Rutting

DORK modified modified

In six weeks, the rutting season begins. Like sap in the mighty maples, hormonal juices will ascend from the nether regions of couples everywhere. Dormant horniness will awaken with the first hints of Spring, coursing upwards until it floods the brain with an ocean of endorphins and desire.

One morning you awake, roll over suddenly aroused and curiously driven, gaze upon your spouse’s beckoning, hungry contours and find yourself muttering, without sense of the words,  “Honey, let’s go to some open houses.”

And so it begins.

Mike in Toronto says he and his wife make a bundle (“between $175,000 and $225,000 a year) with about $275,000 sitting in various investments. They also have an early case of the ruts.

“I have another 215k rotting in a high interest savings account waiting on a home to be deposited on. We\re conservative and have been scared away from the Danforth real estate market twice (2007 and 2009 both houses had 10 bidders and went 100k over). Your blog gives me somewhere to share my disgust with the market. We now rent a house off the Danforth for 2,250 a month. Our place is good but my wife yearns for a grass backyard, a bit more space and our own place.

“My question is this; I have been waiting for some sort of let-up on the market for over 6 years now. Even if it means a few less people lined up with offers. I have the 20% or 30% deposit waiting for a house. I am starting to wonder that waiting a few more years is just giving away more money to rent until the inevitable big purchase comes along. You have indicated that you don’t think the popular markets in Toronto will really correct so should I be just looking now? Is a 5% correction (which might not even happen) on a 700k house not worth waiting on for another two years of 2250 a month in rent? I assume a bigger correction is unlikely.

“Your thoughts? A lot of your blogs are aimed at the 5 percenters but I have been sitting on my home deposit for a long time with the 20% to 30% and my question is what am I waiting for? Is there something that could happen if I wait or am I just prolonging the same net departure of money from my pocket? I am an avid reader of your blog. Please help.”

You can see the justification for buying (“popular markets won’t really correct”, “a small correction isn’t worth waiting for,” renting is “departure of money from my pocket”). Pitted against this is the desire to buy (“My wife yearns for a backyard…more space…our own place.”) So, in a high-cost city, where $700,000 generally buys you a piece of crap, is it worth it for Mike and his yearny spouse to take the plunge?

No easy or simple answer. So let’s allow the numbers to speak.

Danforth  (By the way, here’s what $750,000 buys you in the Danforth area of Toronto.)

So a home selling for seven hundred grand with a fat 25% down  payment would require $175,000 in cash, avoiding the hefty CMHC premium, and then a mortgage of $575,000. Assuming a mortgage with a 3% rate (five-year variable) and a 25-year amortization, the payment would be $2,800. Property tax and insurance would amount to at least $500 a month. And the $175,000 plopped down as the deposit would mean a monthly opportunity cost of $1,020 (were it invested to grow at an average 7% annual rate). That totals $4,320 for home ownership, compared with $2,250 for renting. The premium to own: 92%.

Of course, there’s more. Mike will have to find an additional $20,200 for double land transfer tax in Toronto, so together with the down payment and legals the total cash required is almost exactly equal to the cash available – just over $200,000.

Over five years the monthly premium for owning the home over renting will be $124,200, plus the closing costs and, of course, drain off the savings. However, during five years Mike & Babe will pay down $83,363 of the mortgage principal (while making $80,239 in interest payments), which will reduce the sting of ownership. But if they sold after five years, commission of $35,000 plus their initial closing costs of about $22,000 would put a serious dent into the differential. The only real salvation would be continuous gains in houses. However, higher mortgage rates between now and 2019 could do major damage to the build-up of equity, since they’d have a variable-rate loan, plus put any real estate appreciation in jeopardy.

See how unsexy this is?

Will this change her mind? Will Mike even have enough of a suicidal streak to present the counter-argument? Will they opt for using their great incomes to grow their wealth, or for feeding a house? Will Mike print off this pathetic post and leave it tucked under her Cheerios bowl tomorrow morning? Will he rut or resist?

Dude. We expect a full report.

173 comments ↓

#1 Goldie on 01.05.14 at 5:54 pm

When will the madness end? That little place is only one level above cabin.

#2 TurnerNation on 01.05.14 at 5:55 pm

Saw on my newz feed that the would-pecker would not chop rates, might increase instead? 2014 will be fun.

#3 Julia on 01.05.14 at 6:08 pm

During the ice storm my mom had a 53 year old tree completely uproot and fall into her neighbour’s yard as well as a huge branch from another tree fall on her brand new roof. Don’t forget to add in a few unexpected costs like these along the way.

#4 Grantmi on 01.05.14 at 6:18 pm

#2 TurnerNation on 01.05.14 at 5:55 pm
Saw on my newz feed that the would-pecker would not chop rates, might increase instead? 2014 will be fun.

The normal procedure here is when you have a link and mention it to the dogs… LINK IT!!!!!

#5 Mr. Frugal on 01.05.14 at 6:24 pm

Maybe it’s just me but I fail to understand why anyone would spend $750K for a dinky little play-house on the Danforth. They have these things called cars and if you hop in one you can drive outside of the GTA where they have real houses, with real yards. You should see what you could get in Bolton, Georgetown or Orangeville for $750K. Better yet, buy a house for $400K, fix it up and put the rest into…. wait for it…. a balanced, diversified, liquid porfolio.

#6 not 1st on 01.05.14 at 6:25 pm

Mike, you are obviously not a 5 percenter like Garth’s other readers. That $750,000 house is beneath your character. Someone like you needs at least something in the 2 mil range. Thats what people in Vancouver with half your income are doing. I mean thats nothing for a 1 percenter and all. Sink it all in and live the dream.

#7 Terry on 01.05.14 at 6:25 pm

I would never even consider buying in the Toronto area with home prices as high as they are right now. It’s too bad that record low interest rates has created this imbalance and it’s also a too bad that too many people are being hoodwinked by organised Real Estate into buying these properties. As rates rise the slow motion train wreck will destroy a lot of dreams towards the end of this decade.

#8 T.O. Bubble Boy on 01.05.14 at 6:26 pm

At least if they make $200k a year, they can afford the payments… so, as ridiculous as the numbers are, at least this couple won’t be scraping by with an ever-increasing HELOC balance.

Here’s my question: has Toronto ever been like this before?

I mean, areas like Rosedale and Forest Hill have always demanded a premium, but now it seems like any piece of land with a 416 area code can fetch close to $1M.

This seems unprecedented — ridiculous overpriced homes in virtually the entire city.

#9 John Locke on 01.05.14 at 6:28 pm

Hello Garth,

In support of your main thesis regarding house prices flattening or dropping in Canada (particularly in Lotusland), I thought I’d provide some corroboration in that regard with respect to my elderly parent’s house in the Jericho Beach area of Vancouver, which is one of the most desirable YVR neighbourhoods given the proximity of the beach, a few large parks, a tennis club, and several yacht clubs.

They just received their BC Assessment Notice the other day, and lo and behold, for the first time in over 10 years, it actually dropped by $70,000, all of which was attributable to declining land value (the house didn’t budge given that it has depreciated over time to almost zero, in spite of still being eminently usable for decades to come, albeit with a few thousand dollars thrown at it every year).

The actual gain/loss record for their Assessed Value over the past 14 years has been:

2001-2006: plus $379,000
2007: plus $251,000
2008: plus $179,000
2009: zero
2010: plus $25,000
2011: plus $293,000
2012: plus $488,000
2013: plus $88,000
2014: minus $70,000

As you have pointed out, this has all the signs of a market top (at least in their local area), especially when you consider:

a) they have seen 3 brand new houses built within a 1 block radius in the past year, one of which has an Assessed Total Building value of $1.45M (on top of the lot value, which is Assessed in excess of $3M), and the other 2 had Assessed Building values in excess of $1.2M, on top of $2M land acquisition values; and

b) there are 4 more houses under construction within a 1 block radius, all of which are of similar quality and size to the ones above, with a 5th expensive teardown/rebuild pending in the next 6 months by a new owner; and

c) Mayor Moonbeam’s Point Grey Bike Lane is under construction at the Jericho Beach end, and when completed this year will reduce traffic volumes near their house by 95%, or 9500 cars per day (can you say “quiet zone?”). By the way, even though they’ll be the recipients of reduced traffic and thus noise and very likely increased land values as a result, my parents were dead-set against the bike lane, and so are many of their neighbors, some of whom are apoplectic over the loss of street parking and the wasteful spending of $6.5M dollars of funds that the City cannot afford given the state of its finances.

I’ll let you know a year from now re their 2015 Assessed Value change, but my guess is that in spite of the bike lane and more new houses nearby they’ll be lucky to see the Assessed Value hold steady in light of all the negative factors that you have outlined over the years (excellent work, by the way – I and a few of my friends are daily readers of your blog, especially when you frequently diverge from housing to talking about financial matters. With that in mind, I’m still waiting to hear your take on the Life Insurance industry – should be fun reading when you have time to delve into it, and then hearing the howls of pain from those whom you will no doubt skewer :)

By the way, my parents will never sell, regardless of prices in the next decade or two: they’re among those very fortunate few in Canada for whom the Rule of 90 does not really apply, as the Law of Compounding Returns in the markets over the decades has been of great benefit to them, especially since they pre-dated all those poor souls, the Boomers, of which demographic I am at the tail-end of, alas. :)

#10 AK on 01.05.14 at 6:33 pm

“Assuming a mortgage with a 3% rate (five-year variable) and a 25-year amortization, the payment would be $2,800.”
====================================

Fact: With 3% mortgage rates, people will continue to borrow.

#11 Retired Boomer - WI on 01.05.14 at 6:33 pm

92% Premium for OWNING over renting? Mike for a lot less than 92% you could seek out a different rental with a 3 yr rental contract to control your costs, and allow for continued savings, and a change of scenery. 3 years is a LONG time my friend. You could change jobs, change cars, even your outlook on home ownership. Geez, I’ve even bought new undies within 3 years!

As a homeowner, it’s not a big deal. Renting is more flexible, and the landlord replaces the water heater. What IS the big deal “owning” a slice of crabgrass with a dwelling on it? You only “own” it if you pay the whole house costs, on-going taxes, insurance, utilities, upkeep & repairs. Gee, what did I forget? It is a lot easier to write a monthly rent check, & renters insurance….done.

So, find a different rental if you want, but take a cold shower if you need to dispel the beauty of ownership!

#12 AB Boxster on 01.05.14 at 6:35 pm

Yeah, but the listing says its ‘located on the best part of the street’.

Nuff said.

#13 TurnerNation on 01.05.14 at 6:36 pm

#207 Smoking Man your post reminded me.

I gotta say my school ‘career’ ended effectively after Grade 8.
See, teach said submit a handwritten essay in pencil a few pages long with margins of a certain width. I did. Teach handed it back said margins were too narrow.
I had a plan else write pages by hand again.
In those days teaching supplies were kept in teach’s desk or with classmates.
I surreptitiously obtained, by asking the needful: paper, tape, scissors, ruler. See where this is going.
Neatly I cut & taped new margins onto existing essay’s sides. Handed it back in to teach.
Teach bust out laughing and accepted it. They always liked me.

Spent 5 years in H.S. back when Gr 13 was around still, but graduated with Gr 12 diploma. Dropped Math and science after Gr 10. No need.
Started uni a few year afterward, spent 4 years but graduated with 3 year deg. I see a pattern.
O well, got A+ on first MBA course recently. Still got it – when I wish to wag wag and play the game.

#14 T.O. Bubble Boy on 01.05.14 at 6:39 pm

@ #2 TurnerNation on 01.05.14 at 5:55 pm
Saw on my newz feed that the would-pecker would not chop rates, might increase instead? 2014 will be fun.
——————————-
Saw the Flaherty headlines also… it mentions budget cuts and “asset sales” helping to balance the budget.

I’m curious: why does an asset sale get recognized only in over year?

Sounds like shady accounting from F and the peckerettes… the same phony numbers that made the sale of the 407 make the Ontario books look balanced for all of 5 minutes.

I guess that there is no such thing as “GAAP” and “non-GAAP” when it comes to Governments?

#15 GLK on 01.05.14 at 6:43 pm

Mike your biggest mistake is that you are keeping you cash in “high interest savings account “. Get a balanced portfolio instead. No kids? Then find a nice condo for rent.

#16 Julian on 01.05.14 at 6:49 pm

The only solution to survive in Vancouver and Toronto is to make more money. Start with the end in mind and ensure you are making enough money … http://goo.gl/2mUaSD

#17 jess on 01.05.14 at 6:53 pm

anti pheromone spray !

———————-
from the other day
106 Mister Obvious / shady marketing …how does one make a decision if some of the evidence
is missing / for e.g tamiflu publication bias when the negative results go missing

drug trial results are still being withheld /drugs firms aren’t publishing all the evidence????
http://www.theguardian.com/commentisfree/2014/jan/05/scandal-drugs-trials-withheld-doctors-tamiflu

http://www.alltrials.net/
…”Around half of all clinical trials have not been published; some trials have not even been registered. If action is not taken urgently, information on what was done and what was found in trials could be lost forever, leading to bad treatment decisions, missed opportunities for good medicine, and trials being repeated unnecessarily.
—————————-
watch the TED lecture on research misconduct

http://www.alltrials.net/blog/

#18 Derek R on 01.05.14 at 6:56 pm

So, Mike. How about you up the rent? If you looked for somewhere at $3,000 per month, you’ll still be paying a lot less than Garth’s estimate for owning and you might find that sort of rent pays for somewhere that has a grassy backyard.

And forget that “departure of money from my pocket” stuff. The fact is that money is going to leave your pocket whether you rent or whether you own. The only questions that you should be worried about are “how much?” and “is it value for money?”.

A lot of the people forget that housing is a cost whether you own or whether you rent. With ownership you pay all the rent up front; with renting you pay as you go. That would be great if you had the money to pay up front but most people don’t. So they end up renting money to pay up front instead of renting housing as they go. Fine, if the rent for the money is less than the rent for housing. Not so good, if it’s more. And as Garth says, rent for money (ie interest rates) looks like it’s on the rise. Even more so than rent for housing.

#19 X on 01.05.14 at 6:56 pm

Similar situation, not a 5%’er. Appreciate the post for those of us blog dogs.

When all factors are considered the place we would like to buy would cost $3225 a month, but rents for $2200 a month. We just can’t bring ourselves to buying for the sake of buying.

That is like being locked in to overpaying $12,000 of our hard earned money, every year for life, just to say ‘it’s ours’.

It would take a 30-40% correction to even those monthly numbers out. I just can’t imagine that happening, although I guess neither did the Americans a few years ago either.

Renting for now…will run new numbers next year to compare.

#20 X on 01.05.14 at 7:06 pm

re 16 – Julian – neat link, it taught me that by living below my means, and investing the difference, my money at work was worth more than me at work over time.

#21 Bill M on 01.05.14 at 7:18 pm

“Property tax and insurance would amount to at least $500 a month. And the $175,000 plopped down as the deposit would mean a monthly opportunity cost of $1,020 (were it invested to grow at an average 7% annual rate). That totals $4,320 for home ownership, compared with $2,250 for renting. The premium to own: 92%.”

If you add in maintenance/upgrades (say $500/month – probably on the low side for an old house on the Danforth), that brings the own/rent premium to over 100%…

#22 Andrew Woburn on 01.05.14 at 7:32 pm

#214 googool on 01.05.14 at 1:33 pm
it says IMF is working on seizure of funds

http://armstrongeconomics.com/2014/01/05/imf-urging-rapid-seizure-of-funds-in-europe/

Of course it is crap. I am always astounded at what people want to believe, and dismayed at the charlatans who feed them. — Garth
===============================

Garth is right. This is sensationalist drivel.

The OECD countries have in fact generally passed harmonized “bail-in” legislation so that the treatment of failed banks is essentially similar across member countries. They have also agreed on increased bank capital requirements so as to reduce the risk of failure. The bail-in legislation is a clear warning to banks that they can’t take crazy risks anymore and expect government to bail them out. I wouldn’t want to be a US bank chief now whose reckless management led to creditors taking a haircut. He might as well rent a bedroom at his law firm.

This bail-in legislation simply clarifies what was always there. Bank creditors and depositors have never had any legal right to be saved by government and have often lost out in bank failures. That is what deposit insurance is for. People who entrust banks with large amounts of cash should always be aware of the strength of that institution but average Canadian depositors have nothing to worry about.

The IMF did in fact publish a working paper by two prominent economists which has already been posted on this blog. It looks at what options European governments have to deal with under capitalized banks. It states the authors’ belief that more debt restructuring will be needed than European officials are willing to admit, especially in Southern Europe, but it never uses the term “bail-in”. This is hardly news even if the IMF says it. Furthermore, the IMF does not call the shots in Europe. I would delete Armstrong “Economics” from my favourites if I were you.

#23 eddy on 01.05.14 at 7:33 pm

waiting for some sort of let-up on the market for over 6 years now.


‘let-up’ there have been a few minor blips. 2009?
that would have been a good time
or last year, the East York Bungalows were A LOT less
waiting for 6 years?? It’s not a spectator sport.
There is No money on the sidelines.

#24 Dave on 01.05.14 at 7:41 pm

Wait…I’m confused.

Interest rates are going up? Since when? I thought we were headed for a deflation- at least that is what I read on Saturday.

Best learn the difference between bond yields and central bank policy, plus short and long-term. Tapering will bring higher fixed-rate mortgages in 2014 (as happened last year). US recovery will bring higher central bank rates after 2015. — Garth

#25 U should see on 01.05.14 at 7:53 pm

Instead of hating on housing so much you should listen to the CEO of Oxford properties who says that on an international basis, we are still very very cheap-he was on BNN. So MR GARTH BARTH, try buying something decent in any world class city-which Toronto and Vncouver are. 750K will get you nothing in any great city and people want to live and enjoy a decent house- cant do that with a stock or bond last time I checked. And people don t want to have a landlord own your ass. SO GArth try to make some sense.

#26 Marty on 01.05.14 at 7:58 pm

Garth
I’m a new reader of your blog, I will become another regular. Great insight for us.

2 ideas for your daily post :

What does the real estate bubble may mean for the health of our banks, and other companies like Home Capital Group ? Are they at risk if the prices come back to earth ? Since the banks are a big part of the TSX, is it another reason to “short Canada” ?

What are the websites that could be useful to follow the Canadian real estate market ? Any place where one cand find ( more or less ) reliable numbers on # of sales, average price in each market, mortgage defaults and such.

Thanks for a great blog.

#27 Trevor on 01.05.14 at 8:00 pm

Garth,

I was speaking to a financial advisor recently about income splitting. She told me that unless I contribute to a spousal RRSP then I would not receive any tax benefits. Is this correct? I was hoping I could use this tax shift to lower my marginal tax rate and have her then contribute the transferred money into her TFSA. Is there any other way to lower my marginal rate without transferring money into the spousal RRSP?

Trevor

#28 Smudgekin on 01.05.14 at 8:00 pm

Mike & wife go buy, you need a John Wayne clip on the jaw. Hunt Moore Park or Forest Hill for that dream home and zilch your net worth. Don’t forget an LOC on a pair of luxury utes. Then you can commute up/down Jarvis/Mt.Pleasant with your noses stuck in the air. You’ve earned that, you’re so much better than everybody else. Join the genre.

#29 Steven on 01.05.14 at 8:05 pm

$750,000 for a bungalow is disgusting!

#30 Van guy on 01.05.14 at 8:18 pm

Hi Garth,

In the last REBGV report for Dec, sales were incredibly higher yoy and avg prices hit another all time high. Dips are being bought and supply dwindling. Even in Richmond things have improved and those seafair and terra nova homes have found a bottom when bears claimed they have taken control. And now we are entering the busy season, and as a long time bear, it looks like im not too bearish anymore.

Garth, you have put lots of effort into this blog and I enjoyed every post. But at some point, we may have to accept defeat.

That would suit you. — Garth

#31 T.O. Bubble Boy on 01.05.14 at 8:22 pm

Apparently I should have just bought $5500 of Bitcoin in my TFSA on Jan 1st… back up over $1000 today:
http://bitcointicker.co/

#32 Robert on 01.05.14 at 8:26 pm

It’s says a lot when people with great income and saving have to take a hard look if they can purchase a property in this market.

#33 TheCatFoodLady on 01.05.14 at 8:28 pm

#25 – U should see…

Where do you get the idea Garth hates housing? He owns a place as well as rents one.

Maybe Van & TO are ‘cheap’ compared to world class cities but the readers here as well as many others are looking to buy something they can afford in, primarily, those cities/regions. Incomes for most are stagnant & buyers now can enjoy dirt cheap mortgage rates but how long will those last?

Garth IS making sense – take an average family income, average level of consumer debt & see what’s left after you add the costs of buying a home – both the upfront taxes, fees, etc. as well as monthly carrying costs. If your total net worth & income is such that you have plenty of financial room left – GREAT! If not, you may LIVE in your new home but there’s nothing enjoyable about sweating where you’re going to get the money for an unexpected repair.

Landlords own your ass? No, they own the HOUSE. Small landlords often rent homes for cash flow – they’re unlikely to give you notice because a basement dweller nephew wants to try their hand at renting – not if you’re a reliable tenant. If your home was built before 1991, you know exactly what your next year’s rent increase is going to be.

Both renting & owning can be positive or negative experiences. Everybody has to do their own math based on their own location & situation.

#34 Frustrated Kiwi on 01.05.14 at 8:34 pm

No kids mentioned -> what is the hurry to buy?? As Derek R pointed out the “money out of my pocket” argument is seriously flawed thinking – look at the cost to own versus cost to buy. Invest the down payment (maybe you can employ Garth’s team since you’re in Toronto), save a good portion of your nice income, and don’t plan on buying for five years. A correction of 30% in real terms over 5 years is not at all hard to imagine (say 15 percent in nominal terms and 3% a year inflation). You and your wife should be enjoying yourselves – traveling and feeling wealthy, not tied down to house maintenance and tight cash flows. Now is not the time to violate Garth’s rule of 90!

#35 Frustrated Kiwi on 01.05.14 at 8:35 pm

cost to buy -> cost to rent (sorry)

#36 bruce s on 01.05.14 at 8:39 pm

#29 Steven

u are buying land value—duhhh
see what 750 k gets u in Paris London or New York

Now, that’s funny. — Garth

#37 DR on 01.05.14 at 8:42 pm

#5 that’s all someone has to do.
And it works for me-many times over.

Nevermind 750K for a bungalow north of Danforth. Its not Leaside…yet.

Personally I think they are nuts.

#38 Van guy on 01.05.14 at 8:43 pm

There’s more risk of a stock bubble than a housing bubble. Explain the Russel being up over 100% in this rally when earnings are poopoo and not even improving. Ultra low rates driven by QE will result in a sizeable correction. 30% gain for the S&P isnt dangerous? But in RE it is? I love my US stocks, but this party could end soon.and im ready if it is.

So Garth, in 2013 was the year to not hold fixed assets. Balanced portfolios made less than equity funds. Taper is coming and the opportunity has likely vanished. 7% is not much, I beat that # and im a newbie trader. It was easy yes, but easy isnt forever!

#39 EvilMagpie on 01.05.14 at 8:50 pm

Would the TFSA still be useful if I’m a Canadian citizen going to work in the US for 3 years or more?

RRSP
TFSA
Roth IRA
401K
Some other US account I’m not aware of.

Where’s the best place to dump cash that I want to grow at 7% for a short term (1-3 years)? If I like it down there, and my employer likes me, I can use it as a down payment on a decent sized bung which goes for roughly 150K.

#40 DR on 01.05.14 at 8:51 pm

#8….I remember my grandfather thought ten grand was too expensive for a house at spadina and harbord.

He was offered it from his German landlord back then and he told him forget it.

#41 Daisy Mae on 01.05.14 at 8:51 pm

#25 U Should See: “CEO of Oxford properties who says that on an international basis, we are still very very cheap-he was on BNN.”

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

Whoppee frickin’ doo. He represents just another self-interest company dealing with RE investments/development. So what do you expect?

#42 Junkieman on 01.05.14 at 9:05 pm

http://www.dailymail.co.uk/news/article-2533994/PMs-right-buy-poster-girl-revealed-estate-agent-sold-flat-herself.html
“David Cameron was facing potential embarrassment last night over a high-profile publicity stunt to promote his controversial Help To Buy scheme.”

#43 Uh Oh Canada on 01.05.14 at 9:06 pm

Mike: invest your money in a balanced portfolio (with ETFs or preferred stocks as Garth advises) and watch it grow. Show the growth to the wife. The excitement of watching your money grow will replace the house horniness. Worked for me.

#44 Uh Oh Canada on 01.05.14 at 9:09 pm

#31- Bitcoin is the new gold. Personally, I’d rather own gold. At least it’s not virtual.

Both are mistakes. — Garth

#45 yeah Baby Yeah! on 01.05.14 at 9:18 pm

First!!!!!

#46 Obvious Truth on 01.05.14 at 9:24 pm

From my perspective mike the more you put away the more you will see the power of cash generation. This may change yours or your wife’s perspective on trading a cash machine for a house at double the living cost.

You may need some professional investment advice. At your level you will grab the attention of almost any full service investment house. You could talk to a half dozen and see what they can do for you. Raymond James and Garth might be a good place to start. I read Jeff Saut every Monday. Talking to a group of real pros will at least give you clarity whether you go with one or continue on your own.

From reading the blog and speaking to a lot of young people I can sympathize with your dilemma.

I played a lot of sports when I was younger and it always held true you could only do what was within your control. You can’t worry about how others play the game. You have to play yours.

And now Garth has called you a follower. But made it sound sexy.

Congrats on the enviable position you and your wife have put yourselves in.

#47 Ret on 01.05.14 at 9:31 pm

#26 Re: Home Capital Group
Is Oaken Financial a new sub group of Home Capital?

If so, who cares? CDIC insurance as per CDIC limits has you covered.

Government regulators are surely doing their due diligence, oversight etc. w.r.t. deposits/loans.

#48 P-gizzle on 01.05.14 at 9:52 pm

Love your blog, but don’t like the math….

1. Not sure it’s fair to add “lost opportunity cost” to the cost of owning a home, without adding home appreciation into the equation (I agree it seems unlikely that RE will increase much, but…). As your post from 1, or 2 days ago points out… 1% return on 1 million dollar house (leveraged) is like 10% on 100 000 (cash).

2. Not sure it’s fair to include the total mortgage (as almost 1/2 goes back to you in the form of principal – under current interest rates) in the monthly cost of owning. 0% of the rent goes back to you.

Peace and love

(a) Anyone buying now will be horseshoes lucky just to retain value. (b) I clearly factored principal repayment into the math. There is no denying, buying this house is emotional, not financial. — Garth

#49 Ralph Cramdown on 01.05.14 at 9:53 pm

Mike in Toronto should keep working to completely pay off the house he hasn’t bought yet. He’s already got $500k, and with the couple’s earnings plus what the investments should generate, that can grow by $100k.year with discipline. Which means that in three or four years, they’ll have a pile that can either generate enough monthly to cover rent or a mortgage, or can buy a house for cash, which they can then get an 80% LTV mortgage on, invest that money, and have diversification and tax deductible mortgage interest.

#50 More seller/listing lies on 01.05.14 at 9:53 pm

That 750k piece of junk is hilarious. The listing boasts over 100k in Renos! Hahaha…. Are you kidding? That interior is a Home Depot special worth maybe 20k at best!

These sellers and realtors are an absolute joke in Toronto.

#51 Vangrrl on 01.05.14 at 9:54 pm

These two make between 175 and 225K a year- approx 16 grand a month (ok, even if gross)- and they even bat an eye over 2250/mth rent?!
What the hell is wrong with people…?!

You forgot hot yoga and dog grooming. — Garth

#52 TheCatFoodLady on 01.05.14 at 9:59 pm

#50 – but it’s got GRANITE and STAINLESS!

#53 Shawn on 01.05.14 at 10:00 pm

STOCK Bubble?

VVan Guy at 38 says:

30% gain for the S&P isnt dangerous? But in RE it is?

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

The S&P 500 is up only 21% since the start of the year 2000 while its earnings have doubled in that time period.

Vancouver houses are up how much in that period?

#54 Shawn on 01.05.14 at 10:01 pm

OOps

Van Guy said

30% gain for the S&P isnt dangerous? But in RE it is?

#55 shanks on 01.05.14 at 10:14 pm

Garth,
I am a fan, but I have an issue with your math:
“And the $175,000 plopped down as the deposit would mean a monthly opportunity cost of $1,020 (were it invested to grow at an average 7% annual rate). That totals $4,320 for home ownership, compared with $2,250 for renting.”
I don’t think its really fair to include the $1,020 you would earn if the down payment was invested, it skews the comparison. The purchase of a house is also an investment, and may appreciate over time, but generally could be said to retain value +/- over time. The value of rent money however IS gone at the end of the month, never to return again.

Like interest? Your argument is flawed. This is a true cost of ownership. — Garth

#56 Chickenlittle on 01.05.14 at 10:17 pm

http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/20130905theglobeandmailltidavidchiltonpart01mp4/article14422961/

Someone posted this link a few months ago and I think it is worth another look. Besides, I have a small crush on Mr. Chilton.

Look what you can get in the west end for the same price:

http://realestatebay.ca/listing/bungalow-raised-detached-house-at-rathburn-kipling-princess-rosethorn-toronto-w2804075-149680.htm#listing

I have never understood the appeal of the east end. I prefer the west end hands down. With this west end house you get 20 ft more yard. I love this neighbourhood. I miss it!

Mind you, for the east enders it’s more convenient to borrow a cup of sugar from your neighbour because all you have to do is open the kitchen window and have them hand you one.

Having said that, $750k for a bungalow is insane. It’s like paying full price for a Big Mac. Why?

#57 Saskatoon-Living on 01.05.14 at 10:22 pm

Saskatoon becoming a buyers market:

http://www.cbc.ca/news/canada/saskatoon/saskatoon-real-estate-shifting-to-buyer-s-market-1.2483047

#58 Cow Man on 01.05.14 at 10:37 pm

#55 Shanks:
I think the best MP Halton ever had, continually forgets to factor in the taxation on the lost investment opportunity that he quotes. (7% – 40% leaves 4.2% unless they can fit it into a TFSA) It is hard to be perfect; but Garth is close.

Nice. But the returns are dividends and cap gains. More like 15%, with unrealized gains at 0%. — Garth

#59 Dan on 01.05.14 at 10:39 pm

Wow, “between $175,000 and $225,000 a year with about $275,000 sitting in various investments” I don’t even know of anyone with combined income over $75,000 let alone any saving in the six digits. I must be completely in another country or missed out on something. You bloggers are rich, a class apart. Nice reading about your trials and tribulations.

#60 raisemyrent on 01.05.14 at 10:40 pm

Another case of someone who says they get it, but really can’t wait to pay some money down on a house and have that big sigh of relief from their inner fears…

#61 Sideline Sitter on 01.05.14 at 10:49 pm

Was that between $175K and $225K EACH?!!

Wow. Good one.

Until my wife has a baby, I think I can hold off the house horniness!

#62 Sideline Sitter on 01.05.14 at 10:51 pm

#59 Dan – I don’t even know of anyone with combined income over $75,000 let alone any saving in the six digits. I must be completely in another country or missed out on something.

Cost of living is high in Toronto, as are the number of jobs that pay well above $75K. Now, I’m not saying everyone makes that, but in most major cities that’s where these folks will be.

#63 Squatter on 01.05.14 at 11:02 pm

There is no denying, buying this house is emotional, not financial. — Garth
————————————————-
Like buying a Hummer or a Harley.

The house costs $700,000 and involves amortizing over half a million in debt for a quarter century at future, unknown rates. Try harder next time. — Garth

#64 Cd on 01.05.14 at 11:13 pm

Most people with good jobs want to either live close to work or close to good transportation so they can get to work. Hence in Toronto, housing that is a 5 minute walk from the subway or streetcar line is way too overvalued. There are some nice and semi affordable places in the Toronto region but don’t have good public transportation options and/or are far from any normal work.

I think the city should just buckle up and raise taxes and get more and better subway lines. A fair bit of problems would be solved with this. Raising taxes is unpopular but keeping a mayor that smokes crack is embarrassing.

#65 quebec economist on 01.05.14 at 11:14 pm

Mike from Toronto ”I am starting to wonder that waiting a few more years is just giving away more money to rent”

#55 -The value of rent money however IS gone at the end of the month, never to return again.

Garth- Like interest? Your argument is flawed. This is a true cost of ownership.

Yes Garth, people can’t come around to understanding that owning a home is ‘giving away money’ just like ‘renting’. Taxes, interest and loss capital as you have clearly shown way too many times on this ‘pathetic’ blog. Rent is a ‘better price’ to put a roof over your head then owning a house. My hot yoga mantra is ‘ Renting is cheaper’ ‘Renting is cheaper’ ‘renting is cheaper’ ooomh.

(did i ever mention that my father in law is a RE agent, he has been trying to find us a house for 15 years, he does not get it, happily yoga helps me and my wife direct our house horniness to more rewarding areas of our life )

cheers.

#66 KG on 01.05.14 at 11:27 pm

Garth, the ending gave me a Frederick Forsyth rush…

#67 skybluepink on 01.05.14 at 11:29 pm

Hubby has been soooo house horny I’ve had to beat him with a stick. Told him to back of until the holidays are over and good god, here we are!!

I agree that our house is too small (went from 1 to 2 children) and both of us work from home and that won’t be changing any time soon.

I will propose that we sell first before putting in any offers. I know the music will stop during this game of hot potato the day after we buy and really be screwed.

Any suggestions, Garth???

Online dating? — Garth

#68 Ayn Rand Army on 01.05.14 at 11:29 pm

Mike should just buy gold, silver and mining stocks. Then he can quit his job cuz he and wife will be set for life! haha

#69 Owl Eyes on 01.05.14 at 11:52 pm

#59; #62. Could someone explain what they are doing to allow them to earn that much with almost no ability to do math?

#70 aprilNewwest on 01.05.14 at 11:54 pm

#25 Your out to lunch! You think prices are just going to keep going up forever. Who will be buying…….

#71 Infused with Opiates on 01.05.14 at 11:59 pm

59 Dan – make it your New Years resolution. Seriously. My wife and I have made in that range at times. If we
had a better plan we would be years ahead of where we
are now. Its still good but not extraodinary by any
means. Ask yourself what is stopping you. Good luck.

#72 Sotiri on 01.06.14 at 12:11 am

Garth, nothing is expensive with borrowed money.

#73 L Lawliet on 01.06.14 at 12:15 am

If you buy a home outside of the bubble pricing of big cities and without financing, home ownership is cheaper than renting. It’s only when you can earn at least 7% return on money that renting is always more advantageous than owning. But for those who are too risk averse (or financially ignorant) to invest in anything but term deposits and savings accounts, even 4% return is out of reach, let alone 7%. If the opportunity cost of your money is only 3%, there is no advantage to renting and investing (because cost of rent is greater than return on investment); you would be better off buying a home with that money, provided you don’t use financing (which might give the advantage to renting).

I wouldn’t tell someone to avoid home ownership and load up on stocks and bonds to pay the rent. Without bubble pricing and the cost of financing, there will be bear markets when owning a home feels better than owning stocks and bonds.

#74 45north on 01.06.14 at 12:18 am

253 Westwood Avenue which is 650 meters from my brother-in-law’s. This neighbourhood was middle class, I mean the houses were middle class houses, but the seller claims to have gutted the house. My other brother-in-law has hot water heating, the furnace broke and he paid $6000 to have it replaced. Still I think hot water heat is superior to forced air.

Okay Mike right now you live on the Danforth so I’m guessing you’re 500 meters from the subway station. 253 Westwood is 1200 meters so your new house will give you a little more exercise.

I’d say the area will hold it’s value better than most. I mean if the Danforth drops 5% then Woodbridge is going to drop 20%. Think social unrest. Think Liberal Party defeat.

Mike, you could stand a 5% drop. Hell you could stand a 10% drop.

#75 tank on 01.06.14 at 12:37 am

its funny how the previous owners of these dilapadated homes, lived in them for 40 years, were not able to complete one renovation, or upgrade.

#76 Shortymac on 01.06.14 at 12:44 am

Mike, I understand where you are coming from. My hubby and I are a young couple like you and house horniness is getting to us too. Culturally it’s the last “step” to become a full adult and the pressure is intense. Add in dealing with landlords and it can get even worse.

If you want something to kill your house horniness I would watch the show “my first sale”. The vast majority of people on that show either lose money or barely break even on their houses, it’s depressing.

However, the numbers just don’t add up. Hell, there is a mobile home in Essa, on going for 125,000 for a quarter acre! It’s on the mls. That is not normal and proves this isn’t just a Toronto and Vancouver thing.

Have paitience, and I would get someone to invest that money for you. If you don’t want Garth I suggest vanguard, I use them for my us Roth IRA account and I am very happy with them.

Moreover, I would look into index funds, they perform to the stock market averages and you don’t need to go around managing individual stocks.

#77 1 on 01.06.14 at 12:53 am

#31 T.O. Bubble Boy on 01.05.14 at 8:22 pm
Apparently I should have just bought $5500 of Bitcoin in my TFSA on Jan 1st… back up over $1000 today:
http://bitcointicker.co/

be an investor not an opportunist
a few weeks ago you were laughing at bitcoins

#78 Ozy - WE BOUGHT with no regret on 01.06.14 at 1:17 am

Ozy – WE BOUGHT with no regret, and I say is again 750,000 in 2012 got us a 50×135 feet super private lot within walking distance to subway in a very nice area as well.

we spent 20000 only in various improvements and we are done (ok, a small 1000 fence replacement maybe next year)

we FEEL so GOOD, same house model sold for 843000 in the fall…

there are still some things of value to buy that most of blind buyers don’t see out there, so if u have cojones – go for it

Garth, the city is full with examples of SUCCESS STORIES – why don’t u run a whole season of it

you know, just for the change of tone…so much acidity will not help readers health long term

a HOUSE with a BBQ, huge trees, fruit trees, children playing on a hammac WILL

#79 Ozy - WE BOUGHT with no regret on 01.06.14 at 1:21 am

did I mention 3brd, detached, solid brick split beauty and the wood fireplace was so nice to sleep around when TO renters were left in the dark by the power-less landlords

beat that Garth

#80 Siva on 01.06.14 at 1:30 am

#10 AK on 01.05.14 at 6:33 pm

Fact: With 3% mortgage rates, people will continue to borrow.
====================================

Not with 70% home ownership

#81 joe campbell on 01.06.14 at 1:33 am

you cant ignore the sale of the home at the end. your making a 2000$/month error. sure your ignoring many costs but not as large as this error.

#82 Freedom First on 01.06.14 at 1:39 am

Mike and wife. I think the only financial risk that this couple has is from themselves, as right now, they should be laughing, not worrying. For myself, I buy nothing at record prices, ever. No exception.

Now, Garth, excellent post, and yet in reading so many of the comments from today and many of the past posts on your blog, isn’t it just amazing that so many RE pumpers always screaming to go all in RE and damn the torpedoes, never mention the mega-millions of people who did that in the: U.S., Japan, Europe, etc., and were financially de-nutted? Liquid, balanced, diversified, grateful, and debt free is where I like to be at all times.

#83 James on 01.06.14 at 1:51 am

Unrealistic that they would sell the sfh in 5 years. More like 10-15 years. Enough time to to recover any loss and cone out ahead.

#84 Omg on 01.06.14 at 2:23 am

25 u should see

Now don’t get me wrong TO and YVR are great cities but they are 2nd tier, not in the same league as ny, la, hk or London.

When you travel outside of Canada people have heard of Toronto and Vancouver but otherwise they are pretty much off the radar screen, not like true 1st tier world class cities.

To compare you really would be looking to places like Denver, Birmingham, Dublin.

#85 Suede on 01.06.14 at 2:34 am

Mike in Toronto – Don’t buy the house, you’ll regret it. Trust me, I’m an internet blog commenter.

For the rest of you dawns, get ready for no more “he said, she said” in car insurance settlements.

Mandatory black boxes for all cars starting in 2014. Say whaaaaat?

http://autos.yahoo.com/news/automotive-black-box-mandatory-september-1-2014-150043524.html

#86 Captain Yankee on 01.06.14 at 4:13 am

Love the Blog Garth, comments are priceless, I usually only read those you reply to when it gets a bit side-tracked or unusually long winded (often.)

What do you Mr Garth Turner, man of maths, think of the NYT own v. rent calculator? Once the US mortgage interest deduction is removed I find it a comforting mathematical reality check on what is usually an emotional decision.

Here’s where I brag about renting in Vancouver and own boring blue chip stocks paying dividends. 8% return this year. Yaayyy me! (sarcasm needs its own exclamation point)

http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0

#87 FTP - First Time Poster on 01.06.14 at 4:34 am

Toured nearly 15 homes over the past two weeks. There are a few observations I’d like to make regarding the RE market in YEG right now:

1) Lots of crap on the market: There appears to be a lot of year 2006+ homes on the market that were poorly thought out, poorly built and poorly maintained;

2) Lots of tapped out people: So you paid half a mil for a house and can’t pay $500/yr for paint, caulking and a few other odds and ends? A house shouldn’t look like a crack shack after 7 years;

3) Lots of “do it yourselfers”: Toured homes where people thought they had “skills” in home repair…yikes! Toured one today – asking over $600k on a lot backing onto a busy road that was “owner was the site manager” for the build. Truly breathtaking when my wife can point out the mistakes. Probably not a good idea to wear a smoking jacket with a t-shirt and sweatpants, but who am I to judge.

#88 World According To Garth on 01.06.14 at 5:06 am

http://armstrongeconomics.com/2014/01/04/civil-unrest-rising-in-europe/

Yes because it’s different in Kanada. We are a country made up of mostly aborigines. No Europeans or Asians here. No bloated socialist govt here. No useless workers who for the most part dig crap out of the ground and export it (unlike the Germans who make shit with commodities). No 600 billion dollar paper pushing govt worker pension lability here.

OH……WAIT !!!!!!!!!

#89 Nathan on 01.06.14 at 6:00 am

Man, I don’t disagree with the conclusion, but that math is seriously skewed. First, you consider the opportunity cost of the down payment, but count the entire mortgage payment toward the cost of ownership, rather than just the interest. Second, you use a 7% ROR to calculate the opportunity cost. More appropriate would be to consider this an alternative to a risk-free investment, which these days runs around 2-3%. (Not because RE is risk-free, certainly, but because the effective return you gain from it – savings of rent – is essentially fixed income.)

#90 MEANWHILE IN FRANCE on 01.06.14 at 6:28 am

I read those prices and my head is spinning. Where will it end? is there a point where consumers finally had enough? or is the marketing so slick that they’d go for it even if “Valuations” continue to rise?

#91 Barry in Pickering on 01.06.14 at 6:28 am

Why all the interest in TFSA?

Could someone explain how a TFSA is better than a RSP? For me, it looks like they are the same.

Assume a 50% marginal tax rate (which is my case)

Option A: I put $5,000 after tax dollars into a TFSA. At 7% return per year, and in 10 years I have $10K, which I take out tax free. Great.

Option B: I put $10,000 into RSP ($5K tax refund, so net cost is 5K). Same 7% return per year, and in 10 years I have $20K in RSP, which I take out at 50% tax rate, and I have 10K.

THIS IS THE SAME AS THE TFSA. In each case (TFSA and RSP), it cost me $5K, and I get out $10K (all after tax)

I can see potential advantages of RSP over TFSA (if my tax rate when I take it out during retirement is less than 50%, I would get more than from the TFSA.
There could also be advantages of a TFSA (if I needed to take it out and put it back, or fund one for my wife). Whoopee.

These advantages seem like small potatoes to me, and it looks like the TFSA and RSP are the same. At least in my case.

#92 bdy sktrn on 01.06.14 at 6:50 am

#30 Van guy on 01.05.14 at 8:18 pm
Hi Garth,

In the last REBGV report for Dec, sales were incredibly higher yoy and avg prices hit another all time high.
—————————–
next yr assesments will be near 15% up for most of vancouver.
listings have dried up. prices marching forward again.
driving the waterfront in west van today i saw maybe 10 signs when there were 100 last time (maybe 18mo ago)
a beautiful, summer like day here , watched paddleboarders .kayakers and pleasure boats in the warm sun while my daughter played on the shore in a t-shirt. 3hrs walking in the lighthouse park trails. from a manitoban turned ontarian turned maritimer and back to ont again, i must say i looove the west coast. esp in the winter, and the summer, and. …

#93 Smoking Man on 01.06.14 at 7:08 am

F saying get ready for rate hikes.

Translation, the damn crazy real estate market still strong. Need to talk it down, cause we can’t really spike and kill our export market.

Seams he’s doing talking for Prozac.

#94 Dave on 01.06.14 at 7:49 am

Everyone keeps talking about the death knell of rising interest rates. But can they rise? I think machines are replacing workers big time and thus we will not achieve full employment which is when rates rise. Maybe a rate increase of 1-2% is about it and that will create loads of havoc in itself.

#95 Buy? Curious? on 01.06.14 at 7:54 am

Wait! Am I in 2008 all over again? Haven’t you written this same point, in the exact same style (Rich couple, blonde probably, don’t know if they buy or rent, you, show the difference in costs. Mocking ensuses while old people comment in Smoking Man’s literary kitty box, aka, The Comment section, “Back in my day, we lived in huts with no outdoor plumbing, etc. etc.) for almost 6 years now? If you point out the correct numbers and have been handholding at the same time, why aren’t people getting it? Why hasn’t the market corrected by now? Why have house gone up almost every month? Wwwwwwwhhhhhhhhyyyyyyyyyy?!?!?!?!?!

http://www.youtube.com/watch?v=lHwI4FF7mI0

#96 Not 1st on 01.06.14 at 8:05 am

If I had to shell out big cash for a home in Canada it would be in Vancouver before Toronto. -40 in Canada today except for the west coast where it is +7. That’s worth some sort of premium.

#97 AgentSmith on 01.06.14 at 8:17 am

In the grand scheme.. we all know that Mike.

My version hasn’t stopped having kids. Every time I see him he has another swinging from the what used to be plump teat of his wife.

Oh no..they don’t rent. They bought in the trendiest of trend setting neighborhoods. I don’t think they leave the house with the kids for fear money might escape the front door.

HOUSE POOR

#98 Tony on 01.06.14 at 8:48 am

Re: #14 T.O. Bubble Boy on 01.05.14 at 6:39 pm

Interest rates will go nowhere but sharply lower. 2014 will be the year of the great untaper in America as they increase bond purchases well beyond the 200 billion a month mark. Canada’s interest rates will fall even more than in America. Long term bonds are what to buy right now. Gold and silver should have a very good run. In fact you could see the price of gold triple this year. The wildcard variable being the bitcoin. I’ve a feeling the FED will finally stop suppressing gold and silver prices this year. They want to keep the cost of one ounce of gold above the price of the bitcoin and the bitcoin will keep on rising in value.

Do you ever re-read the drivel you post here? — Garth

#99 martha on 01.06.14 at 8:59 am

I stopped reading at “215k rotting in a high interest savings account”.

:-/

#100 T.O. Bubble Boy on 01.06.14 at 9:05 am

@ #77 1 on 01.06.14 at 12:53 am
#31 T.O. Bubble Boy on 01.05.14 at 8:22 pm
Apparently I should have just bought $5500 of Bitcoin in my TFSA on Jan 1st… back up over $1000 today:
http://bitcointicker.co/

be an investor not an opportunist
a few weeks ago you were laughing at bitcoins
———–

Yes – that was meant to be somewhat sarcastic…. Not sure how I’d own bitcoin in a TFSA anyway (until the Winklevoss twins get their ETF)

My TFSA has REITs, ETFs, and a couple of individual stocks.

#101 B on 01.06.14 at 9:20 am

Why hate on the little house? I know it’s damned near child abuse if the kids don’t have their own ensuite, but it’s all you need! The house itself is fine, and would make a great starter home for a young family.

The price on the other hand, is absurd.

#102 Castaway on 01.06.14 at 9:37 am

#36 bruce s on 01.05.14 at 8:39 pm
#29 Steven

u are buying land value—duhhh
see what 750 k gets u in Paris London or New York

Now, that’s funny. — Garth

Trying to Compare TO with Paris, London or NY. You have got to be kidding. The city with no soul or character other than condo cranes. Oh sorry I forgot you have the tower thingy.

#103 Steven on 01.06.14 at 9:56 am

Castaway when the minimum wage for skilled labor for a year is $250,000 and I am getting paid that amount I will consider the validity of your point of view plausible but not before. Existing pay rates and house prices constitute a crime against humanity and that is all there is to it.

#104 Ralph Cramdown on 01.06.14 at 10:00 am

For the feeb who thinks “housing in Toronto is cheaper than in New York, Paris…” has any bearing on the question “should I buy or rent in Toronto?” I’ve got something that may come as a surprise:

http://www.trulia.com/for_sale/Queens,NY/SINGLE-FAMILY_HOME_type/700000-750000_price/

That’s right. Bigger, newer, nicer houses on bigger lots in an inner suburb of NYC. What, you wanted to compare the Danforth to Manhattan?

#105 In the 'twa on 01.06.14 at 10:12 am

Garth, you have said previously that young investors with < 50K in assets should pick up some broad-based ETFs on a discount brokerage to keep costs low. Would a simple couch potato strategy fit the bill? I just can't get my head around buying 40% gov't bonds right now…

Now where did I say to buy 40% government bonds? — Garth

#106 Daisy Mae on 01.06.14 at 10:14 am

In the news….

CBC: “….are among a growing number of Canadians without adequate credit who are being signed up for (TD) subprime bank loans by car dealerships.”

#107 1 on 01.06.14 at 10:15 am

Yes – that was meant to be somewhat sarcastic…. Not sure how I’d own bitcoin in a TFSA anyway (until the Winklevoss twins get their ETF)

My TFSA has REITs, ETFs, and a couple of individual stocks.

This is not about owning bitcoins it is about your opinion on it. The technology is revolutionary and it is currently stepping on many’s toes with its presence. There will be ups and down, lots of them but it is here to stay despite of so many skeptics

#108 seren on 01.06.14 at 10:44 am

I believe the Canadian real estate bubble will pop with the catalyst coming from the US possibly from tapering. The US bull market is long in the tooth now. There is argument that the US stock market top is roughly between now and mid year for anybody that follows stock market cycles.

This should be a deflationary type recession due to demographic headwinds down there and and up here. And it could be devastating to the US stock markets. Only time will tell. One thing is certain. No one really know when this will all end… Was almost certain it would have been 2013.

#109 Ralph Cramdown on 01.06.14 at 11:15 am

#108 1 — “This is not about owning bitcoins it is about your opinion on it. The technology is revolutionary and it is currently stepping on many’s toes with its presence.”

Can you detail a transaction that you’ve actually done with bitcoin that you couldn’t have done without it? Exactly. Hasn’t changed your life one bit.

Visa, Paypal, Western Union and gold solve just about everyone’s real world needs, and the tiny niche remaining is something only a cypherpunk or a momentum player could get excited about. Were you heavy into Segway, too?

#110 Julia on 01.06.14 at 11:42 am

Speaking of Bitcoins:
‘People WILL probably use Bitcoin to buy drugs,’ admits founder of new app that lets users spend the currency privately. Dark Wallet app and web plug-in was created by U.S-based Cody Wilson. He said the online wallet is set to ‘change the way people spend money’. It will let users store, send and receive Bitcoin privately and more securely. Yet Wilson expects people to use the untraceable system to buy drugs

Read more: http://www.dailymail.co.uk/sciencetech/article-2532720/People-probably-use-Bitcoin-buy-drugs-admits-founder-new-app-lets-users-spend-currency-privately.html#ixzz2pdKR3Crj

#111 Smoking Man on 01.06.14 at 11:52 am

DELETED

#112 jerry on 01.06.14 at 12:03 pm

Flaherty is quoted as suggestion interest rates will feel pressure to RISE in Canada in 2014 as the US Fed pulls back on QE. Yet BOC says no rate increases in 2014.

Are they talking about the policy rate or mortgage rates being affected.

#113 Penny Henny on 01.06.14 at 12:14 pm

Garth-And the $175,000 plopped down as the deposit would mean a monthly opportunity cost of $1,020 (were it invested to grow at an average 7% annual rate).
———————————————————
Him and wifey making 200k per year, he is going to get dinged pretty hard by the taxman on that 1020 per month.
You also forgot to mention what if the house appreciates a mere 2% per year, what’s that? About 85k.
Although Toronto is generally filled with A-holes, there are even more of them that still want to live here.

The return on the invested capital would be taxed an effective rate closer to 15%, since it is not earned income, but received in the form of dividends and cap gains. In fact, unrealized cap gains are taxed at 0%. I think I need to do a post on tax policy. — Garth

#114 fixie guy on 01.06.14 at 12:24 pm

I rent a similar East side house north of that Danforth example, perhaps not as nicely appointed inside, for substantially under $2k. Those interior shots scream wiiiiiiide angle lens.

#115 Morgan on 01.06.14 at 12:27 pm

Calculating a home purchase based on a 5 year turnover is always going to be a bad idea. Short-term renting is better than short-term buying except in very, very few markets. This couple didn’t say how long they would stay in the house. Kids? Odds of job changes? Like most interest dilemmas, it can’t be answered properly without more real-life knowledge.

The premium for owning over renting is so monumental this would not turn in their favour for many years, and could possibly never be justified without more house price increases. — Garth

#116 Bill on 01.06.14 at 12:43 pm

Kelowna single family homes that sold in the past year were on average much below the assessed value. The ones that are priced above are just floundering.

We may not have Zillow, but you can estimate area/street sales price averages over the prior year through BC assessments.

It seems like there will be more pain to come in the Okanagan

#117 TheCatFoodLady on 01.06.14 at 12:46 pm

Those house photos are definitely wide angle lens – compare the visuals with the room dimensions.

It’s a cute little house, little is the operative word. Insane price for something that small.

#118 Shawn on 01.06.14 at 12:46 pm

RRSP is tax free?

Barry in Pickering at 92 demonstrates that the TFSA and the RRSP provide the same after-tax return if the marginal tax rate is the same at contribution and withdrawal.

The interesting aspect of this is that if they are the same under those conditions and if TFSA is tax free then so is RRSP tax free under those conditions.

This fact has escaped most people who view RRSP as tax deferral rather than what it is, tax avaoidance (under the circumstances described).

In fact as Barry mentions if tax rate on withdrawal is lower than at contribution then it’s actually a case of negative tax.

Despite all this we hear that the dividend tax credit, and the lower capital gains tax is lost or wasted in RRSP. Well, you don’t need a tax credit if there is no tax in the first place.

Thanks Barry.

#119 aprilNewwest on 01.06.14 at 12:46 pm

#88- Are people supposed to know where “YEG” is ?

#120 Bill on 01.06.14 at 12:49 pm

There are may substantial drops in assessed values in West Vancouver. Here is just a few examples.

5709 Bluebell Dr, West Vancouver, (house) down 15.06% yoy.

Apt 300 – 568 Waters Edge Cres, West Vancouver, (condo) down 17% yoy.

And these are not unusual properties. Their neighbors in the area are all down similar amounts.

#121 bentoverpayingtaxes on 01.06.14 at 12:54 pm

The couple you mention is an anomaly…more likely than not civil servants. Less than 2% of people in the private sector Canada make the money you mention…15% of the population are civil servants on the gravy train.

More people are like this…..and the 1%er’s who are forced to make 100% financing a reality.

http://www.cbc.ca/news/canada/british-columbia/couple-feel-robbed-by-25-interest-td-car-loan-1.2483342

The couple in the article should also feel robbed by their politicians who have folded under the heavy hand of union politics to raise civic service wages to the lofty premium they receive today over that o the average citizen. When ’emergency rates’ were put in place…the civil service bloated like a fat man at a country fare…..figure it out…the low rates were actually a boon to some…..a nighmare to most…..what side are you on?

You’re tedious. — Garth

#122 Toronto_CA on 01.06.14 at 1:02 pm

Fewer Canadians plan to contribute to their retirement savings plans this year, according to a study released Monday.

Three in 10 – 31 per cent – are making plans to sock away some money in their RSPs (including registered and non-registered accounts) in 2014, an 8-per-cent decrease from 39 per cent in both 2012 and 2011, the poll by Bank of Nova Scotia found.

Of respondents with RSPs who have considered increasing their contribution, 74 per cent cite lack of affordability as the top reason for not contributing more often. That’s down from 84 per cent in 2012.

The survey also indicates that more Canadians are taking money out of their RSPs.

Among RSP holders polled, 40 per cent said they have withdrawn funds from their RSP, up 4 per cent from the 36 per cent in 2012.

The top reason for dipping into the funds is to take advantage of the federal Home Buyers’ Plan to buy or build a first home: 16 per cent, compared with 15 per cent in 2012.

http://www.theglobeandmail.com/globe-investor/personal-finance/retirement-rrsps/fewer-canadians-will-contribute-to-their-rsp-this-year-poll-finds/article16204949/
______________

Yowza. So people are NOT contributing to their RRSPs (20% decrease from last year) and also pulling out what little they do have invested so they can increasingly buy houses. Because reasons. And real estate is the only investment, right?

Garth, please keep helping people.

#123 Mister Obvious on 01.06.14 at 1:03 pm

From F in this morning’s Financial Post:

“We look at debt to net worth,” he said. “As long as the housing market remains relatively strong we don’t really have a debt issue.”
————————————-

So there you have it. There is no debt problem. Not really. Everything’s going to be just ducky and it’s high time we moved on to other things.

What do you suppose Miley’s getting up to these days?

#124 heineken on 01.06.14 at 1:29 pm

Here’ s a real life testimonial .
IN 1990 i purchased my first property for $240,000 in the old city of Toronto (WEST END) with a personal cheque worth $10,000 and no competing bids. at this location, I can walk to the subway in less than 4 minutes.
At the time my interest rate was approximately 10%.
I WAS 27 yrs old at the time and i decided to live in the basement (it was no apt-just a concrete floor that i made into a beautiful bachelor apt ) and rent the 2 top floors to 3 sexy young females who were constantly partying for 9 years. I can’t tell you how many times i fell down the stairs from drinking/swallowing Mr. Morgan’s orange jello bombs.
It was the happiest time of my life. I took the plunge back then and it was more fun than you can imagine. Living in Toronto and being single is the best course of life one can choose.
The young ladies never wanted to move out. The location is spectacular, but after living in the bsmt for 9 fun-filled years (while the property value increased, my personal net worth increased, my mortgage decreased) my wife wanted to move into this property and I unfortunately had to ask them to move.
To make a long story short; buying a property in Toronto was the best choice i ever made. I never found it to be difficult. Slow and steady was the way i was educated from a financial point of view. Today i own a variety of rental properties; but the foundation was that very first beater home. Owning a home in the big smoke is not painful and it turned out to be quite the opposite. Today, my home is worth in excess of $1 million and I carry a mortgage of less than $800/mth because I chose to do that. I’m not bragging, i just want inform everyone that purchasing a home was not a difficult, painfull or bad decision for me, or many others similar to me.

1990 was 24 years ago. Your story is pointless. — Garth

#125 Stickler on 01.06.14 at 1:32 pm

that sample house…if you paid full in cash and could rent it out for $3,000/month would give you a 4.8% return.

But…you can’t rent it out or $3,000 can you?

..add in property taxes, insurance & a modest 1% per year for maintenance…plus financing costs.

Bananas. Plain and simple.

#126 Mike S on 01.06.14 at 1:33 pm

Thank you for the great blog

more reasons not to buy now
– F sees a soft landing and will do what is necessary to achieve that
– the FED/BoC wants bigger inflation

It means that there is a probability of renewing in 5 with a higher rate and less of equity in the house

What do you recommend to do with the cash? Say you have 200K in cash (from selling a property). How do you start the diversified balanced portfolio?

given the great performance in the last few years (10% vs 7% average) wouldn’t it be fair to expect less than 7% in the next few years? Especially that rates should slowly rise (holding back fixed income) and stock markets probably won’t have the great performance they did in 2013?

A balanced 60/40 portfolio over the last decade averaged 7%, and that included the worst meltdown in 80 years. Trying to time things usually backfires. — Garth

#127 Spiltbongwater on 01.06.14 at 1:38 pm

Got my BC Assessment, and my townhouse is up $3000. I am richer then I thought. When is this correction supposed to start?

#128 Dual Citizen in Canada on 01.06.14 at 1:42 pm

#39 EvilMagpie on 01.05.14 at 8:50 pm
Max your 401K as the CDN dollar falls, the exchange for when you transfer that 401K back to Canada RRSP will be all that better. You’re making 7% today.

#129 Crash is coming, Just do the Math on 01.06.14 at 1:51 pm

That $750k bung on the Danforth takes about $150k salary to own with 5% downpayment. How many people in Toronto actually make $150k per year?? Not many. But all over the 416 the average price is around $750k to $800k.

CMHC mortgages with 25 yr am qualify at about 5 times income right now , at 5 year fixed rates.

So basically a starter bungalow in an ok neighbourhood takes $150k salary to own.

This market is doomed.

#130 Paul on 01.06.14 at 1:52 pm

Toronto home prices up almost 9% from last year at $520,398 | Financial Post

http://business.financialpost.com/2014/01/06/toronto-home-prices-up-almost-9-from-last-year-at-520398/

Bubble Bubble Toil And Trouble

#131 Holy Crap Wheres The Tylenol on 01.06.14 at 2:06 pm

#112 Smoking Man on 01.06.14 at 11:52 am
DELETED

::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Just thought of you over the weekend and your disdain of school and the school system. School doesn’t work for all of us the same way. My education started when I was a toddler and has never really stopped. We all learn to fly different ways. Perhaps this song was written for you.

I can see you in the morning when you go to school
Don’t forget your books, you know you’ve got to learn the golden rule,
Teacher tells you stop your play and get on with your work
And be like Johnnie – too-good, well don’t you know he never shirks
– he’s coming along!

After School is over you’re playing in the park
Don’t be out too late, don’t let it get too dark
They tell you not to hang around and learn what life’s about
And grow up just like them – won’t you let it work it out
– and you’re full of doubt

Don’t do this and don’t do that
What are they trying to do?- Make a good boy of you
Do they know where it’s at?
Don’t criticize, they’re old and wise
Do as they tell you to
Don’t want the devil to
Come out and put your eyes

Maybe I’m mistaken expecting you to fight
Or maybe I’m just crazy, I don’t know wrong from right
But while I am still living, I’ve just got this to say
It’s always up to you if you want to be that
Want to see that
Want to see that way
– you’re coming along!

#132 T.O. Bubble Boy on 01.06.14 at 2:06 pm

@ #108 1 on 01.06.14 at 10:15 am
Yes – that was meant to be somewhat sarcastic…. Not sure how I’d own bitcoin in a TFSA anyway (until the Winklevoss twins get their ETF)

My TFSA has REITs, ETFs, and a couple of individual stocks.

This is not about owning bitcoins it is about your opinion on it. The technology is revolutionary and it is currently stepping on many’s toes with its presence. There will be ups and down, lots of them but it is here to stay despite of so many skeptics
——————————-

I’m a skeptic of Bitcoin in it’s current form.

However, I can see a next generation version of an electronic/virtual currency that is used for payment & currency exchange. It would have to be instantaneous, and not subject to the extreme volatility of Bitcoin today.

#133 Stoopid Idiot on 01.06.14 at 2:20 pm

Economist John Williams thinks 2014 will mark the beginning of hyperinflation. Williams contends, “You are going to see, early on, a crisis in the dollar that will start to trigger the inflation . . . as the inflation picks up, that’s going to savage the economy, which is already in a depression. It never recovered.” Forget what you have heard about the so-called recovery. Williams says, “The consumer is in trouble. There is nothing happening to turn the economy around.” The weak economy is bad news for the dollar. According to Williams, “Anything that would suggest deficit deterioration here, and a weak economy would do that, will have a devastating impact on the dollar.” And if foreigners start selling some of the 12 trillion U.S. dollar based assets, such as bonds and currency, things will turn ugly fast. Williams says, “We’re dependent on the rest of the world continuing to go along with us and continue to support the dollar. That’s not going to happen.” So, the big question everyone is asking is when will the buck take a hit in value? Williams says the dollar will likely begin selling off before the middle of this year, and he adds, “It’s really going to be a currency panic . . . when the fundamental selling pressure really starts to pick up, when the selling gets heavy . . . in turn, the weakness will be seen in a spike in oil prices and a spike in gasoline prices.” Williams says there will be a panic out of the dollar and he predicts, “Once you see a massive sell-off here, I see the game as being over.” Join Greg Hunter as he goes One-on-One with John Williams of Shadowstats.com.

http://www.youtube.com/watch?v=dQt-FFDM_5k

#134 DR on 01.06.14 at 2:26 pm

Trying to time things usually backfires. — Garth

That’s an understatement.

#135 Montellino on 01.06.14 at 2:29 pm

speaking of 60/40 portfolios, would someone be able to provide a summary of most popular ETFs that were discussed here recently?

thanks!

#136 DR on 01.06.14 at 2:31 pm

Heineken i enjoyed that story.

You should have bought some more though.

Heres something

http://business.financialpost.com/20…ear-at-520398/

#137 dontcallmeshirley on 01.06.14 at 2:32 pm

Jim Flaherty on CTV:

“We look at debt to net worth,” he said. “As long as the housing market remains relatively strong we don’t really have a debt issue.”

#138 Not 1st on 01.06.14 at 2:33 pm

think I need to do a post on tax policy. — Garth

—-

Yes please and include:

– taxes on a combination of wages and dividends
– taxes on investment holding companies
– rules and taxes in family trusts holding investments

#139 young & foolish on 01.06.14 at 2:57 pm

Gosh, I wonder what kind of correction people expect will come to property in big cities. Last time I checked, we are still “urbanizing”. But if 200k plus households have trouble buying urban property, then obviously not all is well.

Also, buying for 5 years is not worth it outside of a quickly appreciating market. We’re past that now. If you don’t plan to nest for the long haul, then just rent.

#140 bentoverpayingtaxes on 01.06.14 at 3:10 pm

I’ll admit to being tedious if you can explain why 100%the tax revenues of entire ministries ( health & education for ex) go to wages, perks and pensions to unionized civil servants clogging up the system. There is nothing left for infrastructure, bricks and mortar, new builds, new text books, tech upgrades, new hires….literally all tax increases have gone into increased salaries and pension perks. In fact the tax revenues don’t cover the expensive civic servant demands and ‘underfunding’ of lavish pensions. In BC and Ont we taxpayers are forced to issue billions in bonds against future earnings and revenues to pay for the overhead of todays union expectations. Call me tedious….but doesn’t the outrageous tax grab feed into why ’emergency rates’ have held so long with governments addicted to low cost cash to pay for the demands of a few? Would we have as many people forced into sub prime car loans if taxes were not the largest drag on saving?

Look..don’t get me wrong…I’m against getting ripped off from every angle….but I do pay taxes in two countries and see daily what the difference is between the lifestyle of low income people in the US vs Canada. The fact is that low income/middle class people live better in the US. Costs of government are far lower …and people have higher disposable incomes…..whats wrong with that? Call me tedious…but shouldn’t the facts be allowed to speak for themselves without rebuke?

#141 dosouth on 01.06.14 at 3:20 pm

Real Estate Boom continues…..say what??

#142 Obvious Truth on 01.06.14 at 3:30 pm

How bout that xfn. Twin peaks. Peak two was gasping just to get there. Now I read on the blog that rsp contributions will be weak.

Does this tell us something about Canadian housing?

And new highs on Xlf today.

Will be interesting to watch.

#143 Bottom Feeder on 01.06.14 at 3:46 pm

Hi Garth. Given the need for re-balancing for 2014 are you still a fan of picking up preferred share ETF’s?
I have CPD (Preferred Shares on the TSE). Although it’s down 4% since I purchased it, I pocketed the 4% dividend. I get it quite well, that although the ETF is down, it is still churning out a 4%+ dividend and is meant to be held longer term. However, if it will still go downward as interest rates climb, I’m less than enthusiastic and would like to hear what else you would rather recommend for 2014 than a preferred share ETF. My time line is 8 years to retirement at age 60. Thanks.

#144 frank le skank on 01.06.14 at 3:46 pm

I always find the rent vs buy debate very interesting. In this example you pay $80,239 in interest over the first 5 years. If you calculate at 4% you pay $98,500 in interest, 5% you pay $124K in interest. Imagine when rates normalize!?!?!?

I’m sure any homeowner or RE agent will argue that the amount of interest decreases every year since principal goes down. So, for arguments sakes, at 5% interest for 25 years, you pay a total of 396K in interest. So at 5% on $575K for 25 years you would end up forking over a grand total of $1.15 million for the house (DP+Principal+interest, not including property tax, RE commissions or maintenance). 7% compound for 25 years on 175K would give you a 950K
balance.

Unknown variables:
1. How much would you pay in rent over the same 25 years; deduct from 950K.
2. what are the variances in interest rates? No doubt they will be upward.
3. Will house prices increase/decrease?
4. Property taxes and maintenance.

If you believe house prices will continue to increase at its current pace and interest rates will never normalize you will be more inclined buy. If you do not believe in the RE fairy tale you will certainly be better off renting until prices normalize.

Long term or short term renting is going to costs less given the current price of housing.

#145 Tony on 01.06.14 at 3:58 pm

Re: #127 Mike S on 01.06.14 at 1:33 pm

I’ll have to come up with all the language translations for the word crash but you best listen to what trader618 has to say.

http://trader618.com/2013/11/29/fri-29-nov/

Just like 5 years ago, investors, directly or via fund managers
will lose heaps of money. However this time it will be worse than
2008. Too many will never financially recover. Serious illness and
suicides will result.

http://trader618.com/2013/11/22/fri-22-nov/

#146 No crash Vancouver on 01.06.14 at 4:07 pm

There will be no crash in Vancouver for the following reasons:

-Mildest climate of all major cities in Canada
-Baby boomers want to retire here
-Most beautiful city in Canada
-Immigrants can come here and find their culture &
community already exists.
-Immigrants are accepted & welcome
-Safe to live – no gun culture
-Can’t build north because of mountains, can’t build
west because of Ocean, can’t build south because of
Border & can’t build east because of funnel between
mountains & border.
-Home ownership (& how much it’s worth)is status –
very important to people.
-Interest rates are not going up ( not in any
significant mount)
-This is a city where the elite of the world have a home

I look forward to the robust spring real estate market
and no significant erosion of prices.

It’s going to be a great 2014!

#147 Vancouver Joe on 01.06.14 at 4:08 pm

A balanced 60/40 portfolio… I’m actually thinking to hold off investments for few months. Nobody knows when, but everybody fees that we’re due for adjustment. If it’s 5-10% drop then waiting makes sense in the short run.

#148 Stickler on 01.06.14 at 4:34 pm

@ #143 Bottom Feeder on 01.06.14 at 3:46 pm

Hi Garth. Given the need for re-balancing for 2014 are you still a fan of picking up preferred share ETF’s?
I have CPD (Preferred Shares on the TSE). Although it’s down 4% since I purchased it, I pocketed the 4% dividend. I get it quite well, that although the ETF is down, it is still churning out a 4%+ dividend and is meant to be held longer term. However, if it will still go downward as interest rates climb, I’m less than enthusiastic and would like to hear what else you would rather recommend for 2014 than a preferred share ETF. My time line is 8 years to retirement at age 60. Thanks.

——————-

So, you got 4% in income (and will pay tax on that)…but lost 4% in capital.

Guess what…you will earn 4% on 96% of that total (and pay tax on that too)…and potentially drop 4-5% more capital yet again.

You would have been better off keeping your dough in a can.

Here you go for your equities…

DIA (Dow index) or SPY (S&P 500) – 30%

ZDV – 20%
ZWU – 20%
ZWB – 20%

VXUS – 10%

…You are welcome.

#149 Mike on 01.06.14 at 4:42 pm

As the submitter of the email to Garth, to clear up:

I have a couple kids and space is becoming an issue along with no grass.

I have rented for the past 15 years (never owned) and my wife does want a place she can make her own.

We are late thirties now.

We were looking to buy a house that would last our entire life…as long as we can walk up stairs. (sounds naive I know).

I do believe the house that Garth attached has sat for a while. I think you can do much better than that for $700k in that area….but I don’t want to sound like a real estate cheerleader as the prices are still assanine….I just want to know if they’ll be assanine forever.

Or will higher rates next year (maybe) bring prices down?

#150 Rational Optimist on 01.06.14 at 4:43 pm

122 bentoverpayingtaxes on 01.06.14 at 12:54 pm

Thanks for the link. Sad story, I guess, but not for all of the average responsible Canadians who own TD shares either directly or in an ETF.

I’ll have to note that if in a moment of weakness I sign something really stupid, I can call up Pravda to complain about it.

#151 Stickler on 01.06.14 at 4:45 pm

@ #146 No crash Vancouver on 01.06.14 at 4:07 pm

There will be no crash in Vancouver for the following reasons:

———————————-

Let me address your Vancouver jibber jabber as someone who has been there MANY times, but fails to see it as the diamond you do.

-Mildest climate of all major cities in Canada

>> So? Those that need a job will do better elsewhere, and those with money can find much better weather elsewhere.

-Baby boomers want to retire here

>> Says who? All the boomers I know want to retire SOUTH.

-Most beautiful city in Canada

>> If you say so. It is nice. Big whoop.

-Immigrants can come here and find their culture &
community already exists.

>> Same as many other places.

-Immigrants are accepted & welcome

>> Same as many other places.

-Safe to live – no gun culture

>> Same as many other places.

-Can’t build north because of mountains, can’t build
west because of Ocean, can’t build south because of
Border & can’t build east because of funnel between
mountains & border.

>> True. So?

-Home ownership (& how much it’s worth)is status –
very important to people.

>> This has nothing to do with Vancouver.

-Interest rates are not going up ( not in any
significant mount)

>> This has nothing to do with Vancouver.

-This is a city where the elite of the world have a home

>> Same as many other places.

So what you get is a decent but expensive city with below average weather when compared to almost all other international destinations. Yawn…

#152 jess on 01.06.14 at 5:02 pm

Insolvency Statistics in Canada—October 2013
Business insolvencies for the 12-month period ending October 31, 2013, fell by 3.8 percent compared with the 12-month period ending October 31, 2012. The three sectors that registered the biggest decrease in the number of insolvencies were retail trade; construction; and manufacturing, whereas the real estate and rental and leasing sector experienced the biggest rise in insolvencies.
http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br03198.html

======
sub slime
td 25% interest cars loans

crackdown on predatory lending e.g.Cash America International,
http://www.consumerfinance.gov/blog/category/payday-loans/

a new form has opened up “workplace loans”
http://truth-out.org/opinion/item/21023-the-new-financial-scam-driving-workers-deep-into-debt

#153 aprilNewwest on 01.06.14 at 5:05 pm

#146 – sounds like realtor spin….

#154 Smoking Man on 01.06.14 at 5:10 pm

132 Holy Crap Wheres The Tylenol on 01.06.14 at 2:06 pm

Super Tramp, nice. The delete wasn’t that bad, real life observation not suited for this multi gender adiance, could be offensive for some.

I knew it was board line, looks like Gartho is on the ball, post like that better in the late evening, hopefully the great one had had a cocktail or two.

It’s found another place.

It’s not like I provide a link to the latest Toronto real estate numbers from TREB.

W06 dogs, on fire as I have told you.

#155 aprilNewwest on 01.06.14 at 5:10 pm

#131 – Notice the source…….????

#156 :):(Ying Yang on 01.06.14 at 5:19 pm

#146 No crash Vancouver on 01.06.14 at 4:07 pm
There will be no crash in Vancouver for the following reasons:
-Mildest climate of all major cities in Canada
-Baby boomers want to retire here
-Most beautiful city in Canada
-Immigrants can come here and find their culture &
community already exists.
-Immigrants are accepted & welcome
-Safe to live – no gun culture
-Can’t build north because of mountains, can’t build
west because of Ocean, can’t build south because of
Border & can’t build east because of funnel between
mountains & border.
-Home ownership (& how much it’s worth)is status –
very important to people.
-Interest rates are not going up ( not in any
significant mount)
-This is a city where the elite of the world have a home
I look forward to the robust spring real estate market
and no significant erosion of prices.

It’s going to be a great 2014!

………………………………………………………………………
That is until the earthquake hits. Oh probably around 8-9 on the scale. Been there done that in three differnet countries thank you. Boooooooom

http://www.cbc.ca/news/canada/british-columbia/b-c-due-for-mega-earthquake-along-coast-1.13817

#157 :):(Ying Yang on 01.06.14 at 5:21 pm

Smoking Man, what is your prediction for the Asian market? My brother says big issues on the horizon this year.

#158 John on 01.06.14 at 5:40 pm

#145

Yup, Trader618 said so. Must be true.

#159 Ralph Cramdown on 01.06.14 at 5:44 pm

#134 Stoopid Idiot — “Economist John Williams thinks 2014 will mark the beginning of hyperinflation.”

Yep, same as he predicted for 2013, 2012, 2011, 2010, 2009… Look it up; it’s all online.

#160 bentoverpayingtaxes on 01.06.14 at 6:08 pm

#146 No Crash Vanc….you make a mockery of the truth by saying….” Safe to live, no gun culture”……nonsense…thats pure propaganda spewed by the tourist ministry and advertisers……next you’ll be saying that ‘Vancouver is the best place on Earth”…Bwahahahahahahaha …Vancouver is plagued with gun violence and violence of every other kind incuding personal, property, drug, gang, inter ethnic and a stunning history of citizens dying while in police custody.

The safest place to live in North America with the lowest crime stats is Plano Texas……and guess what…everyone owns a gun…go figure eh?

http://www.canada.com/vancouversun/news/story.html?id=4b651ab1-e729-44a9-86d3-79a1ddc84689

#161 Stickler on 01.06.14 at 6:27 pm

@ #146 No Crash Vancouver

Lets take a quick look at crime in Canada and the US and compare it to Vancouver…

Sample of cities with LESS homicides then Vancouver:
Calgary
Montreal
Hamilton
Ottawa
Quebec
Toronto
Canada (on average)
Boston

Less Aggrevated Assult then Vancouver:
Calgary
Montreal
Washington DC
Hamilton
Ottawa
Quebec
Toronto
Canada (on average)

Overall crime…What ranks better then Vancouver?
Winnipeg
Phoenix
Edmonton
Calgary
Montreal
Washington DC
Hamilton
Los Angeles
Philadelphia
Ottawa
Quebec
Toronto
New York
Boston

Dream on #146 No Crash Vancouver

#162 Stickler on 01.06.14 at 6:31 pm

@ #146 No Crash Vancouver

oh …..

And the data was from a BC study.

” City by city comparisons show that, consistent with ranks reported for British Columbia, Vancouver has one of the highest combined violent and property crime rates among major Canadian and American cities. ”

Vancouver has high property crime rates
– the second-highest theft rate,
– the fourth-highest motor-vehicle-theft rate,
-the fifth-highest break-and-enter rate and
– the third-highest overall rate

#163 back it up, bucko on 01.06.14 at 6:53 pm

Bent over said:

The safest place to live in North America with the lowest crime stats is Plano Texas……and guess what…everyone owns a gun…go figure eh?

Plano, Texas owes its safest city in the US awards because a) it’s small (270,000 or so) and b) it’s the wealthiest city (highest median income) in the US. Where wealth inequality is low, there is less crime.

#164 Smoking Man on 01.06.14 at 7:26 pm

#157 :):(Ying Yang on 01.06.14 at 5:21 pm

Smoking Man, what is your prediction for the Asian market? My brother says big issues on the horizon this year.
…………..

Don’t follow it, way to much on my plate at moment. I am sensing via THE UCC bit of trouble in Hong Kong real estate market.

Nothing definitive..

#165 Son of Ponzi on 01.06.14 at 7:33 pm

157 Ying Yang,
Smoking Man, what is your prediction for the Asian market? My brother says big issues on the horizon this year.
—————-
My Chinese wife says Chinese papers full of talk about crash.

#166 Canadian Watchdog on 01.06.14 at 7:50 pm

This is too funny and exactly what happens when tech companies hire a nonbeliever (like Alicia Keys for Blackberry) to sell consumers on why curved is much much better then flat, so you have to buy it.

Michael Bay flips out during Samsung's presentation at CES2014

#167 Obvious Truth on 01.06.14 at 7:57 pm

#149. I think you are incredibly smart and obviously driven to achieve a goal on your terms.

I read recently that there are only 100 000 millionaires in Toronto. Only 400 000 in all of canada.

Sounds like you are on the cusp of being a 1% er.

I think you are playing your game already. You’re good at it.

This blog has quite a few 1% ers from what I read. Some do it themselves. Many others here would kill to be in your position.

My advice aside from who cares about RE is again to make an appt with at least six investment houses. And not the mutual fund companies. Or [email protected] tb.

At 7% your money will double twice by your late 50’s. Yes that’s 2M. Double again by late 60s. That’s 4M.

The vast majority of people need excellent advice and at your level it’s important. they will roll out the red carpet. And it will be free. Ask for a second appt so you can come back with questions. You are truly richer than you think. And you will have a lot more info and less blog dog guessing. Being rich is hard work.

It would be awesome for us to hear about what you have learned. Whatever decision you and your family may make.

All the best.

#168 TEMPLE on 01.06.14 at 8:07 pm

#141 bentoverpayingtaxes on 01.06.14 at 3:10 pm

I’ll admit to being tedious if you can explain why 100%the tax revenues of entire ministries ( health & education for ex) go to wages, perks and pensions to unionized civil servants clogging up the system. There is nothing left for infrastructure, bricks and mortar, new builds, new text books, tech upgrades, new hires….literally all tax increases have gone into increased salaries and pension perks. In fact the tax revenues don’t cover the expensive civic servant demands and ‘underfunding’ of lavish pensions.

Nobody can explain anything to you. A bunch of people on this blog have tried and failed spectacularly. The main problem is that you insist on lying and believing in lies. You are as close to immune to facts and rationality as a human can be while still retaining enough brain activity to power a digestive tract.

I bow to you, BentOver, as one of the greatest trolls to ever pollute Garth’s blog.

TEMPLE

#169 AK on 01.06.14 at 9:15 pm

#145 Tony on 01.06.14 at 3:58 pm
“I’ll have to come up with all the language translations for the word crash but you best listen to what trader618 has to say.

Just like 5 years ago, investors, directly or via fund managers
will lose heaps of money. However this time it will be worse than
2008. Too many will never financially recover. Serious illness and
suicides will result.”

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

Tony, You are killing me, Man.

Trader 618? LMFAO……….

#170 Infused with Opiates on 01.06.14 at 9:16 pm

168 Temple – you bow to bentover? Where does that put your nose??

#171 Entrepreneur on 01.06.14 at 9:48 pm

#141 bentoverpatingtaxes

Running a country finances should balance like running a small business, even your house. A small business has to balance the sheet, try to make a profit for it to prosper, think of different ways to get business moving. A owner of a house has to pay the bills in order to run and keep the place. The owner might have to cut back on less heat, electricity, clothing, food, etc.

Where to cut $ in the government to balance?
The school trustees in this area have voted themselves a 30% raise over three years.

The German, I mean B.C. ferries CEO all have nice salaries. Look at the CEO that just retired with a hefty amount. The ferry prices are too high for to travell on.

While Nurses on Vancouver Island are being replaced by care-aides that only have a 6 month course, not all but enough to shift the care and attention. The responsibility is on the RN shoulders to make sure the patient comes out alive. A 6 month course is not going to do it. The provincial province wants to save money.

While B.C. has the highest child provety rate in Canada.

The disconnect is there. Hard on the small business and families.

#172 Entrepreneur on 01.06.14 at 9:54 pm

Should be B.C. has the highest poverty in Canada.

#173 Derek R on 01.07.14 at 1:58 pm

#172 Entrepreneur on 01.06.14 at 9:48 pm wrote:
Running a country finances should balance like running a small business, even your house. A small business has to balance the sheet, try to make a profit for it to prosper, think of different ways to get business moving. A owner of a house has to pay the bills in order to run and keep the place. The owner might have to cut back on less heat, electricity, clothing, food, etc.

That’s true for everything that a small business, a household or a country buys or sells using other people’s money.

However in a family household that gives out “gold stars” to its kids for good behaviour and redeems them for treats and privileges, it doesn’t matter whether the “gold star” count balances or not, as long as it’s getting the kids to do their chores. Sure, the household doesn’t want to hand out too many or they’ll be worthless and it doesn’t want to hand out too few or the chores won’t get done but balancing the actual count shouldn’t be at the top of the priority list. And the family certainly won’t go bankrupt if it hands out more than it takes in.

But if it tries the same rewards system with dollars or gold, it has to be very careful because doing that can bankrupt the household if the accounts don’t balance.

Likewise for the country, the government has to be careful that its foreign currency payments are less than its receipts but for its internal currency it just has to print enough that its citizens are “doing the chores”. Balance isn’t so important for countries with their own currency. However it’s crucial for countries without. That’s why it’s not that important if Canada balances its budget but its crucial that Greece does.

So what you say about the house is dead on for the country. Anything bought from abroad with US dollars has to be paid for by Canada. Anything produced within Canada doesn’t have to be paid for by Canada (although one Canadian may have to pay another). Just like a household where one kid looks after the garden and “sells” produce to the other family members for gold stars.