Not there yet

Vlad’s confused. “I enjoy reading your blog and can only hope you are right about Canadian housing market, since we are that average family that can’t buy an average house in Toronto even though our salaries are above average.”

He’s right. An average family in Toronto (household income $96,040) has a tough time affording the average detached home ($741,480). By global standards, that real estate is ‘severely unaffordable.’ If it weren’t for historically-cheap mortgage rates and bankers happy to let clients suicide on debt, Vlad wouldn’t even dream of being a home owner. But this is Canada. Everybody who can afford an HGTV cable feed feels entitled to a house.

“Last week I went to see a semi for sale in Davisville. I thought ( and my agent agreed ) that it’s a slower market, no bidding wars, less pressure. I thought I’ll just look, no commitments, gotta know where the market is at. It needed a lot of work, basement unfinished, backyard in ruins, although it did have a long driveway on the back for 3 cars (covered with a foot long grass). Listed last week, asking price was 620K, probably needed another 80 to make it nice. Our agent thought it’ll sell for 680 or so. Lots of people saw it during open house. We didn’t bid, looked like too much work.”

The property attracted multiple bids, and changed hands for $805,000.

“Has the world gone insane?” asks Vlad. “Who pays this kind of money for a rundown semi? We feel like we are priced out for a long, long time. We are not bitter, we are comfortable enough where we are now, but this is just insane and really disappointing and sad. Will this market ever cool down? I am starting to doubt it. Common sense does not apply here.”

A week ago a tired old bungalow with peeling roof tiles and two dead cars in the driveway of its 30-foot Leaside lot was listed for $809,000. It attracted instant attention and sold in a hail of bids for $843,000. So how are these deals consistent with my view of the troubled future of real estate? Is this blog more pathetic than even I imagined?

While that’s entirely true, occasional bidding wars prove nothing more than some realtors are stunningly good at what they do, combined with a strike by homeowners in places like Toronto and Vancouver. Vlad’s derelict semi, for example, sits in an area where detached homes regularly pull down seven-figure offers and where wanton-eyed young couples cruise the streets looking at real estate they cannot afford. So when something in the sixes hits the market, stand back. A crafty listing agent priced the place at least $125,000 below market value, knowing full well it would draw a crowd and end up selling for a premium.

Ditto with the Leaside bung. The last sale of an identical house (soon to be rubble) across the street took place in May, and closed at $850,000. So by pricing at forty grand less in a slow market one month before Christmas, the agent was able to use competition to recreate boom-time conditions when none should have existed. Had it been listed at eight-fifty, it would have sold in two months for eight-ten. But by listing low it went in just days, for a premium on a street where two-stories sell for $1.3 to $1.5 million.

That’s the crafty realtor part. Also at play is a scrawny selection of properties currently listed in some of the most popular hoods in Van and the 416. The dramatic rule changes we’ve seen this year – no more 30-year mortgages, no cash-backs, insurance caps and tougher lending standards – have spooked sellers watching listings sit, prices soften and housing fall out of favour. The inventory of available homes in those places where buyers focus has narrowed fast, at the same time disillusioned condo kiddies have flooded the market with units nobody wants. The result: 17% more listings in general than a year ago, but less to buy. No wonder Vlad’s perplexed.

Where is this headed?

First, the Spring market will be historic. Expect a torrent of new offerings, making this a mama of a buyer’s market compared to the previous April. If you’re shopping for a box-in-the-downtown-sky or a McMansion in Mississauga, you’ll have a wide choice and more motivated vendors. If you’re feeling vulturish, knock yourself out.

But if you’re Vlad, expecting to buy onto a million-dollar street 15 minutes from the core for half-price, fuhgeddaboudit. Despite all the wails I heard from the moldy basement renters on this blog the last time I said this, I’ll repeat: prices will not fall everywhere. The burbs may get  bombed, but the niche hoods which have always cost twice as much will continue to be that way. Yes, you’ll have more choice. Yes, houses will sit longer. Yes, sellers will take less than list. And yes, bidding wars will be rare. But no fire sale in Lawrence Park, The Beach or Hogg’s Hollow. Hell, not even in High Park. Liberty Village and Leslieville? That’s an entirely other matter.

All real estate is local. You’d be amazed what people will pay to get into a school catchment area, for example. Or to save six minutes on their morning commute. Or because the porch trim matches their Audi. Or because they have a dog.

The best advice is the same as with timing the financial markets. Sell when people are greedy. Buy when they’re fearful.

We’re not there yet.

197 comments ↓

#1 Guy on 12.07.12 at 10:20 pm

Number 1!!!!!!

#2 Marcel on 12.07.12 at 10:22 pm

Garth,

My mortgage is coming up for renewal. Should I go with a fixed or a variable mortgage rate? How many years do you think I should lock in for?

F5. — Garth

#3 Smoking Man on 12.07.12 at 10:23 pm

Impressive Post Garth.

You do know you have just crushed LaughingCon.

You’re such a nasty man.

#4 jay on 12.07.12 at 10:28 pm

Agreed, there are always people looking for deals. Priced low enough would attack attention.

#5 tow mater on 12.07.12 at 10:31 pm

Be patient folks. The prices will come down. As mentioned not all areas will drop but many will. The spring will really determine the future of Canadian realestate. If prices continue to fall and lots of listings appear sellers will eventually drop their prices.

#6 dosouth on 12.07.12 at 10:34 pm

Spring can’t come fast enough…will have to watch HGTV reruns until Spring fever hits…then it will be a great gong show….

….are we there yet Dad??

#7 DogWalker on 12.07.12 at 10:34 pm

This is more of a cultural shift than a stock sell off. Just as there are people slow to catch on, on the way up, there are also lots of people who are slow to catch on, on the way down. Relax, enjoy the rationalizations, and know that what cannot go on indefianately, won’t, eventually.

#8 Nodebt on 12.07.12 at 10:34 pm

Firsssst baby!!

#9 Retired Boomer - WI on 12.07.12 at 10:35 pm

Winter RE is always confusing isn’t it?

#10 renters rule on 12.07.12 at 10:38 pm

update re townhouse listed in sept in north delta

no buyers, anywhere, at any price

there aren’t even vulch offers. nada, zippo, zilch, kaputski

latest strategy is too ‘pay off the mortgage entitely, as soon as possoble

#11 renters rule on 12.07.12 at 10:42 pm

oops sorry, posting from smart phone (insert appropriate cheap seats shot here!)

I am not sure how paying off full balance on depreciating/declining sales price townhouse is the right ‘fallback strategy’….?

#12 prarie person on 12.07.12 at 10:45 pm

This assumes that employment will at least stay the same or will increase. The savaging of the housing market would occur if interest rates were to increase, even slightly, and unemployment increased. Unemployment is not evenly spread across the country or the continent so while the rust belt has taken a huge hit in the US, the oil belt in Canada has not. In 2008, Manitoba hardly knew that there was a downturn. Mixed economy starting from a low base. House prices there are still holding. The question is where will prices and unemployment come together? The general consensus is that “it is not different here” applies to the entire country but it would appear that with regional variation, there will be different outcomes. I expect, owning in Victoria, to get thumped, or I would if I had to sell. However, my house is not my retirement plan. It’s just my home. The warnings from the BOC are a concern for those aren’t given lightly. However, some blog dawgs are probably over reacting–unless there are unexpected events that, at the moment, are not clear. Yet, my gut reaction is how can this continue?

#13 george on 12.07.12 at 10:51 pm

Credit Bubbles are at their core about an unsustainable expansion of Credit – the inflation of financial claims spurred by market misperceptions and associated mispricing. During the Bubble, the rapid expansion of Credit is self-reinforcing specifically because financial profligacy will ensure that most “fundamentals” (i.e. corporate profits, GDP, stock prices, etc.) appear supportive. And, importantly, major Credit Bubbles are invariably created through heightened government intervention in “money,” the markets and throughout the real economy. The perception that Treasury, Congress and the Fed would never tolerate a housing bust was the critical fallacy that ensured a historic boom and bust cycle. In somewhat different dynamics than those of the mortgage finance Bubble period, extraordinary fiscal and monetary measures have convinced the marketplace that the historic confluence of massive issuance of (non-productive government) debt and record high debt security prices is both sensible and sustainable. Once again, market price distortions are driven by the perception of all-powerful intervention, in this case that the Federal Reserve and foreign central banks will indefinitely accumulate this debt at record high prices.

http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10735

#14 Mad Scientist on 12.07.12 at 10:51 pm

I knew we couldn’t afford in the GTA back in 2001 – we were approved for a mortgage but the numbers were not sitting well with us – I looked west and Oakville was as brutal – I was struggling for months in trying to put a positive spin on this – were we destined to rent for the rest of our lives. I had terrible luck in renting – either neighbours who were borderline phsyco’s, landlords who gave slumlords new meaning – well, we did find our home – and have been happy ever since. The cost was 2X our income – so we are just 2 years away from paying off our home –

We had to sacrifice – 1 hour north of the big smoke – but you know – we have never regretted it for a minute.

Gonna be mortgage free and loving it!!

#15 ruserious on 12.07.12 at 10:52 pm

I’m a fan, so don’t hurt me…but — “All real estate is local?” For 60% of your grade, Please compare and contrast with previous thesis that it’s not “different here.”

#16 Dr. WAYNE on 12.07.12 at 11:10 pm

#1 Guy on 12.07.12 at 10:20 pm

Number 1!!!!!!
————————————-

YOU ARE A WINNER … YOU ARE ABSOLUTELY RIGHT … YOUR MOTHER IS PROUD OF YOU … YOU’VE MADE MORE OF YOURSELF THAN SHE EVER EXPECTED …

YOU ARE “NUMBER 1” IN THE A$$HOLE WORLD !!!!!!!

#17 jess on 12.07.12 at 11:18 pm

The case is putting so-called “polluter pays” laws to the test. There are hundreds of companies that pose some environmental risk across Canada, and Friday’s ruling could determine who should be financially responsible if any issues arise in the future ..(cbc.ca)

The Supreme Court of Canada says a bankrupt company doesn’t have to pay to clean up the environmental mess it left at a mill in Newfoundland and Labrador.
The judge :
“Reorganization made necessary by insolvency is hardly ever a deliberate choice…”

huh?

Looting

In 1993 Akerlof and Paul Romer brought forth Looting: The Economic Underworld of Bankruptcy for Profit, describing how under certain conditions, owners of corporations will decide it is more profitable for them personally to ‘loot’ the company and ‘extract value’ from it instead of trying to make it grow and prosper. IE:

“Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm’s debt obligations.” [8]
http://en.wikipedia.org/wiki/George_Akerlof

Yves Smith argues in her book “Econned” that Akerlof and Romer’s “Looting” theory applies to the subprime mortgage crisis and the Financial crisis of 2007-2010. She argues that the ‘Looted’ companies in this case are banks and others who were ‘looted’ by certain traders and executives within those companies.[9]
=====================
cannabalistic capitalism

Thursday, December 6, 2012
Wonder Why States Are Broke? One Reason is Companies Play Them Off Against Each Other

By David Segal, executive director of the online organizing group Demand Progress and former member of the Rhode Island House of Representatives…
Our states and localities are cannibalizing one another as they concoct targeted tax breaks which they use to lure corporations from their neighbors. Meanwhile, a bevy of middlemen wet their beaks by helping corporations pit sucker states off of one another and brokering deals to sell the tax credits that comprise much of the ensuing largess. Here’s the rub:
Read more at http://www.nakedcapitalism.com/2012/12/wonder-why-states-are-broke-one-reason-is-companies-play-them-off-against-each-other.html#jYPeSsmhOsmooice.99

http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html==

#18 Smoking Man on 12.07.12 at 11:25 pm

Jobs jobs jobs.

World banker’s are dropping rates. Our bank. Coconuts tied.

What a gorgeous time to be an owner in the grass.

Spring market will crush records.

Not to late laughingcon

#19 Tim on 12.07.12 at 11:25 pm

Why would real estate not fall significantly in choice neighborhoods if it is so severely overvalued?

#20 Grim Reaper/Crypt Speculator on 12.07.12 at 11:38 pm

Dr Wanker ……..err Dr W -A$$hole-nker

FYI I let you get ahead of me…..

Evidence suggests you are a Maple Leafs Player/Fan..aka an A$$Julio.

#21 wes coast on 12.08.12 at 12:04 am

Its Friday night. I’ve just enjoyed a nice Granville Island pale ale. To hell with housing. Cheers.

#22 debtors_winners on 12.08.12 at 12:05 am

That’s what i got in my mail today:

Canada’s housing market is showing great staying power in the face of the global economic slowdown and concerted federal efforts to cool it off.

The real estate firm RE/MAX and the Canada Mortgage and Housing Corporation have both issued reports indicating this year will end almost on par with last year and that there will be some modest increases for 2013.

In its annual forecast, the real estate company says 2012 will finish within 1% of 2011 with sales of 454,000 existing homes and it predicts that will hold steady for 2013.

In its third-quarter outlook CMHC comes in slightly higher at 457,400 homes and projects more than 461,000 sales next year. The Crown Corporation also tracks new home construction and is putting housing starts in the range of 214,000 this year. It expects starts to fall to 194,000 for 2013.

Both groups are forecasting home price increases of between 1% and 1.5% for 2013

http://edwardbarr.com/

#23 Smoking Man on 12.08.12 at 12:07 am

#19 Tim on 12.07.12 at 11:25 pm
Why would real estate not fall significantly in choice neighborhoods if it is so severely overvalued?
……………………………………………………………….

Timmy on any given day go to union station, look at the TV at 12:33. Lake shore west. The tax farm slaves put down the ipones, and galaxy 3s momentarily eyes glued to the to the screen. They do this everyday.

It says track6, the run each other over each other like cattle on the way to the kill floor threw one tiny entrance.

The trains doors open on Track5 first, track 5ers get choice seats. after a few min the hundreds of dogs , fight each other for a seat.

The track6ers make the markets. The TV at union has no sound, no spin, no music. just a number.

When Mansbridge says real estate looking good. Basement dwellers and bubble heads have no chance.

But shoot the messenger.

Not to mention men get laid way more when they give the wives granite and hardwood.

Little head is so easily controlled, who then controls ultimately controls big head.

With a fake smile and a new victory secret out fit.

Dudes have no chance………………..

You’re in debt big time.

#24 jan on 12.08.12 at 12:08 am

I my humble view as a immigrant I see this real estate orgy as a canadian problem only.
Canadians stirike me as people form lalaland who feel entitled to things they couldn’t possibly afford just because they’ve been fed this home ownership thing since they were children, and anything you learn as a child ( good or bad ) stays with you forever.

#25 MutiCult on 12.08.12 at 12:10 am

9 – 9 – 9 ! JOBS JOBS JOBS

#26 MutiCult on 12.08.12 at 12:12 am

Sorry I meant to say 8- 8- 8, fobs fobs fobs

#27 Smoking Man on 12.08.12 at 12:15 am

#17 jess on 12.07.12 at 11:18 pm

DELETED

#28 Mr Buyer on 12.08.12 at 12:20 am

The message is getting a little diluted again. BUYERS BEWARE. NOW IS NOT THE TIME TO BUY A HOUSE. THE BUBBLE HAS TOPPED. Spring is drawing closer and chapter 2 of the collapse will begin nationwide (there were a few places in Tokyo and Osaka that held elevated values even in the midst of 21 straight years of property price declines during the continuing collapse of Japan’s real estate bubble). It is a 20 or 30 chapter story we are just beginning.

#29 earlybird on 12.08.12 at 12:22 am

Once again, fantastic post!! Real Estate with great fundamentals (close to school/cores/amenities) will alway be a premium. Once the maximum benefit of ultra low rates have been exhausted within the economy, exponential diminishing effects will naturally bring us back to fundamentals…..Incomes! I believe this is where we are at…

#30 GTARealEstateCorner on 12.08.12 at 12:24 am

To all the readers, new and old, I urge you on one thing. Please be nice and accepting of Smoking Man. He’s probably a good guy, but has never had a lucky break in his life. It’s kind of sad, but he has delusions of grandeur. This is a sign of impaired mental faculty. Please, no judgement, no harassment. Live and let live.

#31 Mr Buyer on 12.08.12 at 12:35 am

Rates are low, many qualified buyers are not going to qualify in short order. It is now or not for a very long time for a part of the evaporating pool of buyers. The question is not how many people are choosing not to buy. The question is much more dire than that. It is more like how many people can possibly buy, an ever decreasing number in the midst of historically permissive lending conditions even with the new regulations. Now you can no longer be hooked up to life support or deceased to get a mortgage, you actually have to have a self sustained pulse. We have not escaped ridiculous yet, we are only boarding the bus that will take us to the train the heads out of town to the airport. Enjoy the scenery as it burns away over the coming decade.

#32 jan on 12.08.12 at 12:55 am

A question for smoking man.
How is the R.E flipping business thses days??? Thanks

#33 detalumis on 12.08.12 at 1:05 am

#23 you must be an old dude, many women today make damn fine coin you know enough to buy their own house with granite and hardwood in the popular hoods or in Oakville too. If you check out track 6 closely you will see a whole lot of pretty high flying women, maybe the kind you don’t pay attention to, you’re looking more for the 23 old Senator’s wife kind of lady I’m sure. My dentist is on there and she is married to a heart surgeon, he works in Hamilton while she commutes to Toronto, now he is a smart guy don’t you think.

#34 JN on 12.08.12 at 1:10 am

Hi Garth
We sold our towny in Bowmanville and moved into a 1 bed apt. South of Queen in the Beach in May (just in time), which was a decision my in-laws werent fully comfortable with (although i havent heard any grumblings lately). Your blog helped me to make the decision, provided the ammo, and looking back it is the smartest move I could have made. Ive been watching the Beach market for about 3-4 years now and after a scorching hot spring market, things seem to be slowing down. $1M+ houses arent moving and seem to keep piling up (even the Rock Star Wright Sisters have their own home up for sale) http://www.realtor.ca/propertyDetails.aspx?propertyId=12472760&PidKey=40712662
(Maybe they are looking to trade up and move into Casa Loma ?)
There have been nothing but reductions lately, with one detached sfh just North of Queen on Neville Park listed originally for 699, then 664 eventually selling for 600 — a HUGE drop. Homes on Courcelette, 4 of them have sold recently all had to make reductions of up to $60000 to move.
Its obvious I have an interest in the Beach tanking, we Love it here and every price drop fuels my hopes that we can get in on a steal at some point in the next 2-3 years.
My question: Seeing as the Beach is predominantly middle/upper middle class, is it possible that it could be less insulated than, say, more ritzier areas closer to the downtown core where mortgages and affordability dont necessarily factor in as much (i.e High Park?) Or will demand always meet supply in an otherwise shaky and saturated domestic market because buyers will always pay a premium to live here, and be willing to gamble more of their own money to do so ?
Long question I know…
Thanks and Keep up the Good Work, Garth!
Jeff

#35 Mr Buyer on 12.08.12 at 1:22 am

I am guessing that if I were looking back over the limited pool of propaganda about the real estate bubble in Japan and I would be able to shoehorn what I see into my expectation which would be first a lot of news about how ‘everything is great’ with and increasing mix of ‘something is wrong’ in the initial stages of the collapse and then a drop off of ‘everything is great’ which would soon be followed by ‘we have turned the corner’ which would then change to ‘we are turning the corner’ about 5 years out. That would likely be seen to fall away to ‘we may be turning the corner’ a few years after that and that in turn would likely fall away and be replaced by ‘after many false starts we may actually be turning the corner’ at about a decade into the collapse. There is not much about the bubble being reported two decades out now except the relentless ‘another year of price declines but at an ever decreasing rate.’ All these stories are likely peppered with employment and sales stats that told only part of the unrelenting story. Not to worry though it is different in Canada.

#36 Mr Buyer on 12.08.12 at 1:27 am

Oh yeah. It is different in America as well. The biggest difference being that America doesn’t have a huge economy like America’s to sell its exports too like Japan did throughout its real estate bubble collapse but now I am only telling part of the story there.

#37 Mr Buyer on 12.08.12 at 1:45 am

One big difference between the American and Japanese experience may be the degree to which economies in the west have moved away from maintaining the appearance of being free market economies and have become ever so slightly command like economies in the absolutely overstretched and contorted sense the phrase may be twisted into by a mind of limited perception like my own. The tooling around with the economy of late appears at least on the surface to have abandoned any connection with real value from the recent past. Kind of like, we need this so change this law or that regulation, pump in this much and sell it like this except the myth of the free market does not even have to be paid lip service too any longer. With those messy constraints imposed by keeping up the appearance of free markets removed just about anything can be accomplished and likely without everybody cluing in that the same can be done for just about any other issue. Hey old people are only getting one bath a week in parts of Canada, no problem, print up some money and give to people to give the old people more baths, that seems to be where we are at in dealing with the financial problems of late, but I am only telling part of the story again.

#38 Hoof-Hearted on 12.08.12 at 1:45 am

The Architecture of the New World Order

http://www.henrymakow.com/

Oppressive architecture fits inside a more encompassing plan known as the United Nations Agenda 21.

It is a blueprint for the control and domestication of human life, concentrating people in small, overcrowded cities, living in vertical slums with 300 square feet apartments, while the globalist elite lives in old style neo-classic mansions or mediterranean villas.

Forget about decorating your house, mowing your front lawn or having a barbecue with friends on Sundays.

Your only option to leave your jail cell will be to gather with other comrades for a government sponsored event, at some public space, standing on a concrete ground facing a massive building with a cement curve from Niemeyer.

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

Hi I’m Brad Sheepherder …eerrr Broad LaBamba ….err Brad Lamb.

Step right up….free horizontal B/W striped outfit and cap with every purchase !

References? : c/o of Bob Rennie

#39 Nostradamus Le Mad Vlad on 12.08.12 at 1:55 am

Eye would like to state that Vlad and I are three separate, incomprehensible beings. I, Vladius live somewhere in a dope-infested province surrounded by politically correct new agers, and the other Vlad is not as nutty as aye am!

“The best advice is the same as with timing the financial markets. We’re not there yet.” — But there are some really good deals, esp. with corporate profits riding high and trillions sitting on the sidelines across the continent.
*
#18 Smoking Man — Whaddaya say to the possibility that Carney left to join a sinking ship? — Mark Carney and George Osborne AAA rating going for ten bob. Do I hear a quid? Govt. jobs account for 73% of new creation; EUSSR would like to control spending, but if the UK and other countries leave, they will have to re-evaluate their wants; Short Clip Detroit voted for Obama, now wants bail out; Cdn. Friday links; Combining e-Series funds and ETFs; HP New Nortel in the making? Another reason why Carney left? REITs Insatiable demand; Nine Reasons to re-think retirement strategy, and Why 20-somethings should be maxing out TFSAs and socking away for retirement; Giant Platinum Coins Nice to dream about; 8:32 clip The banxters are the problem.

German recession soon? New chart with lots of pretty flags in; Will the housing recovery continue? German growth Coming down; 6:49 clip US$315 bln. worth of gold; Harvard “A giant hedge fund with a little school attached.”; Data Skewed Americans quit looking for work.
*
Jaguar’s Xmas Bonus Cheap for the price; Lavender Fields of Dream Subdued colors; Poop Bombs Not a good selling point; Animal Action; Fracking the food supply aka starving us, and Syria Food shortages send prices skyrocketing; MEast The west wants other countries assets; 1:05:31 doc. BP / GoM mess; Contact Lens from Stem Cell That’s a new one; Shake, Rattle and Roll in seven states; Die off of world’s oldest trees; India and Hitler Mein Kampf a best-seller; 1:20 (or so) clip The Burmese Python — too many of this invasive species; Dr. Oz may be in a spot of bother.

#40 Mr Buyer on 12.08.12 at 1:57 am

The problem with our infinitely slight in nature command economies is that they are not made so with at least the myth of serving the collective but rather to serve the elite while telling the great unwashed they must look out for themselves as the great unwashed are rugged individuals, even as they are in fact being reduced to being unwashed (without a bath but in fact likely sponge bathed daily) six days a week. The last thing rich people would want is electorate simply decreeing there is ample money for all needs and in fact the exchange of money is unnecessary. Simply fill needs as they arise with some sort of accounting and accompanying rationale that attenuates hording and largess. The big question being how will we get working people to clean old people’s bottoms if the working people are not in dire straits or at least believe they are? I mean love is all nice and everything but even psychopaths respond somewhat reliably to fear. Fear is faster and more reliable. I just can’t help wondering if Monster’s Inc doesn’t have a viable option with its whole laughter is 10x more potent than fear thesis.

#41 Realist on 12.08.12 at 2:28 am

>>Buy when they’re fearful.

Sometimes people are fearful because they know more about the market than you do…

#42 Twooping on 12.08.12 at 3:51 am

For kicks, search “basement suite” on Craigslist Vancouver. There’s only about a bazillion results. No smoking, no pets, no laundry, no parties, no farting, no breathing and only professional couples. Must have references. HA, good luck with that, all you indebted twits.

#43 I hate Dr Wanker on 12.08.12 at 3:56 am

#16, Dr. Wanker, please don’t go away mad — just go away. And stay away. Quebecer post from yesterday. Love and respect your culture. Just learn to do your culture without transfer payments from Alberta.

#44 Buy? Curious? on 12.08.12 at 4:03 am

Crea and Christmas?

http://www.youtube.com/watch?v=jxghpD4Wdx8&feature=plcp

#45 Freedom First on 12.08.12 at 4:15 am

“Leverage is fun on the way up, on the way down, not so much”……..and……”More people have been financially bankrupted by RE than any other asset, hands down”. Both quotes are from Warren Buffett.

If you are unable to hear Garth’s truthful, helpful messages on his “Greater Fools” blog, perhaps these messages from Buffett may penetrate the close minded greater fools.

I myself, for my whole life, would never dream of leveraging my ass on one ass-et. I can’t even imagine willingly putting myself in such a dangerous and vulnerable position. It is simply self-destroying financial insanity. No exception.

#46 Soylent Green is People on 12.08.12 at 4:22 am

How is smoking man not a tax slave if he’s at union station every work day commuting between Toronto downtown and his crack shack next to super gay Marie Curtis Park? That part of Etobicoke / Lakeshore is considered white trash land.
O
O
O

#47 Soylent Green is People on 12.08.12 at 4:27 am

Friggery in the twiggery

http://27thstreet.wordpress.com/2010/11/12/plans-unveiled-for-marie-curtis-park/
O
O
O

#48 Rob on 12.08.12 at 4:51 am

Hey blog dogs

Here’s your Saturday morning read from the one who is never first

The Great Hammer Theft

http://bluecollarworkman.com/the-great-hammer-thief/

#49 JB on 12.08.12 at 8:01 am

I´m glad Garth posted this topic here. The real problem of real estate market in Vancouver and Toronto is that there is a limited space in and near the center which will always be a part of the bidding wars. Combined with off shore investors and rich people, some places will never be affordable. Some prices are dropping, but in majority, the market still sits tight, with less sellers offering right now. This fear works in a different way. Instead of selling cheaper, they decide not to sell at all. They rather wait for a better moment. This logic is what I can see on the market nowadays.

Because there is still significant hunger to buy, many RE agents still see positively the development in 2013. Well, I don´t. I follow Garth on this one. I hope that the people will finally stop and think, whether they can afford semi on the best addresses or not?

#50 Regan on 12.08.12 at 8:49 am

The pattern of decline will depend on the causes behind the bubble in the first place. If school district is the driving force for one area, then that will remain until the fashion moves on to a different school. But overall, it’s cheap credit that is running this show and thus the early entry and middle-ground markets will get hardest hit. This is partly because they’ve gained the most. Just take a look at a gorgeous 5 bdrm detached home in the Beaches that recently sold for $1.2 million, only $300K more than a crap semi with 3 bedrooms in the same area. That semi is badly inflated by the scores of buyers who can borrow enough to bid, the million-plus property has been abandoned by CMHC and the room gets cleared. Additionally, if anyone with a pulse can borrow $200K for a home, you’ve just put the floor on the price of even the skeeziest entry-level condo.
I think the pattern would be different if the boom was driven by wage inflation or a stock bubble. Knowing exactly what’s happening in your area is a big advantage if you are looking to sell or buy.

#51 Frank on 12.08.12 at 9:22 am

No one sells anything for a loss unless they have to. Expect a modest 10% – 15% drop, not much more than that. Anyone expecting a 40% to 50% price drop are nuts and wishing for complete economic disaster which will not
benefit many.

#52 Robert on 12.08.12 at 9:25 am

#8 No Debt. Hey fool you are number 8. What a tool you are.

#53 T.O. Bubble Boy on 12.08.12 at 9:49 am

I still see 2 types of properties in these premium areas of Toronto: the “entry level” semi-detached, bungalows, and never-renovated 2-stories. These go for $650k-$850k at the moment. Then there are the $1.5M+ McMansions, most built by tearing down an old bungalow or 2-story.

The average upper-middle class working family in Toronto can get enough cash to buy the $650k-$850k house (from a giant mortgage plus a couple hundred grand from selling the current place). However, with the condo market dying (one of the main sources of down payments for “move up” buyers), these types of purchases should still see a slowdown. I agree that it won’t be anything close to the drop in certain burbs, but it will slow down.

Now, the real bubble is in the McMansion market. If offshore money stops flowing in, or prices flatten out/decline even a bit, I think this market is in trouble. These skinny stucco palaces are not being built by current owners… almost all of them are built by speculator developers (the ones buying bungalows for $850k to tear down). These all get built in a mad rush, and instantly listed. Anything that slows down the flipping process or cuts into the profits for these properties will de-rail this market – could be big trouble for these builders — much like that realtor from the CBC piece that Garth was featured in a few weeks back.

#54 Bigrider on 12.08.12 at 9:59 am

Why would it be different this time..that is ..after the RE crash in the early ninties, Lawrence park, hogs hollow the beach , leaside all fell for years, substantially, bottoming in 1996-7. They have had an incredible run from that bottom, houses tripling in value and more in most cases ,from that point.

What would cause these prices to hold all of a sudden and not repeat past correction mentioned?

Are you suggesting there has been a seismic shift in the RE cred of T.O proper since then?

No matter how much you wish it otherwise, 905 will take the big hit. — Garth

#55 cofessions of a real estate bear on 12.08.12 at 10:00 am

frank #51 People will have to

#56 Bigrider on 12.08.12 at 10:05 am

And by the way Garth, as a follow up to my last posting, RE in the toniest areas you mention DID decline quickly and substantially during the GFC in 2008/9. Lots in Lawrence park ,for example an area of which I am familiar selling for 1/3 less in March 2009 then they did 6 months earlier.

What, no chance of a repeat without the GFC? I say a repeat is entirely possible even without a GFC as sentiment changes are a powerful driver of all markets, financial or otherwise.

Everything fell in 2008-9, so comparatively speaking there was no chance in the relation between asset classes. 2008 is not coming back in this generation. Guaranteed. — Garth

#57 T.O. Bubble Boy on 12.08.12 at 10:13 am

Oh yeah – and the only reason semi-detached properties are still in that $650k-$850k range is because you can’t tear ’em down (unless you also buy your neighbour’s place — which does actually happen one in a while in Leaside / Lawrence Park).

The most you can do to a semi is extend it back or gut the inside.

#58 Ralph Cramdown on 12.08.12 at 10:19 am

#51 Frank — No one sells anything for a loss unless they have to.

Now we’re getting somewhere, as this statement is one of the last in the seven stages of bubble denial. The problem is that even if you don’t have to sell, you go from spending 105% of your income to 96% of your income. You drive the car an extra year, drink a bit more at home and less at the pub, put off dental work, new tires, home maintenance and a few other things, thereby reducing your neighbours’ income. So they in turn stop coming to Frank’s Hair Salon quite as often, and your income drops another 5%. Do you have to sell yet, Frank, or do you just spend ANOTHER 5% less in your community’s economy? Do any of your neighbours have to sell yet?

#59 Smoking Man on 12.08.12 at 10:21 am

#46 Solent

Yes, yes and yes.

I am the biggest tax farm slave over 100% of my consulting income goes to CRA. If you haven’t noticed I have several addictions. The biggest is compounding returns. I don’t like drawing from my investment and trading accounts. Plus did nothing but golf and boat for 4 years. It gets boring.

White trash down here. I fit in perfectly. this place is park dale 10 years ago.

As far as gays go. I like gay people, they let it all hang out. Speak there minds, and are funny as shit.

So yes yes yes. To all you said.

#60 blase on 12.08.12 at 10:48 am

A friend is renting a decent 1-bedroom on Queen St. E in the Beaches, Toronto. Costs $1,000/month. Meanwhile, 1 bedrooms are selling for $380,000-$460,000 on realtor.ca right next to him.

So, only take about 40 years of rental payments to equal the cost of buying. That’s probably how long most of the people got their mortgage for anyway.

#61 Dr. WAYNE on 12.08.12 at 11:13 am

#43 I hate Dr Wanker on 12.08.12 at 3:56 am

Frankly Scarlet … I don’t give a sh++ …

#62 Steev on 12.08.12 at 11:17 am

Garth,

While I agree with your premise to an extent, I don’t agree with you that prices in desireable hoods are impervious. In a blog piece awhile back you showed what the price of a Leaside house did after the ’89 crash. It dipped, not hugely and not for as long as the average TO house did, but it still took 7 years for prices to get back to 1990 levels, even longer if you want to take inflation into account.

Is this correction going to but that much milder than the last one? I certainly hope not…

I did not say impervious. ‘Resistant’ is a better word. Prices everywhere will be hit (already happened) but demand areas will be shielded from the hit others will take. — Garth

#63 Ret on 12.08.12 at 11:20 am

We seem to be in two camps wrt house price drops. A “we won’t even feel it,” 10-15% drop or a, ” crash and burn,” 40-50% drop.

The tipping point is an unpredictable number somewhere between these two positions. A 20% drop may be okay, 23% could bring another rapid 10% drop in that market and chaos. Hopefully we don’t find out the, “trigger number,” for the market that I reside in.

Not many areas in the GTA went unscathed in the early 1990’s and we still had lots of high wage manufacturing jobs then that we don’t have now. Very few, if any areas of the US, have escaped some pain in the drop in RE prices.

Lots of people sold for a loss in both events because they had to. This could be a new concept for GTA residents who have been living the RE dream for the last 16 years!

#64 TurnerNation on 12.08.12 at 11:21 am

Attn. new blog dogs. The following user names are still available.
Reserve yours today!

Bay st. Janitor.

Senator, elected.

Stephen who?

Wealtors: a nasty cwash!

Flouride is making me passive.

Jim, Jack, and Johnny.

Beach man.

Reserved:

Sir Blog Dog Carney.

#65 Realtors in an all out PANIC! on 12.08.12 at 11:30 am

What garth is saying is everywhere will see a hit some more then other but everywhere will see prices fall. Like in my area where $1.2 million dollar houses which were selling in a week are now sitting EMPTY at $980K that’s a drop of $220K and not even being able to sell. This is happening all over The GTA. Prices are falling and will continue to fall (JUST LIKE THE US). Canada has an even BIGGER bubble then the US and people are MAXED OUT and on the BRINK of going bankrupt. People were SAVED by being able to sell but this is no longer the case. This is why you have FORECLOSURES in Yorkville. Give people time to go bankrupt.

#66 Realtors in an all out PANIC! on 12.08.12 at 11:41 am

Just think Nortel….People bought all the way down….People bought NT at $100 thinking it was a deal…then $80 was a deal…then $60 was a steal…..until it crashed back to reality. I am not saying GTA home prices are going to zero. GTA prices will go back to 3-3.5 times income for every area in Canada. Right now prices are 7-8 times income and so prices will crash 40-50% back to HISTORICAL norm. Prices always go back to what something is really worth. It’s going to be a NASTY crash realtors , A NASTY crash! You can hope all you want out of work realtors on the brink of going bankrupt. It’s really going to be a NASTY crash!

#67 Waterloo Resident on 12.08.12 at 11:44 am

From what I see, CANADA IS DIFFERENT, its somehow changed since 2003 and now home prices will continue up on their upwards spiral forever.

Sad but true.

Prices cannot rise without a commensurate increase in incomes or debt. Both have hit walls. Stop being an idiot. — Garth

#68 Mr Buyer on 12.08.12 at 11:47 am

#51 Frank on 12.08.12 at 9:22 am
No one sells anything for a loss unless they have to. Expect a modest 10% – 15% drop, not much more than that. Anyone expecting a 40% to 50% price drop are nuts and wishing for complete economic disaster which will not
benefit many.
……………………………………………………….
You are pretending that buyers have the option of paying more and over extended owners have the option of insisting upon more. I think it is more like get ready to carry your behemoth monthly expenses because there is nobody left to take it off your hands at any price. That is going to hold you in good stead for the duration of a very long process. Sellers, there soon will be nobody left to buy your houses at any price. Many acquaintances are only now paying off mortgages in Japan that they have been carrying on their properties since the bubble collapse over 20 years ago. Some to the the tune of double the present day value of their homes before interest is figured in. No bull. Your Realtors are telling you bedtime stories when they hold your hand and tell you everything is going to be alright. The best bet would be to vote some guy into office that is going to turn the free flowing credit taps back on at least long enough for you to get out from under. The problem is that the whole real estate can go down thing is gaining traction in the popular psyche and that is going to fowl the vaunted machine up for a generation or two. Get ready to be paying that mortgage for the duration and hope to hell it doesn’t go up at renewal. There is no way the government would let you get burnt like that after all look how well they took care of 1st time home buyers and baths for elderly people, wait a minute…
PS. I am a buyer and I do not feel any need to pay an asking price. There is no dire force pushing me into a deal. I am totally okay and can tread water like this indefinitely while actually gaining some ground in the process. Is the picture coming into focus yet?

#69 hangfire on 12.08.12 at 11:56 am

Houses have not become overvalued…..they have become overpriced due to ’emergency rates’. As long as the nut jobs like Carney continue down the road to ‘stimulate’ a bubble economy which should have been put to sleep long ago based on natural conditions within a self regulating market place instead of this ‘fantasy fight’ with deflation….we will have people able to ‘pay’ ( what a joke) 2-400% more than these dumps are ‘worth’ on any traditional metric.

Heres the Carney thinking process ‘OK…we’re in the midst of a huge bubble…how do we keep it aloft? Of course..extend the emergency rates another 5 years !! Brilliant…give all the civil servants a raise and make sure those pensions are indexed. The rest of these scum can pee off……weeeeeeeeee I’m the governor of England…….lick my roids Canada.

#70 Hugh Jasz on 12.08.12 at 12:00 pm

2 Marcel on 12.07.12 at 10:22 pm
Re: fixed versus variable.

Soon to struggle with the same decision myself.

My “back of the cigarette-pack” calculation suggested the same thing as Garth – fixed for 5 ish makes sense for me (you might have other considerations).

I figure in the short-medium term, rates are likely to start creeping upwards……I mean, what other possible direction is there?

Just doesn’t seem to be the same spread between fixed and variable, or between 2/3/4 year terms and 5 year terms as there used to be……If you don’t want to be a gambler, might as well take the certainty at historically low rates.

Even if the uptrend is sluggish, say 0.25 to 0.5% per year, you’re either going to start feeling the higher rates mid-term, or be looking at renewing at higher rates before you would otherwise have to.

If I were closer to the end of my ammortization period, I might even be looking at the 10 years. I sort of love it even now, but I still see too much risk that I might have to move for career reasons within the first five years, and some of those penalty clauses look painful!

#71 Paul on 12.08.12 at 12:01 pm

I think Dec sales stats will be up. Sold signs are showing up more often now. Price wise I don’t know. This is in the Cobble Hill, Duncan area on Van Isl.

#72 X on 12.08.12 at 12:06 pm

Sold my townhouse in July, just sold the rental property too. Currently condo sitting for a out of country working relative until the end of next summer.

Actually considering renting for another year after that. Fortunate to have a wife who is completely onboard.

We can actually afford a home, but for the potential price of 1 years rent, why buy now. (and yes Garth the money is not sitting in the back pocket of the orange guys shorts, lol)

#73 renter bobby on 12.08.12 at 12:10 pm

the house that was listed in leaside for 809,000 was not a 30 foot lot. it was a 35x 140 foot south lot which is one of the biggest in the area. yes the 1.5 mil properties that are overpriced are sitting and being reduced by 10%.

#74 Hugh Jasz on 12.08.12 at 12:18 pm

http://www.torontosun.com/2012/12/07/do-we-need-another-stimulus-plan

NO!!!!

I watched first hand as these Con-swerve-ative f-tards threw money at a variety of public capital works projects in 2009.

Funny thing about that was that they had the old “shovel-ready” criteria for securing funding.

Nice going, geniuses. If it’s shovel-ready, that means that funding has already been lined up! All you achieved was to spread the tax bill over all of Canada, instead of the people in the area served…….YOU MAY NOT HAVE SAVED A SINGLE JOB WITH THOSE BILLIONS!

Might have helped secure a vote or two, however.

Come on, guys, let’s see some real leadership.

#75 TurnerNation on 12.08.12 at 12:18 pm

#33 JN

4.5 mill in the Beaches? No way. That one is a “middling” middle-to-upper-middle-class pad.

And today’s budding yuppies are flocking to Bloor W. Villiage, Roncesvalles, Annex and the lesser ones to Leslieville.
Beaches now strikes me as a late-boomers area.

Now this for 4.5 mill in central T.O. may be a better deal. Better area. No street parking allowed! Compare its inside pictures.

http://www.realtor.ca/propertyDetails.aspx?propertyId=12555753&PidKey=1617834060

#76 TurnerNation on 12.08.12 at 12:25 pm

Speaking of alphas, or near-alphas, Bigarider is a facinating study.

I bet, he bougtht a large (3000-4000 ft) Richmond Hill/Vaughan house 10-15 years ago and is sitting pretty on some equity. Two kids in post-secondary.
Drives a BMW 7-series or an M5.
Investment portfolio in the very low 7-figures.
Has ability of dropping 300k into risky Second Mortgages fund.
(Severe liquidity risk there, but that’s altogether another blog post ).

#77 Mister Obvious on 12.08.12 at 12:31 pm

#51 Frank

“. Anyone expecting a 40% to 50% price drop are nuts and wishing for complete economic disaster which will not benefit many.”
———————————————

Perhaps so Frank, but anyone in the year 2000 wishing for a 100% rise in the following decade would also have been considered nuts.

The fact that it did happen is also a disaster which is not benefitting many today. At least, not those who refuse to cash in and put their anomalous profits into something less risky that actually spins off income.

The window is closing fast on that opportunity.

People who intuitively understand this tend to read ‘Greater Fool’ to get some actual facts about the closing of that era.

(Others want to talk about gold, guns and doom but you always get that when a blog develops some serious readership).

#78 Smoking Man on 12.08.12 at 12:42 pm

No matter how much you wish it otherwise, 905 will take the big hit. — Garth

That’s my hypothesis as well, but last months stats threw cold water on that one……

The good news white trash, gay long branch was up 8%. and Marie Curtis Park is having a 8 million dollar Reno, awesome play ground for youngsters.

But like you say Garhottomule. Not there yet.

#79 futureexpatriate on 12.08.12 at 12:44 pm

All you have to do is completely ignore the first lie by almost every realtor when they receive the first cell call while viewing a property and it ALWAYS turns out to be “another” “offer” that’s “just come in”. You ignore that piece of theater with an unfazed crack like “How wonderful for you” or “That’s nice”, and they usually give up trying to sucker you further. At least as other calls come in. And it goes a long way to gaining whatever respect you can gain from a realtor.

#80 Ronaldo on 12.08.12 at 12:45 pm

Did you ever wonder what $315 billion dollar worth of gold looks like? Check this out.

http://www.businessinsider.com/this-is-what-315-billion-worth-of-gold-looks-like-2012-12

I got to thinking about how much the U.S. deficit is increasing yearly and it blew my mind to think that it amounts to 4 times the above amount of this shiny yellow stuff that is currently sitting in the Bank of Englands vaults. But then, gold doesn’t have any value anyway, you can’t buy anything with it, it just sits there and shines as Buffet says. So why worry. Let them print all the money they want. Who cares?

#81 Mister Obvious on 12.08.12 at 12:49 pm

#42 Twooping

Correct. You may as well be in hell as in a $1300/mo Vancouver basement suite. So don’t go there.

In Vancouver, you need to spend at least $2500 monthly (plus a fair bit of time searching) and you can come up with a suitable, professionally managed place that should meet most people’s needs who wish to live close to downtown.

#82 Finally on 12.08.12 at 12:58 pm

Live in YVR, sold downtown townhouse in May 2012, Baby born, renting and loving it in Kerrisdale, just wish I can afford to buy here as houses cost in the 1.5+ million range … Been telling all friends and family prices are going to drop since 2011, they all thought I was an idiot … Patiently waiting for prices to drop, so I can say “I told you so” … YES I know, not nice, not mature, but whatever, it’s been a long wait!

#83 Math....man on 12.08.12 at 1:06 pm

Long time reader and re bear. I agree the sought after areas with not suffer as much, that being said in high prk/roncy, places over 1 mil are not moving. That says to me that all the buying in the 650-850 range is CMHC and buyers at the margin. People don’t have to sell now, but if had a $ for everyone I know tht is over leverage, I’d ble living large somewhere. What has happened in the last 3-4 years defies any logic and cheap money is the only thing supporting the CDN house of cards.

I rent happily in a neighbourdhood I enjoy, watching people that make less than half of what I do blow there brains out on huge mtgs. This will not end well as soon as rates move north re is toast. Everything is relative, couple living in high park with 200k in income and a 800k mtg, is no different then couple in MIlton with 100k in income and 400k mtg. They are both stretched to the max and something has got to give.

#84 jess on 12.08.12 at 1:08 pm

Vlad re: Carney left to join a sinking ship?

Perhaps he enoys big game hunting and collects shrunken heads,

Mr. Sikka summaries here: predatory practices of major accountancy firms

http://www.guardian.co.uk/commentisfree/2012/dec/08/predatory-practices-accountancy-firms

HMRC is investigating some 41,000 tax avoidance schemes national audit office It has identified around 30,000 users of ‘partnership loss’ schemes and disguised remuneration schemes.

#85 $$$BPOE#1 on 12.08.12 at 1:08 pm

Finally common sense prevails:
But if you’re Vlad, expecting to buy onto a million-dollar street 15 minutes from the core for half-price, fuhgeddaboudit. Despite all the wails I heard from the moldy basement renters on this blog the last time I said this, I’ll repeat: prices will not fall everywhere.

#86 Bigrider on 12.08.12 at 1:15 pm

#54 Garth to Bigrider- ” No matter how much you wish it otherwise, 905 will take the biggest hit”

I am not sure where you surmised that I wish it otherwise and in fact have always agreed that 905 would take bigger hit than 416.

You, however, avoided the question I asked.

If the toniest areas of T.O as mentioned by you, have tripled in value or more since the bottom in 96-97(easily verifiable), then in order for your thesis to hold water, that is , if we understand it correctly, that prime 416 areas will primarily hold there value within 10 to15% of current values, then logically you must believe that a large increase in T.O RE cred has occurred at both the local and global level.

You cannot dispute the logic of the reasoning above.

Leaside sales/price statistics. Make your own conclusions. — Garth

1990 123 366,505
1991 132 359,684
1992 199 343,157
1993 191 322,571
1994 176 337,639
1995 140 359,150
1996 180 335,820
1997 170 383,490
1998 169 435,661
1999 172 460,001
2000 213 500,855
2001 155 493,542
2002 201 611,250
2003 206 586,265
2004 185 682,949
2005 174 766,557
2006 186 827,368
2007 200 1,003,029
2008 128 1,051,645
2009 194 993,450
2010 152 1,088,893
2011 164 1,183,153

#87 $$$BPOE#1 on 12.08.12 at 1:17 pm

So you sold your townhouse and made out like a bandit and now love renting. Would you feel the same way if you had been renting the past decade. I would think not. When you make $$$ selling real estate then you can afford to buy again or rent. The renter has nothing but a bleak future. Finally common sense has prevailed on this blog. Choice areas like BPOE will never go down no matter how many restrictions are put in place
**********************************
Finally on 12.08.12 at 12:58 pm
Live in YVR, sold downtown townhouse in May 2012, Baby born, renting and loving it in Kerrisdale, just wish I can afford to buy here as houses cost in the 1.5+ million range

#88 Bigrider on 12.08.12 at 1:20 pm

#63 RET.

Both your second last and last paragraph lead very well into the comments I have registered today with blog host response.

Needless to say, I agree with your post.

#89 luke8929 on 12.08.12 at 1:28 pm

House valuations are dependent only the amount of money people can borrow. The amount they drop will also depend on what people can borrow, if you think that economic conditions, jobs, rates etc will half the amount a family can borrow then house prices can also fall that much.

Try and imagine a world with no leverage ( no credit) and you had to pay cash for everything, what do you suppose a house would be worth then? Now think somewhere in between no credit and easy credit for everyone which is what we have now and you can make a reasonable guess as to valuations.

#90 Bigrider on 12.08.12 at 1:30 pm

And by the way Garth, to add to my response to yours in #54, if you believe that the toniest areas of T.O experience only a mild correction in prices, then you must believe that T.O ,A + areas now command a much,much higher multiple of income then the usual 3to 3.5, than they did back at the bottom 0f 96/97. You can’t have it both ways.

After all, a ten to fifteen percent reduction in prices at Leaside and Lawrence park still leaves income multiples well into the 7 times and above category at least.

Again, you must then by default believe in the realtor thesis that there has been a seisimic shift in T.O RE credibility on both a local and more importantly ,global scale.

My argument that A+ areas will get hit almost, I emphasize almost, as hard means that I do not buy the realtor arguments at all.

#91 Bigrider on 12.08.12 at 1:37 pm

#86 -Garth to Bigrider – “… Make your own conclusions”

I have made mine but because of my respect for your point of view, I wish to hear yours.

Point blank I ask you ” Has T.O proper, 416 , increased it’s credibility so much such that previous price metrics such as 3.5 times income that have always applied to this city through the past 50 years including places like Leaside ,no longer apply” ?

My view in advance is no, the multiple of income metric will eventually force prices down to within that metric ,give or take a little, depending on area.

The average HH income in south Leaside is $320,000. Houses cost 3.5 times income. Case closed. — Garth

#92 Hugh Jasz on 12.08.12 at 1:46 pm

#79 futureexpatriate on 12.08.12 at 12:44 pm
……when they receive the first cell call while viewing a property and it ALWAYS turns out to be “another” “offer” that’s “just come in”…….

What an amazing coincidence – this happened at the second property on the first day I met my agent. :)

It was a pretty good house, probably priced fairly, at location that would have worked. I was tempted to make the offer for full-ask, but managed to stuff the rock back into my pants and calm down.

“OK. Let’s let them deal with that offer, and if their counter expires, maybe I’ll line you up for a second look plus inspection. In the meantime, could you also show us the other one we asked to see?”

Didn’t smell any bullshit after that, and I truthfully think I’d recommend my agent as an almost standup guy for anyone shopping average GTA homes.

(an honest/competent agent is probably not enough for dealing on the expensive stuff in trendy neighbourhoods. Way more at stake, demands a specialist as opposed to a good generalist)

No regrets. I have a house that was better located and better deal.

Don’t rush this shit, it’s expensive!

#93 Hugh Jasz on 12.08.12 at 1:49 pm

BPOE – context is needed.

0ver-extending to buy 10 years ago made a lot of morons look like geniuses.

The same action 2-3 years ago will ensure that the morons are recognizable.

#94 Brad in Cowtown on 12.08.12 at 1:53 pm

Prices cannot rise without a commensurate increase in incomes or debt. Both have hit walls. — Garth

True, but prices can be flat for awhile while incomes catch up and debts get under control.

#95 Rookie57 on 12.08.12 at 1:56 pm

In my opinion the demise of the bubbilicous(sp) housing market is linked to the economy. I look at the provincial and federal budgets and wonder about the state of our economy. Although Canada appears to be a poster boy for financial stability, why are we running these deficits? For example, BC is running close to a 2 billion dollar deficit yet the economy is good, or so the pundits say. I say if things are so good, why are the budget deficits so large. Methinks things are not so rosie in LaLa land or even Canada as a whole. These endless budget deficits cannot be good for housing long term. Perhaps someone can explain what the symptom(s) are for these deficits and what their eventual effects are on our housing sector?

Thanks.

Rookie57

#96 Old Man on 12.08.12 at 2:15 pm

Garth knows his stuff as some areas will remain somewhat stable, and to study these areas I have developed a weighted velocity of positive and negative factors. This will include demographics, postal code income, and lack of new construction in any given area that might be exposed to high mortgage leverage to name but a few.

Real Estate is essentially a science, but common sense prevails, and perception, transportation, the proximity of amenities, and even the quality of schools must be considered. I have the latest stats on school performance rankings in Toronto, and there is no surprise that the top ten schools are directly related to the richest Real Estate neighbourhoods.

Garth alluded to this as well, so lets just focus with common sense, as any area with quality factors that will support value in a difficult upcoming market is going to survive the best with a yawn, as they are well established with what matters going forward.

#97 Smug Renter on 12.08.12 at 2:26 pm

#87 $$$BPOE#1 — So you sold […] and made out like a bandit and now love renting. Would you feel the same way if you had been renting the past decade. I would think not. When you make $$$ selling real estate then you can afford to buy again or rent. The renter has nothing but a bleak future.

May I field this one? I’ve got a pretty good idea of what neighbourhood I’d have bought in ten years ago, how much I’d have paid and what it would be worth now. We wouldn’t have maxed ourselves out, but would have to have come close. Instead, we kept renting, continued living below our means and investing the difference. There have been no special assessments, $40k kitchen renovations or what have you. When we moved, it didn’t cost us $30k in fees. Our investments have done merely OK. We could now pay cash for the places we were considering back then, but of course, those neighbourhoods haven’t gentrified enough for us to want to live there now (or then, particularly). Our living costs have carried *EXACTLY* like rent, not that “carries like rent” canard that realtors peddle. I can look out the window and see one of the $4.5mm places discussed here today, and my son is going to the same school as the proud new owner’s will be. Are we underhoused? A bit, but I’m holding all the cards.

#98 Beach Girl on 12.08.12 at 2:45 pm

Before I read this blog, does anyone know why I called the hedgehog Jeremy? That is Ron Jeremys nickname. The porn star. Is anyone awake. I put it in the tree. Confused our Bi-polar resident. But it is Christmas.

This Christmas will be epic. Hired a D-J with lights and everyone has to dress up. Boring turkey shit will appear.

#99 Ralph Cramdown on 12.08.12 at 2:48 pm

The average HH income in south Leaside is $320,000. Houses cost 3.5 times income. Case closed. — Garth

Oh Garth! People are NOT paying 3.5x to get into Leaside. Leaside is 3.5x income if you factor in all the old couples and widows who’ve been there 40 years and now spend their days writing vitriolic letters about the outrageous property tax assesments.

They are not the buyers. — Garth

#100 Beach Girl on 12.08.12 at 3:01 pm

Smoking Man

#46 Solent

Yes, yes and yes.

I am the biggest tax farm slave over 100% of my consulting income goes to CRA. If you haven’t noticed I have several addictions. The biggest is compounding returns. I don’t like drawing from my investment and trading accounts. Plus did nothing but golf and boat for 4 years. It gets boring.

White trash down here. I fit in perfectly. this place is park dale 10 years ago.

As far as gays go. I like gay people, they let it all hang out. Speak there minds, and are funny as shit.

So yes yes yes. To all you said.
__

Love you dude. I used to own a rental in Parkdale. Rented out to 13 men. Made large and was working for myself. The poor bastards. Wrong side of town for this girl.What a shithole. Dumped it. White trash is in. I am just a better version of it.

#101 Beach Girl on 12.08.12 at 3:02 pm

And I love the gay parade. Awesome. Not gay, but they say women outlive men.

#102 Bigrider on 12.08.12 at 3:14 pm

#91 Garth to Bigrider- ” average household income is 320,000 in south leaside, case closed”

Average household income in north leaside and in Lawrence Park both under 200k and multiples remain sky high.

Case re-opened.

Check out the demos for Bessborough School catchment. This dumb convo is over — Garth

#103 Guy on 12.08.12 at 3:24 pm

Smoking man where are U, sitting at the bar at Seneca drinking all alone, just finished 3 single malts and a very nice Cigar! lol

#104 Old Man on 12.08.12 at 3:34 pm

I took the Real Estate course which was about 6 weeks long, but never sold a house in my life; just to further my education. Now when I went to University took a few courses in Urban Economics as well which was all about Real Estate, more or less. I had one professor that came from Europe, and he introduced a small book from Sweden about Urban Planning unheard of in North America all about the importance of neighbourhood perception – it is important!

Now for the ladies have a tale of importance. I dated briefly with a French Canadian gal who was an utter knockout, and one night asked her what is the secret of a beautiful woman in jest? She laughed, as said that is not me, as all women are beautiful, but the key is how a woman packages herself to create an illusion of perception. Now for you that want to make the big buy in a few years do not overlook the intrinsic capital value of a neighbourhood as to how it is perceived as a future investment.

#105 Foggy on 12.08.12 at 4:07 pm

At 98 Beach Girl:
“Before I read this blog, does anyone know why I called the hedgehog Jeremy? That is Ron Jeremys nickname. The porn star. Is anyone awake. I put it in the tree. Confused our Bi-polar resident. But it is Christmas.”
————————-

It could have just as easily been ‘Jeremy’ by Pearl Jam. Something a little more current than an early 80s porn star. Jeremy’s spoken – oh yes he did…..

#106 Picasso on 12.08.12 at 4:08 pm

$800,000 for some tired old semi, it’s so ludicrous one can’t even imagine.

#107 Smoking Man on 12.08.12 at 4:47 pm

#103 Guy on 12.08.12 at 3:24 pm

Not today. band any good?

#108 Old Man on 12.08.12 at 4:59 pm

Smoking Man will never have a problem as know all the women on track 6, and if he is down and out will take a few out of my stable to meet him at Southside Johnny’s Bar and Grill. They will pamper him with free eats and booze; I think just three will be enough for a fun night, as they know how to make a man feel like a King for a night.

#109 Guy on 12.08.12 at 5:08 pm

CCR, Santana, SteelyDan, Pink Floyd, Beatles , Stones,
Great music , this place is great!
Investing in Seneca, highly recommended , cash crop here!

#110 Smoking Man on 12.08.12 at 5:56 pm

#108 Old Man on 12.08.12 at 4:59 pm

See you there tonight be there after 10

#111 TurnerNation on 12.08.12 at 6:16 pm

Thanks to Guava.ca,
I learned the semi’s price bought by someone I know. “upper” beaches. About 600,000 + all the silly land tranfer taxes x2 and closing costs.
As mentioned upon moving in it was time for a suprise. Thousands in repairs immediately required.

Their combined income is likely $140-150000.

#112 willworkforpickles on 12.08.12 at 7:24 pm

Retiring GTA’ers will be doing the 705 split like never before over the next decade.

#113 Waterloo Resident on 12.08.12 at 7:32 pm

Figure this out:

Two recent university grads: One a nurse earning $32,000 per year in home care for a private company, another a new Certified Management Accountant = he just got a swank new plum job in downtown T.O. for a cool $38,200 per year salary. Take their salaries together and they’ve got it made!

So now they are going to try to get something around the Steeles / Bathurst area, something under $800,000 for a 2-bedroom.

#114 Hugh Jasz on 12.08.12 at 7:52 pm

“upper” beaches?

That ‘hood ends somewhere around VP and O’Connor, right? :-)

In this market, few things amaze me more than what a 20 foot wide East Toronto handyman’s special can fetch these days.

#115 Derek R on 12.08.12 at 8:01 pm

#95 Rookie57 on 12.08.12 at 1:56 pm wrote:
For example, BC is running close to a 2 billion dollar deficit yet the economy is good, or so the pundits say. I say if things are so good, why are the budget deficits so large.

There are two surplus/deficits that count. The government surplus/deficit and the trade surplus/deficit. The private sector has to get its profit from a government deficit or from a trade surplus. When you have both the economy is in great shape. When you have one of the two, the economy might be doing good or bad, you’re going to need to look at the relative figures to work it out. when you have neither, the economy’s in trouble.

At the moment Canada’s Federal deficit is balancing off the trade deficit to some extent so things aren’t great but they’re not terrible either. Of course things are better in some provinces than others, depending on how much of the Fed deficit plus trade deficit each is getting. But if the trade deficit widens or the Federal deficit shrinks, it will lead to trouble overall.

#116 Smoking Man on 12.08.12 at 8:33 pm

Nice Job Sylwia

She’s holding up signs that say Love You Smoking Man

Move over Gilmore let the next Generation In

https://www.youtube.com/watch?v=MfvQevEuymU

#117 coastal on 12.08.12 at 8:58 pm

Prices cannot rise without a commensurate increase in incomes or debt. Both have hit walls. Stop being an idiot. — Garth

It’s funny reading the Victoria agent comments that say housing is getting more affordable all the time, which should in theory boost prices if were actually true. It really is disgusting how they get away with this BS cause they toss out a few freebie numbers.

#118 Grim Reaper/Crypt Speculator on 12.08.12 at 9:04 pm

#101 Beach Girl on 12.08.12 at 3:02 pm

And I love the gay parade. Awesome. Not gay, but they say women outlive men.

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

Q: Why do men die younger than women..?.
A: Because they want to.

Not sure about the gay ones…

#119 Grim Reaper/Crypt Speculator on 12.08.12 at 9:24 pm

#98 Beach Girl on 12.08.12 at 2:45 pm

Before I read this blog, does anyone know why I called the hedgehog Jeremy? That is Ron Jeremys nickname. The porn star. Is anyone awake. I put it in the tree. Confused our Bi-polar resident. But it is Christmas.

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

Ron ” HedgeHog ” Jeremy is a multi talented person.

From humble beginnings as Smoking Mans valet….and Old Mans valet….and teaching Dr Wayne what a wanker is for…he moved onto a higher calling as a movement consultant to a bunch of overpaid a$$holes .

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

#120 TRT on 12.08.12 at 10:00 pm

Bears expecting a 30% drop on same sub-million SFD home in Vancouver will keep me entertained for years and years. Yes, sell now and invest in Banks and Reits….I’ll do it for you if that’s what you want…for a fee;

#121 juno on 12.08.12 at 10:17 pm

Looks like canada is getting the message on debt. Yeah right. Mabey it’s because they are so freakin broke that most of them ran out of credit.

Mabey there is a relationship between lower heloc and lower and lower house prices meaning less credit available to those debt addicts!

http://www.theglobeandmail.com/report-on-business/top-business-stories/consumers-getting-message-on-debt-but-will-it-last/article5910537/

#122 happy renter on 12.08.12 at 10:51 pm

If any one can,move to the U.S.A .Nice houses for 2/3 less.Its amazeing how much are houses are but I don’t think are wages justify the price difference.I’m a renter and would love to own a house but its so unaffordable here in Canada.Americans are in a way much better off than highly indebted Canadians

#123 Hoof-Hearted on 12.08.12 at 10:55 pm

See What It’s Like To Live In An 89-Square-Foot ‘Tiny Home’

Read more: http://www.businessinsider.com/what-its-like-to-live-in-a-tiny-home-2012-12?op=1#ixzz2EWHWRvwh

http://www.businessinsider.com/what-its-like-to-live-in-a-tiny-home-2012-12

#124 TRT on 12.08.12 at 11:10 pm

My last comment didn’t get published. Maybe this one.

Canada’s population hits 35 million. 40 million in 12 years!! Bring them in!! Single detached homes in Vancouver and Toronto is where it’s at!!!

http://www.thestar.com/news/canada/article/1298566–canada-s-population-hits-35-million

#125 claudius emperor on 12.08.12 at 11:20 pm

Garth: I’ll repeat: prices will not fall everywhere

Actually they will. From Trump Tower to the subburbs.
Strangely enough there were no price reductions for Trump Tower in New York…

I would expect reductions in Toronto everywhere from minumum 20 to 60 in some places.

And I bet a gold maple leaf on it. Are you taking it Garth?

#126 Snowboid on 12.08.12 at 11:38 pm

#94 Brad in Cowtown on 12.08.12 at 1:53 pm…

“True, but prices can be flat for awhile while incomes catch up and debts get under control.”

Not going to happen, with property taxes, utilities and maintenance (as well as fees and assessments with condos/townhomes) going up higher than the inflation rate, while incomes are not keeping pace with inflation at the same time.

Debt under control? That’s not going to happen for a long, long time!

Prices are going down, maybe more in BC than Alberta, but is going to be nasty nonetheless.

Curious, of all our relatives and close friends over their heads in RE currently, only one is at crisis stage in BC – the rest are in Alberta.

#127 Nostradamus Le Mad Vlad on 12.09.12 at 12:01 am


#84 jess — “Perhaps he enoys big game hunting and collects shrunken heads, . . .” — Which would make him a head hunter! Curious that he was offered the position, ‘tho. The other person seemed to be doing alright. Triple Dip Double dip means recession, next is depression.

#87 $$$BPOE#1 — “Would you feel the same way if you had been renting the past decade. I would think not. When you make $$$ selling real estate then you can afford to buy again or rent. The renter has nothing but a bleak future.” — Not so fast. The downturn in the economy, as well as the speed has forced people to re-evaluate their needs vs. wants.

No matter where it’s located, RE is a want but shelter is a need. With the west currently going to heaven in a handbasket, would it not be more prudent for renters to put aside 30% of their income into a non-registered plan, and still have money left over?

Once one has submerged themselves into an illiquid asset, it can be difficult to get rid of that ball and chain around the ankles. With the birth rate declining each year, and fed. / prov. govts. running deficits / debts, where is CPP / OAS / GIS going to come from? However — China’s Super Rich BPOE and Mikey the Realtor, this one’s 4 U;
*
ObombaDemands Time to see the real Obomba. Link in, Economy and stuff “To President Obama and much of Congress, these people are completely expendable. Why else do you think various government agencies have been buying millions of rounds of human-shredding hollow point bullets? Because they expect that millions of Americans will get very angry, and violent, when they cannot feed themselves or their families, through no fault of their own.” wrh.com; Fed Borrowing US$4.8 bln. per day; 37 bln. tons of shale oil stone in Syria. That’s good enough for motive for an invasion by the west; Apple SMan, lower reset coming? Real Unemployment rate is not 7.7%; Washington State New pay per mile gas tax? Putin starts construction of new south stream pipeline; Michigan passes right to work legislation, plus other stuff; US imports and a new Panama Canal; Gittin’ Toasty Inflation in China; Dilbert At Large; 89 sq. ft. Tiny home; Greece’s healthcare system is gone, but everything goes.
*
No, Non, Nyet, Nein All things in moderation but die in ecstasy; Ballistic Missiles Russia arms Syria, and this. It’s beginning to look a lot like war and 3:11 clip Nuke test in Nevada this week; Tel Aviv “Had this march been in Tehran…US media would have feasted on the story.” wrh.com. Proves that the western m$m is paid for and controlled; Installing Truecrypt Computer stuff; Vive le Quebec See the article. Won’t please Harper; 2013 The year of the comets; Catch 22 High ranking pedo walks free, person who exposed him is charged; Fracking Hurting livestock as well as people; Oops! Cameras were still rolling and mikes were on; Black Boxes in cars; 5:15 clip Inside weather modification (chemtrails) planes; James Holmes Anyone remember him? 5:15 clip Rebirth. Each will prove to themselves that reincarnation exists, that we are in this world but not of it.

#128 Ralph Cramdown on 12.09.12 at 12:07 am

#115 Derek R — The private sector has to get its profit from a government deficit or from a trade surplus.

So if I grow 10,000 pounds of ginseng and trade it to some guy in Guangzhou in exchange for a ‘new’ Chinese tractor that looks suspiciously like an old Ford 9N, I’ve made no profit, even though I’m up a tractor?

#129 Molson Ukrainian on 12.09.12 at 12:13 am

Very interesting news, and definitely WTF??

com/obama-gives-ok-for-black-box-data-recorders-to-be-installed-in-all-cars/

#130 Molson Ukrainian on 12.09.12 at 12:19 am

#66 Realtors in an all out PANIC! on 12.08.12 at 11:41 am

I have an idea, repeat yourself over and over until people get annoyed and finally tell you to shut the F up with the Nasty crash! Nasty crash!

Time to come up with something new

#131 $$$BPOE#1 on 12.09.12 at 12:51 am

The spring/summer market is going to be gangbusters. Here’s why. A certain Country with a very large population is going to see some major changes shortly. Their main focus is cleaning up the corruption in the Country. What does this mean to BPOE? Simple – The corrupt money needs to be taken out of this huge Country and invested elsewhere. Folks, I am tickled pink. Stay tuned as another one of my trends comes true in the very very near future. Big Country, lots of corruption, now cleaning up the corruption = big time flow of corrupt money flowing into BPOE. LOVIN IT. Folks do your own DD Due Diligence and you will see this is a no brainer

You would know. — Garth

#132 Mainlander on 12.09.12 at 1:53 am

#66 Realtors in an all out PANIC! Hey dummy, give it a rest already! The nasty crash is your medication wearing off! What kind of idiot keeps repeating over and over again. Realtors don’t carry inventory or set prices. Not sure what this moron does for a living but would love to have his industry crash, I’m guessing a gas jockey at a late night convenience store.

#133 Chaostrology on 12.09.12 at 2:02 am

T-minus 13 days and counting.

Soon the sun will slip over the galactic equator, turn north to south and start spinning in the opposite direction.

We, as usual are just along for the ride.

If you block heads were really thinking…you would buy property in Inuvik…it could be the next Riviera…or you could just get ready to trade your BMW for a can of tuna.

#134 Derek R on 12.09.12 at 4:03 am

#129 Ralph Cramdown on 12.09.12 at 12:07 am wrote:
So if I grow 10,000 pounds of ginseng and trade it to some guy in Guangzhou in exchange for a ‘new’ Chinese tractor that looks suspiciously like an old Ford 9N, I’ve made no profit, even though I’m up a tractor?

You’re up a tractor but you’re down 5 tons of ginseng. Is that a profit? No idea. I guess it depends on the price of the tractor here and the price of 5 tons of ginseng in Guangzhou. It would have been much simpler to work out if you’d agreed a USD price for the tractor and the ginseng with the Guangzhou guy when you made the deal and then settled the difference in cash.

All I can say for certain is that you haven’t made a monetary profit but you’ve made a 1 tractor profit and a 10,000 lb ginseng loss. Oh yes, and there’s no government surplus/deficit involved, so any profit/loss on your part is coming out of the trade surplus/deficit with Guangzhou.

#135 Canuck Abroad on 12.09.12 at 5:27 am

55 Bigrider, I agree. These neighbourhoods also took a big hit in 2008 but recovered quickly. Garth is likely correct that 905 will suffer more, but I don’t see how the rest of the TO market is completely unscathed. And even if prime 416 only falls 10%, well that is $100k on a $1 million house, which to me would make it worthwhile renting for a few years. Maybe others wouldn’t care but $100k is $100k.

#136 Canuck Abroad on 12.09.12 at 5:31 am

Garth, 905 is a very big area. Are there any neighbourhoods that you think will be particularly badly hit? And which one should be okay?

#137 Canuck Abroad on 12.09.12 at 5:54 am

The average HH income in south Leaside is $320,000. Houses cost 3.5 times income. Case closed. — Garth

Is this also true of High Park? Forest Hill North? Where can I get this information?

#138 Marco.R on 12.09.12 at 6:29 am

All areas will get hit hard…Leaside and Beaches especially as they have been hyper-inflated the most. The notion that supposedly high household salaries will keep the prices in these areas firm and almost unaffected is historically unprecedented and silly. Lot’s of high demand areas with lofty household incomes got slaughtered in the U.S. and have not come close to recovering.

#139 MarcFromOttawa on 12.09.12 at 8:09 am

How many ounces of silver do I need to protect myself from the coming zombie apocalypse?

Wrong blog?

#140 Raj on 12.09.12 at 9:16 am

Whoever thinks that Leslieville,Beaches or other prime areas will not correct is in dillusion.
Simple logic :where were these fool bidders when interest rate was 5-6%.The house on sale at 300000 around 2005 in East York is now asking 600000.
Climax of insanity!

#141 Eaglebay - Parksville on 12.09.12 at 9:48 am

Don’t bet against America.
More new examples everyday. Canada will follow suit.

http://www.npr.org/2012/12/08/166801322/not-just-patriotic-u-s-manufacturing-may-be-smart

#142 Grim Reaper/Crypt Speculator on 12.09.12 at 9:57 am

#140 MarcFromOttawa on 12.09.12 at 8:09 am

How many ounces of silver do I need to protect myself from the coming zombie apocalypse?

Wrong blog?
================================
(No this blog may be pathetic, but a gold mine of info re silver)

Answer Whatever ounces of silver required to buy a greyhound bus ticket to get out of Toronto..BC and Alberta also require first born is she ends up hot.

#143 Ralph Cramdown on 12.09.12 at 10:48 am

#135 Derek R — You’re up a tractor but you’re down 5 tons of ginseng.

But last year I didn’t have the ginseng OR the tractor. And if I grow another crop and do another trade, I could have two tractors next year (three maybe, if you include my increased productivity due to mechanization). By your logic, Canada wouldn’t be any richer for it, as no government surplus/deficit nor an international trade surplus/deficit was involved. And you’re trying to drag transfer pricing into it to make a simple case seem complicated.

#144 TurnerNation on 12.09.12 at 11:01 am

Our forum host, on the Howe St. radio station this week:

http://talkdigitalnetwork.com/2012/12/this-week-in-money-61/?utm_source=weeklyrecap&utm_medium=email&

This Week in Money

Saturday, December 8th, 2012 | Filed under This Week in Money

Podcast: Download (Duration: 44:05 — 30.3MB)

■Garth Turner — Real Estate update.

#145 TurnerNation on 12.09.12 at 11:08 am

If you are a part of the current crop of small-C CONservatives, be sure to stay on-message with your talking points:

Values that Canadians cherish (record defecits).

Making working families a Priority (with massive, no-bid military spedning).

Giving ordinary Canadians a strong voice (via unelected Senators at the trough).

A Strong Canada (ramming through thousands of restrictive laws favouring corporations and China).

By the way, I once went to school with the wife of a current Con. MP. Her dad was a preacher/pastor. I hope there is not too much zeal in the fire & brimstone dept. I like reality and science.

#146 Ralph Cramdown on 12.09.12 at 11:09 am

Wrong blog?

Wrong blog. Silver protects you from werewolves. Note the picture of the host of this blog.

#147 Ralph Cramdown on 12.09.12 at 11:27 am

#135 Derek R

OK, I figured it out. Your theory: “The private sector has to get its profit from a government deficit or from a trade surplus.” is just an extension of mercantilism, itself an extension of bullionism. So lemme guess: You’re a ‘bug, whether you realize it or not. You’ve heard of absolute advantage and comparative advantage? Have those theories been repealed?

#148 Picasso on 12.09.12 at 11:38 am

#123 happy renter on 12.08.12 at 10:51 pm
If any one can,move to the U.S.A .Nice houses for 2/3 less.Its amazeing how much are houses are but I don’t think are wages justify the price difference. I’m a renter and would love to own a house but its so unaffordable here in Canada.Americans are in a way much better off than highly indebted Canadians
……………………………………………………………………

I can relate first hand in my field of work. I’m getting paid $50 an hour in the U.S. and they’re still at $35 an hour in Canada
Yet everyone is ball and chained to huge mortgages on these stupid astronomical house prices.
It’s not only housing, everything is a lot more expensive up there, from gasoline to food to booze and cigs.

#149 Picasso on 12.09.12 at 11:42 am

Oh ya… I went Mexican auto insurance. It’s $240 for 6 months and I don’t have a Texas drivers licence so there’s no history on me what so ever. No problem he says… a lot of people don’t have any drivers licence. lol

#150 Waterloo Resident on 12.09.12 at 11:45 am

Yes, professional accountants in Toronto earning $32,000 per year on average.
No, that’s not a typo.

Here’s proof:
http://www.livingin-canada.com/salaries-for-financial-auditors-accountants-canada.html

Starting wage for Toronto is $16 per hour for an Auditor with 5 years experience, and that continues for another 5 years at that pay level.

I really don’t get where people are saying that they are earning $100,000 + as an accountant, I guess they got hired BEFORE all of the salary freezes went into effect in 2010.

#151 Old Man on 12.09.12 at 12:04 pm

#136 Canuck Abroad – They would be laughing at a 10% drop on a $1 million home in a quality area, as the option of selling is self-evident. The intrinsic costs of moving; real estate commissions; legal and closing fees might come in at about 7%. Not worth worrying about in the least.

#152 Country Girl on 12.09.12 at 12:09 pm

#151 Waterloo Resident

There are a lot of jobs for professional accountants that pay a lot more than the auditor positions. For example, Comptroller, CFO, and various management positions across all industries.

#153 Grim Reaper/Crypt Speculator on 12.09.12 at 12:15 pm

Mexican auto insurance ?

Buy REEBOK or NIKEs

aka my understanding is if in an accident, the Guilt Party is the person who doesn’t run away fast enough.

#154 Gunboat denier on 12.09.12 at 12:22 pm

144 Ralph – keep it even simpler. If you build the tractors yourself and keep them, have you made a profit?

151 Waterloo – those figures are for the bottom 10%.

134 Chaostrology – it’s the celestial equator and the sun crosses it at the equinox.

#155 Picasso on 12.09.12 at 12:28 pm

#154 Grim Reaper/Crypt Speculator on 12.09.12 at 12:15 pm

Mexican auto insurance ?

Buy REEBOK or NIKEs

aka my understanding is if in an accident, the Guilt Party is the person who doesn’t run away fast enough.
……………………………………………………………………

Won’t argue that.

#156 Regan on 12.09.12 at 12:33 pm

I think fancy neighbourhoods will be affected by 2 factors: 1. If a RE slowdown leads to an overall economic slowdown. There will be fewer high-paying jobs to pay for a Riverdale SFH. or 2. The mid-range housing value takes a significant hit, gutting the down payment for move-up buyers who are relying on high downpayments instead of high incomes to buy that upscale home. Either of these factors is possible.

#157 Picasso on 12.09.12 at 12:34 pm

#154 Grim Reaper/Crypt Speculator on 12.09.12 at 12:15 pm

I see these $400 ghetto high risers that aren’t even road worthy with the $2,000 rims and tires?

There’s Mexican tire and rim shops everywhere, well I found yesterday you can rent these rims and tires. lol

#158 Sell My Car on 12.09.12 at 12:46 pm

A 20-30% home price drop would be good for the economy but only if spread out over a few years. In other hand i have a feeling it will get ugly in spring.

#159 Realtors in an all out PANIC! on 12.09.12 at 12:49 pm

Picasso on 12.09.12 at 11:38 am
#123 happy renter on 12.08.12 at 10:51 pm
If any one can,move to the U.S.A .Nice houses for 2/3 less.Its amazeing how much are houses are but I don’t think are wages justify the price difference. I’m a renter and would love to own a house but its so unaffordable here in Canada.Americans are in a way much better off than highly indebted Canadians
……………………………………………………………………

I can relate first hand in my field of work. I’m getting paid $50 an hour in the U.S. and they’re still at $35 an hour in Canada
Yet everyone is ball and chained to huge mortgages on these stupid astronomical house prices.
It’s not only housing, everything is a lot more expensive up there, from gasoline to food to booze and cigs.
—————————————————————–

Alot of job are going back to the US from Canada and even China now. Why? Because they can pay workers $13 an hour and these workers can still afford their 4 bedroom 3 bath 3000SQ home for $150K. The US understood they had to crash their housing bubble inorder to get their economy going again. Canada did the dumbest thing by blowing up the bubble even bigger. Canada will continue to lose jobs and unemployment will continue to increase and people will now continue to lose their houses and go bankrupt.

#160 Realtors in an all out PANIC! on 12.09.12 at 12:54 pm

Mainlander on 12.09.12 at 1:53 am
#66 Realtors in an all out PANIC! Hey dummy, give it a rest already! The nasty crash is your medication wearing off! What kind of idiot keeps repeating over and over again. Realtors don’t carry inventory or set prices. Not sure what this moron does for a living but would love to have his industry crash, I’m guessing a gas jockey at a late night convenience store.
—————————————————————–

lol, the truth makes your blood boil! It’s going to be a NASTY housing crash realtors , a NASTY crash! YES

#161 Devore on 12.09.12 at 1:03 pm

#139 Marco.R

You have to look at where those incomes are derived from and how they will perform in the future. Although all real estate is local (the product is not portable or fungible), it is subject to the same laws and consequences of economics.

#162 Picasso on 12.09.12 at 1:04 pm

Here, check out this high riser donk

http://www.youtube.com/watch?v=Kx-uNPine8Q

#163 Daisy Mae on 12.09.12 at 1:14 pm

#127 Snowboid: “Prices are going down, maybe more in BC than Alberta, but is going to be nasty nonetheless.”

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

There will be some fluctuation but basically, prices will return to the levels they were before all hell broke loose — before the unscrupulous realtors and greedy sellers promoted bidding wars and auctions.

#164 Picasso on 12.09.12 at 1:18 pm

Dirty south donks

http://www.youtube.com/watch?v=1B0Lp-8NuGQ

#165 Derek R on 12.09.12 at 1:25 pm

#144 Ralph Cramdown on 12.09.12 at 10:48 am wrote:
But last year I didn’t have the ginseng OR the tractor. And if I grow another crop and do another trade, I could have two tractors next year (three maybe, if you include my increased productivity due to mechanization). By your logic, Canada wouldn’t be any richer for it, as no government surplus/deficit nor an international trade surplus/deficit was involved.

On the contrary: there were two international trade surplus/deficits. The tractor one and the ginseng one. Your tractor profit was part of the former and your ginseng loss was part of the latter.

Difficult to say whether Canada became richer or poorer without more info though. It certainly became richer in tractors but it became poorer in ginseng. I would say that because you personally valued the tractor more than the ginseng, you became richer. Whether the rest of Canada agrees with you depends upon how overall they value tractors and ginseng. And that comes down to the dollar value of each.

#166 Daisy Mae on 12.09.12 at 1:28 pm

#127 Snowboid: “Not going to happen, with property taxes, utilities and maintenance (as well as fees and assessments with condos/townhomes) going up higher than the inflation rate, while incomes are not keeping pace with inflation at the same time.”

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

There has to remain a balance. If municipalities, utility companies, and corporations in general hike their rates/costs too much, there will hardly be enuf disposable income left for consumers to bolster the economy…a vicious circle.

#167 Tony on 12.09.12 at 1:44 pm

Of course everywhere around the Toronto area will fall just like in America one of the last cities to fall was New York. All of New York fell just like all of Toronto will fall and fall hard it will.

#168 Old Man on 12.09.12 at 1:45 pm

I will give you the top 6 areas in Toronto based on just one of my velocity vectors; the combination of all vectors will not disclose at this time, as discounting occurs with a weighted balance.

1) Lawrence Park
2) Lytton Park
3) Moore Park
4) Armour Hills
5) York Mills
6) St. Andrew – Windfields

#169 Daisy Mae on 12.09.12 at 1:57 pm

#142Eaglebay – Parksville: “Don’t bet against America.
More new examples everyday. Canada will follow suit.

http://www.npr.org/2012/12/08/166801322/not-just-patriotic-u-s-manufacturing-may-be-smart

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

Took them long enuf to figure this out….

#170 Gunboat denier on 12.09.12 at 2:07 pm

160 Realtors – doesnt this tell us the US$ is woefully undervalued and/or CDN$ is overvalued?

#171 Derek R on 12.09.12 at 2:25 pm

#148 Ralph Cramdown on 12.09.12 at 11:27 am wrote:
OK, I figured it out. Your theory: “The private sector has to get its profit from a government deficit or from a trade surplus.” is just an extension of mercantilism, itself an extension of bullionism. So lemme guess: You’re a ‘bug, whether you realize it or not. You’ve heard of absolute advantage and comparative advantage? Have those theories been repealed?

Hardly mercantilism. Not even a theory really. It’s just accountancy. And certainly not in conflict with either the comparative or absolute advantage economic concepts. After all both you and Guangzhou guy thought you got a good deal, so you both ended up richer overall, didn’t you? It’s just that you valued the tractor more than the ginseng whereas he valued the ginseng more than the tractor. That’s where economics tells us what accountancy alone can’t.

So, believe me, I’m no goldbug, let alone a tractorbug or a ginsengbug. I’m just pointing out that only ginseng farmers make ginseng, only tractor manufacturers make tractors and only governments make money. The rest of us have to trade our own stuff for those items if we want them.

Returning to my original point, if you want to see a visual demonstration of the fact that [domestic private monetary profit] = [domestic public monetary deficit] + [foreign monetary trade surplus] take a look at the graphs which appear in this article or for various countries inthis article.

#172 Toronto_CA on 12.09.12 at 2:44 pm

Never before have we had interest rates stay this low for this long. It’s unique in modern history.

I’m not sure that anyone can predict with confidence what will happen when this credit bubble unwinds. Interest rate hikes if the economy is better will affect housing downwards, but in a different way than a recession which will also affect housing (downwards) . Trying to accurately predict the drops/rises in specific neighbourhoods once one of those two scenarios happens (rate hikes or recession) is even more impossible.

#173 Old Man on 12.09.12 at 2:47 pm

I prefer the greater Moore Park area for any future buy in a few years time without weighting all vectors, as it has a wonderful settled mixed neighbourhood; good perception value; all the nearby amenities for quality of life; has the feeling of a small town atmosphere; and best of all there are several travel routes into the core and elsewhere – quickly!

I lived in the Moore Park area years ago, and the basic residential homes will hold values in a bust, but there are condos scattered around, and if the horny buyers went in during the past few years with leveraged mortgages they will bail out first in the coming years, so a bargain might be had – watch this area carefully for a deal.

#174 Derek R on 12.09.12 at 2:56 pm

#140 MarcFromOttawa on 12.09.12 at 8:09 am asked:
How many ounces of silver do I need to protect myself from the coming zombie apocalypse?

Wrong blog?

Right blog. Wrong apocalypse though. It’s a question of bullets. Just use lead for the zombie apocalypse. You’ll need all your silver for the werewolf apocalypse.

#175 Canadian Watchdog on 12.09.12 at 3:08 pm

#170 Daisy Mae

One of those factors that businesses are starting to take into account is intellectual property, Fishman says. Specialized technology can make products more competitive, but if they're made overseas, it's easier for others to make knockoffs.

In other words, there is a cost benefit to domestic manufacturing by ways of lobbying the system in order to retain dominance in the market place, or in a nutshell, Apple hates capitalism.

Apple vs Samsung

Apple May Seek Expanded Samsung Ban for Future Devices

 

#176 Derek R on 12.09.12 at 3:09 pm

Ach, beaten to the punch! I should have read all the comments before making the werewolf joke. Kudos to Ralph for getting there before me.

#177 Devore on 12.09.12 at 3:19 pm

#155 Gunboat denier

144 Ralph – keep it even simpler. If you build the tractors yourself and keep them, have you made a profit?

Depends. It’s an opportunity cost. You’ve probably made a profit (assuming parts cheaper than finished product), but have you maximized it? It’s opportunity cost. Could you make more money in your field of expertise in the time it took you to make the tractor than the tractor costs to buy?

Derek is “arguing” (well, more like he made a statement and disappeared without defending it) from the point of a zero-sum game, which we know the economy is not.

#178 DonDWest on 12.09.12 at 3:30 pm

The average HH income in south Leaside is $320,000. Houses cost 3.5 times income. Case closed. — Garth

Now comes the big question, how much of this income is attached at the hip to real estate? My guess is quite a fair bit. . .

Bad guess. — Garth

#179 Devore on 12.09.12 at 3:33 pm

#170 Daisy Mae

Took them long enuf to figure this out….

The interesting thing to note is that these manufacturing jobs are not coming back to US, they are new jobs. And I don’t just mean figuratively (they’re not the same jobs). Many (most?) of the things we use today, were never made in the US. Ever since the manufacturing exodus from the US/Canada, generations have passed and entire industries have never been located (competitively and in scale) in the US.

So these are all new jobs. All new infrastructure. All new skills.

Outsourcing indiscriminately has never worked. It took longer to realize this when high paying jobs go to very low wage workers, such as with manufacturing, but is apparent almost immediately in other areas, such as IT. It barely makes any sense to outsource IT functions (and even less with administrative, such as I’ve seen). The company I work at outsourced an entire segment of its network/IT functions, some which might even be considered core competency, and then almost immediately had to bring everyone back as contractors.

#180 Hoof - Hearted on 12.09.12 at 3:38 pm

Anecdote….

Watched a roofing crew re-roof a condo complex…

Every one of the crew of (8) was Latino … spoke Spanish..my guess is from Mexico.
I am seeing this more and more.

Interesting evolution…as it used to be Caucasian….then mostly South Asians…now ?…..

#181 VB on 12.09.12 at 3:54 pm

Even houses in North Toronto over 1 million are now sitting on the market. I went to an open house a few weeks ago when I inquired if the listed price was negotiable or if they sellers were intent on getting the listed price or more, the agent said that there was so much interest in the house that it would probably be sold in a few days. Well that house has now been on the market for many weeks now. There are no offers and no interest in it. It’s listed for $1,249,000 and sold for $889,000 a few years ago. I guess the idiots willing to pay this insane price have finally come to their senses!! The market is tanking — even in North Toronto:

http://www.realtor.ca/propertyDetails.aspx?propertyId=12620338&PidKey=-1384145404

#182 Hoof - Hearted on 12.09.12 at 4:01 pm

#167 Daisy Mae on 12.09.12 at 1:28 pm

#127 Snowboid: “Not going to happen, with property taxes, utilities and maintenance (as well as fees and assessments with condos/townhomes) going up higher than the inflation rate, while incomes are not keeping pace with inflation at the same time.”

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

There has to remain a balance. If municipalities, utility companies, and corporations in general hike their rates/costs too much, there will hardly be enuf disposable income left for consumers to bolster the economy…a vicious circle.

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

IMHO, there is no balance and they couldn’t give a rats ass.

What I foresee is continued tax increases and more bureaucratic empire building. …which in essence is the transition from what is left of the bogus democracy called socialism to a quasi -communist/corporate fascist state.

Huge Hornets nest here in Metro Vancouver re garbage.

Recycling has been such a success that Metro landfills are seeing decreased volumes = less revenue…then Metro raises tipping fees . Then contractors pursue a cheaper option(ie around 30% cheaper.) of driving 50+ miles to a private transfer station that ships it to the US.

Now Metro is trying to ban this? Then they are accused by construction council president of trying to justify a $500 Million ” waste to power” incinerator…which of course would be dependent on enough waste.

Of course, they already have 3 waste streams….(i)Recyclables…(ii)Green waste and (iii)Garbage ..which of course will create (3) more Bureaucratic empires.

Then of course, they will decide infrastructure is crumbling (or was it sabotaged? post on this later)and raise taxes more.

Where is the nearest Amish community?

#183 Ronaldo on 12.09.12 at 4:26 pm

#164 Daisy Mae –

”There will be some fluctuation but basically, prices will return to the levels they were before all hell broke loose — before the unscrupulous realtors and greedy sellers promoted bidding wars and auctions.”

So its the unscrupulour realtors and greedy sellers that caused “all hell to break loose” was it?

I thought maybe F & C mighta had something to do with it with their low interest rate policy, promoting zero down payments, 40 year amorts, lack of controls over banks, CMHC backing of high ratio mortgages, etc, but has you said in a previous post,

”And who made it all possible? Why, the consumer, of course!”

So lets just blame the consumer for this Sh*tstorm that’s about to break loose in real estate.

I do agree with you tho that prices will likely come back down to the 2008 prices before this whole thing is done with. So in the meantime let’s all hope those consumers load up with even more debt so that they can all enjoy a Merry Christmas and we can get our economy going again.

#184 Old Man on 12.09.12 at 4:27 pm

Now I know there are some of you who are renting with a dream of ownership, but even in a crash over the next few years cannot afford it. There is no shame in being broke, but all is not over, as you must adjust for what you can get. The real bargains are there now, but in a few years time it will be a discount sale along track 6 from Long Branch to Port Credit, and to the north which is where the Smoking Man lives. Now it is not much to brag about, but bargains will prevail, so you too can own the condo or a modest home, and it is not too bad, as this area can be a fun place to live.

#185 Aussie Roy on 12.09.12 at 5:41 pm

#132$$$BPOE#1

on 12.09.12 at 12:51 am

Folks do your own DD Due Diligence and you will see this is a no brainer

………………………………………………………………………….

Yep, a no brainer alright but I think most of us already knew that about you.

#186 Mister Obvious on 12.09.12 at 5:45 pm

#173 Toronto_CA

“Never before have we had interest rates stay this low for this long. It’s unique in modern history.”
———————-

Unique in modern history? Tell the Japanese.

#187 Canuck Abroad on 12.09.12 at 5:52 pm

185 Old Man – Now I know there are some of you who are renting with a dream of ownership, but even in a crash over the next few years cannot afford it. There is no shame in being broke … in a few years time it will be a discount sale along track 6 from Long Branch to Port Credit…

Let me translate: You losers who rent all really want to own, but can’t. Owning is the Canadian dream, and you fail. But don’t despair. Someday, you might, if the gods smile on your sorry pathetic loser a$$, just be able to swing a loser house in the outer rings of shitty 905. And then you too will have live the Canadian dream.

Ummm, no thanks. And you maybe shouldn’t make assumptions about who is hanging out here or what we strive for.

#188 Hoof-Hearted on 12.09.12 at 6:00 pm

Old/Smoking Man

What bargains?…its all relative . Greater Fools in Reverse gear?

Money is so inflated, hence are the assets monetary value.

The whole thing …..aka Ponzi Scheme… could do a Felix Baumgartner

#189 45north on 12.09.12 at 6:06 pm

Toronto_CA: Never before have we had interest rates stay this low for this long. It’s unique in modern history.

I’m not sure that anyone can predict with confidence what will happen when this credit bubble unwinds. Interest rate hikes will affect housing downwards, but in a different way than a recession which will also affect housing (downwards) . Trying to predict the drops/rises in specific neighbourhoods once one of those two scenarios happens is even more impossible.

this time is unique, the down turn in Canada will not be the down turn in the US. However, in Toronto the core areas will fare better than the vast expanse of the 905.

In Ottawa areas north of Hunt Club will fare better than areas to the south.

#190 homeless on 12.09.12 at 6:18 pm

toronto semis and detached home prices south of lawrence will remain strong. even the gentrifying hoods like leslieville, parkdale and the junction. so many people in toronto still waiting to buy. too much money in toronto and the “average” torontonian should accept that they need to move to oshawa, ajax or aurora. someone else better off financially wants to live in toronto.

#191 Questioning Calgary stats on 12.09.12 at 7:06 pm

#121 TRT

You may have spoken too soon. A west Van home has sold for almost 30% below assessed value.

It may not be below $1 million, but that will happen. This house sold for $400,000 below what it sold for in 2009.

#192 Derek R on 12.09.12 at 7:37 pm

#178 Devore on 12.09.12 at 3:19 pm wrote
Derek is “arguing” (well, more like he made a statement and disappeared without defending it) from the point of a zero-sum game, which we know the economy is not.

Well sure, of course the economy as a whole is not a zero-sum game but the equation that I presented, (the sectoral balances equation) doesn’t imply that it is (or that it isn’t). Sorry for disappearing but I didn’t even realise that the equation needed defending. It’s fairly well known and not particularly controversial. Here’s a write up about it on the Australian Macrobusiness site.

#193 Daisy Mae on 12.09.12 at 8:06 pm

#180 Devore: “Many (most?) of the things we use today, were never made in the US. Ever since the manufacturing exodus from the US/Canada, generations have passed and entire industries have never been located (competitively and in scale) in the US.

So these are all new jobs. All new infrastructure. All new skills.

Outsourcing indiscriminately has never worked. It took longer to realize this…”

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

Exactly. New jobs…in North America.

#194 Daisy Mae on 12.09.12 at 8:14 pm

#183 Hoof-Hearted: “IMHO, there is no balance and they couldn’t give a rats ass.”

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

You’re probably right. Common sense goes out the window always. There are plenty of greedy buggars out there looking out for only #1. What WAS I thinking? LOL

#195 Daisy Mae on 12.09.12 at 8:18 pm

#184 Ronaldo: “I thought maybe F & C mighta had something to do with it with their low interest rate policy, promoting zero down payments, 40 year amorts, lack of controls over banks, CMHC backing of high ratio mortgages….”

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

That’s a given. We’ve rehashed that to death.

#196 Snowboid on 12.09.12 at 11:39 pm

#183 Hoof – Hearted on 12.09.12 at 4:01 pm…

Same thing happened in Victoria – Water Board pushed conservation for years, then were angry we had conserved too much and they had to implement large rate increases.

Similar thing in Kelowna, city is spending close to $ 50 million to revitalize the downtown, rebuild main street, massive parkade, and attract the Interior Health HQ downtown – as well as a major park/retail/condo complex on the old Kelowna Senior Secondary site.

Not sure how much they expect to recover, but I foresee big property tax increases in coming years.

Of course, at least Kelowna has sewage treatment, and now Victoria has to spend billion$ to build theirs!

#197 cynically on 12.10.12 at 4:04 am

Tony #168 – don’t make a statement such as all of NY fell if you don’t have proof. As you probably know NY city comprises 5 boroughs and although prices may have fallen slightly in four of them (I doubt it) the fifth, Manhattan, certainly didn’t decline in most areas – in fact they rose or remained stable. This is because NY is a REAL “world class city” where many people from other areas of the US or other countries want to live or are transferred to. Toronto hasn’t the same appeal but I’ll bet the downtown area holds up better at least until some of the new condos are built, if they ever are. Vancouver is another situation.