Common denominator


The lowest interest rates since ever have been with us for about four years now. Instead of using cheap money to retire debt, people have gorged on it. Like all those pitiful equity mutual fund investors who bailed out on the afternoon of March 9th, 2009, they have taken the mirror opposite of rational action. But this is way more consequential.

This week we were handed independent and believable evidence of what happens when a whole nation falls for house porn. When 70% of all families own real estate (76% in Toronto, 77% in Ontario), and have taken on epic debt to get it, how can we be that surprised at what the accountants found?

According to the Certified General Accountants Association, we’re so screwed. In less technical terms, it means household income that should be saved or invested is being sucked off as mortgage payments. A third of families now save nothing. A quarter of families have never set aside anything. The savings rate for all of us was 20% in the early 1980s, and is now 3.8%. A third of all Canadians have ‘no wealth’. Only 30% think it’s important to try and build wealth. And of those people who do have money saved, 80% say they’ll probably blow through part of it within three years.

So, not only have most of the people you know, including your idiot relatives and old boyfriends, squandered he cheapest rates of our lifetimes, but they’ve pretty much guaranteed a lousy future. Worse, they don’t think this is a big deal.

And here’s the hilarious part. This week’s new BMO survey (they sell mortgages, don’t they?) finds 45% of Canadians plan to buy a house within the next five years and 56% believe house prices will be higher by next spring. Fully half of people under 40 say they intend on purchasing a bigger house. At this pace we’ll have 100% home ownership and a 0% savings rate.

Says bank spokesperson Martin Nel, who did not giggle or throw up: “The relative strength of the Canadian housing market continues to bolster homeowners’ confidence.”

Now back to the accountants for a moment.

Most people aren’t even paying attention. The bean counters found over a quarter of folks don’t monitor ‘any of the key external factors’ that would affect their wealth. Like, oh, the economy. And we already know that two-thirds of all the money Canadians have in TFSAs is sitting in brain-dead savings accounts making less than 2%. We know from this pathetic blog there’s a widespread belief interest rates won’t rise again. Ever. And we know that 73% of the largest demographic group in the country (making up a third of the population) have no pensions.

Add this all up and it’s safe to say most people you know have no clear idea whatsoever of what comes next. They don’t have investments, nor worry about it. They do not understand equity markets, don’t trust anyone looking vaguely financial, measure success in stuff, think debt is totally fine and consider August extreme long-term planning.

These are the folks the banks go after. In past days I’ve shown you the deceit and misinformation of two of the largest. The Royal lied in print about the equity advantage of buying a condo. TD is misleading mortgage clients into thinking they can painlessly skip payments. This blog will have absolutely zero impact on their actions, because they know nobody normal reads it. Normal people are busy telling BMO they plan on buying a bigger house.

So all that information I gave you – on real estate sales levels from Halifax to Victoria, on the next wave of mortgage changes, on monetary policy and the generational shift out of real assets, on price/rent ratios, income growth and demographics – well, forget it. This train will run out of track all on its own. Few are listening, fewer acting. Each month that drifts by with sustained house lust even as the market weakens brings us closer to a hard landing.

An innumerate nation will find its level. The lowest common denominator wins again.

Silly me.


#1 Mike on 05.22.13 at 8:48 pm

Today’s kids sure mature early :)
Look at the looks on those faces …

#2 Mike on 05.22.13 at 8:49 pm

What they don’t know however is that she’s not interested until they buy their first condo.

#3 gladiator on 05.22.13 at 8:49 pm

you will be asked to change the pic in no time, Garth.

#4 Randy on 05.22.13 at 8:50 pm

Screw Income Taxes….If the Government needs money…just print more…

#5 Oceanside on 05.22.13 at 8:51 pm

Don’t you just love bank surveys…..

#6 Josef on 05.22.13 at 8:52 pm

First!! Oh YEAH BABY!!! Yeah!!! Josef is the BEST!!

Josef is DELETED. — Garth

#7 Mocha on 05.22.13 at 8:52 pm

56% think house prices will be higher by next spring? They need some Garth in their diets me thinks.

#8 T.O. and GTA bidding wars debunked -May 22 on 05.22.13 at 8:52 pm

#9 Dan from Calgary on 05.22.13 at 8:54 pm

Digging deep into our financial system, I’d like to see your comment on this:

Low production values but a treasure trove of politicians and policy makers.

If you rallied for something like policy change to get us out of this mess, I would campaign for you! You have clout, as much as it only looks like smoking man on the surface…

Our real estate market may be destined for fields devoid of flowers and full of manure, but it is the underlying policy that lured the average Canadian into this pasture.

Love your blog, enjoy pushing the envelope.

#10 CrowdedElevatorfartz on 05.22.13 at 8:56 pm

I’ve given up trying to explain ‘saving’ vs “spending” with coworkers, friends, etc.
What do I get for my troubles?
People realize I have a few dollars so they try and hit me up for a loan………..

i give up.
I’ve come to the conclusion……

The financial ‘zombie” masses will eat the cash of the few remaining solvent “humans”.

we’re all doomed unless we become……vultures…..


I’m happy again.

#11 Common denominator — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate – The Affluent Boomer on 05.22.13 at 8:56 pm

[…] via Common denominator — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Est…. […]

#12 Smartalox on 05.22.13 at 8:56 pm

Like all predators, the banks smell weakness, and sense opportunities.

#13 Fat Senator Dufster on 05.22.13 at 8:59 pm


#14 John in Mtl on 05.22.13 at 9:03 pm

Even tho I sometimes wear a tin foil hat, I’ve listened to your wise counsel and acted on some of your suggestions, and I’m better off for it. Thank You Mr Turner, for your relentless effort to educate. All I can do, like you, is spread the word.


#15 frank le skank on 05.22.13 at 9:06 pm

#10 CrowdedElevatorfartz on 05.22.13 at 8:56 pm
Stop dropping bombs in the elevator and maybe your colleagues will take you more seriously! :)

#16 RayofLight on 05.22.13 at 9:07 pm

Why is there not some required courses in high school on practical personal money management 101? Something that includes budgeting, awareness of investing, the dangers of debt.
It would pay for itself a thousand times over. It would be way more useful than calculus for 99% of the students.

#17 Marco from van on 05.22.13 at 9:07 pm


One listened. I’m financially secure now and have the ability to self fund my own entrepreneurial projects which are alternative sources of income aside from my employment stream.

If I were normal, all that economic activity would have been sucked up by a mortgage. Thanks to the learning in this blog, I also have a 10+ year savings buffer (nobody’s my boss anymore), kids education sorted out and a healthy pension fund to look forward to.

I will continue to make more money than I spend until that suits me and enjoy the liberty of picking my top shelf long term lease rentals from desperate specuvestors in the Vancouver west end.

After 3 years here, I want to thank you for helpings find and live the Canadiam dream on the back of those with sleepless nights as a result of being stuck with illiquid assets in a market where the trend points to the bottom right…

Thanks again from your Vancouver faithful…

#18 gladiator on 05.22.13 at 9:14 pm

@10 Crowded:
I gave up on spreading the word about RE dangers long ago. No one will listen, the ones who own RE will get offended, the ones just about to buy it will say that housing always goes up, and I, in the end, will be the bad guy and drink in solitude.
Instead, I now talk about anything but RE, have fun with friends (about to get fried by what’s coming) and enjoy parties with everyone else. The only difference: they own, I rent.

#19 HD on 05.22.13 at 9:18 pm

#10CrowdedElevatorfartz on 05.22.13 at 8:56 pm

I’ve given up trying to explain ‘saving’ vs “spending” with coworkers, friends, etc.
What do I get for my troubles?
People realize I have a few dollars so they try and hit me up for a loan………..

So true.

I have experienced this a few times as well.

I decided to keep my mouth shut from now.



#20 Robbie on 05.22.13 at 9:18 pm

Well Garth, it must be discouraging to see so many people out there who don’t seem to care about what is happening and don’t want to take the time and effort to find out. Sadly, there are always lots of people and businesses who will take advantage of that ignorance. As H.L Mencken said, “Nobody ever went broke underestimating the intelligence of the American people.” I don’t think there is any difficulty in substituting “Canadian” for “American”. That said, there are always those who will actually listen, reason and make (usually) good decisions.
Take heart, they are out there, paying off debt, driving old, but reliable, vehicles and diversifying their investments. Alas, those people are just a small minority…but a significant number of them are devoted to your blog. :)

#21 Nemesis on 05.22.13 at 9:21 pm

Egads! You have surpassed yourself, OldPol!

Yes. For the very briefest of instants… I was transported to ToddlerHood. And compelled to reflect upon things that were clearly a big influence in later life.


Those were the days…

#22 Small Town Steve on 05.22.13 at 9:25 pm

I’ve socked away 20k so far this year,payed off the credit cards and am pummelling my vehicle loan into dust, it too will be payed off this year, my goal is to max out both mine and my wife’s TFSA’s by year end. RRSPs are maxed already. By next year my goal is to also have 100k in a non registered account as well! I am fortunate that I am one of those who also has a decent pension and still have 21 years until I hit 65.

#23 robert on 05.22.13 at 9:25 pm

thank you for helping people learn about the pitfalls of real estate stand tall above those who prey on gulibile consumers.

#24 Keeping the Faith on 05.22.13 at 9:25 pm

#18 Gladiator

I ditto your sentiments exactly.

I learned back in 2006 not to dis real estate in front of anyone for the reasons you mention and i’ve been happy ever since. Just drink, smile and be merry.

I silently laugh to myself because owners look down on me for renting, while I covertly laugh back at them for teetering on the cliffs edge knowing that I don’t just rent, I rent + invest … and life goes on, ube-la-dee-ube-la-da …

#25 Real Estate Pundit on 05.22.13 at 9:26 pm

In today’s Globe&Mail
1/3 of Canadian households live from paycheque to paycheque.
50% of Canadian home owners wil buy more Real Estate.
Yeah sure, with Monopoly money.
People are so screwed.

#26 lee on 05.22.13 at 9:28 pm

If 100 percent of people own, who will rent all those condos investors bought?

#27 Property Accountant on 05.22.13 at 9:31 pm

Few are listening, Garth. I’m CMA, 35, I rent and have over 250K in stocks, manage investments through Interactive Brokers & Questrade. Study for CFA exam. Still single. Used to own a house for 3 years, sold it 6 months ago.

All my friends and ex-girlfriends owing condos, houses are in denial and renting “is good” iss worst pick-up line ever. Sparking monies in front of their eyes works like a charm though :-)

#28 DaleFromCalgary on 05.22.13 at 9:34 pm

#16 – When I was a high school student in the late 1960s in Red Deer (LTCHS), we were required to take a personal finance course. We learned how to do a basic budget, and what revolving credit was. Today the schools teach self-esteem and cultural diversity. With automatic debit, few people know for sure what their utility bills are or understand why they have no savings.

This makes them easy prey for the nice lady at the real estate office who shows them how a shopgirl and her construction labourer boyfriend can afford the monthly payments on a particleboard firetrap in the distant suburbs.

#29 Freedom First on 05.22.13 at 9:35 pm

Great post Garth! Yes, I have given up trying to give financial advice. The only people I will talk to about anything financial, are the like minded people I know, or who I can see are financially literate. The others are too frustrating to talk with. By the way……this approach has been slowly manifesting over time, but I am going to try to move it to 100%…….starting right now:)
Thank you for your blog Garth, it is like visiting financial sanity on a daily basis.

#30 Ronaldo on 05.22.13 at 9:39 pm

Great post once again Garth. This fellow tried to warn what was going to happen for a few years before it did and nobody took him seriously and he had a very wide audience. Can’t say you didn’t try.

#31 tigerbaby on 05.22.13 at 9:41 pm

> Why is there not some required courses in high school on practical personal money management 101? …

who doesn’t know how debt and interest work? if you know multiplication you understand interest. there’s plenty of debt/mortgage calculators online or just make yourself a spreadsheet to see how it works out.

the problem is greed, there is no course that will save people from it. people think they have found a sure plan to the riches and they become fixated to it, especially when they hear the phrase “tax free capital gain”.

I guess soon it will called “non-deductible capital loss”?

#32 Algo on 05.22.13 at 9:44 pm

Usually your pics are great, Gartho, but today’s wasn’t in the best of taste…

#33 valleyrenter on 05.22.13 at 9:44 pm

Let’s see, 30% have no money left over after paying necessities, 30% have some sort of savings and retirement planning, that leaves 40% that have no savings/retirement planning with their paycheck because they spend too much on non-necessities! Sounds about right. Vacation to Hawaii or Mexico on CC or LOC and paying it off? Non necessity! Want a bigger house ’cause [email protected] says your approved? Non necessity! Two car payments on the Bimmers? Non necessity! Could go on, but not needed. On a different note, Garth, your buy America stance is bang on! Home sales up to 2005 levels. High end home prices rising in lots of areas, set by builders. Michigan a hot market right now, who would’ve guessed? Lowes and Home Depot stocks at record highs! Keep up the good work my good man, we are listening.

#34 Andrewski on 05.22.13 at 9:45 pm

Sheeple line up at the bank, like lambs to the slaughter…

#35 blase on 05.22.13 at 9:48 pm

A 3 bedroom condo in Cougar Ridge, (far West Calgary), 20-30 minutes to downtown will run you well over $400,000.

A 3 bedroom condo in West London, Ontario, 10 minutes to everything, will run you $100,000.

At the end of the day, a house is just a place to live. A mortgage is a debt obligation for most of your life.

#36 Eric on 05.22.13 at 9:49 pm

I guess from the picture one might conclude that the bottom is in sight.

#37 Real_Professional on 05.22.13 at 9:49 pm

I was almost twice that age when I went through puberty!

Great post tonight garth.

@Property Accountant: Good for you and good luck on your CFA exams!

#38 Smoking Man on 05.22.13 at 9:50 pm

#28 Property Accountant on 05.22.13 at 9:31 pm

Few are listening, Garth. I’m CMA, 35, I rent and have over 250K in stocks.

Used to own a house for 3 years, sold it 6 months ago.

You sold in Dec the lowest point of the annual housing cycle. Why, that was dumb, usally get 50k more when dandy lions are out.

take 50k of the 250 open a Forex high margin account, Trade USDCAD, watch EURUSD and GBPUSD, they move first in opposit direction, Hammer 20 contracts USDCAD on fast moves of , 2 million in play, use If the others move up, USDCAD sell, they go down, Buy USDCAD

Hammer hard!!!!!

Taking candy from babes, Much better than Camel Toe and Batman.

#39 DJB on 05.22.13 at 9:53 pm

Great post tonight! Most people do not get it but you are getting through to some.

#40 John in Mtl on 05.22.13 at 9:57 pm

[quote/ #16 RayofLight on 05.22.13 at 9:07 pm said:

Why is there not some required courses in high school on practical personal money management 101?
It would pay for itself a thousand times over. It would be way more useful than calculus for 99% of the students.[/quote]

Because it would be bad for a lot of greedy people’s bottom line!

#41 wendi1 on 05.22.13 at 10:02 pm

For sure, knowledge will set you free – but I don’t think high school is the place to learn this stuff. There were no TFSAs when I was in high school, few mutual funds, no ETFs or discount brokers.

CSBs were the savings vehicle of choice, and GICs were prudent.

You have to keep up to date – and that is the individual’s responsiblity. All this information is available.

#42 Retired Boomer - WI on 05.22.13 at 10:06 pm

Stupid Stupid Stupid Stupid Stupid Stupid Stupid Stupid

Hope I have made myself quite clear. We are the most marketed to people ever. Apparently, it works. Advertisements sell homes, cars, virtually every “consumer” product.

I don’t blame the schools, or as the Smoking Man would say the place where one gets “Obedience Training Certificates”. That said, I would hope they teach us social skills that allow us to live within proximity to one another without unjust fear of thy neighbor. I would also pray they do NOT destroy one’s ability to think independently, however the stats Garth has cited shows a mass tendency toward group think, if not mass stupidity!

Anybody who thinks an old age pension, and a house will get them to the end of their life is dreaming of a very meager existence! While Canadians enjoy some social and health securities that we Americans do not have offered, we also do not pay the onerous taxation that makes these programs possible, though we are taxed well enough, thank you.

Please!! Remember to PAY YOURSELF FIRST. I don’t know what a “good” number is these days, for me it was 10-12% for retirement, and 5% into savings for spending later. I hate credit cards unless one pays them off in full monthly -no interest. Yes, rent, or home mortgage it is up to the individual so long as the bitch is paid off before you retire, and you have a well fed retirement account.

Only an idiot goes into old age broke. Only an idiot remains strapped to the max when they are younger.

Are you an idiot?

#43 Ford Prefect on 05.22.13 at 10:06 pm

“People would rather go bankrupt than think and many do” with apologies to Bertrand Russell.

#44 Smoking Man on 05.22.13 at 10:08 pm

When, Las Vegas Nevada Florida, and Phoenix tanked they all had a few things in common.

The prices doubled in 18 months
The Fed Spiked rates just before it happened
Oil was 150 a barrel.

In Canada took our prices 10 years to double
Rates not going up for years

Just saying…..

#45 Pr on 05.22.13 at 10:14 pm

So all that information I gave you…well, forget it.

What has been will be again,
what has been done will be done again;
there is nothing new under the sun.

#46 rosie "moving forward" on 05.22.13 at 10:15 pm

For all of you bleating for Economics 101 for kids read the posting again. The kids parents aren’t listening. The kids grandparents aren’t listening. Most of the teachers I worked with weren’t listening either. What makes you think the kids will listen. Experience is the best teacher for most. Let’s see how they all handle the experience of a life time unfolding before us now.

#47 Smoking Man on 05.22.13 at 10:16 pm

#16 RayofLight on 05.22.13 at 9:07 pm

Why is there not some required courses in high school on practical personal money management 101? Something that includes budgeting, awareness of investing, the dangers of debt.It would pay for itself a thousand times over. It would be way more useful than calculus for 99% of the students.
School is not about education, it’s slave training…..
Everything, any topic, is on line… You can read it, view it, or hear it… It’s free…

School is redundant……

And really, would you want a teacher, who has made it to their position by kissing ass and following rules, to teach you finance, deal making, gambling.

How can school make you a smoking man, it can’t. Like asking a fish to climb a tree.

That’s a recipe for disaster…..

#48 Renter's Revenge on 05.22.13 at 10:17 pm

Well, it’s not possible for everyone to be financially independent at the same time! Otherwise who would be working to drive the profits at the corporations whose dividends you’re living off of? Maybe the rational choice for most people is to load up to their eyeballs in debt and buy as much stuff as they can. Besides, every saver needs a corresponding borrower, otherwise the economy would grind to a halt. The only way that a savings rate of 20% was sustainable was if inflation ate up most of the savings.

@ #72 Vangrrl from yesterday:
Don’t you know? Greed is Love. Debt is Wealth!

#49 In the cold from Toronto on 05.22.13 at 10:20 pm

I have one colleague at work who signed last week on the dotted line for a house in Hamilton. We both work in Mississauga, close to the airport… He is smart, and financially literate; however he decided for this because Hamilton is the only city where he could afford to buy a home within his budget (and a baby is on his way).

Today, another colleague, who was planning to visit my neighborhood over the weekend to look for a one-bedroom apartment rental, told me that he decided to buy a condo. I tried to talk to him about this – but he avoided the topic… I felt powerless.

I’m learning to be polite, grin and wish people good luck with their lives.

This Government failed us all, some of us just don’t know it yet.

#50 What about CMHC? on 05.22.13 at 10:23 pm

Cooling housing market will cost us 150,000 jobs, mortgage group warns:

Interesting this coming from CAAMP!

Who says news in Canada is boring? We have Duffy and Ford!

#51 Chickenlittle on 05.22.13 at 10:27 pm

“…nobody normal reads this blog.”


Again, an insightful and accurate analysis of your readers.

#52 Shawn on 05.22.13 at 10:31 pm


The savings rate for all of us was 20% in the early 1980s.


No, it wasn’t. I don’t dispute that someone calculated and published a 20% number. But anyone who lived through that era as an adult knows that 20% is totally bogus.

Since forever, saving 10% was considered to be an excellent level of savings.

I was there in the early 80’s. That was a time of record high interest rates. There was an incentive to save but many people struggled with mortgage payments at high interest. Many thousands of people were losing their homes due to high interest rates. Boomers mostly had young children and that did not leave much money for saving. Gasoline prices were high. Home heating fuel (in the Maritimes and elsewhere that relied on it was high). Inflation was rampant and wages were not keeping up.

Basically it’s almost against human nature to save 20%. There are just too many pressures to spend today to do that.

To suggest that the average was 20% would imply some people at 30 and 40% since surely some were at 10% and 0%.

Pension plan contributions would not explain it either since contributions in those days were in the range of 8% between the employer and employees, versus 20% today.

Point taken that savings may be less today but I simply refuse to believe that the average was anywhere close to 20%. 5% would be more realistic. Something is wrong with that data.

Whatever that 20% is it was not a personal savings rate. Not a chance.

The peak personal savings rate in Canada was 20.2 per cent, in 1982. — Garth

#53 Alan on 05.22.13 at 10:33 pm

Don’t fight the tape Garth

#54 The Prophet Elijah on 05.22.13 at 10:35 pm

Garth you didn’t tell us you had a son:

#55 Victoria the original on 05.22.13 at 10:42 pm

I think the picture is darling btw.

#56 Times Change on 05.22.13 at 10:52 pm

I was always amazed when colleagues would tell me how broke they are. Double incomes, higher level “management” jobs, yet they would tell me I must be rich because I am single. Finally I realized they are mortgaged to the max, two nice cars, commuter costs, etc.
This is in Calgary! By the way all the small business people tell me business is really slow, hiring is off, the place is hedging its bets that the Keystone Pipeline will pump things. On the other hand, other tenants have told me the landlords have jacked thier rents to obscene levels and they are moving out. No such thing as rent control here in Alberta, no that would be a BC thing.

#57 cowtown cowboy on 05.22.13 at 10:53 pm

#36 blase on 05.22.13 at 9:48 pm …..

I live in Cougar Ridge, have since 2002 when we bought our first place, I don’t think there has ever been any 3bdr condos anywhere in Cougar Ridge.

I think I have made all the money I will make on our house, roughly 600k, depending on much someone will value my peek-a-boo views of the Bow Valley….and our ‘very’ close proximity to the 900k Mcmansions on the other side of the fence.

What boggles my mind is that for me to upgrade from 2100 sf to about 2400-2500sf new in this area, would cost about another 350k…incredible. But as for suburbs I don’t think this can be beat, 20 minutes to work, no deerfoot or glenmore or crowchild or mcleod and 2 minutes to the countryside in Springbank. I’d much rather spend a million on 2acres and no neighbors in sight than some 2300sf side by side in the beltline….but to each their own.

#58 Cristian on 05.22.13 at 10:57 pm

“At this pace we’ll have 100% home ownership and a 0% savings rate.”

You will never have 100% home ownership for the simple reason that I will never buy a house in Canada.
Even though I have millions saved I would not spend a dime on a house here.
Canadian houses are probably the worst I have seen in my life (and I have lived 50+ years on three continents). In Europe we keep livestock in wooden shacks similar to those Canadians call “homes”.
Hell, even in China they now build better houses!

#59 Millionaire Machinist on 05.22.13 at 10:58 pm

Doomers!…. Flaherty says there is NO BUBBLE so it “must” be true! Plus, people are paying their debts at a “lightning-fast pace” (ie: 40+ years), so everything will be just fine. (Yeah right!..) F couldn’t spot a bubble if it was growing on his nose!

Article from Bloomberg News:

Flaherty Says Doesn’t See a Bubble in Canadian Housing Market

Canadian Finance Minister Jim Flaherty said steps he took to tighten mortgage lending rules over the past four years have helped to moderate price increases in the nation’s housing market.

“There’s been some beneficial effect in the retail housing market, particularly the condominium market,” Flaherty told a committee of senators in Ottawa today. “We’ve seen a softening in demand, in the condominium market for sure in Canadian big cities. This is a good thing. I welcome this. We don’t have a bubble.”

The central bank has indicated the policy rate is unlikely to rise “for some time,” which is a “persisting problem” because it leads to residential mortgage rates being so low that people may take on debts they can’t afford, he said. Still, Canadians are keeping up with credit card payments, Flaherty said.

“On credit card payments, people paying their credit cards on time has gone up, and that’s a good thing,” the finance minister said.

The Office of the Superintendent of Financial Institutions will continue to monitor Canada Mortgage & Housing Corp. “very closely,” because it’s become a “major financial institution” and needs to operate like one, Flaherty said.

OSFI “has been over there doing some stress testing, and we’re going to continue monitoring CMHC very closely,” he said.

#60 AK on 05.22.13 at 11:01 pm

U.S. House votes to force approval of Keystone pipeline

Keystone XL oil pipeline

#61 Nick on 05.22.13 at 11:16 pm

Very true garth. Millenials think stocks are basically the devil.

#62 LookoutbelowKaran on 05.22.13 at 11:18 pm

Forgive them, Garth, for they know not what they do!

#63 Benefit of doubts on 05.22.13 at 11:19 pm

I once heard an investor expert / radio host (sorry, not local) said, when someone has heavily invested themselves, it’s very hard for them to keep a clear view of the market. In most cases, there’s nothing about lying (if they knew they were wrong, they would have invested otherwise), it’s about the blurred vision.

You wouldn’t even listen to your parents which girl/boy you should marry, why would you just listen to the bankers/media how to invest. I prefer to glean the facts.

The fact from “Slowdown? Nearly half of Canadian homeowners eager to buy property” from G&M is: (Garth, is this the news you’re talking about?)

16 % of those polled plan to buy a larger home as their primary residence
21 % plan to buy a smaller home;
15 % plan to move within their current neighbourhood;
12 % intend to move to a more expensive one;
7 % to a less expensive one;
10 % of homeowners plan to sell their home and move to a rental property, retirement community or in with family;

6 % intend to buy an investment property to flip;
10 % plan to buy a recreation property like a cottage;
10 % plan to buy an income property to rent to tenants

A total of 107%? Never mind! So, a mere 20% actually wants to invest more on RE. The rest actually feels they want to move and sell. 6% (among 107%) wants to flip. The facts from that article actually should make everybody more worried that rest assured.

#64 Dr. Hoof - Hearted on 05.22.13 at 11:19 pm

Yo Garth…

Picture is cute….but advise remove ASAP…..some a-hole may call kiddie porn

not worth risk and hassle

#65 45north on 05.22.13 at 11:29 pm

This train will run out of track all on its own. Few are listening, fewer acting. Each month that drifts by with sustained house lust even as the market weakens brings us closer to a hard landing.

sales are down this year, April wasn’t so bad but overall sales are down. Maybe May won’t be so bad but still down. As we saw in the US, employment follows sales which follows employment. And most people don’t have anything saved. And they don’t care. Well they’re gonna.

In the cold from Toronto: I have a colleague who signed last week on the dotted line for a house in Hamilton. We both work in Mississauga, close to the airport

so to maintain his livelihood he has to drive 60 km to work each morning and 60 km back. google maps says that takes 40 minutes. On good days. Back in the day, it took me an hour and half one way to get from Scarborough to the U of T. On the subway. I’d say in a year your friend will have had enough and in a normal market he could just sell – take a loss and move on. However Garth says the train is running out of track – your friend may have to keep on truckin.

#66 Julia on 05.22.13 at 11:38 pm

I know how you feel Garth. I spent a 25 year career in addiction prevention only to have crack and OxyContin become the new Molson. Everyone has their drug of choice. For many right now it’s real estate. Helps them forget their lousy jobs, empty lives and loveless marriages. And no amount of rational argument is going to cure the obsession. But good on you for trying. It makes the tea teetotalers among us feel better about ourselves.

#67 Herf on 05.22.13 at 11:40 pm

#19, #10

Matthew 7:6 “Do not give dogs what is sacred; do not throw your pearls to pigs. If you do, they may trample them under their feet, and then turn and tear you to pieces. ” (NIV)

#68 Carpe Diem on 05.22.13 at 11:41 pm

Some days I feel like a loser.

I rent. (A mansion + acreage)

My “friends” tell me prices in Ottawa are stable – why do you keep reading that blog…. buy a place.

I feel doing 5-10% ROI is ok considering the risk in RE.

Then again, I have no debt, my investments result in my rent being < 1000 bucks and my neighbors have so many financial worries but I have none!

OK … I'm cured!

Thank Garth!

#69 lucyj on 05.22.13 at 11:55 pm

Excellent post tonight, what a sad commentary on the people living in Canada. What is so hard about making some sort of a financial plan and sticking to it? But the reality is most can’t plan for tonight’s dinner let alone a five or ten year financial plan. If you don’t know where you are going how will you know when you get there? A lot of people’s plan is to have no plan and they think it is working very well, very sad indeed.

#70 Nebbio on 05.22.13 at 11:57 pm

Chill out on the photo. There is nothing wrong with it.

Garth you are bang on again. So glad I took your advice 5 years ago. Now I am doing well (outside of an unfortunate foray into silver).

Thanks for the sage advice.

#71 Angry 32yr old with CIBC on 05.22.13 at 11:57 pm

I can’t tell you how pissed l am. I saved my cash have put 11G into a TFSA and saving 1000/mth + another 1000/mth in disposable income ( l live frugally ), no debt, great credit, making 72G a year. I went to get a loan to buy some equipment to start a business to make more “GUARANTEED INCOME” from my clients and got denied. The funny thing is l would have been approved if it was for car or mortgage. Meanwhile there forcing me to put my cash into a dumb a$$ 3% saving account to prove my credit competency.

Are you kidding me… The banks are going to destroy this country. Im actually getting punished for saving and not using my money for a house. Thanks goodness l came across this site long ago and turned around my expenses. My stock portfolio is already @ 10% YTD and were barely half way into the year.

I’ve been doing my best to teach financial competency and point people to this site but some people refuse to learn. Something about this post infuriated me about todays generation.

~ Thanks Garth, at least you got to me.

#72 Cici on 05.23.13 at 12:13 am

@#33 Algo

Oh c’mon. please…can we just stop being paranoid. The photo shows that a majority of little boys are attracted to little girls. So what.
Lighten up, it’s not child porn, if that’s what you are trying to insinuate.

#73 Joe on 05.23.13 at 12:14 am

Good points Garth. Looks like Canadians drank way too much real estate Coolaid.
I’m renting and just saw today that my maxed out TFSA (invested 40/60 in safe/growth) jumped almost 3% already in just the past two months. So instead of regretting that I didn’t buy a house like everyone told me to do, I’m just regretting of not getting back into the stock market earlier than two months ago. Perhaps I bought close to the peak now, however I’d rather do this than let myself get completely wiped out by buying a house now. So thanks for your continued advice here on the blog.

#74 Timbo on 05.23.13 at 12:21 am

“Asian markets were dealt a double blow on Thursday after a preliminary survey of China’s manufacturing sector raised alarm bells while fears grew that the U.S. Federal Reserve may withdraw its bond buying sooner than expected.

Australia’s S&P ASX 200 tanked 2 percent to a one-month low after China’s HSBC’s Flash Purchasing Managers’ Index (PMI) fell to 49.6 in May, slipping under the 50-point level demarcating expansion from contraction. The news sent the Australian dollar tumbling to a one-year low against the greenback.”

PMI below 50……hang on commodities…..print BEN!…

“A Japanese government panel warns there is “absolutely no guarantee” that domestic investors will keep financing the country’s massive public debt, citing the risk of a spike in bond yields that could crimp long-term growth prospects, draft report seen by Reuters shows.

The warning from the advisory panel to Finance Minister Taro Aso comes at a critical time – when the government bond market has seen volatile price falls, underscoring a delicate balancing act for Prime Minister Shinzo Abe’s government.”

“no guarantee” means start looking for the exits….

#75 renata on 05.23.13 at 12:37 am

I don’t understand people who are saying somebody or something,like school, have teach them to manage the money. For me it is so simple, don’t spend the money you don’t have yet. It was always my priority,and even my children know that. I don’t also understand why should I speculate on investing in abstract markets but saving real money. Better the sparrow in your hand than pigeon on the roof (just my back country saying). At least I know what I have until the banks or government will take it from me. Well you never know, only death and taxes are for sure (just saying).

#76 Mad Nostyferatu on 05.23.13 at 12:42 am

5:28 clip SMan, shanks, Blacksheep and Frizz — More to the tornado than what is being released. Evidently, we’re being watched. However, this and this may play a role.

GW Guess the planet is getting warmer. Now it is possible to drive from Russia to Canada, so here it is — GW debunked by NASA As per SMan’s shrinking universe, we’re drifting away from the sun. TTFN!

#77 Mike on 05.23.13 at 12:50 am

More shameless media-whoring:

My favorite part is when the “customer” Nathan Flanagan who is actually a real estate agent says “the umbrella of appreciation has not fully opened”

#78 Veej on 05.23.13 at 12:53 am

Here is what a REAL poll looks like:

Globe and Mail online poll:

Are you planning to buy or sell a home in the next five years?

Yes, I’m buying and selling

Yes, I’m buying only

Yes, I’m selling only

No, I’m staying put

How can you tell when a banker is full of shit?

#79 Mister Obvious on 05.23.13 at 1:33 am

#32 tigerbaby

“who doesn’t know how debt and interest work?”


At least half of the population isn’t even clear on how percentages work. In fact, they are often proud of the fact: “Hey, I’m a ‘people’ person not a numbers nerd!”

#80 timmy on 05.23.13 at 1:42 am

this hard landing is sure taking a long time…maybe next year? the year after? next?

#81 S on 05.23.13 at 1:47 am

“And we already know that two-thirds of all the money Canadians have in TFSAs is sitting in brain-dead savings accounts making less than 2%.”

Could it be that at least part of the reason there is so much money sitting on the sidelines (re 2% saving accts) is that population is still traumatized by the events of 2008 and earlier, the .com crash? Countless millions evaporated and many a retirement dream shattered. Little in terms of consequence to the perpetrators of the debacles. Markets are perceived as dishonest, inefficient and corrupt. It is difficult to blame savers for playing it that way.

#82 Tom from Mississauga on 05.23.13 at 1:52 am

So Flaherty went before a Senate committee BMO Investorline clients are being told. He said:

“I do have concerns about CMHC and have had them for some time,”

“We’re going to continue monitoring CMHC very closely … They still insure what are called portfolio residential mortgages … We’re looking into that as well,”

“The governor of the Bank (of Canada) has indicated that the policy rate of the bank is not likely to change for some time so this is a persisting problem,”

So more mortgage tightening instead of choking business with a rate hike rate looks like the plan.

#83 Wilbur on 05.23.13 at 1:56 am

It is very sad that the news and media make people think that what they read and see is what is actually happening…
Had this latest info about what is actually happening with Canadians and how much they are saving been published in the last two years would we be in the housing bubble today?
I feel sorry for those that didn’t see or have someone tell them what was actually coming…
Anyone that takes pleasure in canadians losing their net worth happily is a very sick individual…
This restructuring of our housing prices is going to have a negative effect on all of us…
I am sorry this was approved to happen hear in Canada…
Yes, it saved us from 2008 but at what cost???

And yes, I don’t own my own home… I sold them…

It doesn’t make me feel better, instead I feel sad for those that “drank the cool aide ” it will cost them dearly in the years to come…

It really isn’t a time to say “YAHOO!!!”

#84 Literate on 05.23.13 at 2:05 am

Robert Kiyosaki, author of the Rich Dad books, says, “When you are a child the number of A’s on your report card indicates how well you are doing. When you are an adult the size of your bank account indicates how well you are doing.”

#85 Sean on 05.23.13 at 2:39 am

I’m listening & while I’ve got some catching up to do I feel good about the future. Thanks the fatherly cuff behind the ear Garth, & the entertaining way yo udeliver the message.

#86 Devore on 05.23.13 at 2:52 am

#53 Shawn

You can believe whatever you like.

Personal saving is the amount left after deducting personal expenditure on consumer goods and services and personal transfers to other sectors from personal disposable income. Saving can be used for investment purposes (both financial and non-financial) as well as to reduce outstanding debt; in other words, to accumulate wealth.

It reached nearly 30% in Japan.

#87 Dorothy on 05.23.13 at 3:05 am

I’m not sure that home ownership is the reason so many Canadians are saving so little. I know many folks who are renters who are also not saving much of their income. I think it’s a trend these days, to spend almost every penny you earn and then some – hence the high level of debt.
Learning to live BELOW your means is essential for both homeowners AND tenants if this country is to avoid the fate of our cousins to the south. Blaming all current debt problems on home ownership is an oversimplification.

#88 an innocent bystander on 05.23.13 at 3:21 am

Bob Reny was talking on CKNW several days ago.

He said the Stats were 67% of the real estate bought were investment homes from Canadians. Not Asian.
Then he played with the figures and cut off the top 20% of housing and said we are so so affordable. And Basically Said BPOE, better than the Hawaii etc.

Interest thought Garth, Recently we been seeing more old retired people coming into the office and trying to figure a way to continue living on the little government income they have and continue holding their house.

Because of the low interest, most are screwed and have problems paying off their property taxes because housing and taxes have shot up. A replay of the “Crying Game” at the thought that the only solution is to downsize and sell their house.

Wondering if you been seeing more and more of that recently?

#89 drydock on 05.23.13 at 3:27 am

You can talk about debt saturation or interest rates, living in the burbs and exurbs vs urban living till the cows come home.Nobody cares, most people don’t know this blog exists they’ve bought into the cult hook line and sinker.Your preaching to the choir where i’m concerned and presumably so with the rest of your readership.Bad things will happen when a barrel of oil goes to $150.00 and stays there,suddenly living in a small rural farming community will start looking really really good.

#90 Devore on 05.23.13 at 3:28 am

Perhaps this is why the savings rate is in the toilet?

#91 Tony on 05.23.13 at 4:11 am

Re: #53 Shawn on 05.22.13 at 10:31 pm

Canada savings bonds were paying 19.5 percent interest that year. That was probably the main reason for the savings rate being that high that year.

#92 Frustrated on 05.23.13 at 6:52 am

Did F change the rules about no more 30 years ? I haven’t heard anything yet

Decision made. Announcement pending. — Garth

#93 pbrasseur on 05.23.13 at 7:42 am

It appears the only thing that can stop this market is downright implosion.

There is just too much money involved, too much greed, too much inertia and too much at stake for too many poeple for anything else to work. Political intervention could help and has to some extent, but it’s not enough and more forceful intervention is rather unlikely since it could become politically damaging and as we all know politicians don’t go there unless they face a wall (which Canada will at some point).

Looks like a hard landing is comming, just a matter of when.

#94 Franco on 05.23.13 at 7:43 am

Please remove the picture, it has crossed the line.

What line is that? — Garth

#95 neo on 05.23.13 at 7:48 am


Remember our little conversation about Japan and the dangers of Central Bank policies in equity markets and you basically ignored what I had to say and bragged about how robust that stock market was. Low and behold the Nikkei dropped as much as 1,500 points last night and tripped the circuit breakers. It was up almost 50% on the year. The indice and bond market is completely unstable and dangerous to put money in. So is the U.S. right now to to a lesser extent.

Actually I pointed out the market was ahead this year more than 40%. Now it dropped 7%. Yawn. BTW, the proper exposure to this market in a balanced portfolio is around 3%. — Garth

#96 2CentsCdn on 05.23.13 at 8:03 am

Kind of reminds me of driving down the hwy beside the truck full of happy pigs (on their way to the slaughter house). I always feel sad that they have no clue what’s coming next. How can we (the same species that sends space ships to Mars) be so clueless and short sighted as to what is coming in our lives? Build and prepare your own future, or you put your life in the hands of people who really don’t care a whole bunch about you. Most people are just sitting in the back of that pig truck …. cruising down that hwy.

#97 torontorocks on 05.23.13 at 8:10 am

one study says we’re paying our debt faster than a speeding bullet, another says that 150,000 jobs are at risk, another says we’re all buying houses.

fundamentals are there? who knows. we had 300+ applicants for 2 spots in our bank, expectations are definitely there in terms of what they want to earn.

I have no idea what the F is going on but I know I won’t buy a condo anytime soon. will it cascade into houses in the proper GTA? who knows.

I figure if there is 5% appreciation per year in houses and I’m doing anywhere from 5 to 20% on my investments, paying less carry overall, I figure I’m either indifferent or ahead of the game. so we’ll see where this is going – but Garth, buy US, sell C was right on the money.

#98 TurnerNation on 05.23.13 at 8:21 am

I’m reminded of this Led Zep album cover.

I suppose this could be the first ‘grunge’ album. Way ahead of their times.

#99 Musty Basement Dweller on 05.23.13 at 8:23 am

Isn’t that frickin Carney gone yet? I am so tired of hearing about him going, and the glorification of him and the other central banker “gods”.

What a strange thing how one can be glorified for aiding and abetting so many fools with their own financial ruin via pigging out on debt.

#100 bruce on 05.23.13 at 8:41 am

car and truck bubble. Being involved in Car sales I saw something yesterday that is alarming. Car sales have been hitting record pace in past few years. Only problem is
over 84% is financed. This is more than any other country on the planet. We are just biding our time as this credit bubble is alarming

#101 Makarand Pradhan on 05.23.13 at 9:03 am

Though I believe all the logic that you have been presenting, reality continues to defy your predictions so far.

Houses in my locality (Guelph) are still selling like hot cakes. I see banks advertising 2.98% mortgages on the road.

I am looked upon as the greatest fool when I talk about a possible correction in house prices.

I long for the day to say, “I told you so.”.

#102 gotthardbahn on 05.23.13 at 9:27 am

People in Canada are broke – and getting more broke – because Canadian employers pay subsistence wages and all three levels of government tax everybody to death. ‘Globalisation’ has been used by private-sector employers to drive down everyone’s wages with the exception, of course, of the executive elites. So it’s no wonder nobody has any money. Of course, if you’re a company executive or government worker, then it’s Christmas every day: guaranteed job, guaranteed salary (with automatic raises), guaranteed bonuses, a guaranteed pension to die for and so many other goodies.

It really is quite unhelpful for you, Mr. Turner, to criticise Canadians for not saving when, bluntly, they’ve never had any money to begin with, nor is it likely they ever will.

#103 Susie Q on 05.23.13 at 9:33 am

Awwww, Garth – you sound so discouraged today! You won’t save the country, but you are making a huge difference to the little people like me that follow this blog. Your insight and witticisms are the sanest part of my day.

Chin up, chest out, carry on…

#104 Standard Deviation on 05.23.13 at 9:37 am

I for one am looking forward to the day that reality strikes and the government with this countries massive pension deficits go to the public to request increased taxes from the masses to pay for:

1.) the phenomenal (relatively speaking) index linked pensions of our public sector workers.
2.)Those egocentric, selfcentered, parochial individuals who have saved nothing for their retirement and expect everyone else to bail them out.

The reaction could be an election determinant, if not a reason to emmigrate.

#105 Rational Optimist on 05.23.13 at 9:38 am

#49 In the cold from Toronto on 05.22.13 at 10:20 pm

It’s hard watching people do these things. I was asked yesterday by a colleague to help convince another not to rent. The guy is in his late-20s, living at home, and wants to rent a place so he can bring girls back. Makes sense to me. The other guy said that he can save more for a down payment living at home, and that he himself somehow stood living with his parents until 28.

We’re in Hamilton. As the guy is young, I asked what would happen if he bought a house, and then got a really great job offer in a more exciting part of the country or world? Other colleague’s answer: “then you can make money renting it out.” Right.

By the way, your colleague’s new commute will be murder. He will not be the same person in six months’ time. If he’s never done two hours a day in that kind of traffic, he doesn’t know.

#106 The Prophet Elijah on 05.23.13 at 9:45 am

150,000 jobs lost to RE:

“Canada’s housing market is slowing dramatically in terms of both sales and construction, dragging down economic growth and putting some 150,000 jobs at risk in coming years, a mortgage industry association warns in its spring report.

The Canadian Association of Accredited Mortgage Professionals stops short of calling the ongoing slide that began about nine months ago a crash, but chief executive Jim Murphy says policy-makers should stop trying to tighten lending rules further and start thinking about help for first-time purchasers.”

#107 someone on 05.23.13 at 9:53 am

Is the stock market going to crash today?

#108 blase on 05.23.13 at 10:08 am

All you complainers who asked Garth to take down the first picture: get your minds out of the gutter.

#109 thiscountryisgoing down the toilet on 05.23.13 at 10:15 am

The campaign of fear has been launched…..who didn’t see it coming???

Armageddon is just around the corner….you’ll lose it all….dogs will marry cats….the end is nigh!!!!!!!!!!

I truly hope that the 150,000 jobs lost are all the excess reaturds that have been circling around……otherwise who would could about a rational market where average citizens aren’t being skewered into putting all their eggs in one basket…..after all doesn’t the economy need more than one one leg on the stool?

In Vancouver for example……the homeowner sect is so poor that they have been invading soldiers legions for cheap beer and the new style of poverty chic is not by choice….its because the thrift store is the only way they can keep clothes on their backs!!!!

Me thinks the real estate inductry has been a bit greedy and normalcy must return to the economy before entire sectors are literally wiped out due to lack of disposable capital.

#110 Dr Hoof Hearted on 05.23.13 at 10:18 am

Re last photo of 3 children:

We know it was not kiddie porn….and was a funny photo…BUT welcome to Canada and the modern world.

People are all wound up so tight with political correctness…all it takes is one complaint.

That’s the point. Commons sense is not common anymore.

#111 blase on 05.23.13 at 10:22 am

cowtown cowboy:

sorry, not cougar ridge, west springs.

#112 HouseBuster on 05.23.13 at 10:52 am

Garth, There are a lot of dumb people in Canada. Just look at what Mike Duffy exposed.

#113 Chris in Burlington on 05.23.13 at 10:54 am


I heed your recommendations and appreciate your efforts.

Thank you

#114 What about CMHC? on 05.23.13 at 10:56 am

Special offer from TD CanadaTrust:
New customers – get Samsung Galaxy Tab FREE, Existing customers – suck your thumb!

#115 Cowpoke on 05.23.13 at 10:58 am

Should read, the Surgeon General, financial division, has determined that to much debt is definitely bad for your health. Debt should come with warning labels like drugs and alcohol do. The ‘pushers’ should be prosecuted!

#116 Tyrone Asauras on 05.23.13 at 11:10 am

#101bruce on 05.23.13 at 8:41 am
………Being involved in Car sales I saw something yesterday that is alarming. Car sales have been hitting record pace in past few years. Only problem is
over 84% is financed……

G’day, Bruce.

What is historic norm?

I’m wondering if it’s crept up due to the “free-money” on offer.

I recently bought, and after negotiating hard on cash price, I determined I could get the same bottom line with 6 year money at 0%.

I took the free loan (and thus didn’t have to sell any of the portfolio to find cash for the car).

There have to be a handful like me taking advantage of sellers in a desperate fight for market share. That said, I fear that you’re actually right, and that folks are financing because it’s the only way they can pay for it.

#117 Doug in London on 05.23.13 at 11:11 am

@Times Change, post #56:
If I had a nickel every time I heard that tired old urban myth about how much easier it is to save when you’re single, I wouldn’t have to worry about buying a house (with cash, that is) at the top of the market because I would be so outrageously wealthy. It’s actually harder to accumulate wealth with only one source of income and not having the economies of scale of being married. And yes, many of these cooples have a spending problem not an income problem. It’s not just a Calgary thing, I’ve seen it here in Ontario.

#118 Daisy Mae on 05.23.13 at 11:14 am

#88 Innocent Bystander: “…most are screwed and have problems paying off their property taxes because housing and taxes have shot up….”


Assessments have gone thru the roof? And with it, property taxes? The values of their homes will revert to the mean and property taxes will go down eventually. This is a sad scenario for seniors.

#119 TnT on 05.23.13 at 11:18 am

Cash Back mortgages are still here….

#120 Tkid on 05.23.13 at 11:25 am

Advise others to not buy? I can’t even get my mother to quit repeating the don’t-waste-your-money-renting propaganda.

My job is on shaky ground, I am saving money hand over fist, i have a great rental, I would like to move to Calgary, I have warned her real estates prices are falling.

Her response? Why am I wasting money renting in TO? Even if I wind up underwater, she thinks owning is still preferable to renting.

There is no reasoning, no explaining facts, you cannot walk them through the math, or show them tv shows on the impact of falling real estate prices on Americans … nothing will convince them that owing isn’t the best of financial plans.


#121 Smoking Man on 05.23.13 at 11:25 am

Bad News bubble heads….

UI Clames down, more and more people working..

#122 The Prophet Elijah on 05.23.13 at 11:50 am

With low interest rates and sheeple sentitment not changing towards RE then the much awaited for correction will take a long time to come. Basically we need a debt bubble explosion and it doesn’t matter if people are living pay cheque to pay cheque as long as they have money to pay the bank.
Many will end up with no retirement savings and having to go for reverse mortgages, so in the end the bank will get the house back. The house always wins in the end, or in this case the bank.

#123 Post Haste on 05.23.13 at 11:52 am

Funny about rates, we bought our first home in 2002 – and just 2 years away from paying this bad boy off – and then with the freed up cash flow – my sailboat will become a reality – anyways – I am a person who will investigate all avenues when I purchase things..

Back in 2001 I kept this article regarding rates, back then it was mentioned that the average 5 year posted rate over the past 20 years was 11% … we calculated if we had only one income and a 11% mortgage, could we continue with the payments .. answers at the time was yes .. but a serious struggle. I believe our posted rate in 2002 was 5.4% which made me feel like a million bucks as I was nearly a whole point less then most of my buddies..

Fast forward today – and I wonder if people who are buying use a 11% rate and determine as we did if they can carry forward – this can get ugly…

#124 Brian on 05.23.13 at 12:03 pm


I’ve been following your blog for 4 years now. You have provided valuable insight opposite to the prevailing views in the media, financial institutions and the in-laws. Thank you

Where many a bear got it wrong was discounting the prospects of a long-term low interest rate environment, and a healthy Canadian economy. These factors are sustaining high prices, despite a larger share of family income required to carry a mortgage. The upside is your skepticism positioned you long US rather early on, and you caught the best part of that move – kudos.

Like you I hold a bearish view of Canadian real estate, but I do not purport to have a crystal ball as to when prices will decline. Experience tells me people will do whatever it takes to buy, and hold real estate even if it means eating canned food. So long as people have employment or the means (like parents with money), prices will remain relatively stable despite fundamentals. For now and the foreseeable future, sales are likely to slow, sellers will hold out and bunker down, possibly retracting supply. Prices will remain stable as people who can afford will buy. The day of reckoning will arrive, but this could be next year or many years in the future. For those holding their breath for prices to fall, don’t bother. If the US rally has legs, we may get a wealth effect that could last another 3 or 4 years, who knows…

For anyone looking to predict future price direction, start tracking leading economic indicators and focus less on real estate stats. If you need a home now buy one. You may find yourself in no better a position in the future if the economy is in the toilet, you are unemployed, interest rates are higher and prices are lower, still you may not be able to afford to own. This goes back to the point Garth has been making, real estate is not an investment, buy what you can afford and understand all of the financial and non-financial benefits and risks of ownership.

#125 Puzzled Redneck on 05.23.13 at 12:04 pm

[talking about the Nikkei] BTW, the proper exposure to this market in a balanced portfolio is around 3%. — Garth

Hi Garth, would you mind explaining how you arrive at this figure? You’ve recommended in the past that global equity should be maybe 20% of a balance portfolio, and Japan is the third largest economy in the world. I would have expected the number to be more like 10%.

It’s a big world. Total international (non-NA) equity exposure, in my view, should be 17%. — Garth

#126 bigrider on 05.23.13 at 12:24 pm

If keynesian policy is successful in re- igniting a moribund economy and increasing growth, can an argument not be made that inflation will surface that will propel RE values higher here in Canada.

Afterall , all commodity or hard assets would experience an inflationary effect in such an environment would they not?

Since we have not experienced any real meltdown in RE pricing yet (perhaps in demand only), is it not possible that it misses us altogther should the U.S get it’s ‘house in order ‘ so to speak in terms of growth, unemployment etc.

Just saying.

#127 Victoria the original on 05.23.13 at 12:25 pm

Dr Hoof Hearted and Blase,

I totally agree. I wish people would get their minds out of the gutter. It was a cute photo. I have 4 young children.

I am tired of this political correctness paranoia.

#128 Spiltbongwater on 05.23.13 at 12:33 pm

Garth, did you cave to the complainers about the picture? I thought you had more of a backbone then that, or perhaps you knew you would get the complainers mad and put the picture up to piss them off. Tell me you are not softening up.

Bite me. — Garth

#129 Old Man on 05.23.13 at 12:35 pm

#104 Susie Q – Mr. Turner is not discouraged as he is thinking about the big day which is January 2, 2014, and he is looking at an old hat in the closet and wondering. No thinking, contemplating, and plotting whether or not he should throw it one more time to hoop them all. It reminds me when I was at the county fair as a kid throwing a ball into a basket to win a huge Teddy Bear, and won it, and the concession guy was not too pleased with me, but the crowd was cheering.

#130 neo on 05.23.13 at 12:42 pm

Actually I pointed out the market was ahead this year more than 40%. Now it dropped 7%. Yawn. BTW, the proper exposure to this market in a balanced portfolio is around 3%. — Garth

A 7+% decline or 1,000+ point decline in one day isn’t a yawn. The only thing silly is that the U.S. equity markets can’t even go negative for any reason whatsoever because of the Fed not the economy which is weakening macro wise. My point was Japan(Nikkei) had nothing to do with the strength of their economy. Unless you are trying to day being up 50% in 6 months would be. Try to be at least somewhat objective about what is actually going on here. Balanced? Global indices down 2+% across the board but near positive in the U.S. and that has nothing to do with the Fed?

Sure Garth…

#131 Shawn on 05.23.13 at 12:59 pm


Banks take in savings and lend them out. Governments and corporations borrow by issuing bonds which are invested in by people and corporations that have saved up the money needed to invest.

For one person or entity to borrow another must save.

Therefore, if the world is awash in debt is it also awash in savings?

For the world as a whole the net savings rate is positive since savings will exceed borrowings since not all savings are loaned out? (There is some cash in safes and such and the equity in your home represents savings that you have not loaned out).

#132 TomJefferson on 05.23.13 at 1:02 pm

Very interesting video about Canada’s fiscal future. Well worth a watch:

#133 larf on 05.23.13 at 1:09 pm

Maybe it’s just the fact that I’m an Irish Mammy, but I think it’s weird and odd when people complain about nothing more than a child’s arse. Ehh, aren’t the complainers the ones who are putting it into a sexual context by calling it inappropriate?

#134 Wilbur on 05.23.13 at 1:12 pm

Why Canadian’s live Paycheck to Paycheck

#135 Victor V on 05.23.13 at 1:29 pm

“Bulletin for people buying homes today: If you opt for the very popular five-year fixed rate mortgage, you will pay a higher rate on renewal. That you can bank on.” – Rob Carrick, Globe and Mail

#136 Bottoms_Up on 05.23.13 at 1:32 pm

#16 RayofLight on 05.22.13 at 9:07 pm
There is now a new school curriculum, and yes they are teaching money management and finances.

#137 miketheengineer on 05.23.13 at 1:35 pm

Garth et al:

Commute from Hamiton to Airport…hmmm…been there done that for about 8 months.

Let’s see what happened. During 1st month, nothing much except the daily exhaustion of driving 1.5 hours each way…and yes it is 1.5 hours.

Then the alternator caught fire on the Skyway Bridge. Not fun having a flaming car, coasting down the bridge. Lucky for me not too much damage. Next month the exhaust system fell off my car. The next month, engine developed an oil leak. Next month was winter….and the first snow fall with a rear wheel drive car….needed new tires, since the old ones were almost bald and I was sliding all about. Next month, the brakes went. Next month the battery went. At that point I was soo pissed off at the car my dad “gave me” I returned it to him and purchased a new one. When I got my new car, someone rear ended me. Shortly after that, I moved to a basement appartment at “Jane and Wilson” for a much needed vacation.

The commute is a deadly commute.

#138 SCIBIDUBADEBUMBADO on 05.23.13 at 1:43 pm

Just thinking out loud.
If the Bond market some day says they wont buy US notes unless they get say 7% for them.
Well the US Government probably could not afford the rent on its debt at 7%.
So wont they take the easy way out and do a massive QE and debase the currency instead of taking the medicine of higher interest rates and protecting the value of the dollar?
Is that workable? Does anyone have any thoughts on this?

#139 Bottoms_Up on 05.23.13 at 1:45 pm

#42 Retired Boomer – WI on 05.22.13 at 10:06 pm
That’s not nice, implying that young people today are idiots.

Put yourself in their shoes. Just try it and see what type of metrics come from you earning a poverty wage, in an environment of high housing and living costs and limited job opportunities.

#140 Bottoms_Up on 05.23.13 at 1:50 pm

#47 Smoking Man on 05.22.13 at 10:16 pm
Smoking man, you have much to learn.

Independent thought is taught at schools — at the graduate level in universities, and in schools going by the name “Montessori”. And I’m sure there are many intelligent, worldly and critically-thinking highschool and even elementary school teachers that are helping their students along the path to independent, critical thinking.

You need to wake up old man and snort the coffee.

#141 squidly77 on 05.23.13 at 1:52 pm

Laugh of the day.

Calgary realtors selling houses to other Calgary realtors juicing the stats, pre-sales resold again and again also adding juice.

Whats even more funny? Some realtors are actually pumping the CREB’s smelly stats.

Unbelievable ignorance and dis-respect shown towards the citizens that call Calgary home.

BTW, checked out FB lately, this puppy going down.

#142 Dr. Hoof - Hearted on 05.23.13 at 2:02 pm

Political Correctness

Later I’ll post this interview that was recommended and I listened to yesterday.

This lady is being interviewed, with hair-curling stories about how ugly Gender Wars, Political Correctness etc can get. I thought she was in the U.S.

Then she lets out she is from Canada ..mentions Simon Fraser University …..holy crap……talk about close to home.

Its not just assumed guilty..its tar and feathered as well, ……..THEN you get your day in kangaroo court.

#143 Old Man on 05.23.13 at 2:17 pm

Imagine my utter shock as Mark Towney who was Ford’s Chief of Staff has gone, and I knew about this all yesterday, and am laughing about this all. This all involves Real Estate; this all involves Toronto on the world scene, and this all involves the citizens of Toronto, so am within context.

#144 Kaganovich on 05.23.13 at 2:42 pm

#122 SM

Wrong. Bad news equities investors. Don’t you know that bad is good news for US equities.

#145 al on 05.23.13 at 2:42 pm

just saw a preview on local T.O. CBC about the “bidding wars” and that “it’s ugly for the buyers out there”, 6pm tonight

now CBC is getting into it, probably is ugly

#146 Old Man on 05.23.13 at 2:55 pm

Now when a showdown is about to take place between a man with integrity and principals with a bossman like Mr. Turner did, and now it is Mark Towhey, the good guy who stands up for the citizens will always be thrown under the bus with a YOU ARE FIRED. I say to all citizens vote for the good guy, as that is the person you want in office to act on your behalf, and pay him well; let him have a fat expense account, and a nice car with a driver, as you get what you pay for.

#147 Shawn on 05.23.13 at 3:02 pm


116 Cowpoke says:

Debt should come with warning labels like drugs and alcohol do. The ‘pushers’ should be prosecuted!


Nothing wrong with reasonable debt used intelligently.

In fact when money is loaned that represents how the economy shares and lets those without cash today consume today in return for repayment tomorrow.

The alternative to debt for some people might be freezing and starving in the dark without shelter.

Also without borrowers, the interest rate on savings must definitley be zero.

One must be careful what one wishes for, lest it come true, complete with unanticipated consequences.

#148 Dr. Hoof - Hearted on 05.23.13 at 3:34 pm

#145 Old Man on 05.23.13 at 2:17 pm

Politics is not just a dirty game , it is a soul- sucking horror movie.

#149 ithinkyoumissedaspot on 05.23.13 at 3:42 pm

Shawn on 05.23.13 at 12:59 pm

For one person or entity to borrow another must save.


I am certainly no great expert but i believe you are missing quite a critical part of the whole debt = savings scheme; fractional reserve banking.

Even typing those words out makes me groan because I only ever hear it in the context of “The sky is falling, doom!”

Except it does exist, and of course allows banks to create much much more debt than they have in savings.

What would the world be like if debt was ~limited~ by savings at a 1:1 rate? I’ll leave that to the tinfoil hats to argue.

#150 Penny Henny on 05.23.13 at 3:47 pm

Good economy means no more QE. Good economy means interest rates rise. Good economy means no more free money to dump into stock market by banks. Thus, good economy is bad for stock market.

Bad economy means more QE, more free money, low interest rates, more money to dump into stock market, more fake numbers to post showing everything is fine- bad economy means good stock market.

Now it all makes sense to me.
Penny Henny

#151 -=jwk=- on 05.23.13 at 4:09 pm

I always miss the good pics :(

That video on Schiff was astonishing, the denial was something to see. Did he make the 1$ bet ?

#152 bill on 05.23.13 at 4:13 pm

I see that a ’empty condo’ tax is being contemplated in todays vancouver sun page a15

#153 rosie "moving forward" on 05.23.13 at 4:20 pm

Thank you, thank you very much.

#154 brainsail on 05.23.13 at 4:21 pm

#139 miketheengineer


#155 Smoking Man on 05.23.13 at 4:38 pm

#142 Bottoms_Up on 05.23.13 at 1:50 pm#47

Smoking Man on 05.22.13 at 10:16 pm———————————————-
Smoking man, you have much to learn.Independent thought is taught at schools —

Ah, what planet were you born on……..
Ba hahaha………..

Cognative dissonance is what you condition is called..

So if a slave says to teacher, I don’t want to do math or English today, I don’t want to take the test today, I will hand the assignment in when I feel it’s just right, not when you demand it. Who the hell do you think you are grading me. What, you want me to use up my free time doing home work… You going to pay me…

Today I want to surf the Web and find out what really happened on 911. Then I want to research how to start a business so I can take advantage of all my stupid fellow students you believe your malarkey…..

See were I’m going with this.
You argument is ridiculous, schools train slaves, not critical thinkers..

#156 Shawn on 05.23.13 at 4:41 pm


151 missing a spot says (in response to me at 149):

Fractional reseve banking exists, and of course allows banks to create much much more debt than they have in saving


I missed nothing. Fractional reserve banking refers to the fact that a fraction of each dollar deposited must be kept on hand and not lent out.

This results in bank loans being LOWER than bank deposits/savings.

Check any bank balance sheet.

Fractional Reserve banking does create money for the banking system / economy as a whole as money that is loaned out gets redeposited (as a vendors savings) and loaned out again.

But the fact is loans are lower than savings/deposits.

Without bank deposits there are no bank loans. Bank deposits are owned by savers not the bank.

#157 jess on 05.23.13 at 4:49 pm

#60 AK

Wabasca Heavy crude, a type of heavy oil made from bitumen mined in Canada’s oil sands region. Because bitumen is too thick to flow through pipelines, it is diluted with natural gas liquids and turned into dilbit, or diluted bitumen.

InsideClimateNews won a Pulitzer Prize for its reporting on “‘The Dilbit Disaster: Inside the Biggest Oil Spill You’ve Never Heard Of,’

a project that began with a seven-month investigation into the million-gallon spill of Canadian tar sands oil into the Kalamazoo River in 2010. It broadened into an examination of national pipeline safety issues, and how unprepared the nation is for the impending flood of imports of a more corrosive and more dangerous form of oil.”

The Corruption of Value
Negative Moral Associations Diminish the Value of Money
Jennifer E. Stellar1⇑
Robb Willer2


…”mistakes were made in the past that undermined our good name, we realize that we have to win back the trust of our clients and society.”

#158 jess on 05.23.13 at 5:02 pm

paradox of plenty

finance curse = resource curse?

#159 Ronaldo on 05.23.13 at 5:14 pm

#151 – ithinikyoumissdaspot

Is this what you were getting at?

#160 ithinkyoumissedaspot on 05.23.13 at 5:20 pm

I missed nothing. Fractional reserve banking refers to the fact that a fraction of each dollar deposited must be kept on hand and not lent out.

This results in bank loans being LOWER than bank deposits/savings.

Well what could happen is;
I get a loan of 10k from a bank (from a deposit of 12k). I buy a car from an owner who has paid it off.
He then deposits the 10k in a different bank
That bank lends out 8k of it to someone else.

In that scenario one deposit of 12k has generated 18k of debt.

Like i said before I am no expert. It seems that banks can in fact create much more debt than the amount of savings. But maybe I’m just misinformed.

#161 Ronaldo on 05.23.13 at 5:43 pm

#162 – Ithinkyoumissedaspot

Sounds like this is what you’re saying.

You watch that crap? — Garth

#162 Shawn on 05.23.13 at 5:47 pm


162 said:

Well what could happen is;
I get a loan of 10k from a bank (from a deposit of 12k). I buy a car from an owner who has paid it off.
He then deposits the 10k in a different bank
That bank lends out 8k of it to someone else.

In that scenario one deposit of 12k has generated 18k of debt.


This is great, you are working through the math.
But you also said the person who sold the car deposited $10 k in the bank.

So the $12 k deposit generated $18k in debt plus a new $10 k deposit. We are now at $22k in deposits (some one’s savings) owed by the banks to depositors and $18 k in debt loans owed to the banks.

So, as your math shows savings deposits exceed the bank loans. Glad we could agree on this.

Those who doubt it should refer to any bank’s balance sheet. (And not to doomer rantings)

#163 Bill Gable on 05.23.13 at 6:10 pm


MORT GAGE * en francais = translates to DEATH CONTRACT, en anglais.

‘Nuff said.

#164 Average Joe, Vancouver BC on 05.23.13 at 6:11 pm

Garth stay focused. Normal folks read this blog and act….I know a few included myself who done just that in last 12 months. I do agree with the stats…most folks simply give up on financial planning for the future or lost interest in investing since they have no savings to start with. They can’t take the risk of MF…..but they like to think that they at least have a home and hope for the best. Problem is : “hope” is not a good strategy to start with.

#165 observer on 05.23.13 at 6:57 pm

Canada can print more money. They should also give negative interest rates to borrowers. So the more you borrow the more interest you get back. Oh yeah with absolute zero $$ down. With no risk to the banks!
All Government backed loans

Any savers should be punished and flogged in public. They should be stripped of all assets and given to the “REAL PRODUCTIVE MEMBER OF OUR SOCIETY”. The “Speed spenders”

This way we get to keep this train wreck going. Why have a car Crash, when you can have the MOON Drop down on the earth

#166 Shawn on 05.23.13 at 7:00 pm


U.S. new home prices are at RECORD highs!

Certainly “used” houses are not at record highs, but the new ones are!!

That gotta catch a lot of people by surprise and lead to a lot of denial among the doomer set.

#167 Daisy Mae on 05.23.13 at 7:56 pm

FLAHERTY: “Canada doesn’t have a housing bubble — but it would have, had it not been for the government’s mortgage rule changes.”


What a complete ass….

#168 Herb on 05.23.13 at 8:51 pm

#157 SM,

and one of your conditions is called “Oppositional Disorder.” You’ve written up the “Juvenile” version in your school example, and display the Adult yourself every day.

Mothers, send your kids to school!

#169 Rustic on 05.23.13 at 10:18 pm

As long as one maintains a love for life, the pic was cute and innocent. If one casts all who views it with despicable pedophile qualities, than it should be removed.

I miss the picture. It captured a funny part of life. Boyish curiosity that may just last until you are a senior citizen. A common denominator many families can relate to.

I am fatigued of being guilty until proven innocent because of a possible interpretation and someone else’s unnecessary fear. Have some faith in your neighbours people! I’d put money on the fact that the MAJORITY of viewers found the picture cute. Yet, not to offend the MINORITY of viewers, it had to be removed. This is not how democracy is supposed to work. It is indeed sad.

Similarly, someone who wants to buy a house shouldn’t have to contend with skewed market fundamentals and prices that are out of touch with the economy.

Anyone have a link to the pic? My wife is less than impressed with my description of it…

#170 car loan on 05.24.13 at 2:45 am

I recently bought a new car…. funny when i came down to numbers the 1st thing they launch on the screen is the monthly payments- options 3-4-5-6-7 yr , i told him i was paying cash and stated my on the road price… it was evident very few pay cash, unfortunately there was no super low interest rate hence the decision to pay cash. I ended up getting 7% off msrp and some freebies thrown in

#171 World Traveller on 05.24.13 at 5:49 am

#157 Smoking Man,

Apparently your internet research did not teach you spelling or grammar.

Today I want to surf the Web and find out what really happened on 911. Then I want to research how to start a business so I can take advantage of all my stupid fellow students you believe your malarkey…..

See were I’m going with this.
You argument is ridiculous, schools train slaves, not critical thinkers..

#172 Haligonia on 05.24.13 at 8:37 am

Halifax Resales Drop 13% compared to last quarter:

#173 retired WI Boomer on 05.24.13 at 10:05 am

#141 Bottoms_up

No disrespect intended either for the young just starting out, or the newly retired (like me).

Prior planning precludes poor outcomes.

All i am asking for is that people THINK for themselves.

I’m 61. High School graduate no particular talents. Started at the bottom in life, no inheritances (dam it).
Stated putting away 10% on that big salary of $15 grand in 1987. No, that was NOT big money then, and it would be below minimum wage now. Could not afford a NEW car, made do with cheap used for years.

Sure, we had some debt, but never allowed it to run our lives.

I watch the younger ones today, car payments, house payment, cell phones, cable tv. Sure it is all nice to have, but largely unneeded -especially when you are in debt.

When you are retired, and do NOT need your old age pension is when you have arrived in my little book. It is being able to make choices, including the luxuries, or declining them as well.

Buying property now, when it nearly the most expensive EVER in Canada is not a smart buy. Renting never killed anybody, things can -and do- change in the course of a year, or two.

Don’t be foolish, don’t BE an idiot is all I was trying to convey. Debt slavery is no friend to anyone. You are merely living one pay check from disaster without adequate savings.

I saw the housing bubble inflate here, then deflate. There were lots of foreclosures, job losses, pain & misery. My son was laid off the better part of 2 years. Thankfully, he had no bills he could not manage from his savings, and unemployment insurance. He was the exception I might ad.
I just do not see your property bubble ending well, and lots of expectations will be re-set.

#174 analyst on 05.24.13 at 4:23 pm

Keep writing Garth, I’m listening very carefully and think we all need these repetitive, persistent reminders in order to swim against the tide.

But – I’d like to know your perspectives on the following story.

Lots of (stupid) children were playing on a train track (Track H) when a passenger train was moving quickly towards them. In order to avoid the crash the engineer had to make a decision to redirect the train to a nearby discarded track (Track I). On that track, only a couple of kids were playing because they were smart enough not to play on the track in use. The engineer saw them -but had to make a decision – he had a full load of passengers on board and also had way more children on the track ahead.

Logically, to avoid a bigger tragedy, the engineer, let’s call him F, would decide to redirect the train to Track I, fully aware that those intelligent children were scarifying for the not so intelligent mob.

Aren’t the elites being punished? Low interest rate forces people looking for higher return (higher risk) investments. And that’s just the rate alone.

No one wins unless we make the majority elites. Another reason to keep writing Garth!