Victoria’s secret


The long weekend marks the beginning of bug, infection, drowning and melanoma season, which is why we celebrate it. But this is also prime time for realtors – which is why they’ve been working so darn hard lately turning out misleading reports, manipulating the media and cooking numbers. Sales are down and yet Audi payments are relentless. You can see the problem.

The RBC Mortgages fake editorial I showcased in the previous post is a great example. The message to property virgins is simple: owners win and renters lose. You can also see the half-truths, subterfuge, misrepresentation and omissions it took to tell the story. At the end of the day, there is only one real persuader for buying a house right now. Yup, emotion.

So, kids, this post is for you. When your house-humping Boomer parents get on your case about buying a place and become an adult, they’ll probably use one of the 6 following arguments. Here’s how to defend yourself.

You’re throwing your money away on rent.

Quite the opposite. It’s cheaper to rent than to own (this blog has run the numbers many times). Renting means not having a mortgage and not making monthly payments which are 90% interest. Renters don’t pay condo or strata fees, or property taxes. They don’t finance any major repairs or get saddled with special assessments. Their insurance is cheaper. They haven’t shoveled tens of thousands into a down payment which earns nothing.

In fact, owners are subsidizing renters.

Example: my Toronto pad is a ritzy, three-storey, three-bedroom condo loft-townhouse with parking and a private backyard 15 minutes from downtown in a hood of multi-million dollar homes, which I rent for $3,200 from owners who got transferred and couldn’t sell it. They paid $800,000, and now subsidize me. To own it would cost me $800,000, which would earn $56,000 a year invested at 7%, plus $9,000 in fees and taxes. That’s $65,000, as opposed to the $38,400 I actually shell out. By owning it I’d be throwing away two grand a month.

But, owners build up equity. Renters don’t.

Wrong again. Every mortgage payment is comprised mostly of non-deductible interest. The amount of principal paid is simply retiring a small piece of the overall debt. Paying back a loan doesn’t ‘build’ anything. It’s just less debt.

If the house doesn’t appreciate in value (which most aren’t) then the thing you’re paying off over time only represents income you used to have, which you converted into house. It didn’t magically get bigger. Besides, thanks to the wonders of amortization, you end up paying 300% more than you borrowed. Some deal.

Moreover, equity is just another word for money. Renters who pay less to live in an identical house, have more money every month to invest.’hey can accumulate wealth many times faster than homeowners, especially in years when real estate flatlines (like the decade we are entering). Worse, owners have no control over rising property taxes, higher condo fees, falling housing markets or bumps in mortgage rates. Plus, like the guy who owns my digs, owners can find their assets turning into a major liability when they go illiquid.

Rates will never be this cheap again. Get a mortgage.

Get a grip, instead. Rates are cheap because the economy’s gasping. The feds brought in ‘emergency’ rates in 2009 to save us from going over the brink. The fact we still have them should tell you something. Like, it isn’t working.

Real estate values shot higher on those low rates, not on economic renaissance or ballooning incomes. In fact, wage gains are less than inflation, unemployment is rising and household debt sets a new record every month. This is a time you want to borrow up the wazoo and buy real estate at inflated prices?

Far better to wait for rates to rise and real estate to descend. If you buy and finance less, the monthly won’t be any higher, while your risk is lower.

Houses always go up.

No they don’t. That’s urban myth. Residential real estate is an emotional, speculative asset bought by many people who think TFSA is a motor oil. That’s why the greatest buying binges come when prices are the loftiest (like last spring), and why listings swell when the market bottoms. They don’t have a clue.

In absolute terms, housing is just as volatile as any other asset class. After the Toronto market peaked in 1989, for example, it took 14 years for prices to recover. When adjusted for inflation, downturns can be even more injurious to your wealth. The housing correction we’re working on now has the potential to be an enormous destroyer of equity, like the one which cost the US middle class $6 trillion.

You want to make money? Buy a house when nobody wants one.

Stocks can fall to zero. Houses can’t.

But your equity can. Isn’t that the same thing?

Someone who bought a $400,000 condo with 5% down and sees no price appreciation for three years, then sells, will have lost more than 100% of their money when they bail and pay the fees and transaction costs. Anyone with less than 10% equity in their real estate will be more than wiped out with a reduction in prices of 15% – which is certainly going to happen in most markets.

Imagine how many people over the next few years will be selling their real estate in a cold market, forced to bring a cheque on closing day. That would never happen with a stock.

Only losers rent. Nobody will marry a renter.

Since when is being in debt better than having freedom, mobility, diversification, balance and liquidity?

The final determinant of success is the size of your wad, not the grandeur of your pad. In the years to come, for all the reasons articulated on this pathetic blog, residential real estate is destined to be an under-performing asset class. An expensive, complicated, non-liquid investment that pays no interest or dividends, costs a bundle, and is unlikely to offer capital gains. When you can rent the same thing for half the cost while investing for twice the return, having tons of money in your old age for a hair weave, penile implant and a Hummer, who wouldn’t want you?

Can’t imagine.

Happy Victoria Day.


#1 Alero01 on 05.19.13 at 5:29 pm

Awesome post, Mr. Turner – very well done!

#2 Bill Gable on 05.19.13 at 5:33 pm

Hope your Long weekend is great – and Mr. Turner, you just keep turning out these incredibly insightful, and superbly written articles. Thanks for this killer.

We know Boomers want to downsize, and retire, and so how does this impact Business, especially small business?

This caught my eye: *This is a USA based article – but still relevant for Canadians, methinks.

“Baby boomers preparing for retirement are driving a surge in small business sales, as they find more and more buyers confident enough in the improving economy to expand their own businesses through acquisitions.

In the first three months of this year, the number of sales that closed jumped 56 percent from the same time in 2012, according to, an online marketplace for small businesses.

Retirement was the No. 1 contributor to business sales in the fourth quarter of last year and the first quarter of 2013, according to a survey by Pepperdine University and two trade groups, the International Business Brokers Association and M&A Source.”


#3 City that smells like it sounds on 05.19.13 at 5:33 pm

Well I’m probably in the top fiiiiive!

#4 Howe Street on 05.19.13 at 5:37 pm

Garth on This Week in Money with host Phil Mackesy

#5 Musty Basement Dweller on 05.19.13 at 5:42 pm

Thanks Garth. A very succinct summary of the key points.

To be honest though, I’ve given up trying to explain them to people such as my brother.

He is going to be burnt big time with his approach to real estate and is entirely clueless but also unwilling to learn the math and accept anything beyond point 1 ie: “renting is throwing your money away”. He is going to be so freaking pissed in a few years. Oh well, buyer beware I guess.

#6 Brad J Lam on 05.19.13 at 5:46 pm

Wow Garth you’re early today! Happy Victoria Day…and didn’t want to say it but can’t help it…FUUURST FIVE TO POST?

#7 Randy on 05.19.13 at 5:48 pm

7 points…..Bang on Garth….

#8 Waterloo Resident on 05.19.13 at 5:48 pm

In the past 4 weeks I’ve talked to 84 people about the future of interest rates. These were SERIOUS talks, not just light comments. Only 2 felt that interest rates MIGHT rise, and then only in about 5 or 10 years time from now.

The main view amongst EVERYONE that I talked to was the idea of DEBT ! The general consensus was that everyone and every government has way too much debt, and that no one dare raise interest rates even 1/100 of a percent over the next 50 to 100 years, or the entire economy will come crashing down. Most of the people I talked to ( 61 of them ) felt that mortgage interest rates will be dropping 0.25 to 0.50% some time this year. And everyone felt that current house prices were high, but they were justified due to the current low interest rates, something that won’t be going away in this generation, or the next one either.

Frankly, I’m confused. Many of the points they said were correct; debt really is way too high; both individual and corporate. So i guess rates won’t be going up. But I know that taxes WILL be going up, and along with taxes so will people have less money to spend on luxuries, or even essentials. When that happens, jobs are lost because less people to out to eat, or go shopping at stores. As jobs are lost, then who buys those $2,000,000 3-bedroom houses when the couple is only earning a combined income of $54,000 in the service economy jobs that exist today?

#9 TurnerNation on 05.19.13 at 5:48 pm

Today’s blog post is full of beer-y goodness I am sure. Great weekend including on my rental condo’s deserted rooftop patio & BBQs. Everyone’s left town.

New Canadian rule: no current or former CTV/CFTO newscaster, reporter, or on-air personality may hold a Senate position – ever. (Sorry Garth). What those two did.
Still awaiting the Reform Party [sic] elected senate push. It’s amazing how a move to the right side of Canada moves them farther left.

Just checked my email. Here’s our forum host, on the nascent Howe Street Radio show.

This Week in Money

Saturday, May 18th, 2013 | Filed under This Week in Money

Podcast: Download (Duration: 41:37 — 28.6MB)
?Garth Turner – Canadian home prices leveling off… thanks to “F”
?Robert Campbell – US prices rebounding – new bubble unlikely

#10 Pfft on 05.19.13 at 6:00 pm


lol, damn dude… That’s weak…

#11 Piccaso on 05.19.13 at 6:05 pm


#12 Christopher Lackey on 05.19.13 at 6:11 pm

My family and I rent a 775 square foot two bedroom for $730 4 km from downtown Montreal. A condo a stone’s throw from our place (literally same postal code) is up on mls for $285000. Imagine paying two-three times per month for the illusion of “ownership”, to discover after 25 years that you still have to pay taxes, utilities and maintenance fees that work out to the same as the rent on that damn apartment across the street whose rent never went up because of Quebec’s crazy tenant protection laws. If we saw a “textbook” example of how to wake up with half a million dollars in that info-torial yesterday, the example I just gave shows you could just as easily toss half a million dollars down the drain

#13 Tom Vu on 05.19.13 at 6:13 pm

Re Blog photo:

When I see a$$holes park like that, I park very VERY close along side. Usually use one of my bikini clad crews Hummers.

#14 Carpicker on 05.19.13 at 6:15 pm

Great points Mr. Turner, ill forward them to few house horny people i know. Happy Victoria Day.

#15 Barry in Pickering on 05.19.13 at 6:16 pm

The 25 year comparison of renting to buying ignores inflation. 25 years ago I bought a house for 100K, that is now worth 600k. Rents rise each year, mortgage payments don’t with locked in rates.

If you’re planning on living in it for 25 years, buying is a better option. You only live once, and you might want to own a house in your lifetime.

I never suggested not owning when the time is right. This is not it. — Garth

#16 Piccaso on 05.19.13 at 6:23 pm

The Shocking Truths About High Frequency Trading

Manipulation. Rigging. Computer Traders. High Frequency Trading. Hackers. Your Money.

All of these words fit together in one category: the stock market.

For many years, I have talked about how the stock market really works; how it has and always will be manipulated.

The movies you see — Wall Street, Boiler Room, and Margin Call — are all movies based on events that have happened before, in one form or another. The only difference is instead of big name actors, its big name bankers, traders, and politicians – we are the extras, the victims.

Manipulation has always been a part of the stock market game. Whether it was insider information, or price action manipulation via large sell or buy orders, it was done in a way that regular investors actually stood a chance because they could see the price action happening and react accordingly.

But technology and the advent of high-frequency computer trading/algorithmic software have changed the way the stock market is now being manipulated.

“The world is literally on the brink of a financial collapse and we have software programs running and gauging our day-to-day markets. It’s a scary thought.

Software programs have bugs. At any given time, the wrong input our output could cause catastrophe. I am sure everyone has had their computer crash or had some kind of weird malfunction with a software program before. Imagine when it happens with software trading programs that control billions of dollars worth of wealth – i.e. flash crashes.

Current data shows that more than 70% of all equity volume traded in the US markets is now as a result of these algo-traders (the SEC cites 50% or more.) In a market where retail investors are holding onto cash, this percentage may be even higher. That means retail investors who have the ability to gauge economic factors are no longer controlling market sentiment; computers do.

If history tells us that the stock market is forward looking by 6 months, then computer programs are now dictating our future.”

Investors are growing more impatient everyday, turning the stock market into a casino, rather than a platform to help companies grow.

According to Business Insider, investors now hold stocks on average for only five days; compare that with the eight years in the 1960s.

If business performance dictates how a stock should react, than companies are now only given five days to succeed. After all, that’s the average time investors are holding stocks now.

But if you think that’s a short time frame, wait until you hear how long the software programs – the same ones that represent nearly 70% of all volume in the U.S. – hold stocks for.

On average, high frequency traders (HFT) hold stocks for no more than 16 seconds:

“Investors have turned into day traders. Day traders have turned into algo-traders, who not only make trades in 10 milliseconds or less, but also typically hold stocks for no more than 16 seconds. The days of watching the ticker tape to get a sense of where a stock is headed is over.”

Not only are stocks being held for no more than 16 seconds, the software’s decision to buy or sell a stock is made in less than 10 milliseconds. Some say it’s as fast as half a millionth of a second – that’s more than a million times faster than the human brain can process a decision.

That may sound fast, but how fast does it really sound?

they’re competing with a program that can make decisions faster than any human ever could?

These programs are also used to trade stocks up, or down, by giving the optical illusion that a stock is being bought with momentum, or sold with force. It’s essentially rigged market making.

That is why it is so hard for technical traders, and those who follow the ticker tape, to get a grasp of where price action will lead a stock.

Arbitrage. By selling stocks practically as soon as they buy them, the high-frequency traders can manipulate small price differences in the stock market.

Faster trades equal more money. That is why the algorithms and the technology used in HFT are always being upgraded to work faster.

In HFT, it doesn’t matter how much money is moving in each direction per trade, it’s the amount of trades the program can make in a split second that’s important.

If I can make 10,000 trades every second and arbitrage $0.0001 cents per trade, that equals to $1 every second, $60 every minute, and $3,600 in just one hour.

What may seem like worthless fractions of a dollar, soon becomes much more. Because of this arbitrage advantage in speed, HFT algorithms are continually being upgraded to analyze both short and long-term trends, as well as tiny momentary blips in trading.

#17 Silver on 05.19.13 at 6:37 pm

How did Debt become Actual Equity????


#18 Nick on 05.19.13 at 6:38 pm

Another thing in favor of renters, the average home owner only owns their home for 5-7 years. That is a lot of lost money tied up in realtor fees! Meanwhile, the renter is laughing all the way to the bank.

#19 Jas G on 05.19.13 at 6:44 pm

If somebody will not marry you because you ate renting, consider yourself lucky and saved from more headaches. Hahaha.

#20 TurnerNation on 05.19.13 at 6:46 pm

At least Bandit get his own bedroom.
In fact, if said ritzy TH lies in the shade of old money singles then they might have gotten a deal – in today’s heady terms – at 800k.

On Forest Hill’s edge a new rowhouse starts at 1.4 mill:

In Little Italy, even, new lofthouses run at a cool mill:

#21 Spiltbongwater on 05.19.13 at 6:50 pm

“Worse, owners have no control over rising property taxes, higher condo fees, falling housing markets or bumps in mortgage rates.”- Garth

Garth, are you saying the elections are meaningless? Isn’t that the supposed control owners have over taxes and condo fees?

#22 Sandra on 05.19.13 at 6:55 pm

“Only losers rent. Nobody will marry a renter.”

I am engaged to a renter! I met my fiance about 8 years ago when I was in university. I told one of my girlfriends about this amazing guy I was dating. Her first question was: “Does he own a house or a condo?” I said neither. She then followed up by asking, “Well, does he at least aspire to own property some day.” I answered that, yes, I think he would like to own property some day. That answer seemed to redeem him in her eyes. Of course, this conversation was in real estate-obsessed Vancouver. That was when I learned that for many women in Vancouver, the measure of a man is how invested he is in real estate.

#23 AK on 05.19.13 at 7:02 pm

I always thought that there was a parking space reserved for all the “Firsts” of this blog.

#24 Dean Mason on 05.19.13 at 7:04 pm

To Waterloo Resident #8

You have to distinguish between short term interest rates that are up to 1 maybe 2 years and longer term interest rates that are 5 plus years or more.

The Bank of Canada increases or cuts interest rates that affect variable mortgages,lines of credit,home equity loans that are usually not fixed interest rates.

Bond markets affect longer term mortgages rates,loans,lines of credit etc. that are all fixed.U.S. 30 year bond yields are up at least 0.80% from 10 months ago 2.36% to 3.16% now. Canada’s 30 year bond was a low of 2.19% to now 2.51% 10 months ago.

This is only a 0.32% increase 10 months ago in Canada’s 30 year versus 0.80% increase 10 months ago in 30 year U.S. bond.If this continues to happen at this pace and the U.S. 30 year bond reaches 4.50% then Canada’s 30 year bond would reach 3.05%. It could be go a little higher at 3.25% to 3.50% as the spread is too wide.

This is what could happen as Canada’s economy lags and is slower than the U.S. and might just see only a 3.50% to 4.00% 5 year mortgage rate at most in 3-5 years.

The problem is a 0.25% point increase in any type of interest rate fixed or variable with a highly indebted consumer say $400,000 total debt for a couple would mean a $1,000 more in annual interest.

The Bank of Canada rate was 4.50% in 2007 before all the financial mess started.If they go back to this level it is 3.50% or 350 basis points higher so 14 0.25% increases would mean $14,000 in extra annual interest for the $400,000 in total debt of this couple.

If this takes 3,5,7 or 10 years with rising gas,energy,food,auto insurance,home insurance,property taxes,utilities,medical,telephone,internet,vehicle prices,clothing,maintenance,repairs costs and other cost of living expenses increasing where are these people going to get this extra $14,000 in annual interest to pay their lenders.

Remember this is just interest not the mortgage payment,car payment etc. which would be much higher by as much as 30% or more than the $14,000 in annual interest so $18,200 a year.

#25 aprilnewwest on 05.19.13 at 7:07 pm

#15- One may plan on living in the same place for 25 yrs but it doesn’t always work out that way.

#26 AK on 05.19.13 at 7:22 pm

“Only losers rent. Nobody will marry a renter.”
Geez. I wish I was renting back in 1979. :-)

#27 westcanguy on 05.19.13 at 7:27 pm

22Sandra on 05.19.13 at 6:55 pm

“Only losers rent. Nobody will marry a renter.”

I am engaged to a renter! I met my fiance about 8 years ago

Hey, slow down there lady! Are you sure 8 years is enough time to know if this is the right guy???

#28 AisA on 05.19.13 at 7:44 pm

What number 1 said, X2. Nothing to add.

#29 freedom1 on 05.19.13 at 7:52 pm

I rent a 600 sq foot apartment just outside of new york in weehawken, new jersey.

In 2005 I started a job at 41,000$ in etobicoke.
I thought of buying a house in
2005, 2006, 2009, 2011 but couldn’t pull the trigger.

Since 2008, being mobile I have changed 5 jobs.

I now work in NYC and should pull in 120k this year with the wife studying. After my stocks losses in platinum and uranium I have saved a 250k (80 USD). Wife had a 2 year job with a hobby and saved 40k. She can’t work as I am on a TN visa.

Looking to get a green card.

I have a lot of diverse experience living on the east coast in the US. I plan to put an offer on some local real estate within the year. I have also gained valuable work experience and been living freely and saving close to $4000/month.

I pay 1300$ with gas, electric, water, internet and parking included. If i had bought a house when my salary was 41k in the marxist nation, it’d be 75 at most today.

F! ontario.

#30 Lower rates to come? on 05.19.13 at 7:53 pm

Garth, you owe us an explanation why you believe the govt will not further reduce interest rates.

They won’t. Period. — Garth

#31 Ralph Cramdown on 05.19.13 at 7:55 pm

#16 Piccaso — “The Shocking Truths About High Frequency Trading”

You want to see how smart those computers are, Picasso?
“The Trust, by its terms, will dissolve on April 6, 2015, 20 years after the death of the last survivor named in the original December 7, 1906 Trust Agreement. At the end of the Trust on April 6, 2015, the certificates of beneficial interest (shares) in the Trust will cease to trade on the NYSE and thereafter will represent only the right to receive certain distributions payable to the certificate holders of record at the time of the termination of the Trust. Upon termination, the Trust is obligated to distribute ratably to these certificate holders the net monies (essentially, total assets less liabilities and properties) remaining in the hands of the Trustees (after paying and providing for all expenses and obligations of the Trust), plus the balance in the Principal Charges account (primarily representing the costs of surface lands acquired over the years). After payment of this final distribution, the certificates of beneficial interest (shares) would be cancelled and have no further value.”

ONLY A COMPUTER WOULD BE STUPID ENOUGH TO OWN THIS STOCK AT THIS PRICE. Lord, please send me counterparties like these computers all day long! They have the attention span of a gnat, no capital or willingness to ride out adverse moves, and buying liquidity from them for a penny surely beats the 1/8th ($0.125) that we all used to have to pay the market makers way back when.

#32 RegularReader on 05.19.13 at 8:06 pm

I’ve been around here for a while.

This is one of your best posts ever. I think I’m gonna print and frame a few copies and give them as a present to young people I care about.

Great work. Thank you

#33 Average Joe, Vancouver BC on 05.19.13 at 8:06 pm

Time for a new ( 2013 look at things) book G.T.

#34 Nemesis on 05.19.13 at 8:12 pm

Purely rhetorical, of course…

But why would anyone with a ‘large wad’ need a pneumatic willy?

Tricks. — Garth

#35 An Importation to Prop the Ponzi Scheme on 05.19.13 at 8:14 pm

Well, the CAD is tanking. That would boost the economy and indirectly prop the housing bubble…

#36 Notta Sheeple on 05.19.13 at 8:15 pm

Current rent in my building: $1,178/mo

No condo fees (saved $229/mo),
No heat, AC, water, cable utitlities (saved $165/mo),
No property taxes (saved $175/mo),
No home maintenance costs,
Cheaper renter insurance,
Two free parking spots,
No fee banking,
No bank mortgage prostitute interest,

Leftover investing cash………do the math,

Girlfriend still loves me……….Priceless.

#37 Dr. Hoof - Hearted on 05.19.13 at 8:15 pm

#16 Piccaso on 05.19.13 at 6:23 pm

Re Stock Market and High Frequency Trading Computers at Goldman Sachs etc.

Yes..that’s what these stock market rocket scientists don’t get..the ” Final Plucking”….the last gasp is the “pump and dump” the stock market.

At least Real Estate is REAL….The GREATEST FOOLS ON EARTH are the stock market sheep.

#38 Chickenlittle on 05.19.13 at 8:20 pm

#15 and #25:

I agree with #25 april. I have lived in Ontario, BC, and Romania. Two different towns in Romania, one in BC, and six in Ontario. That makes 9 different places I have lived in my 30 something years alive. That averages to a new place every 4 years for me. I don’t think I could ever live somewhere for 25 years in a row!

#39 canadian on 05.19.13 at 8:45 pm

#26 Interest rates rise when the dollar falls in order to protect the Canadian dollar,how can this be good for real estate sales.

#40 Freebird on 05.19.13 at 8:47 pm

Hi Garth,

I’m going to assume you’re last line is aimed at male (and maybe some transgender) readers based on the implants? So women won’t be retiring? I may need a weave at some point, maybe even implants…just not a penile one unless I’m driven to switch teams in my old age – stranger things happen.

#41 Garth, Check your math on 05.19.13 at 9:00 pm

House cost $800,000, downpayment $40,000, financed $760,[email protected]%

Cost of financing $760,000*3%*90%=$20,520
@7%, $40,000 earns $2,800

Total cost of owing:$9,000+$20,520+$2,800=$32,320
Your rent $38,400.I used your assumptions Garth.

I disregarded tax on $2,800, appreciation that homeowners enjoyed for the past 10 years, and the fact that primary residence is exempt from capital tax on gains.
I want to be clear here: For long time I believed (and still believe) that real estate is due for correction. The values have been built on government and R/E industry manipulation, and hype. It still does not justify streaching facts. Garth, you don’t have to do it. The real estate in Canada is doomed anyways.


I used a fairer comparison – no leverage. Your example is a real estate death sentence. – Garth

#42 45north on 05.19.13 at 9:10 pm

The RBC Mortgages fake editorial I showcased in the previous post is a great example.

the fake editorial looks like desperation or at least visible concern. I mean the bank has unrivaled access and influence over its own customers. For example the man at the bank can phone you and say “we were reviewing your account and thought that you might be interested in a mortgage pre-approval”. I mean who else has that kind of access or influence? Apparently that’s not good enough and it has to buy space in the Toronto Star to expand its influence. The problem is that in doing so it is open to public criticism such as Garth’s. Which brings me to the conclusion that Garth is now having a decisive influence in the housing market

#43 CrowdedElevatorfartz on 05.19.13 at 9:10 pm

Ahhhhh the “Parking Lot Pricks”…….
Ya gotta luv em.
I usually leave a note on the windshield thanking them for being an asshole AND to check all four tires
( i never do anything to the tires but it is amusing seeing some kid that usually looks like a “Growing Up Gotti” wanna be ,walk around his car massaging his tires. Selfish pricks deserve worse.

#44 I love mobilr parks babes on 05.19.13 at 9:37 pm

Garth, What’s your take on mobile homes. It seems their values increased along other real estate. Should they be considered real estate? Is it sexy to live in a mobile park?

#45 Smoking Man on 05.19.13 at 9:50 pm


When are you guys going to get it…..?

The mind of the herd is what drives the market, logic, brains, doing the right thing doesn’t matter.

Getting inside the mind of the herd which no MBA course teaches…..

I have mad fortunes on this little know fact. Camel toe, Bat man charts tell you what the herd is thinking..

It’s so visible and easy to see, yet the schooled are blind.

Schools mission, take out there eyes, ears, and voice.

#46 Renting in the GTA on 05.19.13 at 9:56 pm

Loved the post tonight.
I will continue to spread the word about this blog.

#47 gdawg on 05.19.13 at 9:57 pm

“Your home is like a huge tax-free savings account with no contribution limits”

#48 Cici on 05.19.13 at 9:58 pm

“Residential real estate is an emotional, speculative asset bought by many people who think TFSA is a motor oil.”

Love it…Trop funny!

#49 Smoking Man on 05.19.13 at 10:05 pm

F-en weather in AC sucks, so do the slots…..

Thank god, a roll the dice with a magic touch….

You dogs ever Wana make loot at the crap the table.

Smokey is your shooter. 6 rounds of 45 min. On two of the rolls, I even told everyone to take it down.

One player throws me a pink chip when I leave.. He made 80 k.. Not like the first night when I made one dick 60k, not even 5 bucks to the shooter…. I put a jinks on him.


#50 X on 05.19.13 at 10:16 pm

re #41 – check your math – actually your math is incorrect.

$760,000 financed over 25 years at 3% would cost $3596.57 amonth or $43,160.04 a year. It would pay $20782.70 of that amount towards your principle. Pretty easy to double check on a mortgage calcualtor.

So $43,160.04 plus the $9,000 and $2,800 as you mentioned. The total annual out of pocket expense as per your example would be $53,960.04.

Vs renting at $38,400.

No facts stretched.

#51 AK on 05.19.13 at 10:23 pm

Prior to the GFC of 2008, Huge mortgages, with no down payments, were made to numerous NINJA borrowers by U.S. Banks.

However, those days appear to be gone as a number of Banks are shuting down accounts, due to “compliance issues.” – LOL.

Drawing a Line on Loans

#52 Ralph Cramdown on 05.19.13 at 10:26 pm

Don’t look now but the PM markets are open. Methinks the TSX will underperform the S&P tomorrow. (So what else is new?)

#53 Smoking Man on 05.19.13 at 10:41 pm

Renting is for losers, low life scum bags….

That’s the emotions the track6ers have….

You can’t beat Em. To many

My recommendation, buy in long branch….

Filp bird to land lord….. See they hate the land Lord more than the banksters

Now time to put my son’s wedding speech together….

To be a fly on the wall at the reception dogs. It’s going to be a bueaty……

#54 not 1st on 05.19.13 at 10:44 pm

Garth, you forgot to address one thing…what if there is no decent housing for rent in your city? Here in Regina, its either $3,000/month for some exec bungalow or $1200/month to watch prostitutes outside your window and your kids playing with needles and condoms.

Sometimes ownership is the only way to get control of you and your family’s future. I am not going to rent if it means my family grows up in a less desirable neighborhood, gets a crappy school and I have to move ever few years when the landlord reads your blog.

Why Regina? — Garth

#55 Retired WI Boomer on 05.19.13 at 10:56 pm

Hysterical….Truthful….With Impeccable Integrity, so obviously, Garth, you are NO reporter.

One of your BEST posts thus far in 2013.

Enjoy your Holiday!

#56 Herb on 05.19.13 at 10:57 pm

Do you suppose that if someone told Nigel Wright that the taxpayer is on the hook for the national debt, he’d pay it too?

#57 AK on 05.19.13 at 11:04 pm

#52 Ralph Cramdown on 05.19.13 at 10:26 pm
Don’t look now but the PM markets are open. Methinks the TSX will underperform the S&P tomorrow. (So what else is new?)
Down another $18.00 for Gold.

As you stated, nothing new.

#58 aprilnewwest on 05.19.13 at 11:15 pm

#44- If I were to buy a mobile home it would have to be on it’s own land. I would not pay those pad rental fees of over $600 per mth in the Lowermainland BC area. Also I’m told they have a life span of about 30 yrs. Anyone?

#59 Tom Vu on 05.19.13 at 11:19 pm

Re: Smoking Man

He is a Canadian icon…like Stompink Tom, Rita McNugget, and Poutine

I submit we pass the chapeau…and either Lennin him..or freeze in Liquid Nitrogen with Walt Dizzney

#60 Timing is Everything on 05.19.13 at 11:44 pm

Why Regina? — Garth

Probably a good job.

‘The lowest rate among the 33 cities surveyed was 3.5 per cent in Regina.’…

#61 Bill Gable on 05.20.13 at 12:07 am

OK – let’s talk reality:

“A special report in The Globe earlier this year found that roughly a quarter of the condos in Vancouver sit vacant. What’s more, the city was found to have a much higher overall rate of empty apartments than any other Canadian city.
The study, which was performed by adjunct UBC planning professor Andrew Yan, found that Vancouver has about 7,500 more vacant housing units than what would be expected. Metro Vancouver alone is believed to have roughly 15,000 to 20,000 more vacancies.

At the same time, condo listings on the MLS in Toronto rose 8 percent to hit a record high recently.

Sales, on the other hand, slumped 18 percent. That’s bad news in and of itself; the fact that there are some 55,000 additional condos currently under construction, the majority of which won’t hit the market until 2014, is downright terrifying.”


#62 Bass Fisherman on 05.20.13 at 12:15 am

#36 Notta Sheeple on 05.19.13 at 8:15 pm
Current rent in my building: $1,178/mo

Where are you renting Notta? I am looking to move out this summer. Care for a new fellow-blogdog neighbor?

wait the minute, you are not in those run down apartment building wih no in-suite laundry are u?

#63 i love libraries on 05.20.13 at 12:27 am

Garth, you forgot to address one thing…what if there is no decent housing for rent in your city? Here in Regina, its either $3,000/month for some exec bungalow or $1200/month to watch prostitutes outside your window and your kids playing with needles and condoms.
Why Regina? — Garth

…same thing here in Thunder Bay, very low vacancy rates. Why that is…? Why Thunder Bay?…my family and good paying job.

I consider myself lucky I own because rents here are astronomical

#64 Jeff on 05.20.13 at 12:30 am

Any “financial advisor’ who uses a 7% rate of return in his calculation of opportunity cost is either dishonest or ignorant. Either way, he should be ignored.

Last year a balanced portfolio (40% Cdn bond index, 60% global equity index) returned 9.25%. Over the last nine years a balanced portfolio returned 6.98% – and that included the 2008 crash. Over the last three years the S&P gained 8.45% and the balanced portfolio gave 8.2%. This year the Dow is ahead 18.51% YTD. Sounds like you need a new advisor. — Garth

#65 Ballingsford on 05.20.13 at 12:32 am

Wonderful post tonight Garth! You explained things precisely and concisely! Man, if nobody gets this then they deserve what they get!

#66 Tom Vu on 05.20.13 at 12:44 am

Watchink TV…mostly Donald Duck Trumps Free Market Intellectual TV show with Genius Hollywood Celibates

Thank God for Botox…..or else I would go blind.

#67 Ballingsford on 05.20.13 at 12:44 am

Thanks also for the early post! My heart has just settled down with the SENS win. Nudge Nudge, Wink Wink!!!

I need to relax for a few days!

I’m going fishing; until Wednesday.

Stress relief at it’s finest!!!

#68 Piccaso on 05.20.13 at 12:52 am

Murphy’s Law…

The hot water tank blew on a long weekend, it’s $1,240 +GST to replace and remove on Tuesday.

Oh ya and the property tax bill came, that’s another $3,000

I guess the front driveway $5,000 tab is put off for a while

Grrrrrrr…. the other costs of home ownership.

#69 what bubble? on 05.20.13 at 1:00 am

#8 Waterloo Resident
The general consensus was that everyone and every government has way too much debt, and that no one dare raise interest rates even 1/100 of a percent over the next 50 to 100 years, or the entire economy will come crashing down.

Don’t they need constantly print money to keep them that cheap? …for another 50 or 100 years? That might case some misbalances in the economy which, in its turn, will make winning of elections for the ruling party much more problematic… and that’s hardly what they want

#70 prairie person on 05.20.13 at 1:00 am

People who believe that real estate only goes up don’t know any history. Boom and bust is the normal cycle.
The bust is often regional but can be national. Some downcycles outlive the people caught in them. Speculation is always an example of the greater fool at work. The hysteria of greed drowns out everything else.
Add in social pressure created by financial institutions, TV, film, the RE industry plus cheap money. It’s a set up until the day comes when it doesn’t work anymore. Most people who went to the Yukon gold rush came back broke.

#71 Carpe Diem on 05.20.13 at 1:15 am

The last piece of this article got me back in this blog.

“Only losers rent. Nobody will marry a renter.”

There is nothing wrong with not being married!!!
Your freedom and finances are so easy when single!!!

I remember 10 years ago, single, renting a one bedroom in Vancouver. 33rd floor. Each chick I brought in that place loved the leather couch overseeing downtown ….

10 years later .. still not married (unless in Nevada). The last babe that liked that couch sure was fertile. We now live in sin with 3 kids. We owed a couple of homes in Vancouver and we are now in Ottawa and renting again. Why?

Simple we can rent more than we can owe and have our more investments making more outside real-estate.

We actually went around a bunch of open houses today. One place had the boomer realtor chatting with the older rich boomers want-to-be owners. But they couldn’t buy since they were stuck with their overpriced McMansion that no one wanted …

It was a fun day of window shopping and my woman told me – it’s nice to rent – so much freedom.

It was a good day. Now I want to rent a waterfront property and see if that works for us.

One thing that was very interesting today. Driving around today we saw a lot more for sale signs than what was posted on and it’s mobile app. I wonder why that would be …. hmmmm …

#72 TOLurker on 05.20.13 at 1:46 am

I have read this post (or at least the renter’s counter-arguments against owning in a bubble) before….almost eight or nine years ago. See for the California (later the general U.S. Housing bubble).

Bears repeating for the Canadian market whether or not Garth was even aware of Patrick Killelea’s prescient website. Thanks Garth for helping those of us renting to resist the siren song to buy……

#73 Kalergie on 05.20.13 at 2:54 am

Great post, Garth. One of the best! This should be printed in the next Star!

#74 Buy? Curious? on 05.20.13 at 3:02 am

What’s an “Asshale” and who kind freak carries chalk with them?

Garth, great post, 8.5 out of 10. I hope Hwy 400 is gridlocked.

#75 Mike T. on 05.20.13 at 3:05 am

Happy firecracker day to you too Mr Turner

this is what we call it in our family…

this post reminds me of something I love to think and occasionally say:

I’d rather be right than popular

good post

#76 bob in a a no longner cold house on 05.20.13 at 3:20 am

it took 14 years for prices to recover.

Absoutelty true, we bought in the late 80’s out bid 3 other people and by the time we manged to get a proper (non vender) mortgage) we under water to the tune of 26,000 dollars, that we had to borrow from the bank.

Took us about 10 years to dig out and then sold for a small profit.

#77 drydock on 05.20.13 at 3:47 am

#57 AK

Auro et argento et mortui sunt.

Aurum et argentum vivat.

#78 Sam on 05.20.13 at 6:35 am


In response to your comment on #54 “Why Regina?”

I’m not in Regina myself but in a similar situation. Renting in my area is a big downgrade and/or expensive.

I guess my wife and I could quit our jobs, yank the kids out of school, leave our families and friends to go start over somewhere that has better rental opportunities. However the years spent trying to re-establish our careers and our lives will certainly carry a great expense too. Does this make sense???

I can’t imagine leaving a place and a life I love to go rent in a place I won’t be as happy.

Your advice seems great for the big city condo crowd but what’s an average guy living in the real world to do?



#79 khosro tohidi on 05.20.13 at 6:39 am

the condo i am living in toronto
previous owner bought it for 340000 in late 80s
sold to me for 210000 december 1996
last spring similar units were sold around 500000
now it is around 450000
here is not different

#80 GPS on 05.20.13 at 6:52 am

Thanks Garth!
It’s great to see these arguments and numbers.

Could you put some numbers to the house you own as well? If it’s so great renting, why do you also own a house?

And while your numbers make sense if you rent/or buy over a 25 year mortgage, what if you’re able to chip away at the principal by making overpayments?

Another personal question. How do you accept comments so quickly for there to be competition for who is first? You must be tied to your emails to let comments through so quickly.

#81 Derek R on 05.20.13 at 7:30 am

Hi, everyone. Happy Victoria Day! Hope you all got good weather and had a great time out with friends or family. Sadly I’m missing out just now because I’ve had to go to Beijing for my employer and it’s work, work work. So have a good time for me!

Anyway I have a request. Many of you will know about the GarthFAQ which I publish from time to time.

Garth has down a bunch of great postings over the years. Today is one of them. It made me think that it might be nice to add a “Greatest Hits” Top Twenty to the GarthFAQ. But rather than just being my personal favourites, I’d like to ask the blog dogs what they think. So if you’ve got a favourite, give me the title (or even better a link) and I’ll add the most popular ones to the FAQ.


#82 rosie "moving forward" on 05.20.13 at 8:03 am

The official Tory organ is outlining the next part of the Action Plan. Seems Garth has more sway than some here realize.

#83 Tony on 05.20.13 at 8:21 am

No one mentioned the mortgage discharge fee on the mortgage which has gone up about 300 percent over the last 15 years in Ontario. Inflation certainly hasn’t been 300 percent over the last 15 years in Ontario.

#84 AK on 05.20.13 at 9:29 am

#76 drydock on 05.20.13 at 3:47 am
#57 AK

Auro et argento et mortui sunt.

Aurum et argentum vivat.
I am still holding some Yamana and Barrick. I have no idea why though. :-)

#85 Musty on 05.20.13 at 9:43 am

Nice photo. In many places that I have lived that guy with the red (…Datsun is that a hot car or something lol..? ) car would only park like that once because a key would be taken to his red paint.

#86 Freedom Seeker on 05.20.13 at 9:53 am

I am renting a cool studio apartment in downtown Montreal for $650 a month right downtown with a million fun things to do and people to see outside my door.

Sure wish I was back in the burbs with a mortgage and watching declining equity and increasing utility and repair and tax bills in some house or condo…. NOT!!!!!

And by the looks of new condos going up in Montreal I sure don’t see my rent skyrocketing anytime soon.

#87 blase on 05.20.13 at 10:09 am

Fantastic post Garth.

#88 blase on 05.20.13 at 10:14 am

People who keep saying rents are astronomical are not looking hard enough. You can get 4 bedroom houses that sell for over $500,000 in Calgary for $2,000/month. Doubt that Regina or Tunder Bay are any more expensive.

#89 FullOfFear on 05.20.13 at 10:17 am

$3,200 a month on rent! Given that this blog’s author has revealed a second property and probably adheres to the 30 percent of income on housing rule, I’d say he won’t need his OAS check next year. Oh wait … there’s a claw back rule on that, right? :)

You want a financial-advice blog written by a guy who needs OAS? — Garth

#90 YYC on 05.20.13 at 10:25 am

#63 i love libraries:

Rent is high because house prices high… I mean astronomically high…!

By owning you chose to lose big time than paying little extra rent and pass that risk to others…

Just my thoughts…

#91 Mike on 05.20.13 at 10:26 am

I think it would be helpful to all of us
as well as those that count you as a doom and gloom blogger, to write a post on when IS the right time to
purchae real estate.

I think those that have purchased rentable
properties in good condition will have an excellent
asset to sell come retirement. So that’s one loose example, I’d love to hear more examples of when is
a reasonable time to buy a home to live in.

#92 MinInMission on 05.20.13 at 10:28 am

Definitely and “8 out of 10” post.

“Awesome Lady” and I own our house. However, we do have to worry about the upkeep and maintenance. I am fortunate that I can do the majority myself, not too old for that yet.

We managed to “luck out” and follow the recommendation, about buying, before I even knew about this blog. Or, that sources of information like this even existed.

The R’tor mentioned several times “I don’t understand it, there isn’t anything selling now”. So, we purchased.

Like Garth has said, “The time to buy a house is when no one else is.”

#93 Spiltbongwater on 05.20.13 at 10:41 am

I think this blog is a shameless brag about Garths net worth. He has already stated he could buy his 800K rented home with cash. As well in previous blogs he has mentioned about all his real estate holdings but that they only equal 20% of his net worth. Nothing wrong with bragging, but eventually the friends get jelous and dessert you.

Those friends I don’t need. Nor do I strive to be average. — Garth

#94 Kessel on 05.20.13 at 10:45 am

Garth, what are the odds the Feds quash the 30-35 year am’s for those with >20% down within the next month?

#95 MWerk on 05.20.13 at 11:13 am

Here in Calgary all seems to be very good, prices continue to go up, here is different, according to local media. We have oil and 120000 new people coming to town every year, so RE will always pay off. At least this what they say, but I see some houses sitting with “for sale” for quite a long time. Maybe my impression is wrong…

That’s what ‘they’ said in Vancouver last year. Nothing changes. — Garth

#96 MWerk on 05.20.13 at 11:17 am

#83 correction, 120000 newcomers between 2006 and 2011.

#97 Old Man on 05.20.13 at 11:24 am

#59 Tom Vu – you missed the best of all who was a buddy of mine. He was bigger than Elvis, and turned down $millions in Nashville as loved Canada. Shame on you for not knowing the KING of all time who made over 100 records, and his name is Ronnie Hawkins known simply as the Hawk who lives near Peterborough.

#98 Julia on 05.20.13 at 11:38 am

Sounds like even at a good time to buy a house, after the Phoenix crash, it can be frustrating.

“All the while, prices have soared in the region, climbing about 30 percent over the past year to an average of $175,000, according to a report from Arizona State University. More than one-quarter of those properties, or 27 percent, were purchased by investors, the report says.”

#99 Julia on 05.20.13 at 11:43 am

#93 Spiltbongwater on 05.20.13 at 10:41 am

I’m going to hazzard a guess that Garth’s friends can spell. Besides, if he were struggling like us would we trust his financial advice more?

#100 Kreditanstalt on 05.20.13 at 12:10 pm

“Real estate values shot higher on those low rates, not on economic renaissance or ballooning incomes.”

Yet you persist in denying that ETFs, stock prices, preferred share prices, bond prices or REIT prices haven’t shot higher for the same reason.

Buying or selling an ETF, for example, does not involve leverage, closing costs or commissions, and I have 100% liquidity. There is no direct comparison. — Garth

#101 Shawn on 05.20.13 at 12:11 pm

Realistic Returns and Opportunity Cost

Jeff at 64 said:

Any “financial advisor’ who uses a 7% rate of return in his calculation of opportunity cost is either dishonest or ignorant. Either way, he should be ignored.

Garth pointed out that recent returns even going back nine years have exceeded that.

Here’s another way to think about it. Time for a little math. My source is from Dow Jones at:

I adjusted for the change in the Dow from the April 30 date on the source to Friday’s close.

The Dow Jones Industrial average is trading at trailing P/E ratio of 16.7. Turn that upside down and the earnings on price ratio is 0.060 or 6.0%.

The Dow companies trailing ROE (Return on book value of equity or profit divided by equity) averaged 17.9%. But to buy the Dow you pay a price of 3.0 times book value Price to Book ratio is 3.0.

17.9% book ROE (profit on book) divided by paying 3 times book arrives at 6.0% profit on your investment.

So initially you might expect to earn 6% if the P/E remains unchanged.

But wait, there’s more.

The Dow companies retain about 60% of their earnings.

If they keep investing the retained earnings at 17.9% ROE they will grow earnings at 60% of 17.9% or 10.7% per year.

The current dividend yield is 2.4%. An investment that yields 2.4% and where the dividend grows at 10.7% per year would return 11.1% assuming the P/E ratio is unchanged.

If the DOW companies instead earn only 10% ROE on new retained earnings (and 17.9% on the existing) then the dividends should grow at 6% for a total return of 8.4% assuming P/E unchanged.

Another way to calculate this is to note that the DOW earnings should grow about as fast as the economy.

Let’s say 3% real GDP plus 2% inflation. That would be 5% growth. In this case the expected return is 5% plus 2.4% dividend = 7.4%. Assuming P/E unchanged.

But some will argue it will be more like 2% GDP and 2% inflation in which case 6.4% return. And if the P/E drops it is a lot less than 6.4% for a few years until the P/E comes down.

Another point is that no rational company would knowingly invest in projects expected to earn les than 7% on equity.

The math and history can support a very wide range of expected ROEs. 7% is hardly a wildly optimistic figure. Reality could be higher or could be lower.

If you invest in bank accounts then I guess your own opportunity cost might be 0%. If you invest with typical advisors who charge you 2% then perhaps your opportunity cost is 5%. If you invest wisely in ETFs or use low cost and good advise your opportunity cost could easily be 7%.

In theory, the opportunity cost should also consider the risk of the investment.

#102 Tom Vu on 05.20.13 at 12:18 pm

Only losers rent. Nobody will marry a renter.


This is true.

Goes all way back to Adam and Eve.

They were renting real nice place…. able to keep pets…, but pissed off Landlord..eviction !

#103 Grantmi on 05.20.13 at 12:19 pm

#44 I love mobilr parks babes on 05.19.13 at 9:37 pm

Garth, What’s your take on mobile homes. It seems their values increased along other real estate. Should they be considered real estate? Is it sexy to live in a mobile park?

Eh Baby… want to come back to my trailer?!?!!!

Hmmm. Not sure if that’s worst or better then “Eh Baby” finding out that I rent this apartment not own it.

I’ll let the dog blogs decide!

#104 CrowdedElevatorfartz on 05.20.13 at 12:21 pm

Hmmmmm, driving in the burbs of the Lower Mainland i have noticed a rather unusual number of houses with private “For Sale” signs……. I saw two in 3 blocks in Burnaby, amoung others.
I’m assuming these are not “counted in the official listings numbers pumped out by MLS or CREA?
“City on the edge of the rain…..” has reported there are 18,100 listings in the Lower “Brainland” for May1st

#105 Tom Vu on 05.20.13 at 12:28 pm

#97 Old Man on 05.20.13 at 11:24 am

Well does he rent?

Can’t be Canadian, true Canadian would sell out !
Maybe he’s from Latvia…

#106 Ann on 05.20.13 at 12:47 pm

Spiltbongwater on 05.20.13 at 10:41 am
I think this blog is a shameless brag about Garths net worth. He has already stated he could buy his 800K rented home with cash. As well in previous blogs he has mentioned about all his real estate holdings but that they only equal 20% of his net worth. Nothing wrong with bragging, but eventually the friends get jelous and dessert you.—————————————————–

If you think that Garth rent’s his home and it’s only worth $800,000 you are the greatest fool. No disrespect intened!

Actually it is true. That’s my Toronto exposure. — Garth

#107 baddog on 05.20.13 at 12:49 pm

Garth, you forgot to address one thing…what if there is no decent housing for rent in your city? Here in Regina, its either $3,000/month for some exec bungalow or $1200/month to watch prostitutes outside your window and your kids playing with needles and condoms.
Why Regina? — Garth

…same thing here in Thunder Bay, very low vacancy rates. Why that is…? Why Thunder Bay?…my family and good paying job.

I consider myself lucky I own because rents here are astronomical

Same situation in Winnipeg. Rents are high and monthly costs are about the same if not higher than owning. Many people here that rent houses are booted out every couple of years when the landlord sells. I feel quite fortunate to own. Why Winnipeg? Good paying stable job and It’s a good place to raise a family. I realize that we are not as enlightend and cultured as you folks out east but we like it here.

#108 drydock on 05.20.13 at 12:59 pm

# 84 AK

tempus narrabo.

#109 AndrewAb on 05.20.13 at 1:03 pm

#41 Garth, Check your math

You remind of a dude called WSN on theEdmonton Real Estate blog who continually corrects others, always in favour of buying real estate, who is continually shot down as Garth does here, but continues to post relentlessly anyway.

#110 observer on 05.20.13 at 1:06 pm

#15 Barry in Pickering on 05.19.13 at 6:16 pm

The 25 year comparison of renting to buying ignores inflation. 25 years ago I bought a house for 100K, that is now worth 600k. Rents rise each year, mortgage payments don’t with locked in rates.

If you’re planning on living in it for 25 years, buying is a better option. You only live once, and you might want to own a house in your lifetime.

I never suggested not owning when the time is right. This is not it. — Garth

We bought my first two houses in the 80’s for 55,000 with a 9000 dollar grant to first home buyers.

Fixed the basement up and rented the top and bottom clearing 250 dollars profits a month each after taxes etc.

Back then , you expect to have your house paid off when your 35 or 40 and retire at 50.

Times has changed, now you buy a house and pay for it for the rest of you life and several generations later (house slaves). Is this really living or are you DEAD?

One must remember unless you have you house paid for, you don’t own it “THE BANKS DO” your the Banks’ BITCH.

FYI I had my houses paid for at 35, and bought a total of 9 houses in my lifetime. But I rent now, because I feel the game has changes and sold my last two houses in 2010 and 2007/8.

If I sold today I would of lost 300,000 on one and 65,000 on the other. But I feel they still have a long ways to go. I have a lifetime to wait , not in a hurry

#111 Cowpoke on 05.20.13 at 1:09 pm

This is a very well ‘controlled’ society we live in and completely brainwashed public by the collusion of
big business, banks and governments who desire an
obedient docile work force full of managible employees and egar consumers with fixed habits of response to thier authority through intimidation and mind control.

#112 Snowboid on 05.20.13 at 1:12 pm

#98 Julia on 05.20.13 at 11:38 am…

When we purchased our Phoenix home in late 2010, our goal was to break even if we had to sell around 2020.

Now, after seeing the place increase about 40% in value over 2.5 years, who knows?

However, we saw a number of homes being listed at insane prices, by sellers that are delusional about the actual value.

Some of the places we went through were a joke, a lot of crap on the market for prices only a greater fool would pay.

In the meantime, we are happy to rent in the Okanagan, and although we don’t save quite as much as the esteemed Professor, we still appreciate the owner subsidizing our housing costs for the foreseeable future.

Patient as ever…

#113 TurnerNation on 05.20.13 at 2:00 pm

Of course I am trading today. Home away from the tax farm corp.

Anyway the shiny stuff’s reverted back to 2010 levels:

Time to lick some more, bugs.

#114 Herb on 05.20.13 at 2:13 pm

#112 Cowpoke,

may I suggest a friendly amendment? Add “and Smoking Man spelling” to the end of your litany.

#115 TurnerNation on 05.20.13 at 2:17 pm

Oh, Kanada. We hardly knew ya. Serfs and Subjects be damned. Globalization and NAFTA is great, no?

Can’t wait for Tim “Who Dat?” to solemnly campaign in Ont. that his party is committed to “jobs for working families” and “building better futures for our children”. I could write this stuff.

“”I wanted to hire Canadians, but I was told no,” said the former manager, who agreed to speak only anonymously. “I had to hire Indian people [as temporary foreign workers], and they didn’t have the skills.”

To illustrate his points, he provided forms TCS used in 2011, to apply for government approvals and visas, to bring in foreign workers.

They appear to be standard documents, with blanks for the worker’s name and other basic information. They list several TCS “proprietary” information technology “tools,” which the documents stress all workers must know.”

#116 GUnit on 05.20.13 at 2:19 pm

CTV news short on the condo market in Van

#117 I screwed up! on 05.20.13 at 2:33 pm

Interesting article I found worth a read.

#118 Garth's Condo Neighbour on 05.20.13 at 3:01 pm

Hey buddy

Can you please keep the noise down?

I mean riding Hummers up the stairs is amusing once…

Those late night poker games with Harper , Flaherty and Brad Lamb is keep me awake.

PS Who’s that drunk that keeps yelling “Camel Toe…”?

#119 Mister Obvious on 05.20.13 at 3:02 pm

Responsible citizens of a democratic, capitalist society are expected to provide for the needs of themselves and their families. Two of these needs, among many, are shelter and investment.

For some generations, largely by chance, these are reasonably well aligned goals executed with singular purpose. Cases in point would be my generation (irritating baby boomers) and that of my parents.

It’s no surprise that today’s prevailing wisdom preaches real estate ownership at any cost irrespective of the highly rational counter arguments presented daily on this blog. “If a flat earth was good enough for mom, it’s good enough for me. Why would the person who raised me from birth try to steer me wrong?”

When a specific ‘truth’ lasts for a generation or longer it remains, for that sample of humanity, truth evermore.

It occurred to me long ago that fifty percent of what my parents told me was valuable advice directly applicable to my own life while the rest was simply voodoo they had been carrying around for justifications long forgotten.

My task (everyone’s task really) is to discretely separate the two. It practice though, it’s almost better to just work out your own ‘truths’ than spend your life trying to cleave brilliance from bunkum.

For reasons painfully obvious to anyone who wishes to look, the alignment of the goals of investment and shelter are about to diverge in an unexpected, ugly way.

Nay, not ‘about to’… already have. Another generation is about to embrace a new truth

#120 espressobob on 05.20.13 at 3:32 pm

#102 nothing new

Good point nn. After all gold is real money, right? Frankly I’m finding the ‘fiat’ profits from the dow, s&p 500, & international markets are becoming quite a nuisance as they clog up my accounts with all that silly paper currency.

Maybe its time to liquidate all that fuss & load up on bullion, or invest with Sprott?

#121 NotAGreaterFool on 05.20.13 at 3:36 pm

Canada’s housing market could be headed for a long, slow decline as baby boomers age and fewer young Canadians buy houses in the coming years, says researcher George Athanassakos.

#122 Jl on 05.20.13 at 3:43 pm

“It’s cheaper to rent than to own (this blog has run the numbers many times)” – Garth

Maybe in Toronto but not in Calgary.

(And Garth, before you argue something like, “I’m one example”, I’ll counter that if you’re allowed to use your personal example to make categorical statements like “its cheaper to rent than to own” then so can I).

My condo in Calgary is worth about $200,000, inner city property, 2 minute walk from transit, just west of downtown. Decent area but still in transition, parks, tennis courts, stores within walking distance. I’d give it 7/10.

I have maybe $20,000 in equity ($10,000 left after transaction costs, if I sold right now) with a $180,000 mortgage that I locked in for 10 years at 3.89%, 20 year ammortization = Mortgage Payment of $1077/month.
Taxes are $1200/year = $100/month
Condo fees are $ 3240/year = $270/month
Insurance is $215/year = $18/month

Total is $1465/month

An identical unit to mine is rented in the building for $1325/month and I have done additional research and find that rents in this and surrounding areas are in the $1300-$1400 range for comparable units.

Of course property taxes, condo fees and insurance will increase with inflation, but so should rents, and 73% of my monthly payment ($1077/$1465) is inflation proof because its the mortgage payment which is locked in so depending on the annual rate change between the rents and condo fees and taxes the monthly cost between buying and renting should converge somewhere around year 5 (but for arguments sake to appease Garth let’s just ignore any change in monthly costs and we’ll assume I am out of pocket the $150/month for the next 10 years).

I sit on the condo board, the building is well maintained, reserve fund is healthy, no problems, boiler just replaced. We just had our reserve fund completed by an engineering firm and we don’t anticipate any substantial increase in fees or upcomming special asessments, roof is good for 10+ more years, building is concrete built in the 1960’s when contractors actually knew how to seal a building enveloppe unlike today.

In 10 years I will pay off $73,000 in principal and will have a $107,000 mortgage owing. By the way that means that of my $129,240 in mortgage payments over 10 years, over 55% was prinicpal (not the 90% of the payments are interest like Garth said in his post which was just flat out incorrect).

Now even if we concede that real estate prices don’t increase at all in 10 years (equivalent to a 20-30% drop in real terms) I will have $93,000 in equity ($73,000 gained from my current $20,000). So $73,000 in equity at a cost of $150/month (which is overestimated but let’s leave it) plus the opportunity cost on the $10,000. Plus we can’t forget to take out $10,000 in transaction costs if I wanted to liquidate in 10 years so that brings the equity down to $83,000.

Going to my financial calculator:

PV = $10,000
Payments: $1800/year
FV = $83,000

Interest Rate= 15%

By keeping this condo vs selling I will earn the equivalent of 15% per year on my $1800/year of out of pocket difference vs renting and the $10,000 I could invest in today.

Check the math:

$10,000 invested today at 15% = $42,475 in 10 years

$150/month invested at 15% = $40,175 in 10 years

Total of $82,650 in 10 years

This blows Garth’s argument completely out of the water.

1. 15% per year is not going to happen, not even close.

2. This assumption generously assumes zero change in real estate prices in 10 years. Put it to a sensitivity analysis and let’s go further and say real estate prices are down 10% in year 10, re-run the numbers and you get an “r” of 9% compound annual growth rate.

3. This dosen’t even factor in income taxes. Maybe you could shelter the $10,000 and $1800 per year in a TFSA, but not if you already are using the space.

4. This assumes zero increase in rents in 10 years. If you aknowldge that the monthly carrying costs between buy and rent will converge (likely) than that makes owning even more attractive.

5. If I want to buy a house or move I can flip this into a rental property with no problem. Take off 10% of the rent for management fees and it still substantially beats stock market investing.

And for anyone saying that rents are currently inflated in Calgary and will fall? Possible, but not likely. 1000’s of people coming to Calgary each year, ZERO new rental stock being created (other than condo’s and houses bought by investors – builders haven’t built a multi-family rental in decades). Where are these people going to live.

#123 Mr Buyer on 05.20.13 at 3:57 pm

thanks to the wonders of amortization, you end up paying 300% more than you borrowed. Some deal.
This is a massive drain on our economy that is not addressed effectively. Imagine a society without house pricing requiring borrowing. Imagine what this money burnt up as interest could do for us as a society. House prices have been driven beyond the level that people can save up to buy by banks lending money to drive up these prices to levels that require all purchases involve borrowing and now at punishing levels of interest (even 3% on massive price gains is a burden). Unfortunately people do not think there is anything wrong with such levels of usury.

#124 troy on 05.20.13 at 4:07 pm

Garth – still waiting for that CRASH in prices you’ve been talking about. You said it was going to happen in Q1 of 2012 for goodness sakes. MORE EXCUSES!

Where did I say ‘crash’. — Garth

#125 FATHER on 05.20.13 at 4:16 pm

124 so what would happen when your condo drops down 2 100g from 200g

#126 Piccaso on 05.20.13 at 4:16 pm


#127 espressobob on 05.20.13 at 4:17 pm

#123 nothing new

Good point, again! Actually I was thinking about physical bullion, you know, gold & silver. Problem is, I need to store it somewhere? Maybe I’ll call Brad Lamb personally and reserve a 500k condo for just that purpose. And stop calling me a girl, I’m getting turned on! Unless you wanna share a condo with all that hard precious metal?

#128 The Man From Nantucket on 05.20.13 at 4:31 pm

Smoking Man:

If I didn’t think gold had a fair bit further to crash, I’d swear this was cameltoe complete with a pair of legs!

I’d love your thoughts. After Garth you’re one of few opinions I value.

#129 bill on 05.20.13 at 4:35 pm

and a happy victoria day to you Garth and the dogs as well.

#130 bill on 05.20.13 at 4:41 pm

124 Jl on 05.20.13 at 3:43 pm
”ZERO new rental stock being created (other than condo’s and houses bought by investors – builders haven’t built a multi-family rental in decades)”
you could not be more wrong.thats the new rentals.
we are in the renting apartment biz.
we have very serious competition with under water mortgages.
believe it or not.
it matters not to us. what matters for us really is how soon we can fill a vacancy.
six to 8 weeks now when formally there was a lineup up of very desirable professional type renters.
ie dr ,lawyers ,nurses and a host of other professionals.
and it will be coming to calgary soon.

#131 Dienekes on 05.20.13 at 5:04 pm

It amazes me the timelines that people use to calculate paying off a mortgage. I would never purchase anything I couldn’t have paid out within 5 years. 10 year mortgage? I don’t even remember who that person was that occupied my body 6 years ago, he is not the same person as me. I envy people who can spend there lives paying a mortgage, get it paid, retire a year later, go on a holiday, and die because they are 73.
I have a year left on my 5 year mortgage, things are slow till October, so my family of five are going to go to Croatia and I am going to lay my head in the Adriatic and think about what a loser I am, how stupid that my wife doesn’t have to work, and how lucky those people are that leveraged themselves into there graves.

#132 Tony on 05.20.13 at 5:40 pm

Re: #124 Jl on 05.20.13 at 3:43 pm

That condo you”think” is worth 200 G’s is actually only worth 140 to 150 grand. You bought at the wrong time and you’d soon find that out if you did try and sell it. As land values continue to fall every year in Alberta of course it’s cheaper to buy than to rent because no one wants to buy into a falling market.

#133 Cowpoke on 05.20.13 at 5:54 pm

#115 Herb, may I add this, that ‘Government of the people, by the people, for the people, shall not perish from the Earth. Abraham Lincoln
and this, We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. You know how the rest of this story goes!

#134 Dienekes on 05.20.13 at 5:58 pm

I guess I sounded harsh last comment.
But I don’t understand how people subject themselves to mortgage slavery.
I’m visiting Saskatoon right now and got talking to friends neighbour, he said the family just sold there house in Riverheights for 290k which was paid off, and purchased a new home in Evergreen for 500k. The wife mentioned that ” I guess I’ll be working till I die”.
Why would anyone accept that life? Does no one travel? Does no one want to explore new opportunities in life? I have friends who decided to move to different countries for an adventure. My wife and I have discussed moving to a foreign country, and our children are 5, 3 and 1.
It seems like people have given up on life.

#135 Q on 05.20.13 at 6:05 pm

Ricky Chadha is a broker with Royal LePage Estate Realty in Toronto. He has an article in the Globe and Mail right now entitled, “Should I buy that condo now, or wait for prices to fall?”

“On one hand, you have some media reporting doom-and-gloom scenarios while others remain optimistic about future growth in the condo sector…The one thing that’s certain is that the Toronto market has continuously taken hits and bounced back over time…Sure, the market may bottom out in a month or six. You will still have likely gained some equity, and you can expect to see significant growth in the long term based on past trends.”

#136 Dr. Hoof - Hearted on 05.20.13 at 6:13 pm

Condo logic:


Strata living is the “Canadian Tire” of asset class and currency.

Every unit err..ewe-nit …should have a communist flag.


#137 Shawn on 05.20.13 at 6:17 pm


Mr Buyer at 125 said:

Imagine what this money burnt up as interest could do for us as a society.


Yeah, ’cause it’s not like depositors and bank share owners get any of that interest is it?

Man we got the absolute lowest interest rates in history and some people still complain.

The fact is house prices would not be this high if the houses were actually unaffordable.

Keep in mind about 30% of people don’t own houses and quite a few of them cannot afford it.

We simply don’t need the average household to be able to afford houses. We just need the actual buyers to afford them. If they can’t the prices WILL drop.

Don’t bet the farm it will happen. It might. It might not.

Apparently the people buying today can in fact afford it. One way or another they are making the payments.

You don’t like today’s prices? Then don’t buy. Rent. Or buy small and far outside of the City and commute.

Life presents many choices. Deal with it.

#138 Captain Critical on 05.20.13 at 7:59 pm

#74 Buy? Curious? on 05.20.13 at 3:02 am said:

“What’s an ‘Asshale’ and who kind freak carries chalk with them?”

#139 Daisy Mae on 05.20.13 at 8:12 pm

#93Spiltbongwater: “I think this blog is a shameless brag about Garths net worth. He has already stated he could buy his 800K rented home with cash.”


So what?

#140 X on 05.20.13 at 9:38 pm

#64 – Jeff – I have the calculation for the past 25 years annual return of the TSX being 6.8%.

#125 – Jl – You forgot to calculate in the lost investing power of the amount that you put down as your downpayment. Add that in with your monthly expenses for a more accurate monthly calculation over a 25 year period.

I am not saying it will make renting a better option than buying, just that it would make for a more accurate comparison. Ex: say you put down $20,000 downpayment, at 6.8% that could earn you a little more than $100 a month that you can’t get anymore. Which would increase your total to $1565 a month.

Also as per #5 rental income is taxed at a higher rate than dividend income. Just an FYI.

#141 TurnerNation on 05.21.13 at 7:33 am

Nemesis: I guess the saying is
“Speak softly and parry a big stick”.

#142 Justin on 05.21.13 at 12:38 pm

The Toronto Star is giving papers away for free today at Union.

#143 Turok on 05.21.13 at 2:44 pm

Calgary house market is boomnig our selves and another couple we know cannot buy a house due to several other people buying 20k above list price. This has been going on since December 2012. Our saving keep growing but that house price keeps going up. When somthing happens in Calgary to burst the bubble I will not feel sorry for the dunba$#$ who pay that much for a house.