really really hope it comes uniformly, but I kind of doubt it will. I believe even the mighty Garth has mentioned that walkable urban neighborhoods will probably fare much better than the overall trend in the “microclimates” of local real estate.

——
Karie

“There are some people are being financed by parents but I think it’s not a big percent, on the other hand, have you ever seen the show- “Your House, My Money”?

I do see some out there having parents help with daycare and vacations. Although I wish I had this luck, people who are independent and accomplish things on their own are attaining other skills that will help them to fare well in life!

I have to say I see a lot of my friends paying for their kids post secondary education, car, trips, etc. I am positive they would buy their kids a home or at least a down payment if they have the money. People are very concerned that their children do well as a positive reflection on them. ”
———–

EXACTLY. It would be toooooo embarrassing if they didn’t own in the right area, on the right block, by the right park, in the right catchment area…

—–
Seven Stars and Orion

Anecdotal evidence by definition is poor evidence, but I have to agree with the intergenerational bailout theory. I work with a lot of loose-lipped doctors, (I’m not one), and the bailout money flowing to entitled kids and underwater siblings is bananas. When some doctors start doubting out loud that they can put 7 figures away by retirement, we are well and truly hosed.
—–

Yes anecdotal evidence is weak, but it’s supported by other facts, e.g. the average salary in toronto is about ~45k, 50% of the population doesn’t work at all (too young/old/sick, disabled, retired, home with kids, etc etc), do the math and where do the housing prices come from?

—–
The Original Dave

Keith is wrong.

As soon as there’s some sort of buying exhaustion and a decline in prices, those wealthy parents will not be giving their children hoards of cash encouraging them to purchase real estate. Prices will come down just like it would in any other place for any other asset.
—–

I hope so! But it’s a chicken-and-egg problem, when prices go down the parents will stop giving, but how will prices go down when the parents keep giving?

—–
wes coast

Even if money is flowing from wealthy parents to their adult kids – a general housing crash will have economic effects. Even the ‘wealthy’ suffer loss of profit / income as business cuts back. Its that’s genral shrink in volatile money that cuts off the froth and causes there to be less money floating around in general. I’m guessing California had a greater share of millionaires that cared for their kids than in Toronto – but just like the Titanic – once the ship starts to sink, the 1st class passengers drown just the same as 3rd class. Much wealth is created by leverage and on the way down leverage amplifies the wealth destruction. No one is immune – but the way the bubble bursts will be unique to each area.
—–

Look up the “doctor housing bubble” website. It’s all about the california bust. But guess what, there are real estate “microclimates” and areas where prices will not go down no matter how bad the aggregate statistics on jobs, foreclosures, defaults and sales look. Some areas are still at the pre-bubble level of 12-15x income for a house, the uncool neighborhoods have dropped down to normal levels (or below!). Same situation here, that’s all I’m saying, places can stay overpriced for just about forever. Sad to say I suspect my area is one of those places, so for now the wife and I shrug our shoulders and rent but we have basically given up on this area ever returning to earth.

Now if you’ll excuse me, I think I need to go sign up for cable (which we don’t have in our foolhardy renter penny-pinching) so I can watch “your house, my money.” It sounds wonderful!

Praying for the bust on my block but doubting I’ll live to see it, Keith

PS “HELOCopter parents” is fantastic, many karma points to whoever came up with that…

#144 disciple on 05.28.12 at 11:53 am

Kevin said “Do you really not understand that somebody lost a ton of money?”

I can assure you it wasn’t the banks or their insurance partners in “legal” crime. Commercial banks lend money that zaps into existence the moment they lend it, without any promise that the bank will pay it back with hard assets to back it up. Therefore, you are wrong, Kevin.

#145 disciple on 05.28.12 at 11:57 am

The commercial banks SHOULD NOT be involved in housing, period. Future generations (and Kevin), take note. Roofs over our heads are not casino material, sorry.

#146 Snowboid on 05.28.12 at 12:11 pm

#138 Rent Express on 05.28.12 at 10:54 am…

Scam alert! Love the penthouse in Kelowna http://ca.rentxp.com/apartment-45/ for $ 880 a month.

Who are they kidding? Like the way our province is spelled “British Colombia”!!!

Can hardly wait for your IPO!

#147 Daniel on 05.28.12 at 12:11 pm

#108 Kevin … you’re an idiot.

I could go into it, but read above to see why.

Let me guess, people walk all over you and you don’t know why. You’re a bitter person the nobody likes and almost every comment that comes out of you mouth is negative, am I close?

#148 Mark on 05.28.12 at 12:12 pm

“My credit score is 751. Does that make me sub-prime?”

If you have less than the 20% downpayment, then your loan is subprime. Its really as simple as that. Remember the “3 C’s of credit — character, capacity, and collateral”.

#149 Jason on 05.28.12 at 12:12 pm

Completely agree with Kevin. Hot Central Toronto neighbourhoods are completely immune to any negative correction. Bloor West Village, Ronces, Queen West, St. Clair West (Wychwood Barns and west)Riverdale, Leslieville, Beaches. Hell, semis at Greenwood/Danforth are going for 800K. Toronto (downtown) = immune to (let be specific) NEGATIVE CORRECTION. Sure bidding wars may cool off, but 300k price increases over the last 3-4 years in these neighbourhoods. And those who bought are not and will not lose any money.

Nothing is immune. — Garth

#150 Jeff Liot on 05.28.12 at 12:13 pm

Ouch,

Never expected for such a talented wordsmith as yourself to make the classic boo-boo.

The expression is “couldn’t care less”
Not “could care less”

JL

Actually it is a useful derivation, with a slang twist. Knowing the rules allows one to break them. — Garth

#151 Frank the skank on 05.28.12 at 12:13 pm

I think its difficult to predict the percent devaluation as a result of a crash. I don’t believe you can generalize by saying condo’s will depreciate this much and SFH will depreciate that much. I know in Toronto, prices are influenced by many things and I’m sure its like that everywhere. You can even have certain areas that are high in demand that really don’t have anything to offer that justify the overinflated price. I think those areas will decrease more in value when comparing 2 house of the same size and quality. One weird thing I’ve noticed is that you can look at 2 houses on the same street where one house will be completely renovated and the other a dump that hasn’t been taken care of. More of then than not, the price difference between the two houses is negligible. There may be a little more negotiation power with the dump, but it really depends on the area. Some people like to buy based solely on area, and not consider costs such as repairs. That’s real smart and another sign of things going bad!! Again, I’m completely amazed at how easily people are influenced by the machine.

#152 Daisy Mae on 05.28.12 at 12:14 pm

#118 JIM: “Mommy we have a new kid and need money for a down payment on a new condo. And retired teacher ‘lends ‘ them the down payment….”

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

I know of one woman who actually sold her house, freeing up equity to give to her 40-year-old daughter so the daughter could clear up debts…

#153 From Winnipeg... on 05.28.12 at 12:14 pm

Garth, I’d like to see you address “Keith”‘s point about wealthy parents who routinely provide their adult children with money. It’s the same thing I’ve seen in Winnipeg.

I see posters above say it doesn’t happen, to look at previous Blogs that provide statistics of how many Boomers have nothing saved for retirement. I get that.

BUT, in our beautiful neighborhood is filled with people we consider to be “semi-employed”. Their incomes in no way cover their lifestyle – BUT the generation above them are MDs, corporate execs, business owners, etc. What Keith wrote about is very real but is never discussed in the media.

More lifestyles are built on debt than daddy’s RRSP. — Garth

#154 daystar on 05.28.12 at 12:39 pm

#89 Blacksheep on 05.28.12 1:35 am

Quoting from 2 different comments, thats a mind twist. :)

What is it that makes couples buy million dollar homes with incomes of less than $100,000… naivety? Ignorance? Stupidity? Illusions of grandeur? Deaf, blind and dumb parent(s) lost on pride and materialism? Is it social competition? Because a bank and government will both allow and encourage it for fleeting power and fed greed regardless of future consequence?

On some level, gladiator, flawed as we all are, is right. (still got to snicker at what he’s missing or how he tries to explain it, but he’s right in a sense) Who up and decided that the economic model of the parent couple is one where both parents are required to work at all times or they lose their home? Did our nation and the nations of the world really allow bankers, CEO’s and politicians to decide how much time parents get to spend with their children, particularly mothers? The working business model of the home entry level in today’s cities (readers, look around, a small town existence is 5 times cheaper, do you need income at parity? Why chase the rat race) is now one that requires both parents to work or they lose it. What made bankers up and decide whats best for the children of today? Their own benchmark belief of what success is? Moulded by? (thats right, all those rhetorical questions)

There is such a thing as too much. Too much work, too much competition, too much debt, too much… so called ownership if you will (its all on loan, some might resist this but when you dirt nap you realize quickly you can’t it with you so what was it all for?) so what really drives it. Pride? The need to be percieved as successful or you are worthless or of lesser stock? To work one’s self to endless burnouts or you are lazy? People like to hone in on what is not enough and yet, excess is all around us driven by what. At some point the directions toward extremes having found their mark will turn, it has to, its out of balance and disappointingly the pendulum swings to the other extreme. As the U.S. and Spain gets its lumps, so will Canada and it is wise not just to ask why but to control the damage from here.

Here, you want me to be brief and get to the point with quick soundbites and short sentences, I’m capable but it leaves a great deal out.

Weakness is unsustainable.

As far as Harper goes, our southern empire has meddled in more nations politically covert or otherwise than any other for economic gain. (see, thats the problem with me, it deserves a book, not a sentence) What makes Canadians seriously believe the U.S. wouldn’t do it here? They have 175 military bases world wide for a reason, are Candians so naive as to not know why that is or what lengths our neighbor will go to secure their “interests”?

I think back on old predictions, about how Harper will govern Canada as though its just another U.S. state and I think about how americans themselves, riddled with gridlock, want the Canadian experiment to be just like them and I have to ask what purpose it serves.

Weakness is unsustainable.

And its everywhere. That rabbit hole you speak of, how deep and dark it goes, I’m likened to wonder if its within us all and it gets back to this quote:

“travel to some dirt poor nations and then come back and then try telling us how bad we’ve got it”

Some of us can walk through the slums of Mexico City or Bangladesh or Toronto and Montreal (dont’ try this at home) for that matter and say to themselves, “how can the rest of the world allow this?”

The quick answer is, some of us don’t want equality. Some of us don’t want change because we like it as it is at both extremes… for ourselves and the short answer is? (shouldn’t take much imagination as to who I’m talking about now)

Weakness is unsustainable.

Question is, what are we willing to do to make ourselves, and our fellow human beings and the rest of life out there, strong?

#155 coastal on 05.28.12 at 12:41 pm

“Firemen with four houses. Retired school teachers flipping urban condos. Young rig hands with acerages and F350s, quads, sleds, two kids.”

It’s getting very pathetic reading the west coast blogs about all the Trump wannabee landlords who think a housing downturn will have no effect on their ability to rent out their stock of shacks. Talk about delusional in spades. Every major correction or crash leaves no over-leveraged idiot unscathed, no matter how great they think their places are located.

The amount of F350’s in the city is also noticeable out there these days with 20 somethings behind the wheel and not a scratch on them to show they did a real days work. It’s all going to end so badly.

#156 Mightymouse on 05.28.12 at 12:50 pm

I guess I am like the kids that Keith is talking about although we are not from Toronto and my parents are not Anglo but the idea is there. Got 100 000 wedding gift from my parents who sold me a house for less than market value from their company. They are retired with a million dollar house paid off and more than a million in the bank. Since they are not working, they provide free daycare for my kid. Wife use to not work and we can afford the 800 a month mortgage but now that she is working, we can afford yearly vacations. Sounds good but it’s not. Relying onmy parents so much takes away our independence. They will tell us how to teach our kids as well as what we should do with our house. Sometimes my wife thinks whether it would be better to move far away as well as take our kid to daycare but we always change our mind when we think about maximizing responsible and tfsa and all the luxury such as vacations and eating out that we can afford right now. So Keith, these people might have their expensivehouse (or in my case, cheap house nearly paid off), but they will not have the independence from their financial master (parents).

#157 Mightymouse on 05.28.12 at 12:54 pm

Maximizing responsible from my last post should be maximizing rrsp. Stupid spelling thingie from my playbook changed my word. Last time I buy anything blackberry.

#158 timbo on 05.28.12 at 12:57 pm

http://articles.timesofindia.indiatimes.com/2012-05-24/india/31838402_1_price-hike-bharat-bandh-petrol

“In a sudden development, oil minister S Jaipal Reddy today cut short his official visit to Turkmenistan by a day to be in the national capital to field questions on the steepest ever increase in the fuel price a day after state-owned oil companies hiked petrol price by a massive Rs 7.54 a litre.”

backlash has an effect and it will not be pretty come the end of May….

#159 Guan-Di on 05.28.12 at 1:10 pm

Anyone else getting the impression Kevin is foaming at the mouth as he writes his posts? Such moral outrage, such disgust, such impotent rage… sounds like someone is just terribly frustrated… talking about cheating spouses and scarlett letters, I bet we can all guess what it is your frustrated about too;)

#160 Devore on 05.28.12 at 1:12 pm

#83 Not 1st

They also know nothing about who got in first and who they would be buying those shares from. If they knew the truth, that piece of garbage stock would be sitting at $5 bucks right now. The retail investor is totally at a disadvantage in the stock market.

So…. why are they buying it? It’s not like there haven’t been a half dozen analyst reports on FB published before the IPO, putting their fair value in the teens, nowhere near $38. No one is forcing them to buy stocks, and, incidentally, no is forcing them to buy $1M teardowns in east Van.

I still want to know what the guy who bought Facebook at $45 was thinking… maybe it was the eTrade baby?

#161 Harlee on 05.28.12 at 1:20 pm

# 95 -45north
“…the ice man”. Now there’s one I haven’t heard anyone say in a long time.It’s right up there with ‘dray man’.The Co-op Milk company still had horse-drawn wagons here in Saskatoon until 1962 when the other dairy companies had changed to motor vans in the late 40s.The horses knew their routes so well that they would automatically move from one house to the other house that needed milk without any prompting from the driver. Now there is no milk deliveries at all.
#105 unbalanced & #123 disciple
Thanks for the greetings. It’s raining here this morning. Saskatoon doesn’t always shine. I think it snowed in southern Alberta and Regina,so JUST having rain is okay ! It’s an ‘inside day’ so I’m keeping up with the news about the CP strike and am going to have a second cup of coffee after I post this. That’s enough for an ‘old guy’ like me to do on his birthday (Alas,I am not rich enough to have any “Amazons” to keep me amused….:-)
#118 J.I.M.
LOLM -Did someone just invent another acronym on this blog site or did you steal it from somewhere else ? A good one though. (I think my mother qualifies for that one :-)
Quite a few good posts today,so far. I read them all. I don’t always have comments to make but they’re interesting. Keep it coming…!

#162 jess on 05.28.12 at 1:25 pm

Bloxham to cease trading with immediate effect after discovery of financial irregularities
Henry McDonald, Ireland correspondent
guardian.co.uk, Monday 28 May 2012 12.49 BST

overstating of income
Bloxham Halts Regulated Activities Over ‘Irregularities’ (Steven Carroll, irish Times)
===================

No one listen to Prof. Kelly
from 2011 – two Irish economists arguing fundmentals
Morgan Kelly Warning IMMINENT COLLAPSE, 2007 (Prof. UCD
http://www.youtube.com/watch?v=11CCxv2ueiQ&feature=player_embedded

Kelly predicted in 2007 that property prices were going to crash by 60% based on empirical evidence of past property crashes. Kelly has garnered praise from fellow economists for his prediction of the collapse of the property market.[3]

Kelly was implicitly criticized by the then Taoiseach, Bertie Ahern in July 2007 for his articles predicting a property crash; “Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don’t know how people who engage in that don’t commit suicide because frankly the only thing that motivates me is being able to actively change something.” Ahern subsequently apologized for the reference to suicide in his remark.[4][5]

Kelly takes the view that the Irish state should not have put itself forward as guarantor for the Irish banks in September 2008.[6]

As of May 2011, Kelly is now suggesting that bankruptcy for the state of Ireland is a possibility.[7]

http://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123_pf.html
http://en.wikipedia.org/wiki/Morgan_Kelly_(Irish_economist)#cite_note-6

Irish property prices have fallen by 50 percent from their peak in early 2007. Dublin house prices have dropped by 55 percent and apartments …
Property prices still in decline‎ Irish Times

#163 2centsCanadian on 05.28.12 at 1:25 pm

Buy? Curious? #93
What a f#cking idiot! I hate banks as much (or more) than the next person …… but those “faceless soulless entities” make our world turn. Where would you be living if you had bought only from your savings? Beautiful down town Sri Lanka maybe, with flyes crawling up your nose (sorry to any of the Sri Lankan readers : ) To run away and bail on your responsibilty when you dum assess blow your lives up through greed, stupity and the inabilty to build a little patience and cushion into your lives is shameful. What? you failed?.. you couldn’t pull your weight in life? … dump your problems on someone else? … anyone else? …. you’re a victim? … how could the government let this happen? …… Paleeeeze!!! What a sad excuse for a human being. If you do things right …. good things happen … if you do things wrong ….. we pay. Period! I suppose everyone who borrowed more than you should have, should bail on their responsibilties when things go crappy. And I’m sure if you made a million you would have forwarded some profits to the bank. F#ck your attitude makes me sick. If we mess up … we take our lumps, learn and move on …. we don’t bail. Chicken sh!t POS!

#164 bigrider on 05.28.12 at 1:30 pm

#121 Frank.

You must be new here and based on your writing , an IQ equal to your age.

I have been here since the beginning and have maintained a bearish stance on RE right from the beginning. Try looking at all my previous posts . Go back at least two years.

As for me being a realtor… not anymore than I am an astronaut.

Imbicile.

#165 Devore on 05.28.12 at 1:34 pm

#139 Balmuto

I was given a CMHC insured, 40 year variable rate mortgage to buy my condo that I just sold. My credit score is 751. Does that make me sub-prime?

It’s sub-prime, because the bank essentially requires a third party to co-sign guaranteeing your loan, at your expense. If it was a prime loan, it would be just you and the bank. I imagine there will be lots of this kind of talk if CMHC gets into trouble and needs a bailout.

#166 Kevin on 05.28.12 at 1:48 pm

@disciple:

“Commercial banks lend money that zaps into existence the moment they lend it”

False. We’ve repeatedly covered your fundamental misunderstanding of fractional reserve banking. I’m quite confident Garth does NOT wish to have another thread hijacked by your ignorance. Suffice to say, only governments have the power to create money out of thin air. Banks can only lend what is already in their vaults.

@Daniel:

“You’re a bitter person the nobody likes and almost every comment that comes out of you mouth is negative”

I’m negative toward people who break their promises and welch on their debts. You should be, too.

#167 Debtfree on 05.28.12 at 2:15 pm

@93 I don’t subscribe to your sentiment but I understand it . When I was in the workforce I witnessed a few of my coworkers do exactly what you espouse . After a few years they were right back in the game only to game the game the same way. We today just like slave days of old have two choices as debt slaves . We can buy our freedom or we can runaway. Today in Msm we are told that 27 percent are Debtfree Canadians and 72 percent are not. I also think voting is useless . The government has killed collective bargaining . Student debt is killing post secondary education . What is left? What is the end game ? I guess there is a third option . Stay out of the game.

#168 J.I.M. on 05.28.12 at 2:19 pm

It seems that the story of the California couple repudiating their debts (legally) has struck a nerve with the commenters on this blog! I certainly can see both sides of the argument.
Garth : I would certainly like to hear your thoughts on the subject of walking away from your debts – as allowed by law.

#169 disciple on 05.28.12 at 2:23 pm

Daystar, kindly allow me to introduce you to reality through a couple of personal anecdotes. About a decade and a half ago, I had an older relative chide me for “wanting” to live in the city. “Why not be happy and peaceful in a small town like mine?”, he whined with a decidedly snickering sense of disgust with me for being born and raised in the city. Like it was my fault. Well, guess what, his own grandson has now moved to the big lights of a major American city working for an international conglomerate, supposedly with his blessing, as I didn’t see him complaining, and certainly not to me.

My point? Is that you are lacking perspective on that farm of yours. Do you really think like GTA Girl that everyone can live in a small town with acreage? It never ceases to amaze me how people like you can be stuck in such a time warp. In fact, it’s fascinating. Like a trip to the zoo. The world has moved on since the 20s, buddy, in case you didn’t know. Yes, a double income is absolutely necessary just for the basics. How many small town jobs can sustain even a small town gasoline expense for the month? You’ve got to be crazy, I don’t know if I should take you seriously anymore…

And then another anecdote. Again, an older relative, this time female, would always complain to me that the problem with modern life is that we always want more stuff. And that this causes unnnecessary stress. She was only half right. Guess what? She is now embroiled in a bitter dispute over land with her own brother. And she previously signed over the land to him! And now she wants it back. And she doesn’t even need it for anything other than hedonistic hubris. Can you believe that? Did she forget what she told me causes stress? Apparently.

My point? Again, that perspective thingy…

#170 disciple on 05.28.12 at 2:27 pm

#167 2cents… “those “faceless soulless entities” make our world turn…. Paleeeeze!!!” – Oh yes, pleeeease, pass some of what you’re smoking… A borrower never borrows anything but a promise, one that the bank instantly breaks once they forward non-existent funds to you. Next.

#171 daystar on 05.28.12 at 3:00 pm

#157 From Winnipeg… on 05.28.12 at 12:14 pm

Stocks and houses are not comparable at all with timelines and the ease of buying or selling as examples but they do have two things in common. They are both monetary assets and when the market turns up or down, most… sometimes all of them will move in the same direction. A serious correction or selloff leaves none unscathed and I offer west van as an ongoing example. Inner Toronto will face the same fate as inner L.A., Miami and N.Y. when direction changes and its timing is as predictable as CMHC hitting its $600 Billion ceiling unless we embrace the false belief that some area’s of RE in cities are cash buyers only. Cheap money & loose credit grew this bubble. Conversely, expensive money & tight credit will deflate it. The rest is predictable, including who stands to profit the most as yields rise if one cares to look at who really benefits.

#172 Toronto_CA on 05.28.12 at 3:03 pm

Good article, hammering home that prices may come crashing down and that it is not a good time to buy a condo.

http://business.financialpost.com/2012/05/25/why-you-shouldnt-become-a-condo-speculator/

Although the writer still thinks prices will rise at inflation level, I can’t see that happening with GTA or Vancouver condos; esp with the out of control condo fees in the GTA.

#173 jess on 05.28.12 at 3:14 pm

600 electricians to lose their jobs.

hastie
Of the more than 50 subsidiaries that formed Hastie, just 10 will survive.

…Mr Wild revealed that the accounting irregularity that sank the company totalled $23 million – more than the market value of Hastie Group when it collapsed

Read more: http://www.smh.com.au/business/all-too-quickly-hastie-workers-dreams-are-crushed-20120528-1zffi.html#ixzz1wBylrXWr

#174 Westernman on 05.28.12 at 3:19 pm

John G. Young @ # 43,
Given your penchant for incentivized victimhood I submit EVERYTHING you see 24 hours a day is either offensive or somehow a threat…

#175 Doug form Victoria on 05.28.12 at 3:34 pm

#93 Buy? Curious?

“These are faceless, soulless entities that deserve to be treated with as much respect as a fly in your kitchen. (That’s a real-time metaphor. I just whacked one with a rolled up dish towel)”

Real-time metaphor, Brilliant!

#176 Balmuto on 05.28.12 at 3:41 pm

#152 Mark

If you have less than the 20% downpayment, then your loan is subprime. Its really as simple as that. Remember the “3 C’s of credit — character, capacity, and collateral”.

If all 5% down mortgages are subprime, then we have a much bigger subprime problem than the US ever had. But I don’t think it’s that bad. The subprime borrowers in the US had bad credit on all three counts – character, capacity and collateral – at least judging by their credit scores. You can’t make that statement about all 5% downers. What worries me most, though, is not just the 95% LTV, but the added factor of the HELOCs that are supposed to be capped at 80% LTV but in reality are being given out well beyond that ratio. When you combine the HELOC with the mortgage, a lot of people are underwater already and don’t even know it.

#177 Canadian Watchdog on 05.28.12 at 3:43 pm

The Red Pin Weekly MLS Listings Update http://www.theredpin.com/blog/canada/toronto-real-estate-may28-2012

Red Pin Listings Up 17.3% w/w, 23.3% m/m/ http://i49.tinypic.com/213rrt.png

Alas, from my posting last week regarding speculators heading for the exit door here http://i47.tinypic.com/est8gk.png we now await TREB’s manipulated active listing statistics, who is likely to report a mere 20k figure to keep the headline monkeys eating all the banana stats they can get.

#178 truth hammer on 05.28.12 at 3:54 pm

OK…so heres the latest spin on Mullah Mulcairs 11X’s refi on his ‘barn?’

http://business.financialpost.com/2012/05/28/maybe-mulcair-had-it-right/

They started the day with ‘debt is good’ now they’re advancing to this as ‘smart’ and have posited that it is a bargian if you ‘invest’ in a political career and end up with a gold plated pension….Bwahahahahahahahaaaaa

Ok investors…lets all become political parasites and get a pension that no other ‘investor’ can possibly imagine.

Oh yeah baby……there’s debt and then there’s ‘political capital’.

Only in Canada would a twister like this make the front pages.

How is his mortgage possibly your business? — Garth

#179 big T on 05.28.12 at 3:54 pm

its all a variation on OPM [other peoples money], this
time its OPM [other parents money] new canadian, or
native born sons all have access to the family stash..

#180 timbo on 05.28.12 at 3:59 pm

http://www.guardian.co.uk/business/interactive/2012/may/24/greece-euro-exit-flowchart-what-happens-next?intcmp=239

Follow the flowchart to the end. Problem is, the wrong choice can have you chasing your tail.

#181 John on 05.28.12 at 4:10 pm

2centsCanadian wrote:

“And I’m sure if you made a million you would have forwarded some profits to the bank. F#ck your attitude makes me sick. If we mess up … we take our lumps, learn and move on …. we don’t bail.”
——–

Why go half way here? You admit you bailed out on personal responsibility and named the fraudulent derivatives casino system as something “we’ve” got. And then “went with it”. But you were conservative in your personal irresponsibility and “didn’t rock the boat”. Others did. You’re still both wildly irresponsible.

You know the deal and did nothing? Huh? How could you post your 2 cents then? It would be another matter if you owned explicitly your part and admitted you’re barely different than those that gambled more casino money than you. And then went on to say how you personally are going to make up for your error and start talking solutions. Right now you’re offering zero value…just whining.

You’ve looked the other way on a thousand different aspects of the fraud, but dare to judge another? That’s your solution to the current situation?

You don’t even have 2 cents up on the table. In fact you’re not even AT the table.

I used to live in Canada, and I bought the fraud. I actually didn’t know. You seem to. I still win on the backs of slave labor and a financial house of cards, filled with debt slaves. Ok. A debate about that is useful. I’m no better or worse than anyone in the unsustainable scam.

But at least call a spade a spade…your comments are nonsense.

#182 Dontcallmeshirley on 05.28.12 at 4:15 pm

Good views on recourse, non-recourse today.

Personally, when entering into a loan, I don’t think a lender should have recourse to anything more than specific loan collateral. Why should it be otherwise?

Once a loan is sour, individuals should have the same avenues and benefit from the same legal discharges as corporations when they bankrupt.

Canada’s recourse law is a huge favour done by the gov’t for the banks.

#183 Regan on 05.28.12 at 4:25 pm

Great post. It wasn’t really worth reading the comments today though… sheesh. So. Much. Bickering.

#184 timbo on 05.28.12 at 4:28 pm

http://www.huffingtonpost.ca/2012/05/28/ndp-leading-tories-poll-forum_n_1550775.html

hey truth hammer

wtf are you taking about?!

The simple fact is the Conservatives are falling behind in the polls and need to dig up dirt. It was a pathetic swipe and should be treated as such.

Man this blog need’s a ignore button………..

#185 brainsail on 05.28.12 at 4:40 pm

Now that FB has all of this Hot Apparent Money is it remotely possible that it might have its sights on RIMM?

“Mark Zuckerberg is gearing up to build a smartphone and has begun by hiring more than half a dozen former Apple iPhone and iPad engineers.”

http://tech.fortune.cnn.com/2012/05/28/amazons-iphone-the-most-ill-fated-idea-since-the-palm-pre/?iid=HP_LN

#186 Bottoms_Up on 05.28.12 at 4:44 pm

#158 daystar on 05.28.12 at 12:39 pm
——————————————-
What happened is that wages did not keep up with inflation (why isn’t housing, the biggest household expense, not included in the calculation of inflation?). Thus, purchasing power slowly erroded. Now there is a need for 2 incomes (for younger couples) to maintain the standard of living that use to be had on 1 income. And employers love it, because they effectively get 2 employees for the price of one.

#187 Fee-Based Financial Advisor on 05.28.12 at 4:47 pm

Garth,

Instead of sinking 500,000 into a house right now, might it not be better to borrow the half mill, give it to a fee-based financial advisor, write off the interest on the borrowed money, and collect capital g’s all the while?

Sound good?

Is this a trick question? — Garth

#188 John G. Young on 05.28.12 at 4:55 pm

#178 Westernman on 05.28.12 at 3:19 pm

“John G. Young @ # 43,
Given your penchant for incentivized victimhood I submit EVERYTHING you see 24 hours a day is either offensive or somehow a threat…”

“Threat” was too strong — more like “wishful thinking”. But rather than my guessing, why not enlighten us all by telling us what you meant?

BTW love the phrase “incentivized victimhood”. Where do I sign up for that?

#189 Blacksheep on 05.28.12 at 5:12 pm

Daystar, I mean, Kevin,

“False. We’ve repeatedly covered your fundamental misunderstanding of fractional reserve banking. I’m quite confident Garth does NOT wish to have another thread hijacked by your ignorance.”

“Suffice to say, only governments have the power to create money out of thin air.”

I will refrain from unflattering comments that would be entirely suitable, for this deceptive statement.

“Out of thin air” or Multiplied is just word play. Additional money is created BY private for profit, commercial banks, PERIOD.

I guess Wikipedia must be incorrect.

The new money introduced by the central bank is MUTIPLIED by commercial banks through fractional reserve banking; this EXPANDS the AMOUNT of broad money (i.e. cash plus demand deposits) in the economy so that it is a MULTIPLE (known as the money multiplier) of the amount ORIGINALLY created by the central bank.

http://en.wikipedia.org/wiki/Money_creation

take care
Blacksheep

#190 stickler on 05.28.12 at 5:15 pm

well…saving the banks is what caused all this nonsense (…maybe not the overvaluation of Facebook)

if the bank wants to lend 95% to a home buyer they should be able to…but they wouldn’t because that would be STUPID.

the problem is that CMHC will make sure the bank does not get hurt by doing so. So this does 2 bad things:

1. Inflates house prices
2. Puts taxpayers (you and me) $ at risk…less services for us because that money goes to bail out / support the banks, so people with no $ can buy houses (because houses are so inflated they need help)

So why is this something that the government decided to do (and yes they do know the implications)?

– jobs

Take this government (tax payer) subsidized business away and what do you get?

– lower GDP (oh no! no growth is so bad with all that debt to be paid at interest)
– more unemployment
– people start to notice that “real jobs” are being moved out of Canada

It wouldn’t surprise me that when things start turning sour Gov’t starts “helping” even more…Can’t let the poor banks get weak can we..

#191 Westernman on 05.28.12 at 5:23 pm

John G. Young @ # 192,
Johnny, Johnny, Johnny… you do have flair for the dramatic… I’ll bet you enjoy broadway musicals and fashion shows as well…
As far as enlightenment goes I am under no obligation whatsoever to explain anything to the the likes of you…

#192 brainsail on 05.28.12 at 5:24 pm

#180 Balmuto

Are the metrics used for credit scores identical for both the US and Canada? I don’t know.

“The subprime borrowers in the US had bad credit on all three counts – character, capacity and collateral – at least judging by their credit scores.

#193 Toronto_CA on 05.28.12 at 5:35 pm

#191 – the problem is that no one lends out people making $80k household income a half million dollars to invest in the stock markets (or bond markets, or preferred shares, or whatever). They only lend fools money to buy a house with zero or very little down.

Unless you mean a HELOC, which yeah, some people have done just as you suggest and pulled the equity out of their home to fund their RRSPs or TFSAs and fully taxed investment accounts while writing off the interest.

#194 GTA Girl on 05.28.12 at 5:41 pm

Disciple;

I’ve never said living in a small town is better. I was born and raised on the subway line in Toronto.

What makes me cringe is the price gouging going on in housing in Toronto. As well as an inept council that cannot focus on long term planning. Other comparable cities are able to think big, such as Boston. And build infrastructure, public parks etc. Toronto has only reacted to the condo boom and hasn’t properly looked forward to the possibility that the city is becoming the bedroom community to the GTA.

Torontonians deserve better. And many would realize this if they traveled to cities like Barcelona or Boston, and see what planning and ideologies implemented such as bike lanes, architectural control,street art, transit and transportation.

Country living is a standard only some want. Don’t put words in my mouth.

#195 Blacksheep on 05.28.12 at 5:42 pm

Defence, I mean Daystar,

Frankly, I’m disappointed. Smart guy like you. Twenty questions with no legible answers.

Just more distractive words (pbtw!). Did you actually read my post, or just cherry pick for this witty response:

“That rabbit hole you speak of, how deep and dark it goes, I’m likened to wonder if its within us all and it gets back to this quote:”

“travel to some dirt poor nations and then come back and then try telling us how bad we’ve got it”

Yup, were just a bunch of lucky zombies.

Come on dude, put some effort in to it!

take care
Blacksheep

#196 Superman on 05.28.12 at 6:02 pm

Vancouver hit a 10 year all-time high in Inventory on Friday, and prices are already down almost 10% from peak. The thing is, sales in Vancouver have been “somewhat” decent (MOI is “only” 7).

So, one can logically assume that when the May stats are released in early June, we will see prices plunge. People in Vancouver are dropping prices daily. When people hear “40%” drop”, they say impossible. What they need to realize is that is 40% from peak. We are already down almost 10%, so… we will easily hit 40%.

And even after a 40% drop, the average house price in Vancouver will be around $700,000. Of course, the drop will be much more than 40% because you also have to factor in inflation. E.g., if we drop 40% over the next 3 years and then are flat for 2 more years, that’s 5 years of lost inflation. (around another 10% at least).

What a mess…………..

#197 Robert on 05.28.12 at 6:23 pm

#182 TruthHammer

How about you set your sights on the Quisling quorum that has driven our country into debtor’s prison. Mulcair refinanced his home, that’s his business; the Harpercrites re-mortgaged Canada to get themselves elected, that’s our business.

#198 cramar on 05.28.12 at 6:27 pm

#88 Industrial Guy on 05.28.12 at 1:29 am

“RIM expected to announce major layoffs this week” … “I think they need to come down to 12,000″ I sure home that guy who wrote in the blog a few weeks ago about buying a condo in Waterloo has been slow to act.

http://www.thestar.com/business/companies/rim/article/1197035–rim-expected-to-announce-major-layoffs-this-week

Would the last person with a job in SW Ontario please remember to turn off the lights?

———

It doesn’t look good, but hopefully the other 800 high-tech companies in the Waterloo Region will hire some of them. They are always complaining of a lack of qualified workers. There are 30,000 tech workers in the Waterloo Region.

#199 disciple on 05.28.12 at 6:31 pm

#170 Kevin…”I’m negative toward people who break their promises and welch on their debts. You should be, too.”

Yes, please explain to us how bailing out the banks was the prudent thing to do, while millions are on food stamps. No broken promises or fraudulent derivatives trades there, right?

#200 Devore on 05.28.12 at 6:37 pm

#190 Bottoms_Up

What happened is that wages did not keep up with inflation (why isn’t housing, the biggest household expense, not included in the calculation of inflation?).

This is incorrect (the CPI part). CPI does include the cost of housing, but not the cost of houses, any more than it includes the price of Apple stock. CPI is a price index, not an asset price index.

#201 disciple on 05.28.12 at 6:39 pm

The fact is, Kevin, that I understand fractional reserve banking quite well. There is no government vault. And there is no need for commercial banks. You can take these words to the bank and cash ’em, as it were. No amount of semantics can apologize for the sly deceit of the financial parasite class. If there is no labour or technology directly associated with money as currency or as a store of wealth, then it does not exist, period.

How’s the Afterlife going for ya? — Garth

#202 TurnerNation on 05.28.12 at 6:46 pm

Corporate robberbarrons will take our pensions come hook or crook. 50% cut to worker’ pensions demanded. But, the mind controllers have convinced us that “unions are the problem”. Ooookay….

PRESS RELEASE: Nexacor workers prepare to strike tomorrow

TORONTO, May 28, 2012 /CNW/ – After several months at the bargaining table, members of the Communications, Energy and Paperworkers Union
Locals 27 and 34-0, who work for Nexacor, have overwhelmingly rejected a final offer from their employer.

“We will do everything within our power to reach an acceptable settlement,” says CEP’s Ontario Administrative Vice-President, Barb
Dolan. “But our members are prepared to take strike action unless the company makes significant improvements to its offer, especially in the
important areas of wages and pension contributions,” she adds, noting that ***”the company is demanding a 50% cut to pensions.” ***

Nexacor is a wholly-owned subsidiary of SNC-Lavalin. The CEP members are
technicians who maintain Bell Canada’s critical systems across Ontario
and Quebec

#203 disciple on 05.28.12 at 6:46 pm

Kevin, please explain what caused the GFC? How can you be so oblivious? Future generations will look upon our worship of money and classify this mental derangement as just another form of religion in humanity’s past. Let us proceed.

#204 An Cat Dubh on 05.28.12 at 6:48 pm

The herd mentality. They people who bought shares after the insiders did were “ZUCKERED IN!” Goldman Sachs and JP Morgan did well from what I’ve heard.

#205 Arshes on 05.28.12 at 6:58 pm

#170 Kevin on 05.28.12 at 1:48 pm @disciple:

“Commercial banks lend money that zaps into existence the moment they lend it”

False. We’ve repeatedly covered your fundamental misunderstanding of fractional reserve banking. I’m quite confident Garth does NOT wish to have another thread hijacked by your ignorance. Suffice to say, only governments have the power to create money out of thin air. Banks can only lend what is already in their vaults.

@Daniel:

“You’re a bitter person the nobody likes and almost every comment that comes out of you mouth is negative”

I’m negative toward people who break their promises and welch on their debts. You should be, too.
———————————————————

If banks dont want people defaulting on thier loans, they shouldnt be taking so many risks with their loan process. Banks have economists, Finance majors etc. etc. on thier payroll yet they cant put in better processes to screen thier loan applicants, some basic questions and verification would do a world or wonder for them. But alot of them dont or didnt. Why ??? They were making too much money. They hope the money they make will more than justify any loses or defaults.

#206 DDLama on 05.28.12 at 7:00 pm

Cutest picture ever!

#207 Nostradamus Le Mad Vlad on 05.28.12 at 7:02 pm


#96 Harlee — “. . . I guess there is no “End of the World”…. First Harold..now, Ronald…They’ve both let me down… Ya know, I ‘m beginning to think these evangelists don’t have a clue what they’re talking about.” — You mean this is all a big joke? Damn! I was so looking forward to being part of an exploding world!

Where’s Jimmy Swaggart and Tammy Faye when we need them?! Send your dollars HERE suckers!
*
IMF What if Greece says no, you can sue us if you want but you ain’t gittin’ nuttin; from us?! Greece and Spain Both outta money, back to bartering; Fractional Reserve Banking Part one of six; Haiti Gold Awfully convenient that the US military is still there; States divert billions To moi? I wish! FB Great advertising; Free Enterprise and Capitalism Nothing is free.
*
Meet Flame New malware, and possibly designed and created by the US and Israel, as per Stuxnet; Slow ageing Either take Vitamin D or do a lifecycle in reverse, and Flawed Pharma Study on vitamins debunked plus Eat Curry! Drink Pineapple Juice! Apparently, the first one is good, but the Side Effects of Hormone Replacement Therapy tell a different tale; Eating Aluminum Glow in the dark tinfoil hats when mixed with radiation? The m$m and Vitamin D. Ignore the m$m; 4:33 clip ObamaCare — The truth; Fake Terror Create the enemies needed from within; Joe Biden Brainless and Brainwashed in DC; BBC As it did with WTC7, good ‘ol Auntie Beeb has misrepresented a non-existent Syrian massacre for propaganda purposes; PDF on radiation and nuke fallout material; Mass Repression in Quebec; Mexico – Arizona “Mexico does not want their own people back after Arizona put that anti illegal alien law into effect.” and The Planned Re-election of Obama; GW Heavy sea ice in Arctic?

#208 Herb on 05.28.12 at 7:09 pm

Sorry, somehow posted before I had the comment finished. What I wanted to say is:

C’mon Garth. It’s a Conservative talking point and prepares the ground for the “He can’t even handle his own finances and wants to manage the country?” ad campaign. It very much IS Truth Hammerer’s business.

Actually this crosses a line. I thought you would see it. — Garth

#209 Westernman on 05.28.12 at 7:15 pm

John G. Young @ # 192,
Sorry boy, I just tell’em I don’t explain’em.
BTW – you don’t have to sign up for victimhood, you are the poster boy for that dispicable social infection…

#210 TurnerNation on 05.28.12 at 7:22 pm

#124Kip on 05.28.12 at 9:26 am

So you worked most of your working life raising your family, and now you’ll work all remaining years supporting your adult childrens’ real estate speculation blitz?

Tell them to frig off, take back your cash and RETIRE.

A family of greater fools??

Amazed Gen Y here, speaking out.

#211 Toronto news on 05.28.12 at 7:47 pm

GTA sales slowing down

http://www.bildgta.ca/media_releases_2012_detail.asp?id=880

#212 SaggyBottomBoomer on 05.28.12 at 8:26 pm

#142 John Jacob Jingleheimer Schidt

Sounds like we dodged a bullet when you moved to Portland.
Seriously though, these type of ad hominem attacks do little to enhance this website. Further I’m at a loss to see the relevance of your multiple links on American Healthcare relate to Real Estate, which after all is the subject of this website. I’m sure you can find a more relevant blog to vent on.

#213 Not 1st on 05.28.12 at 8:41 pm

Westernman, why don’t you offer some real commentary about something related to this blog…like say real estate. Heck, why don’t you just write the blog posts. You obviously know everything there is to know. Garth can then take a vacation and let the blog dogs chew themselves apart here.

#214 Jim on 05.28.12 at 8:43 pm

It doesn’t look good, but hopefully the other 800 high-tech companies in the Waterloo Region will hire some of them. They are always complaining of a lack of qualified workers. There are 30,000 tech workers in the Waterloo Region.

—————–

That’s a little bit deceptive. High tech companies create very specific postings (e.g., 10 years of java plus 12 years of CRM plus etc etc), and then complain that there aren’t enough candidates who qualify. They want a large number of applicants for each position, in order to have leverage in terms of salary.

Various economics departments and think tanks have investigated the so called ‘skills shortage’ during the US dot com boom, finding that it was not a shortage, but rather a concern over wage rates. Those reports are worth reading, because the same propaganda is still making the news.

Waterloo is in trouble if RIM goes down. There are other tech companies out there, but RIM really built that scene. It will have a demoralizing effect on everyone else.

#215 Herb on 05.28.12 at 8:55 pm

Re. #214,

Sorry Garth, I was being facetious. I consider Truth Hammer to be a Neandercon troll who, like his party, has no regard for truth or “lines”, only political utility. That’s why he always sings from the War Room Song Sheet.

You know what Harper’s real problem with Mulcair is, don’t you? He bears the mark of Garth – facial hair. That’s why he’s got to be flattened.

Now, that I agree with. — Garth

#216 Industrial Guy on 05.28.12 at 9:26 pm

cramar “There are 30,000 tech workers in the Waterloo Region.”

What is your definition of a “Tech Worker”?
Are the janitors who cleans the RIM campuses tech workers?

#217 Harlee on 05.28.12 at 9:50 pm

#213 Nostra
I used to tune in to the Bakkers and Swaggart and their ilk back in the days when there were less channels on TV and on a Sunday when there was less to do.
The show (in every sense of the word) that I found fascinating was ‘The World Tomorrow’ hosted by Garner Ted Armstrong. He’d take bibical prophecies and try to tie them into the events today. Not that I believed any of it but that show was entertaining. That and ‘Stampede Wrestling’.I don’t know which was the phoneist….

#218 Gun Boat denier on 05.28.12 at 9:55 pm

207 Disciple

“If there is no labour or technology directly associated
with money as currency or as a store of wealth, then it
does not exist, period.”

I’ll agree with that. Now we just have to define labour and technology

#219 Gun Boat denier on 05.28.12 at 9:57 pm

Harlee – Stampede wrestling was phony? No way!

#220 cramar on 05.29.12 at 12:18 am

#223 Industrial Guy on 05.28.12 at 9:26 pm
cramar “There are 30,000 tech workers in the Waterloo Region.”

What is your definition of a “Tech Worker”?
Are the janitors who cleans the RIM campuses tech workers?

———

That is a question you should as Communitech since it is their stat!

#221 JC on 05.29.12 at 8:37 am

How very succinct.

Just the other day when I was working on my car I happened on the perfect (at the time) analogy.

Doing a job right requires the right tools… you need the right tools and the right knowledge to use them properly to get from effort to result.

Too many people apply the same two tools to every situation in life… adjustable spanners and Vice-Grip pliers when maybe what they need sometimes are a good set of Crowfoot wrenches. If you don’t have a set, or don’t know how to use them then find someone who does.

However, its human nature to “make due” with the limited tools we have on hand that often results in an outcome that is “mangled, aka FUBAR, aka SNAFU”

Moral of all this… recognize when a complex situation requires a tool and skill set that you don’t possess and resist the urge to “make due”, rather find someone who’s got the tools and knowhow.

Unfortunately, that too is easier said than done :(

#222 John on 05.29.12 at 11:55 am

Real estate. Timing. Greed. Fear. The market. Options. Market dynamics. Really great topics for opening up the minds of many.

So why not do that? It’s now way beyond talk of “precious metals” and “doomers”. That’s 2009 talk. Built on bailout money and continued “belief in the system.”

Believing in a real estate hoax is one thing, but uncovering the dynamics and suggesting a movement around the casino tables with “better judgment” is oh so 2010. It might fly for the first half of June 2012. Maybe all the way to September. But some stuff is coming up to quiet down the “Real estate-gold-financial analyst” talk.

1. Phony presidential elections
2. Foreign “dynamics” as power brokers square off
3. Exposure of non-sovereign governments

Anyone can fill in the other 20 items. It’s all obvious, and none are included in the analysis. Hmmmmm. Uh…why not?

I suppose one could get drawn into some kind of JOHO argument and point out the obvious reason for precious metals being low in price. There is no free market…at all. It’s yet another false front. Precious metals wouldn’t save your wealth or your butt in the casino. Value does.

What’s value in a community? Ah…not relevant eh? Back to the casino then. But knowingly? If one isn’t virtually in insulin shock from derivatives glucose, thinking about casino play really should be a mortal sin. Perhaps of the forgiveable kind. Nonetheless, what the hell man.

Looks like “best case” for casino playing planning is 3 months to 3 years of continued delusion, and then as “events” happen, they can be catalogued as “game-changers”, and all bets will be off.

Sound about right?

#223 Shehz on 05.29.12 at 4:19 pm

I totally hear what you are saying. People do make decisions emotionally & by listening to their friends and families. They are unaware that buying & selling a home is one of the most important decisions they will be making. Such decisions cannot be made without reading about what is happening in the market.

As per some price research, you may not recover the full amount spent in completing renos in your home, i.e. completing the basement.

For instance, if you spend $30K to complete your basement, then do not expect to recover the full value of completion when you sell your home. However, this could differ if the supply of houses is lower & high demand, leading to an increase in house prices. Then you are very lucky!!

#224 aggie on 05.29.12 at 5:38 pm

I was asked to keep y’all posted (re ‘just another idiot’).
My mortgage broker, after I sent her a link to the blog and told her I want an open mortgage till I sell, still replied with this: “By the time you pay and have a loan of $15,000 to 20,000 plus rent you are better to do the renewal into 5 years. Even if you stay another year then sell the mortgage will be lower and the rate we can only forcast will be better then current rates at that time and very desirable to assume with small downpayment and no new CMHC fees. We renew into a 5 year rate and keep the amortization as it is and as long as possible and your payments are as low as can be to also make the assumption some day more attractive to a new buyer. Even if you had to pay out and not be assumed you would only have a 3 month interest penalty (hopefully it is assumed)and with the much lower interest rate of the 5 year is is likely a break even even after paying the penalty then if you stayed in an expensive open term. If you can hang on for a year, pay down the mortgage and have an attractive rate, put a little extra money throughout the year onto the mortgage while you are working, not have another loan to be paying off you are much better to stay and or get a tenant to pay and do this in a year or so.”
Meanwhile, it seems that my realtor actually heard what I was saying to him: “To follow up what [mb] has told you, I am still a little reluctant to jump into a five year mortgage immediately. I would like to have a shot at bringing a buyer for at least a week to 10 days. Her other points are well founded and if you were to renew a mortgage I would definitely make sure the penalty was discussed and understood before committing to it. I also believe that you could be going into the debt that [mb] speaks of if you were to put it on the market.
I am trying to arrange a showing for this coming weekend and will keep you posted.”

Now, I’m trying to get a clear picture on how much money I might owe if (when!) a sale ensues. A realistic closing price might be around 238, for a shortfall of 7. Add to that a reduced commission from this kind realtor (details not discussed nor listing signed yet). I’m thinking ~10. Plus legal. Plus sales tax? So yes, around 20K.

How would I pay it off? I have a 13K LOC. I’m thinking I’ll cash in a 10K RRSP to pay off the bank (inc tax would be withheld on the rrsp), and then use my LOC to pay the realtor. Does that make sense?

Then I’d have the LOC to pay off. I think that by renting a room from a friend for a year, it would be wiped clean pretty quickly.

If my job gets pulled (due to economic realities), I envision that happening possibly next year, when the current big project is done. I would then be unemployed — again (was part of a mass layoff in 09 for a year). Idiots allow themselves to be hired back.

One kind reader suggested that I will be better able to handle the stresses of my career once rid of my current worries, and I believe it. I work 60-80 hours (get paid 40), and my headspace is always there. It’s not an efficient use of said headspace!

I always feel on the verge of being fired, because my focus has been poor and I’ve begun to miss deadlines. I will work hard to get all that under control, remain employed, and retain (or even expand!) my credibility within my career.

Should I post another update when I sell my place? I feel bad, because I’m not blending into the current discussion, although I did read through much of it, and some of it is relevant. I, for one, am learning a lot from you all!

#225 TurnerNation on 05.29.12 at 8:04 pm

#231aggie on 05.29.12 at 5:38 pm

If you can renew for another or two with long amort and good interest rate why not keep it going? Rather than losing all the closing and realtor costs. Unless you believe your local condo market will fall. That’s the wildcard, that your equity being built will lag a market decline.
Or, rent it out and then rent a room or bedsit? If the rent will cover your costs…

#226 Dan in Victoria on 05.29.12 at 9:52 pm

Aggi @ 231
Hmmmm, not following it all, but look at it this way.
You will have fixed costs whether you sell it now or later. Eg. real estate commision, legals, moving expenses etc.
So those costs are fixed.
Look at the costs to break your mortgage now.
Look at the cost when the mortgage matures.

And especially look at what the market is doing
(Its not going up is it?)
Take a read on Vancouver blogs such as Whispers from the edge of the rain forest.
I Think another one is Vancouver real estate ancedote.
Also think about where BC is headed in the next few years politically, lot of angry, restless people out there.
Its simple math really, do a couple of spread sheets and think it through.
DO NOT base your descision on a realtor or mortgage brokers figures.
Thats what got you in this mess.
Learn from that.
Good Luck keep us posted.