El predicto

If you knew an asset was going to careen lower in value, what would you do? Chances are if you didn’t own it, you sure wouldn’t buy it. And if you did, you’d dump it. If this were a stock, you might short it (that means borrowing the security and selling it at current value, so you can buy it later at a cheaper price before returning to the lender. You keep the difference).

But how do you short real estate?

Not so easy. But it sure makes sense to try.

The Canadian residential real estate is in for some tough years, as this pathetic blog has predicted with enough boring repetition to lobotomize an entire generation. Not only have we borrowed our little brains out buying houses just because money’s cheap and HGTV told us to, but we’ve done it at a time when wages and salaries actually fell below inflation. Not smart. The country has now achieved 70% home ownership, which is roughly the level at which the US real estate market fell to pieces. In other words, demand is largely sated. Next we’ll be flogging condos to eight-year-olds.

The feds have declared war on houses, because if they don’t prick this bubble then pricks will keep bubbling. And that’s poor public policy. Better the gasbag deflates than explodes, as happened in the States, blowing up the middle class. Killing off 30-year mortgages was just the start. But bank changes will now click in by the end of October.

All this means prices will correct, then flatline or melt in a process you should expect to take several years. Some markets will be creamed. Others grazed. Everywhere people will lose equity.

Some actions are obvious. First, if you have been thinking about selling, do it. Now. Especially if you’re a wrinkly, oxygen-sucking Boomer with the bulk of your net worth in a particle board McMansion in suburbia. If you can get your hooks into a greater fool who still thinks Tubetop Sandra is hot, do so.

Second, if you’re house lusty, then wait a year, or four. Anybody buying property almost anywhere in the country in the next year, who plans on owning it for less than half a decade (or possibly much longer) will lose money. If you don’t care, go ahead. But don’t come round here bitching in 2016.

Third, rent. Right now most landlords subsidize tenants. It’s virtually impossible to lease out a condo or single home in any major centre and not be in negative cash flow, unless you have a massive amount of equity – and then you’re only robbing yourself. Without capital appreciation, owners lose. And it will be liquid assets, not real ones, which will be doing the appreciating for years to come.

Fourth, you can short the stocks of companies that a real estate collapse might nail, like publicly-traded second-tier mortgage lenders, real estate marketers, developers and furniture chains. But forget the banks. They saw this coming long ago and have massively diversified sources of revenue. Besides, F bought all their dicey mortgages three years ago.

Fifth, buy an apartment building. I’ve done the math on this for you in the past, and if you’re into coin-op laundromats and toilet engineering, this is probably the safest real estate in the nation. Just watch the cap rate, and if you don’t know what that means, buy a REIT instead.

Real estate investment trusts could be the ultimate way to have exposure to the property market, and still giggle when it collapses. Commercially-based REITs buy office towers, malls and industrial buildings, then pass on rents to unitholders. They have zero exposure to residential houses, and have given investors outstanding returns since I started suggesting this to you three years ago.

And residential REITs – those which build, buy and own apartment complexes – are an even sweeter choice. With housing bloated and unaffordable, these REITS are seeing record occupancy levels and rising rents – along with soaring share values. Once the housing market’s deterioration is evident to everyone, the demand for rental accommodation will only increase.

What’s going to happen is no longer the question. What you’re going to do about it, is.

Garth live in Vancouver tonight

A reminder that I will be speaking in Vancouver tonight (Monday). Admission is free, however I’ll be happy if you bring squirrel brownies or spare Hummer parts. The gig’s at the Marriott Pinnacle Hotel, on West Hastings, and the doors open at 6 pm.

If you signed up here and received a confirmation email, perfect. If you’re just coming to harass me, I truly hope you can deal with a wet Amazon.

The latest radio interview is here.

156 comments ↓

#1 Musings on 08.19.12 at 10:10 pm

The end is nigh. Were all doomed to live in our moldy basements for the rest of our lives. Too expensive to move and we don’t have enough money for the fuel that would have been shipped west from the Albertan’s who now hate us.

#2 donald trump on 08.19.12 at 10:11 pm

no price delines in toronto head re agent Lou Berkovits says so . don,t listen to the doom and gloomers.

#3 Jeremy on 08.19.12 at 10:11 pm

What exactly is a “wet amazon”???

#4 Corban on 08.19.12 at 10:13 pm

What kinda hummer we talkin about? An h1 or one of those fake plastic ones?

#5 MarcFromOttawa on 08.19.12 at 10:14 pm

Suis-je le premier?

#6 Lilyflor on 08.19.12 at 10:17 pm

The rich will get richer, and the poor will be lucky if they just better cover their ..l

#7 Mike on 08.19.12 at 10:21 pm

What about RBC, with more than half their balance sheet in residential mortgages, yet only just over a third insured by a govt. agency or third party? Don’t they stand to lose too when the boomers default on payments?

Can you provide some examples of second-tier mortgage lenders and RE marketers to single out?

Don’t expect defaults, certainly on non-CMHC-insured loans. — Garth

#8 House on 08.19.12 at 10:22 pm

So did F also buy their liarer loans and cash backs for the last three years?

#9 [email protected] on 08.19.12 at 10:29 pm

First?
BTW, long time reader and love the blog but first post.

#10 Freedom First on 08.19.12 at 10:29 pm

Great article Garth! For people wise enough to have sold their RE to rent, or are going to, a word of advice, rent only in a quality neighborhood/building where they require a credit check. These places are looked after better, you are treated better, the rents are more stable, and the people renting have been checked out, although not a sure thing, trust me, this helps a lot.

#11 Party On Garth on 08.19.12 at 10:30 pm

Are you equally bullish on US REITS as you are Canadian?

Also, should we buy our US equity ETF’s from a US exchange in greenbacks, or should we buy the currency hedged versions of the same funds from the Canadian exchanges?

I have a little of both.

#12 Keeping the Faith on 08.19.12 at 10:31 pm

Hey Stevenson, DA and BPOE, please identify yourselves when you step up to the mic tomorrow night and ask a question to Garth.
We want a picture to put beside your names in the Guinness Book under “Worlds Dumbest Comments made about real estate”.
IDIOTS! Please show up again and argue the world is flat.
IDIOTS!

#13 Marco from Van on 08.19.12 at 10:32 pm

See you tomorrow Garth. Looking forward to it. I’m looking forward to REALTOR (TM) heckler butchery with style and gusto. They just have NO logical argument with which to counter reason and reality so they have to resort to marketing, spin, frankennumbers, stereotypical ignorance and pure drivel.

Thank you for your hard work.

P.S. you helped me save a friend… Penthouse condo, pressured to compete against a standing bid from “mainland Asia” (yes, can’t call them Chinese anymore) for a development in kits.

I went with her and saw a really jittery over eager (desperate) realtor – I’m a salesman and have a nose for desperation (i’m a real salesman selling million dollar enterprise software solutions, not a real estate dimwit).

I told my friend to leave an offer and a phone number (unsigned too) $100k below asking AND with 2 parking spaces required, then leave saying it is valid for 48 hours.

She got a call in 6 – excuse is the “mainland Asian” thought the unit was too small/cheap and it was now available. We responded, “yes that’s true, and we found something else” – price? Well the offer is now $125k below the asking of $810k.

Still stupid money for a condo, but worth it as a mood bellwether and messin with the retard (realtor in southern European).

My friend? She found the same condo available for rent in the sister building at half the carry cost… That was easy – she will be there tomorrow too…

#14 GTA Suburbanite on 08.19.12 at 10:32 pm

Garth, love your blog. I’ve seen the value of our house in Oakville go to levels that I could not have imagined. I think we’re going to get creamed here, not grazed. What’s your view on Oakville real estate?

#15 T.O. Bubble Boy on 08.19.12 at 10:34 pm

Canadian Apartment Properties REIT up 29% over the past year, and now only paying a bit above 4% yield.

Everything is overpriced these days!

#16 OZY - KNOWING on 08.19.12 at 10:38 pm

Knowing the kanatian typical laid-back mental state (not that is somehing wrong with that) prices will shoot up 10% after the coming 10% drop, they just need a spring to flourish…remember it

#17 Sunday Night Humor on 08.19.12 at 10:38 pm

Funniest comment I read on Globe & Mail. Perhaps a HAM “investor”?

I wish there is more home owners on this page motivating your fellow home owners instead these comment are made by a bunch of loser who don’t own homes and who wish the market would crash so they can get in on it. Good luck. We home owner never give up without a fight. Also, keeping your house price high is a patriot duty. We are better than the American markets so we will prove those American economist who say our market are going down wrong. Let us rally together to protect our real estate value.

#18 City that rhymes with Fun on 08.19.12 at 10:41 pm

Garth, it’s different here.

Firrrsssstttttt!

#19 White Rock Mom on 08.19.12 at 10:41 pm

I respectfully disagree on REITs.
Maxed out consumer debt.
Increased unemployment.
Increased cross border shopping.
Empty store fronts.
Surplus commercial space.
REITs are going to take a hit within the next year or two.

You have no idea what you’re talking about. Respectfully. — Garth

#20 Maxamillion on 08.19.12 at 10:42 pm

#1 Musings

It looks like the price of gasoline in B.C. has forced some to fill garbage bags of gasoline across the border in the U.S.

http://www.vancouversun.com/news/appears+fill+garbage+bags+full+gasoline+Bellingham+station+with+video/7113470/story.html

#21 Rhaegar on 08.19.12 at 10:45 pm

Clearly he is refering to Genworth (MIC.to) the “other” mortgage insurer in Canada (all the crap CMHC wont take). He probably just isn’t allowed to say it ;)

#22 TaxHaven on 08.19.12 at 10:49 pm

“And it will be liquid assets, not real ones, which will be doing the appreciating for years to come.”

And why should this happen? Overpriced stuff like bonds, REITs, cash, loans and bank accounts?

I always thought appreciating assets would be real – those shortest in supply, yet with steady demand and thus pricing power. You know, stuff people want and need…

Follow the fates of the money market industry. That’s where cash and other “liquid assets” are going.

#23 Fort Mac Flatlander on 08.19.12 at 10:54 pm

Good evening blog dogs,

My roomate/landlord’s house has now gone up for sale. He is currently asking $35,000 less than last comparable on the block to sell, which was a month ago for a “quick sale.” After prepping the house and looking for a new apartment he had his first open house yesterday.

Guess what happened? Absolutely nothing. Crickets. Not a single person showed up. Buddy is nauseous with stress and realtress is pissed instead of being the other way around.

Morale of the story, its not even different here.

#24 Short Picks on 08.19.12 at 10:55 pm

Here are my thoughts on potential shorts:

Genworth Canada (MIC)
– Canada’s second largest and only private mortgage insurer
– Triple whammy: as insurance premium revenues decrease in a housing bust, claims will increase, and returns on invested premiums could be hit.

Home Capital Group (HCG)
– Canada’s largest sub-prime lender
– Low dividend makes it cheaper to short

Equitable Group (ETC)
– A large second-tier mortgage lender
– Low dividend makes it cheaper to short
– Stock price nearing an all-time high

Anyone have any thoughts on these or other suggestions?

#25 blase on 08.19.12 at 10:55 pm

Hey Garth,

Real estate investment trusts could be the ultimate way to have exposure to the property market, and still giggle when it collapses. Commercially-based REITs buy office towers, malls and industrial buildings, when pass on rents to unitholders. They have zero exposure to residential houses, and have given investors outstanding returns since I started suggesting this to you three years ago.

>>>Should be “then” not “when”. Also, unit-holders, not unitholders.

P.S. Hope you do a blog on the history of your new digs in Lunenburg!

#26 Sebee on 08.19.12 at 10:56 pm

I am not Gary, but I have been authorized to sell a limited number of forecasting stones at $19.99ea plus shipping and handling. If you bought a condo in the GTA in last 2 years, contact me – forecasting stone will be free with purchase of comforting stone.

#27 Junius on 08.19.12 at 11:01 pm

John (from previous post),

Please explain the role of derivatives in creating the Canadian housing bubble. As this something of a “hole” in my arguments I am eager to learn.

#28 Victor on 08.19.12 at 11:03 pm

FOR LEASE – 55 Boswell Avenue and 160 – ANNEX
This house in the Annex that has been for sale forever and has had numerous price drops…

January 10: $3,628,000

March 2: $3,495,000

April 18: $3,299,000

May 11: $3,100,000

May 29: $2,900,000

…is now for lease.

For $4,990/month .

http://themashcanada.blogspot.ca/2012/08/for-lease-55-boswell-avenue-and-160.html

#29 Poorboy on 08.19.12 at 11:03 pm

Looking forward to tomorrow night!

#30 TS on 08.19.12 at 11:07 pm

Garth,

I only come here to see your hot babe of the day. It’s been like 6 columns since we’ve seen a female of any sort in your picture.

Let’s get back to basics…

PS

If you have pictures of Sandra in a tube top, I have cash.

Lots of cash

#31 Sebee on 08.19.12 at 11:07 pm

#4 Corban on 08.19.12 at 10:13 pm
What kinda hummer we talkin about? An h1 or one of those fake plastic ones?

It would be gangsta if Garth rocked an H1 with a Heli hook on the roof and floor blast plates! But I bet it’s an H2.

#32 greed on 08.19.12 at 11:24 pm

http://www.firstservice.com/investors/newsroom/

Here is a Real Estate Services company you may want to have a look at. They have been recently buying up CDN mgmt companies.

#33 Foggy on 08.19.12 at 11:25 pm

At #24 Short Picks:

Here are my thoughts on potential shorts:

Genworth Canada (MIC)
Home Capital Group (HCG)
Equitable Group (ETC)

Anyone have any thoughts on these or other suggestions?
—————————–

Short the Social media stocks – the trifecta of evil.

Facebook – the most hated stock on Wall St. Sitting at $19, exactly half of its IPO price. There are still over a billion lockup shares to come to market. The first release was last week causing it to dip into the teens despite resistance. This stinker’s going to 12 bucks or lower.

http://money.cnn.com/quote/quote.html?symb=FB&iid=HP_LN

Also Groupon and Zynga have revealed themselves as vulnerable.

#34 Falconer2012 on 08.19.12 at 11:26 pm

You imagine a wall shielding REIT’s and other asset classes that simply does not exist. A systemic error like this does not stop at one sliver of one asset class, as even recent history would show.

No one comes here for your analysis of other asset classes, but you should know your limitations. Promoting REIT’s and pref shares as some salvation during a credit meltdown is as silly as the readers who ask you if they should buy in d/t Vancouver right now…

There is no credit meltdown. — Garth

#35 tomohawk on 08.19.12 at 11:27 pm

On a lark my wife and I went down to Brockville and decided to check out the newish condo development down there: http://www.tallshipslanding.com/

The patient realtor showed us a demonstration model. Very nice. If you want more than 1100 sq ft with a view of the St. Lawrence it’s going to cost you – at least 600K! I mean we are talking Brockville here. How the heck do people pay for this?

#36 Roial1 on 08.19.12 at 11:37 pm

So sad, It’s a mainland gig for you so I’ve had to pass it up.

Oh well, I’ll just go fishing instead.

Have a good war with the realturds.

#37 TaxHaven on 08.19.12 at 11:37 pm

You can short real estate by selling now and renting until prices return to reality. Then you buy again.

#38 Another Albertan on 08.19.12 at 11:44 pm

I just returned from an extended vacation in BC. Bring Cash, indeed.

At a wedding I attended on the island, during the reception, there’s a flogging of properties at Sproat Lake to the Albertans in attendance. Classy.

I stayed with a friend at The Falls tower condos on Douglas in Victoria. If there is an epitome of speculation downtown, that might be it. Achievable prices in those two buildings are down a solid 25% since the summer of 2009. $750k+ for a rat maze of a condo layout overlooking the volleyball courts above the Sticky Wicket pub? That’s my new definition of insanity. Oh. And not a single stall of visitor parking in the complex. You’re basically forced to park underground up the street at the library.

Multimillion dollar condos overlooking Cordova Bay not having a single viewing in months and the absent owners believing that a hundred thou or so in tweaks and renovations might entice a buyer… and the only tire-kickers have been Albertans. I wouldn’t have believed it if I didn’t see it first-hand.

For Sale signs through the whole of the Interior. The fruit may be fresh, but the listings appear to be getting stale.

Through the whole trip, there was a common theme… locals asking if I had any thoughts about investing in real estate in BC “because I’m from Alberta and am “in oil”.

From my standpoint, I’d say that there’s more than just a “quiet concern” about the state of real estate on Canada’s Left Coast.

Everyone else’s mileage may vary.

#39 Scalgary on 08.19.12 at 11:51 pm

Can we compareResidential REITs full occupancy and increase in pent up demand(fence sitters)?

#40 Van guy on 08.19.12 at 11:51 pm

Reit’s will tank one day. Just like many other stocks. Just hope to time them right too.

#41 Bobby on 08.19.12 at 11:52 pm

I’ve been looking at condos here in Victoria and there is very little selling. What is more surprising, many are sitting empty and have been for quite a long time. Updates from my realtor are for mostly price reductions.
I am looking to buy with cash so my starting will be at a minimum of 10% below asking. That’s if I feel generous.
There are a lot of realtors out there not making a pay cheque.
I feel sorry for them in one respect, as I hate to see someone struggle. However that being said, the RE industry has played a significant role in bringing this upon themselves. No, prices do not go up forever.
Little sympathy from me!

#42 Gary Wong on 08.20.12 at 12:02 am

I just spoke to my friend… he sold his semi to his parents.. who sold their home and more than doubled their money.. anyway.. he got market rate from his folks and his folks encouraged him to buy a double garage home in the neck of the woods for $760K.

I can’t understand what people are thinking these days…

anyway.. he said he’ll be there till he dies…

#43 Dividend Yield Investor on 08.20.12 at 12:08 am

Garth states:

Real estate investment trusts could be the ultimate way to have exposure to the property market, and still giggle when it collapses. Commercially-based REITs buy office towers, malls and industrial buildings, then pass on rents to unitholders. They have zero exposure to residential houses, and have given investors outstanding returns since I started suggesting this to you three years ago.

Canada has a full blown private sector debt bubble that has manifested into a real estate [primary residential & secondarily commercial] mania along with massive consumer debt.

When this bubble bursts it will be subjected to an aging population that is unprepared for retirement along with a fertility rate similar to Central Europe. This three prong attack will drive down consumer spending.

1. Credit bubble bursts property values decline and families are locked into their homes. Many will declare bankruptcy and others will increase payments to chase the declining value of the home.

2. Aging population is now in the do or die saving mode for retirement. This will pick up steam now and over the next few years reducing consumer spending.

3. Low birth rate for future home buying. Unless this increases substantially or Canada goes on a recruiting binge to increase immigration the population of future home buyers will be dismal.

4. All of the above equals RECESSION!!

Commercial RE earnings will be affected negatively. NO they are not going out of business on a mass scale but nevertheless those REIT’s will be affected and a minority will become distressed.

The Canadian Central bank will ram interest rates down to the floor, this will help mitigate the earnings fall off of commercial REIT’s and their stock prices.

You will not have to wait long, for the U.S. and the world since May or June gone back into recession. When it comes to Canadian commercial RE “giggle” is not the word I would use. I’ll take a pass until the recession is in full bloom and buy when there is blood in the streets.

I’m still on record for the Standard and Poors to decline around 40% and for the U.S. Treasury 10 and 30 year bonds to dip below in 1% and 2% in yield respectfully.

Want to take the other side of that trade?

Dividend Man
Atlanta GA

#44 Not 1st on 08.20.12 at 12:12 am

Garth, just 3 little things;

1. A bank will borrow me money to buy an apartment block. Nobody will borrow to buy a REIT.

2. Apartment blocks anywhere with people and an economy are going to be min million bucks.

3. Won’t apts fall in price along with other residential properties?

#45 Nostradamus Le Mad Vlad on 08.20.12 at 12:23 am


Good post. Best parts were the stone and “. . . then pricks will keep bubbling.”
*
BoE This could have happened last year, but didn’t; Advice from a former US Comptroller; Investors unload treasuries and Corporate earnings; This week Lotsa stuff; Calendar Dates to take note of; Maps Walmart conquering America; 6:45 clip Paul Ryan in favor of Keyneyisms; Curious Share price dives, death toll spikes; City of London rents soaring; EZone Finland, Russia and Germany — lots happening; Radical Economy; Chinese gold rush? Black Out; Derivatives exchange in Europe; EZone and Latin America Different decades, different crisis, much the same fallout; Zimbabwe Baby boom plus hyperinflation. Only a man could think of something like this.
*
Snakebit Best not to get too close, and Spider Sauce; ‘Quake off Washington coast. Cascades region? 2:30 clip Tough winter ahead? Ryan and Ruin A couple of wrestlers? Cartoon’s good; Assange may blow the whistle on US and UK war crimes; Disney and Facebook Developing and cloning physical facial recognition; 4:12 clip Perfecting the technowar; Hacking a Brain (mind plus memory) and Finding Oneself, which is why rebirth is part of the process; Hit the road, Jack Newsweek says Obomba must go.

#46 Devore on 08.20.12 at 12:25 am

In other words, demand is largely sated. Next we’ll be flogging condos to eight-year-olds.

I think that ship has already sailed. Condos have been marketed to “young professionals” for years now. More recently we’ve seen lots of marketing, and mortgage products, for shared ownership. A bunch of students are supposed to get together and buy a house. Why throw money away on rent, right? Might as well start your life off on the right foot, with massive debt and a financial nightmare of a millstone around your neck.

But it gets worse.

I personally know someone who bought a condo, so his kid, who has maybe now crawled out of diapers, will have a place to live while he goes to school and gets out on his own, because by that time he’ll be priced out. Can you imagine the amount of fear this guy must live with on a daily basis, to actually spend a quarter million on something he won’t even use for another 10 years.

Somehow, I do not think he grasps and absurdity of “priced out forever”. Right up there with “what if everyone sells and rents”.

#47 SeriousMoney on 08.20.12 at 12:26 am

“The Canadian residential real estate is in for some tough years, as this pathetic blog has predicted with enough boring repetition to lobotomize an entire generation.”

Ain’t that the truth!

#48 Cristian on 08.20.12 at 12:56 am

“And residential REITs – those which build, buy and own apartment complexes – are an even sweeter choice. With housing bloated and unaffordable, these REITS are seeing record occupancy levels and rising rents…”

One thing I don’t understand: how is housing unaffordable when 70% or so of the Canadian families own rather than rent? Or when losers with no money can buy a 500,000K house?

#49 TimV on 08.20.12 at 1:03 am

Interesting thought: I just heard that standard realtor commission is 8% (4% buying agent, 4% selling — can anyone confirm?) in London ON, vs 5% in Toronto. Toronto bonus land transfer tax is max 2%, for a total of 7%. So even after bonus land transfer tax, Toronto transaction fees are still lower than London’s transaction fees. Oddly, you don’t hear about London’s agents complaining about how the commission fees are artificially depressing the London market.

#50 FI Guy on 08.20.12 at 1:31 am

#24 Short Picks on 08.19.12 at 10:55 pm

Genworth is the #1 pick for me. Based on my calculations, it does not have sufficient capital to support its currently insured res mtgs over time – even with a scenario of a 10% decline, I would expect the stock to be zero quickly.

I would be hesitant to bet against home cap / equit. They build in strong buffers in LTV values and lend out at high rates, protecting income. They are also focused on res mtgs which are more highly collateralized than other consumer debt. Additionally, as credit tightens, this could even create more lending opportunities for them by people who are shut out by the banks. Eventually there will be an opportunity, but I’m hesitant to transact.

While I wouldn’t bet against the big banks right now, I think eventually there will be an opportunity to short them. The banks have a lot of unsecured personal loans on their books, and when additional defaults occur, this debt will go bad first. While secured debt is more safe and collateralized, even a tripling of the default rate could put pressure on these stocks. Consider what the P&L would look like if RBC had to provide an additional 1% against its entire res mtg book (remember, even CMHC loan insurance doesn’t cover all losses). Disaster for a year or two. But enough capital to continue the business.

#51 Vulture Fun on 08.20.12 at 1:36 am

Am I the only one who caught this? Garth used the word “flatline” in reference to future market direction. I feel like a bit of a dork parsing his post like it was a statement from the Federal Reserve, but I believe this is the first time he’s raised this as a possibility. A change in direction? What sayeth Garth?

#52 Tim on 08.20.12 at 2:16 am

Garth,

What to I do with the $150K I’ve squirreled away for a down payment? How much equity exposure should I have if I’m waiting for the market to tank?

#53 FTP - First Time Poster on 08.20.12 at 2:23 am

Just finished watching “Chasing Madoff”. A very interesting documentary. Here’s the trailer:

https://www.youtube.com/watch?v=62L7VxMDg68

#54 GTA Girl on 08.20.12 at 4:53 am

Big developers are ripping up farmland west of hwy 27 north of Major Mack, in GTA.

5,000 homes going in, sales office (with cement base) being built on former horse farm at corner.

Developers are calling this tract of land as being part of Kleinburg…which is misleading and a lie. Somewhere part of Nashville/Brampton/Woodbridge/Bolton. It would take you a 15min car ride to get to the village…and walking is not an option, unless your the Rastafarian homeless white guy who pushes his shopping cart up hwy 27 every day. It’d be a 2 hour walk.

The prices for the homes will start at $550k towns/semis and singles start at $850k. This reflects the market madness that’s been going on with new builds in north Woodbridge.

Watching this project shall be a hobby. Knowing the particular lead developer’s character (personally), if he fails expect an epic meltdown, and another trip to a Florida rehab centre for a couple of months

#55 GTA Girl on 08.20.12 at 4:56 am

…. A 15 min car ride to Kleinburg village from developers build site…if it’s 3am, no traffic, and you punch your Aston Martin to 140km/hr.

#56 elmsley on 08.20.12 at 6:26 am

XRE also dropped like a ton of bricks in 2008. Why would you want that?

Everything dropped (temporarily) in 2008. And 2008 isn’t coming back. — Garth

#57 John on 08.20.12 at 6:51 am

Babblemaster wrote:

“#194 John

You’ve made some good points:

– Politicians follow the money trail.
– Politicians have limited power and are essentially shift bosses that answer to others who placed them in power.
– The system is corrupt and is no accountability built into it.
– Bay Street and Wall Street manipulating the system are bigger factors than the politicians.

All of this has much truth to it. So far, so good, but you also state that the people get the government they deserve. Well, if it’s a rigged game and it doesn’t matter who’s in power, then how can you hold the electorate accountable for the government they chose if it doesn’t matter whom they chose?

Personally, I often make involuntary retching sounds when I go vote and see my available choices on the ballot.

As a solution, you propose that we first admit the nature of our current reality and it’s futility. Then we are to take personal responsibility and strive for a better community. To that, I can only say, it simply isn’t human nature. If people see cheap and easy money and they see others taking advantage of it, they’ll be very tempted to take advantage also. That’s reality. Harper and his team definitely made the money easy and they made it cheap also. They’re responsible, even they are not accountable.”
———

I appreciate you debating this, because you nailed it all…especially the truth about human nature and the conclusion about responsibility.

#58 maxx on 08.20.12 at 6:52 am

#17 Sunday Night Humor on 08.19.12 at 10:38 pm

That is hilarious…..how do you spell “desperation”?

In a few months time, that one will turn like a leaf and be fit to be tied….a few months after that resignation, followed by acceptance.

#59 jane54 on 08.20.12 at 7:30 am

I have just sold a bungalow here in England paying the usual realtor rate of 1.5%. Really guys, the job is not worth more than that.

Some people do list with multiple agents and pay 2% but I figure that once you are up on the big websites such as http://www.rightmove.co.uk. one agent delivers the world so why bother paying the other .75%.

#60 Victor on 08.20.12 at 7:40 am

http://www.theglobeandmail.com/globe-investor/personal-finance/most-fiftysomethings-plan-to-work-in-retirement-to-offset-low-savings/article4489503/

A new survey of Canadians in their 50s found that 53 per cent of those polled said they plan to continue working after retiring in their early 60s.

The online survey of 805 people across Canada was conducted for CIBC by Leger Marketing from July 5 to 8.

Surveys of this type have a margin of error of 3.45 per cent on a national basis and breakdowns by region or other subgroups are less accurate.

Leger found Quebec residents were least likely to say they’ll work after retirement, at 47 per cent.

Manitoba and Saskatchewan residents were the most likely to say they planned to work after retirement, at 59 per cent.

Atlantic Canada (54 per cent), Ontario (55 per cent), Alberta (57 per cent) and British Columbia (49 per cent) were closer to the national average.

#61 pbrasseur on 08.20.12 at 7:46 am

Shorting anything is a bad idea.

Unless you’re an investment bank in need to edge something, and even then…

Just don’t do it.

#62 NYCer on 08.20.12 at 7:46 am

Went to open houses on Saturday (gorgeous day) and saw so many places (Yonge/Sheppard area) in one complex for sale. It’s insane! Some agents are so pushy and aggressive I was turned off. Others were really nice and if I were to ever buy I’d contact them. Also, these places are horrible. Terribly built, cheap and overall not impressed by location, layout, functionality etc. I didn’t even get turned on.

Prices are all over the place and nothing is selling.

I’ve also noticed that many condos that fail to sell are put out to rent now. Pretty sad but good for me as a renter :)

#63 Don't read his post on 08.20.12 at 7:58 am

Wouldn’t a great way to short real estate be shorting HCG- Home Capital Group on the TSX?

#64 House Horny Housewife on 08.20.12 at 8:13 am

Oh Garth,

There you go, generalizing about the entire country again !

Why not come for a holiday in the beautiful Eastern Townships of Quebec sometime ? A nice decent property (with a house) in the largest city here (Sherbrooke) can cost as low as $180,000.00 – $200,000.00. It is also extremely rare to sell your home in less than a month and usually houses sit for a few months before they are sold. The fastest moving market is the lowest priced one (of course .. more people can afford these homes) and the slowest are the homes that go for between 1 and 2 million (these are unbelievable top of the line, luxury properties by Toronto standards). Bidding wars are foreign here and people usually take their time buying … in addition, buying sight unseen is almost never done. People will definite do a second and even a third visit because even putting in an offer. We also have a huge lakefront market were, depending on the lake (some have more prestige than others), you can pay as little as $300,000.00 or as much as 40 million dollars (or more). Suffice it to say, there is something here for everyone. By the way, I am not an agent, just someone who has been on the market for a while (people sometimes take years to find the right property, as we did .. unlike Toronto where, if the countertop is the right colour, it’s sold !).

Right now we have a very high vacancy rate for apartments here and people who are renting out apartments and triplexes (many here live in one unit and rent out the others) are having a hard time finding renters. Highly unusual but that is the state of things around here right now and I have never seen so many ‘for rent’ signs, especially at this late date (this is a CEGEP and university city and the last to rent, the students, have found their places by now .. we are also a fairly large university hospital city but most of the medical staff in this region do not rent, in favour of buying).

My husband and I were just saying what a mistake it is to be a landlord around here these days and I open up your blog this morning to find you recommending the purchase of an apartment building as a good investment. Are you serious ?! Being a landlord has got to be the worst way of making money here in Québec, where rent controls and many other laws make it extremely favourable for renters and extremely unfavourable for landlords.

Perhaps you should start to call this blog the Vancouver, Calgary, Winnipeg, Toronto blog … after all, there is nowhere else worth living in, right ? and the edge of the world drops into a gaping abyss on either side of this group of cities.

Sorry Garth but whatever you may say, there are regional differences in this country, just like there were regional differences in the US during the 2008 “situation”. How can there not be when our two countries span more than the entire continent of Europe ?

In addition to these financial differences in regions within Canada, there are also personal differences in people’s situations. Selling now, renting for 4-5 years and then buying another home is a tremendous amount of personal stress on anyone, much less a growing family with children etc.. Making such a move based solely on the financial aspects and not taking into account of all of the other, equally if not more important, aspects would be assinine.

Indeed, if you live in Toronto or Vancouver or any of the other larger cities were real estate is currently overpriced, and you are thinking of selling your home, try to speed up the process to take advantage before the economic climate turns sour. However, be aware that you will have to wait quite a while before buying something else at a reasonable price. Prices are notoriously sticky and they may come up quickly but they come down at a much slower pace. Be prepared for this and if the only reason you want to sell is because the bathroom fixtures are the wrong colour then for heaven’s sake renovate and stay put. Don’t be an idiot.

HHHW

#65 neo on 08.20.12 at 8:18 am

#24

Under the doth protest too much category Home Capital Group’s CEO has been all over BNN imploring everything who will listen that they are perfectly robust not combustable Huxtable. Hmmmm. We’ll see.

#66 TurnerNation on 08.20.12 at 8:22 am

#24Short Picks on 08.19.12 at 10:55 pm

Looking at the charts, all three have room to run. ETC to 32, MIC to 20.50, HCG to 53-54.

Beware of shorting – you are one takeover rumor/bid from ruin. Better to buy long term puts. Only MIC has these listed. Or…short and buy some cheap OTM calls as takeover insurance.

#67 DH on 08.20.12 at 8:37 am

Hey Garth, I don’t need a house but I want one because we sold our condo and have a baby on the way anytime now. My plan is to buy a nice detatched house that is not as much money as the other houses that I can afford, and only buy if I can get it below 10% asking price. That way I will have a bit of cushion. For example, if it’s a $700,000 house, then I’ll try to get it for $630,000.

#68 Ret on 08.20.12 at 8:42 am

#61 I’ve also noticed that many condos that fail to sell are put out to rent now. Pretty sad but good for me as a renter :)

Great. Nothing personal, but why would anyone buy a condo for $3-500,000 and live with the same people that were in the dumpy apartment building that they just moved out of?

My daughter’s 575 sf unit in the Waterclub Complex (T.O.) that she rented, had 2 guys living in it before she moved in. There were bicycle tire marks all over the walls by the door in her unit. Bike couriers? I bet that the owners of the luxury Mercedes, Bimmers and Vespas in the underground parking loved their morning elevator rides!

The politics of condo boards, guarantee an ever deteriorating building once the investors show up. “Investors” will refuse any condo board motions for improved maintenance or needed upgrades. They will vote against anything that will affect their monthly cash flow and as a owner actually living there, you will be stuck with your clapped out “investment.”

#69 Tom from Mississauga on 08.20.12 at 8:49 am

Garth, agree on the commercial REIT’s (own H&R) but the multi family not so much. Almost every apartment building in Mississauga has vacancy now. Some lots. On viewit.ca there are 175 building ads in a 900 to 1,200 price range. This is only getting started.

#70 Falconer2012 on 08.20.12 at 8:59 am

“there is no credit meltdown” not yet. How did you think this was honestly going to end? Housing prices sink and that’s it? For all the blindness you see in others… Good grief.

#71 Toronto_CA on 08.20.12 at 9:06 am

Office anecdote du jour.

A young male co-worker friend of mine, about 31 years young, had an apartment he owned and lived in over in Scarborough.

He decided late last year the commute to downtown was too much, so bought a condo at Yonge & Eg. Rather than sell off the Scarborough one, he rented it out.

After 2 months, his tenant was arrested, he’s had to carry it ever since with no rent income and hire a lawyer to evict the tenant, in the process drained his RRSPs and TFSAs and all regular savings.

He looks like he’s aged about 20 years in the last 6 months. I almost feel bad telling him the latest condo doom and gloom report for how much equity he will end up losing in the next 5 years.

#72 DonDWest on 08.20.12 at 9:16 am

#63 House Horny Housewife

“A nice decent property (with a house) in the largest city here (Sherbrooke) can cost as low as $180,000.00 – $200,000.00.”

And in the United States you can get a better house for 150K that isn’t in the equivalent of rural Hicksville en Francais.

#73 mythbuster on 08.20.12 at 9:33 am

Actually, all the condo sales by developers that promise the condo would be ready in 2-5 years, are in fact selling them short. They get current prices, and might buy the condo’s back from the hapless specs when those have to dump the condo and cannot find buyers for them… Lol.

#74 eaglebay - Parksville on 08.20.12 at 9:45 am

#43 Dividend Yield Investor on 08.20.12 at 12:08 am

Things can only get better.
Your predictions are doomed.
Who’s gonna win?

http://www.youtube.com/watch?v=j5onkl2EHV4&feature=youtube_gdata_player

#75 refinow on 08.20.12 at 9:52 am

The irony of Home Trust is they are truly one of very few lenders who are long time historical equity lenders who actually get it……..

They have been lending to the client’s who have been turned down by their Banks way before this recent surge in the housing markets .

Have one of the most profitable portfolios because of this.

But what is different with Home Trust is they lend based on asset first… Location, marketability, pride of ownership, all of these factors are involved with granting of approvals. Loan to values are generally in the 65% to 80% maximum..

But the #1 difference of this lender over all others….. They have bar non, the most aggressive and fast acting collection departments compared to any other lenders in Canada.

Most traditional lenders wait a minimum of 3 months to initiate any action, then take 3-4 more months to start the process, so most homeowners are safe for a minimum of 6 months before any possibility of a sheriff knocking on your door…

Home Trust, they start proceeding after 30 days of delinquency , and understand the power of sale and repossession procedures very clearly. Most homeowners are out within 90 days if no payments are forthcoming.

So aligning your cross-hairs on this particular company as the one that is most vulnerable in a downward trending market may be a mistake.

Go chase another ambulance….

#76 Gunboat Denier on 08.20.12 at 10:00 am

38 AA – Sproat Lake? Just what a well to-do fellow like youself needs:

http://www.realtor.ca/propertyDetails.aspx?propertyId=11671953&PidKey=-599382602

Make them toss in the boat.

#77 45north on 08.20.12 at 10:00 am

GTA Girl: 5,000 homes going in

Knowing the particular lead developer’s character (personally), if he fails expect an epic meltdown, and another trip to a Florida rehab centre for a couple of months

I’d put my money on Florida rehab centres.

#78 Nick on 08.20.12 at 10:03 am

Good luck to all the detractors who will come to see you tonight. They will need it!

#79 Daisy Mae on 08.20.12 at 10:22 am

#57 John: “Harper and his team definitely made the money easy and they made it cheap also. They’re responsible, even they are not accountable.”

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

I agree.

‘Harper and his team’ knew full well what the result of their decisions would be….and now they’re scrambling to undo the damage they’ve caused.

They most definately are responsible.

#80 2centsCdn on 08.20.12 at 10:32 am

#74 refinow
Sounds like you have a lot of shares of House Trust. I think you’re toast.

#81 cramar on 08.20.12 at 10:49 am

Went to visit my wife’s aging relatives in Scarborough & Markham yesterday. Almost 50 years ago my wife’s brother-in-law bought his first house in TO south of Gerrard and east of Woodbine. Today it has a trendy RE marketing name of ‘Upper Beaches’. Five decades ago he said it was a termite infested hood, but owners had pride in their properties so houses were well maintained and lawns manicured. He recently drove down the old street and said it looked like a slum compared to when he lived there!

How much are suckers paying for houses today in the Upper Beaches?

#82 kevsta on 08.20.12 at 10:52 am

But forget the banks. They saw this coming long ago and have massively diversified sources of revenue. Besides, F bought all their dicey mortgages three years ago.

the banks are not immune

http://canadabubble.com/bubble-watch/2384-canadian-banks-not-immune-to-housing-bubble-osfi-official.html

and have already been bailed out once before

http://www.policyalternatives.ca/newsroom/updates/study-reveals-secret-canadian-bank-bailout

Fitch say there is risk

http://business.financialpost.com/2012/05/21/mortgage-risk-biggest-threat-to-canadian-banks-fitch/

and of course with a declining economy comes declining ratings, escalating collateral calls and borrowing rates.. ..well you know how it works..

nobody is immune from what’s coming, not even REITs

http://boombustblog.com/blog/item/6129-the-canadian-real-estate-bubble

how it will play out remains to be seen, we will mostly each be right about some things and very wrong about others.

place your bets.. :)

I hear we all die, too. Bummer. — Garth

#83 luke8929 on 08.20.12 at 11:10 am

The credit crisis in 2008 was banks not doing business with each other because they were concerned about other financial institutions ability to pay it back. The central banks and treasuries stepped in to provide liquidity and backstop any losses. So if you believe the banks are financially stable, the CB’s will forever be able to provide liquidity ie QE then no credit crisis. If however the CB’s can’t or won’t (inflation and currency debasement) then the potential for another crisis is still in play. I always ask myself it came down to those nice bankers saving their own necks or looking out for the little guy?

Well they sponsor cancer runs, little kiddies, sports events, with your money of course but hey they enjoy the great food and drink and look like the good guys so no way would they put themselves first.

There will be no liquidity crisis. Those betting on one will lose big. — Garth

#84 Old Man on 08.20.12 at 11:13 am

TIM V #49 Call the Ontario Real Estate Registrar with all the details, and see what he has to say!!!

#85 Patience Fish on 08.20.12 at 11:17 am

Woke up today to this little gem in the Victoria Times Colonist:

http://www.timescolonist.com/business/Colwood+developer+offers+kind+mortgage/7111142/story.html

Seems a little fishy.

#86 elmsley on 08.20.12 at 11:19 am

” Everything dropped (temporarily) in 2008. And 2008 isn’t coming back. — Garth”

Garth, I was “all-in” until you said that. How can a US crisis affect CA equities but a CA crisis not affect CA equities? Seems like you’re contradicting yourself and saying “this time it will be different”. When big things happen, it seems all indexes get pulled in the same direction.

I said 2008 will not be repeated. It won’t. — Garth

#87 John on 08.20.12 at 11:23 am

#57 John: “Harper and his team definitely made the money easy and they made it cheap also. They’re responsible, even they are not accountable.”

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

I agree.

‘Harper and his team’ knew full well what the result of their decisions would be….and now they’re scrambling to undo the damage they’ve caused.

They most definately are responsible.
——-

As “Babblemaster made more clear ( in context), this is certainly true. The other challenge ( not so comfortable) is to see the theatre in which they have been acting. And even going so far as looking at responsible citizenry who may have acted via “Canadian entitlement”, ignorance or recklessness. There is the concept of fraud, but even that is often not “outright”. There are shades of grey all leading to freedom: 100% responsibility. Maturity as a person and a culture.

And that whole cold reality about human nature…ouch.

I plan to move forward as positively as possible, learning, taking action where I can, and trying to put aside the things fully outside of my control ( which is probably a lot more than I’d want to admit).

#88 Old Man on 08.20.12 at 11:32 am

Keep in mind that qualifying REIT’S were excluded from the Income Trust tax legislation, so Garth has a point to make, but will fine tune it a bit.

#89 thinker on 08.20.12 at 11:36 am

Forget REITs, own LIQ.TO or WB.TO – these will get bought out.

#90 freddy flintstone on 08.20.12 at 11:44 am

Ottawa housing market cooling down

http://www.cbc.ca/news/canada/ottawa/story/2012/08/20/ottawa-real-estate-market-cools.html

The president of Ottawa’s Real Estate Board, Ansel Clarke, said the city has enjoyed a hot and active housing market for 10 years. Now it’s returning to the 1990s.

“I think it’s averaging out and cooling down, and I think it’s going to be a more consistent market where buyers and sellers both have time to make a decision,” Clarke said. There are more houses on the market, and they’re taking longer to sell. It took about 40 days last month. That’s a week longer than at the same time last year.

With the lower-priced homes sitting on the market longer, the more affluent buyers are pulling back too.

Our inventory for the homes over $500,000 are dramatically higher than we’ve seen in the last five years,” said Leam Hamilton, sales representative for Keller Williams Realty.

The owner of a west-end townhouse, Tatiana Proshina, took it off the market after three months without a buyer, and then she put it up for rent.

“Within half an hour, amazing, I had telephone calls, and people asking for an appointment for viewing. I practically rented it out immediately,” she said.

#91 Hicksville Alberta on 08.20.12 at 11:49 am

#75 Gunboat Denier

$3,250,000 for a 6000 foot place on Sproat Lake?

Before this is all over you could probably get one of Catalyst’s pulp mills on V.I. or at Powell River for that kind of money…… lock, stock and barrel

Crazy times and with all the pumping of paper money and credit to anyone with a pulse i guess anything is possible.

#92 John on 08.20.12 at 12:21 pm

Falconer wrote:

“You imagine a wall shielding REIT’s and other asset classes that simply does not exist. A systemic error like this does not stop at one sliver of one asset class, as even recent history would show.

No one comes here for your analysis of other asset classes, but you should know your limitations. Promoting REIT’s and pref shares as some salvation during a credit meltdown is as silly as the readers who ask you if they should buy in d/t Vancouver right now…

There is no credit meltdown. — Garth”
——-

This wall that Falconer refers to may actually exist, through manipulation and it “not being allowed”. This means a non-free market at a level unseen before. That certainly adds some unpredictablity into the equation.

Plus, assuming that we’re talking manipulation ( and maybe there exists an argument for the wall that doesn’t include manipulation), there are accumulative costs associated with that. People can speculate on what those might be…I’d say that’s fair.

Plus, the bet that there is a wall ( if it is considered a bet) may well be the best option. That’s fair too in my opinion.

#93 Dontcallmeshirley on 08.20.12 at 12:33 pm

@ #7 Mike

Can you provide some examples of second-tier mortgage lenders and RE marketers to single out?

—————

First National Financial, Home Capital Group, MCAN Mortgage Corp, Xceed Mortgage Corp. All trade on the TSX.

#94 888realtor on 08.20.12 at 12:52 pm

http://beforeitsnews.com/economy/2012/08/el-predicto-2447846.html

#95 Mister Obvious on 08.20.12 at 12:59 pm

#10 Freedom First

If anyone out there is thinking of moving from ownership to tenancy, post #10 is worth reading several times. Let it really sink in.

Go with the pros and steer clear of reluctant landlords who are struggling with their backfiring ‘get-rich-quick-in-real-estate’ plans.

#96 truth hammer on 08.20.12 at 1:01 pm

As if Canada didn’t have enough hero’s the BOC decides to pander.

http://www.theglobeandmail.com/report-on-business/economy/currencies/carney-apologizes-for-asian-banknote-controversy/article4489633/

This mentality of pandering to voting blocs sort of flies in the face of the recent acknoledgement of the Dieppe disaster that saw thousands of Candadians die on a foriegn beach before they reached votong age. Lets see some of those faces on the $100 bill Mr Carney.

The Liberals were famous for this and found that GG’s appointed from the ranks of the CBC brought in …wait for it….full support from the CBC……..when all along Canadians know that the GG seat is a privelage that is supposed to be earned by giving service to the country….not just railing against the Liberal opposition day after day.

This is Canada……we have plenty of Canadian hero’s…lets keep the places of special recognition open to people who have served…..not save spots for those limousine economic migrants who see no part of joining this country beyond the safety of our passport.

#97 TRT on 08.20.12 at 1:19 pm

Garth, the hecklers can be outed for harassment.

Here’s how you may want to go about it.

1) Put a sign up outside the venue that says ‘harassment will not be tolerated.’

2)Just take a picture of the audience (with a Gigapan camera if possible- very high megapixels). If anyone harasses you, get the cops to match the face image with the ICBC drivers licence face-recognition database. Then you can put a name to the heckler…and press charges if needed…

#98 TRT on 08.20.12 at 1:22 pm

Link to above…

http://gigapan.com/

#99 Humpty Dumpty on 08.20.12 at 1:23 pm

Legal precedent means nothing. Rule of law means nothing. Free speech means nothing. Their own treaties mean nothing. It’s unbelievable. Anyone in the west who honestly thinks he’s still living in a free society is either a fool or completely out of touch.

http://www.zerohedge.com/news/guest-post-west-has-just-become-giant-banana-republic

So who’s the greater fool now!

#100 eagle eyes on 08.20.12 at 1:28 pm

I registered for your seminar tonight. Really looking forward to it. Is there any proof of registration required at the door? I didn’t get any confirmation email.

#101 Mr Magoo on 08.20.12 at 1:33 pm

Hey Garth,

Your event tonight was filled before I could confirm, but I live exactly 2 blocks away from the hotel. I’ll know if it hasn’t ended well if I hear sirens and see an upside down burning car a block away on Nelson St. :)

#102 Realtor # 1 on 08.20.12 at 1:42 pm

You heard Garth now is the time to buy a rental. The demand for rental accommodations will only increase.
Don’t wait for three more years, look we’re it got you today. I bet everyday you say to yourself everyday

“damn why didn’t I buy three years ago, now I need to wait until 2016 to see those prices again, all these years paying rent”

Can’t wait till 2016 only 3 years and 4 months to go.
Losers- your priced out now your complaining.

#103 };-) aka D.A. on 08.20.12 at 2:02 pm

DELETED

#104 Canada Watchdog on 08.20.12 at 2:15 pm

Red Pin MLS listings surge 52%w/w off of last week’s +111% increase to a whopping 8,980 listings in one week.

http://www.theredpin.com/blog/canada/toronto-real-estate-aug-20-2012

Panic!

#105 Inglorious Investor on 08.20.12 at 2:29 pm

An apartment building can be a very good investment if you are inclined and able to be a landlord, or it is feasible to pay someone to manage it for you (and I don’t just mean getting a super). Leverage, taxes and inflation all work for you when you have an income-producing property.

The idea that multi-family income properties may be a very good investment going forward is based on the experience in the US, where the housing crash turned people who should never have been owners back into renters. Perhaps there was a dearth of units during a time when all properties took a hit. The drop in prices, combined with the increase in demand has resulted in a sweet spot where there are now properties with relatively high cap rates and excellent ROIs in many areas of the US.

Will this happen in Canada, or more specifically, Toronto? I’m not so sure the rental market here will be quite as lucrative. For starters, there already seems to be an excess supply of rental units among established buildings. As others have pointed out, there are For Rent signs everywhere. Second, there will a huge supply of condos continuing to come on the market, most of which were purchased as investments and will likely be rented out. Third, more and more people with money are turning to RE over stocks/bonds, so more people are buying income properties, further increasing supply. Fourth, I predict an explosion in basement apartments (even more so than now) as boomers with more house than they can afford turn to this option to fund their retirements. Fifth, right now there is just less money to go around. This is causing a noticeable decrease in what you could call “renter quality.” I’ve seen this first hand: renters who try to scam you; renters who can’t pay; renters on drugs; renters who deal drugs, etc. This last point does not go to supply, but it augurs ill for being a landlord as managing properties and cashflows may become increasing difficult.

In order for the rental market to be truly worth getting into, we will need much more demand to soak up all the new supply I see coming on stream. Will droves of Canadian home owners become renters, like what happened in the US.? I’m guessing the gov and banks are coordinating to make sure that a mass exist out of mortgages does not occur. If Canadians don’t give up their homesteads, then mich more demand for rental units will have to come from immigration and the young.

A better economy with robust job growth would also help.

That’s not to say income properties will not be worthwhile investments or perform relatively well. Just perhaps not a great as many people think.

#106 IM in C on 08.20.12 at 2:36 pm

There are 2 times in a man’s life when he should not speculate. When he can’t afford it, and when he can!
Samuel Clemens (Mark Twain)

Mr. Clemens penned this after he had recovered from a seies of speculative ventures that financially ruined him and drove him to the depths of dispair. He managed to recover by reinventing himself as a stand up commedian. (He also had the help of financier Henry Huttleston Rogers, a principal of Standard Oil; who managed Mr. Clemens financial affairs – There’s a plug for you Garth!)

My motivation for writing this is all the comments I see here today about shorting stock, or buying options.

#107 In Colwood equity = debt on 08.20.12 at 2:47 pm

A great posting at world housing bubble on a developer’s scheme in Colwood, B.C to designate a second mortgage, taken by the developer, as both equity and security for a first mortgage. Words fail. There is a link in the site to an article in the Victoria Times Colonist. Again it is necessary to read it to believe it. http://worldhousingbubble.blogspot.ca/

I believe something similar is going on in Courtenay, B.C. The city in conjunction with a developer is putting an a large subdivision to the south of the city. It appears that the city is paying for the bulk of the infrastructure – sewer, sewage lift station (not cheap!) water, roads etc. – with little hope of ever getting its money back. For example, the city website says the existing homeowners have to connect to the new services at a cost of $25,000 a pop but they can defer for 55 years! This tells me that the taxpayers of the town will be on the hook for the entire bill, especially when you consider the state of the present housing market – bad or worse. The City of Courtenay councillors were elected on a “common sense” platform, which seems to mean that developers rule and the “common cents” come from the taxpayers’ pockets.

Thus the taxpayers of Canada will soon find themselves backstopping not only the “Harper government (TM) induced housing bubble” but municipal government induced housing developments. This will not end well.

#108 Dividend Yield Investor on 08.20.12 at 2:55 pm

#43 Dividend Yield Investor on 08.20.12 at 12:08 am

Things can only get better.
Your predictions are doomed.
Who’s gonna win?

I’m never popular at major market turns! Nothing new here move along.

Dividend Man
Atlanta GA

#109 In GARTH Almighty not God we Trust on 08.20.12 at 3:51 pm

#85 Elmsley

“I said 2008 will not be repeated. It won’t. — Garth”

If the bearded mystic oracle, all knowing, all wise, financial prognosticator without equal, denouncer of parliamentarian peckerheads and peckerettes, former minister of national revenues, Harley riding, sexy Amazon surrounded New York Times bestselling author, lone voice of financial reason crying out in the HELOC infested wasteland of Canada says 2008 will not be repeated then it will not be repeated! Sheeesh, knoweth thou not who thou readest?

#110 Nick on 08.20.12 at 4:05 pm

Garth,

Myself and a partner (both in our mid 20s) have decided to rent in TO and dump a chunk of our savings into 2 triplexes in Windsor over the past year. With each property we put 20% down (207k and 228k purchase prices) and both cash flow just over $500 a month (covers half my own rent!). I personally can’t see Windsor bottoming out anymore than it already has.

Questions – should we keep buying these properties in Windsor? Switch markets? Sell?

#111 Jim Lahey, Sunnyvale Trailer Park Supervisor on 08.20.12 at 4:28 pm

#54 GTA Girl

“… if he fails expect an epic meltdown, and another trip to a Florida rehab centre for a couple of months.”

Get your friend a first class ticket to the rehab centre. He won’t be over it in a few months either. This could be the final project that puts buddy in the asylum for good. Hubris has killed many a developer and businessman. Buddy is riding into the mother of all shithawk storms and by the time it is over, the only four walls he will be seeing are the walls of his padded room in the asylum…

#112 Jim Lahey, Sunnyvale Trailer Park Supervisor on 08.20.12 at 4:34 pm

#109 Nick

Good luck with the rentals Nick but a good rule to follow is not to buy a rental property more than an hour’s drive from you. Hamilton may have been a better location although tenant quality is probably the same as Windsor. Your fear should not be any lowering of prices in Windsor as they are pretty low already but rather tenant problems and the lack of liquidity if you finally decide you have had enough of the rental game. You are still a newbie. You will be tested and the combination of tenant headaches and lack of liquidity may come to haunt you. Hell, I should know with all the misfits I deal with in Sunnyvale. Last night alone, Ricky and Cyrus got into a friggin gun fight…

#113 TakingResponsibility on 08.20.12 at 4:57 pm

“just watch the cap rate, and if you don’t know what that means, buy a REIT instead.”

*THIS IS KEY.

GT rokks!!

#114 futurologist on 08.20.12 at 5:02 pm

next in Canada?

US taxpayers bail out California homeowners, as banks fail to pay their share

The program, known as the Hardest Hit Housing Market fund, is part of a $7.6 billion federal effort to help underwater homeowners in 18 states. California received $2 billion. But when banks and lenders who service loans refused to write down even a small portion of the negative equity loans, California decided to use the taxpayer money to pay 100 percent of the mortgage reduction.

Richard Green, a professor of real estate at the University of Southern California, said it’s not what taxpayers signed up for.

“I think taxpayers would be furious at the idea that everybody gets completely off the hook for this,” Green said. “There are people that say, look, I’ve been a renter all these years, I’ve been paying my mortgage all these years, why am I bailing out these people who made a bad decision? I think the politics of it are very combustible.”

Read more: http://www.foxnews.com/politics/2012/08/20/us-taxpayers-bailout-california-homeowners-as-banks-fail-to-pay-their-share/#ixzz247eQn6pe

#115 randman on 08.20.12 at 5:10 pm

Hey….. Another Albertan

“I stayed with a friend at The Falls tower condos on Douglas in Victoria. If there is an epitome of speculation downtown, that might be it. Achievable prices in those two buildings are down a solid 25% since the summer of 2009. $750k+ for a rat maze of a condo layout overlooking the volleyball courts above the Sticky Wicket pub? That’s my new definition of insanity. Oh. And not a single stall of visitor parking in the complex. You’re basically forced to park underground up the street at the library.”

Too funny! I managed that place last year ….you are bang on for the most part”

#116 futurologist on 08.20.12 at 5:13 pm

Big jump in the number of new listing in the GTA with 8,980 new listing up from 5,907 last week.

http://www.theredpin.com/blog/canada/toronto-real-estate-aug-20-2012

#117 eaglebay - Parksville on 08.20.12 at 5:34 pm

#78 Daisy Mae on 08.20.12 at 10:22 am
“‘Harper and his team’ knew full well what the result of their decisions would be….and now they’re scrambling to undo the damage they’ve caused.

They most definately are responsible.”
_______________

What, nobody is responsible for their own actions anymore?
That’s it. Let’s blame the government.

#118 randman on 08.20.12 at 5:42 pm

XRE also dropped like a ton of bricks in 2008. Why would you want that?

Everything dropped (temporarily) in 2008. And 2008 isn’t coming back. — Garth

Son of 2008?

Bride of 2008?

#119 KG on 08.20.12 at 5:53 pm

“Anybody buying property almost anywhere in the country in the next year, who plans on owning it for less than half a decade (or possibly much longer) will lose money.”

Does not go with the other sentence: “All this means prices will correct, then flatline or melt in a process you should expect to take several years”

Of course it does. I am always irritatingly consistent. — Garth

#120 jess on 08.20.12 at 6:01 pm

…anger grows in Illinois at Bain’s latest outsourcing planThe Sensata plant in Freeport is profitable and competitive, but its majority owner, Bain Capital, has decided to ship jobs to China – and forced workers to train their overseas replacements

http://www.guardian.co.uk/business/2012/aug/10/illinois-workers-bain-outsourcing

or the mechanical kind

Skilled Work, Without the Worker

By JOHN MARKOFF
Published: August 18, 2012

http://www.nytimes.com/2012/08/19/business/new-wave-of-adept-robots-is-changing-global-industry.html?pagewanted=1&ref=general&src=me
===

i wonder how much energy goes into these plants?

#121 Old Man on 08.20.12 at 6:17 pm

Garth have a blast in Vancouver tonight, and heard that Mandy paid off the front desk for your room number, as wants you badly, but is too young and beautiful for you to handle, so lock your room door tonight with utmost security, or will you forget?

#122 P & T S on 08.20.12 at 6:19 pm

Dera Nostra;

If Obummer “has to go” then we’re left with Mr Tax Avoidance MR.
http://www.thedailybeast.com/newsweek/2012/08/19/niall-ferguson-on-why-barack-obama-needs-to-go.html

And on the basis of stated policy, MR seems somewhat more inclined to start WW3 earlier rather than later.

Whilst we too can’t stand the very well-connected, very “I’m So Smart” current incumbent at all, we’d prefer to be alive a little bit longer, so hopefully the US Population might consider the lesser of the two evils, since there’s no doubt that both of them are not going to be good for the US, and by extension the Planetary economy and wellbeing!

The Ross Iceshelf is starting to look quite attractive as a place to retire to – sod the weather, at least you’ll be away from most of the fallout!!

#123 jess on 08.20.12 at 6:22 pm

can it happen here?

June 05, 2012
PRESS RELEASE
NYC DEPARTMENT OF HOUSING PRESERVATION AND DEVELOPMENT INSPECTIONS SUPERVISORS AND THREE REAL ESTATE DEVELOPERS ARRESTED ON BRIBERY CHARGES

Federal and New York City law enforcement agents and officers today arrested the Director of Construction Services for the New York City Department of Housing Preservation and Development (HPD) and three others on bribery charges in connection with a widespread scheme to bribe high-ranking HPD officials in return for lucrative construction contracts, and a fifth defendant has been charged with soliciting and receiving illegal kickback payments from a general contractor on an HPD project. Michael Provenzano, HPD’s Director of Construction Services, and Luis Adorno, formerly an inspections supervisor in HPD’s Department of Architecture and Construction Engineering, as well as real estate developers and contractors William B. Clarke, Panayiotis “Peter” Papanicolaou and Placido Rodriguez, will be arraigned this afternoon on criminal complaints before United States Magistrate Judge Joan M. Azrack, at the U.S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York.1

http://www.justice.gov/usao/nye/pr/2012/2012jun05.html
================================
As part of Mayor Michael R. Bloomberg’s 10-year housing plan, the city produced 1,676 new middle-income housing units in 14 developments from 2006 to early 2008, and 26 more were in the pipeline. The completed ones have been built by nonprofit organizations and private developers with the help of various city subsidies. Most have annual income restrictions that range from $56,700 to $124,075 for a family of four.
==============
poor quality

In Affordable Housing Program, City Oversight of Builders Is Found Wanting

http://www.nytimes.com/2012/08/20/nyregion/new-yorks-oversight-of-builders-in-affordable-housing-program-is-criticized.html?_r=1&ref=affordablehousing

#124 GTA Girl on 08.20.12 at 6:49 pm

Mr. Lahey, the developer isn’t exactly a buddy of mine. But a well known explosion-waiting-to-happen.

It may be his ScarFace moment.

#125 LSC on 08.20.12 at 7:01 pm

Garth;

I’m delighted to see you’re planning to keep this blog going for the next few years……at least your comments suggests that.
“But don’t come round here bitching in 2016.”

Good to know!

#126 Old Man on 08.20.12 at 7:05 pm

Taxation is a killer, and avoid such to dance around it all, and the Tax Act is a must read, and years ago found a loop hole to bring in foreign capital that was exempt for withholding tax with mortgage money that even the experts missed. Yep, as if a mortgage was drawn with a 5 year term or longer, it was exempt from from all withholding tax, and did not have to be reported, so made some money with this knowledge.

#127 Form Man on 08.20.12 at 7:29 pm

#102 DA

poor DA. the Kelowna market has become quite dead in the last few weeks, and passing time in the dog days of summer just isn’t the same when he can’t post on Garth’s blog……….

#128 Sparky55 on 08.20.12 at 7:31 pm

Bad HAM?

http://www.calgaryherald.com/business/China+tricks+socalled+economic+criminals+into+returning+home/7113821/story.html

#129 TurnerNation on 08.20.12 at 7:31 pm

Ha, one of the Ritz Carleton units finally sold. Huge markdown and DOM.

183 Wellington St W 2505 Sold: $900,000
Toronto, Ontario M5V0A1 Toronto C01 Waterfront Communities C1 List: $995,000
Orig Price: $1,275,000 Taxes: $0/2012 90 % List
SPIS: N 120-18-T DOM: 220 Contract: 1/10/2012 Sold: 8/17/2012

#130 Old Man on 08.20.12 at 7:33 pm

I will never forget getting an accessment from Tax Canada that owed them this huge amount of money, and hit the phone in Winnipeg and called BS, as love a fight with the Tax Man, as just might know more than them. I said you owe me money, and will not pay, so said you must pay, and now what? I told her wanted a 3 year audit; she said this has never been done before from a citizen, and said it will become a first, so will pay in full for now, and it was kicked up to a senior auditor. It took about 5 months for a 3 year audit, as my situation was complex, and got my big cheque in the mail; never fear the Tax Man.

#131 Bailing in BC on 08.20.12 at 7:42 pm

Just got a call from a friend with an extra ticket for tonight. Looks like I’m off to the big city. See you there blog dogs.

#132 Junius on 08.20.12 at 8:16 pm

#116 Eagle Bay Parksville,

You said,”What, nobody is responsible for their own actions anymore?
That’s it. Let’s blame the government.”

She said they were responsible for THEIR actions in regard to creating the housing bubble.

Of course, that a Conservative government would intervene in the economy and screw it up doesn’t fit with your ideology but that is what happened.

#133 Junius on 08.20.12 at 8:19 pm

#95 Truth Hammer,

Are you trying to blame the previous Liberal governments for the statements that Carney made today? Are you going to blame them for the weather as well?

It is clear to everyone how much you hate them but at least try and show some objectivity once in a while. Your lack of sanity is showing.

#134 jess on 08.20.12 at 8:29 pm

this is pathetic

“state-subsidised so-called “mini-jobs.”
…”One out of five jobs is a now a “mini-job,” earning workers a maximum 400 euros a month tax-free. For nearly 5 million, this is their main job, requiring steep publicly-funded top-ups.

“Regular full-time jobs are being split up into mini-jobs,” said Holger Bonin of the Mannheim-based ZEW think tank.

And there is little to stop employers paying “mini-jobbers” low hourly wages given they know the government will top them up and there is no legal minimum wage.

http://www.reuters.com/article/2012/02/08/us-germany-jobs-idUSTRE8170P120120208

#135 Mark W on 08.20.12 at 8:33 pm

It will be interesting to see how much coverage you get in the next day editions of the two Vancouver newspapers.

(1) The Vancouver Sun &
(2) The Province.

My guess is zero or next to zero.

They are too dependent on advertising revenue from the real estate industry.

If you do get any coverage (?) you will be portrayed as a nutter to be counter-balanced by “experts” in the real estate industry.

I would lay pretty good odds.

Not a value judgement just realpolitik.

#136 TurnerNation on 08.20.12 at 8:53 pm

I mentioned, it was too soon:

Today:

ETC up 4%
MIC up 2.2%
HCG up .5%

#137 wrong on 08.20.12 at 8:56 pm

Everything dropped (temporarily) in 2008. And 2008 isn’t coming back. — Garth

Wrong…coming back this fall!

Just like it did last year – which was a fine buying opportunity and a time to bail out of gold. — Garth

#138 Daisy Mae on 08.20.12 at 9:38 pm

116eaglebay – Parksville on 08.20.12 at 5:34 pm
#78 Daisy Mae on 08.20.12 at 10:22 am
“‘Harper and his team’ knew full well what the result of their decisions would be….and now they’re scrambling to undo the damage they’ve caused.

They most definately are responsible.”
_______________

What, nobody is responsible for their own actions anymore?
That’s it. Let’s blame the government.

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

Once again….the feds made it easy. For the newbies to make stupid choices. So yes, I blame the government. They knew what they were doing — or thought they did — and didn’t give a damn about the outcome. Until it backfired…

#139 Nostradamus Le Mad Vlad on 08.20.12 at 9:51 pm


#121 P & T S — Bongjour!

“And on the basis of stated policy, MR seems somewhat more inclined to start WW3 earlier rather than later.” Aahhh yes, WW3 to be played at Lord’s Cricket Ground. East is batting first.

However, due to MR’s illegal collection of funds for his campaign while in Israel recently (US Constitution prohibits any politico from garnering money outside the US), it appears MR has disqualified himself from running.

No doubt that will please the Soros / Obomba team, but it also leaves open the possibility of Jeb Bush running, with Paul Ryan as #2.

Even though Jeb said he wasn’t interested, everyone knows that politicos lie — they have to, it’s part of their basic training for a life of power.

Many things will happen between now and the election. The election itself is a moot point, as it doesn’t matter who gets in, they’re all serving TPTB who are currently putting the world on an austerity kick, so they can prosper more while we urchins are fed less.

So I agree with you. The Ross Ice Shelf, by way of polar shifts, CC and anything else that sounds to good to be true, will end up being a nice, large island in the middle of the Pacific, excellent for surfing and retirement!

#133 jess — “And there is little to stop employers paying “mini-jobbers” low hourly wages given they know the government will top them up and there is no legal minimum wage.” — A nice way of saying how TPTB are bankrupting countries one by one. Endless wars help as well. See following — Pussy Galore “This furor over Pussy Riot is the start of the campaign to demonize and destabilize Russia ahead of the war between the US and Russia that Israel covets.” wrh.com, because 10:49 clip Involves the Rothschilds.
*
Different Chart of the Day — Americans living at or blow the poverty level; Greece and Ireland “It needs to be remembered that Greece went through two elections [as did Ireland]. The anti-banker faction won the first one, then the bankers’ candidates refused to form a coalition government, forcing a second election which Mr. Samaras won amid vote fraud that included burning whole ballot boxes in districts opposed to the bankers.” wrh.com; FB and Apple with other links; Enslaved by Banxters Whup me good, Massa! Hurt me more! Like an apple rotting from within, the west is doing the same; 2:12 clip Drought uncovers ghost town in Indianapolis; The Euro or democracy Damned if you do, damned if you don’t.
*
As Above, So Below has a new meaning — different levels of govt. serving Agenda 21, and Agenda 21 Revisited with bullet trains; Facebook Great excuse not to use FB; Ecuador and Iran Improve ties, stuff the west; Bon voyage, Voyager 1; CO2 emissions drop. Tell me again about The Fairytale of GW; Illegal Aliens Obomba’s ticket to repeat unless TPTB decide otherwise.

#140 daniel on 08.20.12 at 9:58 pm

I question your journalistic integrity. I cannot find any image of Sandra R. in a tube top. I demand proof.

Thank you

#141 walter safety on 08.20.12 at 10:10 pm

#74 #79 – Home Trust
I know a repo man for Home Trust , # 74 is right that’s how they do it . It speaks to their whole process,their paying attention .
My friend is surprised by the number of people who will go right to the repo date then come up with the cash , three months mortgage money , costs etc . This also speaks to the type of client they have . A salaryman would lose their house but self employed , commiss, professionals , have resources they can tap .
If share price breaks down it a buying op.

#142 Old Man on 08.20.12 at 10:18 pm

I see my friend MISH is freaking out about robots, and hope he is ok, as says the robots will take all women out of the workforce, so gals get back to the kitchen and cook us men a meal.

#143 Carpe Diem on 08.20.12 at 11:13 pm

“They have zero exposure to residential houses, and have given investors outstanding returns since I started suggesting this to you three years ago.”

Garth, I see plenty of new malls in new areas in Ottawa surrounded by plenty of plastic boxes as homes and a majority of folks with excessive debt.

Won’t local strip malls with new National Bank outlets, mini-petstores, and super-expensive pizzarias take a hit? Will this not happen nationwide and as a result affect the REITs holding those buidings?

Just wondering….

#144 KG on 08.20.12 at 11:20 pm

@ #118

“Of course it does. I am always irritatingly consistent. — Garth”

“All this means prices will correct, then flatline or melt in a process you should expect to take several years” -> Implies -> For several years the prices will be lower than today.

“Anybody buying property almost anywhere in the country in the next year, who plans on owning it for less than half a decade (or possibly much longer) will lose money.” -> Implies -> There is a possibility in five years the property price can be same as today.

How are the two statements consistent ?

Hope you had a good time in Van city tonight !

#145 John on 08.20.12 at 11:29 pm

Junius wrote:

John (from previous post),

Please explain the role of derivatives in creating the Canadian housing bubble. As this something of a “hole” in my arguments I am eager to learn.
——–
If you want to get up to speed on this, it’s best to jump on the net and start reading. For me it has taken 4 years. Prior to that I had absolutely no clue. Along the way of course there are the doomers and freaks, techies and salesman. It’s not easy to realize what’s really happening these days…for anyone. In my opinion it helps to understand what isn’t happening ( such as the housing bubble cause being brought on by local factors).

We can safely say that the world has been flooded with cheap money…using derivatives. This isn’t that complex, but you may hear some surprising things like “derivatives are for hedging” etc. It’s meaningless.

Derivatives mean lots of speculation and little savings. The world has become a casino. Canada is simply part of that. The shift bosses who happened to be at the wheel just did nothing…how could they? Goldman Sachs insiders were already entrenched in the financial system and throughout the world central banking system. Gamblng and the sale of cheap money to muppets
( as well as making earlier buyers think that they had equity) was the game.

Carney was even sited for The Bank of England, and was already all tied up in the European Stability Board. A lower level technocrat, rubbing elbows with Mario”three card” Monte and Draghi. Just worker bees. Goldman Sachs all of them.

Look into what derivatives have done for Canadian banking. Been to Manhattan? Why are Canadian banks everywhere? Seen what the pension funds are doing? The casino doesn’t have borders anymore.

It was said here that the Canadian politicians are not doing it on purpose…and I’d say that’s true. They are not evil…in fact they may not even know what’s happening or who their bosses actually are. Yeah…that seems impossible, but it could be true.

Merkel…a really low level player it turns out. She doesn’t KNOW about Canada and the bubble. Merkel is a muppet too. I find that really hard to buy actually, but I’m starting to believe it. Just based on what she’s saying.

Derivatives have to do with leveraging…that’s what got Canada. Since it’s not a political place and citizens are barely involved in government, it was easy to sell them debt. They already were shoo-in’s for not knowing how the financial markets worked…and what their houses were going to be used for ( leveraging).

Thing is, the interests that used Canada know that deleveraging is not possible ( 28 trillion need to get to 60% of GDP ….the US is parked at 350%….there was no 2008….2008 was supposed to be a deleveraging and it didn’t happen).

Deleveraging not possible? Wow. So what happens to Canadian real estate?

Get on the net, research…get informed…post some links. It takes a long time to absorb the big picture because, for one, it’s unbelievable….and it’s just too simple to believe also.

It’s just a network of interlocking local parts grinding around a few thousand people taking advantage of the confusion. International derivatives are the blood of the system right now. Without the fraud? No Canadian real estate bubble.

#146 Kasia on 08.20.12 at 11:33 pm

We’ve been rentung for 3 years. After first 2 years we moved b/c landlord was thinking about selling and didn’t want to renew our lease (said he lost hus job). Listed after we moved at $519K. Needless to say he ended up renting it out again (called us first if we would come back, as if!!!). He tried again a year latter, this time at $499K….5 weeks latter, the for sale sign still on his front lawn. Opsy daisy I guess.

#147 Joke Anagan on 08.20.12 at 11:35 pm

The okanagan in for a wicked pranging. That should wipe some smugness off a few workmates faces. Realturd says an offer is imminent on the so called asset. Dig it, some fool is going to pay us 50,000 dollars to take on all our debt. That’s unreal. I’ll never do it again.

#148 david on 08.21.12 at 12:16 am

Nice presentation in Vancouver Garth. I liked it. Knowing the paper assets of things in stocks myself. I like your balanced portfolio of preferred shares/bonds/energy/REITs. Great way to preserve nest egg as you mentioned. Real Estate seems to be a dangerous asset class to invest in next 3-5 years.

I got a Q though with one area though you steered clear from. I remembered you mentioned precious metals, most notable Silver Bullion will not be a good investment. I follow other economists/managers on king world news- such as Peter Schiff, Jim Richards, Marc Faber, Steven Leeb, Rick Rule, John Embry, etc all seriously recommend Precious metals as a core asset in your portfolio. In fact, Basel banking rules now state gold to be a tier 1 asset starting Jan 1, 2013.

I was wondering did you not recommend precious metals from your part because its area that you’re not as familiar with? Or you don’t prefer yourself? With all these other major economists and George Sors investing in Precious metals, along with all the debt created from quantitative easing done, and history of failling fiat currencies, Precious Metals you’d think will need to be readjusted to higher levels as forecasted? History for example has made silver readjust to its traditional 16 to 1 ratio. What’s your take on the history of fiat currencies and the effect it has on precious metals? I include them in my portfolio of REITs/Energy/preferreds/bonds, etc.

Thx

#149 Tony on 08.21.12 at 1:57 am

Re: #11 Party On Garth on 08.19.12 at 10:30 pm

Unload all Canadian REITS and if you’re good at sizing up companies pick a few that will go to zero and short them dividend or no dividend. Only a total idiot would own Canadian REITS.

#150 gentleInvestor on 08.21.12 at 7:15 am

Surprised! The writing style and the voice don’t seem to match…

#151 KG on 08.21.12 at 10:15 am

@ #150

Ditto.

#152 Dupcheck on 08.21.12 at 11:13 am

The problem with Canada is its own populations sometimes. When times get tough the new immigrants equipped with passports will flee and go back to their backup nest in some corner of the world. Do you remember the half million Lebanese that came back to Canada after a conflict in their home country a couple of years ago.

A lot of the immigrants rent and if they decide to go, residential REIT’s could suffer as well.

#153 Bob on 08.21.12 at 1:22 pm

Predicting can be very tricky at the top of any market and i am sure many dismissed your comments in 2009 concluding that you were horribly wrong by 2011. Like any investment, markets can be irrational far longer than anyone cares to believe and this is precisely what happened. The good old Canadian Government decided to protect the real estate market in 2008 with 40 year mortgages and relaxed lending policies and in essence simply kicked the can down the road. I am sure if they could go back in time they would have decided against adding a turbo charger to the real estate market.
Had a converstaion with a mortgage manager for a Canadian bank yesterday and she confirmed much of what you have talked about. The mortgage business has come to a standstill, the new banking regulations are in full force and qualifying is tighter than he has ever seen. The other factor is Banks now insist on appraisals on all properties and surprise surprise some of these appraisals are coming in 10-15% below assessed values and deals are collapsing on this issue. So i asked if i bought a house with 35% down i am sure the bank would wave appraisal and the answer shocked me. Absolutely not even with 40% down we have to have the property appraised. No matter what the banks say about a soft landing their policies are indicative of fear of a very hard landing and IMO thats exactly what they are preparing for. Took a trip into Kelowna last week and was shocked how totally run down it has become and it reminded me of the 20/20 profile of the subburbs of California. i was shocked by the number of for sale signs and even more shocked at the number of houses with toys displayed in the driveways with big for sale signs on them as well. I believe the prices have just started their decline and we are in phase one of a deep correction and this phase is based on recognising it has become a buyers market out there. Phase two begins when you are told your property is worth $400,000 but if you want to sell it in a reasonable timeframe it should be priced at $360,000. Once this starts then the comparables indicate the home was truly worth only $360,000 and the next seller of a $400,000 home is told your home is worth $360,000 and here is why. However this home was newer and had this and that so if you want to sell in a timely manner i think we should keep it under $350,000. Now imagine this happening multiple times and it is not difficult to understand how your home value could drop 25% in a heartbeat. Phase three is the panic phase where homeowners have to sell and are just happy to get out from beneath the mortgage, Remember the dollar down days of 1980 – 1981? Two differences today, in the last major correction owners could do quick claims and were not responsible for losses incurred on a foreclosure and could simply walkaway with no further liability. Well those days are gone and if you are underwater and walk today the financial instititution can sue you for the loss and trust me they will grab every asset you have prior to marching you into the Courts. The other difference is rates were 18-21% back then and although it is highly unlikely to climb back there the price of houses today compared to then is 5 to 6 times more expensive so if you look at debt load we are probably sitting at the equivilent of 18% today. ( 6 x 3% = 18 ) Has the tipping point been reached again? No one knows for sure but the market always gets it right and in my view the market view is screaming something is horribly wrong and the Banks want no part of it and will do everything in their power to issue only very low risk mortgages.

#154 jess on 08.21.12 at 3:29 pm

what was 30% spec is 70%

Commodity derivatives
The growth in speculative trading is largely the result of new investment products that channel savings into commodity “investments” (Exchange Traded Funds or ETFs). In fact, these products are channelling savers’ money into derivatives. With commodities closely linked to food and fuel prices, vulnerable households suffer the most and the consequences are serious. The chart […]

Read more

http://www.finance-watch.org/2012/07/commodity-derivatives-resources-page/
commodity dervivatives-contracts to bet
mifid 2 – limits
By Greg Ford
Head of Communications, Finance Watch
http://www.finance-watch.org/2012/07/libors-lesson-we-have-to-manage-the-public-interest-role-of-banks/#_ftn1

#155 Canada Disaster Story on 08.21.12 at 11:56 pm

Interesting comment by Garth “What we all require isn’t a house, but money. And while 70% of families own real estate, half of us have no savings. What the hell are we thinking?” I agree totally on house prices significantly overvalued especially in the major markets. A few comments, one would think that baby boomers or people who bought pre 2000 in most places in Canada would be exempt from loosing on equity as house prices were significantly lower at that time. I am curious of the approx percentage that are i this category. The people who will be taken to the cleaners will be buyers post 2005 and perhaps the baby boomers who upgraded or have second homes etc. The ones who sold over the last few years or have their home as residence only pre 2000 without any speculation behavior should be financially sound in that regard. It will of interest to the percentage out of the 70 percent who are in that other category and technically underwater.

#156 cynically on 08.22.12 at 1:47 am

#123 Jess — yes it could happen in B.C. at least, but the outcome would be different-guaranteed! The 3 guys lose their jobs but keep their pensions and get a silver parachute out the door – well they wouldn’t be high enough in the priority system for golden ones. However don’t suggest trying them because it will cost us all as the government will offer to pay their legal costs. That’s how it’s done in B.C.