Some months ago I told you about a hotshot young lawyer who bought a hotshot house in swishy North Toronto for $1.25 million. He put 5% down, tacked on a few closing costs and mortgaged it for $1.2 million. Now he had a driveway for his leased BMW. Because he made $300,000, but had no actual money, the bank gave him the down payment in the form of a cash-back loan, and Ottawa guaranteed his borrowing.
Oh my, how things have changed.
Today the same house no longer qualifies for CMHC insurance, since the feds cut off $1 million-plus properties. That means a 20% down payment. Plus, quietly, bankers have bowed to pressure from the regulator and adopted new loan-to-value limits. In Toronto, that’s 80% to a million, and 50% of the rest. On a $1.25 million house, the max is $925,000 in financing. And there are no more cash-backs. It all means, with closing costs, the buyer now needs $375,000 in cash.
This is probably why there are no more multiple offers in the hood. Seven months ago the house would have fetched 15% above list. Not it’s likely to get 10% less. That’s a decline in street value of $312,500, or 25%.
This is why projections from Bay Street economists that real estate will have a ‘soft landing’ of 5-7% are so yesterday. Just 100 days after F tanked amortizations, with CMHC and the bank cop ushering in new regs, real values are in retreat. High-income buyers – even lawyers making three times the average family wage – are now booted out of the market because of a credit restriction.
Meanwhile, as I described yesterday, the bottom end – condos, mainly – is being severely thumped by the death of 30-year amortizations, the end of cash-backs and higher standards for virgin borrowers. Buyers without savings who last year could buy a condo more easily than a Kia and now forced to retreat to mom’s basement. Oh, the infamy.
Conditions are changing quickly, if you haven’t noticed. The Bank of Canada’s ‘slow-growth’ rhetoric yesterday is something you’re going to hear a lot more about. The world is tilting more towards deflation than inflation, and in Canada real estate will be the fall guy. This is one reason why, at the Ol’ Time Revival Meeting last night in Toronto, I let people know a 20% price reduction across the GTA is now a distinct possibility. Some hoods will be more impacted than others, but the downward momentum is now obvious.
But, Angelo asks, what if you know a price dump is coming, and you can’t sell, for wife reasons?
“My situation is the wife refuses to sell as she likes the “security” of owning our home (condo actually) and the low monthly carrying cost “if anything were to happen”. We’ve been mortgage free for about 2 years; purchased the 1400sqft. condo in 2006. We have many “discussions” about why we should sell now, but she gets very emotional at the thought of moving or selling. At least she agreed to come to your talk last night.
So… if the issue of selling will cause more marital strife than it’s worth, should I instead be looking at leveraging RE to take advantage of the low rates, tax deductible interest, and try to mitigate my RE asset deflation with a balanced/dividend yielding portfolio? (Another relevant financial metric is that we have almost $400k saved and invested between my wife and I in RSPs, TFSAs, and other unsheltered accounts including the Orange Guy’s Shorts.)”
Well, Angelo, sounds like you already got the memo about diversification and liquidity. Having $400,000 in financial assets is good, but not in the OGS. There’s no longer any such thing as a ‘high-interest savings account,” since every one is paying less than inflation and yielding fully-taxable interest. Why would you not have that money in bank preferred shares, or quality real estate investment trusts, or even a low-cost dividend or monthly-income fund?
As for the equity in your paid-for condo, a fifth or a quarter of it could melt away over the next year or two, and never return. If the place is worth $500,000, that’s a loss of at least $100,000 in capital gains tax-free wealth. Is that what your wife means by “if anything were to happen”? How would she feel about holding financial assets and losing a quarter of them? Would she ever forgive you?
At least you could counter the decline and loss in equity by removing some of the money and getting it growing. A home-equity line of credit would let you access funds and get tax-deductible interest at the same time. Hopefully your bank could give a secured line at prime (3%), so after taxes it might only amount to 1.8%. If you can invest in stable bank preferreds (just an example) giving 5.2%, payable in lowly-taxed dividends, then the net spread should be about 2.5% in your favour. A diversified portfolio with a 40/60 fixed/growth split would likely do much better, but with more volatility.
Should you do it? Ask her. There’s no rate of return which can compensate for a busted marriage.
But I’m sure after last night, hallelujah!, she is saved.
210 comments ↓
Garth…Britain’s Financial Services Authority just cracked down on reckless lending. This is getting trendy.
Source for the new loan to value limits please?
Angelo it is time to see a divorce lawyer who can make a good settlement for you before your wife hoops you first, as buddy you are in big trouble.
The Geo Metro in the background buys gas, but the BMW is the guy that steals it? I guess we could have all guessed that.
It’s all over
nice driving! must have been a RE pumper with a hot lead
“… leveraging RE to take advantage of the low rates, tax deductible interest, and try to mitigate my RE asset deflation with a balanced/dividend yielding portfolio?”
Garth, I think this guy was actually asking should he dump his HELOC into the stock market. Did you just say thats a good idea in your response?
Nice job and nice hummer Garth, I would have bought some oil stock if I would have known it was out!
Grow a pair son. Explain to your wife life is not the Disney movie she was raised on rather its the Kubrick one we are living.
20% decline? That’s already happening in many parts of Vancouver and the party just started :) Will Torontonians really be so lucky? Hm …
Angelo says that he paid off the mortgage on a relatively big GTA condo in only four years, while simultaneously maintaining savings of over $400k? Why would someone with that kind of cash-flow be looking for advice on a blog?
The only issue I see with someone selling a paid off condo to capture the gains is having to rent some place to live in the interim. There is a cost to harvesting those capital gains and really they were paper gains you never really had anyways. Anecdotally, I’d say stay put and enjoy your low overhead. Take the excess cash you make monthly and pay a mortgage into your investments.
the good news, those who are renewing their mortgage will a lower rate.
Angelo is sitting pretty. But getting a wife to part with her “nest”…….extremely difficult. Societal brainwashing has done its job. Relax though Angelo, Garth gave you great advice. Take it.
Million-dollar tear-down bungalows are alive and well in Leaside:
1-bdrm, $925k
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=12534009&PidKey=1029909955
2-bdrm, $1.2M:
http://www.realtor.ca/PropertyDetails.aspx?PropertyID=12533969&PidKey=670345159
After tearing em down and putting a new McMansion, you’re looking at another $500k on the purchase price… completely sustainable, just like Vancouver.
Fun day on the S&P today – down 20 points on the day (1.4%). Get used to it – we have plenty more earnings and warnings to come. Perhaps due for a relief rally, but this isn’t the end. Yes, I’m the prognosticator of doom.. I like to think of it as the inevitable truth. QE won’t inflate us out of this – it’s merely offsetting the destruction of money in real estate, and with the dollars flowing to bonds and not to the consumer, there is very little inflationary pressure to keep inflating the markets. Election and QE madness will soon pass, and the business cycle will take over.. Prepare yourself for the ride ahead!
Meanwhile – AAPL underwhelms with its new “look – it’s the same thing as ever but a different size!” product and plunges 20 points after the close. What happened to innovation? Korean alternatives, as the ads suggest, have overtaken in terms of features. This might be AAPL’s “RIM” moment..
Angelo has money coming out of his ass. He doesn’t need to write to Garth so much as show up at Garth’s office and hire him.
http://www.moneyville.ca/article/1276144–investors-move-to-sidelines-as-toronto-condo-market-cools
Interesting to see someone state out loud in the media that investors make up 75-95% of condo buyers in the GTA, and that they stopped buying.
Condos are going down.
Great to see your live seminar Garth.
Enjoyed it very much.
Meeting with a fee based advisor tomorrow to put your method to work!
You shocked me when you said “you don’t like stocks…not even if it were Suncore”
With all the upward momentum and bull market talk of Suncore I would have thought you would have been a supporter?
Anyways great show tonight !
Toronto loves you.
Angelo, your wife might be right. A paid of home gives you cash flow freedom to be more aggressive with your other assets – it’s a decent risk management plan. I assume that since you’ve been there a while you know the place is well built and managed, another risk-reduction. Plus, you haven’t told us how your living costs compare to renting something comparable. Or how secure your income is. There are more factors here than you’re telling us.
I’m back from GarthMania 2012 – GTA edition.
(I didn’t know Scott is a Blog Dog?)
At 6:15 the room was already 1/4 filled. Garth walked purposely a few times around the room. Presumably, on mullet patrol. Thankfully the event went off without a hitch.
A wag reporter asked Garth: Are you a mod or a rocker. He replied: Neither, I’m a Talker!
Later, more than a few eyebrows were raised when it was suggested that the weblog was becoming
“more popular than jesus”.
Brazen female boomers hurled their most private and intimate of items – their porfolio statements – onstage, with which hopes it would be looked at by our forum host.
People clamoured for something, anything – a handshake, autograph, or lock of hair.
Then, from the parking lot arose such a clatter. We lept from out seats to see what was the matter. Alas, all that remained after a night of toil was a warm puddle of Harley oil.
Into the light of the dark black night…?
Deflation is real
I bought an item on ebay yesterday, or rather I had the highest bid and won the auction. Immediately after the close the seller emails me that the price didnt go high enough, he needed 4x the amount that the auction went for, because he paid twice that amount for it 2 months ago. He hoped I understood.
I tried to reason with him, that this is now a hard asset deflationary period, that this auction proves the items current market value, and that I’m sorry he over paid for it, and that boutique audio is a very poor long investment strategy. Needless to say he didnt understand.
It really seems like the whole thing is about to bust at the seams!
So I go to the Gartho show, show up at the bar no script. no turner nation to great me. my five fans where there.
An options currency trader and his buddy, an re agent. Albanian, I’m a 1//2 Serb. hell we got along.
A lady just slightly past prime.,but hell you where still sweet. and a couple from Hamilton. I wish guys well.
My son stayed for a bit buy split, 6 4 brad pit look alike, was there for protection Me and the options dude and albainin went to bar, I’m sure the chick in the grey boots noticed my son.
At the end I was going to split board out of my mind. No offence great one but you can’t compete vs. online poker on the Galaxy 3 phone.
So Gartho is giving away books. and says smoooooooo something, a bit of a dis
The crowed goes wild. I say Fking hero worshipers.
Well that’s it I stop in my tracks. Turn and head for the stage. Gartho hear you don’t do Orbs. (he knows what I mean) smoking man here. His Body language terrified.
Hello he says, scared or surprised that I would show, I don’t know.
Me I’m looking around, I’m shiting my paints thinking LaughingCon is going to hack me to pieces with a kill bill sword.
It all worked out, The options trader got me a good buzz thanks.
And I shock hands with the great one. The shit head is actuly a good dude. Pleas don’t take that as sucking up. Know one is better than me.
all in all a good night.
Anyway Gartho glad it went well for you.
#2 Dontcallmeshirley on 10.23.12 at 8:54 pm
Source for the new loan to value limits please?
The last time someone asked the G-man for a source, he told us that he just makes this stuff up.
It’s certainly easier and faster than researching + citing.
insert stupid smile icon here
Good information and entertainment value tonight!
I loved the lady who asked about where your data came from. I found it gutsy and you were very polite with her without going into the new frankenumber, manipulation of last years numbers, manipulation of sell to list without mention of multiple discounts. It’s bold but I guess you were sizing her up as a new Amazon since she’s losing her current job. Some girls just bounce into the next thing.
Middddddddddllllllllle of the Pack!
Dividend Man
Atlanta GA
Wondering what colour is the sky in Smoking Man’s world?
Suspecting that it may be several. Tie-dyed.
Shine on, You Crazy Diamond!
#12 west coast – if I was Angelo, and if that condo is his principal residence would blow it off for tax free money on the capital gain, and park for a few years in a rental somewhere. This would give him and his wife an adventure to explore a new area of the city with no stress or worry, and have fun to see it all come down.
Then they can at the right time watch a bottom set in which will take several years, and have the joy of once again buying a bargain for a discount. The biggest joy in life is taking an adventure with change which can be very exciting for a marriage by living in a different area of any given city.
There is nothing to lose, and all to gain by seeing the writing on the wall, so parking with cash would be a wise move for Angelo in my opinion.
Thank you Garth. Great effort working to spread the religion of financial common sense.
Garth, good to hear that your concerned about the 905 areas in the GTA, areas like unionville and Markham. It has gone parabolic in Markham.
Wait, you spoke in toronto tonight (tuesday the 23rd)
You posted this tonight (tuesday the 23rd)
Angelo emailed you about your talk ‘last night’ (monday the 22nd?)
The wife was saved last night ‘hallelujah!’ (monday the 22nd?)
What talk happened on Monday? Why weren’t we invited??
My posts are time-date for the morning. I write to that. — Garth
#25 Hugh Jasz on 10.23.12 at 10:00 pm
Wondering what colour is the sky in Smoking Man’s world?
Suspecting that it may be several. Tie-dyed.
Shine on, You Crazy Diamond!
……………………………………………….
Jealous
DA
You are sounding panicky old friend. It is worrying that the market in Vancouver is tanking, however Alberta’s fortunes are more relevant to Kelowna.
We already know the price of natural gas is in the basement; keep an eye on the oil price…………..shoot, it just dropped today……………
as I always say…….home prices will keep dropping until MOI is under 6………….
a 20% price reduction across the GTA is now a distinct possibility.
20% reduction sounds about right, average drop in the US was 30%. lots of places dropped more.
He put 5% down, tacked on a few closing costs and mortgaged it for $1.2 million.
so he is now effectively underwater, he would need to write a cheque to sell his house
Well done Garth. Really enjoyed your talk tonight, as did my GF.
Garthstock rocked! I was hoping to do some spoken word poetry open-mike style on stage but his Amazon body guards turned me away, after a good frisking.
couple responses I owe for yesterday
#166 Dontcallmeshirley on 10.23.12 at 8:38 pm
Yes, I know you are right. It’s way more profitable to be a ‘crook’.
#165 Form Man on 10.23.12 at 8:23 pm
I hear ya and really I understand where you are coming from but the shit hit the fan more than four long years ago. We really are improving things not making them worse. In fact, we are four years improving things already. I know it must not seem like it to many but if they’d just be patient things will improve for them too. These are growing pains for most. Stil,l don’t just sit there waiting. Imagine the head start you can gain by starting now.
Great conference, sir. Good to know what to expect in the years to come. Too bad I couldn’t find Smoking Man, that was my secondary mission. I even made a sign…
Garth says, “20% decline a distinct possibility in the GTA.”
that’s where prices were 2 years ago. May not happen as per Garth.
So we can conclude:
1) Anybody that bought in Toronto more than 2 years ago are okay. Anybody that bought 5-10 years ago is laughing. And life isn’t fair.. I hear homeowners will do everything in their power to maintain high prices even if it means sacrificing renters first born!
2) Young people will have to work 5 years longer than current Boomers…is the majority complaining? Maybe a blog will be started in hopes of returning the retirement age to the mean of the last 30 years???
Powerful presentation. Concise sentences, images that introduced the next topic, graphs, charts, facts, fund names, lions and tigers and bears. Oh my. Well done G man the disciples are happy. Thank you.
So Garth, is the correction over and now the melt stage? You quoted a few weeks back that prices were down 14%.
Now the melt or plateau?
http://www.borderwatch.com.au/story/417941/spains-most-famous-ghost-town/?cs=1770
“With a housing backlog of more than 1.2 million unsold newly build homes, banks in Spain have recently started to sell their real estate assets with discounts, some up to 80 percent, slashing prices to a level not seen for over 20 years. With morgages of 100 percent, some experts worry that mistakes from the past are repeated again. ”
Holy condo crash batman! 80% is a heck of a discount…
http://mikewhitneysgraspingatstraws.blogspot.ca/2012/10/todays-links_23.html
“Going back to the paragraphs above, the fact that investors are bidding prices up by $75,000 to $100,000 over market valuations in this current economy is very reminiscent to a mania. If you view the world through the lens of a hammer everything looks like a nail. These bulk investors are diving in head first here and entry level buyers are competing against large funds. This bubble is different. During the early 2000s you were basically competing against anyone with a pulse. Today you are competing with big pocket investors, hedge funds, flippers, and large real estate investment funds.”
Crash the market and then come in and pick the market clean.
It is such a wonderful life in potter-ville..
Nice presentation tonight. At the end, woman told her male colleague how you were a genius, look how many people you got to come out. I didn’t hear the rest of the conversation, but found the comment interesting.
I hope Angelo knows the number one cause of divorce is money. Lets hope Angelo has no ill feeling towards the wife when the market value of his condo drops far below what he paid for it. Probably back to 1997 values.
“As for the equity in your paid-for condo, a fifth or a quarter of it could melt away over the next year or two, and never return.”
“Never” Garth? Isn’t that a bit hyperbolic?
Ask an owner in Miami. — Garth
#9 Reveen– Grow a pair son. Explain to your wife life is not the Disney movie she was raised on rather its the Kubrick one we are living.
——————————————————————–
Haha! Ain’t that the truth! Love it!
Time to stop reading this blog.
As an almost 60 year old baby boomer who is financially illiterate and facing 20 years of mortgage payments with a very small pension income it has become too depressing. I have to face the future as it is.
And selling is not an option. Not because of the size of the mortgage, because even with insurance and property taxes added in, this house still cost less than a comparable rental unit here in Yellowknife.
Ok, have news for you all as in the core of 416 all prices down by 50% for condos; and as a rock hitting a pond the wave will spread out into the greater 416 area with variations according to areas; some will do better than others from 25 to 35%. Now 905 and the GTA will take a hit with at least a 25% haircut; now for standard residential homes all is up in the air, as this will depend on the location.
#16 GTA Engineer
Doubt it. However, how will Apple’s future earnings be sustained at present levels? There’s no hot new product on the horizon. The people on the Apple annual upgrade treadmill are a small portion. iBooks? commodity. iPods? commodity. iPhones? commodity. iPads? getting there. Maybe two more generations left in that horse. Iterative improvements don’t drive Apple’s explosive sales. They need something the digerati will proclaim “paradigm changing” every 2-3 years.
Aussie Update
Aussie Treasurer, Wayne Swan bets big on a housing recovery
Never mind the rats and mice and smoke and mirrors that have gone into pulling a surplus out of the budget hat this financial year, Wayne Swan is betting the next financial year on housing.
“Dwelling investment is forecast to be flat in 2012-13, before growing 4 per cent in 2013-14. Dwelling investment declined 3.3 per cent in 2011-12 on the back of continued weakness in the detached housing market. Conditions across the sector are expected to improve gradually over the remainder of 2012, consistent with the solid growth in dwelling approvals and commencements seen in the June quarter.
With so much of the economy predicted to grow more slowly next year, it becomes a very big bet indeed that housing construction will be robust enough to maintain GDP growth at the predicted 3 per cent and keep unemployment steady.
http://www.brisbanetimes.com.au/business/swan-bets-big-on-a-housing-recovery-20121023-282o2.html
Record low building approvals, record low demand for mortgages, record stock on market. Good luck Mr Swan.
Smoking Man @ 30
Not sure what I’m to be jealous of, but I do enjoy reading about your real and imagined exploits.
Tell you what – there’s only one of you, and maybe the world couldn’t handle another.
I’ll give you that your mutterings have made me rethink one or two long held beliefs, and I might even end up better for it. Jury is out.
Enjoy your trip, dude.
#19 TurnerNation, thanks for the reportage!
Vancouver home prices could drop by 10 per cent next year, says UBC expert
Read more: http://www.theprovince.com/business/Vancouver+home+prices+could+drop+cent+next+year+says+expert/7435812/story.html#ixzz2ABRLvi72
If you guessed Tsur Sommerville (sp) was the so called expert you guessed correctly. After years of saying the opposite he is now changing his tune, how convenient. If I took classes at UBC and this guy was the prof…I would be asking for my money back. Cameron Muir is also quoted in this article. The archives will not be kind to either of these individuals.
Exxxageration, com’on, I do not see street prices at 30% off, maybe few months later? I see prices minus 3 % in average lower depending on what homes you look at.
Still shitty houses selling for top dollars in North York, North Toronto and West Toronto….
It does not do any good to the cause, to exaggerate, it sets unrealistic expectations – that could be later triggering the opposite reaction from disappointed on the sidelines buyers,,,,and they will buy when they should pass.
Let’s be honest and patient, no marketing spin needed here.
Oh-oh, this is bad news for the Canadian economy. It shows that the American economy is slowing down quite rapidly.
We all know that as the economy gets better, people drive more, there are more sales so there is more need for delivery vehicles to deliver stuff. And when a recession comes the amount of fuel in America falls to reflect a falling economy.
Well, take a look at THIS CHART and you will see that the American economy is truly crashing:
http://www.marketmonograph.com/a/goodman/201210/16derfRefinery.gif
It is NOT a pretty picture.
My feeling from seeing that graph is that America is going BACK into a recession SOON.
#43 Investx – am in contact on my rant blog with those that live in Florida, and how about losing 50 to 70% in home value, and they thought it could never happen in Florida. One gal was under foreclosure, and flew to Nashville to see her rich daddy to bail her out, and he did.
54Old Man:
#43 Investx – am in contact on my rant blog with those that live in Florida, and how about losing 50 to 70% in home value, and they thought it could never happen in Florida. One gal was under foreclosure, and flew to Nashville to see her rich daddy to bail her out, and he did.
————————————————–
This does not mean the price of those properties will “never” return. And we’re talking about Canadian RE where not even Garth is talking about 70% drops.
However, I guess it all depends on the duration of occupancy and what stage of life the occupier is in – the older residents, a decade or less away from retirement have a good chance of “never” seeing the a recovery in price.
Smoking Man 10-22-2012
I stand corrected. You said no RE melt on GTA 416 SFH.
I apologize for the generalized mis-quote.
Sounds like all enjoyed Garth’s presentation.
Neighbours bought their house in 2010 for $393,000 and have it now listed for $350,000….No action. Nice renovated 4 bedroom 3 bathroom on .25 acre near the beach.
Old Man – #54, we purchased a Florida property in Feb 2011 for less than half of its former selling price. Every property we looked at was essentially in the same boat. Huge declines in every case and big losses for the owners. By the way, selling prices are common knowledge in Florida and can be easily looked up on zillow.
Garth, why bother with bank preferreds, especially if you’re holding for the long term (where price volatility is not much of a concern)? Most of the common stocks are currently paying 4.8% dividends and the yield will likely keep increasing, unlike preferreds.
Thanks for posting Smoking Man. Your why I keep comming back hear.
Hey Garth, you once glanced and made small mention of Oakville. I’m curious how you think that town will manage the impending crash. Same as GTA or will all the rich folks survive?
I often comment, but rarely say thanks. So, Garth, I want to say I really appreciate your tireless efforts to inform people about investing and RE. (I’m sure you captivated your audience last night.) And I’ll always be thankful for the help you’ve given me personally.
“But I’m sure after last night, hallelujah!, she is saved.”
… Maybe, but they still need a buyer.
Tsur, must of been hitting the ol vaporizer. How dare you. How dare you state such falsehoods
#45 LG,
Cheer up! It will get better…and within the next few years. When the market does tank, it won’t be depressing to tell people you never owned a home; people will think you’re a genius.
In the meantime, many people are being screwed by government policies at both the provincial and federal level. What is unique in this time is that Government policies are polarizing; they are pitting common folks against one another (homeowners vs renters) ALL WHILE Big Business laughs all the way to the bank! Enlighten people and vote accordingly next time.
#16 GTA Engineer on 10.23.12 at 9:28 pm
Today’s iPad mini launch was not about a new look, or even a new product. It was about creating a niche derivative of the iPad to compete against low-cost, 7″ Android tablets, such as the Kindle Fire HD and Google Nexus.
That said, I was very disappointed in the iPad mini today. Yes, it is an Apple product, so it will be of the highest quality with many of the refinements and excellence in design we’ve come to expect from Apple.
But with the iPad mini I was hoping to get a quality, portable ebook reader, web appliance, and sometimes toy that I can hold comfortably in one hand for extended periods. My principal criteria was the display. You see, I have an iPod touch, which has the best display I’ve ever seen on any device. The main reason is the freakishly high pixel density of 326 ppi. This “Retina Display” is so fine, you can read minuscule type that would appear like fuzzy insects on other screens. No other Apple device (save the iPhone) has this display.
When the iPad mini was announced, the first thing I did was check out the specs. What?! The display has a rough-as-gravel density of 163 ppi! Downer. I had a 7″ Kindle Fire HD that I just sold. Its screen had a density of 216 ppi. Sounds good, right? Well, my tiny iPod touch is still better for reading. So if the Kindle Fire HD, with 216 ppi didn’t cut it, the iPad mini, with its paltry 163 ppi must be downright dithery.
It goes to show that, at $329 to start, Apple can’t compete on price against Android in that market segment, thanks to Google’s essentially no-cost business model. But even if Apple products were historically more expensive, they were also always better. No so the iPad mini. This thing is simply inferior to comparably-sized Android tablets. The Kobo Arc is a bonafide Android device with the same hardware specs as the Kindle Fire HD, and costs only $200 for the entry level model.
This, I think, is worrying for Apple, because this is probably the first product they’ve put out that costs more, but is not better. Maybe this is why Steve Jobs was dead-set against a 7″ tablet. But Cook, Ive and the boys got around that; the iPad mini is 7.9″.
Carney should read some of the comments from people who actually think interest rates can go lower….
http://www.theglobeandmail.com/report-on-business/economy/interest-rates/bank-of-canada-warns-of-rate-increase-flags-debt-concerns/article4630682/
Keeping interest rates low, so people can pay off their debt has backfired, instead it allures them to take on more. All Carney really has to do is get rid of CMHC and let the bankster and bankster insurance company fend for themselves. They would do what is right and I guarantee they will only lend to people who has potentials to pay off their debt.
In the business of making money, there is no way 30% of the people who got loans the past 3 years should of gotten loans. At least not at ultra low interest rates. (RISK). Free market and common sense will take over and things would correct itself.
In a typically reactive fashion to the lowest_common_denominator, the Aussie Foreign Investment Review Board was talking tough on tightening the rules and investigating alleged breaches of *Cough cough* “Asian investors” in the residential property market. Unfortunately, as one reporter is finding out, the FIRB is less than forthcoming with the numbers. The question remains….why?
http://theage.domain.com.au/home-investor-centre/blogs/domain-investor-centre-blog/foreign-investment-dont-ask-dont-tell-dont-know-20121020-27yk7.html
pleasure is all mine smookin fella
see you at the joint
cheers
Smoking Man, this one’s for you:
http://www.youtube.com/watch?v=DT8CYhKyj8U
#43 Investx asked…
“As for the equity in your paid-for condo, a fifth or a quarter of it could melt away over the next year or two, and never return.”
“Never” Garth? Isn’t that a bit hyperbolic?
Ask an owner in Miami. — Garth
Garth…4 years is not “never”. Normal real estate cycles were typically 7 years historically (depending where).
This one (peak to trough and back up) may just take longer.
2015, i say.
It is estimated Miami condo values will achieve 2006 levels by (perhaps) 2020. That is far longer than the average person owns a unit. Hence, “never.” — Garth
“Should you do it? Ask her. There’s no rate of return which can compensate for a busted marriage.”
——–
There it is again, “the wife”. Busted what? If a guy is “married” to “the wife”, the deal is as much of a lie as the ponzi the Canadian real estate game is soaked in.
That aside, there’s a lot of peace of mind to be had by getting out of debt or not jumping in to debt.
Personally, I think it’s kind of miserable when a man isn’g in charge of his decisions and needs to placate “Mom” in order to move forward. So miserable that financial common sense and “security” wouldn’t take the edge off of it.
Instead of looking for security in keeping someone else happy ( as if that’s even possible) or “investing”, it’s probably better to quietly and maturely find out what’s going on, and then let it go. Focus on more importany things. Fake marriages and “diversification” will hopefully have a very small importance.
Hey, people might even have to actually begin something real while the hyper reality drones on: Ask themselves about what is personally important.
Here’s a kind of “cartoon” Gerald Celente video. Gerald isn’t talking about anything personal, nor is he talking about real importance.
But he is poking his finger in the eye of the hyper reality. Which has some usefulness. At least it knocks out “the wife” and “diversification” thinking as high priority for a man….and maybe opens a space for something actually important.
“Busted marriage”…how ridiculous. What marriage. No different than “diversification” in a ponzi. Notice how the marriage and the ponzi remain unexamined?
http://www.youtube.com/watch?v=7c1NFCzskWI&sns=em
#35 DA
While the correction in Kelowna may have started 4 years ago, it is just beginning now in Canada’s major cities ( where the majority live ).
The fact that Kelowna never rebounded after the 2009 stimulus is interesting. Is it because we were that badly overbuilt ? or is it because of the ‘fake’ Kelowna economy……….?
Peak pain, at election time !
Hey Angelo,
Find out exactly what deducting that line of credit interest involves .. pretty complicated stuff. You have to be sure you meet certain conditions and be very careful what you invest the money in or they will come after you with a sticky rubber glove.
Also, if you lose money with that money that you borrowed from your house, then you are even more screwed (sans rubber glove). Unless you know what you are doing in this day and age, be careful about how you are investing the funds.
Garth, you are assuming that Angelo is going to make the best investment decisions and keep tabs on his loan and hire an accountant to do his taxes (or read through all of the tedious rules for himself). Many people cannot do it or cannot be bothered so be careful about what you advise.
Angelo, your house is paid for, you are living in it, your wife loves it and is very happy living there. Stop worrying about losing value on your house because this blog told you so and enjoy your life with your wife. Keep saving for retirement and try to find the best way of investing those funds (and put away more of them). Do not count your house as a business investment because it isn’t ! There are many things in life that we pay for that go up and down in value if we were to sell them but they are simply not for sale so we keep them and enjoy them.
Why spend money on a vacation when you can put that money away in a REIT and make a fortune ? Why buy that car when you can take the bus and invest the difference ? Why have children when each child will cost you around $800,000.00 over their lifetime ? Sounds ridiculous, doesn’t it ?
The key is to know if you can afford it. Many people who are buying condos these days, cannot. They are putting 5% down because they don’t have enough money for the downpayment and they are barely able to make the mortgage payments. This means that if interest rates went up (which they will), they will be unable to make those payments … AND … when they go to sell their property in order to get out, they will be unable to sell the property for enough money to settle their existing mortgage amount … THESE are the screwed up people that Garth is talking about. Along with those idiots that are actually speculating on condo property (same outcome). Get it ?
If you plan on staying put for at least the next 10 years then just stay put and start enjoying your life instead of finding ways to put stress on your marriage.
HHHW
Garth will you be speaking in Montreal?
Great talk last night Garth! My friend enjoyed it as well and thanked me for inviting her. Although I was quite disappointed that you gave free books to two other Julias and not me. Since when is Julia such a common name?
Re #2 Dontcallmeshirley
Source for the new loan to value limits please?
===============================
Call your friendly RBC mortgage specialist
Full details leaked in the wild by one of them here:
http://forums.redflagdeals.com/official-mortgage-rates-thread-351105/1177/#post15602634
#65 TRT on 10.24.12 at 1:18 am
And, vote for who?
There are no options. Ding Dong.
Brava, HHHW for injecting a bit of reality into the discussion.
Turner Nation – with Garth’s connections in Ottawa, the reporter might have asked if he was a Squirrel or a Yohawk…
Angelo, I agree with HHHW.
Stay put and enjoy your life…you have no mortgage; just condo fees and taxes.
Prioritize your spending and save. If you dont want to, prioritize and travel a little…
What 2009 stimulus?!?
The correction did hit major Canadian cities (where the majority live) in 2008 as well. But that ‘stimulus’ you speak of did give them a wee bit of an adrenaline boost which is just now wearing off. But mostly our general Canadian economy is viewed as a safe haven by many a foreign investor who invested here rather than other ports of call. Now that the world situation is tempering they do have other options to consider. Talk to San Fransisco.
San Francisco I mean not that Mexican knock-off to the south San Fransisco.
#78 LaughingCon,
Thanks. A redflag message thread is an obscure source.
How does RBC’s new policy square with CMHC’s 5% downpayment policy? There appears to be a conflict.
Nevertheless, Canada’s biggest mortgage player going to LTV tiering will have BIG impact on price.
RBC’s language:
“Effective October 15, 2012, the lending amount for conventional residential mortgages and RBC Homeline Plans, for all of Canada is subject to:
· loan to value tiering
· a maximum loan amount of $2,500,000.”
PS. Garth you don’t need to be mysterious about this, just say where you got it from. Sheesh.
Previously posted on this site. — Garth
Some months ago I told you about a hotshot young lawyer who bought a hotshot house in swishy North Toronto for $1.25 million. He put 5% down, tacked on a few closing costs and mortgaged it for $1.2 million.
It seems that even lawyers are capable of poor judgement and making big mistakes.
Paying too much for too little.
Hi Garth,
My interest is as a middle-class renter hoping to buy a house if they ever become affordable. Unfortunately, I think that’s unlikely. At the seminar you mentioned a 20% drop. I’d have to agree with TRT @ 37; that’s only a few years gains, and those who bought earlier are laughing. Those like me who have yet to buy are hooped.
I also want to touch on the unaffordability index of 416-area sitting at 8.1, while something affordable is supposed to be 3.0. A 20% reduction would lower that to 6.5. Still sounds pretty unaffordable. Does anyone honestly see a 63% drop happening to bring us down to an index of 3.0?
This seems like the new normal, where upper middle-class and above live close to work in the 416, and the middle-class and lower either rent or have horrendous suburban commutes. (Why more jobs aren’t located closer to suburban homes is a whole other discussion.) What’s changed to make the index double from the value of 3.0 it was supposedly at decades ago?
I have no clue, but my guess is population pressure. It baffles me why immigration is ignored as the other half of the high house price conundrum. Hell, I wouldn’t be here if my parents hadn’t come up from ‘merica in the 70s.
I didn’t get a chance to pipe in yesterday. In response to Steve, I agree with AACI homedog, grow a pair! You had no problem being treated like a rock star during the boom times, during a time when it was a lot easier to appraise and a time that a monkey could sell real estate. Like AACI Dog I have seen many real estate cycles come and go. It is times like this that separate the boys from the men. Regards
#35 };-) aka DA,
You’re a stubborn character aren’t you. I like that, i like it a lot.
I’m suggesting you make your pitch more substantive.
#82 DA
I give up…………you obviously have no clue…….
GTA Engineer wrote:
“Election and QE madness will soon pass, and the business cycle will take over.”
Why is this gloom and doom? It’s just a fact. Risk analysis 101.
#73 Form Man on 10.24.12 at 5:58 am
#35 DA
While the correction in Kelowna may have started 4 years ago, it is just beginning now in Canada’s major cities ( where the majority live ).
The fact that Kelowna never rebounded after the 2009 stimulus is interesting. Is it because we were that badly overbuilt ? or is it because of the ‘fake’ Kelowna economy……….?
————————————————————–
The whole Okanagan has never recovered. The bumpy ride will continue.
# 85 Science Monkey
Its what I was trying to tell everyone.
During the second half 09 when housing prices started to run up to took many by surprise and some people thought it would only last a year so they waited , however its still going.
Years ago on this blog people talked about those who took on a large mortgage will be in shock when they renew at an increased mortgage rate. We now know that will not be true for a while. Carney hands are tied with personal debt as high as it is what can he do?
I will tell you speculators and flippers have left the market , however will still have young families looking for homes and people trading up.
The condo market is over (which is okay because the number of viewing and the small commissions don’t make it worth it, not when semis and detached sell in two weeks and for twice the commission.
A 20% reduction is the last two years if you waited longer than that you will not get a “deal”. If you plan to wait longer I hope you are in your 20s.
Prices will not reach the 08/09 year.
3% mortgage rates will hold prices. Like I said without a huge spike in unemployment from various sectors I don’t see people getting desperate.
Garth, I’m still hearing a lot of ads on the radio for mortgage brokers advertising cash back mortgages. What gives?
#14 Freedom First: “Garth gave you great advice. Take it.”
*********************************
Garth also said: “Should you do it? Ask her. There’s no rate of return which can compensate for a busted marriage.”
Marriage is, after all, a partnership. There must be agreement. ‘Growing a set’ and forcing the issue won’t do it.
#17 Toronto Mine Sweeper: “Meeting with a fee based advisor tomorrow to put your method to work!”
***********************
I’m sure Garth is tickled pink to hear that. What do you think HE is?
#75 HHHW – Well said. Nice comment.
#20 Shanks: “I tried to reason with him, that this is now a hard asset deflationary period…”
***************
You mean he could legally renege on the sale of an item sold at auction?
Angelo,
If you and your wife enjoy the condo and the neighbourhood, and if the building is well-managed with a healthy reserve fund and reasonable maintenance fees, then I would suggest keeping this as your paid-off home. Before borrowing against your equity for investments, consider if you both will sleep better without the debt.
Garth, that was a rock star performance last night.
Next time, maybe bring Smoking Man on stage with you.
Facebook stock is up 22% today. Quickest I have been in and out since I was married.
#41 Mixed Bag: “At the end, woman told her male colleague how you were a genius…”
*****************
Tell that to the feds….
Condo sales tank in TO.. not really new news
http://www.moneyville.ca/article/1276144–investors-move-to-sidelines-as-toronto-condo-market-cools
Hey all – hope that you had a blast last night. Garth congrats on your Toronto premiere. I apologize that I was not in attendance as I was/and am fighting a flu or something similarly brutal and laid up with intermittennt 39 degree + fever.
I can see smoking man is full of his usual bluster and bravado and small cack syndrome, but whatever
will this be available on podcast or something similar?
#65 TRT: “ALL WHILE Big Business laughs all the way to the bank!”
***************
Well, I guess big business is big as long as consumers are buying what they’re selling……
I saw you speak last night and it was a last minute decision and showed up 10 min late and there was only standing room left. I have to say that I am quite impressed with your presentation. Basically I found out that you are not a doomer, but an optimist. On the blog you come across as if you are saying RE is toast, but all you said last night is that there might me a 20% correction, but most likely a 15% correction and a long melt, whatever that means, but you do not know how long that will last. I think that RE will correct, but not crash and then eventually things will stabilize as they usually do.
Re-.#17 Toronto mine sweeper on 10.23.12 at 9:33 pm
Great to see your live seminar Garth.
Enjoyed it very much.
Meeting with a fee based advisor tomorrow to put your method to work!
You shocked me when you said “you don’t like stocks…not even if it were Suncore”
With all the upward momentum and bull market talk of Suncore I would have thought you would have been a supporter?
Anyways great show tonight !
Toronto loves you.
…………………………………
Hey Garth
Don’t you love it can you suggest a good one .
Cry out load
Garth, I guess we’ll have a greater fools slaughter coming soon in Montreal… it will start this Saturday. (like the one in Vancouver you talked about a few days ago)
Fancy condo project, 48 floors, 520 units… from 330 to 2000 sq ft… starting at $200K… just beside the Bell Center (Canadiens’ arena).
They are pulling the “hockey fan” card to sale these condos:
“…Future buyers will also enjoy exclusive access to the Montreal Canadiens. Every year, they will have priority for purchasing tickets to regular season games and will be able to enjoy one two-hour skating session for two people at the Bell Centre…”
oh that’s low man… but I’m sure a lot of fools will buy, it’s gonna be the greater fools zoo (all sorts, all breeds. at least they won’t need to drive back home after the game… well, if they can afford the tickets)
It’s kind of hard to find good links in English (you know, we are “différent” here), but here they go:
http://tourdescanadiens.com/index-en.html
http://www.4-traders.com/news/Fonds-de-solidarite-FTQ-La-Tour-des-Canadiens-revealed–15416717/
What do you think is gonna be the Street Value for these cookies (sorry I meant condos) ?
Garth, we really need one of your talks here in Montreal (c’mon, nobody will sue you at the OQLF)
Thanks for the great job you are doing.
sciencemonkey on 10.24.12 at 9:21 am Hi Garth,
My interest is as a middle-class renter hoping to buy a house if they ever become affordable. Unfortunately, I think that’s unlikely. At the seminar you mentioned a 20% drop. I’d have to agree with TRT @ 37; that’s only a few years gains, and those who bought earlier are laughing. Those like me who have yet to buy are hooped.
I also want to touch on the unaffordability index of 416-area sitting at 8.1, while something affordable is supposed to be 3.0. A 20% reduction would lower that to 6.5. Still sounds pretty unaffordable. Does anyone honestly see a 63% drop happening to bring us down to an index of 3.0?
This seems like the new normal, where upper middle-class and above live close to work in the 416, and the middle-class and lower either rent or have horrendous suburban commutes. (Why more jobs aren’t located closer to suburban homes is a whole other discussion.) What’s changed to make the index double from the value of 3.0 it was supposedly at decades ago?
I have no clue, but my guess is population pressure. It baffles me why immigration is ignored as the other half of the high house price conundrum. Hell, I wouldn’t be here if my parents hadn’t come up from ‘merica in the 70s.
———————————————————-
No such thing as new normal and the USA is proof of that. Realtors and people said the same thing. THE ONLY REASON why Canada housing bubble is where it is today is because of CHMC. See how banks stopped lending people without money on $1 million dollar homes and now require people to have money. With the 600B limit getting hit banks will tighen lending even more. People are going to be defaulting like crazy. If there was no CHMC prices would fall back down to 3 times income ratio since banks would be taking the risk and thus price risk accordingly.
Garth,
Simple and straight question:
Why do you make such resistance to share your talks electronically?
(youtube, mp3, etc. whatever media)
It shouldn’t be a matter of technical resources or copyrights or any other excuse, it’s a matter of spreading the voice to save people from slavery.
And I’m pretty sure you can count on us to help if needed.
So, I’m all ears
Thanks a lot for your blog. Great work!!!
I have enough to keep me busy. If you want to organize a shoot, be my guest. — Garth
Oh it is all that and more. My ‘pitch’ is a refreshing break from the posturing BS one normally encounters. It’s not so much a ‘pitch’ as informative truths by which one can make logical informed decisions. Education is the greatest influencer of all.
Oddly enough I was thinking the very same thing… of you.
Actually that’s not true. I do believe you have legitimate concerns but you are letting those concerns fog your vision that you think things are worse than they really are and consequently led to believe they are bound to only get worse. I don’t believe that is the case. More to the point harboring such an attitude tends to facilitate the feared result befalling upon the holder of that attitude where a more positive attitude tends to result in a more positive outcome. Now I’m not saying you can alone change the world with merely a positive attitude but you would be surprised how much difference it actually will make, if not to the world at large to that of your own.
No AACI we have not recovered to those highs of 2007/08 but really should we expect to? Those were unrealistic times. Times in which, as you said in your post at #87 today times when you could be”treated like a rock star during the boom times, during a time when it was a lot easier to appraise and a time that a monkey could sell real estate”. We really don’t want those unsustainable times do we? Because ‘unsustainable’ times like that come at an after-cost. We want stable times – stable times like most of the country, including Kelowna, has had these past four years.
Yes Vancouver and Toronto might be headed for a bit of price capitulation, but I doubt nearly so much as the majority of posters on this blog believe. Could it happen? Of course, anything is possible. But should it happen the ‘anything’ that causes it will likely divert your attention from being so smug as to say you told us so. For that it, should it happen, will be something of far greater consequence that will likely have as much adverse effect on your life as those of others.
Coincidence has no prejudice and she can be a bitch.
#92 Realtor # 1 on 10.24.12 at 9:55 am
I find your advise extremely shady, void of hard facts, over optimistic and extremely convenient for you. Simple fact is that prices are correcting now, even on SFHs and there has been no increase in interest rates, even the over optimistic MSM has realized that. Wait for the spring market, sales will drop at that time and you will see some significant price drops. Whenever the BoC decides to increase interest rates, (probably next year) you will see even more drops in price.
Re: #107 Realtors are in an all out panic on 10.24.12 at 11:11 am
The affordability index in Edmonton is at 3.1 and property values are still falling so the index will shortly fall below 3.0. Try a different city.
#47 Devore on 10.23.12 at 11:10 pm
#66 Inglorious Investor
Agree with you both. I have a Nexus 7 myself and at $200 it has more flexibility than the ipad mini at a much lower price point. Aside from the Apple faithful, I sense there won’t be much of a new market for this device based on what they’re offering. A retina display might have sealed the deal at those prices, but as is? Yeah not that great. And agreed that Apple has to get its innovation horse kick-started in the next few product cycles since the commoditization of its current product line will inevitably eat it alive. RIM fell prey to that – thinking the BB was so amazing it would sell forever. Unfortunately for them, competition doesn’t stand still, and although it’s currently Apple eating their cake, Apple needs to be cognizant of other wolves licking their chops. As an investor, the risk in Apple is way too high right now. Much more downside risk than upside potential. Again, unless they innovate. Perhaps if they figure out a way to negotiate and shift the content paradigm from Cable/Satellite+Netflix to something fresh (fat chance since the ‘status quo’ corps out there won’t have it – that being the reason it hasn’t happened to date), they might stand a chance. They’ve got the influence – but is it enough? And beyond that, what else is there? The next few years will be interesting, that part is certain..
Buy a Condo at “The Palm” in North York and receive a Gold Bar: Link
#90 John on 10.24.12 at 9:46 am
GTA Engineer wrote:
“Election and QE madness will soon pass, and the business cycle will take over.”
Why is this gloom and doom? It’s just a fact. Risk analysis 101.
———————–
Amen! :)
#109 DA
I don’t rely on emotion when making financial decisions. I rely on data.
You aren’t one of those fools who believe ‘The Secret’ I hope……..
remember DA………..prices will continue to drop until MOI is below 6……..
# 87 AACI
I concur.
This goes back to basic theory and fundamental principles of valuation. Course 101. It’s about trends (or cycles). For me, since 1980, this trend has been the most predictable.
….the forces that affect value remain unchanged.
Never?
How large of a portfolio would you need to retire on dividends at retirement. Here is someone’s take on it.
http://www.theglobeandmail.com/globe-investor/investor-education/how-big-a-portfolio-do-i-need-to-live-on-dividends-in-retirement/article4607635/
I think the ‘loan to value’ rules that have been implemented will be a good thing for Canadians living in Canada.
It will keep the middle-class away from making mistakes, while essentially allowing foreigners and those with what my girlfriend calls ‘more money than sense’ to spend actual money (not debt) to secure housing assets. It’s a policy that protects its citizens, while potentially fleecing outsiders.
The rules shouldn’t have much of an effect on foreign investors that are typically buying in cash and using Canadian real-estate as, at a minimum, a shelter from political risk in their respective countries, and more skeptically, to launder money. The latter shouldn’t be allowed to happen, but I don’t know that buyers paying in cash are shooed away by real estate sales people that work on commission.
The key is to avoid a US ‘locked-in’ problem. The mortgage/house phenomenon in the states led to rampant structural unemployment. Setting rules that encourage Canada’s citizens to rent will keep them mobile and allows the country to deploy its real labour effectively where it is needed.
Vancouver isn’t really much of a labour market or a local housing market to Vancouverites–so those ‘locals’ have left. Vancouver is like any other internationally sought after destination, e.g. Geneva, central London, central Paris, central Tokyo — house prices are based on what the elite can afford, not what the locals can afford.
I gave up my condo recently, despite the emotion of it, and probably caught the last gasp before the media really got a hold of things. I quickly managed to wipe my tears with the huge capital gain, and I think I can manage to cry myself to sleep in an equivalent ago condo that is DOUBLE the size of my current place, for slightly more than my previous outgoings, and where after a year I can get out at my leisure without any financial obligation beyond 60 days. Most parents would say I am throwing my money away–to them I say, I am not only DEBT FREE but ASSET rich in my late-20s and living a comfortable cash-flow positive life that is within my means and comfortable.
Success is often tied to having the conviction to do exactly the opposite what everyone around you is doing. Read ‘If’ once in a while, and focus on ‘keeping your head about you, while others are losing theirs’.
So F now figures selling off CMHC might be a good idea. This should be interesting.
http://www.theglobeandmail.com/report-on-business/economy/housing/flaherty-eyes-privatization-of-cmhc/article4627593/
#7 Not 1st on 10.23.12 at 9:07 pm – Yes I am basically asking if I should get a HELOC and dump it into the stock market. Pros: tax preferred income, tax deductible interest, ability to offset RE losses through income and any cap gains. Cons: a whole slew of risks in addition to the RE risks on that portion of capital with additional potential losses. However last night Garth presented his opinion of where financial markets are going. So basically I understood Garth’s answer to be “yes” dump the HELOC into the markets.
#11 Paully on 10.23.12 at 9:16 pm – Looks like the lawyer in Garth’s example above should have sought advice despite his “healthy” cash flow situation. Information is free, so why not get it. I have seen Garth advise on this blog to not accelerate your mortgage payments and pay as slowly as you can due to low rates and redirecting uncommitted capital to other balanced/liquid investments. For those of us with no mortgage, one could extrapolate that advice to mean re-leveraging our RE to diversify. I wanted Garth’s opinion, and I think I got it. Why not get some other points of view before I take out the calculator and do the analysis on investing a HELOC? But ultimately we all have to make our decisions within our own risk tolerances – especially if you want to sleep at night.
#12 wes coast on 10.23.12 at 9:21 pm – This is my wife’s point of view. The “security” she finds is in owning our home and enjoying the financial freedom of being debt free.
#18 Regan on 10.23.12 at 9:33 pm – Again my wife’s point of view. She likes that the condo costs less than $550 per month between property taxes and condo fees, which is affordable if “something happens” like one of us loses a job (who really has income security anyway?) or we reduce our family income because we start trying to have kids and she goes on mat leave. I’ve done the buy vs. rent analysis in detail and we are better off selling our condo and renting something similar – which is what I want to do.
#75 House Horny Housewife on 10.24.12 at 7:41 am – I think you and my wife would get along famously. I agree with you, you have to live your life, not all of your decisions can come from a spreadsheet, and there are additional risks to investing borrowed money. And I agree to enjoy being debt free, with a happy wife (which = happy life), but I don’t see us in our condo for 10+ years and am concerned we will be looking to move right at Garth’s predicted 2014/2015 market bottom where condos get hit more than houses due to oversupply.
Generally I still need to run the numbers in detail, but I am feeling out the idea of borrowing to get some capital gains and income of 5-7% over the next 2 – 3 years to partially offset a RE decline of 20-30%, so that maybe the RE loss isn’t $100k but rather $70k, say, by leveraging $150k. If Garth is right on both counts (RE and markets) then it’s a loss minimizing strategy. If Garth is wrong on both counts there’s a loss in the markets but RE is fine. If Garth is wrong about RE and right about the markets this strategy is golden. If Garth is right about RE and wrong about the markets I’m hooped. However I’ll bet Garth thinks he’s right – he even said so last night! :)
#109 };-) aka D.A. on 10.24.12 at 11:21 am
#88Dontcallmeshirley on 10.24.12 at 9:32 am
#35 };-) aka DA,
You’re a stubborn character aren’t you. I like that, i like it a lot.
I’m suggesting you make your pitch more substantive.
Oh it is all that and more. My ‘pitch’ is a refreshing break from the posturing BS one normally encounters. It’s not so much a ‘pitch’ as informative truths by which one can make logical informed decisions. Education is the greatest influencer of all.
————————————–
Smoke and mirrors, just plain smoke and mirrors and maybe a bit of what you are smoking….?
109 };-) aka D.A. on 10.24.12 at 11:21 am
No AACI we have not recovered to those highs of 2007/08 but really should we expect to? Those were unrealistic times. Times in which, as you said in your post at #87 today times when you could be”treated like a rock star during the boom times, during a time when it was a lot easier to appraise and a time that a monkey could sell real estate”. We really don’t want those unsustainable times do we? Because ‘unsustainable’ times like that come at an after-cost. We want stable times – stable times like most of the country, including Kelowna, has had these past four years.
——————————————————-
We are not in a stable market.. the other major cities recovered after 2008 with values climbing above 2008 highs and yet the Okanagan has not. You have said on here many time that Kelowna is different, people want to come here.. well? then why did we not follow suit and rise like Vancouver , GTA, Calgary etc..
Garth, I was just going to dive into my Leftover Turkey Potpie when I heard Dwight Duncan, Ontario Finance Minister, is doing a Francesco Schettino, following Dalton McGuinty’s lead and is jumping ship. With pension funds set to implode, health care costs for seniors about explode and Smoking Man’s account of meeting you sounding like he blew his load, Ontario is for one bad trip! If you think you’re going to weather this storm out, you’re sadly mistaken. Just because Canada is the last G7 country to experience a housing correction doesn’t mean you’ve avoided it. It’s coming down the pipe and if you can’t see what a resigning Premier and Finance Minister in the matter of a few weeks means, well, you’re out of luck.
Don’t try to show off, now is the time to panic!
http://www.youtube.com/watch?v=9RiVd4fTfNE
#99 County Girl
Im sure garth would get a kick out of that.
Not sure about the sponcers.
The bar is more fun anyway
#109 };-) aka D.A.
Those were unrealistic times. […] We really don’t want those unsustainable times do we? Because ‘unsustainable’ times like that come at an after-cost. We want stable times – stable times like most of the country, including Kelowna, has had these past four years.
You might want it, but you won’t get it. If you want stable prices and sales, consider working in a market that isn’t tied to the broader, cyclical economy and dominated by amateurs using lots of leverage.
This is how they roll in the UK. Are we different?
>
Figures from the FSA indicate that of the 11.2 million home loans, around 43pc are interest-only deals.
#113 Canadian Watchdog
Hey Watchdog,
How do you think they account for Gold Bars in the monthly HPI numbers?
Need we debate this over and over again and again.
1st. I don’t rely on emotions when making decisions although I maintain I do listen to my gut instincts along with good consideration of the facts.
2nd I don’t subscribe to the philosophy of ‘The Secret’ although I do know from firsthand experience that attitude does indeed make a huge difference in the good outcome of everything from sex to success.
3rd If local Kelowna prices are indeed dropping so why am I not seeing evidence of it. As I suggested to you in an earlier post we will see what the 11% increase in volumes this year over last to date does to the insignificant 1.2% drop in prices over the same period come this April 23rd, 2013 when, as promised, I will post the stats comparing then to now.
“Quality” and “Real Estate Investment Trust” don’t belong in the same sentence, IMHO.
Buy? Curious?: Dwight Duncan, Ontario Finance Minister, is doing a Francesco Schettino
McGuinty looked over the cliff and got on his parachute
Francesco Schettino the captain of the Costa Concordia:
http://en.wikipedia.org/wiki/Francesco_Schettino
Gold slumps to 6 week low, will it hold $1,700
#127 Sebee
With the integrity of our real estate boards rigging prices and sales figures, they probably quality-adjust the gold value into HPI.
#128 DA
As a salesman you must keep a positive attitude in order not to alarm your clients. As a business investor, I look for opportunities that may arise from negative situations……not the same……….
keep that 6 MOI uppermost in your mind………
just sayin…….
( when choosing salespersons for my products I prefer positive thinkers. When choosing other consultants, such as accountants or investment advisors, I prefer reality-based thinkers )
Garth,
You say the world is leaning towards deflation, but aren’t all the central banks racing to be at the bottom. It isn’t hard to imagine that the FED is trying to lower the value of the dollar to inflate away the debt. Ben admitted so much in Japan. If all the other central banks need to spend to keep the exchange rates favourable, then how will this result in deflation? If all the banks are spending/printing, then isn’t inflation going to be the end result. The global currency war is now under way, or am I miss informed? I can understand house prices falling equals deflation, but the cost of my food and energy is rising.
Great event Garth and I did bring a friend to pay the $14 parking. Thanks. To Smoking Man : I’m sure that sweet lady at the bar would love to know that she is slightly past prime.
Garth,
Isn’t deflation desirable for people! (Obviously not for governments). People may have been foolish, but this doesn’t change the fact that if things are getting cheaper, then I’m happy. Didn’t the industrial revolution occur during a deflationary environment?
Not when 70% of people have 80% of their net worth in a deflating asset. — Garth
Oil slumps to 3 month low, will it hold $88
#115 Form Man on 10.24.12 at 11:50 am…
It seems the volatile RE industry in the Okanagan has caused a few realtors to lose their marbles.
Some got caught up in the boom of a few years back, dabbling in investment properties, bed and breakfasts, and recreational areas.
Some smaller agencies had big expansion plans, fancy new websites, new office locations decided on – all of them now dormant entries in web archive sites.
While some of these agents keep themselves busy as ‘property managers’ for their few remaining rental units, they still pretend that things are normal, prices are stable.
They have no listings (or websites), although they may
act as buyers’ agents – who knows?
The proliferation of desperation ads posted daily on Kijiji, Craigslist and other local sites, offering foreclosure lists, homes under $400K, etc are but one indicator of the slowdown.
We have watched for over a year now as prices have decreased steadily, and the bottom is not in sight.
The ‘flippers’ are increasingly putting cheaper materials and workmanship in – basically replacing old ‘crap’ with new ‘crap’.
Others have done wonders on the renovations, but in homes with ‘crap’ locations – what are they thinking?
We know one good contractor who did high-end ‘complete renos’ on small homes in north Kelowna, but now has a second job as business is so bad.
At least some agents know what’s happening (such as the agent we have), and have prepared for lean times – others just keep pumping the OMREB BS.
Of course, nothing beats the ‘in-denial’ FSBO group – most of them sit dormant on sites like http://tinyurl.com/OK-FSBO
One property we like has come down 15% since May (and we could pay cash for it), but will wait until May 2013 – if it is still for sale – we are going to offer 30% less than their original list.
If not, we are ever patient.
Selling Fear Is Good Business
Whether it’s good investment advice is beside the point — fear sells.
No $ hit it’s good for business — a broker whether he’s real estate or financial services needs volatility.
I didn’t see asian people yesterday… they don’t share the view
They were in disguise to fool you. — Garth
#138 Snowboid
I agree. You have nailed the current Okanagan market dead on………….
John…. Gerald Celente is a fraud, a.k.a. Adi Da. Stop wasting your time, buddy…
Realtors are in an all out panic wrote:
“THE ONLY REASON why Canada housing bubble is where it is today is because of CHMC. See how banks stopped lending people without money on $1 million dollar homes and now require people to have money.”
——–
There’s not having an idea about what your talking about…but you have no idea of what you’re talking about.
You’re drowning in koolaid.
#132 Canadian Watchdog
You know what, you really irritate me with these chart Watchdog. Because each time they clearly show REBs going back and adjusting humbers to show a differenet outcome vs. current data. Yet they are not called out on it by regulators or media, or anyone. How can this not be newsworthy? And how can the Govn’t not tell them to knock this crap off?
I really liked this post Mr Turner. Thank you again for this un-selfish service to others. I know how hard it is to stand in your truth when your ideas are the minority. I would rather be right than popular.
That being said, today the BoC forecasted good times ahead for the Canadian economy?!?!?
Do they not have access to the same data you do? I hope so. So why the deception? Why does our bank of Canada mis-lead anyone that can’t think for themselves? Why are they staffed with ex-Goldman people?
Institutions such as banks, also religious and corporate institutions, simply do not operate for the highest good of the people they are intended to serve.
We have long used the excuse that it could be worse, or stop complaing and appreciate what you have. Well, you said it, the goal in life is freedom of choice. They are being taken away…the BoC is helping achieve that goal….our collective ‘look the other way’ has caught up with us.
Anyways, here is a bit more on data manipulation, specifically RE seasonal adjustments and downward revisions. US new home sales numbers may not be what they seem below the surface.
http://www.zerohedge.com/news/2012-10-24/new-home-sales-highest-april-2010-until-one-reads-fine-print
#134 EIT… You are missing everything. Asset deflation concurrent with consumer price inflation. Because there are two economies that operate side-by-side, the real economy of supply and demand, and the fake monetary economy where demand is artificially produced either through “legal fraud” or “legal monopoly”. This is the realm of the financial parasite class. But maybe that’s too much thinking for you for one day… sleep on it and come back at me tomorrow… I’ll be here…
Theoretically, there is nothing wrong or amoral about governments or corporations. According to modern definitions, they are the same thing. Look at Encana CEO Eresman: he IS the government of Canada essentially. The problem arose when we allowed corporations to become “people”. It took women 6000 years to achieve that same status. Ha!
86 sciencemonkey:
Hi Garth,
My interest is as a middle-class renter hoping to buy a house if they ever become affordable. Unfortunately, I think that’s unlikely. At the seminar you mentioned a 20% drop. I’d have to agree with TRT @ 37; that’s only a few years gains, and those who bought earlier are laughing. Those like me who have yet to buy are hooped.
I also want to touch on the unaffordability index of 416-area sitting at 8.1, while something affordable is supposed to be 3.0. A 20% reduction would lower that to 6.5. Still sounds pretty unaffordable. Does anyone honestly see a 63% drop happening to bring us down to an index of 3.0?
——————————————–
Good questions.
Garth, why wouldn’t Toronto real estate correct lower as per the valuations mentioned above? Won’t it revert to the mean?
Or is it different in Toronto?
#112 GTA Engineer on 10.24.12 at 11:30 am
Agreed. I’m also waiting for Apple TV, but I agree they may be stepping on some very large toes. Apple typically demands large tribute for its good graces. I doubt the industry will want to play along. Then there’s Google. We’ll see how/if they work around these challenges.
Apple has been a great aggregator of technology, such that they are very good at creating the so-called ‘killer app’ (e.g. reinventing the Walkman for the Internet age using existing technologies). But one company cannot be more innovative than everyone else combined. And with Android, that’s kinda what they are up against. Microsoft: remains to be seen. RIM may prosper doing something else, if they last long enough.
how about a country that speaks regularly on democracy and than has an “expert go on tv to claim conspiracy
well tis is from the brad blog :
Was it ‘conspiracy garbage’ when paper ballot optical-scan tabulators made by Sequoia Voting Systems in Palm Beach County declared incorrect results of three different races last March, including declaring two losing candidates to be the “winners”?
• Was it ‘conspiracy garbage’ when the Canadian firm, Dominion Voting, which now owns Sequoia Voting Systems admitted the failure in Palm Beach was caused by a bug in all versions of its central tabulation software which will be used to tabulate the Presidential Election (and many others) on November 6th this year in Arizona, California, Colorado, Florida, Idaho, Illinois, Louisiana, Michigan, Missouri, New Jersey, Oregon, Pennsylvania, Virginia and Wisconsin?
• Was it ‘conspiracy garbage’ when, despite using Dominion/Sequoia’s recommended “fix”, the same problem occurred yet again in Palm Beach County’s August primary elections, as their Supervisor of Elections recently explained to me on air?
• Was it ‘conspiracy garbage’ when 16,632 votes were found unaccounted for when those same machines were first used in Palm Beach County back in 2008?
• Was it ‘conspiracy garbage’ when eight (8) top election officials — including the County Clerk, a Circuit Court Judge and the School Superintendent — in Clay County, KY were sentenced last year to 156 years in federal prison for gaming elections, including changing the votes of voters on ES&S electronic touch-screen voting machines?
• Was it ‘conspiracy garbage’ when the President of Diebold Election Systems, Inc. (by then renamed Premier Election Systems, which is now owned by the Canadian firm Dominion Voting) admitted in 2008 that the company’s GEMS central tabulation software, used in some 34 states, does not tabulate votes correctly and routinely drops thousands of them when they are uploaded to the central server?
• Was it ‘conspiracy garbage’ when Diebold/Premier’s spokesman admitted to the CA Secretary of State during a 2009 hearing that the supposedly permanent “audit logs” in all versions of its GEMS central tabulation system fail to record the deletion of ballots, after it was discovered that their electronic tabulator had failed to tabulate hundreds of paper ballots in a Humboldt County election (or to even notify system administrators that it had deleted those ballots)?
• Was it ‘conspiracy garbage’ when the CA Sec. of State decertified federally-certified electronic voting and tabulation systems made by Diebold, Sequoia and Hart Intercivic in 2007 after a state-commissioned team of computer science and security experts from the University of California, Livermore National Laboratories and elsewhere “demonstrated that the physical and technological security mechanisms” for all of the state’s electronic voting systems (also used across the rest of the country) “were inadequate to ensure accuracy and integrity of the elections results and of the systems that provide those results” and that their “independent teams of analysts were able to bypass both physical and software security measures in every system tested”?
• Was it ‘conspiracy garbage’ when the 2007 landmark study commissioned by OH’s then Democratic Sec. of State, found “Ohio’s electronic voting systems have ‘critical security failures’ which could impact the integrity of elections in the Buckeye State” and when she (unsuccessfully) recommended, along with the then Republican Speaker of the Senate, who is now the state’s Republican Sec. of State, that all touch-screen systems in the state be decertified due to concerns of, as she told The BRAD BLOG, “viruses that can be inserted into [Ohio’s e-voting and tabulation] system through something as simple as a PDA [Personal Digital Assistant] and a magnet and then the cards are passed from machine to machine almost like Typhoid Mary” so that “If there is malicious software, like a virus put into the system, it can not only affect the machines at the polling places, it can affect the tabulation that occurs at the server and it can also affect future elections if it’s not detected”?
• Was it ‘conspiracy garbage’ when the New York Daily News discovered in 2012 that hundreds of paper ballots at just one precinct in the Bronx went uncounted in 2010 during the September primary (failure rate of 70%) and the November general election (failure rate of 54%) on their brand new ES&S DS200 paper ballot optical-scanners, which are also used in OH, AZ, MI and elsewhere?
• Was it ‘conspiracy’ garbage when the U.S. Election Assistance Commission (EAC) released a warning in 2011 from a “Formal Investigation Report” that those same systems failed to count paper ballots correctly, on the heels of Cuyahoga County (Cleveland), OH’s previous finding that 10% of those machines failed during pre-election testing in 2010?
• Was it ‘conspiracy garbage’ when Oakland County, MI wrote a letter of concern to the U.S. Election Assistance Commission (EAC), seeking advice in 2008 after finding their ES&S M-100 optical scanners “yielded different results each time” the “same ballots were run through the same machines” during pre-election testing?
• Was it ‘conspiracy garbage’ when Princeton University discovered in 2006 that they could, in seconds time, implant a virus onto Diebold touch-screen systems used in dozens of states which could then spread itself from machine to machine and result in an entire county’s election being flipped with little chance of detection?
• Was it ‘conspiracy garbage’ when a computer security expert hacked a memory card on a Diebold paper ballot optical-scan system and flipped the results of a mock election (see the hack and its results as captured in HBO’s Emmy-nominated 2006 documentary Hacking Democracy here) in such a way that only a hand-count of the paper ballots in the election could reveal the true results?
• Was it ‘conspiracy garbage’ when a CIA cybersecurity expert testified to the U.S. Election Assistance Commission(EAC) in 2009 that e-voting was not secure, “that computerized electoral systems can be manipulated at five stages, from altering voter registration lists to posting results” and that “wherever the vote becomes an electron and touches a computer, that’s an opportunity for a malicious actor potentially to…make bad things happen”?
• Was it ‘conspiracy garbage’ that the Vulnerability Assessment Team (which also monitors nuclear facilities) at Argonne National Laboratory (the non-profit research lab operated by the University of Chicago for the Dept. of Energy) released a report earlier this year finding that Diebold’s touch-screen systems and, according to the team’s lead scientist, “pretty much every electronic voting machine”, can be hacked with just $10.50 in parts and an 8th grade science education, or just $26 if you want to do it remotely?
• Was it ‘conspiracy garbage’ when, in Volusia County, FL’s 2000 Presidential Election a paper-based optical-scan tabulator made by Global Elections Management Systems (GEMS, thereafter purchased by Diebold to become Diebold Election Systems, Inc.) tallied negative 16,022 votes for Al Gore thanks to a supposed “software flaw” which has never been explained by anyone, and which Leon County (Tallahassee), FL’s Supervisor of Elections Ion Sancho — the man, so well respected by both major parties, that he was placed in charge of the aborted 2000 Presidential Election recount in Florida — believes was a purposeful hack of the electronic tabulation system which is now used in hundreds of counties in dozens of states
From the Bernank and the FOMC of the Federal Perverse System:
“Exceptionally low rates until at least 2015. Chairman Bernanke wanted to say ‘3015’, but the committee agreed 2015 was slightly more realistic.”
“Operation Twisted to continue until at the least the end of the year. The LIBOR crooks who manipulated rates over in stuffy old England are amateurs compared to us.”
“We will also continue to buy everyone’s house via MBS because the banks don’t want the hassle anymore. And we think American homes could really go up in value. At some point. Maybe.”
“Business investment has slowed. Who the hell would want to do business in the US today anyhow?”
“Unemployment remains elevated. That’s good for your corporate masters who want low wages, large labour pools and frightened masses. Just be thankful you’re lucky enough to want a job.”
“There is significant downside risk to the economy. C’mon play along. Try to guess how many people in line at the grocery store are on food stamps.”
“U6 and other data points will continue to be manipulated. Deal with it. If it makes you feel better, you can make up your own numbers.”
“The war with Oceana continues.”
“Oh, and some pigs are more equal than others.”
From Mark Carney:
“Uhhhhh…”
#72 John – thanks for the video, as it made my day. I love to see a man in his 60’s who worked hard for decades making a fortune which gives him FREEDOM to speak his mind. He is having fun with facts to trash the machine, and enjoys it all; not for the money, but to make a point going forward for all. Recently, he bought a building dating back to 1750 if my memory serves me correctly; not for an investment, but to preserve the memory of USA as he cares about the past. He is fed up with what America has become, and will speak his mind about it all, and for you in Canada do you remember the good old days? What happened? Things are changing, and is it better now?
Wonder why there were no debate questions based on ETHICS and what the hell is the HUSTLE
Manhattan U.S. Attorney Sues Bank Of America For Over $1 Billion For Multi-Year Mortgage Fraud Against Government Sponsored Entities Fannie Mae And Freddie Mac
FOR IMMEDIATE RELEASE Wednesday, October 24, 2012 After Collapse of Subprime Lending Market in 2007, Countrywide Started Alleged Fraudulent Mortgage Origination Program Called the “Hustle” Designed to Sell Defective Loans to Fannie Mae and Freddie Mac
Bank of America Continued the “Hustle” After Acquiring Countrywide in 2008
http://www.justice.gov/usao/nys/pressreleases/October12/BankofAmericanSuit.phpOffice
#133Form Man on 10.24.12 at 1:19 pm
I do take exception to your insinuation that I use a positive attitude to gloss over the reality of a situation thus putting, in effect, a positive spin on it. Education is the greatest of influencers. Too many say what they think the listener wants to hear rather than telling them that which they need to know. Misleading by keeping one in the dark does not get the job done; it only leads to more damage being done.
I cannot comprehend from where you and Snowboid are getting your information. I have repeatedly posted accurate unfettered raw statistics pulled directly from the MLS which prove the market in Kelowna, while down from 2007/08, has been consistent since from and including 2009 on. Can you not grasp that 2007/08 was an anomaly which needed correction as has been made and we are back on track with a stable four year track record behind us and from which, looking forward to the foreseeable future, there is no significant reason should expect we will deviate. Sure we could, but what reason can you give that would compel anyone to unequivocally believe it eminent that we will do such a ‘double dip’? How can anyone better than ‘guess’ beyond six months let alone a day?
Look I don’t expect you to believe me. I understand from where you stand I am the enemy. I really don’t care what you and Snowboid think. What I take issue with though is gross exaggeration of the facts and hypothesis presented as inevitable in a forum which has way too much gloom and doom presenting what you consider probable future events that you cannot possibly know. You are as guilty of SPIN as any you accuse of.
Again, misleading by keeping one in the dark does not get the job done, it only leads to more damage being done. I am quite sure, some day, in retrospect, it will be found that this blog has been doing more damage to the personal economy of its participants than they know. I will keep fighting the prospect of that happening.
#43 Investx asked…
“As for the equity in your paid-for condo, a fifth or a quarter of it could melt away over the next year or two, and never return.”
“Never” Garth? Isn’t that a bit hyperbolic?
Ask an owner in Miami. — GarthGarth…4 years is not “never”. Normal real estate cycles were typically 7 years historically (depending where).
This one (peak to trough and back up) may just take longer.
2015, i say.
It is estimated Miami condo values will achieve 2006 levels by (perhaps) 2020. That is far longer than the average person owns a unit. Hence, “never.” — Garth
Garth I agree!
Not only the time frame you had in mind but as Boomer’s here in the States look for money they will cash out anywhere they have any equity. This will be the sag and go flat and sag some more in value and go flat years after the crash portion is finished.
Eventually around 5 to 7 years from now deflation will end and interest rates will raise at least to a normal level but most likely will over shoot as markets are notorious for doing. Thus dropping RE some more.
Who will benefit the most from all of this is the Cyber Generation [late Gen. X’er’s & Millennial’s Children]. About all they will have to do is show up and buy RE to make a small fortune. The name of the game for this generation is to buy the biggest house they can afford and constantly roll up to an even bigger house.
But alas us Boomer’s will have to watch all of this from the sky box in heaven [or other hotter climates].
Yes I do agree completely and then some.
Best Wishes,
Dividend Man
Atlanta GA
Got to agree with Carney and the economy’s slowing. All the road carriers are wondering where the freight is.
http://ca.finance.yahoo.com/news/bank-canada-halves-third-quarter-144835318.html
so can cmhc come back and sue the “hustlers”
Love the tale about Angelo – how typically Canadian…
Completely neutered, has to get his wife’s permission for everything, living in a grossly overpriced shoebox in the sky – no land, nothing, just a few hundred square feet of substandard concrete box.
So sad…
#140 name,
Interesting. As the majority of Population growth in Canada is now ‘minorities’, what percentage in attendance at the seminar were??
You are obsessed. — Garth
#86 sciencemonkey
#147 Investx on 10.24.12 at 2:11 pm
In the GTA we can expect an initial 20% drop in price, then a slow melt beyond that point which will be different depending on where you live. This is what Garth said at his Toronto show. There are buyers/owners who will not fall under the 3.0 rule for many reason such as people who have old money or people inherited a house but make average salaries etc.
Garth,
thoughts on buying a sdh in an older part of.kitchener (not
Waterloo)?
Thanks
My husband thanks you for the book you gave him last night (and our son is proud that you complimented him on his printing!).
We will be reading it diligently so that we can be better informed on investing more effectively.
Since we sold our home a couple of years back, with the encouragement of our sons, we have been deliberately over liquid in the Orange Guy’s shorts ( I can’t apologize enough at the image that that brings to mind) because we had intended to rent for only a year or so before buying another house. Since the market didn’t correct as we anticipated and by the time it does, we will be in our 70’s and a step away from “the home”, we have to adopt a different strategy.
Thanks again, Garth
I am going to give you all what guides me in life, so write it down, as it regards the inner soul of humanity, so pay attention. It matters not what a man or woman says, but how they say it. It matters not what a man or a woman does, but how they do it. This holds true for all human interactions, so never judge on the surface about a comment, an email, or whatever, but focus on the intent. This holds true in all Real Estate and Investment dealings; not to mention one’s daily walk in life – think about it!
#154 };-) aka D.A. on 10.24.12 at 2:46 pm
Don’t pretend to be a knight in shinning armour. There is an abundance of facts here and being passive aggressive by playing the “I’m trying to help you” card is a load of shit. You’re on the wrong blog if you think all these pessimist are going to be easily swayed. All the accusations you make are actually a reflection of your own posts. The sheer number of comments you have shows that as a realtor, you have too much time on your hands. That’s probably due to slow RE market and the fact that you don’t get repeat business. I try to refrain from replying to your posts since there’s really no substance but I couldn’t hold back on this one.
” Seven months ago the house would have fetched 15% above list. Not it’s likely to get 10% less. That’s a decline in street value of $312,500, or 25%.”
I have to call BS on this statement Garth, sorry.
Nothing to call. — Garth
Back in the day when I was young and frisky my then girlfriend and I had a conversation that went like this:
Me: I’m sort of thinking of buying a house
Her: Wow, you and I should get a house and move in together!
Me: And where will your half of the downpayment be coming from?
Her: ……….
The good news was that zinger sure cooled her feminist rhetoric! That’s for all the Angleo s out there
# Frank le Skank
1. the change in mortgage rules is equal is an interest rate hike. It was mentioned here several times.
2. When wil the interest rate increase? Do you have facts or is this your “feeling”. Please provide facts.
3. Wait till next year. Thats theme of this blog “next will be different” Oh April – let me guess because its the best performing month for RE, prices and sales will never top it again. Thats what they said in 2011
your advise seems shady and void of facts.
Speaking of gold… here is one way to get some for free! http://3.bp.blogspot.com/-nWssEO9jxko/UIgX-CYwPzI/AAAAAAAAAgk/fFBhUALPqtg/s1600/Picture+4.png
I am peev’d that I wasn’t able to make Garth’s presentation yesterday –
Did anyone “actually” see this supposed Smoking Man – or maybe it’s garth in disguise ?
Hope everyone who attended enjoyed themselves – Garth your a noble fellow to provide a forum on real estate and investing at large –
Canadian Watchdog re Calgary real estate:
I got very excited when you said you had uncovered more evidence of a board fudging its stats, but I’m afraid you made a mistake this time. The numbers on the left of your image (comparing 2012 to 2011) are for the Calgary core only; the total in your long tabulation on the right includes the country and lot sales.
If you look at the 2011/2012 data at http://www.creb.com/public/seller-resources/housing-statistics.php,
and click on the “total residential” column, you will see that the numbers they reported are pretty consistent. They’re certainly much closer than TREB’s numbers, anyway.
However, I do think we should expect to see more number-fudging as the long dark night of Canada’s real estate decline begins in earnest.
#54 Old Man – there is no greater love between an only daughter and her daddy, so here is the rest of this story, and approve of what he did. Ok she bought a condo for $150,000 with $50,000 down, and took out a $100,000 mortgage, and when the crash came was underwater in the Tampa area. The property in question went to a market value of about $75,000, as she stopped making payments, as was just going to hand in the keys.
Then she received a foreclosure notice, so off to daddy with the deep pockets, and he said this is a disaster in your life, so tell me what is important. She said ok I love where I am living no matter what, and he listened to what she had to say, as that condo, location, and friends in the area mean’t everything to her in life.
Her daddy said ok, as money cannot buy a happy life, and do not want to see you on the street, as will execute $100,000 out of your Trust Fund to pay that mortgage off in full to take back to Florida with you; this is not a good investment, but such is life and the problem will be over.
Garth,
Isn’t deflation desirable for people! (Obviously not for governments). People may have been foolish, but this doesn’t change the fact that if things are getting cheaper, then I’m happy. Didn’t the industrial revolution occur during a deflationary environment?
Not when 70% of people have 80% of their net worth in a deflating asset. — Garth
Sure deflation will be bad at first for the fools, but in time won’t deflation be a benefit? At first there will be a crash, the world won’t end, this is a government created miss allocation of resources that corrects. But doesn’t deflation over time mean that people are encouraged to save and not spend, which addresses our issues of over consumption? (I could take about the benefits of savings in an economy, but with government controlled interest rates what’s the point?)
Isn’t deflation the golden egg desired by all those here renting waiting to BUY.
#118 Vince on 10.24.12 at 12:05 pm
==========================
Geneva, London, Paris and Tokyo are all major finance and business centers of the world. I somehow doubt that Vancouver is quite in the same league.
#163 Old Man on 10.24.12 at 4:10 pm
Very true.
#146 disciple on 10.24.12 at 2:00 pm
#134 EIT… You are missing everything. Asset deflation concurrent with consumer price inflation. Because there are two economies that operate side-by-side, the real economy of supply and demand, and the fake monetary economy where demand is artificially produced either through “legal fraud” or “legal monopoly”. This is the realm of the financial parasite class. But maybe that’s too much thinking for you for one day… sleep on it and come back at me tomorrow… I’ll be here…
lol… o that’s funny. I’m sure Gerald Celente, Max Keiser, Jim Puplava, (dare I say Alex Jones), Doug Casey, Peter Schiff, …. , Nigel Farage, Jim Rickards, Martin Arstrong would all be proud of you. I listen to these people every day because it makes sense to me. I know what you’re getting after, I think you missed what I was going for. If you read blank on some of those names… read up on it and come back at me tomorrow… I’ll be here…
*Martin Armstrong
#169 just park.
I did lots of mirrors. Plus the bar was full of couriosity seakers. Only a few after having a few aproched and asked actuly it was the sweet lady that asked. 2000 people one brave sole.
Please dont take the slightly past prime as an insult lady. We never did exchange names. Want u to know it was you i was talking about.
If it did hurt your fellings please feel free to call me a bald headed fk.
Asset price deflation is good news. The housing industry is extremely negative, they are only happy when prices inflate and affordability is ruined. It would be nice if we didn’t have to listen to their doom and gloom all the time.
…”Using Bloomberg News as a vehicle to trash one’s employee and turning over employee personnel files is bad enough, but simultaneously lining a news outlet’s pockets with an ad campaign is just so vampire squid-esque. ”
http://wallstreetonparade.com/2012/10/goldman-sachs-smears-greg-smith-shades-of-christian-curry/
http://wallstreetonparade.com/2012/10/goldman-sachs-smears-greg-smith-shades-of-christian-curry/
#164Franke le Skank on 10.24.12 at 4:11 pm
You are partially correct. I am light on listings, listings of homes owned by ‘motivated’ sellers anyway. Which is why I have been spending much time lately at my desk with two computer screens going researching and calling prospective new clients with which I can replace some of that ‘dead wood’ in my listing inventory.
This is a business like any other and your shelves need to be full of well-priced desirable product that rotates rather than sits gathering dust and costing time and money. That is actually an interesting reflection on the current state of the market.
What typifies a market such as this, which has recently come off a bubble, is the mindset of a predominance of sellers who think they ought to be able to get a price they might have five years ago when the market was at its peak. Finding a serious motivated seller in this market is like finding a needle in a haystack but I would rather spend my time doing just that than wasting it trying to flog a dead horse. I’ve said here before that about 30% of listings expire without a sale, 30% are cancelled by sellers who just plain give up and of the 40% remaining only 20% are priced that they will sell in a manner that yields their highest potential price as the remaining are overpriced, need constant service at great expense, one or more price reductions only to finally sell for about 3% less than those which start out at the right price in the first place. You tell me which you would rather represent.
It’s also closing in on the slower time of the year and while any seller selling in winter is more typically a motivated one there are fewer of them . So I am spending a lot of my time cultivating leads for the busier spring market. Funny thing is that spring is not the best time for a seller to sell as there is way more competition for their home then as EVERYBODY thinks the spring market is the best market in which to sell. It is the busiest market to be true but the listings to buyer ratio is never so skewed in the buyers favour as it is in Spring. Of course telling sellers so at this time of year too often appears the needy ploy of someone who wants them to list now rather than later.
Different inside the business than you thought isn’t it?
Deflation? LOL: I would believe the stats coming from this guy then hot air blown around here..
http://www.youtube.com/watch?feature=player_embedded&v=GRR7EzsS6m4
Well, Duncan follows in Dalton’s footsteps. Clear sign for all; party is over.
Seven months ago the house would have fetched 15% above list. Not it’s likely to get 10% less. That’s a decline in street value of $312,500, or 25%.
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“would have – likely – street value”
I would prefer empirical fact and demonstrable market value conclusions.
Market price and market value are not necessarily synonymous.
Seriously, a lawyer purchasing 1M+ of residential real estate with a few percent equity is a study of stupidity -not real estate valuation.
#21 smokin man, maybe you and gartho should get a room.
“#33Party On Garth on 10.23.12 at 10:27 pm
Well done Garth. Really enjoyed your talk tonight, as did my GF.
—-
So did we.
#170 Coraline
Ok that was an error, but if you look at SHF and condo sales the numbers are still off. Link I’m not sure what the criteria is between metro and city. Calgary isn’t my area.
Besides that, Calgary has a pretty big pre-sale market , and I highly doubt they exclude sales on units that are not even built yet.
Sometimes when the numbers seem too good to be true, something is wrong.
#43 Investx on 10.23.12 at 11:05 pm
“As for the equity in your paid-for condo, a fifth or a quarter of it could melt away over the next year or two, and never return.”
“Never” Garth? Isn’t that a bit hyperbolic?
Ask an owner in Miami. — Garth
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21 straight years of property price decline in Japan now.
#155 Dividend Yield Investor on 10.24.12 at 2:59 pm
Eventually around 5 to 7 years from now deflation will end and interest rates will raise at least to a normal level but most likely will over shoot as markets are notorious for doing. Thus dropping RE some more.
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This is not a real estate cycle, this is the collapse of a real estate bubble. 21 straight years of property price decline in Japan so far.
http://themashcanada.blogspot.ca/2012/10/and-it-went-for_24.html
Looks like the house at 298 Berkeley Street in Moss Park that sold in May but then was relisted in September has sold again!
This house was initially listed at $1,195,000 and sold for $1,050,000.
I am not sure why the deal fell through last time but it did and was relisted in September for $1,069,000. It didn’t sell and the price was dropped a couple of weeks later to $999,000.
On Friday, the price was dropped again to $949,000.
It sold the next day for $915,000.
Hmm. Wonder if it was the location or the cost of the renos.
#55 InvestX on 10.24.12 at 12:07 am
This does not mean the price of those properties will “never” return. And we’re talking about Canadian RE where not even Garth is talking about 70% drops.
However, I guess it all depends on the duration of occupancy and what stage of life the occupier is in – the older residents, a decade or less away from retirement have a good chance of “never” seeing the a recovery in price.
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This is the collapse of a real estate bubble. So far 21 straight years of property price decline in Japan. This is not a real estate cycle. The real estate cycle assertion is pure propaganda.
Disciple wrote:
“John…. Gerald Celente is a fraud, a.k.a. Adi Da. Stop wasting your time, buddy…”
—–
You sound underfunded and reactive, but post up your links anyway. I don’t think Celente’s info is “wrong” exactly, but he’s a “fraud” in the sense that he’s presenting the situation in one-sided “us and them” manner. Not accurate.
You, on the other hand sound deluded. It sounds as if you think the information itself is wrong or “fraudulent”. Can’t help you with that.
Just post up your links. Or think of a “tail between your legs” one-liner.
Busting Celente’s angle would be good. What do you have?
Now here’s a Kelowna realtor that has it all figured out.
http://www.castanet.net/edition/news-story-82044-1044-.htm#82044
Angelo, here’s a tactic you might try. Tell your wife you would like to sell and rent for two years so you can purchase a house then. Tell her you believe houses will be cheaper in two years. Then look at some house showrooms, muse about locations, have a quiet discussion over whether the GO is better than the TTC, find out if other downtowns are comparable to Toronto’s …
But telling her she has to sell and rent for what could be eternity will doom the enterprise from the start.
#154 DA
thanks brother !
goodness knows I need someone out there ‘fighting off the prospect of this blog doing damage to my personal economy’………. !
Kelowna’s housing market corrected sharply in 2009 and has been on a slow melt ever since. All indications are that Vancouver and Toronto are only now starting down the same path.
If you are confident in your predictions, why so defensive……….. ?
Watchdog: I agree that something is probably up with the Calgary numbers, maybe with the condo sales like you suggest. It doesn’t seem realistic that every city in the country experienced a decline due to the Flaherty/OSFI changes except Calgary. But I don’t live there, so I don’t have a sense of the market.
Heard this rumour that Smoking Man was indeed at the Hilton bar the other night, and the best he could pick up was some old woman about 75 years old, so can anyone else confirm this?
#80Rusty Venture .
Trusting most people got the 3 Beatles media references in my mostly gag report…it was based upon Beatlemania (with a bit of Tom Jones thrown in). Well before my time but we know history repeats itself.
But the mullet patrol was the real deal. Never before have I seen such a clean-cut bunch ;-) And Garth’s haircut, well you could set your watch to it.
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES
(in billions of dollars)
HOLDINGS 1/ AT END OF PERIOD
Aug 2012
China, Mainland 1153.6
Japan 1121.5
Oil Exporters 3/ 263.0
Carib Bnkng Ctrs 4/ 256.9
Brazil 253.9
Switzerland 202.2
Taiwan 198.0
United Kingdom 2/ 153.6
Russia 153.3
Belgium 142.6
Hong Kong 139.6
Luxembourg 131.4
Ireland 92.2
Singapore 91.9
Norway 73.9
France 68.1
Germany 64.0
Thailand 58.8
Canada 57.0
etc ……………………..
…………………………>
————
Grand Total 5430.0
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
#198 Old Man on 10.24.12 at 8:10 pm
Nice old man, don’t think she deserved that. But hey democracy here.
The Sweety, the Hamilton couple, The Albanian and Options trader never post. But the bar was full of others staring in awe of the great one trying to get the courage to say hi.
174 EIT
“But doesn’t deflation over time mean that people are
encouraged to save and not spend”
That is the feared deflationary spiral you refer to. This results in deflating wages as well. Not a good thing, unless you have no debt and lots of cash/cash-like or fixed income holdings from creditworthy sources. Very bad if you have debt.
The industrial revolution increased productivity thus lowering prices or supplying better products for similar cost. Not the same thing.
#202 Gunboat denier
I found this on the wikipedia in two sec. :”Whether deflationary spirals can actually occur is controversial, with its possibility being disputed by freshwater economists (including the Chicago school of economics) and Austrian School economists”
I’m sure that if I did more research, I would find that the Austrian school of economists things deflationary spirals are BS. So I guess capitalism = deflation good, creditism = deflation bad?
21 straight years of property price decline in Japan now.
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the only thing worse than a land bubble is a stock bubble -nikkei225
top~ 39k
now~ 9k
a slight 76.9% loss to this day
japan re looks positively stellar by comparison.//In Tokyo Metropolitan Area:
The average price of new condominium units dropped 5.1% y-o-y to JPY691,000 (US$8,894) per square metre (sq. m.) in August 2012, based on figures released by the Land Institute of Japan (LIJ).//
still way higher than vancouver!
#175 Hawk
I should have clarified. I agree – London, Paris, Tokyo are all major finance centres and that Vancouver is certainly not. Vancouver’s lure is that it’s more of an ideal location because of geography, that people want to live there:
1) Nearest China/HK/India without actually being in the USA and subject to whatever surveillance/law/taxes/political risk is there
2) Oceanfront/Sea
3) Mountains and World-Class skiing
4) Open space
5) Wilderness
6) Mild temperatures year round — i.e. no Canadian winter
7) City life without being completely overwhelming
It’s certainly not a financial centre, but there are a lot of people that will pay to have a place that has such close access to so many things. Is this enough to support high prices long-term without being an economic/financial hub? Probably not. But for the time being, this is certainly part of the attraction.
But I certainly accept your point in your comment, and wasn’t trying to suggest Vancouver was a world-class financial centre.
302 EIT – I guess we are looking for the one-armed economist……there is always another viewpoint.
No matter what we call it I take the great depression as
the textbook example of deflationary spiral, and this is what Ben B fears.
If you click on the following link and choose picture 8 in the first portfolio you will see Ben piloting the copter.
The plane is carrying the money.
http://www.danmegna.com/
#206 Gunboat denier
http://www.cobdencentre.org/2011/01/the-deflationary-spiral-fallacy/#
Lots of people think deflationary spirals are economic propaganda. The fraud perpetrated today by the banksters makes me question all mainstream economic concepts. Case in point: Too big to fail. You must have heard of that one. Go ahead and please tell me ‘too big to fail’ is truth.
http://mises.org/daily/1254
another 2 sec. and someone saying deflationary spirals have the healthy effect ‘replacing an inferior sort of money’. i can do this all day (hypothetically)
No one will believe this. My painter asked to borrow my extension cord. He is hooking up to his neighbours house for power. They don’t know. He is 44.
He painted my garage door and front doors for a 24. I gave him 200$ plus the beer. This might get scary. Nice guy though.
I am single forever. I would not get married if his or anyone elses ass was studded in diamonds.