What they know

Ugly1

If you recently bought real estate, this was one scary week. In fact, you might want to skip the rest of this article. Bye.

For the scant few of you who remain, things are turning out for the Canadian economy about as I expected. Which is not well. A growing number of people get it, including the same gang of developers, promoters and pumpers who constantly tell property virgins there’s never been a better time to plunge into real estate. They’re doing the opposite.

The latest numbers from RealNet Canada paint a picture of rapidly dropping confidence. In Toronto, Calgary and Vancouver purchases of residential development land plunged in the first six months of the year, at the same time sales of new houses and condos slumped by more than a third. Land buys tumbled 51% in Toronto, 52% in Calgary and 30% in Vancouver – a clear sign, say insiders, a big slump’s coming for housing.

“This is definitely a major slowdown which will last for some time,” according to RealNet’s research guy, Richard Vilner. “It’s not going to turn around in the third quarter. There’s not going to be a major correction back to the high-flying land acquisitions of 2011 or the first half of 2012 because there’s still a huge amount of inventory to sell off.’

Ya think? In the GTA alone there are 19,394 unsold, new condos sitting around on the shelf (21% of the market), with another 57,461 already in the pipeline. Add to that 9,600 resale condos on MLS and thousands more being flogged on Kijiji or Craigslist, and you have the definition of glut. The developers know it, with many entering crisis mode. There’s no doubt mucho projects now aggressively marketed will never be built.

“The slowdown began to happen in mid-2012,” says Vilner. “There was a big time slow down versus those robust two years pre-slowdown. The cranes you are seeing now are for residential land deals that closed a couple of years ago.”

Now, there’s even more to worry about. Here are four reasons we may be entering a difficult time for residential real estate.

Fewer jobs.

Not only did the job numbers announced Friday suck, but the trend is deteriorating. In the last half of 2012 the economy was creating a meagre 27,000 new positions a month – hardly enough to make a dent in the 1.33 million looking for work. But in 2013 that’s collapsed to an average of 11,000 monthly. In the latest period we actually shed 39,400 positions, with the most pain being felt by the young.

While the unemployment rate rises, we’ve had a year and a half of monthly trade deficits plus anemic economic growth. Governments are shifting into austerity mode and wage gains have now dropped to the same level as inflation – which means even working people aren’t getting ahead (more on that below).

There’s nothing that kills a housing market more effectively than unemployment, except…

Higher mortgage rates.

Less than four months ago a five-year bank mortgage was 2.69%. Now it’s 3.59% to 4.99% – a massive increase. Worse, rates seem destined to rise further. Looks like the US Fed will begin turning off the stimulus spending tap as early as next month, promising higher bond yields. Since banks fund their home loans in the bond market, up she goes.

Of course this is exacerbated by…

Less mortgage funding.

The big story this week, if you remember all the way back to Tuesday, was the latest move by CMHC to hose down the real estate market by taking away the cookie jar. Alarmed by a housing sales and price pop during July, the feds are now rationing the riskless funds being made available to banks to hand out as mortgages. This pretty much guarantees money will get more expensive, unless loan demand collapses.

The consensus among economists: the move will add about half a point more. And why is mortgage financing so critical to the housing market? Simple. We have…

No money.

While 70% of Canadians own a house, 51% of them have less than $10,000 in savings. That was the shocking finding of a new bank survey this week done by Pollara Strategic Insights. When people were asked if they feel financially prepared to handle a ‘rainy day’, it was hard to believe the poll was conducted in a first-world country where thirtysomethings do bidding wars over $800,000 semis.

Almost one in five people don’t have even $1,000 sitting around in a bank account. A quarter of us live paycheque-to-paycheque. And 84% couldn’t live six months without being paid.

The conclusion’s obvious. Debt – not rising wages or robust savings – has fueled the real estate binge that’s driven home prices to historic levels. Yet debt has limits, which we’ve clearly hit. So as rates edge higher, job growth stalls and incomes erode, what possible backstop is there for housing?

Yup. None.

Say, was that Brad Lamb’s Rolls that just streaked out of town?

brad

206 comments ↓

#1 guelphstudent on 08.09.13 at 7:15 pm

Clearly the housing boom benefited mostly the rich on top. Everybody else was left to believe that they can rich to the top by investing in real estate. What a pile of BS!

#2 father on 08.09.13 at 7:16 pm

at work so not enough time to think but great post garth

#3 Oceanside on 08.09.13 at 7:17 pm

Pretty much says it all today. A home just sold here today after being on the market for over a year. Started at $4,388,000 and sold for $2,322,000. Houses that were purchased 5 years ago in the mid sixes are selling in the mid fours…

#4 Shawn on 08.09.13 at 7:17 pm

IT’S GOOD TO BE RICH…

For rich people the fact that their house falls in value should be no big deal at all. It’s a smallish part of their net worth and they weren’t planning to sell anyhow, so who cares?

#5 Sasha on 08.09.13 at 7:20 pm

Canada is going to suffer through huge real estate dump.

And for everyone else who doesn’t believe that and thinks that Canada is different just look at all the other housing bubbles around the world! Its worldwide lol!

#6 T.O. Bubble Boy on 08.09.13 at 7:23 pm

The sheep (lamb) logo is perfect for the Sheeple he hocks condos to.

Brad is an unintentional symbologist.

#7 dosuth on 08.09.13 at 7:23 pm

I guess I don’t get the math. 1 in 5 have less than $1,000 in the bank and yet 25% live paycheque to paycheque. Wouldn’t those numbers be the same? (Either 1 in 5 or p2p)

#8 timmy on 08.09.13 at 7:24 pm

And prices remain inflated…

#9 TO and GTA Stats and Sales 2013-08-09 on 08.09.13 at 7:33 pm

TO and GTA Stats and Sales 2013/08/09
http://recharts.blogspot.ca/2013/08/416905-condo-sales-and-stats-2013-08-09.html
http://recharts.blogspot.ca/2013/08/905-sfh-sales-and-stats-2013-08-09.html
http://recharts.blogspot.ca/2013/08/416-sfh-sales-and-stats-2013-08-09.html

#10 ILoveCharts on 08.09.13 at 7:36 pm

Credibility is critical for a blog. You state:
“Less than four months ago a five-year bank mortgage was 2.69%. Now it’s 3.59% to 4.99%”

But a major bank is currently approving a rate-hold for me from a at 3.39% for a five year fixed mortgage.

Can I trust the other numbers or are they exaggerated as well?

Rates referenced are current offerings, as of Friday. Try harder not to be a dick. — Garth

#11 Daisy Mae on 08.09.13 at 7:46 pm

Well, that was breathtaking! How did you get so smart? ;-)

But getting the message thru to others is like “pulling hens teeth”. They just don’t GET it.

But they will….

It’s all so damn frustrating!

#12 Gor Gon Lin on 08.09.13 at 7:54 pm

#5 Shawn

IT’S GOOD TO BE RICH…

For rich people the fact that their house falls in value should be no big deal at all. It’s a smallish part of their net worth and they weren’t planning to sell anyhow, so who cares?

____________________

Dude, rich people care. How do you think they got rich in the first place?

You sound like a scared Realtor…

#13 K9 Ghost on 08.09.13 at 8:00 pm

Your last picture, If you look above the German Shepard, in the window you see a reflection of another dog or wolf.

#14 ILoveCharts on 08.09.13 at 8:10 pm

“Rates referenced are current offerings, as of Friday. Try harder not to be a dick. — Garth”

No need to call me a dick. I’m a fan of the blog but don’t want to give the bulls firepower to undermine the arguments.

If we are using the rates posted on the internet instead of the actual rates that are being provided when you phone in, was 2.69% ever posted online? (honest question – I do not know.)

Posted or published rates are the only valid ones to quote. — Garth

#15 raider on 08.09.13 at 8:18 pm

Looks like someone else is actively reading this blog. This is the second time this week, he refers to the bubble here:
http://www.youtube.com/watch?v=90frhVcYCqM

Thumbs up, Garth!

#16 Ballingsford on 08.09.13 at 8:21 pm

Garth, you mention at times that things are turning around.With the latest job numbers we are in a decline.
You also say part time jobs lead to full time jobs. Does that fuel the economy if you work at McDonalds or Walmart?
Definitely not enough money for the new generation to buy a home.
US stats are also a fabrication even though you intimate things are getting better there.
Homes in my hood (Nepean) around 500 grand aren’t moving at all.
Seems like the greater fools held on too long.
Looks good on ya’s!

#17 economictsunami on 08.09.13 at 8:21 pm

Unfortunately, in this new Canadian economic reality, it won’t be just the unsophisticated greater fools who will find themselves in economic trouble.

There will also unfortunately be people that did all of the seemingly right things and through no actual fault of their own, just got caught up in the undertow.

I truly hope this doesn’t make me appear to be an alarmist, Canadian hater…

#18 Mister Obvious on 08.09.13 at 8:26 pm

#2 guelphstudent

“Clearly the housing boom benefited mostly the rich on top.”
———————————

Incorrect. The boom befitted those who bought when houses were affordable, then eventually recognized a huge but unsustainable rise in prices and wisely exited the market before the inevitable return to normal.

#19 Bob on 08.09.13 at 8:30 pm

I know you love hypotheticals Garth. So here’s one:

Let’s say that someone has all their savings tied up in real estate. They decide to sell and are successful. Now, they have a pile of cash purely to invest. They are close to retirement age and will need some of the cash flow to live.

What rate of return one could expect if they were to invest it wisely TODAY or in the near future?

There is no concise answer. I have often said a 7% overall return from a balanced, diversified portfolio is a reasonable expectation. — Garth

#20 Babblemaster on 08.09.13 at 8:34 pm

“There’s nothing that kills a housing market more effectively than unemployment, except…” – Garth

———————————————————-

A dead housing market? In Toronto? With significantly real falling prices for single family homes? It may happen, but I’ll believe it when I see it.

#21 Mike on 08.09.13 at 8:37 pm

I honestly believe the American recovery has been slow because of the extended housing slump. During this period many jobs were gone (Construction, trades, real estate agents etc.). The US is picking up so much steam now because of the housing recovery. Those jobs will be there for years to come, and so will growth in their economy. When you lose a major job providing sector for years, it is nearly impossible to recover quickly, especially when many of the jobs lost are well paying.

#22 JUNO on 08.09.13 at 8:38 pm

#11 ILoveCharts on 08.09.13 at 7:36 pm

Credibility is critical for a blog. You state:
“Less than four months ago a five-year bank mortgage was 2.69%. Now it’s 3.59% to 4.99%”
===============

Who care, even with your numbers 3.39 its still a rise of almost 1% and a 30% increase in rates.

People should be worried, because if your barely able to scrape through and 70% of your income goes to you house. With a 30% increase almost 100% of your income will go into paying your mortgage.

#23 Musty Basement Dweller on 08.09.13 at 8:43 pm

What a great summary of the state of the nation of our real estate market. I know to call it Ponzi scheme like is over used, but it really is like that. Too late to bail now for the recent unfortunate sheep who have been seduced by the likes of Lamb, Carney, and idiot politicians too numerous to name. The banks will be fine through all of this but Joe and Jane average who were sucked in will pay the majority of the price. Oh well it’s always been buyer beware I guess.

#24 dienekes on 08.09.13 at 8:47 pm

Garth, you forget mining will save us.
Oh wait, our electrical firm went from 34 men in the mines up till January to 4 working on some commercial warehouses. The mines we deal with assured us we still have the contracts, but we were told to go home because they “are out of money”.
As a result, our spending has also been frozen. I wonder how many others are experiencing this?

#25 Donald Trump on 08.09.13 at 8:47 pm

No worries…

Canada is strategically playing possum.

As Garth said…bet against the U.S.

Then, Canada can sweep in and turn the U.S. into another Province as 350 million people greatfully surrender to 30 + Million Canadians .

PS: if they do not submit….we have Celine Dion and Just-in Turdeau as WMD’s ( weapons of moose detraction)

#26 sleeper on 08.09.13 at 8:49 pm

Great post, Garth. What a troubling stat: 70% of us have mortgages and half of them have less than $10K. 

Some friends of ours took the plunge last week in Surrey for $550K. I wish them well but they had no down payment so the bank told them to use the LOC and say it was “gifted” money. Sale was approved. I laugh when people say there’s no subprime in Canada. 

#27 g on 08.09.13 at 8:57 pm

“I guess I don’t get the math. 1 in 5 have less than $1,000 in the bank and yet 25% live paycheque to paycheque. Wouldn’t those numbers be the same? (Either 1 in 5 or p2p)”
25% could have more than $1000 in the bank(lets say $3000)but still be living paycheck to paycheck if their monthly living expenses are greater.

#28 Smoking Man on 08.09.13 at 8:57 pm

Problem, The Herd don’t care,

Condo’s have been toast for two years.. The exact condo I sold in summer of 2011 was re listed and sold for 8 present less than I got.

I picked the top….. Infact no other 1+1 in that building sold for more.

Again those land sales slide mean nothing in 416 in the SFH market. No more land and nothing for sale.

Lots of room for price growth still…

#29 western observer on 08.09.13 at 9:04 pm

Number of sales may decline but there will be no price crash in Vancouver SFD’s.

#30 retired Boomer - WI on 08.09.13 at 9:06 pm

#8 dosouth

1 in 5 is 20% 1 in 4 would be 25% you’re welcome, now don’t buy real estate.

What Does a Real Estate induced crap economy look like?
CANADA now…

Rich people, the well-off people, the just makin’ it people, and especially the terminally indebted ARE scared! Some will lose everything, some will sell off what they can, others trim the lifestyles up. Evereybody’s scared!!

Who wouldn’t be? No fun to see your neighbor in trouble, or your investments perform like crap. No fun to see plants shuttered, people on lay-off for weeks, months, even years! Rich, poor, or somewhere in between when self inflicted stupid hits a country it SUCKS!!

As a dude below the 49th parallel let me tell you 2007 some could see it coming, 2008 everybody saw it arrive, 2009 – 2010 we ALL paid some price for the Real Estate – Bankers – Incompetent Government – bailouts.

While the economy is better, we are STILL MAKING DEBTS

which means it is NOT over, we have NOT recovered. It means that the reasonably well off are not going to make those otherwise discretionary purchases for awhile. As for making new DEBT myself – forget about it.

I expect to see higher taxes once the American politicians can extricate their heads from their arses. no mean feat…
and easily exportable

#31 Devore on 08.09.13 at 9:15 pm

The conclusion’s obvious. Debt – not rising wages or robust savings – has fueled the real estate binge that’s driven home prices to historic levels.

And increasing household net worth is primarily based on real estate valuations, and since we’re not making or saving or investing more money, and house purchases are based on lending, and those loans are backed by real estate values, we have out of control asset based lending. Lending based not on expectation of productivity, or growth, or returns, but rather on increasing prices of a single asset class.

This will not end well.

#32 willworkforpickles on 08.09.13 at 9:18 pm

No end in sight for a bottom on the TSX . Where and when will it bottom ? – can anyone guess ? – does anyone even want to try? . At any rate …when it does , give the economy 9 additional months of real pain followed by another 9 months to work itself out and begin to turn. Give real estate another 2 years after that to begin that rebuilding process and add 3 more years before price madness begins to kick back in…..you should then figure in about 2 years of that – followed by a 1 year cooling off period . When the beast gets ready to pounce from the bull-rushes there will be a 4 year additional climb in prices right dead on its heels…. This will bring the national dilemma full circle back in line with all of today’s conundrums and much much worse of course………………yeah………..or not

#33 The west on 08.09.13 at 9:18 pm

Don’t bother coming out west it’s starting to slow down in parts of Alberta.I’m ball deep in the patch and its pretty dead where I’m at.haven’t seen it like this since 08.The boom looks to be over unless drilling rigs start moving soon.

#34 Devore on 08.09.13 at 9:21 pm

#8 dosuth

I guess I don’t get the math.

It’s a survey of people’s opinions about their own financial situation. People can’t do math. Why are surprised the math doesn’t make sense?

#35 Randy Randerson on 08.09.13 at 9:22 pm

I get annoyed whenever anyone says Vancouver is the “Best Place On Earth.” I always retort by asking them if they have the choice of living in NYC, Paris, Berlin, Shanghai, London, Hong Kong, or any other major metropolis, would they still want to stay in the crappy Van. The majority would want to leave in a heartbeat!

People are now facing jobs that pay peanut, with no real savings, and are faced with poor future job prospect. Welcome to Canada, where people don’t think for themselves.

#36 takla on 08.09.13 at 9:33 pm

I dont think the big banks really care what they look like when the uninformed walk in the front door looking for a residential morgage,steady job and a pulse will do{oh ya the less informed the better}..They are offering haircuts tho,you just dont know it yet.Buying over inflated homes in a deflateing price enviroment with riseing interest rates is a formula for disaster.try googleing current RE foreclosures in your area,eye-opening for sure and the foreclosure party is just getting started.

#37 Marginal on 08.09.13 at 9:35 pm

#24 Dienekes. I think this is happening in other sectors as well. Apparently the majority of Canadian job losses in July were in the public sector, where there were 74,000 fewer jobs.

http://www.cbc.ca/news/business/story/2013/08/09/business-economy-jobs.html

This is in line with expectations for far greater public sector job losses at the federal level (although I don’t know if July’s losses were at the federal level) in order to balance the budget. Efficiencies are good in principle, if it wasn’t so pathetic that the number of federal employees grew dramatically under the same government that now wants to cut. Heartless, efficient, sociopathic, incompetent…..fill in the blanks according to your political orientation.

“The PBO spread sheets reveal the number of individuals on the federal payroll rose 14 per cent between the end of the 2005-06 fiscal year, when Harper’s Conservatives came to office, and 2012.”

http://www.cbc.ca/news/politics/story/2013/06/29/pol-cp-tories-signal-cost-cutting-in-civil-service-but-bureaucracy.html

Public sector jobs tend to be well paid with good benefits, so I would guesstimate a real estate impact in locations like Ottawa as the current government makes further cuts to deliver a balanced budget before the next election.

#38 45north on 08.09.13 at 9:36 pm

Shawn: For rich people the fact that their house falls in value should be no big deal at all. It’s a smallish part of their net worth and they weren’t planning to sell anyhow, so who cares?

Shawn you’re not a real estate agent because they deal with the real world – people who are not rich. Here’s how falling real estate affects them – people who aren’t rich:

“Although the foreclosure crisis has eased in Colorado neighborhoods such as Platte River Ranch, the economic damage has not. Many houses in this neighborhood, including the Tanksleys’, are now valued by the county assessor at 20 percent to 30 percent below prices paid more than a decade ago. Michelle Desantiago purchased her house for $155,000. She filed for bankruptcy four years ago in an attempt to stave off foreclosure and keep her home but is on the verge of giving up. The assessor values her house at $127,239.”

http://thehousingbubbleblog.com/?p=7889

#39 Herb on 08.09.13 at 9:37 pm

“While 70% of Canadians own a house …”, how many do so free and clear, as opposed to renting it from the bank via mortgage payments?

The answer would tell us a lot more about our actual economic circumstances. Borrowed wealth is only debt, and unrealized capital gains on a falling asset fluid, not liquid.

It’s not just homeowners who are going to get screwed in this economy.

#40 MarcFromOttawa on 08.09.13 at 9:41 pm

It seems people would rather keep a HELOC on hand in case of emergency and shovel all their disposable income to pay back their mortgage.

Not necessarily a bad thing.

#41 Herb on 08.09.13 at 9:42 pm

#28 SM,

“… those land sales slide mean nothing in 416 in the SFH market.” Possibly, but take it for fact that the 416 SFH market means nothing in the RE market in the rest of Canada.

#42 Dude, The on 08.09.13 at 9:47 pm

“Rates referenced are current offerings, as of Friday. Try harder not to be a dick. — Garth”

Garth,
That reader had a good question. You called him a dick.
That was a dick move, Sir!
Also, today’s posted ING 5yr fixed rate is 3.39.

I said ‘bank’ mortgage. As for being a dick, I suggested he try harder not to fall into that category. It was brotherly advice. — Garth

#43 Interest_Only on 08.09.13 at 9:57 pm

I hate to pander but best post you’ve made to date!!

well done.

#44 Dr. Bunsen Honeydew on 08.09.13 at 9:58 pm

Uh-oh realtors and mortgage brokers.

Iceberg dead ahead!

#moralhazard #careerchange

#45 Suede on 08.09.13 at 10:02 pm

Over in Van Coofer, the housing market is still not dead and rolling over just yet – still fighting that trend line.

Why? – Relative bought a home in a bidding war.

“Houses in Vancouver can only go up.” This three days after a lengthy convo with Lagavulin at the craps table as the background when they were going to rent and invest.

Popular delusions is not a reality yet.

Chive on…

#46 Chicken little on 08.09.13 at 10:09 pm

Funny you should put this picture up. This ” salon” is in Troy Michigan where my Inlaws live. I pass it all the time! And wouldn’t you know, I’m there right now. I need to go buy a lottery ticket right now! Actually, no I cant…I’m not in canada…dang it.

#47 Chicken little on 08.09.13 at 10:09 pm

I’m not at the salon…I’m at sonic across the street.

#48 Marginal on 08.09.13 at 10:12 pm

#8 Dosuth

“I guess I don’t get the math. 1 in 5 have less than $1,000 in the bank and yet 25% live paycheque to paycheque. Wouldn’t those numbers be the same? (Either 1 in 5 or p2p)”
—————————————————————-
I’m not troubled by this (despite it not being a random survey) since they are in all likelihood answers to two different questions (not necessarily mutually exclusive questions). It’s entirely plausible that someone (living in their parents’s basement) with less than $1k in the bank does not believe that they are living paycheque to paycheque. Conversely, it is possible that someone who has $5k in the bank believes that they are living paycheque to paycheque.

#49 mark on 08.09.13 at 10:13 pm

Hi,
So what about the micro economy in b.c.
Dawson Creek is booming with oil and gas operations.
Is it still foolish to buy here?
Business cant find people to work. Unemployment they say is less than 4 percent if you can handle the snow and the hick town…………

How do we find data on this?
A 1000 sq foot starter is 150000 to 200000 k arrrgggg

Thanks

Mark

#50 clint on 08.09.13 at 10:16 pm

Hope you ladies covered your PM shorts as I suggested last month…. Good call huh?… I’ll be back the end of September to see if any of you rookies had the cohunes to nibble a bit this week…….

#51 What they know — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer on 08.09.13 at 10:17 pm

[…] via What they know — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#52 Marginal on 08.09.13 at 10:30 pm

#41 MarcFromOttawa

I think this would be a good time for people to read the fine print on their HELOC/LOC agreements. Some agreements allow the bank to shut down and/or demand full payment on notice. Also, if you have bundled services banks may be able to take money from your other accounts (non-registered) to pay off moneys owed to them on notice. All depends on the terms of your agreement. Time to read the fine print……

#53 TheCatFoodLady on 08.09.13 at 10:39 pm

It’s getting scary out there. It seems each passing day, liquidity is more important.

Sadly, too many STILL aren’t learning. Sitting with a bunch of people late this afternoon – about a dozen. The topic of lottery wins came up & one asked what people would do with $5,000. I know a good many have had trouble coming up with rent on time in the past. Many have had items repo’d. They collectively never seem to have two cents to rub together. Some are currently one step ahead of collections on one bill or another. Yeah – they’re a little too free publicly with that kind of info.

Most decided they’d either buy a car or go on a holiday. Not one mentioned paying bills or having any kind of cushion. When I was directly asked, I said I’d invest it. I got either sneers or blank stares. “What a waste of a windfall. Why would you do something that stupid?”

I dunno – why would I?

#54 souvereigninternational on 08.09.13 at 10:39 pm

#8 dosuth wrote:
“I guess I don’t get the math. 1 in 5 have less than $1,000 in the bank and yet 25% live paycheque to paycheque. Wouldn’t those numbers be the same? (Either 1 in 5 or p2p)”

Let me spell It for you:
2o% of all canadians live ptp ( 1 in 5 )= 0 or neg. savings,
25% = less than 1000$ savings,

than

51% of 70% with houses = less than 10000$ savings [that is 35.7 % of all Canadians]

# 5 Shawn:

Define Rich please. If you’re worth 5mil. and you own a 4 mil. house are you rich? What would Buffet’s definition be?

Now Garth, you said ” Looks like the US Fed will begin turning off the stimulus spending tap as early as next month, promising higher bond yields. Since banks fund their home loans in the bond market, up she goes.”

My thinking is the fed will only taper the taps when it has the knowledge that there are enough buyers (not currently) for US debt. This will happen only when there is a flight to safety from somewhere else in the world
(Europe?) to US debt. Until then there may be just talk of/minimal tapering. The US can afford only marginal increases in bond yields.

Now the real questions is how many of those 5% mortgage owners with less than 10K in the bank have a luxury car and dress at Holt’s. World on the street is people in TO have lots of money.

#55 Bill on 08.09.13 at 10:40 pm

I’d go for the massage ….

#56 MarkCarney on 08.09.13 at 11:11 pm

I reckon things are on schedule. Got out just in time!

#57 NotAGreaterFool on 08.09.13 at 11:14 pm

Election year in 2015? My guess the H & F will be very active in controlling the real estate meltdown. If not, it may cost them.

#58 catzoduro on 08.09.13 at 11:23 pm

Housing market is least of Canada’s worries. We have a Prime Minister willing to give Verizon an easy ride into Canada. This will not end well.

#59 Big Angry Bear on 08.09.13 at 11:23 pm

7 odd years ago, our deceptive conservative government (lets just call them decepticons) kicked common sense to the curb and knee jerked their way from one short term solution to another. As Garth says, we have reached our limit and the deflation has begun. All our elected officials are bought and paid for by blackmail or bribery and tow the line or get purged. Plain and simple. Follow the money. To be a ‘successful’ politician these days is to talk out of both sides of your mouth while parroting prepared scripts from your puppet masters in the banking cartel. They put you there with the understanding that you will create laws to protect them from the commoners and do as your told or have your funding switched off and re routed to your nemesis from across the aisle. Canada has become part of a discredited alliance tied to the city of London, Neo Cons all bowing to a country the size of New Jersey in a bad neighborhood. We have been duped, we have been played and we are about to be discarded.

Wake up and connect the dots people

#60 Waiting4crash on 08.09.13 at 11:41 pm

All this talk about the potential housing crash makes me wonder how it will affect our portfolios. Sure I’ve reduced my exposure of Canadian equities and have a diversified portfolio with us and international allocations but I have a hard time believing that this portion will offset the losses expected with the TSX when this housing market finally crashes. Thoughts?

Why would a housing correction hit the TSX hard? BTW, hope you don’t hold individual equities. — Garth

#61 FATHER on 08.09.13 at 11:43 pm

#58 no matter what they do people have no savings and cannot make money from RE so voters will want change, you do not make economies thru RE and harper should know that. Isn’t he an economist

#62 Bottoms_Up on 08.09.13 at 11:43 pm

Looks like developer land prices will be/are a leading indicator of the coming real estate price plop.

So much buying demand has been brought forward with 40/0 mortgages, then 35/5, 30/5 and 25/5, then qualification rule changes, then CMHC putting caps on funds, all the while people rushing to ‘get in’ while they can with a ‘good’ rate (“it’s never been a better time to buy”), it’s hard to predict how many years will be required to actually get back to a balanced market where demand is TRUE demand and supply isn’t burgeoning at the flood gate due to geezers trying to lock-in their lottery winnings.

Demographics are a Bitch. I subscribe to the DaaB philosophy.

#63 Bottoms_Up on 08.09.13 at 11:50 pm

#54 TheCatFoodLady on 08.09.13 at 10:39 pm
————————————————
What’s sad about your story is that how do these people become so “money naive”? The education system has ample time to teach people about money. Parents should have ample time to teach children to be debt averse. Your friends have been failed by both systems.

Funny, I can’t remember learning in school that ‘debt is bad’. I have great parents, though, that said avoid debt for as long as you possibly can. It was great advice.

Another way to think about debt — each payment you can make toward it, is actually a recurring savings that you are ultimately paying to yourself. If you have debt with an interest rate of 8%, making a payment on that debt is automatic 8% on that money that you never have to pay again, month after month. How long does it take a teacher or a parent to convey this fact to their kids????

#64 Bottoms_Up on 08.09.13 at 11:56 pm

#1 Shawn on 08.09.13 at 7:14 pm
————————————–
Think again, there are close to 1 million Canadians close to starvation. This represents close to 3% of our population. So your statement holds true for ‘most’ of us.

“In 2012, a record 882,000 Canadians used food banks each month, the highest level of food bank usage ever (Food Banks Canada), in 2011 the number was only slight lower at 851,014 – which is still 26% above the 2008 levels (Hunger Count 2011).”

http://www.cwp-csp.ca/poverty/just-the-facts/

#65 Bottoms_Up on 08.10.13 at 12:00 am

#11 ILoveCharts on 08.09.13 at 7:36 pm
———————————————
You obviously are new to the whole “get a mortgage approval” thing.

A bank will hold your rate for 90 days. But major changes can occur to their current offering (as Garth states), while they still have to honour their commitment to you. This tends to drag forward future demand in environments where rates are rising (you’re more likely to act and purchase a home knowing that you’ve ‘locked-in’ a good rate).

#66 Dc on 08.10.13 at 12:26 am

#47 Chicken little that salon is on the south side of 14 mile… That is Madison heights (the most northern part), the other side of the street is considered Troy mich (the most southern portion)

Anyways people make fun of Detroit but we have more in common with them than we think. At least the photo is a funny, not one the typical ruins

#67 Freedom First on 08.10.13 at 1:13 am

#41MarcFromOttawa

Your way of thinking is why Garth writes his free Blog. Pumping all of your money into a house bought at record high prices with record low interest rates and record long amortizations seems like a good idea to you. We are screwed……just like all of the other countries who had their own devastating housing market crashes.

First lesson……ALWAYS be financially: balanced, diversified, and liquid. No exception.

#68 Tony on 08.10.13 at 1:35 am

Re: #11 ILoveCharts on 08.09.13 at 7:36 pm

I’m seeing 2.99 closed for 5 years and 2.40 variable for 5 years.

#11 ILoveCharts on 08.09.13 at 7:36 pm

#69 Notta Sheeple on 08.10.13 at 1:37 am

For regular blog doggers here, today’s post is pretty much a summary of common sense.

For the balance of Canadians in their never-ending quest for that Holy Grail, a home to call home, common sense is so rare, it is often mistaken for genius.

#70 M. Winterton on 08.10.13 at 1:43 am

>> things are turning out for the Canadian economy about as I expected.

Actually no, this is the exact opposite of what you expected. This time last year you were saying that the chance of Canada going into recession was negligible, and that anyone who thought that was a crazy conspiracy theorist.

Slow growth, no recession. As I expected. — Garth

#71 ch on 08.10.13 at 2:17 am

Great article. Cool ending lol!
God damn I love your blog Garth.
Have a great weekend!

#72 Buy? Curious? on 08.10.13 at 3:11 am

So Canada is now experiencing what the rest of the world experienced over the past 5 years. I can’t wait to hear some sob stories. “Boo hoo, I lost my job. Boo hoo, I’m downsizing. Do you want to buy my BBQ? I paid a grand for last year. I’ll take $200. NO! Wait! Ok, $50?”

Right on mofos, I’m refurbishing my house with nearly new, second hand stuff from people losing their shirts, awright!

Bring on the Canadian economic tsunami!

Though on a serious note, Thank Justin Trudeau for bringing an enlightened new approach to legalizing marijuana. It’s about time.

JT for PM!

http://www.youtube.com/watch?v=GsNav3QgOzo

#73 Ronaldo on 08.10.13 at 3:15 am

#13 Gor Gon Lin – “You sound like a scared realtor”

Or a mutual fund salesman.

#74 Andrew Woburn on 08.10.13 at 3:45 am

#17 Ballingsford on 08.09.13 at 8:21 pm

US stats are also a fabrication even though you intimate things are getting better there.
=====================================

It is reasonable to expect the resilient and entrepreneurial US economy to be floating upwards after a shock as it appears to be. It is also reasonable to be concerned if not frightened by the decline in the quantity and quality of employment for more and more Americans. The contention that the “jobless recovery” proves that the US government is faking the improved economic statistics misses the point that both conditions could be true at the same time.

Simply put, the continuing substitution of capital for labour means that the same or greater amount of revenue can be generated by less employees. Business does well while employment falls. This is not new. In 1968 I was a summer labourer for a construction company. They handed me a sledgehammer, pointed to 400 yards of curbstone along an industrial street and said break it up. It took a week. Now an excavator would do it in a day. My first real job involved punching an adding machine in a payroll department. Computers took those clerical jobs a long time ago. More machinery, more production, less jobs.

Digital systems, power equipment and the export of jobs have dried up the greater part of low end industrial, construction, farming and clerical jobs. The Asians or machines took over, the companies prospered and the losers migrated into service jobs. Now the machines are coming after those service jobs as with automated checkouts at the supermarkets, or, in the not too distant future, driverless transport trucks. Therefore it is entirely possible for US output to be increasing now while full-time employment stagnates or falls. The introduction of Obamacare has accelerated this process as employers scramble to dump full-time employees in favour of part-timers to avoid the new costs of medical coverage for people employed for forty or more hours a week.

Economists used to pooh-pooh mere mortals’ short-sighted concerns about the impact of technology on decent jobs. “Creative destruction” would boost prosperity and create new jobs all around. Now even Paul Krugman has woken up according to a recent comment:

“Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.”

He’s figured out why the 1% has been getting richer but where will future customers come from? But then think about Brazil, a wealthy middle class surrounded by slum dwellers. Henry Ford needed thousands of consumers to support mass production runs but Tesla doesn’t. Perhaps the new reality in the US means not every one gets to play any more. Maybe that’s what 50 million people on food stamps really means. And why exactly has Homeland Security obtained 2,700 tanks and millions of rounds of military grade ammunition? The Al-Quaeda magic carpet invasion?

#75 Freedom First on 08.10.13 at 5:10 am

Garth, you are so kind to people. Especially the “dicks” and assho…s who write you. And that’s the nicer class of dicks and assho…es you actually publish on a daily basis. We already know the really not nice dicks and assho…s who write you with the real “hate mail” messages are being saved by you for the RCMP in case you disappear, or worse. To dick, and ass….., man up, show some respect, disagree, but be human.

#76 younameit on 08.10.13 at 5:43 am

Absolutely True, Grath.
You nailed it right in the head, where it belongs. I fully agree, that housing is in for a serious correction – atleast it will purge all those cashless virgins who have gone horny with free money from CMHC at low rates (who never deserve to own a home in the first place), or the Canadian Subprime.
People never learn from other’s mistake. When it comes to housing, they have to commit the mistake themselves to learn.

#77 AK on 08.10.13 at 6:58 am

Magna International Q2 estimates, nets $415M

#78 AK on 08.10.13 at 7:16 am

#51 clint on 08.09.13 at 10:16 pm
“Hope you ladies covered your PM shorts as I suggested last month…. Good call huh?… I’ll be back the end of September to see if any of you rookies had the cohunes to nibble a bit this week…….”
====================================
Yes. When you come back at the end of September, Gold will be lower than it is today.

Dead Money, Dude.

#79 Ballingsford on 08.10.13 at 7:41 am

#72 Andrew

Great post! I don’t think I’ve seen you around here before.

Today I’m going through my stuff and throwing out what I haven’t used in the last year. Should I sell it in a garage sale? No!

Have any of you driven around your neighborhood and noticed that your neighbors can’t park their cars in their garage because it’s too full of STUFF.

Who’s going to have to sort through all that mess when you croak?

#80 Randy on 08.10.13 at 7:44 am

Why are taxpayers propping up CMHC ???? It’s a Ponzi scheme…

#81 sunshine on 08.10.13 at 7:51 am

I am following all the listings on mls hoping to see something affordable in the GTA area and I don’t see any correction in prices. On the contrary there edging higher by the day.
I don’t know when or if there will ever be a correction. The fact is that now is not the case. Btw, my expectations are very low in what i want in a place, I realized a year ago I have been outpriced from this crazy market.
I am not a realtor, just a naive average joe who thought 10 years ago can live a decent life in a decent home.

#82 Stickler on 08.10.13 at 7:56 am

@ #33 willworkforpickles on 08.09.13 at 9:18 pm

No end in sight for a bottom on the TSX . Where and when will it bottom ? – can anyone guess ? – does anyone even want to try?

>> 11,255

#83 BillyBob on 08.10.13 at 8:52 am

#66 Bottoms_Up on 08.09.13 at 11:56 pm
————————————–
Think again, there are close to 1 million Canadians close to starvation. This represents close to 3% of our population. So your statement holds true for ‘most’ of us.

“In 2012, a record 882,000 Canadians used food banks each month, the highest level of food bank usage ever (Food Banks Canada), in 2011 the number was only slight lower at 851,014 – which is still 26% above the 2008 levels (Hunger Count 2011).”

——————————————————————–

Using a food bank is not the same thing as “close to starvation”. Speaking as someone currently posting from Lagos, Nigeria.

Get a grip.

#84 Waiting4Crash on 08.10.13 at 9:08 am

All this talk about the potential housing crash makes me wonder how it will affect our portfolios. Sure I’ve reduced my exposure of Canadian equities and have a diversified portfolio with us and international allocations but I have a hard time believing that this portion will offset the losses expected with the TSX when this housing market finally crashes. Thoughts?

Why would a housing correction hit the TSX hard? BTW, hope you don’t hold individual equities. — Garth
—————————————————————
Garth,

Correct me if I’m wrong but when a housing market tanks, markets also tank….for example, look at the US, Japan, Europe, etc. They will soon recover of course cause time is on your side but with the canadian housing market at a bubble territory, I’d expect the TSX will take a hit when this bubble finally pops.

Why? The most exposed would be banks, and they are well protected from a correction. — Garth

#85 TorontoBull on 08.10.13 at 9:28 am

I am sorry but the banks NEVER had a posted 5 year fixed at 2.69!

I said ‘published’ or ‘posted.’ Yes, it was published in offerings to clients. — Garth

#86 The Big M on 08.10.13 at 9:34 am

As #6 Sasha pointed out, every country has gone through a housing bubble or is about too and they survived.

The housing bubble in Canada is not unique, nor is the want or need to own a home. It’s worldwide and it’s directly tied to interest rates and the fluctuations we’ve been seeing in the last 12 months.

Basic economics folks and chastising people for choosing to own a home really accomplishes nothing except to create confrontations on a blog, name calling, etc.

All counterproductive.

The 4th Quarter will dictate the next 3 years I believe. The direction of interest rates will be established by then, the trend for house prices and sales numbers will be established, QE tapering or not and the implications of that and the stability or instability of the DOW and other Global markets.

For now, I’m going to relax and enjoy the rest of the summer. Gotta run, I have a tee off time at noon.

#87 live within your means on 08.10.13 at 10:04 am

#67 Bottoms_Up on 08.10.13 at 12:00 am
#11 ILoveCharts on 08.09.13 at 7:36 pm
———————————————
You obviously are new to the whole “get a mortgage approval” thing.

A bank will hold your rate for 90 days. But major changes can occur to their current offering (as Garth states), while they still have to honour their commitment to you. This tends to drag forward future demand in environments where rates are rising (you’re more likely to act and purchase a home knowing that you’ve ‘locked-in’ a good rate).
…………………………
When we bought out current home in ’91 we went to TD. I had been dealing with them since the early 80’s when it was Central Guarantee (IIRC). Our lawyer said we should get a 90 day rate guarantee. I think the rate at that time was 11%. TD would only give us a 60 day guarantee so we went to RBC. RBC’s mtg. was more flexible too. We paid it off in 7 yrs by doubling up payments, etc. A current friend bought the house we liked, but it was $5K more than we wanted to pay. We based our decision on one of us losing our job. Friend is up to his eyeballs in debt, yet they’ll fly to TO for a concert & only the best seats will do. I don’t know how they sleep at night.

#88 Doug in London on 08.10.13 at 10:05 am

@Mark, post #50:
I’ve been hearing what you said many, many times. In some parts of the country it’s actually hard to get the skilled people you need. With the economy slowing down, it should be easier to get the people you need going forward. No one wants to go to Dawson Creek? In 1993 I applied for a job in up north in Gillam, Manitoba that was hard to fill. Shortly after that the employer, Manitoba Hydro, was in a downsizing mode and surplusing staff. Suddenly, a lot of people were quite eager to relocate to Gillam to fill any vacancies. You’ll probably see the same happen in Dawson Creek and other remote locations.

#89 Daisy Mae on 08.10.13 at 10:15 am

#17 Ballingsford: “Garth, you mention at times that things are turning around.With the latest job numbers we are in a decline.”

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

“Things are turning around” in the USA.
“We are in a decline” in Canada.

#90 Rob_in_TO on 08.10.13 at 10:20 am

In the GTA, just under 20,000 new and unsold sitting on the shelf, and about 57,500 in the pipeline, to be completed within the next year or so is my guess. Many of these were probably bought by flippers, hoping for that quick profit. They get no sympathy from me, they will likely become unwilling landords, hoping they can just make the mortgage payments, maintenance fees, property taxes, etc.

For those that bought them to actually live in, my best wishes, these days the builders
increasingly get away with using shoddy building materials (can you spell p-a-r-t-i-c-l-e board?) and workmanship. I thought it was bad when I bought my first ‘new’ condo in 1984, lived there for 10 years. Then I bought a ‘new’ house, which was even worse, the builder used “scrub” labour and I sold it two years later, it would have been a decent profit, had I not been foolish enough to get emotional and load it up with $40,000 in upgrades. My last place was a condo again, moved in there in 1999, was one of the last of that bunch to buy and move in there. It was a comfortable place, 1500 sq.ft, a small low rise with very few units, not one of those monstrosities that cover much of downtown Toronto and other parts of the city. It was the maintenance fees that finally drove me out of there, $1,000 per month for a building with no ‘amenities’ except a small exercise room, containing only 3 pieces of equipment, a decent sized back yard that looked out onto some nice houses and a party room that doubled as the place where the AGM’s were held once per year. I just could not justify paying that much, have read on this blog a few times that maintenance fees for condominium apartments average about $500 per month – must be 400 to 500 sq.ft boxes in the sky, or brand new ones that have not elected a board of directors yet. That is when reality sets in, as many of you know, developers always put in very low fees when selling, to entice buyers.

Okay, so I rent a small unit now in ‘Condoland’, don’t love it, but at least it’s quiet in here, considering it’s 22 floors and in a nice neighbourhood.

I wonder how those resale units on MLS are doing. As for Kijiji or Craigslist, I should take a quick look, just out of curiosity.

“A growing number of people get it, including the same gang of developers, promoters and pumpers who constantly tell property virgins there’s never been a better time to plunge into real estate. They’re doing the opposite.”

Another thing to wonder about, all these “VIP” Condo Sales showing up all over the internet, not anywhere close to even breaking ground.

“Say, was that Brad Lamb’s Rolls that just streaked out of town?” Probably.

#91 Catalyst on 08.10.13 at 10:23 am

Garth, why you blocking my posts dawg?

No posts blocked. — Garth

#92 Daisy Mae on 08.10.13 at 10:25 am

#26 DONALD TRUMP: “As Garth said…bet against the U.S.”

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

Garth said: “DON’T bet against the USA.”

#93 Catalyst on 08.10.13 at 10:26 am

74K less government jobs and +31K private sector jobs is a great jobs report! We need more like it.

#94 Ballingsford on 08.10.13 at 10:44 am

#88 Big M

I lead a less active life; not really though. I’m going to relax and read in my anti-gravity chair and read a book, then go for swim, and then take a walk through the hood and try to talk to some Italians who are making tomato sauce from tbeir harvest of roma tomatos.

Man, I need to learn bow they do it. They make enough to last them all winter for their pastas and pizzas. They just cook them outside in these big pots and then bottle them. Not sure what else they add; maybe some basil.

Yummmmmm!!!

#95 Daisy Mae on 08.10.13 at 10:53 am

#54 TheCatFoodLady: “Most decided they’d either buy a car or go on a holiday. Not one mentioned paying bills or having any kind of cushion….”

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

They dribble money away getting their eyebrows plucked and their toenails painted. Very amusing if it wasn’t so pathetic.

#96 Chicken little on 08.10.13 at 10:57 am

68 Dc:

I think you are right. I enjoy my frequent visits here to Madison Heights/ Troy very much! It’s not all bad as you say.
You can still buy a decent house for a decent price.

The only thing I don’t like is that I’ll never see
Steve Yzerman here….

#97 Catalyst on 08.10.13 at 10:59 am

“No posts blocked. — Garth”

Weird, sometimes after submitting a post it goes to “your comment is under review” and other times it just clears the text and scrolls to the top of the comments.

For some site improvement ideas; can you please a) put links to some of the blogs where you discuss core macroeconomic topics like effects of interest rate movements or how ETF and re-balancing works. Like a favourites section…just throwing it out there.

Also, you should hyperlink your book pictures under ‘Abouth Garth’ to some site where I can buy them or provide an ecopy for d/l…I’d buy it.

Thanks for the near daily discussions, keep on trucking…

#98 T.O. Bubble Boy on 08.10.13 at 11:10 am

@ #82 Randy on 08.10.13 at 7:44 am
Why are taxpayers propping up CMHC ???? It’s a Ponzi scheme…
———————-
hardly… a ponzi scheme benefits the first buyers from the additional funds flowing in from future buyers. CMHC is hardly the one benefiting from new insured mortgages.

However, the housing market itself is a giant ponzi scheme… especially the condo market in Toronto, where developers just keep upping the price/sqft with each new project, and the old condo buyers keep selling to the new condo buyers at increasing prices (at least until 2012).

#99 Daisy Mae on 08.10.13 at 11:12 am

#66 Bottoms Up: “In 2012, a record 882,000 Canadians used food banks each month, the highest level of food bank usage ever…”

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

Doesn’t mean these families are ‘starving’. Food banks are, hopefully, a short term solution for single moms and out-of-work dads.

#100 Condo Minion on 08.10.13 at 11:12 am

What could possibly be wrong with $3000 monthly condo fees and assets that are about to plunge in value with taxes at three times the normal property rate?

http://www.thestar.com/business/real_estate/2013/08/10/toronto_trump_towers_investor_revolt_bigger_than_thought.html

#101 Penny Henny on 08.10.13 at 11:27 am

Most decided they’d either buy a car or go on a holiday. Not one mentioned paying bills or having any kind of cushion. When I was directly asked, I said I’d invest it. I got either sneers or blank stares. “What a waste of a windfall. Why would you do something that stupid?”

I dunno – why would I?

That was a Cat Food Lady Story.

if you ask a bunch of renters this is what you can expect for an answer

#102 comrade on 08.10.13 at 12:02 pm

Any comments on buybacks. Not sure if it is a trend but I noticed an increase in buybacks. Home Depot in February, timmy, blackberry is considering it now.
I know statistics is like bikini shows everything, reveals nothing. But statistics show that buybacks are 88% up this year in comparison to last year. They must find that their stocks are undervalued at this time.

Any comments on this?

#103 Namblin Man on 08.10.13 at 12:11 pm

Lovely post, Garth! I considered sharing it on Facebook but decided against it. It would fall on deaf ears anyway.

Anecdote time:

I’m 40 and I work with/supervise a bunch of guys in their 20’s. A couple of days ago, one of them completely blew my mind.

He is 26 (I think) & lives in his parent’s basement with his girlfriend. His girlfriend moved in a few months ago because she is pregnant – due in about one month.

He was talking with co-workers and I heard him complain that they can’t even get a $300,000 mortgage because their combined income isn’t over $70,000. I couldn’t resist joining the conversation.

I asked him why – with a baby on the way – he would want to further complicate things.

“To have a place of our own”.

“Why not rent”?

You know the rest…

The part that blew my mind was that he thought our employer should just pay him more to make up for his life changes without any demonstrable increase in productivity.

It ended with me telling him to get a higher paying job somewhere else & rub it my face when that happens. He shut up & went back to work.

This guy makes less than me, doesn’t have a working life-partner like I do & has gigantic baby-related expenses on the horizon (I happily rent with my wife & dog). He wants to buy real estate.

This is a sickness that needs a cure. I don’t think the latest government intervention is severe enough.

Or maybe his parents can’t wait to get him the F out of the house.

#104 rosie "moving forward" in the knowledge that, "this won't end well" on 08.10.13 at 12:13 pm

Condo bubble? What condo bubble?
http://www.torontocondobubble.com/

#105 Ballingsford on 08.10.13 at 12:24 pm

#103 Penny Henny

That comment about renters was totally like a greater fool comment. If you didn’t know, our investments and other bills are ‘paid in full’.

Sorry you don’t have enough cash lying around to treat yourself once in a while.

#106 father on 08.10.13 at 12:33 pm

Garth I was wondering why we are not heading for a recession with a majority of jobs in housing ?

#107 screwed on 08.10.13 at 12:54 pm

Not so quick and easy. We all knew this day would come.

Government got us into this debt mess and government needs to get us out. Government allowed 40 yr mortgages and subprime funding. Government also allowed foreign ownership of property to go unregulated. That is what skewed valuations and qualifications. Nothing else.

Government is in the crapper if the housing market implodes. Mass layoffs in the public sector already showing that.

Brother Poloz better get to Staples and buy all the ink for his printers he can manage.
If Poloz doesn’t print and soon, Uncle Stephen’s credit cards will maxx out and his funding will dry up.

Save the Loonie or save the economy. Can’t have both.

End of story.

#108 T.O. Bubble Boy on 08.10.13 at 1:47 pm

A rush for the exits?

This builder couldn’t even wait to get the stucco and stone facade on the $1.5M McMansion before listing it:
http://www.realtor.ca/propertyDetails.aspx?propertyId=13493736&PidKey=193827269

However, to prove that the insanity is still out there… check out what the sub-$1M market is like in Toronto right now (be ready to suspend disbelief).
http://www.realtor.ca/propertyDetails.aspx?propertyId=13217793&PidKey=-587074594

This is a $900k basic semi-detached on a 20ft lot!
And, thanks to cheap CMHC money for sub-$1M houses, there will likely be bidding wars for this flipped semi that was listed/bought for only $599k in 2010: http://guava.ca/?p=2281

That’s right folks, a 50% ($300k) increase in price for a 20-ft wide semi-detached in 3 years… and only a few basic renovations (if any) were done based on the pics.

what bubble?

#109 TilJ on 08.10.13 at 2:04 pm

There is no concise answer. I have often said a 7% overall return from a balanced, diversified portfolio is a reasonable expectation. — Garth
————————————————–

When people quote overall return, is that usually inclusive or exclusive of inflation?

Exclusive, inclusive of fees. — Garth

#110 daystar on 08.10.13 at 2:27 pm

#32 Devore on 08.09.13 at 9:15 pm

Well said. Credit expansion has shot way past income for a long time now, basically since F & H. Valuations were steamrolling when the Libs were in power as well, but there was income there to support.

CMHC’s insurance in force was $275 billion at the start of Harper. When Harper took over, household debt to GDP was 115%. 7 years later, its nearing $600 and CMHC is getting out of the 100% insurance game altogether because they are tapped, while household debt to GDP is at 165% and climbing. That’s a 50% increase for those who are challenged in math while incomes grew a mere 8% in the same timeframe.

All this growth came from loose lending regs from 2006 to 2012 and from “emergency” rates that lasted for 4.5 years. Banker CEO’s made out like bandits, politicians took and remained in power with the wealth effect and a good chunk of the population is worth more, but its all built on borrowed money that income can’t support when higher rates return so unless folks cashed in and gained capital, it might not be realized. Not hard to guess what follows every other bubble that deflates.

I haven’t looked at the jobs numbers but my guess is jobs are bleeding directly and indirectly from RE and this trend will continue. All the signs point to it. Rate hikes, housing starts around 200,000 annual again that are unsustainable numbers for Canada, CMHC shrinking 100% insurance volume by 75 – 80%, likely permanently down the road as the $600 billion ceiling is likely to remain meaning rates will get higher by a half point overall but it could surge to a full point or more depending on demand and the future of long term bonds which is higher from what I can tell, possibly sooner, especially with the U.S. fed is saying concerning Q.E. coupled with the edgy elevated risk that MBS’s pose when RE leads the way in recession. Defaults will be the leading indicator.

Looking long term, Canada has been running trade deficits now for a year and a half. Keystone is being stalled because pipelines and facilities can’t keep up with increased U.S. production as it is (although that’s changing). The proposed West/east pipeline is 4 and 5 years away with refineries possibly longer. If prices remain strong in the meantime, it might not help Canada in the sense that we don’t get WTI prices, we get WCS and the gap is around $20 a barrel and widening as U.S. production continues its energy renaissance. U.S. demand for oil is also popping, another sign on the growing list of recovery that doomers claim still isn’t happening, but I wander. I think energy prices will remain strong, but it might not support the loonie like before and the consequences of a falling loonie is higher export costs at a time where we are running trade deficits. Export volumes will have to ramp up an I don’t see that magic happening for Canada overnight.

http://www.bloomberg.com/news/2013-08-08/canadian-light-crude-oil-strengthens-before-plant-maintenance.html

I’m going to get bold here and call for a Canadian recession beginning in the first half of next year. I’m basing this on growing unemployment, a drop in currency, trade deficits and rising interest rates in the bond markets. This recession will likely double and triple dip and last for a period of several years once it starts. No soft landing whatsoever from what I can tell and few should be surprised.

#111 daystar on 08.10.13 at 2:39 pm

“the consequences of a falling loonie is higher export costs” – daystar

Wups, I meant higher import costs as the loonie falls meaning trade deficits are here to stay until volumes and manufacturing catch up and it won’t be any time soon.

#112 Donald Trump on 08.10.13 at 2:58 pm

#94 Daisy Mae on 08.10.13 at 10:25 am

#26 DONALD TRUMP: “As Garth said…bet against the U.S.”

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

Garth said: “DON’T bet against the USA.”

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

C’mon Daisy Mae quit being so legally blonde, at least be a whacky redhead.

#113 Stoopid Idiot on 08.10.13 at 3:18 pm

Great post Garth…. The last vestige of wealth resides in the hands of the private sector, housing and pension… Soon to be gone

http://en.wikipedia.org/wiki/Cloward%E2%80%93Piven_strategy

Ann Barnhardt:

The Economy Is Going To Implode – Full Version

http://www.youtube.com/watch?v=7bA_NbYSaGM

#114 Waterloo Resident on 08.10.13 at 3:38 pm

Time and time again I see posters here talking about how they are a couple,with the guy earning $250,000 +, and his wife earning almost the same. Yet they come here and ask Garth if they should sell their $350,000 house and just rent for a few years.

I shake my head in disbelief when I have friends who are University grads, working 24/7, and still have a hard time earning $60,000 in today’s downsizing / layoff-crazy / temp-work economy.

Then I shake my head in disbelief again when I realize that the couple earns $500,000 per year, yet they are worried about a house that cost less than what they earn?

First of all; where do jobs like that exist for guys in their 30’s these days?

Second of all, where can a guy buy a $350,000 house in Toronto these days?

#115 April on 08.10.13 at 3:59 pm

#92 Rob. I’m often looking on MLS just for curiosity and I’ve never seen condo maintainance fees of anywhere near $1000.00 per mth. That must be some plush place your living in.

#116 Donald Trump on 08.10.13 at 4:04 pm

Hey Smoking Man:

Re blog photo

How many times did they turn you down ?

Did they refer you to a dog groomer ?

#117 Julia on 08.10.13 at 4:08 pm

High prices or high mortgage rates. Either way people can’t afford houses. http://www.theguardian.com/society/2013/aug/10/housing-bubble-families-london-help-to-buy?CMP=twt_fd

#118 Ballingsford on 08.10.13 at 4:23 pm

#117 April

Where do you live? I know of lots of places around here that have close to that rate.

Sucks to be them though.

#119 TurnerNation on 08.10.13 at 4:33 pm

Realtors panicking and twittering! Vs. our forum host. Quite a slugfest on there

#120 willworkforpickles on 08.10.13 at 4:49 pm

daystar #112 – about that coming recession….you may want to buy stock in your favorite distiller right about now. The masses really hit the hard stuff in hard times.

#121 Devore on 08.10.13 at 4:55 pm

#65 Bottoms_Up

Another way to think about debt — each payment you can make toward it, is actually a recurring savings that you are ultimately paying to yourself. If you have debt with an interest rate of 8%, making a payment on that debt is automatic 8% on that money that you never have to pay again, month after month.

Huh?

How is paying interest on a loan “paying yourself”? You’re still paying interest, so unless whatever you bought with that debt has benefits greater than the interest (look up the definition of consumer debt), you’re paying yourself nothing.

#122 Whinepegger on 08.10.13 at 4:59 pm

Is it really different here?

http://www.winnipegfreepress.com/business/housing-sales-starts-red-hot-219088871.html

What in this picture could one possibly read as a negative RE trend – other than a small drop in SFH starts? Or is it a harbinger of the distance Winnipeg will have to fall to get back to realistic prices?

#123 tkid on 08.10.13 at 5:07 pm

#117 April. Plenty of places have high monthly fees. See along the Queensway for an example.

#124 Kilby on 08.10.13 at 5:22 pm

#117 April on 08.10.13 at 3:59 pm
#92 Rob. I’m often looking on MLS just for curiosity and I’ve never seen condo maintainance fees of anywhere near $1000.00 per mth. That must be some plush place your living in.
+++++++++++++++++++++++++++++++++++++

1,500 sq. ft. unit, lot of floor space, the bigger your floor space, the more you pay. 600 sq. ft. may only be $500….

#125 Devore on 08.10.13 at 5:26 pm

#103 Penny Henny

You were trying to make a point, but I thing you forgot do it. Something about labeling and stereotyping people?

#126 johnanddagney on 08.10.13 at 5:58 pm

#99 catalyst
Garths blogs of interest:
Oct 15 2012 “Non Cowboy Portfolio”
Oct 28 2012 “Banking”
Canadiancouchpotato.com/model-portfolios/
Andrew Hallam “Millionaire Teacher”

For those “deer caught in the headlights” of the realestate correction and failed to sell their houses in time, cue the music. Pink Floyd “no one told you when to run, you missed the starting gun”

#127 Evan on 08.10.13 at 6:49 pm

Garth – what do you make of this one news story’s assertion that the collapse in land investment “will mean fewer homes coming on the market in coming years, which in turn could help drive prices up and help a slowing housing market”?

The above post dealt with it. — Garth

#128 disconnect on 08.10.13 at 7:19 pm

So let me understand this. This year, CMHC was given authority to guarantee up to $85 billion under the program but by the end of July, $66 billion had already been committed. That’s $9.4 per month, on average. Now F , through CMHC has notified banks, credit unions and other mortgage lenders that they will each be restricted to a maximum of $350 million of new guarantees this month under its National Housing Act Mortgage-Backed Securities (NHA MBS) program. So some little credit union has the same limit as say one of the big-five banks. Does this make any sense? By the way, this limits the big-five to total of $1.75 billion per month. That has to be a big drop from what they loaned out (with CMHC) before. I would have to assume the big-five were well over 50% of the mortgage business (in Cnd). don’t think we heard the last on this one.
Also, why not just raise the minimum down payment? Well that would be F saying you cannot have the house, now the banks have to say it. Gutless as usual.

#129 Evangeline on 08.10.13 at 7:34 pm

#104 comrade: “Any comments on buybacks. Not sure if it is a trend but I noticed an increase in buybacks. Home Depot in February, timmy, blackberry is considering it now….They must find that their stocks are undervalued at this time.”

Barry Schwartz at Stockchase re Timmy’s: “2 activists are pushing hedge funds and he agrees with their findings that this company should take on some leverage to buy back stock. At this price, it is no longer a reasonable bargain. Not sure what they should do. If it fell 10% from this point, he would consider it as an opportunity.”

He made those comments on Aug. 6, when THI was trading at 59.70. On Friday, Aug 9 it closed at 61.08.

I think buybacks have a positive effect on share prices and in Timmy’s case I don’t think buybacks are because the shares are undervalued, but are means of boosting the prices of already overvalued stocks even more.

#130 think again on 08.10.13 at 7:35 pm

“Recovery? US Has Enough Empty Houses to Hold Population of Britain…”

http://www.storyleak.com/recovery-us-enough-empty-houses-hold-population-of-britain/

#131 Daisy Mae on 08.10.13 at 7:42 pm

#123 DEVORE: “Huh? How is paying interest on a loan “paying yourself”? You’re still paying interest, so unless whatever you bought with that debt has benefits greater than the interest (look up the definition of consumer debt), you’re paying yourself nothing.”

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

I wondered about that reasoning, also. ;-)
Credit is not free. It is not cheap. You lose.

#132 kothar on 08.10.13 at 7:50 pm

I have read the past few blogs and haven’t said anything for a bit.

Regarding REITS, why would anyone who bought them for yield ever sell just because they go down a bit???? They will go up and down, but always will pay out to an owner!

GOLD, really don’t understand the mythical nature of this and the goldbugs mentality. Hold 5% physical or less if you think the world will end.

Realestate, a home is a place to live, if it goes over 3x your income, you can’t nor should live there. As well as Garth says if it makes bulk of your net worth, get out and rebalance things.

#133 espressobob on 08.10.13 at 8:36 pm

#134 kothar

Thats the problem with retail investors, well most of them. Panic sets in, they hit the sell button! Don’t get the concept of re-balancing. Gold, gotta be kidding? Actually index investors hold this sector anyways and probably don’t care. RE prices are a joke! Your comment makes a lot of sense, cheers.

#134 Smoking Man on 08.10.13 at 8:39 pm

The comments here are like a broken record. Everyone making predictions without even the slightest connection to the universal consciousness consolidator.

I went into great detail of its power in one of my many unpublished books.

Ultimately one needs to have a bit of schizophrenia to tap it’s power. Voices inside head, lips moving when connecting.

Full blown schizophrenic’s have a strong connection, too the normal observer they appear mad. They are not mad A average human brain on a strong connection can not handle it.

Less you me.

Leave the predictions to me. And never bet against me you will lose.

Damn got to run, the voice is back………….

#135 CantRememberMyName on 08.10.13 at 9:03 pm

What kind of a loser actually drives a Rolls Royce? He’s called a Chauffeur. (Not sure if I spelt that right ;))

#136 CantRememberMyName on 08.10.13 at 9:17 pm

People need to realize, the Universe is infinite, our lives are rental. When you get it, you’ll get it.

LAST!!!

#137 Macrath on 08.10.13 at 9:26 pm

Mad Max Keiser is on fire taking shots a Canada`s housing bubble and Sir Blogdog Mark Carney .

Keiser Report: Open Sewer of Fraud
http://www.youtube.com/watch?feature=player_embedded&v=cxHegCocur0

#138 Shawn on 08.10.13 at 9:27 pm

DISCONNECTED

Disconnect at 130 remarks that banks will be able to lend out a lot less due to the very recent CMHC reduction in the mortgage backed securities program.

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

Not true, the recent change did not affect the amount of CMHC guaranteed mortgages that can be issued. It only had to do with bundling mortgages and selling to investors.

It means the banks have to fund the mortgages a different way. It means the mortgages will stay on the bank’s balance sheets and be funded with bank equity, debt or deposits on the liability side of the balance sheet.

As banks lose their cheapest funding source they can simply issue debt to fund the mortgages.

Mortgages rates will rise.

This CMHC change is not a huge big deal. Mortgages will continue to be available.

#139 CantRememberMyName on 08.10.13 at 9:32 pm

#60 Big Angry Bear on 08.09.13 at 11:23 pm

Hallejulla!!!

#140 Yuri Duboisky on 08.10.13 at 9:56 pm

Hi, Garth! I enjoy reading your blog for almost a year.
You are writing about real estate and investments. But idea of greater fool has many practical implications in other areas. For example it may be used in Toronto’s restaurant business. It is another big casualty of the crisis when disparate owners trying to find a greater fool to get rid of a falling down business.

#141 mortgagebrokeron on 08.10.13 at 9:59 pm

my brother just sold his house, he builds one every couple years then sells them.

the people who bought his house are having to sell their beamer in order to qualify for financing.

Keep in mind the people you see driving porsches and beamers. A large number of those people don’t have the cash to buy those things, also betcha a dollar a fair amount of those vehichles get repossessed

#142 Siva on 08.10.13 at 10:13 pm

In Love It or List It Vancouver a fire fighter buys a $960K house

#143 Piccaso on 08.10.13 at 10:21 pm

#136 Smoking Man on 08.10.13 at 8:39 pm

You better go run after that voice before it drinks your last beer.

#144 2CentsCdn on 08.10.13 at 10:29 pm

#136 Smoking Man
Go for a walk …. get some air…. soon … please. I can see a progression of madness in play. The advice still carries weight …. but the host is starting to take itself way too seriously and consume itself (in this case a “he”). Were you the inspiration for Kevin Spacey’s character in the movie Seven? What is in that box SM? : )

#145 Big Brother on 08.10.13 at 10:31 pm

#136 Smoking Man on 08.10.13 at 8:39 pm

MK-Ultra is watching you, you’re lips move but I can’t hear what you say!

#146 OK Scaremonger - new idea on 08.10.13 at 10:33 pm

Garth, could you for a change run an article about MOST POSSIBLE POSITIVE RE SCENARIO in your opinion?

I would be very curious to hear it, the most optimistic one, pls

#147 bob slydel on 08.10.13 at 10:46 pm

I had the chance to listen yesterday to a Paul Craig Roberts interview on youtube -he is former assistant secretary of treasury from Reagan’s time. The guy’s reputation is impeccable, his view on outsourcing is spot on.

So when he and also David Stockman – former director of the budget for Reagan’s administration speak I tend to listen. These guys are not conspiracy theorists, they are economists with decent track records.

It seems there are some very deep troubles in the state of the economy that are not publicly known.
What troubles me most is that the media does not cover at all similar views, rather sticking to the popular mainstream views.

Can’t get rid of that ‘Matrix’ feeling that there is something fishi in the air. Remember how everything was fine with communism until it was not.

#148 bob slydel on 08.10.13 at 11:02 pm

Never have been Real Estate or precious metals fan but it seems what is mostly passed between generations is real estate and jewelry. Still keeping that small silver earing from my grandma.

Despite my position that aligns with Garth’s on stocks, gold and real estate I am starting to question lately the sanity of the environment we live in.

With crappy bungalows in North York going north of 1 mln. and a statement that the real estate prices decline will be moderate I am starting to question the value of the money we use and starting to lose any respect for it.

Even though my stock returns are impressive they are nowhere near the appreciation of houses in the last 10-15 years.

With the zirp (zero interest rates policies) here to stay and with all the money printing and cheap credit I am extremely worried.

Tapering is not possible, it will drive the interest rates up as there is no way in hell I am going to buy any bonds or stick cash in GIC for less than 6-8 % annual return.

#149 Smoking Man on 08.10.13 at 11:25 pm

#147 2CentsCdn on 08.10.13 at 10:29 pm

What is madness, it’s a behaviour category and painted on an individual by the collective who’s vision and senses is deliberately diluted by its slavers,

Madness is the individual who cherish individuality, loves himself, who rides track 5, a man who believes in nothing as a result of being a gifted lier.

Being different in today’s world is dangerous, living a life without fear is an act of insanity to the collective.

I like being mad. I’ve always been mad.. I will always be mad.

Well at leased till I find god, and if I do, please someone shot me.

#150 Donlad Trump on 08.11.13 at 12:03 am

Smoking (wohoohoooo- ooooo)Man

Your wisdom is glow ballzhuy ackwno-alleged..evem By irish prson O’ .B laden

#151 Enz on 08.11.13 at 12:04 am

Hi Garth thanks for your persistence over the many years 5 to be exact. I sold my palace pier condo in oct 2008 just prior to us meltdown and canadian 10% free fall. Since then toronto prices have soared to even higher levels. I’ve been a happy renter since then and firmly believe we are at the inflection point for toronto housing. I’m shorting aggressively home capital, genworth, mcan and others. This once in lifetime opportunity!

#152 collettenewwest on 08.11.13 at 12:04 am

#125 tkid –
You must be referring to high end condos well over a million or more. I have checked condos up to 1 million in the city of Vancouver and I didn’t see any fees for more then just over #500. Maybe it’s different in Toronto.

#153 Smoking Man on 08.11.13 at 12:40 am

When it rains, the normal’s reach for umbrellas, in the sun, Spf60.

Not I, I take my shoes of and splash in the puddles, in the sun, Hawaiian tropic oil.

Did you bubble heads know the moon is not round, Its egg shaped, bigger end facing earth. It don’t spin.

How do I know this?

I died in a strip joint as the song great gig in the sky was playing, little to much white powder that afternoon.

Becky my angle took me on a tour of the universe that;s how I found out about the moon. was spectacular.

I went threw the UCC learned all kinds of shit. Met who I thought was god, but no, the crazy voice in the coconut playing games.

I think.

Was revived in the ambulance, woke up in hospital.

I was thirsty, I levitated a glass water floated it to my hand.

Had the cure to cancer, saved everyone, put a lot of people out of work. The spy services where after me, as I transformed the old to the young. Made problems go away for humanity.

they came after me, I made there heads explode. This power went out of control. Eventually I was left with true blue ass kissers worshiping me. I could not take it.

Went to a bridge jumped. I woke up in the same hospital with the same power.

I decided not to use it, I hide now.

I took up blogging as a hobby.

and here I am.

#154 bill on 08.11.13 at 1:27 am

#149 OK Scaremonger – new idea on 08.10.13 at 10:33 pm
everybody gets a pony….

#155 Edmontonian on 08.11.13 at 1:40 am

We’ve got over 20 huge high-rises slated for edmonton..http://www.edmontonsun.com/2013/08/09/hicks-on-biz-edmontons-high-rise-condo-explosion
Who will buy them all? thousands of edmonton condos around the city, many units, like the Icon II mentioned in the article still advertise brand new suites for sale, even though the building was completed in 2008. This won’t end pretty!

Also: good article on what REAL inflation is, not the governments B.S. numbers, REAL inflation IS MUCH HIGHER! Makes me really want to get my but in gear and invest (as GArth has been telling us all year)with a reliable person I can trust who won’t fee me to death, any suggestions anyone? http://www.migratorynerd.com/journal/the-real-inflation-rate/

#156 Devore on 08.11.13 at 2:05 am

#141 Shawn

Number 65 Bottoms_Up writes intelligently that debt is to be avoided and that AFTER it is incurred it is a benefit to pay it off and avoid the interest.

Paying interest is an expense, not savings. It is not “a recurring savings that you are ultimately paying to yourself” any way you want to spin it.

I’m surprised, you’re the word-smithing nit-picker here.

#157 Devore on 08.11.13 at 2:15 am

#141 Shawn

To head off your retort, if the debt is for an investment, an income-producing asset, then the interest is largely irrelevant, provided the returns are greater than the interest. This is the “good debt”, that allows you to build wealth and equity. The other kind of debt is consumer debt, and it is dumb to claim even a cent of interest paid on such debt is any form of “savings” whatsoever. You should not be advising anyone on financial matters if this is your position.

#158 Stickler on 08.11.13 at 8:27 am

@ #104 comrade on 08.10.13 at 12:02 pm

Any comments on buybacks. Not sure if it is a trend but I noticed an increase in buybacks. Home Depot in February, timmy, blackberry is considering it now.
I know statistics is like bikini shows everything, reveals nothing. But statistics show that buybacks are 88% up this year in comparison to last year. They must find that their stocks are undervalued at this time.

Any comments on this?
—-
>> If you have nothing productive to do with the $ then you buy back shares with surplus cash.

If you take on more debt to buy back shares it could be good (cheaper financing) or could be bad (too much debt).

So it depends if they are generating tons of cash, or if they are skeptical about future growth or covering up deteriorating metrics.

If a company’s stock is suffering from deteriorating financial ratios, buying back stock can give some of the ratios a temporary boost.

Key ratios like earnings per share (EPS) and price earnings ratio (PE) look better because they are based on the number of outstanding shares.

Reduce the number of shares and even though earnings don’t change, the EPS looks better.

#159 Sean Murphy on 08.11.13 at 8:28 am

Hi Garth,

I think the days of reckoning you have been writing about for the last few years are fast approaching.

I got out of that trap a couple of years ago, lots of house, no money. Thanks to cash back mortgages and bad decisions on my part I had to bring a $10k cheque to close the deal. Ouch. It was still $10k well spent. It was the start to climbing out. We still wobble in around the stats you gave above but the direction is up.

Do you still take on clients and if you do is there certain financial criteria to be met first before you consider them? I would like to get more serious about moving forward financially but am struggling with structure and a game plan.

Too bad this blog isn’t 20 years old.

#160 Daisy Mae on 08.11.13 at 8:59 am

#132 Think Again: “Excerpt: The Census Bureau actually keeps track of the number of empty houses, and the numbers it found in the last report are bothersome. They indicate that the real estate market is still far from recovery despite the media claims of a new housing boom.

Read more: http://www.storyleak.com/recovery-us-enough-empty-houses-hold-population-of-britain/#ixzz2bfGqtdyg

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

Who said anything about a ‘housing boom’? The USA recovery will be very, very slow.

#161 Daisy Mae on 08.11.13 at 9:19 am

#65 BOTTOMS UP: “Another way to think about debt — each payment you can make toward it, is actually a recurring savings that you are ultimately paying to yourself.”

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

That 8% is compound interest.

#162 unbalanced on 08.11.13 at 9:30 am

To Rambling Motor Mouth Man. Give me a brake and leave. I git tired scrolling pass your name. All you do is come hear to pulls chains. Now schoo, sciddle along. Go work and pay the taxes.

#163 Stoopid Idiot on 08.11.13 at 9:58 am

#46Suede

RAK Brother

#116Waterloo Resident

First of all; where do jobs like that exist for guys in their 30′s these days?

You may need to move… Mcmurray or a Process Operator’s Job (Power Engineer 4th. Class minimum.. 3rd. for sure) you get a third I’ll give you the job… will take about two years and around 500 hours O.T. average for 300K plus.

http://www.eluta.ca/jobs-in-Fort-McMurray-AB search Process Operator. Remember… this is typical entry level

https://jobs.nexeninc.com/psc/ps/EMPLOYEE/HRMS/c/HRS_HRAM.HRS_CE.GBL?Page=HRS_CE_JOB_DTL&Action=A&JobOpeningId=5281&SiteId=1&PostingSeq=1&

#164 Herb on 08.11.13 at 10:18 am

#156 SM,

“and here I am.”

Pity.

#165 Ralph Cramdown on 08.11.13 at 10:42 am

#158 Edmontonian — “Also: good article on what REAL inflation is, not the governments B.S. numbers, REAL inflation IS MUCH HIGHER!”

That article is based on Shadowstats. Shadowstats is a guy in a room who takes the government number, adds a constant to it, shows us the two numbers and says “Look, inflation is higher than the government says it is!” This strikes me as a loopy and unsound methodology. If you want to measure inflation by doing research, or citing others’ research, cool. But quoting Shadowstats doesn’t score any points.

http://www.econbrowser.com/archives/2008/10/shadowstats_res.html
http://bpp.mit.edu/

#166 tkid on 08.11.13 at 10:47 am

#155, Okay babe, now I have your number. You’ve got lots of opinions but no data to back them with and no intentions of ever doing the homework.

Translation: if you had clicked the link you would have seen a nice 2 bedroom condo for sale for $300,000 with parking.

#167 The Big M on 08.11.13 at 10:58 am

Are there tax advantages to taking out a mortgage on your house and investing it?

Is all of the interest tax deductible?

Anyone know how this works or have a link to a site that covers this off?

Interest on any borrowing used to generate income (or acquire assets with potential capital gains) is deductible from taxable income. Includes HELOC or mortgage interest, for example, used to build financial portfolio. — Garth

#168 TheCatFoodLady on 08.11.13 at 10:59 am

#103 PennyHenny

***if you ask a bunch of renters this is what you can expect for an answer***

That comment certainly applied to that particular bunch of renters. Others here sold family homes as they prepared to retire to have liquidity for life choices. Two have chosen to rent all their lives in spite of good jobs in order to invest, travel; have CHOICES.

In short – not all renters are irresponsible wastrels. Not all home owners are winners – especially if they rushed into ownership without thought of carrying costs & possible icreases in taxes, mortgage interest rates & other carrying costs.

EVERYBODY needs to assess their own particular set of circumstances & work out what’s best for them – especially over the long term.

#169 The Big M on 08.11.13 at 11:04 am

Interest on any borrowing used to generate income (or acquire assets with potential capital gains) is deductible from taxable income. Includes HELOC or mortgage interest, for example, used to build financial portfolio. — Garth

Thanks Garth. Given the current rates would this be something you would recommend.

Assuming no mortgage right now and debt free.

#170 NoName on 08.11.13 at 11:07 am

#104 comrade on 08.10.13 at 12:02 pm

Often many people see buy back as a good thing, but i do think somewhat opposite. As #161 Stickler sad there is many underlying reasons for buybacks, but believe companies that fear that wont grow or ravenues or margins will shrinking in a near future will do buyback, and boards tap them selves on the shoulders around bonus time how good job they did…

#171 JimH on 08.11.13 at 11:14 am

#132 think again on 08.10.13 at 7:35 pm
you write; ““Recovery? US Has Enough Empty Houses to Hold Population of Britain…”
http://www.storyleak.com/recovery-us-enough-empty-houses-hold-population-of-britain/
=====================================
“Think again” is excellent advice! I suggest you take it! If you had to taken just a few seconds to investigate the ‘U.S. Census Bureau News’ release on which the article you link to is based (here you go…)
http://www.census.gov/housing/hvs/files/qtr113/q113press.pdf
…. you’ll quickly see in table 1 that the Household Vacancy rate is currently at 2.1%. The rate was as high as 2.8%-2.9% in 2007-2008; BEFORE the great financial crisis of 2008 and as the US housing bubble was deflating!
Since 2009, the household vacancy has actually DECLINED by about 25%! Yet you apparently see this decline in the number of empty houses as evidence for no recovery in the US?

The storyleak website is loaded with fake articles and depends on people who are so desperate for support for their far-right, anti-Obama, anti government, anti money, anti-bank, anti just-about-everything-that-doesn’t-hold bullets that they’ll grab hold of even the most ridiculous headline and blast it out as gospel truth.

Yes, please take a moment to ‘think again’! It will require using that perfectly good brain of yours! You are not stupid, so what have you got to lose?

#172 Smoking Man on 08.11.13 at 11:15 am

#167 Herb on 08.11.13 at 10:18 am

Herb Herb Herb.. My most favorite poster on GF, you personify the structure, you are the rock of stability, the grand father of normal

No thanks, when I toured the universe, off the orian nebula there was an old man, he’s floating in a winged chair. I recognized him, it was Einstein, crying like a baby.

I admire him not for his science, he got it wrong. Universe is shrinking, he was a great philosopher, with rebellious tinge toward the machine.

He was sad, no puzzles to figure out, all knoswledge acquired, spending the rest of eternity with no challenges.

You remind me of him, in appearance only…

#173 Dogman01 on 08.11.13 at 11:17 am

Wow the MSM has picked this up; must be monitoring the blog now.

Canadian housing boom in ‘9th inning’

http://www.cbc.ca/news/business/story/2013/08/11/canadian-housing-market.html?cmp=rss

#174 Keith in Calgary on 08.11.13 at 11:37 am

Like has been said before………….

When the MSM starts putting articles on the front page that the end is nigh………….it’s too late to undo the damage.

#175 Herb on 08.11.13 at 11:42 am

#175 SM,

you’ve been had! You thought that you were linked into the UCC, but actually your “angle” Becky was a Smoking Man and hooked you up to the UBS (Universal Bullshit Generator).

#176 Herb on 08.11.13 at 11:47 am

Sorry, that’s “UBG” not UBS in my previous.

#177 Victor V on 08.11.13 at 12:22 pm

Well over a year after Toronto’s Trump International Hotel & Tower officially opened, investors in more than 200 hotel-condo units have yet to close on their suites in the troubled project.

This fact, which is just hinted at in a recent court filing, means rookie developer Talon International has yet to collect final payments on all but about 50 of the 261 hotel-condo suites in the 65-storey luxury landmark.

It also means that Talon International is still on the hook for many of the day-to-day costs of running those units, including maintenance fees averaging well over $3,000 a month and commercial taxes on the roughly $800,000 units, which are three times the residential tax rates.

http://www.thestar.com/business/real_estate/2013/08/10/toronto_trump_towers_investor_revolt_bigger_than_thought.html

#178 Victor V on 08.11.13 at 12:37 pm

The number of $1 million-plus condos for sale in Toronto has reached such “shocking” levels, it would take about 20 months to sell them all given current demand, more than four times what it would take to clear the current inventory of more conventional condos.

What’s even more worrisome is those numbers don’t include “shadow inventory,” which could easily exceed the number of high-end condos that were listed for sale on the Multiple Listing Service as of the end of June, says Toronto realtor Andrew la Fleur who did the math recently on behalf of an investor.

That shadow inventory includes units that have yet to sell in five-star hotel projects like the Trump International Hotel & Tower, Ritz-Carlton, Shangri-La and Four Seasons, all of which have hit the market in the last two years.

http://www.thestar.com/business/real_estate/2013/08/02/shocking_number_of_luxury_condos_for_sale_on_mls.html

#179 Infused with Opiates on 08.11.13 at 12:41 pm

40 Herb – good morning (here anyways)

From archived 2006 census data for candian households:

12.2M total, 8.4M owner occupied, 4.9M with mortgages

I havent been able to post the link successfully but if you google “household tenure and mortgage status statscan” you might find it. I would imagine more recent data would increase all figures. Regardless, I expect many owners to still be mortgage free.

The stat I find unbelievable is that 84% of us cant live for 6 months without a paycheque. Of course if we count your fed pension as a “paycheque” as opposed to “savings” maybe that is true.

Garth – perhaps if you supplied the link to the study it
would help. Thanks.

#180 Mister Obvious on 08.11.13 at 12:48 pm

#176 Dogman01

Thanks for the link. My only complaint: Benjamin Tal choose to use the tired old ‘9th inning’ baseball analogy. But, as everyone knows, we are in for a ‘Canadian style’ crash/correction:

We’re now in the final minute of the fourth quarter. The Ottawa Bullriders are down a single converted touchdown against the ReMax Pumpers. It’s a full-on grudge match. For most of the season these two teams have been in a see-saw battle to stay out of last place.

Ottawa has just taken possession deep in their own territory. Quarterback Flaherty has been throwing progressively shorter passes. In the opening quarter he completed a ‘hail Mary’ 40 yarder but since then he’s completed consecutive 35, 30, and finally, 25 yard efforts.

Coach Harper knows this will be the final drive of the game. Flaherty takes the first down snap and draws back looking for a deep receiver…

#181 Herb on 08.11.13 at 1:05 pm

#122 Daystar,

we indeed are on a direct route to a domestic recession. The RE market and its rat tail of contingent enterprises has gobbled up all the loose money available and generated a lot of debt. In the absence of rising RE values, that money is “sunk”, does not grow, can’t be pulled out, and is not available for other purchases or investment. Just servicing the existing RE and consumer debt will ensure that there is no economic growth. When cash and credit are exhausted, it’s over.

Add higher bond prices/mortgage rates and the possibility of RE capital depreciation (inevitable, given lack of buyer demand and mortgage financing), weaken resource demand, mix in higher unemployment and even tighter consumer belts, reduce government revenue, and we have a crisis the Harper Government won’t even be able to tap dance around. Wish I saw grounds for optimism.

#182 dosouth on 08.11.13 at 1:20 pm

Guess who is at it now in England…..yes you guessed it!

I warned you Mr Carney

#183 CalgaryRocks on 08.11.13 at 1:32 pm

#160 Devore on 08.11.13 at 2:15 am
The other kind of debt is consumer debt, and it is dumb to claim even a cent of interest paid on such debt is any form of “savings” whatsoever. You should not be advising anyone on financial matters if this is your position.

If you have 1000$ in debt at 8% => 1000* .08 = 80$ interest / year.

If you pay off that debt you save 80$ thus the equivalent of investing 1000$ @ 8%.

And actually, if your tax rate is 35% then you would need to invest 1000$ @ 12% in order to keep 80$ which you need to pay of the interest.

You understand now?

#184 45north on 08.11.13 at 1:36 pm


Here are four reasons we may be entering a difficult time for residential real estate

Fewer jobs
Higher mortgage rates
Less mortgage funding
No money

yep

Daystar: No soft landing whatsoever

I’m afraid not

dogman01: from your link: some of the data, such as home prices and starts, is pointing to the soothing “soft landing” that homeowners, economists, banks and politicians are fingers-crossed hoping for, others, like land purchases and building permits suggest the real message is: the crash is coming.

Garth asks is the market wobbling around the top?

yeah I think it is but it is not yet obvious. Basically 2013 does look a little slow with a spurt in July but the pattern of previous years has held up. The pattern is that sales increase by a factor of 3 between January and May.

Mr Buyer: is this you? I mean I know you live in Japan and not S. Korea but does it feel like you?
http://www.theglobeandmail.com/life/facts-and-arguments/go-east-youngish-man/article13670902/

#185 Casual Observer on 08.11.13 at 1:55 pm

# 116 Waterloo Resident

Time and time again I see posters here talking about how they are a couple,with the guy earning $250,000 +, and his wife earning almost the same.

I’ve often wondered about that myself. I think some bloggers incomes are somewhat “inflated”, like the proverbial fish story.

With the average family income under 100K, the numbers just don’t add up. Not everyone can be 2.5x above the national average.

http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil05a-eng.htm

#186 daystar on 08.11.13 at 2:14 pm

#185 Herb on 08.11.13 at 1:05 pm

You’ve hit the nail on the proverbial head. Its not like all that debt is simply going to go away with higher rates. Instead, higher rates will bite into disposable income and look out. Devore touched on the same theme as well. CMHC’s getting out of the 100% insurance game is going to bring higher rates, no question and it is significant.

A half point rate hike increases mortgage payments by roughly 10% (that includes variables, from what I know). A full point rate hike, one that analysts aren’t expecting (like rate hikes out of 10 year bonds, like a U.S. housing recovery, like a shrinking Q.E. program, like that), will turn roughly a 20% hike in mortgage payments from a year ago. That’s not minimal, that’s measurable.

I see CBC is pointing out what Garth’s entry has alluded to in this link:

http://news.ca.msn.com/top-stories/canadian-housing-boom-in-9th-inning

What were we expecting, that higher rates weren’t going to kill this market? We are going to face higher unemployment numbers from this, without a doubt and as rates continue to rise, for whatever reason, CMHC, rise in 10 year bonds, Q.E. shrinks and rates rise in the U.S. (meaning all over the world), foreigners get tired of Canadian debt on the verge of a serious housing correction… or crash… or mindless government spending… its to the point where it really doesn’t matter what happens to the rest of the world, we’ve got damaged fundamentals here and the only way through it is deflation and all that comes with it.

Folks with big debts and shorter terms should be scared. I sure would (and was, for you)

#187 Evangeline on 08.11.13 at 2:20 pm

#175 …”(Universal Bullshit Generator)”

… if it had been a universal anagram generator we’d have Snaking Mom, Gamin Monks, or possibly Mango Minks posting.

#188 Evangeline on 08.11.13 at 2:25 pm

my anagram post was meant for #178 Herb

#189 Evangeline on 08.11.13 at 2:36 pm

#185 “Wish I saw grounds for optimism.”

Perhaps it is approaching the time to be a Contrarian in Opportunityland. What were the smart shoppers doing during the U.S.A’s hard times? Cross-border shopping –scooping up bargains from which they are now reaping hefty rewards.

#190 not 1st on 08.11.13 at 2:50 pm

“Like a domino, if it topples, it triggers a chain reaction. Construction jobs are lost, household net worth diminishes, confidence drops and consumers start cutting back on other spending. On top of that, with families already highly indebted, defaults will almost certainly increase and lenders, such as banks, could find themselves taking enormous losses, dropping equity values, leading to tighter credit and slower growth. And on it goes in what economists call a re-inforcing negative feed-back loop.”

http://news.ca.msn.com/top-stories/canadian-housing-boom-in-9th-inning

Garth, is this finally it? What are you going to be talking about after the crash.

#191 Stupesing in Cabbagetown on 08.11.13 at 2:52 pm

The British Garth? http://www.telegraph.co.uk/finance/comment/kamal-ahmed/10235529/I-warn-you-Mr-Carney-a-housing-bubble-is-coming.html

#192 Steven on 08.11.13 at 2:52 pm

“While 70% of Canadians own a house, 51% of them have less than $10,000 in savings. That was the shocking finding of a new bank survey this week done by Pollara Strategic Insights. When people were asked if they feel financially prepared to handle a ‘rainy day’, it was hard to believe the poll was conducted in a first-world country where thirtysomethings do bidding wars over $800,000 semis.”

This type of situation tells me that society and its leadership are living in a make believe world.
A real reality check will be a very rude awakening for many. Sort of like Wile E. Coyote running after the road runner into the clouds, over the cliff and then finding out that the ground is a mile lower than he is and he has no parachute. That is what real estate cultists and debtors are in for. A very hard landing and much pain.

#193 daystar on 08.11.13 at 2:53 pm

#163 Daisy Mae on 08.11.13 at 8:59 am

It’s regional, Daisy. Lots of empty houses in Detroit, the swamp suburbs of Florida and deserts out west, but houses are filling again in sunny Cal, Arizona and anywhere east.

U.S. population grew by .7% in 2011 or 2.1 million people. Roughly half of this number are immigrants. Empty houses will hear the laughter of children and adults again if they have anything going for them (near income potential, access to services, stuff like that). If houses don’t have anything going for them, they end up as bridges to nowhere, unloved and eventually written off on a banks ledger over time and its been what, 7 years since the beginning of the U.S. housing correction? Financials have been given enough time to sop up the losses on their books with multi year profits.

The new concern in the U.S. right now is in how to handle their ongoing housing recovery so that what happened in 08′ doesn’t repeat itself and this means in my opinion, higher rates, tougher lending standards and a watchful eye on new builds. No more blind speculation or bridges to nowhere, just good old fashioned system management by all government levels, financials and developers… y’know, like we haven’t had here in what, 7 years.

#194 Ogopogo on 08.11.13 at 3:16 pm

It’s somewhat encouraging to see that many lucid comments posted in response to the CBC article warning of “frightening” findings in the latest research conducted by RealNet Canada.

http://www.cbc.ca/news/business/story/2013/08/11/canadian-housing-market.html

Are Canadians finally waking up or it’s just us blog dawgs commenting on CBC?

#195 Ogopogo on 08.11.13 at 3:18 pm

#196 Steven on 08.11.13 at 2:52 pm
A real reality check will be a very rude awakening for many. Sort of like Wile E. Coyote running after the road runner into the clouds, over the cliff and then finding out that the ground is a mile lower than he is and he has no parachute. That is what real estate cultists and debtors are in for. A very hard landing and much pain.

Love the analogy! Maybe that’s what we need to start teaching kids in their cartoon-watching years.

#196 Mr. Monday Night on 08.11.13 at 3:31 pm

Speaking of the buy n’ hold crowd who are now stuck with bloated mortgages for the next 25-30 years, I’m seeing a lot of folks starting to make small cuts to their monthly expenses to try to stave off the brunt of the increase of the upcoming mortgage renewal.

Lots of folks letting go their landlines in favour of just having a cell phone, many more getting all of the TV from Netflix. Others are just going without the small luxuries they used to enjoy. I’m also predicting a downward trend in kids enrolled in weekend activities such as swimming lessons, etc.

For those who bought between 2008-2010, you are in for some interesting times. Try not to be too bitter towards those of us who will be rewarded for our patience with a mortgage payment much lower than you for the same house.

#197 Garth Fan since the '80's on 08.11.13 at 3:34 pm

Hey Garth,

This rich guys seems to think that TO and Van are just fine how would you rebut his analysis:

http://www.scribd.com/doc/153610244/ValueXVail-2013-Brian-Bosse

#198 Ballingsford on 08.11.13 at 4:11 pm

#178 Herb

It’s ‘angel’ not ‘angle’.

I can ignore the typo the first time but not the second time.

I expect it from SM but not you.

#199 Herb on 08.11.13 at 4:22 pm

#201 Ballingsford,

and why do you suppose I enclosed it in quotation marks?

#200 Ballingsford on 08.11.13 at 4:27 pm

Also Herb, refer to the correct post. I think you may have been wanting to refer to post 156 not 175.

How anal am I today?!?!?! It will pass I hope.

#201 Dean Mason on 08.11.13 at 6:02 pm

This is really sad that 70% of Canadians have $10,000 or less in savings.I make $10,000 after tax from my investment income in 57 days.

People are really clueless that too much real estate with debt is a drain on their financial life and well being.They are going to learn the hard way.Those $500,000 to $800,000 mortgages are really going to hurt with 5.50% to 6.00% mortgages.

A property like that can easily cost 2.75% a year to maintain,repair,paying property taxes,insurance,utilities etc.It’s a $14,000 to $22,000 a year financial money pit.Remember the movie in the 1980’s.

#202 Dean Mason on 08.11.13 at 6:07 pm

Correction,it’s 51% that have $10,000 or less in savings.It’s even worse then I mentioned.Those 70% that own real estate are in for a real tough time over the next 12-24 months at least.

There are probably 100,000 condos of unsold and for sale inventory on the market in Toronto used and new.

#203 Devore on 08.11.13 at 6:18 pm

#187 CalgaryRocks

If you pay off that debt you save 80$ thus the equivalent of investing 1000$ @ 8%.

You understand now?

No I don’t.

The point is loads of consumer debt (and when you’re bringing up this argument we’re not talking about a couple hundred of debt, we’re talking thousands) is plain silly. Save the money, then buy what you want. Did you see that SNL skit “don’t buy shit you cannot afford”? Exactly like that.

To pretend paying interest on such debt is a form of savings (or even worse, an investment) is equally silly. Simplistic platitudes and patting yourself on the back does no good for anyone. Pay it off, get on with your life, and hopefully learn a lesson. Last thing we need is people believing their credit card balance is an investment because it’s returning them 29%.

Interest is an expense. Always. Even when it’s “good debt” that’s making you oodles of money and easily paying for itself, it’s still an expense.

#204 Daisy Mae on 08.11.13 at 7:54 pm

#197 daystar
#163 Daisy Mae

It’s regional, Daisy. Lots of empty houses in Detroit, the swamp suburbs of Florida and deserts out west, but houses are filling again in sunny Cal, Arizona and anywhere east.

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

I mistook a ‘housing boom’ to mean new construction. All of Detroit would be empty, sad to say.

I appreciate your posts. One of the few intelligent ones.

#205 Dupcheck on 08.12.13 at 9:45 am

What rich does our Canada have? We are swamped in debt. Debt is not wealth. Delusional !!! Our 1%’s are put to shame by other countries 1%’s. We are all show with no go.

#206 M on 08.12.13 at 9:50 am

@ #2 guelphstudent

“Clearly the housing boom benefited mostly the rich on top. ”

Everybody benefited at the right time in the ponzi scheme according to their station in life. The 30K/yr were just as rabid for a quick buck as the 2 mil/yr. The rich on top are just as dumb as the moron at the bottom. The difference is that they may afford a loss. No reason to bash “the rich”.

Everybody else was left to believe that they can rich to the top by investing in real estate.

What’s the name of one that is “led” to believe ? or “left” to believe ?
answer is: “a moron”.
No reason for compassion here. The herd deserves what’s coming to it in a nation devoid of any critical thinking, stiffened by political correctness and endorphin-ed by cheap money.

“What a pile of BS!”

No me boy.. It’s just how things are :) People go crazy suddenly and in herds and the wake up slowly and one by one.