This won’t end well

“Fantastic Value! Estimated annual taxes, $189.33. Monthly maintenance fees only $47.” And wait until you hear the price – just $25,000. So, who says all property in tony Toronto is downright unaffordable?

No need to worry about decorating or landscaping with this baby, either, because it’s a gorgeous… parking space. Here’s the listing, and I’m sending out one of my books to agent Angelo Sol in recognition of the sheer size of his male organ. It takes a certain kinda guy to get excited about a patch of asphalt that comes with its own municipal tax bill and monthly fees. By the way, fees for what?

Also interesting, this Fantastic Value! is attached to a condo building where about $350,000 buys a 586-square-foot one-bedroom unit where you can conveniently sit in the living room and, if you lose the remote, adjust the TV on the far wall with your foot. What thoughtful design. Taxes are $2,200 a year and condo fees $340 a month. So, overhead is $523 a month, and with 10% down ($35,000) plus closing costs ($6,950 for double land tax, plus legals, plus $6,300 for CMHC) the monthly nut with a 3.2% variable mortgage is $2,122. Or, you could rent the same place for $1,350.

Here it is:

How severely will the condo market eventually be hit by what F & the peckerettes have wrought? Well, imagine a direct asteroid strike. A black hole where 2,000-a-month sales once were. Mangled, smoking Vespa debris everywhere. Ikea trucks, circling pathetically. Speculators, barefoot and mute, staring at twisted I-beams in unseeing trauma. Among them, the occasional limp body of an expired barista.

Already condo listings in most Canadian cities are snapping higher in anticipation. Speckers and flippers are overrunning Kijiji and Craigslist, desperate to assign offers on unbuilt units or dump existing ones below cost. Developers are scrambling to unwind projects they know can no longer be sold. And this is but foreplay. You see, about half the country (the half that doesn’t come here) have no idea the rules of real estate just changed.

A bank survey this week found only 45% of people realize that (as of today) the longest insured mortgage is 25 years, instead of thirty. And I’d wager ever fewer know cash-back mortgages are about to be murdered and borrowing requirements made stiffer. Hard to believe, eh? That people would actually go on vacation, flirt with babes, play with their children, visit cottages, flirt with hunks, run with their dogs or quietly lead productive, useful, obedient lives instead of reading this blog?

Amazing, but true. Which suggests the real impact of these changes might be felt when the property market swells like a gland again in September. In fact, the research suggests what happens when people do understand the new reality:

“The BMO survey also showed that 14 per cent of potential home buyers see it less likely that they’ll buy a new house in the next five years, while 41 per cent of those who still expect to purchase a property in that time period say it’s now more likely that they’ll spend less. And 45 per cent say it’s now more likely that they’ll opt for a smaller mortgage.”

This is exactly what F & the Ps were hoping for – to quell demand and deflate the bloated gasbag they’ve spent the last three years denying existed. A 14% reduction in buyers, four-tenths of whom decide to spend less and almost half who will borrow less, is an anathema to realtors and mortgage brokers. And the inevitable outcome is clear – sharply lower sales, a tsunami of new listings and collapsing prices.

There will come a time (maybe it’s now) when historians will wonder why anyone would buy something they could rent for less, spending big money to do so, while taking on massive personal risk in the form of variable-rate debt. Especially when it’s destined to decline in capital value, and costs $47 a month in maintenance fees. Fees for what, exactly?

But enough of condo mayhem. Time for a fawning letter.

Dear Garth. Thank you for saving us. We were the house horny young couple, and first time buyers that you are always referring to.

My wife and I are in our mid 20’s. At the start of this year we were checking out every new townhouse in South Surrey BC (GVA). Convinced that our 30k built up in savings was perfect for our 5% DP – 30 year am on our new 400K+ home: A 1200sqft shoebox built on top of a mini garage.

The worst part is everyone thought this was a great idea, parents included. No one warned of our financial suicide. We would be 25 with a 400k mortgage and nothing in the bank, and all we heard is “These low mortgage rates won’t last forever, better hurry:)”. Anyway, since coming across GreaterFool you have knocked some sense into us, and help us avoid the insanity.

Anyway we have dumped our measly 30k into TFSA’s. Can you advise how we should invest these? I don’t know how or what to do with these accounts to help grow the little savings we do have. Thank you! David.

Bless you, my children, for you shall inherit the Lower Mainland and smite the scuzzy shoebox-floggers and voracious vendors. A buyer’s market lies just over the horizon, richly rewarding the formerly horny like you, who also get to say I-told-ya-so to your parents for the next two delicious decades.

As for the TFSAs, remember that these things are not for saving. Not for GICs. Not for bank accounts. Not for the humid embrace of the orange guy’s shorts. No savings bonds. No money market funds. No cash. Instead, learn about ETFs – exchange-traded funds, which are mutual funds without managers or big fees. They’re 100% liquid, trade on exchanges, pass through dividends from owned companies and offer huge diversification. That means growth without all the numbing volatility of owning individual equities.

Take your cash and divide it between funds giving equity exposure (Canada and the US),  dividends, REITs and bonds. And stay tuned. I’ll come back to this topic later in the week.

First I must water my parking spot.

221 comments ↓

#1 TurnerNation on 07.09.12 at 9:15 pm

1. In the USA, today bond yields continued their plunge.

2. New class in the Land of Freedom:

http://www.bloomberg.com/news/2012-07-09/indentured-students-rise-as-loans-corrode-college-ticket.html

“Indentured Student’ ”

Geraldine Damiani Brezler took out a $5,000 student loan in the late 1960s to study at the State University of New York. She became a nurse, got married, bought a house and repaid the debt in less than three years.

Today, her son, David, 38, owes about $85,000 in loans for a master’s degree in education at New York University. He can’t find full-time work, lives with his parents in White Plains, New York, and has deferred paying his debt for three years
….
Students at for-profit colleges carry the heaviest loan load: 53 percent of degree recipients had school debt of $30,500 or more, compared with 24 percent at private, nonprofit colleges and 12 percent at public schools, according to a 2010 report by the College Board using the most recent federal data available.

#2 TurnerNation on 07.09.12 at 9:15 pm

9:15pm EST, right on time Garth. How did I know. :)

#3 Editor on 07.09.12 at 9:16 pm

A clever friend watching from afar has read a few Canadian news and magazine stories, drawn some conclusions, and submits this (with apologies to the witches of Macbeth):

Double double, prices bubble
A crash then comes and causes trouble.

#4 TurnerNation on 07.09.12 at 9:26 pm

So many of Vancouver’s things are going limp, unloved. Typical.

http://www.vancouversun.com/life/Vancouver+dating+scene+hard+score/6895779/story.html

Vancouver’s dating scene: Why is it so hard to score?

So, why is it so hard to meet someone in Vancouver? Is it geography? Is it part of the city’s identity that the dating scene is as tricky to negotiate as its landscape, divided by waterways and forbidding mountains?

Is it the way the city is spread out and shuts down early, its denizens more likely to rise at dawn to pound up the North Shore mountains on their bikes before work than lie in and roll over for a little good morning sex?

Is it our ethnic enclaves that divide us?

Is it seasonal affective disorder, a collective low libido?

“There is a lack of sexuality in Vancouver,” says Derkson, bluntly. Derkson is petite, tanned, toned, with a bright smile: her nails are done, her hair is thick and full. She looks like she’s got a personal groomer on call.

#5 ANONYMOUS on 07.09.12 at 9:28 pm

Yeah, but its ONLY to existing owners at that building.

Wow, times must be really SLOW for him to go thru all the trouble to list crap like that !

And just because it can fit 2 cars doesn’t actually mean that the management will ALLOW 2 cars to be parked there, almost certainly if you try to park 2 cars there at the same time, you will find that the building management has called in the autorities to give you a parking ticket ! I read about this just a little while ago.

You know; all of these dummies buying condos reminds me of a Redneck joke, here it is:

“What’s the last thing a redneck says before he dies?

“Hey……watch this!”

#6 Johnny D on 07.09.12 at 9:31 pm

Can’t wait to see the impact of this in Regina Skatch… I hope a few inflated realtor egos get pricked.

#7 Julia on 07.09.12 at 9:33 pm

Garth, you outdid yourself tonight.

#8 Min in Mission on 07.09.12 at 9:33 pm

First I must water my parking spot. – Garth

There are some places in, Downtown VCR, where strangers will wander past and do that for you!!

#9 GeoKall on 07.09.12 at 9:36 pm

Garth, why are you so much against RRSPs as of late. I agree TFSA are great but an RRSP should be part of your financial plan especially if you are in a high tax bracket.

Not necessarily. — Garth

#10 Randy on 07.09.12 at 9:42 pm

Yehbut….Didn’t Rocky Balboa say he wanted to invest in condoms ?

#11 mark on 07.09.12 at 9:47 pm

Buy an RV and park it.

#12 CalgaryBoy on 07.09.12 at 9:47 pm

Love your line, Garth! “$350,000 buys a 586-square-foot one-bedroom unit where you can conveniently sit in the living room and, if you lose the remote, adjust the TV on the far wall with your foot. What thoughtful design.”

“New mortgage rules could make switching or refinancing tougher”
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/new-mortgage-rules-could-make-switching-or-refinancing-tougher/article4389044/?from=4399058

The article has some good info and scenarios!

So far, 2 people from my work place have announced they were “lucky” they bought a house before today, despite me telling them it’s not the right time to buy. Oh, well, not my money I’m throwing away.

Here’s to 25 years amortization!!! Lets see what goodies this brings us…maybe a nice correction in Calgary?

#13 Blood Bath for Toronto Condos on 07.09.12 at 9:48 pm

We will see a ton of realtors crying about Garths blog tonight and tomorrow. A couple of co-workers who I got to read your blog a few months ago haven’t been able to sell in downtown Toronto for a couple of months now. One building has 63 units and the other 53 units and nothing is selling. They even said they lowered the price and still not one single phone call. The worst part is they have lived off their HELOC so they can’t lower the price anymore unless they being a check at closing.

#14 Elmer on 07.09.12 at 9:49 pm

I don’t get the hate toward small apartments/condos displayed on this blog. I live in a condo just over 500 sq ft. As a single guy why would I need more space? I don’t have lots of stuff, it’s quick and easy to clean, and cheap to cool/heat. And I spend most of the day at work so all I do when I get home is watch tv or surf the web, don’t need lots of space to do that. I don’t understand why some people feel the need to deride small condos and those who choose to live in them. Do they have so much belongings that they need a 3000 sq ft house? Or do they spend their entire day at home so they need lots of space? Or do they have large families? Or are they just overcompensating for something else in their life being small? I honestly want to know.

#15 Suede on 07.09.12 at 9:51 pm

Why is it hard to score in Vancouver? You gotta get a nice car and tell babes you live in a wicked flat – problem solved. Ditch ’em before they figure out you don’t any of it but have a lease and a mortgage.

Fake it ’til you make it.

GlobalVancouver did a piece today on the BMO survey. Very negative outlook, Chris Gailus can “feel the draft from the cooling market already”.

The newscast was brought to you by ReMax. Yee-haw.

#16 MarcFromOttawa on 07.09.12 at 9:56 pm

Great topic Garth.

Any opinions on the following TFSA strategy:

XIU
XSP
XRE
CDZ or XDV?

Young and I think I can stomach volatility.

#17 Industrial Guy on 07.09.12 at 9:58 pm

A cynical person would say … The Harper Government is taking theses actions to quell demand and deflate the bloated gasbag they created to win an election in 2011

#18 Mark W on 07.09.12 at 10:04 pm

This month the cover story in Toronto Life Magazine is entitled:

“Trouble in Condoland: falling glass, leaking walls, multi-million dollar lawsuits, and other true tales from the dark side of the condo boom.”

The really interesting thing is that the article talks about really poor quality construction ..

so add this on top of a real estate bubble …

and what you have is to quote from Jim Lahey of Trailer Park Boys, “What we have here is a s*#t storm a’coming.”

Toronto’s story will not be shopping centre roofs falling down … it will be falling glass killing people on the street.

#19 vatoDETH on 07.09.12 at 10:07 pm

Does anyone remember when Spain was praised for it’s solid economy in 2008?

http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1589&language=english

http://www.forbes.com/2008/10/13/spanish-banking-bailouts-markets-equity-cx_je_1013markets17.html

#20 Brian Macdonnell on 07.09.12 at 10:07 pm

(we met in Campbellville a few years back)

Please explain REITs. One side of this blog is sell real estate, don’t buy, rent instead …

The other side is invest … ETFs etc.

But

a REIT is a real estate investment trust (right?)… with the expected crash of the real estate market, why would investing in a REIT be a good idea?

I am 50% XBB, and 50% XIU. I cannot handle more “risk”.

But I do not understand REITs.

Thanks.

#21 John on 07.09.12 at 10:08 pm

‘A bank survey this week found only 45% of people realize that (as of today) the longest insured mortgage is 25 years, instead of thirty.’

Probably the same 45% that previously realized the longest insured mortgage was 30 years. Does this really surprise? How many people follow this stuff?

#22 CP on 07.09.12 at 10:11 pm

A post for us 20-somethings with cash to sit on and invest in the short/mid-term would be fantastic Garth, great idea

#23 Toronto_CA on 07.09.12 at 10:16 pm

#13 Elmer on 07.09.12 at 9:49 pm

I don’t think people on this blog hate on 500 square foot condos for a single guy. They hate on the prices of 500 square foot condos in Toronto and Vancouver, because they are ridiculous. Also, a 500 square foot condo for a couple, nevermind a family with children, is untenable.

Hope that helps explain a bit. $350k for a 586 square foot condo is nuts and bizarre given the average income and, as Garth pointed out, the cost of renting the same unit.

#24 Ex-Cowtown on 07.09.12 at 10:18 pm

Watched Global Van news tonight at supper time. The Van Realty Spokesman acknowledged the changes, but said:

“It’s all about Toronto. We’re OK here, we have been steady for a while. Nothing to do with us. It’s all aimed at slowing TO. ”

And that’s when the chinese food hit the floor.

#25 The Americn on 07.09.12 at 10:21 pm

At #129 from the previous post: BCObserver (aka BPOE), the odds are actually about 7 in 10 of all readers and posters on this site currently own a home in Canada. Again, you’re “logic” never adds up.

#26 Gypsy Kid on 07.09.12 at 10:22 pm

current smallest condo in Toronto is 400sf…two are planned and already sold..270sf!

why????
program on cbc tonite was singing the praises of toronto condo market…wthell? one whacky city we live in.

#27 Superman on 07.09.12 at 10:24 pm

Vancouver is quickly becoming a cess pool. Realtors are now fighting over territory and being laid off in bunches. Only the strong will survive. I’m going to guess there’s gonna be a lot of used black Audi’s sitting on the lots in the next few months!

#28 Cory on 07.09.12 at 10:29 pm

Only realtors say the changes will have zero impact on the “hot” Calgary market. Essentially this means that realtors are saying they’re smarter than Flaherty et al. We know this is false of course. They say “the changes of the last 3 years have done nothing to cool demand” but they don’t realize those changes were not real changes like this round. this round was definitely a throw in the towel from the government. Flaherty et al may create bubbles and fan the flames, but they do know what they’re doing. These changes were concrete changes not fluffy pretened changes like the last few years.

Only realtors will say all is well. I can tell you that I watch the mls.ca almost daily for Calgary and this hot market they talk about is bogus. Price drops galore, extended days on market etc. It was inevitable rents would go up as a result of the changes since it knocks people out of the buyers market…they have to live somewhere. that’s when you start to move toward buying.

If it is going to be tough to get a CMHC mortgage and people just think banks will pick up the slack they have another thing coming. Banks will want all the gold in your safe deposit box, and all of the blood from your body before they will even think of taking a risk on you. Banks are risk averse but will write mortgages all day long (and they did) when the taxpayer is the underwriter.

Time folks. Thats all it is going to take…time. I would rather sit and have drinks with a used car salesman than a realtor. I’ve never seen such desperate people willing to do anything to make that commission.

#29 The Americn on 07.09.12 at 10:29 pm

At #14: Elmer, I don’t think it is that anyone has anything *against* small condos. The problem is that people are paying ridiculous sums to purchase those small condos when they could rent the same product for nearly half the price. My question to you is do you plan on living single in your small condo for decades to come? Otherwise, you may be looking at taking a serious loss if you purchased at peak.

#30 Foggy on 07.09.12 at 10:31 pm

What got me is the $2200/year taxes. Given so many households crammed onto one chunk of ground, condos should be the most efficient way to dilute the tax bill for a given piece of city real estate. Hell I only pay $900 a year for my house and 5 acres out here in the land of the Bluenose.
Also a 25 year mortgage is a reasonable length of time give to pay off your home. When I bought I chose 20 years. Those 30–>40 year things were for flippers.

#31 Smoking Man on 07.09.12 at 10:31 pm

#1 TurnerNation on 07.09.12 at 9:15 pm

I was asked awhile ago where I went to University, cause they thought my skills where insane.

I Said U of G , the guy was puzzled, where is that.

I confessed, PC’s hit the market when I was 35, U of G

University of Google.

The machine now requires the baby tax farm slave to be indebted to the nines, to possess an obidiance certificate, in the hopes of landing a cube job, that they will never make the loot, the bullshitter with grey hair makes.

Not fair but reality, moral of the story.

Bull shit rocks, honesty sucks.

#32 Keeping the Faith on 07.09.12 at 10:33 pm

#14 Elmer

I’m with you 100%.

Live in what you need bank the rest.
I will never understand the couple that has a 4 bedroom 2800 squarefoot house and are expecting a baby and when asked why so much space? They respond “For when the in-laws come visit at Christmas at 1 week in the summer”
??!?!?!??!?!?

are you kidding.
Have they heard of a hotel?

To quote Forrest … “Stupid is, as stupid does”

#33 Canadian Watchdog on 07.09.12 at 10:36 pm

The latest mortgage rule changes is still quite puzzling considering the market started contracting in Q4-Q1. http://postimage.org/image/ny6iv6zml/

I don’t buy it…

There is something else on the agenda that we don’t know about yet—my best guess—CMHC bailout is coming one day soon.

#34 Timbo on 07.09.12 at 10:38 pm

#161 Toronto_CA on 07.09.12 at 5:57 pm,

You did not catch the ;)?

http://www.doomsteaddiner.org/blog/wp-content/uploads/2012/05/Double-facepalm.jpg

——————–
http://www.fxstreet.com/news/forex-news/article.aspx?storyid=24abada9-7fc9-4a0a-97b5-9a5bae308be8

“While exports came in slightly better than forecast, a steep decline to 47.5 from 50.4 in New Export Orders suggests a sharp drop ahead,” says Bloomberg’s Michael McDonough. “Weak Chinese import growth (6.3%)—signifying the domestic sector is still slowing—likely provided the impetus for the recent rate cut.”

Rates to zero now. We need inflation……….

http://www.businessinsider.com/citis-forecasts-for-the-most-important-economies-in-the-world-2012-7

“Global growth prospects are worsening, reflecting the euro area crisis and emerging market slowdown,” wrote Citi Chief Economist Willem Buiter. “We now expect global growth of 2.6% this year and 2.7% in 2013, down by 0.1% for 2012 and down by 0.2% for 2013 from last month.”

Canada
“the housing market is up, and consumer spending is robust”

Citi could not predict Canada’s growth rate even if we handed them the books 2 days from our official announcements.

#35 Saskatoon-Living on 07.09.12 at 10:40 pm

With $30,000 you can invest in a lot of great dividend paying stocks. Oil Service stocks (Phoenix Energy- PHX pays 9%), lots of Royalty Funds (A&W, the Keg, etc), and like Garth says Bank stocks. All way better of a return than a house would give. Great post again Garth!

#36 Don't Believe The Hype on 07.09.12 at 10:44 pm

On CBC News The National right now talking about real estate in Cleveland, Ohio and how taking down empty, boarded-up homes will stop, or at least slow down the downward spiral in home prices
http://www.cbcnews.ca/thenational
Look for The Road Ahead series

#37 Mass Debate on 07.09.12 at 10:52 pm

Ya Yo! Just back from Indigo trying to pick up chicks and saw the cover of the dumb-ass mag TORONTO LIFE with a cover story of the crappy towers that now blanket Toronto’s landscape. Floor to ceiling windows that expand in the heat and separate from the walls…water leaking inside…walls so crappy you can hear your college student neighbor masturbating (which might be a bonus if that’s your thing). Toronto’s developers will be the curse of the town in a decade, but they won’t care….they’ll be chillin in private villas in the Caribbean… yeeee haawwww!!!

#38 Inglorious Investor on 07.09.12 at 10:53 pm

#9 GeoKall on 07.09.12 at 9:36 pm

I’m sure you know that RRSP’s do not save tax; they merely defer it. So putting retirement savings into an RRSP only makes sense if you are actually going save tax by doing so. However, I anticipate that income tax rates will be much higher in the not-too-distant future. Governments will be scrounging for money anywhere than can. You want your money to be harder for them to get, not easier.

Also, IMO you should always be suspicious of anything the government or the banks want you to do. The roller-coaster changes that F made to mortgage regs over the last decade should be proof enough of that. Actually, Canadians should be outraged at their blatant manipulation of the market, which, you must know, was done for the banks, not for you.

BTW, Garth has some great ideas on using RRSPs that offer real, immediate benefits.

#39 Toronto real estate bubble on 07.09.12 at 10:55 pm

Garth, who r the orange guys? ING?

#40 West coast guy on 07.09.12 at 10:56 pm

I thought its not a good time to buy bonds?

#41 lol on 07.09.12 at 10:56 pm

“First I must water my parking spot.”

Garth, This is classic :):)

#42 Scott in Gibsons on 07.09.12 at 10:56 pm

Many boomers’ retirement plans are dependent on selling their house for big bucks. How will they react as prices wilt?

#43 Chaddywack on 07.09.12 at 10:59 pm

My dad gave me some advice today. He said “Why the hell are you renting? Just get it done and buy something.”

I told him “I’ve waited this long (5 years) why would I buy at the top?”

His response “Chaddywack…..Vancouver is CHOICE, and it’s not going to drop one bit because of all the Asians coming here. Buying my rancher in Surrey was the best investment I’ve made in my life.”

#44 Nick on 07.09.12 at 11:00 pm

My portfolio : VTI, VEA, BSV. The bonds % should roughly match your age. Rebalance one a year. Stay away from vegans. Read Garth. That’s it.

#45 Julia on 07.09.12 at 11:02 pm

There are 2000 condo listings for Toronto on MLS right now not including Mississauga or Scarborough or preconstruction.

#46 Mister Obvious on 07.09.12 at 11:04 pm

#14 Elmer

“I don’t understand why some people feel the need to deride small condos and those who choose to live in them.”
————————

Its not the smallness of the condo Elmer, its the ridiculous price-per-sqare-foot to which they have been pumped up in some urban centers for no realistic reason.

I wouldn’t deride anyone for choosing to live in a tiny condo costing $800 per square foot unless they also were trying to convince me what a great investment it was.

#47 The American on 07.09.12 at 11:11 pm

I totally get what Garth is saying. Monthly fees on a parking space for what? I can see maintenance to keep up and clean the garage, keep painted stripes bright, and limited common element insurances for those spaces. This wouldn’t run over about $10/ month when you aggregate all spaces in a garage.

I actually paid $65,000 for Each of the to spaces I have in my condo building in Seattle. (NYC now has a space for $1,000,000 for sale, no joke). However, the HOA condo fees bake into the aggregated HOA monthly condo assessments the costs to maintain these deeded limited common elements, so there is no additional monthly fee for it recognized in my fees specifically. Also, there are no real estate taxes I pay out of my own pocket as LCEs are covered under general building taxes paid each year, which come from the aggregate HOA dues collected. For the record, HOA is Home Owners Association, the same as Stratus Fees.

Yes, the costs are exceedingly high, but developers can fetch it because to rent these spots each month would
run $750 total. A monthly payment to finance the spots to “own” them in today’s lending environment is slightly less, and it makes it more attractive to a potential buyer should I chose to sell my condo as the spaces are deeded and appurtenant to the unit.

I’d have to know what parking cost to rent each month in the area in Toronto in which the parking space for sale is located in order to understand if it is fair or not. At that price, I’d take six of ’em in my neighborhood. The spots I have are 8.5′ wide X 21 feet deep, just enough to warrant not needing a f*c*ing can opener to get in nd out without contorting my body.

http://www.thelifefiles.com/2012/05/20/million-dollar-parking-space-about-to-hit-the-market-in-new-york/

http://seattletimes.nwsource.com/html/localnews/2015614960_parking15m.html

#48 Tri-State Pat on 07.09.12 at 11:11 pm

JUNE 2012 Data & Charts for Canadian Real Estate Prices, Sales and Inventory…

Check out all the RED in the scorecard…

http://www.chpc.biz/

#49 T.O. Bubble Boy on 07.09.12 at 11:12 pm

@ #20 Brian Macdonnell:

Most Canadian REITs are not in the residential real estate market (majority are offices and retail), and even those that are, such as Canadian Apartment REIT, own established rental buildings vs. condos.

REITs are not immune from the economic downturn that will happen as house prices tank, but not because they are directly invested in those residential properties.

#50 50% correction predictor on 07.09.12 at 11:14 pm

Condo flippers are like dear caught in the headlight. Yes?

How long they can hold on before they abandon on mass and crystalize the loss?

We need catalysts. And these catalysts will ALWAYS mysteriously show up. Believe it!

#51 Only The Bankers Laugh on 07.09.12 at 11:17 pm

“#33 Canadian Watchdog on 07.09.12 at 10:36 pm

There is something else on the agenda that we don’t know about yet—my best guess—CMHC bailout is coming one day soon.”

Yes, thought about this one a few years back and it was too depressing to consider that all the people who got in with no discipline/no savings on a whim of government to create a mini-boom in economy with housing 0/40 to get that elusive majority would one day save most of them by decreasing forced savings of prudent with further taxes. With escalating debts in every area, higher end jobs disappearing, branch plants shutting down and with boomer health care coming upon us, thanks for throwing this thought on the steaming grey matter pile again. Aarrgghh!

Only The Bankers Laugh

#52 Grim Reaper/Crypt Speculator on 07.09.12 at 11:25 pm

Man…..

That is one luxurious FEMA coffin.

#53 cramar on 07.09.12 at 11:26 pm

What is the $47 maintenance fee for? Keeping the snow shoveled off the parking spots obviously.

#54 coastal on 07.09.12 at 11:29 pm

Just heard of another young couple with kids who are declaring bankruptcy, second one of the group to go under within the last 16 months. Up to their arse in HELOC debt with a mortgage on a house they had for the last five years which has made them diddly squat. They are happy they are free of the ball and chain so that is the good part.

The sad part is there are most likely a whole crap load more of these couples sitting on the abyss in sunny Victoria in the exact same position, scrimping to pay the bill man with nothing to show for it, not even a hot car or trips around the world.

Meanwhile the know-it all agent pimps with the blinders on claim the “sky isn’t falling” ? “Just a bad deal” they say, “win some, you lose some”. Sorry bubs, it is falling, like a fricking ton of bricks.

#55 Inglorious Investor on 07.09.12 at 11:29 pm

#34 Timbo on 07.09.12 at 10:38 pm

“Rates to zero now. We need inflation……….”

No, Timbo. We need economic growth based on the creation of real wealth, not the expansion of debt. Unfortunately, it seems we are not getting it.

Governments and banks have flogged the inflation horse for far too long. But the horse is dead. And they know it. Either they stop, admit defeat, and enact policies that foster real, productive growth, or they risk turning our currencies into wall paper and the entire system will have to be reset.

It won’t be some big calamity. No riots in the streets. No effigies of F burning along the Rideau. Probably just a new currency that you can happily exchange for your old paper at your local bank. Only the new stuff will only buy about half of what the old stuff did. By the time people realize the scam, it will be too late.

Not sure which way they will go, but did I mention that maybe owning some bullion is not a bad idea? The truth is, gold has never lost its position as the core of our monetary system. Just ask the central banks. But don’t sell it unless you absolutely have to.

#56 presley1000 on 07.09.12 at 11:29 pm

@ #14, 23, 29 & 32

I currently live in an apartment of the same size in North York. Myself and the cat. Unit built about 20 years ago. Small balcony. Only difference is that I rent. My current rent, with utilities and underground parking included, sets me back $913.00/month (my friends tell me I lucked out, and I don’t profess to know what a comparable apartment goes for rent-wise). But for me, the figure is around $11,000.00 a year with no mortgage or maintenance fees. I claim a sole-proprietorship rent deduction as well. It’s not a glamorous building, but clean and managed well. What would compel me to leave from here? The only space issue that has ever come up in the last decade is a fairly recent one… I think I finally have too many dress shirts. The closet is getting tight. I have willed myself to suck it up for now… and just get on a better rotation schedule with picking up and dropping off the shirts at the dry-cleaners. It looks like they have lots of space there and they don’t charge me extra for taking my time with the pickup. :)

People can adapt and be totally fine with less space… http://www.youtube.com/watch?v=MtsOQz2I09g

But that is not to say that I will never move into a MUCH larger space. The cost of it is the issue. Yes, the cat deserves it, but she will have to wait until the mathematics of it makes sense to the great Garth. A few years ago, I could not afford to move out. Now, I just don’t want to. Wake me up when it becomes worth the hassle.

#57 Island renters on 07.09.12 at 11:48 pm

#14- I agree. So many letters to Garth like last night’s citing kids as a need to renovate/move to a larger home. Then once they get the added space more credit is needed to fill it with idea & toys r us. Not to mention a New minivan because you can’t walk anywhere in the ‘burbs. We have 2 kids and have just downsized to move back to the city. Couldn’t be happier.
Garth, we’re another couple you saved. Thank you for your blog. Really looking forward to the post later this week on what to do with the tfsa.

#58 NewWorldPartyDotOrg on 07.09.12 at 11:50 pm

Housing is the most manipulated market in the world.

The government created this housing bubble through massive manipulation. Read explanation at bottom half of this blog:

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

Finally, the government is trying to reverse some of that manipulation, but only some. The biggest tool of government manipulation is still the CMHC. The CMHC is Canada’s version of Fannie Mae and Freddie Mac.

#59 Mr. Anderson on 07.09.12 at 11:55 pm

If that young Surrey couple story is true, kudos to you for having the balls to not drink the kook aid.

#60 Doug in London on 07.09.12 at 11:56 pm

On the Monday night CBC news there was a story of how foreclosed and abandoned houses were being demolished. Some were in such sad shape they were falling apart. The next news story was of small 400 square foot condos being built in Toronto, more condos being built in total than in New York City because “everyone wants to live in Toronto”. Am I the only one here who thinks there is something wrong with this picture, that such opposite extremes can occur not that far apart? One or both of these extremes is clearly not sustainable.

#61 Mr. Anderson on 07.09.12 at 11:56 pm

Sorry, kool aid.

#62 Doug in London on 07.09.12 at 11:58 pm

Addition to my above comment: I forgot to mention the houses being demolished were in Cleveland.

#63 Ronaldo on 07.10.12 at 12:09 am

#14 Elmer – your 500 s.f. condo is huge compared to this one this couple occupies in New York.

http://www.zillow.com/blog/2009-12-09/new-york-citys-smallest-apartment-150k-for-175-sq-ft/

#64 cramar on 07.10.12 at 12:09 am

#14 Elmer on 07.09.12 at 9:49 pm

I don’t get the hate toward small apartments/condos displayed on this blog. I live in a condo just over 500 sq ft. As a single guy why would I need more space? I don’t have lots of stuff, it’s quick and easy to clean, and cheap to cool/heat. And I spend most of the day at work so all I do when I get home is watch tv or surf the web, don’t need lots of space to do that. I don’t understand why some people feel the need to deride small condos and those who choose to live in them. Do they have so much belongings that they need a 3000 sq ft house? Or do they spend their entire day at home so they need lots of space? Or do they have large families? Or are they just overcompensating for something else in their life being small? I honestly want to know.

—————

One of my sons is single and lives in Chicago. He spends about 70% of his time traveling. He formerly had a small 1-BR condo then bought a large 3-BR, 2-Bath foreclosed condo. He rented the 1-BR and moved to the 3. Why does he need a 3-BR condo? This works perfectly for him. He uses the master BR for himself obvious, but the large 2rd BR is for guests, which he frequently has. Many of his friends from Canada have visited for example, including us staying there twice while passing through Chicago. He has other American friends that visit. The smaller third BR is used for his sporting and recreational equipment. Hockey and snowboarding equipment. Three Cannondale bicycles plus racks. In fact he said he wanted a larger condo specifically to store his bikes. The room looks like a crowded sporting goods store.

BTW, in Chicago everyone buys parking spots which are sold separately from condos. He has two spots. One for his car, and one for his two motorcycles-a Triumph sport bike and a V-twin chopper that you would swear was a Harley, but is a Honda!

#65 ottawa pete on 07.10.12 at 12:14 am

Bill Gable from yesterday – Thanks for the great story and the reminder that “you are your brothers keeper”.

#66 AGIC on 07.10.12 at 12:21 am

I like that apt. What a beautiful view!
No money left for flat screen TV or even window covers…, but who cares, we are proud RE owners!

Nothing new, house reach, cash poor.

#67 Bobby on 07.10.12 at 12:24 am

Have spent the last few days looking at condos here in sunny ( now) Victoria. Looked from the low end up to the higher end. Most were empty and some have been on the market for more than 6 months.
Went to a number of open houses for condos on the weekend. At most of them we were the only people there. The only exception was an older unit priced at the low end. At each open house the realtor opened the conversation and said the prices were flexible. One realtor said there are no buyers out there, the market was dead. Said there was over 10 months of condo inventory.
Yes, we will be making some offers, but they will take into consideration a market correction.
It is now getting really ugly out there.

#68 Nostradamus Le Mad Vlad on 07.10.12 at 1:03 am


A spirited composition, complete with the slapstick humor that you are quite capable of churning out. Everything in this world, barring Britney Bieber and Justin Spears, has become a joke.

“Bless you, my children, for you shall inherit the Lower Mainland . . .” — All things considered, I’d rather be in Chernobyl. Lotsa free land there!

#31 Smoking Man — “Bull shit rocks, honesty sucks.” — Right on there, ma’ man. That’s how life evolves.
*
0:27 clip The sound of the thunderclap, and the players running after, is similar to the forthcoming condo collapse; Drought Scorching Grain Prices; Defragmenting The EZone, that is; Welfare State This is what the west is destined to become; Unexpected Gift from the recession; Germany, UK and Finland Growing pains; Gloal auto sales collapse on the horizon; Scranton All public pay now minimum wage; Japan Going down; Seniors’ Life Insurance Don’t get sucked in; More Bond Buying.

Steve Keen A HELP debt bubble? US falling into a liquidity problem; Speeding Up NAmerica is woebegone; Real time Larouche; China’s trade surplus surges; 13 People destroying the global economy; OECD sees ChIndia’s slowing growth; Americans’ credit card debt jumps; Second Post says US is a social welfare state; David Cameron If this happens plus a few other goodies, it will certainly liven things up; Govt. in action or govt.. blunders.
*
Guns ‘n’ Roses or the advantage of being armed; Costly Crash Ferrari vs. Citroen; Enuff Already! Swimming down High Street; The Toilet is spreading its wings. The Flying Toilets? Keith Richards Some of his fave pix over half a century; 20 Superfoods Angel Food Cake isn’t one of them.

#69 thinker on 07.10.12 at 1:19 am

Garth, let’s help you think here-

You say “And the inevitable outcome is clear – sharply lower sales, a tsunami of new listings and collapsing prices.” And what is prices don’t go down? Rent’s in your example are half of owning and you ask why would anyone would buy when one can rent for cheaper? That would imply a 50% to get the same levels??? Not a chance in hell we are getting to that level, infact watch rents raise to the ownership level.

Second, the reason the parking has the costs has to due with the garage maintenance – lighting, heating (some), door repair, entry/exit technology, idiots who bang up the pillars need repainting, oil leaks need to be cleaned, garbage removal in the area, bike storage devices, etc…

What is the cost to rent the spot vs owning it? Did you think about that math?

I hope you if prices don’t drop with sales, etc as you say, I imagine you will blame 1) the rush to buy into rule change 2) HAM 3) Banks cheating the new implied rules, 4) banks confused, etc…

Prices I am sure will go down a touch, not to implied rental levels. So the next time you vomit

“And the inevitable outcome is clear – sharply lower sales, a tsunami of new listings and collapsing prices.”

What is collapsing prices – 10-15%. If I am owner, I am not scared, bring it on so I can buy more…

#70 Jody on 07.10.12 at 1:23 am

#36 Don’t Believe The Hype

Yea, I saw that report on the news, I can’t wait till it starts happening here. Of course Cleveland and the realturds are really worried about their share of the pie going down. Can’t have prices go down more, then they will have to change the mill rate. But I saw the quality of houses going for $50,000, wow, nice! The same thing would fetch $500,000 here in Cowtown, yea, nothing wrong with the market, nope.

Saw the micro condo on the news that was in Toronto, what a joke, especially the asshat talking about how they might go down to 300 square feet but he couldn’t see it going much lower because the market would not bear it, hahahahaha! No shit!! Oh how I long for a Arizona or Vegas like crash up here, to be honest I think we bloody deserve it.

#71 live within your means on 07.10.12 at 1:29 am

#26 Gypsy Kid on 07.09.12 at 10:22 pm
current smallest condo in Toronto is 400sf…two are planned and already sold..270sf!

why????
program on cbc tonite was singing the praises of toronto condo market…wthell? one whacky city we live in.

…………………

I too watched it, but I certainly wasn’t left with the impression they were “singing the praises of toronto condo market”.

#72 HD on 07.10.12 at 1:32 am

# 14Elmer

I totally agree with your sentiment. I’m a single guy who lives in a small apartment. Easy to clean and I really don’t need more space.

However, if I were to buy a 500 sq ft condo in Vancouver, I would get charged a lot of dough per sq ft.

People here bash about smaller apartments not because of the size but for the crazy valuation.

If there is a crash and have the opportunity to buy, I would still go for a property that suits my needs. I wouldn’t go for more than 650 sq ft….not that much work to maintain.

Best,

HD

#73 Ted23 on 07.10.12 at 1:51 am

Yes things are changing, they need to. But the drama queens on this web site and that includes you Garth is hilarious. Markets rise and fall. Blame the bankers the Realtors for all of it. But to be really honest Garth if you really cared about your fellow Canadians you would organizing demonstrations outside Real Estate offices and Banks to stop people from buying and getting financing. It’s all hot air here as been for years.

#74 Devore on 07.10.12 at 2:06 am

#1 TurnerNation

Today, her son, David, 38, owes about $85,000 in loans for a master’s degree in education at New York University. He can’t find full-time work, lives with his parents in White Plains, New York, and has deferred paying his debt for three years

Colleges can charge virtually whatever they want, as all student debt is fully guaranteed by the government (haven’t we learned yet?) and cannot be expunged even in bankruptcy.

#75 Devore on 07.10.12 at 2:10 am

#3 Editor

A clever friend watching from afar has read a few Canadian news and magazine stories, drawn some conclusions, and submits this (with apologies to the witches of Macbeth):

Double double, prices bubble
A crash then comes and causes trouble.

Clever, but dangerously incorrect. The trouble was caused entirely by the bubble, not the crash.

I know, there’s a lynch mob already forming behind me for being the know-it-all nitpicker, but this is a pretty freaking important point, upon which this entire blog’s premise rests.

As long as the popular perception exists that it’s the crash that is the problem, we are doomed to keep repeating this wealth transfer exercise in perpetuity.

#76 Buy? Curious? on 07.10.12 at 2:20 am

Garth did you hear that RIM’s CEO may be being sued for being “Overly optimistic”? It’s being seen as misrepresentation. Why can’t realtors, mortgage brokers and those on CP24’s Hot Property be held accountable for the rosy outlook they spew out their glory holes?

http://www.bgr.com/2012/07/09/rim-ceo-lawsuit-blackberry-10/

Also, did you know Carly Rae Jepsen is Canadian?

http://www.youtube.com/watch?v=FE5qgFUx1Ns

#77 eagle eyes on 07.10.12 at 2:22 am

I live in Richmond BC. Some new listings on the market lately have been “priced to sell” meaning ASKING 30-35% below city assessment. I think those in the know are trying to get out quietly. Some are flippers who bought last year in 2011 are taking their losses quietly and quickly (much like peeling off a band-aid). They know the prices are soon going to plummet and they may not be able to jump ship. Of course we all know it is already too late. Even the local newspapers have reported a 54% decline in activity for Richmond. And it doesn’t help that MSM reports on a buyer’s market daily. However there are still people out there who are waiting for the prices to go back up.

#78 Piccaso on 07.10.12 at 2:44 am

#14 Elmer

Not deriding small, just the big price for small.

#79 Pat on 07.10.12 at 2:51 am

#9 GeoKall:
“Garth, why are you so much against RRSPs as of late. I agree TFSA are great but an RRSP should be part of your financial plan especially if you are in a high tax bracket.”
—-

Because he is (1) mathematically challenged and (2) stubborn. Funny writer though.

Feel free to register most of your money with the government. See how that turns out for you in 25 years. — Garth

#80 Harlee on 07.10.12 at 3:33 am

Ah..ha,I like it when Garth goes after the over inflated condo business. Anything that deflates the speckers and flippers is okay with me. Nothing wrong with someone actually living in a small condo and making it their home but all the madness of speculation in shoe boxes has gone on for far too long. Let it burst !
My favourite line was :”…adjust the TV on the far wall with your foot.” Too rich ! Thanks for the laugh.

#81 crashcow on 07.10.12 at 3:38 am

Why a Crash in Canadian Housing Prices is Certain

http://alphahunt.ca/2012/07/07/why-a-crash-in-canadian-housing-prices-is-certain/

#82 cynically on 07.10.12 at 4:13 am

I”ve heard a commercial on a local Vancouver radio station asking people to buy into a company called Flipping Cndos (I believe this is the name) In any case the nature of the business is correct and has probably been active and partly responsible for the rocket rise in local housing prices the last few years. It was shocking to me that some greedy individual would profit from exploiting the ignorance of people needing housing and this isn’t the US where we’ve learned to expect this kind of activity where a buck can be made.

#83 Questioning Calgary stats on 07.10.12 at 4:54 am

Thinking of buying in Calgary?

This is for all of you potential first time buyers who may have recently started to follow Garth’s blog. Apparently he is not very well liked by the authors of various Calgary realtor blogs and you may have heard about him in this way. The fact that you are reading this is an indication that you are seeking more information about the Calgary housing market and that is positive.

Garth provides factual, unbiased information. He does not pump real estate even though he owns multiple properties himself. He does not make any monetary gain from the sale of houses at higher prices. You need to question the motivation of realtors providing blogs for potential buyers. Do they stand to gain anything from the sale of houses at higher prices? Do they ever say it is not a good time to buy?

Realtors and others directly linked to the housing industry in Canada are fighting against the new mortgage rules that have been and will be instituted shortly. They know that the net result will be lower prices and a drop in sales, both of which directly affect the amount of money they make. Their opposition to the mortgage rule changes is a huge red flag telling us that it is not a good time to buy as they think prices are about to fall.

Give prices a chance to decrease as the new rules kick in. If you could wait for a 20% drop, which could easily happen in the next 1.5 years, you would save at least $100,000.00 on the purchase price of a house. Better yet, if you could purchase for $100,000.00 less, that would equate to a savings of $250,000.00 or more over the life of your mortgage (that interest really adds up).

There will be a much better time than now to buy your first property in Calgary. You might be under pressure from others to buy now. Renters are looked down upon somewhat in Canada right now, but this will change. It sure changed in the US, as their housing bubble burst, to the point where many people now think of renters as smart for not having bought in at the peak of the bubble. Remember, people who own houses want others to buy as this helps support the market in general and the value of their house. Don’t let the pressure get to you and force you to buy now. You will thank yourself some day for holding off.

Calgary house prices have historically gone up… and down in cycles. Don’t ruin your financial lives by buying in at the peak of the cycle. Too many did this in the US and we all know what has happened there.

Keep seeking more information as the purchase of a property will likely be the biggest financial transaction of your life. Therefore, you should give it the most consideration of any purchase you have made to date.

#84 Smoking Man on 07.10.12 at 6:56 am

As the world drifts closer to the end of days the way I see it.

The machine has but 3 options

1 inflate the debt away. Asset holders win, cash horders lose.

2 defalts on mass. The investment class get wipped out. Big deflation cash under mattris wins.

3. Heads of the machines control room get cut off and put on sticks.

My money bet on 1

#85 Aussie Roy on 07.10.12 at 7:41 am

Aussie Headlines

A culture of mania: a psychoanalytic view of the delusion which has driven the global debt crisis (Stein, 2011)

“There are two contributions to theory. First, working with ideas from psychoanalysis and its application to social and organizational dynamics, the theoretical framework of a ‘culture of mania’ is formulated and developed. This culture is specified in terms of the four characteristics of denial, omnipotence, triumphalism and over-activity”.

“Second, also drawing on psychoanalytic ideas, this article contributes a new notion of denial to the literature. While denial is usually taken to refer to the overlooking or ignoring of vulnerabilities and problems, the idea of ‘manic denial’ developed in this article refers to the concept that warning signs are indeed noted and observed, but that they serve not as warnings but as provocations to act manically in taking on more extreme risks without realising there are any risks.”

The full papers link is below, and well worth a read.

http://org.sagepub.com/content/18/2/173.full.pdf

#86 Victor on 07.10.12 at 8:22 am

http://www.theglobeandmail.com/report-on-business/top-business-stories/canadas-housing-market-at-tipping-point/article4402077/

Canada’s housing market is now at a “tipping point,” with some cities still showing strong growth and others cooling down, Royal LePage says.

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

Even realtors are admitting to the obvious now. Precious.

#87 John on 07.10.12 at 8:40 am

“How severely will the condo market eventually be hit by what F & the peckerettes have wrought?”
—–

Well that certainly is committment. Won’t this “cause and effect” perspective have an impact on the credibility of the ETF’s ideas?

Just…sayin’

#88 GTA Girl on 07.10.12 at 8:43 am

This TO Star story is an example of lobbyist push masquerading as a news story.

http://www.thestar.com/business/article/1224026–gta-home-resale-prices-overheat-due-to-land-shortage

The one redeeming point is the journalist identified the author of the study as under contract by the Building Development Industry (BILD). A lobby group for developers.

I am aware that the BILD group has started o push this idea that the GTA is running out of land. This is so they can open up the White belt areas north of Toronto, and push for development further into the protected lands of the Oakridges Morraine, and into Niagara.

Pure greed and nonsense. Homes are languishing in markets outside of Toronto proper.

York Region billions in debt due to poorly misused borrowed money to build sewage pipes, infrastructure (which the same developers own/profit from their pipe companies). York region is only subsisting on development fees and further in debt to keep up with infrastructure. Because developers are planning building subdivisions on farm land at a high rate of speed. Municipal councils are so rife with corruption that projects are being pushed forward with no thought on long term impact of congestion, planning or services.

The ponzi scheme has to end.

#89 Realty #1 on 07.10.12 at 8:58 am

if RE drops 25% it only effects those who bought in the last two or three years. And like Garth has mentioned its expensive to sell and buy again (10-12%). Are you really going to sell your home for 12% savings of the deflated price? Move your kids to a different school in hopes of timing the market correctly. Everyone sell and rent .. what would that do to the rental market?

People will not sell if they don’t need to. Everyone know its cyclical. If you bought at the peak of the last RE bubble 1989 , today your house/condo would have appreciated 100% .

House prices do not drop, sit there, then quickly recover. More likely they correct, flatline or erode for years more, then creep back in a process that can take a decade and a half (as last time). If the bulk of your net worth is unwisely in residential real estate, this is a dramatic event. Why would you not wish to avoid it? Your kids will cope. — Garth

#90 50% Correction Predictor on 07.10.12 at 9:08 am

#69 thinker on 07.10.12 at 1:19 am

What is collapsing prices – 10-15%. If I am owner, I am not scared, bring it on so I can buy more…
___________________

DELETED

#91 fancy_pants on 07.10.12 at 9:15 am

I take it there is no pool but hey, that is one insulated garden shed away from a great deal. tongue in cheek.

nuts.

#92 truth hammer on 07.10.12 at 9:36 am

Scranton PA has seen the future and Canada should follow.

http://www.foxnews.com/politics/2012/07/09/political-statemate-leads-to-city-workers-salaries-cut-down-to-minimum-wage-in/

Slashing all civic salaries to the amount they would garner in the open market is a good start. No one can tell me that a city hall clerk or hall sweeper should make more than anyone else. We need to turn the clock back on pensions and perks . A simple stroke of the pen will recoup the largesse of legacy contracts. Make the unions pay back the money that has been stolen from the taxpayer.

#93 Dave on 07.10.12 at 9:43 am

Crazy what’s going on in Cleveland

http://www.cbc.ca/thenational/indepthanalysis/story/2011/11/16/national-ontheroadahead.html

#94 45north on 07.10.12 at 9:43 am

GTA Girl: the BILD group has started to push this idea that the GTA is running out of land. This is so they can open up the White belt areas north of Toronto, and push for development further into the protected lands of the Oakridges Morraine, and into Niagara.

The Oakridge Morraine is entirely different than Niagara. Niagara is the best farm land in Canada – certainly in Ontario – once its gone its gone. Oakridge Morraine is poor farmland – undulating landscapes with slopes poorly suited to crops.

#95 The American on 07.10.12 at 9:45 am

At #89: Realty #1, you stated, “if RE drops 25% it only effects those who bought in the last two or three years.”

I beg to differ. It will begin by affecting those who bought at or near peak, but the consequences of a real estate correction are dramatic across the board. Ultimately, it affects nearly every person within an economy in an adverse manner if you are not dutifully prepared.

#96 Farfetched on 07.10.12 at 9:48 am

I’ve officially added the following to my bucket list:

– Have a beer or 2 with Garth Turner

#97 The American on 07.10.12 at 9:51 am

At #82: Cynically, you stated, “It was shocking to me that some greedy individual would profit from exploiting the ignorance of people needing housing and this isn’t the US where we’ve learned to expect this kind of activity where a buck can be made.”

I hate to break it to you, but that’s how it has ALWAYS been in Canada as well. Hell, the Canadian people (as have Americans) have been exploited by your own government for years. The real difference in the two countries is one country, Canada, tends to act holier than thou, which is quite laughable. It only makes Canada look worse to others, to be perfectly frank, as hypocrisy is never attractive.

#98 Inglorious Investor on 07.10.12 at 9:52 am

The last housing correction in 2008 was not permitted to occur naturally because it was not caused solely by a cyclical downturn. We were on the cusp of a deflationary spiral and a great unwind of debt, which had reached unsustainable levels among consumers in the US.

Deflation is anathema to governments and central banks so they pulled all the levers (and maybe installed some new ones) to ensure real deflation would not take hold. (Bernanke addressed the deflation issue back in 2002 with his now famous “helicopter” speech: “Deflation: Making Sure It Doesn’t Happen Here.”)

In Canada this was manifested as cheap money and lax mortgage rules manipulated by the feds for the benefit of the banks. This, along with an aborted deep recession, caused a rapid rebound in Canadian RE that was not supported by economic fundamentals, but rather by lots of free cash. And which subsequently sent prices into mania territory.

It’s quite clear that housing in Canada is overvalued by all traditional metrics. However, it’s difficult to see how a large across-the-board correction can occur absent an economic downturn causing high unemployment.

(Condos may crash, but that may not necessarily affect the entire market, since condos are not true real estate, more like a consumption good.)

If a crash does not happen, then the likely outcome, IMO, is a long period of stagnant or lower REAL values. This would mean nominal housing prices may not fall much, if at all. However, in real (inflation adjusted) terms, prices will be stagnant or lower. Most Canadians may feel they are financially sheltered in a home that is “holding” its value. But in reality the asset we call housing may be dead for a long time.

The best reason to hold RE today (particularly with a healthy mortgage) is in case of an inflationary blow-off that destroys “paper.” However, I don’t think straight-up inflation will be the outcome. I think, rather, that the new normal will be wild volatility and instability. When a system dies it does not go gently into the good night. It convulses violently before giving up the ghost.

This makes protecting yourself even more difficult than most people think. I believe part of the plan by the central money masters, implemented in earnest starting in 2007, is to turn an all-out collapse into a slow burn. What makes the situation even more difficult for Canadians is we are somewhat out of phase with much of the rest of the world. Will Canada’s “safe haven” status actually save us from our own folly? We’ll see.

#99 live within your means on 07.10.12 at 9:55 am

#67 Bobby on 07.10.12 at 12:24 am

So glad I never moved out to VCR in ’67. Stayed with 3 friends then who were originally from Mtl. & Ottawa. One told me about the endless rain (has since moved to NS , one moved to California & other still remains in Victoria (previously Naramata ) – to get away from her pot smoking hubby who a few years later died of an overdose of other drugs at an early age. I remember him drying leaves in the oven & trying to pressure me into smoking them. His wife was totally PO’d w/him. Frig – I was sleeping in their baby’s room and he came in the middle of the night & tried to put the make on me. I never told her at the time. He was a childhood friend of ours before I met his wife in high school. Weird. Years later I tried grass, & once hash oil – became paranoid & have never touched anything since. I do believe, however, that marijuana should be legalized for far too many reasons than I can go into on this forum. My DH has the odd puff or 2 when he can’t sleep & then he sleeps like a baby. He’s never abused it & won’t participate with others who are partying with it.

#100 Farfetched on 07.10.12 at 9:59 am

@#14 Elmer on 07.09.12 at 9:49 pm

Not everyone is a single dude in the city spending their entire ‘lives’ at work. Some of us have families to grow. Check out this video, it should clear up how you fit into the landscape and the role you play:

http://www.youtube.com/watch?v=x81M3g3zjXc

#101 Dr. WAYNE on 07.10.12 at 10:02 am

Garth … I think you missed your calling. A comedy writer on a sitcom or whatever, would have made you much more money for toys. Instead you write for the majority of people who aren’t bright enough to realize the obvious regarding real estate. But … the saving grace is that you are ‘trying’ to educate … in spite of all the ignorance.

Thank you for the confirmation. — Garth

#102 John on 07.10.12 at 10:06 am

Garth wrote

“House prices do not drop, sit there, then quickly recover. More likely they correct, flatline or erode for years more, then creep back in a process that can take a decade and a half (as last time)”
——-

Yes this makes sense. At the same time a flatline or slow build-up would require the same or similar fundamentals as during those 15 years, and it’s difficult to see where they would come from ( unless it was something we’ve never seen before).

During the last creep up and then bubble the backdrop was Canada plugging into the global economy with a pretty strong value offering ( resources, technology and unquestioning non-political consumers). After 2008 they became a target of international “finance”, paralleled by a lot of odd foreign policy evolution…and China of course. As well as using poor countries for labour.

You need all that, or something like that, to build a thesis of creep down slow decline, creep-up or even a new speculative bubble.

Where would you get a new dumbed-down post WWII public? That demographic, traumatized, delusional public could well be in short supply in the future. Will the kid in grade 10 today be able to use his wages to play? Much of Mom and Dad’s “net worth” is just post war funny money on steroids. That world has changed. The new stooge would have to earn money….in a culture where casino gambling has soaked the environment for years.

Yes, the 15 year old is blasted by stimulation, but where is his buying power for products made by slaves? Would he understand or accept political rhetoric? Maybe if it was hateful ( reflecting the frustration and uncertainty)….but never a Canadian politician and certainly not the ye olde 2008 “yes we can” style.

You need similar illusions to create a recovery of the illusion-based financial machine. We can say with certainty that the damp cuban cigar aint bein’ re-lit, but it is possible a totally new paradigm could come along to float the lie. But a multi-year “recovery” upwards?

I’m staring forward, and don’t see the argument….unless it’s emotion and wishful thinking.

#103 Realtors in an all out PANIC! on 07.10.12 at 10:08 am

Look at the realtors on Garths blog posting wishful thinking and hoping for a small housing crash. Realtor smokingman continue to post his uneducated thoughts on RE but when you are an uneducated and useless realtor you are doomed when RE crashes and your skills become useless. Keep posting in a PANIC realtors cause the housing bubble/ponzi is going to CRASH 50% for houses and 70% for Toronto and vancouver condos. It’s going to br a nasty CRASH realtors.

#104 The American on 07.10.12 at 10:11 am

At #76: Buy, Curious?, you stated, “Garth did you hear that RIM’s CEO may be being sued for being “Overly optimistic”? It’s being seen as misrepresentation. Why can’t realtors, mortgage brokers and those on CP24′s Hot Property be held accountable for the rosy outlook they spew out their glory holes?”

I have to agree with you here. In fact, I am utterly shocked at what realturds are able to say in both verbal and written forms in Canada. Yes, it was very bad in the U.S., but realturds could pump to a point. In Canada, they’re allowed to outright make statements like, “you will make money on this,” or, “real estate only goes up,” or, “buy now or forever be priced out.” These kinds of statements or terms are banned from real estate practice in the U.S. and have been for nearly a decade, yet they were still somehow able to manage to over inflate the market. Additionally, I have noticed several racially charged or elitist real estate advertisements in Canada (especially BC) that outline notions like “home is near great schools,” “be a part of the Asian culture,” “good white neighborhood,” “exclusive area,” and “executive listing.” Although sometimes rarely done in the U.S., these types of ads are illegal and nearly always land some steep fines and penalties as they violate Multiple Listing Service regulations, and more importantly they violate the Fair Housing Act. In fact, the list of banned verbiage would shock most people. No wonder Canada has managed to inflate its market beyond imagination. At least 50% of the ads I see in Canada would violate the U.S. Fair Housing Act, thus making it more difficult to move inventory.

Scroll to pages 16 and 17 for an example of words that are not permitted, use with caution, and permitted through the Fair Housing Act.

http://www.lfuchrc.org/Publications/Publisher's%20Guide%20to%20Fair%20Housing.pdf

#105 Toronto_CA on 07.10.12 at 10:15 am

#34 Timbo on 07.09.12 at 10:38 pm

I got your wink but still felt the need to defend myself :) Emoticons and memes be darned, please don’t lump me in with the blindly hating right wingers.

_____________________________

#88 GTA Girl on 07.10.12 at 8:43 am

That article is so ridiculous. First it’s the 4 year old land transfer tax that causes prices to go down, now we have a land shortage in Canada that is causing prices to go up. Nevermind that Toronto has above ground single level parking lots all over the downtown core, something you would NEVER see in a place that had an actual land shortage (like Singapore, Hong Kong)

#106 Daisy Mae on 07.10.12 at 10:17 am

CBC: “As the big banks get choosier about who they’ll lend money to in this hot housing market, people with questionable credit are benefiting from Canada’s once-small but now booming sub prime mortgage industry.”

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

Well, well, well….the only person who has been willing and prepared to be HONEST about the RE situation and the economy these past few years has been Garth…

Imagine that?

#107 Frank le Skank on 07.10.12 at 10:22 am

I think that the general population of house owners suffer from selective hearing. People choose to hear what causes them less grief, men typically use this on their wives. In the case of real estate, and due to media sponsorship from RE, its very easy to see how people can easily dismiss the limited amount of non-biased information. People don’t want to hear that the biggest purchase of their life is going down, instead they prefer to hear that its all rainbows and sunshine.

Then, there are those people who bought and will keep their house for 30 years or more. The market will have peaks and valleys but they are in it for the long run. For them, 25 year amortization is inconsequential since they don’t expect to buy.

If you talk to your co-workers and friends, you will be amazed at how many people do not inform themselves. I was like that until I was in a position to buy, then I took an interest in RE because I did not want to make an purchase without knowing all the facts. Will I go back to being uninformed after I buy? can’t say for sure!

#108 Canadian Watchdog on 07.10.12 at 10:28 am

#88 GTA Girl

“I am aware that the BILD group has started o push this idea that the GTA is running out of land.”

Builders like Greenpark, Arista, The Remington Group, Vic Dezen et al own all the land from York Region to Barrie. There is no shortage. It’s a monopoly.

BTW, the reporter Susan Pigg is a RE pumper for the developers.

#109 Dom on 07.10.12 at 10:35 am

Wow…alot of realtors today on garths blog but that was to be expected with Garths post from last night. It’s also very obvious realtors here lack the education in economics to understand the changes and it’s effects. Then again these realtors are not that stupid so it would seem they are just liars. In any case many realtor agents are true scum.

#110 NFN_NLN on 07.10.12 at 10:37 am

#76 Buy? Curious? on 07.10.12 at 2:20 am

Garth did you hear that RIM’s CEO may be being sued for being “Overly optimistic”? It’s being seen as misrepresentation. Why can’t realtors, mortgage brokers and those on CP24′s Hot Property be held accountable for the rosy outlook they spew out their glory holes?

Lawsuits don’t happen until AFTER people start losing money. RIM shareholders are losing money so NOW they care.

#111 Renting In The GTA on 07.10.12 at 10:41 am

Apparantly THE STAR likes to push these kind of stories:

GTA home resale prices overheating due to land shortage: report

http://www.thestar.com/business/article/1224026–gta-home-resale-prices-overheat-due-to-land-shortage

#112 broadway skytrain on 07.10.12 at 10:43 am

east vancouver report-
no bump in listings round here, sold stickers take a week or 2 max.
new house w laneway house asking for 1.65m!!!
(in the ‘bad’ side of town)

neighbours are looking to upsize and just this wknd bid 55+k over ask for a rough shape bung, they were 2nd of 5 offers – no house for you!
these are ppl who own apt blocks and work as re appraisers – they say there is no cooling happening in this area
over the past 5yrs on my regular 5mile run i’ve yet to see anything not sell in under week or 3.

#113 refinow on 07.10.12 at 10:43 am

#69 Thinker.

All hail the King of the Not-In-My-Backyardigans.

Ever think that when housing prices drop and people who can not sell because they owe more then the houses current value, what happens next ??

That when the key drop’s start, people move out and give the house back to the Bank. Unit’s start flooding the market, vacant Power of sales, prices drop even more.

Some will try to hang on by moving out and adding their home to a massively increasing rental pool, were the units start exceeding the supply, then try and convince your tenant to agree to the minimum cost of living increase in rent when there are hundreds of vacant rental units in your building available for rent. The rental costs start to drop with the increase in supply.

Now how do you like your future..

Wait you can’t see very much with your head buried in the sand.

#114 Calgary's OK on 07.10.12 at 10:45 am

#83 Questioning Calgary stats on 07.10.12 at 4:54 am

“Give prices a chance to decrease as the new rules kick in. If you could wait for a 20% drop, which could easily happen in the next 1.5 years, you would save at least $100,000.00 on the purchase price of a house. Better yet, if you could purchase for $100,000.00 less, that would equate to a savings of $250,000.00 or more over the life of your mortgage (that interest really adds up).”

That’s some solid math right there Questioning Calgary stats. You probably feeling so good about yourself giving people solid financial advise that will significantly impact their lives for the foreseeable future… The only flaw in you logic, IF they can wait for a 20% drop. The problem is that I’ve heard exactly the same rhetoric on the Calgary Herald RE blog in 2010 – “Just wait a little bit, the crash is around the corner, wait for another six month and houses are going to be half-price!” Fast forward to 2012 – what happened to those who missed buying opportunity in fall 2010 and summer 2011? Still crammed into rental condo’s with families and patiently waiting for the long promised crash? Still posting in frustration on Garth’s blog comments starting with “Thinking about buying in Calgary”? Still piling cash on the bank accounts producing didly squat in interest?

A few days ago, you got upset that I called statements of one of the posters on this blog a “fear mongering”. Well, what do you call statements like “Calgary buyers beware! Wait at least 1.5 to 2 years before you buy. Give the new regulations time to kick in. Prices can only go down and you will save yourself a lot of money.”? Sounds familiar? Are you going to be around to face consequences of your predictions two years from now when inflation is going to kick in and devalue someone’s life saving faithfully kept on the bank account? How many people on this blog brag about “being liquid”? Does everyone sound happy about “being liquid”? Half of the people have no idea what to do with their liquidity other then just spend it on “travel and going out”. Others admit with nervous frustration that they simply priced out of the market where they have previously sold.

I understand that you can wait and not in a big rush to buy, and it even may have a lot of sense in your particular case, but that does not necessarily means that everybody have to be in cahoots with you. The truth is that NOBODY knows which way this market going to play out, so stop pretending to be an oracle and a know-it-all financial guru, because your are neither!

#115 Aussie Roy on 07.10.12 at 10:59 am

Smoking Man on 07.10.12 at 6:56 am
As the world drifts closer to the end of days the way I see it.

The machine has but 3 options

1 inflate the debt away. Asset holders win, cash horders lose.

2 defalts on mass. The investment class get wipped out. Big deflation cash under mattris wins.

3. Heads of the machines control room get cut off and put on sticks.

My money bet on 1
……………………………………………………………………..

Your options are too simplistic and are not the only possible outcomes, when you look through economic history – think Japan.

You can’t inflate it away unless you devalue your currency (import inflation – unlikely) or increase the amount of DEBT (new money) into “spenders hands”. The inflationists forget that the FED has tripled the base money in the system with no real inflationary effect. Why, because this money isn’t chasing items in the economy, it’s sitting on banks balance sheets (mainly to repair the gapping holes created by falling underlying bank assets.

Extra money (debt) chasing the same amount of product will cause inflation, think housing. So, far from inflation being around the corner, it’s already happened, right where all the extra money (debt) was directed – housing and in some countries govt benefits to it’s citizens or simply govt largess.

Watch mortgage debt demand once you see it slowing or going negative, I expect prices to react there, just like they have all over the globe.

I can’t see how people, gov, or business will keep borrowing (increase the money supply) at the level required to spark inflation. Don’t forget all new money is loaned into existence (we live in a debt based fiat currency world). If you believe the inflationary end. Which group (gov private or corp) will this new huge debt demand come from(to cause this inflation)?.

Private debt levels are already high, public debt in many countries is very high and as a business person I’m not about to take on debt considering the current global conditions. I’ve sold all my investment RE taken profits and completely deleveraged.

Better to look at history and Japan seems to be the best example (their plan was also to inflate debt away), they have had mild inflation for every day items, asset price deflation, all in an enviroment of the govt running huge spending (debt) programs.

My money is on the asset classes which have been inflated from the debt bubble will deflate to some normal level of affordability while we will have mild inflation in every day items.

The most inflationary area IMO will be govt revenues, as they deal with higher costs (pop demographic, falling revenues (economic activity) and of course repayment of current debts.

I’m neither just an inflationist or a deflationist as it is very easy to have both at varying levels across the economy. The trick is to know which assets have been inflated by the current high levels of debt (housing) and which sector of the economy will be affected the most when this inflation stops and the deflation starts (govt).

RE prices – down
Taxes – up

#116 Jimmy on 07.10.12 at 11:01 am

More of the same — this blog post claiming impending doom is virtually identical to dozens of others Garth has made over the years. When exactly is the sky going to fall, chicken little? Rates aren’t going anywhere, the new mortgage rules won’t stop anyone who wants a house from buying one (5% minimum down still in place), unemployment rate is stable, no recession in sight — the trigger for catastrophe just isn’t there. Everyone wants to be the smart one who predicts the bursting bubble, but unfortunately its nothing more than prognostication or wishful thinking. It’s not different this time. That is to say, the market will not operate according to your wishes and along with your schedule.

No ‘call for catastrophe’ coming from this blog. Just the irrefutable logic of a coming correction. Heed it, or ignore it. Your risk. — Garth

#117 Nefertiti on 07.10.12 at 11:08 am

As CP in #22 says, I’d love to see a post about ETFs and where to invest. The more I read about ETFs the more I want them. I feel so stupid now having my savings at IG with HUGE management fees. I thought they couldn’t do worst than banks, but now looking at iShares and other investment companies I feel I got robbed. Fortunately I put my money in a B category so that there are no penalties taking it out (which I will to put elsewhere). I want my money ready and available for when I buy in 2-3 years, when the market will have crashed enough.

And BTW, 25k for a parking in TO? I saw way worst in Montreal; downtown and old port parking spots can go for 50-75k easily, which is insane!

#118 Scalgary on 07.10.12 at 11:09 am

Garth,

Thanks for covering Calgary on Monday…! Can’t thank you enough for your advices..!

Looking forward to your post on TFSA investments… Can I request you to name few well managed ETFs…

Best Regards…

#119 Timbo on 07.10.12 at 11:12 am

http://www.cnbc.com/id/48134191

“A New York Fed spokesperson said in a statement that “in the context of our market monitoring following the onset of the financial crisis in late 2007, involving thousands of calls and emails with market participants over a period of many months, we received occasional anecdotal reports from Barclays of problems with Libor.”

A polite way of saying that banks have the right to manipulate the markets in a crash………

http://www.reuters.com/article/2012/07/10/usa-economy-idUSL2E8IA47D20120710

“Small U.S. businesses’ confidence in the economy’s future declined in June by the most in two years, increasing the threat that an economic slowdown could stretch into the second half of the year.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index dropped 3 points last month to 91.4.”

This is not getting better folks. Time to dig a bunker and read up on squirrel recipes……….

#120 This is Wonderland on 07.10.12 at 11:13 am

586-square-foot one-bedroom unit where you can conveniently sit in the living room and, if you lose the remote, adjust the TV on the far wall with your foot. What thoughtful design.
——————————————————————

Jesus! Just blew coffee out my noise. Garth thank god for your humor.

#121 antiflakflak on 07.10.12 at 11:30 am

To post #1, my advice boycott university , afterall it has been renamed unofficially as the college industrial complex. eg. Durham College or now University has bought up Windfields Farm north of Oshawa. They now own it, when you see an outfit like Durham College buying up Windfields farm you know they are in the big league of developers & land speculators, the college industry is a racket, boycott it now.

#122 Jim on 07.10.12 at 11:37 am

#116, Jimmy

You do realize that ‘catastrophes’ don’t always require some sort of dramatic trigger, right? You also realize that the null hypothesis in this case is that the market is going to cool. Given past performance of housing markets, the exceptional case is a housing market that continues to rise forever, or rises significantly and then stays stable. As such, the burden of proof lies on the people who think that there isn’t some form of correction coming.

Of course, it is one thing to point out that a given market looks odd, and another to time it. Just because one cannot accomplish the latter, it doesn’t follow that their argument about the former is unsound.

#123 triplenet on 07.10.12 at 11:40 am

#98 Inglorious Investor

(Condos may crash, but that may not necessarily affect the entire market, since condos are not true real estate, more like a consumption good.)
_______________________________

The correct term is real property.
And yes it’s true.

#124 Black Eagle on 07.10.12 at 11:48 am

#14 Elmer

You are so right. I think they are compensating for something being small. Also the same theory goes for people that drive huge trucks instead of small cars or fuel efficient SUV’s. It is the fear and the ego that makes them show off to their families, neighbors, friends etc. They are the same type of people that do not follow rules, respect the neighbor, or the community.

#125 salonist on 07.10.12 at 11:49 am

oakville is different
oakville is an appreciating asset.buy and hold.

had a bike ride from north oakville to bronte, meandered my way there through the side streets, was totally amazed at the number of tear downs.even as i was bicycling there was a shovel in the midst of a tear down.i stopped for a minute to see this beautiful house reduced to rubble.
the areas for tear downs used to be any house south of the lakeshore.as well several exclusive pockets.
now it’s anywhere south of kerr st, east and west.
west off of trafalger south of upper middle to 16 mile creek.
east of trafalger to joshua creek, south to iriquois shore.
don’t bet against oakville.
people pay large,to live here.
could be that some over extended themselves to be here, they will be replaced.
hear there’s a bunker for sale.

#126 salonist on 07.10.12 at 11:51 am

kerr should be south of speers.if you might edit that please.

#127 live within your means on 07.10.12 at 11:57 am

#92 truth hammer on 07.10.12 at 9:36 am

Maybe you should go live in the USA libertarian.

#128 HD on 07.10.12 at 11:58 am

Garth,

Looking forward to your post about ETFs.

I currently have 20k savings (cash) in my TFSA. I contemplated investing in ETFs but might need the money in 2 years from now if there is a buying opportunity (RE).

I am under the impression that you should buy and hold (long term) if you invest in ETFs.

Wouldn’t it be more prudent to park the money if one is planning to use in about 2 years?

Would Garth or any blog dogs care to comment on this?

Best,

HD

#129 buyahouseorillkillthiskitten on 07.10.12 at 12:17 pm

#114 Calgary’s OK
“The only flaw in you logic, IF they can wait for a 20% drop.”

Why wouldnt they be able to wait? I don’t understand what could force someone to buy a house?

FYI – the tone of your post does not help your case. You should try to relax a bit.

#130 Aussie Roy on 07.10.12 at 12:20 pm

Aussie Update

Is this a case of selective period of data picking, to suit a required outcome?.

This report is from of our large banks the ANZ. The graph “INTERNATIONAL HOUSE PRICES” (P3/11) has been flashed all over the TV tonight as “thats not a bubble (Australia) this is a bubble” (Singapore).

What is very interesting is the chosen “time frame”, please note that all other graphs on the page are generated from a large historical period, 1990 and even back to the 80’s.

So when does the INTERNATIONAL HOUSE PRICES graphs time period start 2005. I find it hard to believe that anyone would consider this graph useful considering the time frame chosen doesn’t include much of the period of the greatest prices increases 2000 – 2008. A sinical person might ask why isn’t this graph using a large “time period” data set, what does it look like if you do?.

Does this prove there is no Aussie house price bubble, not for a second in my mind. I would love to see this graph done from 2000 – now, or better still with the complete historical data set like the other graphs.

Canada is also mentioned in this report.

I told you there is no bubble in Australia the ANZ’s graph proves it – LOL. Well no bubble if you only look at the data from 2005 onwards. How dumb do these people think we are?.

http://www.anz.com.au/resources/4/f/4f8395804a46c7e08341cbac93b0266b/Australian+Housing+Chartbook.pdf?CACHEID=4f8395804a46c7e08341cbac93b0266b

#131 Aussie Roy on 07.10.12 at 12:32 pm

#98 Inglorious Investor

(Condos may crash, but that may not necessarily affect the entire market, since condos are not true real estate, more like a consumption good.)
…………………………………………………………………….

Any chance you can demonstrate this might be true by pointing to any country where this “condo only” crash has happened, leaving house prices untouched?.

#132 GTA Girl on 07.10.12 at 12:37 pm

45North: so does that mean you believe the Oakridges Morraine is then better suited for sprawl?

Quality of farmland is not the only issue. Water sources, protection of environment also has to be considered.

Shall Ontario only subsist on quality farmland? Should we tell the farmers growing corn, potatoes in these areas to ‘not bother’? That a semidetached house is more valuable than open green space, farms, recreation, water source and migratory animals and forest?

If we continue sprawl to Barrie we not only create further gridlock, substandard communities in debt for infrastructure dollars and a unsustainable economy based on cheap gas, low interest rates. Essentially, you will be looking at a type of debt slave ghettos trapped by distance, inferior building standards and corrupt municipal govt’s.

Which is already occurring in many areas of the GTA.

Developers are after protected land, to step over the line drawn to rein in sprawl.

#133 Pat on 07.10.12 at 12:41 pm

“Feel free to register most of your money with the government. See how that turns out for you in 25 years. — Garth”

For me personally TFSA is out of the question as it is not sheltered under US tax law.

For the average 50-yo schmuck who is making good living but just realized that has no retirement savings, RRSP is likely to be the better option as well. But we already had the discussion about marginal vs. average rates, right? Those who pay attention and have functional heads on their shoulders will figure out what is best for their individual situations. For the rest there are gurus (G’s) to follow.

#134 theguyfromthecorner on 07.10.12 at 12:43 pm

What about cities such as Ottawa/Gatineau/Hull region. I had discussion with colleagues during coffee yesterday where every single one except me said that would never happen in Ottawa region.

One guy just sold his house for 400K + and the buyers waved conditions, they did not sell their house yet and not sure about what will happen. I find it quite dumb but hey, who am i to judge, i just decided to rent an appartment for the time being and so happy for having done so….

#135 GTA Girl on 07.10.12 at 12:45 pm

Canadian WatchDog:

Very true. You need only to sit in a Vaughan council meeting to see the developer lawyers from these companies attending. Many lunches, golfing trips and other less legal activities for area councillors sponsored by developers.

They would continue to build subdivisions all the way up to Sudbury if they could. All without any guidelines, land studies, infrastructure money. Only what can be made per townhouse, built on the cheapest material and labour.

Time for a correction . One to weed out the worst developers, and restore the buyer’s market. Bring back good builders with foresight, competition and rid ourselves of this blight of sprawl.

#136 NAM not HAM on 07.10.12 at 12:45 pm

#77 eagle eyes on 07.10.12 at 2:22 am

These sales are so quiet, they don’t even exist. Give some examples please. Address or MLS # please.

#137 grantmi on 07.10.12 at 12:47 pm

Same crap coming out of the Real Estate expert’s mouths on the Bill Good show on CKNW in Vancouver right now!!

Good time to buy!! (Lol)

#138 Daisy Mae on 07.10.12 at 12:51 pm

#118 SCalgary: “Can I request you to name few well managed ETFs…”

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

You’re asking for free investment management advice?

#139 Buy? Curious? on 07.10.12 at 1:00 pm

Old people moving to Miami after selling the family home.

http://www.youtube.com/watch?v=pBkAi-giu-g

#140 T.O. Bubble Boy on 07.10.12 at 1:03 pm

@ #118 Scalgary

Can I request you to name few well managed ETFs…

By definition, ETFs are not supposed to be “managed” — they are intended to track an index of one type or another.

The quality of an ETF is typically defined by:
A) How closely it tracks the index
B) The management fee — as low as 0.1% for some monster US ETFs to 0.9%+ for some Canadian ones
C) Liquidity — you need enough shares trading hands each day to ensure that you can get in/out when you want (and without wild Bid/Ask variations).

#141 Toronto_CA on 07.10.12 at 1:05 pm

To #128 HD on 07.10.12 at 11:58 am

I don’t think a TFSA is a great vehicle for house downpayments. As Garth says, TFSAs are not for ING accounts earning 1.3% interest on a good month. TFSAs are for long term growth, which involves short term risk.

If you need the money in the short term, like in 2 years, why not be 100% safe and use a GIC or high yield savings account outside the TFSA. Max your TFSA anyway as part of your long term savings plan (retirement); not the short term. I’d recommend the max contribution to my employers DC plan to get the match (diversify in the plan); then fully fund the TFSA with ETFs; then fill up my RRSP room to the max; and leftover money goes into ING.

Sadly, that assumes you’ve got lots of money left after paying your bills (or before paying your bills if you pay yourself first).

Hope that is helpful.

#142 Jaydee on 07.10.12 at 1:10 pm

The four most dangerous words in investing are: ‘this time it’s different.'” – Sir John Templeton

#143 penpal on 07.10.12 at 1:38 pm

@ # 115 Aussie Roy

Excellent response by you to the simplistic posting by Smoking .

Shows you who is thinking critically (you, Roy) and who (that would be the Smoking D) is just repeating the latest idea he heard (from Marc Faber, Jim Rogers, Von Greyerz, etc. in the media).

TOO FUNNY

This goof Smoking D says he is a “contrarian” and yet repeats a commonly held viewpoint.

He claims to be a “great thinker” when he can’t even extrapolate the effects of his thesis into the future – despite its assumptions having been discredited in historical fact (velocity of money – it is not entering the system to be spent, no inflation can result)

A great example of how “…. a little knowledge is dangerous…”.

Smoking D, I am afraid, has that affliction.

#144 house burden on 07.10.12 at 1:38 pm

Was listening on cknw to a commercial to make money on real estate with zero down in Vancouver. Kind of reminds me of the legendary Tommy Vu

Hey Garth this video even has a Chinese person in a helicopter

http://www.youtube.com/watch?v=K853GykeGH0&feature=related

#145 HD on 07.10.12 at 1:38 pm

#141 Toronto_CA

Thanks for your answer.

Here’s more info about my situation (if you feel like giving more advice based on the new info):

28 yrs old
TFSA maxed out
RRSP maxed out
10k invested in stock (DRIPs)
And I’m not really worried about a retirement plan because…..I’m a public servant (Federal pension). I know how much you love my kind ;)

Best,

HD

#146 house burden on 07.10.12 at 2:01 pm

#112 broadway skytrain on 07.10.12 at 10:43 am

east vancouver report-

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

I pass that area all the time and have been counting sales Vs sold.

Nothing is moving around that area, there are houses around there that are stale and others which are Ransid.

Who the hell are you trying to fool.

#147 Commercial Lands on 07.10.12 at 2:08 pm

Garth

What are you thoughts on the price of commercial/industrial lands. This would be the lands that developers would buy to develop into multi-family properties. Will these see price declines as well or will they sit on the market for eternity?

Thoughts?

#148 Inglorious Investor on 07.10.12 at 2:11 pm

#131 Aussie Roy on 07.10.12 at 12:32 pm

“Any chance you can demonstrate this might be true by pointing to any country where this “condo only” crash has happened, leaving house prices untouched?.”

Hey, Aussie Roy. OK, to say that house prices would be untouched if condos crashed may be a bit extreme. Maybe it’s splitting hairs, but I didn’t actually say this. I said it may not affect the entire market, meaning a crash in condos would not necessarily mean an across-the-board crash.

This is based on my view that single family homes and condos are something of a different asset class. Prices for any asset are based on supply and demand. The factors that drive supply and demand for SFH’s and condos can be different and therefore they may not move in lock step. For example, it is easy to rapidly increase the supply of condos relative to SFH’s. For proof of this, come visit Toronto and see for yourself. It’s manic.

So the key issue then is divergence. I don’t have a lot of time to research this, but a couple of things that support my assertion of a possible divergence between SFH’s and condos:

Here are some excerpts from a CNN Money article
http://money.cnn.com/2007/01/18/real_estate/condo_prices_reveal_trends/index.htm

——————
“In the third quarter of 2005, NAR stats for single-family homes show that prices fell 1.2 percent from a year earlier, with 30 percent of markets showing declines.

Condo prices not only dropped more steeply, 2.1 percent, but 46 percent of markets showed declines.”

Chief economist for the Mortgage Bankers Association, Doug Duncan, says the following:
“A smaller percentage of people who own condos occupy them; many are bought as second homes and for investment purposes,” he says. “There’s less friction in that market; it’s more liquid.”

Furthermore…

“More condo sellers react to market changes and act quicker than owners of single family homes, who tend to hang onto property in the face of lower prices.

Single-family house owners act like buy-and-hold value stock investors, riding out market peaks and valleys. They sell when they go through a life change – raising a family, retiring or moving for a new job, for example.

Condo owners act more like growth stock investors, who bet on the hottest companies and trade in and out of stocks much more often, reacting to what they perceive is happening in the market.”

And more…

“Miller [of the New York appraisal firm, Miller Samuels] argues that the condo market is too different from the rest of the housing market to be a viable stand-in for it. He says, ‘Because of the investor component, condo prices show more volatility.'”

——————-

There is also this chart (http://www.chpc.biz/vancouver_chart.html) from Brian Ripley’s site. It shows prices for detached, attached, and condos in Vancouver. You can see that while SFH’s prices in Van are up about 25% (roughly) since the temporary peak in ’08, condos prices have been stagnant, or even lower. I would call that divergence.

——————–

Bringing this back to Toronto, we are in the midst of a manic condo boom. It is partly being driven by prices for true real properties (wink to triplenet) becoming unaffordable. As Garth has pointed out many times, the majority of condo buyers in T.O are speculators. Speculative markets can turn on a dime if sentiment toward that particular asset class goes negative.

So, fundamentals for RE in general can remain pretty healthy, but at the same time an oversupply of condos, coupled with negative sentiment for condos in particular could result in a real divergence. Potentially, even a condo crash, while SFH’s are not affected, or not by much.

Will it happen? Dunno. Can it happen? I certainly think so, especially in T.O.

#149 Realtor #1 on 07.10.12 at 2:15 pm

For those people out there waiting to buy a single detached home in a good neighbourhood for 25% off -GET IN LINE, so are many other people. Check the listings for South of Law and Yonge area there are around 25, north of Lawrence another 28, hardly what I would call an oversupply. Only the less desirable areas will have a problem selling. If you couldn’t afford it two years ago will not afford two years from now.

#150 Daisy Mae on 07.10.12 at 2:18 pm

Maybe some would like to read this:

http://soc.li/4Cd4hcb

“Mortgage market tiptoes toward subprime”

#151 jess on 07.10.12 at 2:21 pm

Makes ya wonder

Why pick in Rim?
On Monday, another tech company
wrote almost the entire value chain, from acquisition, depreciation Taking a $ 6200000000.

or this from
Vanity Fair: “Stack ranking” employees has hurt Microsoft
http://www.neowin.net/news/vanity-fair-stack-ranking-employees-has-hurt-microsoft

why French tax inspectors search Microsoft offices in dawn raid.

Nicolas Sarkozy and Carla Bruni’s house raided by police – Telegraphwww.telegraph.co.uk › News › World News › Nicolas SarkozyYou +1’d this publicly. Undo
6 days ago – Nicolas Sarkozy’s offices and home raided by French police … dozen fraud squad officers burst into their home in the chic 16th arrondissement

http://www.thebureauinvestigates.com/2012/07/09/bbas-secret-meetings-with-ministers/

“None of these meetings has to be recorded on official public registers because under government guidelines only ministers and senior civil servants are required to disclose such encounters. Advisers are only required to list meetings that involve hospitality.

This means that despite the government’s attempts to ‘shine a light of transparency’ on the lobbying industry, many meetings where the BBA could exert influence over policy are happening under the radar and the public is unlikely ever to know what was discussed.”

rigged ,”2.Manage or conduct (something) fraudulently so as to produce an advantageous result. “

#152 neo on 07.10.12 at 2:24 pm

Howdy Garth,

Everything coming in just on schedule now with the S&P profit warnings for the second half of the year. Analysts still holding onto 14% S&P 500 earnings growth for Q4. Uh huh. Sure.

Just one more week until China GDP comes out…

Tempus Fugit…

#153 Adam on 07.10.12 at 2:31 pm

Careful putting ETFs into TFSAs. Not all ETFs are created equal. The stock index ETFs are just as volatile as the stock index they track, probably not the best idea for a young couple to throw their life savings into stock ETFs, they are too volatile over the short term. Bond ETFs maybe, if everything Garth is saying on his site is true, we have to expect higher interest rates in the near future, which would hurt bond ETFs. Yes ETFs are very liquid, but they go up and down with the markets, so if you need the money in the next 5 years, stock or bond index ETFs are probably not the best thing.

Eschew five years of growth to be a safe young person? Pathetic. — Garth

#154 Georgi on 07.10.12 at 2:55 pm

Garth,
This is a better deal: a 35000$ parking spot
http://www.realtor.ca/propertyDetails.aspx?propertyId=12117069&PidKey=-692941970

#155 Spiltbongwater on 07.10.12 at 3:00 pm

#144 house burden on 07.10.12 at 1:38 pm

“Do you think these girls like me? NO, they like my money!” – Tom Vu, although Garth could probably use this quote as well regarding the amazons.

#156 eagle eyes on 07.10.12 at 3:09 pm

#136 NAM NOT HAM

#1005-5088 Kwantlen:
May 2011 Purchased for $475,000
July 2012 Sold for $400,000

3760 Pacemore
Tax assessment $917,000
July 2012 Sold for $788,000

7760 Willowfield Drive
Tax assessment $1,164,000
July 2012 Asking $799,900

Posted only last 2 days. Many more similar, but I don’t have time right now.

#157 American Werewolf in BC on 07.10.12 at 3:15 pm

#84 Smoking Man on 07.10.12 at 6:56 am

4) Do nothing except struggle to maintain the status quo while everything crumbles around you and your best friends profit

#158 Stephen on 07.10.12 at 3:19 pm

Back to David’s letter.

Since when was 1200sqft considered a shoebox?

#159 American Werewolf in BC on 07.10.12 at 3:24 pm

#149 Realtor #1 on 07.10.12 at 2:15 pm
GET IN LINE

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

You forgot “….or forever be priced out”

Your colleagues may fine you.

#160 Toronto_CA on 07.10.12 at 3:31 pm

#153 Adam on 07.10.12 at 2:31 pm

I don’t think Garth is saying ETFs for the short term duration savers (although there are some REIT ETFs and Preferred ETFs that are pretty safe and yielding above 5%). It depends on your risk profile.

And for young people who are using the TFSA to their max benefit, aka for long term savings of 10-30+ years, then an ETF is better than a comparable indexed mutual fund in general because of lower fees.

_______

#145 HD on 07.10.12 at 1:38 pm

You’re doing great and you know it. Stop showing off and get back to work :)

#161 Tom from Mississauga on 07.10.12 at 3:33 pm

I’ve got a conditional sale! OMG!!!

Financing is done just home inspection left and status certificate. They got me under my floor price so it may end up being good value to the new owner.

But in Lakeview, prices are melting like snow. This builder dropped the ask 400k this week.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12155209&PidKey=-1720904652

#162 Fabrega on 07.10.12 at 3:39 pm

#4 Turner Nation

Well, well, well. Lets see: Canadian men are afraid of Canadian women? From what I have observed, yes they are.
Do Canadian women have an attitude probem? I think they have.
How about the harassment culture? Turn your head to look at a female and you might get in trouble.

#163 john on 07.10.12 at 3:39 pm

I was having a talk with my Dad about him and my mom selling their cookie-cutter house in a very high-demand area in Oakville and downsizing to a smaller bungalow in Burlington (their house is probably worth $600k, have a small mortgage and LOC at age 57). We talked about the possibility of a correction, and his thinking was that if it happens, he’s not going to be much worse off if they wait until he wants to sell. His thinking is that if his $600k house is soon to be worth $500k, then that $400k house is probably going to be worth $300k. Based on the fact that despite the listing boom, his neighbourhood has a whopping 6 detached houses for sale (all over $600k) in an area that fully supports both a public and catholic K-8 elementary school, I can’t help but agree that his neighbourhood would be amongst the least hit.

So that leads me to wonder, is the old man relatively sound in his logic? The house, while large and nice, needs a new kitchen and floors, as well as some upgrades to the “bones” such as furnace and AC. He wants to chip away at those for a few years and not move til he’s retired in 4 or 5 years.

#164 daystar on 07.10.12 at 3:40 pm

#20 Brian Macdonnell on 07.09.12 at 10:07 pm

REIT’s are commercial. I would think the risks with REIT’s are managerial and fundamental but what effects REIT growth is obviously credit conditions. I wouldn’t buy and hold REIT’s with interest rates on the rise. (ok to own now, though)

#89 Realty #1 on 07.10.12 at 8:58 am if RE drops 25% it only effects those who bought in the last two or three years. – Realty

That’s a fallacy if I ever heard one. A 25% drop on an asset, any asset, regardless of when it was bought, is a 25% drop in value. Thats meaningful

And like Garth has mentioned its expensive to sell and buy again (10-12%). – Brian M

Pricing in a 25% drop on the way back in is more like 9%. Is 16% worth it? I dunno, is $160 G’s worth it for a million dollar home? Thats a year of combined gross income for some folks and the wait is likely 3 years. 5 years, maybe its a 40% drop and a $320 G swing but thats not where this ends. How much could the equity you’ve generated on the sale earn you in the meantime? Uh huh.

We’ve all had a great ride, we were there (I think). Currency went from .62 to par over 10 years negating inflation. Interest rates have steadily dropped and have stayed at or near record lows since early 09′. Incomes were great until 08′ and commodity demand has been strong overall, the markets have given opportunity, RE values have soared, its been easy. Credit has been easy.

But our currency is at par now. Where is it most likely to go? Interest rates are at or near record lows, where is it most likely to go? Valuations have crested. Where will they go? Would above normal rates be a true wrecking ball to today’s valuations? Incomes have flatlined. Household debt and gross public debt has soared. Household is at 153% and gross public debt is at 109%. How much more can the system take? I compare our starting point to 10 years ago and all I see is risk.

At some point the worm turns and when it does, that forever rising RE investment that cheaply provided a place to live along with equity and lines of credit will vanish. Suddenly owning is a curse (not for all but for some markets, oh yeah). All that positive past performance, nothing more than a rear view mirror. Ask the U.S. Spain. Portugal. Ireland. Belgium. Iceland. Australia. Singapore. Dubai. The U.K. soon, France and Canada. The same old lines are all the same. “We have recourse loans, our system is safe”. “Our financial institutions are solid, our regulations timely”. Our economy is performing, etc., etc. etc. until the credit bubble explodes and incomes fall while unemployment rises when overdevelopment halts and bond markets price in public risk and institutions fail.

Nothing is different here, we’re just late to the party and its hangovers and for Canada, honestly, we should be asking ourselves why the govy so strongly facilitated such a rapid increase in values when we had better plays. Who made these calls, our elected feds, our CEO’s in financials, bond investors, who’s bright idea was it to create unncessary credit bubbles both public and private? Is this just another boring greedy rerun, or are our “leaders” really that friggin’ stupid?

They can’t be that dumb, they know where this leads:

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

http://en.wikipedia.org/wiki/Quantitative_analysis_(finance)

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

What really bothers me today is just how much so, our leaders want us to be dumb: (they don’t even want to know for themselves, how stupid is that? Afraid someone will talk? So lame)

http://news.ca.msn.com/top-stories/scientists-rally-on-parliament-hill-to-mourn-death-of-evidence-3

#165 jess on 07.10.12 at 3:42 pm

After a 2007 Canada Revenue audit declared parking at six regional buildings was a taxable benefit, local taxpayers wound up paying $1.4 million in outstanding taxes owed by regional employees. And taxpayers have covered the benefit ever since.
http://www.therecord.com/iphone/opinion/article/748669

============
2 Chicago privatization deals could put the taxpayer at a 200m risk

1 group paid 563m for 9,178 spaces

http://www.millenniumgarages.com/buy-parking/

the other , Aqua Parking Garage , has 1,288 spaces.

Weekday Special – in by 10 am, out by 7pm – $12

=======================
…”arbitration hearings, largely outside of public view. Both claims are before the American Arbitration Association, which promises total confidentiality to the parties in conflicts it’s asked to referee. …But the records lay out previously undisclosed details of the $200 million dispute involving the downtown garages… Chicago Loop Parking LLC, has filed an arbitration claim against the city that could leave Chicago taxpayers on the hook for $200 million or more.”
=

The CFTC said Peregrine falsely reported to the agency that it held more than $220 million in customer funds when it actually had only $5.1 million

Read more: http://www.chicagobusiness.com/article/20120710/NEWS01/120719989/cftc-sues-peregrine-for-fraud#ixzz20FaFd0rF
Stay on top of Chicago business with our free daily e-newsletters

#166 CP on 07.10.12 at 3:48 pm

GTAGirl; I grew up around/on the Oak Ridges Moraine and every time I visit friends and family it makes me so sad to see the rampant development. Nothing is sacred, and I guess most people assume that trucking in food from a thousand kms is better than having it grown 30 minutes from your front door.

Ripen in transit? I’ll take ripe off the vine thank you…

#167 Nemesis on 07.10.12 at 3:58 pm

…”a tsunami of new listings and collapsing prices.”… Hon. GT

What happened to, “slow melt”? ;)

How many times…? A correction, then a melt. The correction will be violent in some places, laid-back in others. There is no national real estate market. — Garth

#168 jess on 07.10.12 at 4:03 pm

Daisy : Death of scientific evidence or just gagged

Under a new law, doctors in Pennsylvania can access information about chemicals used in natural gas extraction—but they won’t be able to share it with their patients.* A provision buried in a law passed last month is drawing scrutiny from the public health and environmental community, who argue that it will “gag” doctors who want to raise concerns related to oil and gas extraction with the people they treat and the general public

http://www.motherjones.com/environment/2012/03/fracking-doctors-gag-pennsylvania

http://www.salon.com/2012/07/09/confirmed_fracking_can_pollute/

#169 HD on 07.10.12 at 4:09 pm

#145 HD on 07.10.12 at 1:38 pm

You’re doing great and you know it. Stop showing off and get back to work :)

——————————————————————

HAHAHAHAH!

Alright, fair enough :)

Best,

HD

#170 EdmontonJim on 07.10.12 at 4:10 pm

I have a request Garth, for when you revisit the idea of ETFs for clueless TFSAers like myself and the writer. Can you tell us where we can go to learn more? The phone book? Our bank? That nice gentleman from World Financial Group?

How can we find a fee-based advisor, and will they even talk to a young-un with less than $100k?

#171 Alex N Calgary on 07.10.12 at 4:23 pm

Fun time at the real estate law firms. The deals are being rammed through as fast and hard as they can. The realtors call every 5min screaming at the secretaries if they poorly prepped deals are complete yet. Two of the girls have cried today from the load, even worst being stampede week everyone is leaving early.

Its going to be short lived though… good thing for these girls, although I see foreclosures expanding soon…

#172 45north on 07.10.12 at 4:26 pm

GTA Girl: 45North: so does that mean you believe the Oakridges Morraine is better suited for sprawl?

it’s better suited than the Niagara Peninsula

As you say the existing pattern of urban development is leading to gridlock, substandard communities based on cheap gas, low interest rates.

Rather than an altruist agrument about water quality et cetera, let’s talk about building houses whose owners will pay the mortgages. Kettleby ON is in the Oakridge Morraine, houses there cost over $1 million. If CMHC won’t guarantee mortgages over $1 million then the houses won’t be built.

#173 jess on 07.10.12 at 4:26 pm

‘dave –
progress
knock down the vacant house and with the new empty space park a fema trailer /tent spot

Why Not More Progress?’ Asks UN Homeless Investigator
United Nations rep Miloon Kothari, back in Vancouver, speaks tonight.

By Ariel Fournier, Yesterday

‘Culture of Deviance’ at Enbridge, Finds US Transport Safety Board
‘Corrosion’ of safety culture ‘throughout the Enbridge organization’ led to Kalamazoo disaster.

By Andrew Nikiforuk, Today, TheTyee.ca

#174 TnT on 07.10.12 at 4:32 pm

#170 EdmontonJim

Hey EdmontonJim

I was like you, totally clueless on ETF’s and where to start.

Start first with all the previous blogs posted here, scan for ETF posts / comments that Garth have done in the past.

Then I recommend this site (hope it’s not blocked).

http://canadiancouchpotato.com

Common rules:
60 / 40 split Equity and Bonds – mix it up between REIT ETF, Preferred shares ETF, TSX/S&P/International ETF and Bond ETF – note the MER costs when building your portfolio.

The key for any investor is first LEARN to SAVE. Learning to SAVE also means LEARN to live within your means.

Once you see your savings getting put into your TFSA’s and Investment Accounts PLUS all the $$ from interest it will collect will give you more incentive to keep saving.

Best of Luck

#175 This is Wonderland on 07.10.12 at 4:33 pm

125 salonist

The majority of those “multimillion dollar” re-builds are owned my Realestate agents. Build and Flip, Build and Flip. Tons of cheap French Chateau nock offs.

Not to impressing considering when you look at listing on MLS for Oakville, far too many of these homes languishing on the market.

Have lived in Oakville for 40 years and very sad to say this; Oakville is just a suburb of Mississauga now.

#176 Ralph Cramdown on 07.10.12 at 4:35 pm

Should we tell the farmers growing corn, potatoes in these areas to ‘not bother’?

It’s been my experience that the farmers holler the loudest when they’re told that their land is protected. Many of them were planning on farming until the price was right, then selling to a developer.

#177 Ralph Cramdown on 07.10.12 at 4:48 pm

I can’t help but agree that his neighbourhood would be amongst the least hit.

Just once, JUST ONCE, I want to read about an owner who thinks “if it crashes, my neighbourhood will be hit harder than most.”

#178 AG Sage on 07.10.12 at 4:48 pm

>#20 Brian Macdonnell on 07.09.12 at 10:07 pm

Pick a few out of the list (google “recommended REITs” just to start) then look at their holdings by reading the legal docs. Nice thing about a passive ETF (there are actively managed ones, do note) is they tell you what they own and that’s what they own. It’s just a way to spread risk within a subsector as a small investor. But as to what they are, well, they tend to hold rental unit stocks and developers. And during the crash, those will do well as people get kicked out of their homes. Unless by some freak of banking nature, CMHC decides to become a giant landlord.

#179 Questioning Calgary stats on 07.10.12 at 4:50 pm

#114 Calgary’s OK

Are you sure I am not a Calgary realtor? Are you sure I am not a homeowner?

Again, since 2009 there has been unprecedented intervention in the Canadian real estate market. CMHC was mandated in 2009 to take on higher risk loans and has pushed the total on its books from $300 B to almost $600 B today in a short 3 years. Nobody could have predicted that degree of intervention and stimulus. As well interest rates were dropped to emergency levels and kept there.

However, if you have been following what has gone on, mortgage rules have changed and there will be more changes in the near future. CMHC’s involvement in the Canadian housing market is in the process of being scaled back dramatically. If you think this will have no negative effect on house prices in Calgary, then buy all the houses you can right now.

Calgary buyers beware!

#180 Aussie Roy on 07.10.12 at 4:58 pm

#148Inglorious Investor on 07.10.12 at 2:11 pm

This is based on my view that single family homes and condos are something of a different asset class. Prices for any asset are based on supply and demand. The factors that drive supply and demand for SFH’s and condos can be different and therefore they may not move in lock step. For example, it is easy to rapidly increase the supply of condos relative to SFH’s. For proof of this, come visit Toronto and see for yourself. It’s manic.

…………………………………………………………………………

Thanks for the info. You are correct about supply overwhelming demand but I still think there is a stronger laging relationship or basis between house prices/demand and condo prices. BUT…

What one would have to consider is, the amount of overpricing in both types of RE at their peaks.

If you have a larger bubble in condos then sure not only will the increased transactional nature depress prices quickly but the rate and size of fall also depends on the price inflation to start with.

To use your Van example, do the numbers show you that the type of housing which has increased in price the most over this period is the one which is likely to correct the most?. What about which type of RE has been the most speculated, maybe it’s not as simple as saying all condo markets are more speculative than housing?.

Those Van numbers tell me the speckers in Van like flipping houses not condos, over the data period anyway. So can you make a blanket statement like. “all condo markets are more speculative in nature”?.

My point is even the data presented isn’t enough to answer the question “how big is the bubble for each of the property types”, surely this is where any good analysis must start. Without this basic starting point then just like my previous ANZ link showed you can pick data to support your claim just by picking a short time period and not showing a complete data set.

Maybe you could do a little research, looking at LTA prices of condos compared to income and do the same for housing, how big are the bubbles, which one is bigger?. Will the largest price bubble fall the most to restore long term afordability?. Even which market segment is the most speculated, the answer may surprise you, I don’t know but your Van example surprised me.

I think it’s wishful thinking to have a house bubble (I believe you do) and be on the cusp of a condo market collapse and think that the bubbled house prices wouldn’t be affected.

But Hey that’s just me, I believe in revision to the mean.

Bringing this back to Toronto, we are in the midst of a manic condo boom.

Just like Melbourne, I wish I could find the link to the skyscraper construction index, from memory Melbourne has just about the same under construction as Toronto, the only difference being ours are just about all completed.

Melbourne Condo (Aussie Units/townhouses) down 6% same period houses down 4%. From my calculations, condos are 5-10% more overpriced than housing. Just like you mentioned (not like Van) condos being a more speculative market in Melbourne (and Toronto?) has affected prices on the way up, just like this more speculative market segment will affect prices on the way down.

But bubbled house prices will still correct, because it’s a bubble and they always do.

#181 penpal on 07.10.12 at 4:58 pm

@ # 149 RealTURD

Are you a complete idiot?

DELETED

#182 penpal on 07.10.12 at 5:02 pm

@ # 149 RealTURD # 1

Oh yeah, you might want to start looking for another career, but you might want to leave your stint as a RealTURD off your resume – I’ve got a feeling that they are about to become pariahs and not too employable.

But, hey that’s what you get for being a slimy RealTURD!
Couldn’t happen to a nicer profession.

HAHAHAHAHAHAHAHAHAAHHAHAHAHAHAHAHa!!!!!!!!

#183 Tom from Mississauga on 07.10.12 at 5:05 pm

Oh, just got a text from agent. Financing didn’t go through. Irony, eh? I was so excited I even left dishes in the sink before leaving for work this morning.

#184 john on 07.10.12 at 5:07 pm

#178 lol, I know. But seriously, the adage location, location, location plays true. I think it’s safe to assume that an area that is in high demand now, will suffer less than others.

#185 penpal on 07.10.12 at 5:11 pm

@ # 145 HD

Oh yeah, you’ve got the world by the balls!!!!!!

Sarc / off

See me when you are a middle aged loser like all your older work colleagues in a few years and then brag to me.

You are selling your soul very cheaply and you are too young to understand that right now. Keep working there and it will be the biggest thing you will regret about your life.

“Working” for the government almost ensures that you have little merit as an employee or will erode any valuable work ethic you may have.

Making a “career” out of it marks you as having low goals and little sense of achievement.

Congratulations – you’re a drone with a pension!

#186 penpal on 07.10.12 at 5:14 pm

@ # 182

So now you are deleting comments made about RE agents?

Geez Garth, easy there now, don’t have a heart attack on us!

Language, not topic, dude. — Garth

#187 penpal on 07.10.12 at 5:23 pm

@ # 178 Ralph Cramdon

Ain’t it the truth!

On top of it, the guy can’t figure that a drop of equal magnitude percentage wise will have a greater nominal effect on the more expensive home.

A 15% drop equates to a $90K drop on a $600K house, but only $60K on the $400K house. And that presumes the same drop despite the fact that in reality, the pricier homes actually can lose a greater % of value.

So it is best to sell now and look at the lower priced home in the future, gaining the maximum from the sale now and spending the least you can after prices correct.

#188 GregW, Oakville on 07.10.12 at 5:23 pm

Hi #68 Nostra,

I also saw another site mentioning the hot dry weather the USA grain belt is having, that helps feed the world. Parts of Canada are often equally effected.
I hope they get rain soon! Or our food availability will become a big issue. And the cost will only go up. How many people are already having trouble making ends meet and still feeding there families?

It’s to bad more places aren’t encouraging there neighbors to grow some food in there yard and in local parks and public lands, maybe even have a few chicken in the back yard too. Hopefully people are able to get some actual GMO free seeds still??

#189 Timing is Everything on 07.10.12 at 5:37 pm

No ‘call for catastrophe’ coming from this blog. – Garth

Well, that’s no fun. You’re getting soft, ‘Bubble Boy’.

‘Toronto’s housing forecast according to Garth Turner, the Dr. Doom of real estate’

http://tinyurl.com/856uua8

Just 4 fun…

http://tinyurl.com/28yhbvx

#190 Can it be? on 07.10.12 at 5:48 pm

Omg based on what I’m hearing people are beyond ash strapped. Had a coworker who’s cell and house phone look to be cut off. He mentioned he couldn’t make his mortgage payments… I knew he shouldn’t have spent the heloc on vacations and home renovations. Crazy times. Wow

#191 Can it be? on 07.10.12 at 5:50 pm

@tom not sure if that guy dropped the price $400000 I thoUght it was $100000… Regardless I’ve seen $100000 drops everywhere. Yes stuff is selling but people are panicking and buyers are sitting on the fence or convincing themselves they are getting good deals, because realtors are still preaching its
Going to go up.

#192 jess on 07.10.12 at 5:51 pm

why doesn’t mr Drummond’s efficiency/productivity lectures include

…”For example, take a company called World Inc., which produces a type of food in Africa, then processes it and sells the finished product in the United States. World Inc. does this via three subsidiaries: Africa Inc. (in Africa), Haven Inc. (in a tax haven, with zero taxes) and America Inc. (in the United States).

Now Africa Inc. sells the produce to Haven Inc. at an artificially low price, resulting in Africa Inc. having artificially low profits – and consequently an artificially low tax bill in Africa. Then Haven Inc. sells the product to America Inc. at a very high price – almost as high as the final retail price at which America Inc. sells the processed product. As a result, America Inc. also has artificially low profitability, and an artificially low tax bill in America. By contrast, however, Haven Inc. has bought at a very low price, and sold at a very high price, artificially creating very high profits. However, it is located in a tax haven – so it pays no taxes on those profits.

What has happened here? This has not resulted in more efficient or cost-effective production, transport, distribution or retail processes in the real world. The end result is, instead, that World Inc. has shifted its profits artificially out of both Africa and the United States, and into a tax haven. As a result, tax dollars have been shifted artificially away from both African and U.S. tax authorities, and have been converted into higher profits for the multinational. …”
http://www.taxjustice.net/cms/front_content.php?idcat=139

#193 Can it be? on 07.10.12 at 5:52 pm

To the oakville people… Nothing’s moving in the high end market.. Just more price drops. I’ve started informlly offering low :) I had one agent tell me I’m not unreasonable. I see a shift!

#194 cramar on 07.10.12 at 5:55 pm

#178 Ralph Cramdown on 07.10.12 at 4:48 pm

Just once, JUST ONCE, I want to read about an owner who thinks “if it crashes, my neighbourhood will be hit harder than most.”

—————

Not on this pathetic blog! That is because we are all smart here and have bought in ‘hoods that are better than most.

#195 Doug in London on 07.10.12 at 6:06 pm

@GTA girl, post #132:
You are right, developers would recklessly build everywhere if they allowed. That’s why we need a good real estate correction to stop this insanity NOW, while there is still enough agricultural land left to feed a small fraction of our population.

#196 HD on 07.10.12 at 6:15 pm

#186 penpal on 07.10.12 at 5:11 pm

I was just asking about ETFs…

You seem to be a nice fellow tho….I’ll make sure to knock at your door if I need any advice on how to be successful in life.

Best,

HD

#197 Hoof - Hearted on 07.10.12 at 6:18 pm

From VREAA BLOG

Lady At City Hall: “We’ve been getting a lot of calls about stalled building lots lately. In this downturn, we’re seeing a lot of people go bankrupt.”
Posted on 10 July 2012 | 14 Comments

“One of my friends who has seen everyone on his street, except one set of neighbours across the road, sell to Mainland Chinese has recently called the COV about a halt in construction on his street. The backstory is the Mainland Chinese owner bought the house two years ago, let it sit empty, tall grass, weeds, problems with garbage, rats etc. And then about a year ago knocked down the house and left the lot empty.
About eight months ago construction started. For about four months. Then it stopped. Month after month, my friend wondered just what the heck is going on. He asked another neighbour on another block who is a retired developer what he thought was up. The developer said, “Well, when you have a project stall like that it’s one of 3 things. It’s either money, money or money.”
So two days ago my friend phoned the City to see if there were any neighbour complaints or any other reason why they were all stuck with a hole in the ground, some foundation and some wet, rotting plywood for these last four months. And the Lady from City Hall said, “Hmmmm… nope. Nothing here. They’re all clear but we’ve been getting a lot of calls like this lately. In this downturn (her words not my friend’s), we’re seeing a lot of people go bankrupt.”

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

Not surprised…

Here in HAMville,(Richmond) I am seeing homes demolished and the lots are sitting empty…or the homes boarded up….

One huge home stopped construction several months ago , approx. 1/2 the 2nd floor framed, no roof..the wood is fading to gray black color.

#198 Triplenet on 07.10.12 at 6:19 pm

Excess parking spaces in strata developments (commercial and residential) have been marketed and sold since God invented condominium ownership.

#199 brainsail on 07.10.12 at 6:19 pm

#164 daystar

I have always thought comparing gross public debt to GDP was a credible way to compare the economic health between different countries. I have seen the 109% Canada vs. US of 103%. So, I am not trying to dispute your statement but I am trying to understand why there are so many different sets of numbers out there.

For example, the following link states 83.5% for Canada and 69.4% for the US (2011). Everywhere you google there are different numbers. Do you or anyone else out there explain why?

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

Most Canadians are wishing for a quick death for the US economy because of their debt load while the numbers imply that Canada’s economic health is actually worse.

#200 daystar on 07.10.12 at 6:45 pm

#170 EdmontonJim on 07.10.12 at 4:10 pm

Happy reading.

http://www.tmxmoney.com/en/sector_profiles/exchange_traded_funds/index.html

#201 John on 07.10.12 at 7:01 pm

“Eschew five years of growth to be a safe young person? Pathetic. — Garth”
———-

Perhaps a potential for five years of growth will be spelled out in more detail in later posts. The question would not be about relativity or “doing the best possible”, but rather the true market fundamentals.

#202 TurnerNation on 07.10.12 at 7:24 pm

Monthly nuts are for squirels!

#203 Ret on 07.10.12 at 7:25 pm

Re; Burlington accessory dwellings.

Looks like Councillor Meed Ward is pushing Burlington council to get more “accessory dwelling units” (read- basement suites, duplexes, triplexes) approved in many SFH residential areas of Burlington.

I guess that she wants Burlington to look like Brampton, or even worse, West Hamilton. There is lots of affordable housing in those places but the slumlords rule.

Law abiding SFH citizens can take forget about by-law or building code enforcement and eventually they surrender the community and just move out. What’s left of those neighbourhoods after 10-15 years isn’t pretty.

Burlington, DON’T do it or your way of life as you know it, is over.

http://www.thespec.com/news/local/article/757816–advocates-hope-burlington-residents-tap-into-little-used-affordable-housing-

#204 penpal on 07.10.12 at 7:36 pm

@ # 197 HD

No you were not just asking about ETF’s.

If this is the kind of disingenuous bs you spew now, I take back my warnings – it is too late for you, you have already been assimilated.

You came onto a blog that is badly disposed to snivel, er .. civil servants such as yourself and, being self congratulatory as you were, you got a blast from one of the guys who pays your (inflated) wages and benefits.

Are you surprised that guys like me who pay your wages would take exception to having been reminded of your existence.

If this is your response, stay with the snivel service – you simply won’t make it in the real world.

#205 eagle eyes on 07.10.12 at 7:45 pm

#198 Hoof-Hearted

Can you tell me what street or area this is in Richmond?

#206 Inglorious Investor on 07.10.12 at 7:54 pm

#181 Aussie Roy on 07.10.12 at 4:58 pm

Hey, A.R. Good post. And generally I agree.

I don’t know if all condo markets are more speculative. Perhaps the people quoted in the article I cited think so. I cited them as general evidence of the differences between condos and SFH to support my assertion that a correction in the condo market may not always require a general downturn in RE.

Without a doubt, condos in Toronto have become the biggest go-to property type for speculators in this city. I believe Garth has mentioned several times that up to 80% of new condo purchases have been by speculators.

As for houses in Toronto, sure they are overvalued and prices will correct, but I see a few different possible scenarios as to how that actually plays out.

#207 Canadian Watchdog on 07.10.12 at 7:56 pm

#98 Inglorious Investor

“This would mean nominal housing prices may not fall much, if at all. However, in real (inflation adjusted) terms, prices will be stagnant or lower.”

In real terms prices would fall faster, this time. Look at what just happened with Vancouver’s composite HPI against CPI components. On the right is real % returns from 2007.

http://postimage.org/image/tiatm6chx/

Van’s HPI is now at par with energy prices from Jan 2007, and at this rate, home prices will be flat against every CPI in no time.

#208 American Werewolf in BC on 07.10.12 at 8:00 pm

Either someone is jealous of HD’s job or they are working overtime to make this blog audience look like dickheads

#209 Daisy Mae on 07.10.12 at 8:06 pm

#172 ALEX: “Fun time at the real estate law firms. The deals are being rammed through as fast and hard as they can. The realtors call every 5min screaming at the secretaries…”

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

Is it any wonder the feds thinks we’re idiots when we keep acting like idiots?

#210 John G. Young on 07.10.12 at 8:07 pm

#197 HD on 07.10.12 at 6:15 pm

Excellent response.

God save use all from “Christians” like penpal.

Cheers,

John

#211 Daisy Mae on 07.10.12 at 8:13 pm

#184Tom from Mississauga on 07.10.12 at 5:05 pm

“Oh, just got a text from agent. Financing didn’t go through. Irony, eh? I was so excited I even left dishes in the sink before leaving for work this morning.”

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

I KNEW you were jumping the gun. I’m superstitious. Next time ‘mum is the word’ until it’s a done deal.

#212 HD on 07.10.12 at 8:15 pm

# 209 American Werewolf in BC on 07.10.12 at 8:00 pm

Either someone is jealous of HD’s job or they are working overtime to make this blog audience look like dickheads

——————————————————————

No kidding!

American Werewolf in BC,

I usually really appreciate your input/contribution to this blog.

Please keep up the good work.

Best,

HD

#213 HD on 07.10.12 at 8:18 pm

#211 211 John G. Young on 07.10.12 at 8:07 pm

Thank you :)

Best,

HD

#214 John on 07.10.12 at 8:22 pm

@ #205 penpal,

Take it easy. Unless you are running a self-contained economy, somebody else is paying your wages as well.

BTW, it beats me what kicks people get out of bragging anonymously. Hey, my name is John (there are a few of us here), I work 3 days a week from home, make $3mil/year, have 3 hot girlfriend in 3 different countries that I visit in turn, always flying first class.

#215 Grim Reaper/Crypt Speculator on 07.10.12 at 8:27 pm

#206 eagle eyes on 07.10.12 at 7:45 pm

#198 Hoof-Hearted

Can you tell me what street or area this is in Richmond?
===================================

If you are referring to the large unfinished house…it is on Sidaway Road….West Side…between Blundell and Steveston Highway…..closer to Steveston Highway

#216 T.J. BONES on 07.10.12 at 8:30 pm

Sir Garth: The personnel attacks on HD by Penpal and Toronto CA are unwarranted, and approach liable. These two trolls of the PMO’s office, are paid to troll blogs such as yours to spread the mantra of class warfare. They are paid shrills. They ( Penpal and TorontoCA ) never mention that you pay all your own benefits, Dental optical and Drugs. And that that DB pension comes off our paycheck as a very large deduction, almost a mortgage payment! Working for the GC is not by any means an easy living. HD what you dont make in wages you can moonlight or work at weekends, until you secome to the family trap. Those little ones are so addictive, and since you only work Mon to Fri lots of time to spend with the family. Thats worth all the reg'[s to put up with. Pay no attention to them. Now is the time for a steady cash flow. And dont put any pennies in Penpals tin cup. I know Garth you will Delete this but the record has to be balanced.

God this blog scares me. — Garth

#217 blase on 07.10.12 at 9:44 pm

Just did an MLS search for $1.5-2.5 million in GTA.

$2.0 million “faux French Chateau”‘ seem to be very popular!

Decorating choices all seem to scream “look at me, I’m important!”

When did people start dreaming of living in museums?

I’m calling a 70% correction in GTA housing within 10 years. 90% correction in condos.

It will be brought on by a massive black swan event: spiraling interest rates.

#218 penpal on 07.10.12 at 11:22 pm

@ # 216 T. J. Bones

Geez, at first I thought your posting was a joke.

Now that I have read it again, I see that you are a joke.

Just curious ole T.J., does it stand for “Thoroughly Jacked” or “Total Jerk off”?

Go find your meds and all will be well, I promise.

F’ing nutter!

He’s lost the plot, definitely.

#219 penpal on 07.10.12 at 11:28 pm

@ # 214 John

No, actually no one in Canada is “paying me”.

I’ve made my own paycheck for about 35 years or so, in my own business and funny, no one ever sent me a cheque unless I did something to EARN it.

Now I live off of what I have EARNED, not from handouts from this or any other government, despite paying vast sums in taxes over many years to them.

Nice try for an apologist though.

#220 daystar on 07.10.12 at 11:43 pm

#200 brainsail on 07.10.12 at 6:19 pm

Good question. I get 109% from a link another blogger provided here not long ago. Thats gross public debt (summation of all gross debt federal, provincial, municipal). Then there’s net debt and breakdowns but I can’t find breakdowns of net assets to know if they are valued in the ball park, at least, federally. Net is obviously more important than gross, but we pretty much know through private or corporate examples of balance sheets that if you can’t see the numbers behind the numbers like what net assets are valued for and by for example, then you can’t access risk and that in itself generates risk:

http://www.statcan.gc.ca/daily-quotidien/120615/t120615b004-eng.htm

What I can say is that since 08′, gross public debt in Canada has grown by 40%. Its jaw dropping. External debt is roughly the same percentage as it was in the 90’s (low 40’s%) but trending higher since 08′ and the last time we flirted with 100% gross public debt, we had a currency crisis that took huge tax increases, the sale of crown assets (CNR) and dramatic cuts in spending in an attempt to balance and later surplus.

http://www.tradingeconomics.com/canada/general-government-gross-debt-in-percent-of-gdp-imf-data.html

If the U.S. central bank wasn’t flooding the world with cheap money and forcing bond investors to look internationally, bond investors would literally have us by the throat and I believe at some point when the U.S. is done keeping rates artificially low, bond investors WILL have Canada by the throat. Our gross public debt numbers are worse than Spain and we are on the edge of our own housing correction, although valuations are not as extreme as Spain’s were in comparison.

Are we headed for above normal interest rates within 5 years? I’m pretty much convinced of it from what can see but it doesn’t kick off until… 2014 maybe? If it plays out like I think it will, roughly 60% of all mortgage holders have 5 year terms while 29% float with variables and the rest have terms shorter or longer than 5 years. Not only will rising rates when they come drive up payments for floaters and make some buyers ineligable to borrow (until valuations plummet), payments will in time go up for everyone when it comes time to renew, particularly the 2014 through 2019 timeline. The drain on our pockets to collectively service debt household and public could push Canada into chronic recession as it did in the U.S., redlining the risk of damage a commodity bust would generate through crashing our loonie triggering soaring gross public debt to GDP (as priced in U.S. dollars) that in turn sends rates higher with our nation in a debt service spiral.

Under Harper’s helm, we ran up gross public debt by 40% (since 08′) and yet, we see him schooling the newly minted president of France on Fiscal debt and prudence… on France’s soil. Europe is pressing for 3% fiscal deficits tops or else walk from the union and yet Harper preaches with annual 10% gross public debt to GDP deficits for 4 years running… its a joke right?

#221 J man on 07.11.12 at 1:45 pm

Another thing to consider is just how many jobs are reliant on the realestate industry. Developers, agents, builders, trades, retail… Most of these people hold mortgages too and if building slows and they lose their jobs that will only compound the problem. In the US that was/is a big problem if not the biggest issue.