Animal instincts

DEER modified

“Next month,” says Sophia to me, irritated, “marks the 8-year anniversary of me putting off buying real estate and waiting for the market to crash. Eight years later, boy do I regret not buying. I have my 20% now, sure, and double the income to carry a place.

“But I’m getting kind of sick and tired of waiting. My professionally managed investments earned me squat last year after fees (did better with the money I shoveled into ING Direct) so that isn’t encouraging me to continue to sit on the sidelines either. Saw some nice open houses this week…”

It’s always interesting what perceptions do to logic. Murder it, usually. Rarely is this more acutely the case than with real estate, the most emotional of investments. Sophia, who I gather lives in Toronto, gives us one good example.

In the spring 2006 the American real estate market was cresting, although prices would not start to seriously slide in most markets for about a year. In Ottawa, the shiny new little finance minister, F, had just presented his budget, which contained a provision to allow 40-year mortgages with 0% downpayments, insured by CMHC. I was an MP in serious crap with the prime minister.

We were more than two years away from a global financial crisis and most Canadians had never heard of Bear Stearns, Lehman Brothers or collateralized debt obligations. But Toronto real estate was trucking along, soon to receive a big jolt from F’s new no-money-required mortgage rules.

The average property price in the GTA was $353,928, which was 6% more than the year before, when Sophia decided to ‘wait for a crash.’ That crash came in the winter of 2009. In January of that year – five years ago – home sales in Toronto crashed year/year by 47%, and prices tumbled by 10%, falling back to 2005 levels. But Sophia did not buy.

By the way, the five-year mortgage rate in 2006 was 6.45%.

Fast forward to today. The average GTA property price this month is $526,528, which is a 48% advance over the level of eight years ago. Ask most people what real estate values have done, and they’ll tell you in a heartbeat they’ve doubled, or more. Not exactly. Meanwhile money invested in financial assets in an RRSP averaging 7% since the beginning of 2006 (the track record of a 60/40 balanced, diversified portfolio) has increased 76%.

So why do people exaggerate real estate gains and diss financials? Easy. They lust for houses. It’s more cultural than rational, and a disease that’s truly infected the middle class. While the top 1% of the population, by net worth, has less than 8% of its assets in real estate, families in the middle have almost 70% of their wealth in one principal residence. Most people equate real estate with security, even as they’re increasing risk by having too many eggs in one basket.

It’s not something this blog, or me, is going to change. It’s human nature. Sophia didn’t buy a property in 2009 when prices and sales were falling, probably because she was afraid they’d fall further. It’s why so many hapless, emotional equity mutual fund investors bailed out exactly five years ago, turning paper losses into real ones. Incredible numbers of them have sat in cash ever since, while markets jumped 170%.

But today, with house prices at record levels, Sophia wants in. So typical.

She’s not alone, of course. Agent Dan’s been keeping me abreast of a developments with an ugly suburban house in distant Markham on a 50-foot lot with a brick face and aluminum sides. He showed the 30-year-old place to clients on Saturday, and told them not to bother making an offer. At that point there were already 19 registered bids, with a few more expected. No value there.

Here’s the house, listed at $749,000, which Dan says was comparable to recent sales in the hood.

HOUSE modified

The listing agent restricted showings to 30 minutes, said offers would be considered at 7 pm on Sunday night and only if they had been faxed in by 4:30 pm. Each one had to be accompanied by a certified cheque or cashable bank draft. And don’t even think about a condition. “Condition upon financing will Not be accepted.”

When the dust settled, the ‘winning’ bid was $886,000, or $900,000 including land transfer tax.

As I’ve said in the past, what people need is income and wealth, not a house and debt. Most will ignore me. It’s how we got the 1%.

229 comments ↓

#1 Jas on 02.24.14 at 8:35 pm

Toronto is ridiculously expensive!!

#2 active on 02.24.14 at 8:36 pm

BAM!

#3 Role on 02.24.14 at 8:39 pm

Has anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth

#4 don juan on 02.24.14 at 8:44 pm

#1 Jas on 02.24.14 at 8:35 pm
Toronto is ridiculously expensive!!

Chang to, Toronto is REDICULOUS

#5 TS on 02.24.14 at 8:44 pm

Of course you were stupid not to buy.

Buying doesn’t mean taking the largest amount of money that a bank will give you though.

It’s perfectly reasonable to buy a house for 2X gross family income anywhere as long as you have money to save and retire on.

#6 omg on 02.24.14 at 8:45 pm

WHY DO PEOPLE LUST AFTER THE RETURN ON REAL ESTATE OVER THE PAST DECADE

Because its hugely levered – sometimes 20 to 1. So a small down payment for many have turned into multi-hundred thousand dollar gains. Pretty awesome if you bought in the last decade. Of course leverage cuts both ways and a small downpayment can evaporate with a slight decrease in house prices.

No average guy buys investments with borrowed money so that is why they will never get the returns like real estate has given over the decade.

#7 Waterloo Resident on 02.24.14 at 8:48 pm

i’ll give $1.2 million for that $749,000 house, and in 2 years it will flip for $2.6 million. That’s the truth that both you and me are finding hard to believe.

Actually I just find you hard to believe. — Garth

#8 pitfield on 02.24.14 at 8:49 pm

I’m very curious how a bank can give the buyer of that home, with 20% down, a 700k mortgage but if one has the same down for a balanced portfolio the bank will not finance the 700k. The balance portfolio can be liquidated in 2-3 day in case of default while the house may take a lot longer with many headaches.

#9 Randy Macho Man Savage on 02.24.14 at 8:50 pm

#3 Role on 02.24.14 at 8:39 pm
Has anyone really been far even as decided to use monies even go want to do look more like house?

…………………………………………

It sounds like Smoking Man has changed his nickname to “Role”.

#10 Toronto_S on 02.24.14 at 8:54 pm

Sophia didn’t buy in 2009 because she was reading your blog :-P

On a more positive note, and back to Toronto, I discovered this great building, walking distance to the lake, 15 minute drive to downtown (on a good day), 1100-1220 sq ft units, low maintenance fees, and still under $400 K. So there are still some reasonable pockets left.

#11 Smoking Man on 02.24.14 at 8:56 pm

Ha, Gartho starting to appreciate the mind of the Herd…..

I still think this Market has legs, another year perhaps, looking at the makings of a small hockey stick pattern, see what the spring brings.

As a pin in the eye to low life renters. G20 Will bring in an extra 2 Trillion into the economy’s.

Translation, money printing, higher asset values…

Cash horders are doomed…

#12 Smartalox on 02.24.14 at 8:58 pm

Could it be that it’s not so much that the 1% moved so much farther ahead in the past 8 years, but instead that the 99% lagged – shoveling their potential for wealth into their single assets, only to watch them decline in value, clinging to the vain hope that prices (paper values) will rise forever?

#13 Smoking Man on 02.24.14 at 8:59 pm

#3 Role on 02.24.14 at 8:39 pmHas anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth
…………

God damn illiterate…. What the hell does that mean

#14 London, Ontario, Calling on 02.24.14 at 9:00 pm

Much better house, better neighborhood, 1.5 hours away, 2.5 times cheaper. No bidding wars, not sold after a week on the market, London Ontario: http://www.realtor.ca/propertyDetails.aspx?propertyId=14086875&PidKey=519512710

#15 A Yank in BC on 02.24.14 at 9:03 pm

The first thing Sophia needs to do is fire those who “professionally” managed her investments.

#16 Paully on 02.24.14 at 9:04 pm

I agree with #6 OMG — It is the leverage that makes most average people think that real estate is such a great investment.

Lots of people seem to be happy to put $50,000 down on a million dollar house, but would never even consider the same amounts on an investment portfolio!

#17 Notta Sheeple on 02.24.14 at 9:04 pm

“….what people need is income and wealth….”
=========================

What people need is affordable home ownership based upon genuine market forces; not a taxpayer/Flatulence/CMHC/Banking/CREA -backed pyramid scheme.

The other two will follow naturally.

#18 YVR on 02.24.14 at 9:05 pm

So why do people exaggerate real estate gains and diss financials?
——————————————————–
There is a simple answer. Because of leverage. When Sophia was going to buy in 2008 she may have gone in with a 5% DP. That 48% increase looks pretty good at 20 to 1 leverage. That small DP invested in financials at 70% return over the same time wouldn’t look so good after taxes. Of course she would have been taking on massive risk buying a house with all that leverage.

No taxes in an RRSP. And don’t neglect high RE buying and owning costs which financials do not have. — Garth

#19 Observer on 02.24.14 at 9:07 pm

But today, with house prices at record levels…

Apparently there’s no bubble folks. Move along….

#20 Adam on 02.24.14 at 9:09 pm

“My professionally managed investments earned me squat last year after fees”

Boy did you get screwed. Pick any index ETF/Mutual Fund in the Western Hemisphere last year and it earned better than 15%.

#21 Ben on 02.24.14 at 9:10 pm

DELETED

#22 A Liar on 02.24.14 at 9:10 pm

Have interests rates ever been this low, this long, and if so, what was the effect on house prices? Thanks.

#23 saskatoon on 02.24.14 at 9:11 pm

garth,

if it is “human nature” (i.e., inevitable) then the policies brought forward by our elected government “representatives” are INTENTIONALLY gutting the 99%.

of course, in the end, our “leaders” will claim “ignorance”, and you will continue mitigating their actions through cute elfin hyperbole, but they know EXACTLY what they have done.

they are deceptive; they supplicate other masters; they are monsters; and, this, i say, is ultimately treason.

#24 jess on 02.24.14 at 9:12 pm

…”Two years ago it emerged that in exclusive Cornwall Terrace in North London, where the average asking price was £35 million, every single home has been transferred to a company on the Isle of Man.

Transferring ownership of a property to an off-shore company means that when it comes to be sold the buyer purchases the company as a whole, assuming de-facto ownership of the property.
Because the deal is classed as a corporate transaction as opposed to a property sale there are no stamp duty obligations involved.
This means that while a family buying a home costing £400,000 would pay £12,000 to the Government, a multi-millionaire buying a luxury pad could pay nothing.

Read more: http://www.dailymail.co.uk/news/article-2556005/Tax-raid-super-rich-hiding-mansions-offshore-companies-raises-100million-FIVE-times-expected.html#ixzz2uIA3FxOw
Follow us: @MailOnline on Twitter | DailyMail on Facebook

#25 GTA Observer on 02.24.14 at 9:17 pm

Question: In this season of snow, why do many more of the house listings on MLS show green grass? Did the sellers try last spring/summer and pull the listings to try again? Did they prepare their photos and *not* list until now, the beginning of the “spring” (ha) market? The answers have implications. Discuss.

#26 GTA Observer on 02.24.14 at 9:17 pm

PS Sorry, I’m talking about listings in the 905.

#27 TnT on 02.24.14 at 9:18 pm

http://knowyourmeme.com/memes/has-anyone-really-been-far-even-as-decided-to-use-even-go-want-to-do-look-more-like

#28 Matt Hughes on 02.24.14 at 9:19 pm

> #6 Role Has anyone really been far even as decided to use monies even go want to do look more like house?

I needed a good laugh today. I really did not expect to see that here.

#29 Bob Rice on 02.24.14 at 9:22 pm

Eww, $900 K for that?

Geez, if I was a buider, I’d be developing every piece of land that isn’t green zoned… the supply of SFH is very low… I don’t get why more builders are pumping out more SFH instead of condos… I guess more money in the condo… cheaper to build and ecn of scale

#30 Arcs55 on 02.24.14 at 9:24 pm

Fun game to play:

Talk to your house horny SO, and pull up a Mortgage Calculator where it shows that you just about pay your entire principal in interest. Eg. $500,000 mortgage = roughly $948,000 by the time you are all paid off.

Now show your S/O the compound interest calculator for investments at 6%. with $1500 a month put away between the two of us we can retire as millionaires by the time most people pay off their mortgages… seeing that it the interest rate stays capped at 5%. Plus a salary at 60,000 plus a year.

Man I love compound interest. A couple young cool cats like us wouldn’t mind being able to blow this popsicle stand whenever we feel like it. Time for some new digs when renting? No problem… Sell the house? Wait for it….

Thank you Garth. You’ve seriously changed my life.

#31 TnT on 02.24.14 at 9:25 pm

Sophia got Garthed!

Should have bought 8 years ago….

Apply the rule of 90 and see where you stand…

Best of Luck :)

#32 shane on 02.24.14 at 9:26 pm

Garth, feel sorry for the people who bought the house above in markham this will never end???

#33 wallflower on 02.24.14 at 9:29 pm

I say, again, mainland China money. No finance conditions, no matter. All cash. Can Garth ask the realtor to identify the nationality of the buyer? I live in this ‘hood and I don’t know a single non-mainlander buying. I do know of a continual stream of non-mainlanders selling to mainlanders because this is what the sellers and/or their neighbours are reporting to me. China mainlanders are increasingly nervous and getting their money out, out, out. Locals cannot compete with this. Also, ask the realtor, what percentage of the ‘registered bidders’ were locals?

#34 DocInWaitingRoom on 02.24.14 at 9:29 pm

Funny how most people put down their future 40 years paying for something that is 900,000 dollars with just a 30 minute showing and no conditions or returns.

Heck after renting many places in 30 minutes my wife and I both hawk eyes with experience missed a few things in our current rental but threat of suing cleared those up in a jiffy with several months free rent.

Even current car made in Japan shopped around and made sure was without any issues on reports. After over 4 hours of inspecting it we financed the sucker fully loaded hybrid suv, but used so we only paid for depreciation ie about 50k off 70k price. My wife convinced me to keep “aftermarket warranty” until I read about scams and lack of need for a Toyota so I used the return condition to refund my 4000 back. So far for just a rounding error of that sad excuse for a home I not only have had no problems and is like new.

Only real estate has no refund, 30 minute viewing, no inspection, 100 offers already on table, offer by 4pm, rules that blind idiots follow. A car salesman said that car is sold so I cant let you test drive it but you can take a quick peek and put in an offer. I said who is so crazy to do that no inspection and no test drive, you think im Rob Ford on white powder? I guess there are a lot of people with serious drug habits

Though “Real” estaters make car salesman look like emergency doctors working with MSF in Rwanda

#35 RockStar on 02.24.14 at 9:31 pm

8 years. Omg. Fail.

#36 Bert..&..Ernie on 02.24.14 at 9:31 pm

Total government debt in Canada (federal, provincial and municipal) now stands at $1.2-trillion and is higher as a percentage of GDP than the U.S. and the E.U….where the big problem exists of course for Canada is in Ontario and Quebec

#37 Passer By on 02.24.14 at 9:33 pm

#8 Pitfield

The answer, of course, is CMHC. A social program originally designed to encourage home ownership in the lower middle class has run amok. I enjoyed how you compared this scenario to lending against a balanced investment portfolio.

#38 CookieMoster on 02.24.14 at 9:34 pm

Just a question?

is Foreign investment allowed under TFSA, for eg. Indian FCNR ( foriegn currency non resident) investment are at 9% guaranteed ( sort of govt bonds) and are tax free in India. Just wanted to know if TFSA allows this, so I dont have to pay taxes in canada as well.

#39 Freedom First on 02.24.14 at 9:42 pm

Thank you for the example of Sophia, Garth. Paul Simon wrote a song called: “50 ways to leave your lover”, and if you read through Garth’s past posts, you will find that Sophia is the 50th example of someone’s way of thinking that enables a person to buy an asset at all-time highs. Her reasoning skills/attitude/childishness/ungratefulness are terrifyingly common, and will fuel an unhappy life no matter what she does. Sophia, change is necessary, it is you that are the problem, to yourself.

#40 T5>myT4 on 02.24.14 at 9:44 pm

@ #8-Pitfield;

I fully agree with you. I wish I could do that too, not to mention it is all deductible debt.

#41 DM in C on 02.24.14 at 9:44 pm

Seeing some new, interestingly priced listings in our neck of YYC. Homes that, brand new, listed for 290k in 2006 now being listed at $640,000 — without even the basement finished. My brother and his wife are seriously considering cashing out. We have a least 3 more years here, til the youngest is done HS.

But it’s all cause of the flood, don’tchaknow. High ground is the place to be.

#42 *NAKED APE* on 02.24.14 at 9:48 pm

Just waiting for “The World According To Garth” to show up and blame this entire mess on the $120K, pencil pushing civil servants….

#43 Cowpoke on 02.24.14 at 9:50 pm

While the top 1% of the population, by net worth, has less than 8% of its assets in real estate, families in the middle have almost 70% of their wealth in one principal residence. Most people equate real estate with security, even as they’re increasing risk by having too many eggs in one basket.

Most of us are not in the 1% Garth, so this is no surprize.

Doesn’t mean the top 1% should set us up for failure either and don’t tell me they don’t.

On another note Carney could have keep our rates at 6% plus several years ago but [no], he had to follow the USA and put us in the tank.

#44 recharts on 02.24.14 at 9:52 pm

#136 Aggregator on 02.24.14 at 4:30 pm
#117 Silver

Why does government even use the CREA stats…

The government, CMHC, StatsCan and the Bank of Canada do not use CREA’s data as official statistics.

They act like they do not read stats at all.
Either Ross Kay is living on another planet or the government et all are in bed with CREA.
F..reak them all !

#45 pitfield on 02.24.14 at 9:56 pm

#8 Pitfield

The answer, of course, is CMHC. A social program originally designed to encourage home ownership in the lower middle class has run amok. I enjoyed how you compared this scenario to lending against a balanced investment portfolio.
———————————————————
Maybe they should encourage a balanced portfolio now and discourage home ownership but what would the 1% do then or maybe they know a balanced portfolio is too risky if everybody has one.

#46 tom on 02.24.14 at 10:02 pm

While the top 1% of the population, by net worth, has less than 8% of its assets in real estate, families in the middle have almost 70% of their wealth in one principal residence.

Stupid, pointless stat.

So my house (house equity??) should be 8%?

That ratio would have a situation where an owner of a $300,00 house would have a net worth of $3.6M

#47 Mark on 02.24.14 at 10:04 pm

#3 Role on 02.24.14 at 8:39 pm

Has anyone really been far even as decided to use monies even go want to do look more like house?
_______________
Dude, it was funny the first 5 times. Obvious Troll is Obvious.

#48 DR on 02.24.14 at 10:08 pm

The average GTA property price this month is $526,528, which is a 48% advance over the level of eight years ago. Ask most people what real estate values have done, and they’ll tell you in a heartbeat they’ve doubled, or more. Not exactly

Well not every house sold for 345 in 2006. and definitely not every house in Toronto is selling now for 526..plus it sounds better.

So not only did she not buy but had to live with her parents for 8 years too? Fail.

#49 pinstripe on 02.24.14 at 10:08 pm

Sophie deserves to learn a lesson the hard way.

Anyone who is waiting for a crash in house prices is a FOOL.

Interest rates will stay low for a long time.

In the meantime the house prices will trend upward.

#50 DR on 02.24.14 at 10:11 pm

City of Toronto house, detached, Leslieville, 32 offers. Whats going on.

#51 Shawn on 02.24.14 at 10:11 pm

The 99%

what people need is income and wealth, not a house and debt. Mos.t will ignore me. It’s how we got the 1%.

****************************************
God bless the 99%. God Bless the little people.

#52 Cowpoke on 02.24.14 at 10:12 pm

Mark Carney could have kept rates at 6% years ago but [no] he had to follow the USA.

I knew he minute he dropped the rates, we were cooked.

[We are not the USA.] We don’t have the will nor the manpower nor the military.

This will and has caused a catastrophe for us.

What would a 6% to 8% bank rate have done for [us]?

Anyone care to speculate?

#53 Daisy Mae on 02.24.14 at 10:14 pm

“I was an MP in serious crap with the prime minister.”

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

And I bet you were shakin’ in yer boots….

#54 szarak on 02.24.14 at 10:15 pm

pitfield on 02.24.14 at 8:49 pm
I’m very curious how a bank can give the buyer of that home, with 20% down, a 700k mortgage but if one has the same down for a balanced portfolio the bank will not finance the 700k. The balance portfolio can be liquidated in 2-3 day in case of default while the house may take a lot longer with many headaches.
.
_________________________________________

Open a margin account…the bank will lend you with 30% down…as long as you buy blue chip stock.

Not bed…you put in 30k and a bank will chip in 70k

#55 donnie darko on 02.24.14 at 10:17 pm

I think housing in the actual Toronto city core will go up for a long time and will always be one of those pocket areas that is great.

however, just a bit outside the core and youll probably be screwed.

#56 Banjopete on 02.24.14 at 10:17 pm

#46 tom on 02.24.14 at 10:02 pm
While the top 1% of the population, by net worth, has less than 8% of its assets in real estate, families in the middle have almost 70% of their wealth in one principal residence.

Stupid, pointless stat.

I think you’re missing the point, having the same mix as a 1%’er isn’t the intention it’s just pointing out that the all eggs in one basket strategy (ie 70 in RE) for the middle is a poor decision.

I left Vancouver and now am in Edmonton, yes, a sad tale I know, but now when I listen to my friends that say owning RE in Vancouver is about prestige and life choices I just think how prestigious and fancy their lives will be in 20 years when retirement approaches after choking down those mortgage payments all that time. I see it already, a friend of mine has everything into a tear down home and is trying to figure our how to finance the planned tear down and rebuild? The budget can only go so far, and he’s a home building contractor… good luck getting him to believe real estate will ever change trajectory.

It boggles the mind.

#57 X on 02.24.14 at 10:23 pm

re #22 – No, you are witnessing it.

#58 OffshoreObserver on 02.24.14 at 10:23 pm

Sorry, I made mistake in last reply “Who” = “Whom”:

My hospital bill was 695,000 Don = about CAD$35.

My new 19 year old GF told me this morning–she stayed the night–100,000 Dong, then I found the receipt for 695,000 Dong.

Again, I had two physicians and 15 nurses attending, not including my 19 year old GF’s “therapy.”

#59 Son of Ponzi on 02.24.14 at 10:24 pm

Any Freudians on this blog who can interpret how the picture of the girl with Bambi relates to RE?

#60 Cowpoke on 02.24.14 at 10:28 pm

Who can you trust?

No one!

Animal instincts?

I’m not your prey!

#61 waiting wanting on 02.24.14 at 10:29 pm

I just cashed in on a good short tern stock play.Sorry folks, I’m greedy and don’t like to share. Anyway $5k in my pocket and boy is weather good down here in south fla.

Bring on these little market corrections!

#62 OffshoreObserver on 02.24.14 at 10:37 pm

Enough said:

http://business.financialpost.com/2014/02/24/warren-buffett-reveals-5-rules-for-investing-in-annual-letter-to-shareholders/

— from my penthouse in Da Nang, Vietnam overlooking China Beach

— I just rented an apartment about two blocks away for CAD$300/month, all in but I reserved the right to install my own Fibre Optic internet, which I will pay for. (Da Nang is one of the connection points for an undersea cable [“submarine”] in the South China Sea.)

—- My Mom turns 90 in May, but after she goes to her just reward, I probably will never return to Vancouver, my birthplace.

—– Investmentwise: after you exhaust the dividend tax credit, you tax rate about 45%. Who wants to pay that?????

#63 Victor V on 02.24.14 at 10:38 pm

Bank of Canada should try to further weaken Canadian dollar, Nouriel Roubini says

http://www.theglobeandmail.com/report-on-business/economy/bearish-economist-roubini-mildly-enthusiastic-about-canadian-economy/article17068610/

Mr. Roubini said the value of the Canadian dollar is too high, given the need to keep the country’s manufacturing sector intact. While the shift to commodity exports has been healthy for the overall economy, it has caused a lot of regional disruption, he noted. And if there a major correction in commodities in the coming years, it will be a “massive shock” to that sector while manufacturing exports will have declined in importance and not be able to take up the slack.

Consequently, “I would use, more aggressively, monetary policy to weaken the currency,” Mr. Roubini said. “If your currency was 10 per cent weaker that would help manufacturing and it will not cause a significant amount of inflation, which is currently well below the target. The risk of doing that is relatively modest. … Keeping your currency weaker right now is important.”

In an interview after his speech, Mr. Roubini said there are a variety of measures the Bank of Canada could use to lower the value of the dollar. “They could talk down your currency by saying you wouldn’t mind if it is weaker,” he said. The case for cutting rates isn’t strong, he noted, but the bank could signal that it is in no rush to raise rates until the U.S. Federal Reserve Board has done so.

#64 Obvious Truth on 02.24.14 at 10:39 pm

Did someone get the horns here?

Most painful post yet.

#65 The Prophet Elijah on 02.24.14 at 10:42 pm

Garth who bought the house, guaranteed it was a foreigner with deep pockets.

#66 David on 02.24.14 at 10:46 pm

Article in this weeks Geo. Straight – transit funding and the international trend to Road Pricing coming to Vancouver. If this happens, what will happen to the suburbs/ real estate values? Maybe not much, considering thousands move here ever year. Haven’t they heard about the snow?

http://www.straight.com/news/589381/road-pricing-necessary-contentious-and-coming-vancouver

#67 Happy Renting on 02.24.14 at 10:49 pm

#31 TnT on 02.24.14 at 9:25 pm

Sophia got Garthed!

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

You got it. You do not complain to Garth about the crap returns your “professionally managed” investments made after last year’s awesome equity gains. Wonder if she’s a friend of a friend, he was actually pretty gentle with her!

I’ve told my spouse that if we make a move on a Toronto house, it’ll be when the market corrects, and that will likely come at a time when it feels like the financial sky is falling. At that time our jobs might feel insecure (or we may have already been laid off.) It will take balls of steel to jump in when things look so dire… But that’s the reason why houses will be on sale. Anyone waiting for a price drop needs to be aware it probably won’t be happening while the economy is going gangbusters.

I say 50/50 chance we’ll ever buy in Toronto. There are lots of good things about living here (mayoral fire hydrants, for instance), but there are also lots of good things I’d rather do with that big a pile of money. May just end up being about the pay premium vs. housing premium.

#68 45north on 02.24.14 at 10:50 pm

And don’t even think about a condition.

such as conditional upon a building inspection. The obvious thing is go up in the roof space and look for leaks. In the middle of winter they’re not going to show up, also there may be flooding problems.

yes the American market peaked in 2006 and boy were there screams and yells as the market teetered and fell. It’s been a full eight years and the Canadian market has soared higher. I believe the Canadian market is going to crash. Federal politics is on a collision with provincial. A crash will hurt the Ontario Liberals more than the federal Conservatives. Flaherty is going to come out of the House and say “it’s the market”.

#69 Fiendish thingy on 02.24.14 at 10:55 pm

Garth, the super long link at post #21 has messed with formatting in the comments section, shrinking comments down to the size of a postage stamp- can you fix?

Thank you. Fixed. — Garth

#70 Cici on 02.24.14 at 10:56 pm

Wow, if it took her 8 years to come up with her 20% downpayment, she’s in for rough waters ahead.

Time to get another better paying job, or better yet, skip that town in favour of a more affordable region or area.

#71 Happy in Kelowna on 02.24.14 at 10:57 pm

Sophia – Your managed investments made “squat” last year. What were you invested in? Our managed portfolio(balanced as per Garth’s instructions) made 15% in 2013 and 9% in 2012. No BS!

#72 Tom from Mississauga on 02.24.14 at 10:58 pm

Poloz says there’s no inflation? My electricity, gas and water bill say different. At least the landlord has the skyrocketing property tax bill covered.

#73 Happy Renting on 02.24.14 at 10:59 pm

Oh, and I grew up in a suburban house like that (brick face, aluminum sides). Is that a Minto signature design or was that a time period where many suburban developers built homes like that?

#74 Steven on 02.24.14 at 11:07 pm

Mean while south of the border the Americans are in a bad way.

http://www.silverdoctors.com/10-stories-from-the-cold-hard-streets-of-america-that-will-break-your-heart/#more-39156

#75 MD on 02.24.14 at 11:07 pm

Garth don’t u think ur beating the drum too long banks here don’t approve homeless people like they did in USA with a heart beat. Me and my wife make 140k and we were approved only 440000 with 60k down payment with no other credit balance. Why don’t u mention how much the party who bought those houses in bidding wars paid as down payment before u ask for crash. Who ever buys those houses knows very well where they stand as far as earning power is concerned. I know people have put 0 down and bought houses, wouldn’t u do that if the rules says so inspite of having 50% down payment and than invest the money somewhere else. Believe me people are not as dumb as u think as if that was case than housing bubble would have crashed long time back and u had said in 2012 summer market will crash and it’s 2014 my friend and even if prices come down 15% who cares. It’s peanuts when I see the leverage. Stocks are 25 times the PE where as real estate is only 6 times average earnings so u do the Math.

#76 Nosty flying the Vanilla Fudge aircraft on 02.24.14 at 11:07 pm

#13 Smoking Man on 02.24.14 at 8:59 pm — “Has anyone really been far even as decided to use monies even go want to do look more like house?

“What language was that? — Garth”

“God damn illiterate…. What the hell does that mean”

Role’s lingo is strange. I consider him to be either one of The Borg (in which case the human race will be assimilated into RE agents), a Harperbot Con Troll preparing us for the next election or off his / her meds.

Take yer pick!

#15 A Yank in BC on 02.24.14 at 9:03 pm — Agreed.

#52 Cowpoke on 02.24.14 at 10:12 pm — “Anyone care to speculate?” — Apocalypse Now! Hot damn sonofagun, it’s good to be retired, debt free and not have to worry!

#77 Cowpoke on 02.24.14 at 11:08 pm

Last comment for the night.

The answer to #52 is,…

The 99% would have gotten richer.

The 1% would have gotten poorer.

And ‘who’ was lobbing Ottawa,… the rich! Aw! Like they think they can make it in this world without us!!

Well go ahead and try. Ha!

#78 Homeless in Canada on 02.24.14 at 11:10 pm

From yesterday,

Trade barriers do not protect jobs. — Garth

Garth, Canada has a long history of mutually beneficial trade with countries around the world. We don’t need Free Trade agreements to create trade. Free trade simply allows production to be off shored for lower prices and benefits the 1% again. The lower price for the trade off of thousands of jobs and therefore consumers is a negative cycle which is reflected in the diminishing middle class.

#79 James on 02.24.14 at 11:13 pm

I lived in a Markham house of that type for just over a year. The construction quality was abominable. Most of the nails for the floors missed the beams supporting them, the brick work was already sagging and cracking, and there were obvious issues with angles and interior materials. The construction companies that put up many of those houses did not pay attention to quality. Good luck with your home purchase.

#80 Holy Crap Wheres The Tylenol on 02.24.14 at 11:14 pm

After talking with friends in the neighbourhood over the weekend we are all over the place in terms of a housing meltdown that I’ve realized it doesn’t matter. Some of us are fine living in our homes until we croak. Some of us are already working on the “sale” and some of us are just indifferent to the whole crash. Everyone in my area here in Oakville owns their homes outright, each one of the homes would range between 1.8 M to around 6 M. These people just don’t care if our homes loose any value, were all secure and our investments are diversified enough to carry us all to the graves. So what is what some of my friends said about this market crash. I just look at it from a business standpoint that you always limit or mitigate your losses. You know what I’m seriously thinking of unloading the Oakville Mc Mansion and taking the extra cash to have some fun with. I really don’t need the money but what the hell am I going to do with a five bedroom home with two people in it!

#81 Realist on 02.24.14 at 11:16 pm

I am like the person you cited in your blog today and I too regret not buying and the market (at least in the areas I looked at) didn’t go down 10% during the recession, it simply stopped rising for a period of about 6 months. You quote stock market returns which are levered but quote real estate values which are unlevered. If real estate values doubled since the downturn, even at 50% down, your equity effectively tripled over the same period. Sure, equities placed in an RRSP or TFSA may also have done well over the same period, but let’s be realistic – the amount of down payment required in a typical GTA home far exceed any amounts you can take out in an RRSP or TFSA – if the same amount was invested in the equity markets, most of it would not be tax sheltered.

I read your blog religiously, and I don’t recall you telling people to buy during the downturn to be fair.

As for the prediction about the floor of houses hitting the market as the boomers retire – they already are and the market hasn’t budged. If they are strapped for cash there’s booming market for reverse mortgages and knowing that generation they will do everything except sell their house.

This is all to say that your house isn’t an investment, people will buy one when they are tired of living in their condos. There are very few people who will sell their house in retirement if they don`t have to. We are not germans and don`t have a culture of renting in Canada for our entire lives. It may be crazy but that`s reality.

#82 Mark on 02.24.14 at 11:19 pm

I see the Realtor trolls are out in full force tonight. But in the real Canada, prices are falling and have been for the 2nd half of 2013, and continuing this year. The big CMHC changes were the high water mark. The Realtors are only clinging to average numbers which are increasingly skewed due to the ‘statistical mirage’ of a changing sales mix. The same sequence of events played out in California, with the obvious consequences.

Sophia should seek out low cost management of her funds, and shouldn’t worry that she’s invested in firms with productive assets and great earnings growth. Not houses with sky-high P/E ratios and very little earnings growth in the future.

#83 Mark on 02.24.14 at 11:23 pm

“Open a margin account…the bank will lend you with 30% down…as long as you buy blue chip stock.”

Yeah and if that portfolio even goes down $1, you will be immediately subject to at least a partial liquidation. Not very pleasant. Practically speaking, this makes using margin relatively difficult. At least with RE, governments and central banks will generally trip over themselves to “help” if the market goes down. Not so with margin accounts and borrowing. Which keeps stocks cheap, but certainly makes leverage very difficult.

#84 Cici on 02.24.14 at 11:24 pm

Garth, please tell me this isn’t the first time you’ve noticed this guy’s strange posts?

Here’s a sampling from the past few days or so:

Has Anyone Really Been Far Even as Decided for house to Use Even Go Want And Buy to do Look More Like?
Has anyone really been far even as decided to use even go want to do look at small house monies?
Has anyone really been far even as decided to use even go want to do look lots for banks?
Has anyone really been far even as decided to use even go want to do look more like big loans?

He’s been at it for days. It’s either cryptic code with a secret message that none of us cares enough to decipher, or he’s somehow hacking your site?? But then again, it could be a cry for help! If so, here you are Role: Distress Centre: 416-408-HELP (4357)

#85 Lukie on 02.24.14 at 11:31 pm

Yes, Toronto is expensive. Yes, Toronto is overpriced. But that is not stopping bidding wars going on everywhere. Listings hardly last a week before they are snatched up.

People are so desperate to own a place that they are willing to pay close to a million for a property that, often times, needs a lot of work (I’m talking oil tanks, blue bathrooms and so forth in the homes) – SOLD for $730,000+ .. enjoy your green carpet! – http://samuelshing.com/index.php?option=com_properties&view=property&cid=3:Sale&tid=2:Detached&id=102949:Location-Location-Location-great-S-C2822438&Itemid=.

You have cookie cutter, shoebox townhomes that were built a few years back going for over $700,000 (example: http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14080589). People have become greedy and want more and more for their properties, while buyers have become desperate as there is little inventory out there. A select few real estate agents are having a field day making $40,000 commission off certain sales PER month. It’s a tough job being a real estate agent out there!

This city has become completely unaffordable, that the house horny are moving to Ajax, Pickering and Whitby to fulfill their house horniness.

#86 Mark on 02.24.14 at 11:33 pm

“I say, again, mainland China money. ”

“All cash”

As always, thoroughly disproven. Canadians, perhaps, of Asian descent, taking out monster mortgages. But not mainlanders. If there was real cash coming to Canada, leverage would be falling. And the sellers would be looking for other assets. Its just not happening to anywhere near the extent claimed. A few one-off instances perhaps, but HAM is mostly a myth made up by Canadians with xenophobic attitudes.

#87 Cici on 02.24.14 at 11:34 pm

#15 A Yank in BC

I think Sophia is full of &?%$.

#88 Catalyst on 02.24.14 at 11:36 pm

In your stated scenario, someone with 20% down in on an average house has seen 240% return because of leverage versus the 76% in financials. It is quite easy to see why people are confused and now see housing as an investment.

Not to mention, as you have pointed out over several posts, Canadians haven’t saved squat and 76% gain on 10k you got squirreled away isn’t much to write home about.

Even assuming your 100% paid off mortgage to get 58% returns, they have still gained nearly 200K meaning you would had to have quite a bit of money tucked away in an investing vehicle in 2006 to match those gains.

Let’s not turn all CREA on your blog readers and start spinning to hard. :)

#89 learningfromyou on 02.24.14 at 11:36 pm

Thank you for the post Garth. The following are facts.

-I visited the major financial institutions for unsecured line of credits with low interest rates, they are not easy to get, the only factible solution is receiving it as promotional like the use to provide from time to time. I did my homework of asking most of them.
I will keep asking.

2-Following your advice of putting money in my RRSP I took more than 7k a few days ago from a low interest credit line and contributed to my RRSP to feel in peace with my conscience. The tax return will pay back a portion of the credit line and I will be forced to save to pay the remaining in the credit line.
People fall in debts for a house, or expensive gadget, I do it for investing.

The RRSP goes to a self directed account to buy some ETF index funds, I had to read a bit to make a selection, I feel lucky to have a few people to discuss about this subject on a daily basis, it gives motivation and we learn together.

#90 Mark on 02.24.14 at 11:39 pm

“What would a 6% to 8% bank rate have done for [us]?”

Crashed the economy completely and utterly. If anything, Canada faces an deflationary crisis in the next few years as RE is basically the only significant force of economic activity keeping us afloat. And with the recent nation-wide price drops, no wonder why the BoC is missing its inflation targets by a long shot. Only going to get worse as the CAD$ starts climbing again in a significant way.

#91 Kyla on 02.24.14 at 11:41 pm

#3 Role on 02.24.14 at 8:39 pmHas anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth
…………

Oh man made me laugh for like 5 mins straight. And Garth’s comment is gold.

Also thanks Garth and commenters for converting me! After a few months of reading this blog (and others) I have paid off my credit cards and made my first real investment today aside from my regular pension contributions!!!! Woo hoo I am so excited to finally know where all my money is going and be on track. So much more to learn but it is a start and I am proud of myself for taking action.

#92 Catalyst on 02.24.14 at 11:41 pm

@#56
“I think you’re missing the point, having the same mix as a 1%’er isn’t the intention it’s just pointing out that the all eggs in one basket strategy (ie 70 in RE) for the middle is a poor decision. ”

I don’t like weightings like that because both a rich person and a poor person need shelter and food. Of course will have a higher percentage of their net worth in housing because they have to spend money on housing and not much money left over for anything else. They are not poor BECAUSE they spend all their money on housing, they are poor because their income does not allow for savings or investing beyond meeting a basic human need for housing.

#93 More Role please on 02.24.14 at 11:43 pm

Role – hilarious – and you make more sense than most here tonight.

Alwyn

#94 The Man From Nantucket on 02.24.14 at 11:48 pm

I too grew up in a house like that in a soul-less York Region suburb.

I think my folks paid about $87K for it 30 odd years ago.

I am amazed, disgusted, and amused at the same time that something so ordinary commands just south of a million.

Would love to see a case study on the family of the “winning” bidder and of the next several.

$700,000 mortgage @ 3% feels like about 3,300 a month.

No idea what the Markham/York idjits have this thing assessed at, but, figuring the taxes are another $500 or $600 a month…

Figure you need to be earning $200K per year to sleep at night if you’re carrying debt on this lovely piece of s…uburbia. Must really need the space that comes with a 50 foot lot to want this at that price.

Anyone know the ‘hood? Also curious to see whether there’s any rentals on offer in the area, and what they might fetch. Could you get a rental for approximately the mortgage carry??

#95 Steve French on 02.24.14 at 11:57 pm

Smoking Man writes:

“In a bit of a shocked state I quickly scan the room for an intruder, my hand clenching the phone in case I need a weapon.

“Smokey, god damn it, put down the phone, look at me man, I’m alive, throw down the sheets….”

.. SM– unfortunately your absolutely stellar, gold standard first sentence was not repeated with your 2nd, 3rd, or 4th sentences….

Could you not try tie in this blog, and Sir Garthsalot, into your novel somehow?

#96 Toronto_S on 02.25.14 at 12:01 am

#48 DR on 02.24.14 at 10:08 pm

So not only did she not buy but had to live with her parents for 8 years too? Fail.

————-

Renting?

——-

#70 Cici on 02.24.14 at 10:56 pm
Wow, if it took her 8 years to come up with her 20% downpayment, she’s in for rough waters ahead.

——-

Or the denominator for that 20% kept on growing along with the income – so what was 8 years ago 5% for a 200 K condo could now be 20% for a $??? K condo or house. But yes, one could always have saved more.

#97 No Debt on 02.25.14 at 12:02 am

#6 omg on 02.24.14 at 8:45 pm –

If they haven’t sold yet in order to realize the capital gain, strictly speaking they’ve gained nothing.

#98 No Debt on 02.25.14 at 12:10 am

#59 Son of Ponzi on 02.24.14 at 10:24 pm – I’ll try. Buying into the RE dream right now is about as smart as having your cheek within inches of those antlers?

#99 Forever Old on 02.25.14 at 12:11 am

#13 Smoking Man on 02.24.14 at 8:59 pm
#3 Role on 02.24.14 at 8:39 pmHas anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth
…………

God damn illiterate…. What the hell does that mean

>>>>>>>>>>>

Haaa haa, SM… it’s encrypted… you should know better.

#100 Aggregator on 02.25.14 at 12:16 am

Another must read breaking story by Glenn Greenwald:

How Covert Agents Infiltrate the Internet to Manipulate, Deceive, and Destroy Reputations

TOP SECRET TO USA, AUD, CAN, GBR, NZL

To the Globe and Mail, Financial Post and Toronto Star trolls reading this blog: read what award winning journalism is and then perhaps you'll understand why nobody wants to subscribe or comment on government-tracked MSM vehicles.

#101 Christopher Lackey on 02.25.14 at 12:18 am

That looks like the older part of Markham, probably where my parents bought their 1st house for 80k. 900k to live next to people the majority of whom are still there from the 80k, 150k, 325k days. What is the turnaround in a neighbourhood anyway? I think this will be less of a case of the rich invading a neighbourhood and more of some greater fools late to the party. People who think this is going to ride 4-5% per annum all the way to 2.5 mil need to ask themselves who is going to pay that in our economy that is relentlessly being creatively destroyed by automation. data, and globalization (no value judgement here – why criticize what is inevitable?).

#102 Calgary Conditional Owner on 02.25.14 at 12:35 am

I bought in 2009, lived in that place for 4 years, sold last summer and basically doubled the money I had put as down payment. Rented for a while, now I’m buying again. Good investment? Possibly will go under water for some time, or at least see my equity reduced, but in my opinion, being perfectly capable of doing something and not doing so because of fear (or because a blogger’s predictions, with all due respect) is the very definition of human misery.

Cheers.

#103 Vamanos Pest on 02.25.14 at 12:41 am

Sorry Garth, but Sophia’s story is BS.

The clincher is “my professionally managed investments did squat last year…did better…(in) ING Direct.”

The rates offered by ING are ~1.4%, as this is interest it fully taxable at Sophia’s marginal rate. So on an after tax basis would return about 1.15% (depending on Sophia’s marginal tax rate.)

The TSX returned ~12%, while the S&P returned ~30%. My understanding is that International Equities were varied, but with the Nikkei returning 57% (yes, fifty-fricken-seven percent last year), the FTSE did 14.4%. No major asset classes showed a loss to mirror these gains, so it is virtually IMPOSSIBLE that a balanced and diversified portfolio was beaten by the interest rate at ING Direct.

While I’m at it:
#7 Waterloo
No, you won’t. But good luck with that.

#23 Saskatoon
The 99% are gutting themselves. Period.

#43 Cowpoke
I know you said not to tell you this, but they don’t.

#46 tom
The statistic highlights a difference in behaviour. You assume, wrongly, that this difference in behaviour is the RESULT of the difference in financial position. Actually, the difference in behaviour is the CAUSE of the difference in financial position. So the statistic is far from stupid and pointless. It is, in fact, very telling.

#58 OffshoreObserver
Creepy.

#104 Bottoms_Up on 02.25.14 at 12:55 am

Same house in Ottawa, same age, excellent school district, backing onto park is half that price. Scary.

#105 Oceanside on 02.25.14 at 1:09 am

Here in Qualicum Beach and Parksville the spring listings are starting to sprout…The trouble is that 90% of them were listed all last year and some in 2012. So many at $599,000 to $699,000 that just won’t sell. Anything priced at under $500,000 sells if it is any good. I’m always amazed that these people can keep the counter’s polished and the crumbs off the floor for showings for years when they know that their home is never going to sell , what a life…..

#106 supermike on 02.25.14 at 1:31 am

Garth,
First, everybody needs a home to live in. Renting and moving is not so fun. Moreover, the fact is that lots of people are actually priced out in the current market.

Second, RRSP might have increased 78% and housing price only increased 48%. but everybody can tell the difference between a 50K RRSP account with 78% increase and a 400K house with 48% increase. It’s a difference between 39000 gain and 19200 gain! that’s the power of leverage!

I am in the same boat as Sophia. I have been waiting for years and still renting. I can tell you I regret every minute! If I had bought a house 8 years ago, I might have paid off much of the mortgage. And the monthly cost on the house might be under or around 1000 including tax and utility. Now I am paying around 2000 for rent.

Garth, you are actually right. In theory! nothing goes up forever. The key is timing. When? how long it take? 1 year, 5 years or 10 years? How many 10 years a person can live? Some people make fun of people like me, yes, you are gonna be right once in your life time. When you are 50 or 60? I only can smile bitterly.

I can’t imagine I would live in a rental property when I retire. So sooner or later people need their own home. then why wait for so long?

And as you said many times, you don’t see the housing price crash at all in cities like Toronto. So why you ask people to wait and wait and wait for years? as you said, there might be 5% percent correction. So, a 5% correction after at least 50% increase? This is simply math, right?

Some of your theories just won’t work to average people. Like house only can account for 20% of the net asset (I don’t remember the exact number). Do you think this is realistic for average people in the current market? Not everybody is as rich as you!

As I said, even 100% increase of an RRSP account can’t compare to 48% increase of the house price. It’s leverage! RRSP simply doesn’t have this kind of power.

I agree some of your points. I don’t think it is wise for retired people to refinance their houses. I don’t think it is wise to invest in houses much. I don’t think it is wise for young people to buy a property when they don’t have much saving.

However, it’s wise for some people to buy their home. Like Sophia and I.

In the end, my point is simple. If you are in 30s or 40s with kids, just go ahead and buy! Just keep in mind, be practical, don’t have to buy a dream house. Don’t let the debt drown you!

You can refer to some points of Garth. But don’t rely on them. In the end, Garth is an author. Authors can put all kinds of theories in their book or blogs or whatever media they prefer. But theories don’t always work in reality. This is the lesson I learned. Life is short!

#107 RockStar on 02.25.14 at 1:42 am

Burned after delaying a real estate purchase for 8 years. Some fools have been left even further behind. It’s no wonder that homeowners continue to have significantly more wealth than renters.

#108 Rabbit One on 02.25.14 at 1:44 am

#38 Cookie Moster

Non-resident of Canada can buy Canadian government issued bonds and interests are not subject to withholding tax.

So, the short answer is yes, but it will be not called TFSA.

Although there is no withholding tax (to CRA), you supposed to file foreign income (interest from Canadian bonds held in Canada) in your country of residence.

More important thing though, Canadian bonds will not pay 9%, but less than 1% on one year term.

#109 Suede on 02.25.14 at 2:48 am

Shananana -nananana- hey hey. Goodbye

RIP Bitcoin

#110 World According To Garth on 02.25.14 at 2:55 am

You forgot to add in 600 billion in useless govt pencil pusher worker pensions. Now your total is 1.8 trillion. But hey don’t worry grandpa and grandma will work at Chinamart (jobs gone from Kanaduhhhhh) and “spiderpiss coffee” Timmies till they’re 109 so those Govt Workers can retire in Mexico when they turn 57. Life is good when you werk fer da taxpayer.

———————-

#36 Bert..&..Ernie on 02.24.14 at 9:31 pm
Total government debt in Canada (federal, provincial and municipal) now stands at $1.2-trillion and is higher as a percentage of GDP than the U.S. and the E.U….where the big problem exists of course for Canada is in Ontario and Quebec

#111 World According To Garth on 02.25.14 at 3:02 am

Still waiting for all the govt worker trolls to rebuttle my facts and figures with their own. Waiting.Waiting.Waiting.

FAIL

#42 *NAKED APE* on 02.24.14 at 9:48 pm
Just waiting for “The World According To Garth” to show up and blame this entire mess on the $120K, pencil pushing civil servants….

#112 Tony on 02.25.14 at 3:51 am

Re: #14 London, Ontario, Calling on 02.24.14 at 9:00 pm

A much smaller house than the one in Markham which is probably just under 3,000 square feet. For some reason all houses in Markham right now are selling at the very latest the first day of the open house. I actually went to a few open houses in Markham and 100 percent Chinese were the potential buyers.

#113 Investor Rob on 02.25.14 at 4:26 am

I completely understand her feelings, an inhertance 2 years ago allowed me move beyond the pay yourself first method of investing, and to tell you the truth investing can be nerve racking, have the markets peaked, a pause before they go higher, damm took my profits and miss out on the short drop/ bounce back in bank stocks, do I wait and only see them go higher or buy now and see the market correct!

Not only that decided not to move a good chunk of money into the US dollar beginning of the year grrrrr!!!!!

Thankfully I followed Garths advice and diversified appox

25% Investment property
25% goverment bond pay 6% (bought years ago)
15% reits (thanks Garth)
Balance cash and blue chip dividend stocks

And a very small amount for trading penny stocks.

Which brings the point I’m making she should look for a decent invest property outside of TO, yes it’s a hassle, but being a rentor in an expensive city I’m thankful I bought a small property. It keeps the house lust at bay.

Rob

#114 Corban on 02.25.14 at 4:53 am

On my honeymoon in the Philippines right now. 20 cent beers and $5/hr massages. With $900k I’d never have to work again in my life, and I’m only 35. Oddly enough I’d miss snow shoeing in K Country..but ya, 20 cent beers and $5 massages go a long way to addressing that.

#115 nubbers on 02.25.14 at 5:08 am

Well done Sophia. We need more people like you, who are willing to pay for a needy boomer’s retirement.

Of course though, the size of your debt will mean that you will never have luxuries or another holiday in your life. However, instead you can get a warm glow inside knowing that the boomer you bought from will be able to spend the rest of their days enjoying somewhere nice with the fortune that you gave them.

And you will have even greater satisfaction when it is your turn to sell up. By then, more normal interest rates will mean that you will pass your house on to the next generation at an affordable price so that they too will be able to have a nice life.

Sophia, your willingness sacrifice, in a time when people think so much of themselves, will be an inspiration to others. Well, maybe. Or maybe not, that is the nature of sacrifice.

#116 Mike in Germany on 02.25.14 at 6:37 am

“.. But Sophia did not buy.”

there was a period for about two weeks where houses were selling for values not seen for for two years earlier.

Sellers took a wait-and-see and prices instantly rebounded. Only an agent could have moved fast enough to catch that drop. And nobody knew if it was the beginning of the anticipated U.S. like decline.

I think what Sophia and I both dislike is that the housing market is *unstable*. I don’t want a house as a speculative investment. I just want a stable price so that I can pay it down, put improvements into it and increase my rate of savings. I want it to hold its value. I don’t want to “invest” in housing, not in the assessed value of the house anyway.

I bought a house in 2003, then sold it for personal reasons in 2006. I took a break from the market, thinking it would be imprudent to jump back in for “fear of being priced out”.

Lo and behold. I’ve been priced out. I couldn’t bear the thought of buying a tiny condo for the price of my fully-detached bungalow two years earlier. Oh well.

Since then, I’ve travelled the world, got my motorcycle license, met a nice woman, even subletted my $1000/mo apartment in Toronto for $1300/mo. I shouldn’t be lusting after houses, but alas I find myself on this blog.

If i did anything wrong at all, it’s been to worry too much.

It seems clear to me that houses in Canada are highly leveraged speculative investments. The government has been manipulating the availability of financing as a method to influence the economy. It’s seemed to have done some good too. Canada weathered a pretty bad economic storm.

What I am trying to come to terms with is that even if there is a correction, housing will continue to be a speculative investment. The boom/bust cycle of housing seems to be part of Canadian culture.

#117 cd on 02.25.14 at 6:55 am

I agree with smoking man… the TO market still has legs.

I believe that there are a lot of idiots in the city who are well overpaid for their somewhat irrelevant jobs. Thus, there are a lot of people with excess money, who shouldn’t have it and don’t know how to spend it. So they spend it on houses because the idiots want to feel safe and mature. And unfortunately, the trend will continue for the next little while.

#118 Grantmi on 02.25.14 at 6:56 am

#13 Smoking Man on 02.24.14 at 8:59 pm

#3 Role on 02.24.14 at 8:39 pmHas anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth
…………………………

– God damn illiterate…. What the hell does that mean

We were waiting for YOU to translate!!

#119 drydock on 02.25.14 at 7:03 am

#3

4chan troll.

#120 Detalumis on 02.25.14 at 8:27 am

The point of Sophia is actually this, most people buy houses for a reason, in my area they move out to Oakville when they have kids. If the “Sophias” had a 2 year kid 8 years ago and then are told to wait much longer their kid will be a teenager and ready to fly the nest by the time she buys.

A young family needs a house when the kids are young not when the kids are 18. People can’t put their lives on hold trying to time the housing market. That is what makes people so frustrated being told by old guys with houses and plenty of dough-re-mi that they should wait. Women in particular know that sometimes you just can’t do that, our biology works against us. We are told our best years are behind us at 30 or 35 tops, try looking at life through woman-lenses once in awhile. We live our lives on fast forward compared to men and sometimes just can’t wait.

#121 Martha on 02.25.14 at 8:42 am

30 minutes to tour and make up your mind with “No conditions”… you mean like an inspection?

If so, one MUST wonder what it is that they are hiding.

#122 Smoking Man on 02.25.14 at 8:49 am

#118 Grantmi on 02.25.14 at 6:56 am#3 Role on 02.24.14 at 8:39 pmHas anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth
…………………………

– God damn illiterate…. What the hell does that mean

We were waiting for YOU to translate!!
……………

Dude your guess is as good as mine. When I murder the English language it usually is related to excessive alcohol consumption, keys to close to each other on a smart phone, and that dreaded auto correct.

My interpretation of what he was saying.

man these drugs are amazing.

#123 Tony on 02.25.14 at 8:54 am

Re: #54 szarak on 02.24.14 at 10:15 pm

The Canadian banks better pray the first initial crash in the stocks markets is 30 percent or less. Margin calls will mean a big sell-off in both gold and silver. The plunge protection team in America will be defenseless this time.

#124 Ben on 02.25.14 at 9:08 am

See I messed up your formatting Garth – apologies! Hope the leg is improving…

#125 TheCatFoodLady on 02.25.14 at 9:14 am

#106 – Supermike: People NEED a place to live. They do NOT ‘need’ to own a home. Look, I’m not saying people shouldn’t buy. Au contraire, if you can buy sensibly & want to, go for it. Understand owning is a WANT, though.

It comes down to personal lifestyle choices. We’ve seen in hot RE markets, anyone with ‘average’ incomes is going to have to understand that if they want to own, they’d better want it bad because it’s going to eat up all their available money – & then some if their house has unexpected, unpleasant surprises. In those same markets, if you can score a rental lower than the true cost of ownership & have the discipline to invest the rest, you can grow a tidy little nest egg.

I rent, certainly wouldn’t mind owning under the right circumstances but those circumstances are unlikely to arise. I’m sure that’s the scenario for many. Rather than driving myself nuts wanting what I can’t have, I prefer to concentrate on making renting work for me. I rent in an apartment building owned & managed by a REIT. Not about to be evicted for a ‘vendor take back’. The ‘decor’ is mid 70s, boring, bland. I can paint if I choose as long as I return the colour to light, neutral when moving. Appliances were new when we moved in – we look after them as if we owned them. My biggest motivation to own is gardening – I’m a passionate gardener. 6 years ago I approached management & asked if I could use ground on one end of the property for a wildflower/bulb/perennial garden. They’d not have to put in one red cent or worry about upkeep or appearance. I’m up to a 30 meter by roughly 2 meter garden & the rental blurb now touts the complex as ‘landscaped’ – LOL. I get my garden, owners get a quiet corner where people can bring down their lawn chairs & quietly visit with neighbours; win-win.

Families with kids can make rentals work. Many landlords own several SFH for rent. They’re not interested in punting tenants & the better a tenant you are, the less likely they are to choose your rental property to unload if their cash flow gets tight.

As to the property detailed, the instructions from the RE agent might as well have simply read: “Bring cheque, check brains.” No way I’d look at a place with instructions such as were given. The fact so many did & put in bids is a clear indication it’s still a sellers’ market in some segments of some markets.

Avoid.

#126 241A65 on 02.25.14 at 9:32 am

Hey Garth –

I like a contrarian argument as much as the next guy – in fact, more so – but your Canada-real-estate-is-gonna-crash theme is getting kinda old, don’t you think? That ‘ugly’ house in Markham is a perfect example of why this RE thing has some ways to go yet. As I have noted on your blog numerous times, the condo construction at Yonge & Eglinton is simply unbelievable. People need a place to live and, for many, condos are a reasonable compromise.

You failed to remark on Sophia’s pathetic return on her ‘managed investments’. According to your blog, it’s easy to make 7 % compounded annually. I’ll bet it is.

Real estate won’t crash. It does not need to for serious financial pain to be inflicted upon the newly-indebted. This blog is not written for those whose risky behaviour surrounds us. Hopefully those who come here will reconsider following the lemmings, even if you do not. As for Sophia’s portfolio returns, obviously she failed. What lesson there? — Garth

#127 Steven on 02.25.14 at 9:35 am

Toronto is ridiculously expensive!!

I concurr then again there isn’t any real estate in Canada that is not ridiculously expensive!!

There are a lot of elitists , public servants and real estate cultists that have the Marie Antoinette syndrome.
They are putting themselves at risk of the same fate.

#128 Marie on 02.25.14 at 9:49 am

Great post by Paul Krugman about housing bubbles http://krugman.blogs.nytimes.com/2014/02/24/natural-big-lies/?_php=true&_type=blogs&smid=tw-NytimesKrugman&seid=auto&_r=0

#129 Ralph Cramdown on 02.25.14 at 10:07 am

“Canadians, perhaps, of Asian descent, taking out monster mortgages. But not mainlanders. If there was real cash coming to Canada, leverage would be falling.”

I think you need to work that through a bit more. If a foreigner buys a newly built condo for cash, Canadian leverage increases, because all the trades and office workers that built, sold and financed it are doing better in the boom. The renters among them have a greater propensity to buy, and the owners, seeing their property values going up, aren’t in quite such a hurry to pay down their mortgages, or they take out a HELOC for a well-earned vacation, or they decide to trade up or buy a second home.

Canadian debt and income figures only cover those who have a Canadian credit file or who file Canadian income taxes. And they don’t cover the implied debt that Canadian non-cash buyers of pre-construction homes have effectively committed themselves to.

We’ve been building more properties than household formation would warrant for years now, the tales of “see-through” condos in Vancouver and to a lesser extent Toronto are well known, various real estate brokerages have set up satellite offices in China, and the South China Morning Post and the Sydney Morning Herald dutifully follows Canadian immigration policies.

I don’t know how much of the bubble is ACTUAL foreign investment and how much is domestic foolishness on the ASSUMPTION of foreign investment, but there do seem to be several federal and provincial agencies who are most decidedly choosing not to find out.

#130 Almontage on 02.25.14 at 10:22 am

I bought a house in 1973. Still own one as a matter of fact. Any returns I got from it are still locked in there. Never have seen a penny of them.
Nobody worried about leverage in the 1980s when interest rates were north of 15%.
After 10 years I escaped debt prison and started saving. My non real estate investments financed early retirement, some nice holidays and gifts for the grandkids.
Right now my net worth in real estate is around 35% – less if you count in pension present value. If I had 70% there I’d be having Fancy Feast tonight.

#131 Holy Crap Wheres The Tylenol on 02.25.14 at 10:22 am

#76 Nosty flying the Vanilla Fudge aircraft on 02.24.14 at
———————————————————

Now I haven’t heard anyone mention Vanilla Fudge for 20 years. Nosty you must be an old guy like me. Saw Vanilla Fudge on leave back in 68 at the Cow Palace in SanFran, I remember Canned Heat was there and Iron Butterfly. Good times. You should introduce SM to Iron Butterfly then see what he writes in his novel.
Man these were the good old days when you could buy a home for $15K on one salary. What happened to us?
http://www.youtube.com/watch?v=YJtzlCa0lW4

#132 DM in C on 02.25.14 at 10:31 am

Sophia; you’re lying about your returns to justify your whining about not buying a house, or (as others have said) you are getting royally screwed.

I just pulled my reports yesterday, and got this:

Personal rates of return for my Registered Retirement Savings Plan
3 MONTH 8.3% YEAR-TO-DATE 23.1% 1 YEAR 23.1% 3 YEAR 7.0%

It hasn’t been hard to get a good return.

#133 Ray Skunk on 02.25.14 at 10:32 am

Bitcoin company disappears – along with customers’ investments…

http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_story_thread_how_much_did_you_lose/cfo4aax

“I am the biggest loser at 4700+ BTC.

I don’t know how dying feels, but I’m pretty sure that’s how I feel now.”

Oh dear. Better call the ombudsman. Oh… hold on…

#134 Herb on 02.25.14 at 10:33 am

#111 World According to Noboby,

sorry, but your invective so far has been fact-free, so how could it be rebutted?

#135 Holy Crap Wheres The Tylenol on 02.25.14 at 10:36 am

“As I’ve said in the past, what people need is income and wealth, not a house and debt.”

———————————————————
This statement really applies to the younger crowd and or the stupid older people who never buckled down to save and pay off their mortgages. A house and debt is what a lot of the young ones have jumped into. You ever notice that a lot of young people today don’t go for that first small starter home but by-pass it and go for the the larger established home. They have already set themselves up for failure! I am lucky enough to be near retirement so I guess I am looking at things through gold rimmed glasses but that’s my take on it!

#136 NoName on 02.25.14 at 10:41 am

Don’t know are Americans one step ahead or behind with this idea…

http://m.newsok.com/oklahoma-schools-required-to-teach-high-school-students-to-manage-finances/article/3936334

#137 Ray Skunk on 02.25.14 at 10:42 am

Further to my previous post…

“I want to start off by saying that I’ve been waiting for this moment for a while. I knew it was bound to happen sooner or later, as soon as we weren’t able to withdraw our coins from Mt. Gox weeks ago. I stupidly had my life’s savings in bitcoin, and when the price started to fall, I converted to dollars and watched the price plummet. I lost $357,000. Not to try to earn a bunch of sympathy or anything but this was not only my money but it was going to be my 5 year old son’s education fund which i took out of fidelity about 1 year ago to mess with bitcoins”

The author then goes in into an expletive-filled rant/cry about how he wants to kill himself.

Absolutely mind-boggling.

#138 DR on 02.25.14 at 10:57 am

Mark on 02.24.14 at 11:19 pm

But in the real Canada, prices are falling and have been for the 2nd half of 2013, and continuing this year.

Oh man go back to RFD please.
I saw the news…said housing became “more affordable” in second half of 2013. Is that your spin on things?

#139 Calgary Rip Off on 02.25.14 at 10:57 am

The latest from the Herald in Calgary: http://www.calgaryherald.com/business/Calgary+housing+affordability+improves+despite+high+prices/9546443/story.html Calgary is affordable….Right…….

The realtor Kathryn is ready to seal the deal on the kitchen countertop, a step above(or below?)the oldest profession in the world.

#140 Tony on 02.25.14 at 10:57 am

#127 Steven on 02.25.14 at 9:35 am

Many good century homes in good shape in New Brunswick for under 50 grand.

http://www.point2homes.com/CA/Home-For-Sale/NB/Murray-Corner/209-Murray-Road-Murray-Corner-Nb/33469574.html

#141 I_AM_HAM on 02.25.14 at 11:05 am

@ #128

Marie. You can see from Krugman/Shiller’s reasoning why Garth and so many discredit HAM.
” After a while, people insisting that the prices make no sense start to look stupid, and are tuned out… and this cognitive difficulty is reinforced by herd behaviour.”

Can anyone blame ordinary Canadians trying to make a living while HAM is/was scooping up $million homes sight unseen for years.

Our banks,government agencies didn’t seem so concerned.Heck, it drives our economy!

So my point is; yes, the bankers and Conservatives should have the finger pointed at when/if it all implodes. And I hope people will use social media as well as their mp’s to drive the point home.

#142 Mr. Frugal on 02.25.14 at 11:17 am

It’s really a multiple-choice question;

(a) Money = Options
(b) House = Responsiblities
(c) Both (a) and (b) = Balance

Clearly (c) is the preferred choice. But, that would require moderation in the house you choose to purchase. The short answer, get out of Toronto and buy where housing is cheaper. Live within your means. The Jones don’t care!

#143 bill on 02.25.14 at 11:20 am

#131 Holy Crap Wheres The Tylenol on 02.25.14 at 10:22 am
did you see the home movie they made?

#144 eyemissgilmour on 02.25.14 at 11:35 am

“It’s not something this blog, or me, is going to change. It’s human nature. Sophia didn’t buy a property in 2009 when prices and sales were falling, probably because she was afraid they’d fall further. ”

Garth – people didn’t buy in 2009 because the money they were using for a down payment was invested, and their investments were down right along with house prices. Some were down 30-50%.

Hardly. Not what she indicated. Nor do people on the immediate verge of a home purchase normally have that down payment money in mutual funds. She did not buy because others were not buying. It’s what defeats most of us. — Garth

#145 airhead princess on 02.25.14 at 11:37 am

““But I’m getting kind of sick and tired of waiting. My professionally managed investments earned me squat last year after fees (did better with the money I shoveled into ING Direct) so that isn’t encouraging me to continue to sit on the sidelines either.”

Wow…I can’t believe how lazy people are with their investments. A few minutes a week could bring home the gold …like Tim’s ( THI)….$18 to $58 in a couple of years. SAP ( Saputo) $20 to $54… CP $40 to $172….AGU ( Agrium ) $30 to $100…..GGI Group GIB.A $15 to $36…TD Bank….I started buying at $14 twenty years ago and have received 1700% excluding regular dividends over that time. . I collect good companies…they never go out of style…occasionally they and the economy might stumble…..but to sit out in the cold and do nothing….well who’s fault is that? Unless you’re a greasy fat civil servant with a gluttonous defined benefit pension you’d better act….soon.

Anyone can do this……go to the library and start educating yourself. Dedicate yourself to reading at least one entire shelf of business and investment related material this year.

#146 Happity on 02.25.14 at 12:00 pm

“Most will ignore me. It’s how we got the 1%.”

Yah, if everyone did what Garth did we would all be in the same country club as the 1%.

Come on people…

Of course not. But some will. Your life, your choice. — Garth

#147 Mr. Frugal on 02.25.14 at 12:02 pm

#145 airhead princess on 02.25.14 at 11:37 am

Well said. If people are lazy with their money they lose out. If you did nothing more than buy a basket of low cost ETFs (i.e. VTI, VSB, VEA) you would be well ahead of the crowd.

#148 blase on 02.25.14 at 12:02 pm

Hear, hear, Airhead Princess.

#149 ozy - Don't you think Fractional RESERVE is the cause of house price inflation year after year on 02.25.14 at 12:06 pm

Garth, Don’t you think Fractional RESERVE is the cause of house price inflation year after year? Would you be so kind to do a posting on this? Thanks.

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

Prior to the creation of the Bank of Canada, the Canadian Treasury was responsible for printing Canada’s bank notes. The Bank of Montreal, then the nation’s largest bank, acted as the government’s banker. A major proponent was the Royal Bank of Canada, which wanted to see the government business taken away from its rival. When the central bank was founded, the government claimed it was constrained by its foreign debts and it would be less costly to borrow money if it could be repaid in debased currency. The government also claimed it was constrained by its inability to deal directly with its foreign debts. The farmers were joined by manufacturing interests and other groups in favor of a depreciating currency, all demanding a central bank. The original name the Bank of Canada (commercial) was a private bank and was renamed the Canadian Bank of Commerce. In 1949, the private banks were ordered to remove their currency from circulation and the central bank became the sole issuer of legal tender bank notes in Canada.[15]

The bank played an important role in financing Canada’s war effort during World War II[16] by printing money and buying the government’s debt. After the war, the bank’s role was expanded as it was mandated to encourage economic growth in Canada. An Act of Parliament in September 1944 established the subsidiary Business Development Bank of Canada (BDC) to stimulate investment in Canadian businesses. Prime Minister John Diefenbaker central bank monetary policy was directed towards increasing the money supply to cause low interest rates, and have full employment. When inflation began to rise in the early 1960s, the governor James Coyne ordered a reduction in the money supply.

Since the 1980s, keeping inflation low has been the central bank’s main priority. In the early 1990s the fractional banking rules of Canada were changed so the Bank of Canada could no longer dictate the amount of fiat currency reserves that Canadian chartered banks must own.

#150 Ralph Cramdown on 02.25.14 at 12:08 pm

Sorry but this whole Mt. Gox bitcoin thing, is that what people mean when they talk about bank bail-ins?

#151 blase on 02.25.14 at 12:10 pm

Marie, this is too good not to post directly on this site, especially considering all the “this bubble will never pop” sentiment that seems to be en vogue lately here.

Paul Krugman: “Natural Big Lies
I’ve been doing some more Fed transcript readings, and noticing how implausible everyone found it that what did happen, could happen. And I have a small insight as I remember the days of bubble denial. It involves a violation of Godwin’s Law, but in a good cause.

Background: One of the really striking insights I gained from Robert Shiller is his notion that bubbles are natural Ponzi schemes — Ponzi schemes without a Ponzi schemer. What happens is that early buyers make money, drawing in more buyers, who drive prices up and allow people to make even more money, and it just keeps on growing for years. After a while, people insisting that the prices make no sense start to look stupid, and are tuned out — and so it’s a great shock when the bubble runs out of suckers and deflates.

So, my insight: while the process of bubble inflation is a natural Ponzi scheme, a thoroughly inflated bubble is a natural Big Lie — that is, a lie so audacious nobody will believe that anyone would dare to invent it. When you have something like this:

the notion that it’s all a bubble, that market prices could be that far off fundamentals, stretches belief. What? You think home prices in California could fall in half? That’s crazy!

And this cognitive difficulty is reinforced by herd behavior: you don’t want to be the guy shouting that the sky is falling when everyone else who matters is treating it as a minor correction at most.

And so it was very difficult, even once the bubble began popping, for Fed officials (and others) to wrap their minds both around the scale of the housing bust and the financial implications of that bust.”

#152 Bottoms_Up on 02.25.14 at 12:18 pm

#136 NoName on 02.25.14 at 10:41 am
——————————————
What they really need to teach students is:

1) How to freak out at your telecon service provider when they’ve over-charged you, how to put up with being hung-up on , and waiting for hours just to speak with a nimrod. And how to wait longer to speak with their manager.

2) Learn how to file consumer complaints with the CRTC, consumer protection bureau etc.

3) Learn how to write their MPs, MPPs etc.

4) Learn the importance of an educated vote (Rob Ford comes to mind)

5) Learn about credit ratings and what it means for their negotiating power

6) Learn how to negotiate the best rate possible on car loans, mortgages etc.

7) Learn how to never pay cash but to reap the rewards of a rewards credit card that is paid off monthly

#153 Alex n Calgary on 02.25.14 at 12:36 pm

Toronto and Vancouver are pretty nutso, but sadly in Calgary it is often cheaper to buy then rent. Our new rental house of 2000sq ft or so, 5k to downtown with a heated garage next to a park with dogs is 1950$, there are a ton of houses you get could a 25yr mortgage for that, although likely much much further on the outside of town, but still we wait. Moving is a real pain though, packing and cleaning is a gargantuen task every time, lasted 22 months in this place before the landlords are moving back in, did I mention its supposed to be -22 this saturday feels like -30? I hope we see some correction soon, this is our 4th house in 4.5years, renting is tough work out here.

#154 april on 02.25.14 at 12:44 pm

#120 – Why do woman need to own a house when they can rent one.

#155 Daisy Mae on 02.25.14 at 12:49 pm

#120 Detalumis: “…and then are told to wait much longer their kid will be a teenager and ready to fly the nest by the time she buys.”

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

A ‘home’ can be a home, wherever we are. We DO buy homes for security reasons — renting is unstable. And most of us enjoy renovating, gardening, general puttering — even mowing the lawns. Good exercise, fresh air. We’re improving our surroundings. Lots of satisfaction in that…and it’s why we do it.

#156 -=jwk=- on 02.25.14 at 12:56 pm

@ #94. Don’t know the hood, but I was in Richmond HIll on sunday. Wy wife’s HAM friends had paid 550k ,cash from sale of beijing condo, for a bung in RH so their 12yr old could go to a good school. it’s a plain 3/1, ~ 1100sf. raised bung. lots of light, original floors and bath, newer kitchen, clean and nice. I would be happy there. Anyway he didn’t find work here so is now renting in Tianjing, China while wife and daughter live here (with no car or english skills). We went to see them because when they shipped their stuff from China they had room in the seacan. So my wife got a bunch of stuff from her parents, clothes, rice cooker, floor heater, humidifier, etc. So we went over there, helped them assemble their furniture and picked up our stuff.

To answer your question, there is a house just like theirs for 600k, and a mcmansion for 975k on same street. Also on same street is a rental bung for $1500 and just down the street another for $1550. So there is your price comparison. All #’s from realtor.ca mobile app. Check west of bayview, north of Major Mac in the Bayview high school district.

#157 The American on 02.25.14 at 12:58 pm

This just in… For all you Bitcoin lovers/believers, I’d hate to be in your shoes right now. This is the problem with a “currency” that isn’t backed by a centralized bank.
http://news.yahoo.com/bitcoin-exchange-mt-gox-39-website-down-053727771–sector.html

#158 Son of Ponzi on 02.25.14 at 1:16 pm

#157
That is the problem with a “currency” that is not backed by a centralized bank.
——————–
No currency is backed. it’s all just FIAT money.
And you can’t even drive it.

Of course it is backed. States issue currency which is rooted in their power to tax, and moderated by its central bank. There will never again be a commodity-based currency in a major nation. — Garth

#159 devore on 02.25.14 at 1:22 pm

#46 tom

Stupid, pointless stat.

You’re completely missing the fores for the trees. Can’t say I’m surprised.

The point is to illustrate the stark disparity in strategies. Wealthy concentrate on building income and growing wealth, everyone else loads up on real estate debt.

#160 supermike on 02.25.14 at 1:23 pm

#155 Daisy Mae on 02.25.14 at 12:49 pm

#120 Detalumis: “…and then are told to wait much longer their kid will be a teenager and ready to fly the nest by the time she buys.”

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

A ‘home’ can be a home, wherever we are. We DO buy homes for security reasons — renting is unstable. And most of us enjoy renovating, gardening, general puttering — even mowing the lawns. Good exercise, fresh air. We’re improving our surroundings. Lots of satisfaction in that…and it’s why we do it.

————-
————

Daisy Mae, I totally agree with you!

I have been renting for around 13 years. My experience tells me my own home is a must!

I lived in an apartment building for around 6 years. An article I read on Toronto Star back then just terrified me. A couple complained their apartment unit was so worn-out that nothing was working well including the bath tub. not mention the growing mold on the wall. But the building management just didn’t care. They had been renting and living in that apartment unit for 3-40 years. They were old, they retired, they were weak, they weren’t able to do anything but cry and complain.

After 6 years living in apartment, I totally understand what the couple went through.

Then I rented couple of condo. Landlords were nice, the buildings were nice,everything was good. But the landlord decided to sell their condo units. So I had to move.

Now I rent a townhouse. The landlord is a nice guy. He bought a bigger house and wants to keep this townhouse for his son living in Hongkong. So I guess I will have to look around to find another rental house if his son comes back from Hongkong.

Moreover, the backyard is full of weeds. After 10 years of lacking of Maintenance, it is just destoryed. The whole lawn needs to be replaced if we want to enjoy BBQ in the backyard. But would you like to spend thousands on a home you just rent?

Somebody might say you can rent a very nice house if you spend more than 2000 thousands or 3000. Well, what can I say? if you have enough money you can do whatever you want, right? But we hard-working people normally don’t live this way.

Anyway, my point is simple. You just can’t rent for ever. An own home is a must for a normal person or family. Can you imagine you have to move around when you are 80s?

Garth talks a lot. But he has been missing 2 keys to investment: Timing and Leverage! I understand that greedy people get slaughtered. However, staying on the sideline for ever will just make you a loser or whiner.

#161 World According To Garth on 02.25.14 at 1:28 pm

I rest my case. Go smoke your taxpayer funded bong Herb. The Govt has some very large snivel servant cuts coming otherwise can you spell Ukraine?

#134 Herb on 02.25.14 at 10:33 am
#111 World According to Noboby,

sorry, but your invective so far has been fact-free, so how could it be rebutted?

#162 devore on 02.25.14 at 1:33 pm

#77 Cowpoke

The 99% would have gotten richer.

The 1% would have gotten poorer.

And ‘who’ was lobbing Ottawa,… the rich! Aw! Like they think they can make it in this world without us!!

Well go ahead and try. Ha!

Try? Try what?

The 99% are going nowhere, and they aren’t, collectively, getting any smarter. They will continue to load up on debt and buy useless junk, because pretending to be wealthy is much easier, and more important, than actually being so.

#163 Still working for a living on 02.25.14 at 1:36 pm

According to CBC News , Condos are a hot seller. What’s up with this….Sounds like a realtor wrote this piece of crap for CBC to spew out

#164 fixie guy on 02.25.14 at 1:37 pm

#37 Passer: “The answer, of course, is CMHC. A social program …. run amok.”

Not really, it’s working exactly as designed. The Conservatives deliberately enabled this situation. ‘Amok’ implies accidental or unintentional. The winners when a highly leveraged asset class is this over valued are the lenders. Otherwise they’d be buying real estate.

#165 Son of Ponzi on 02.25.14 at 1:44 pm

There will never again be a commodity based currency in a major nation. – Garth.
—————-
What about Canada? We have a Petro Dollar.
Are we not a major nation?

#166 happity on 02.25.14 at 1:45 pm

Jpm to let go 17,000 mortgage bannkers. Why? Because of the USA real estate renaissance that’s why…

Feb. 25 (Bloomberg) — Home prices in the U.S. climbed at a
slower pace in the year through December, indicating the market
is entering a new stage that will help sustain further progress.
The S&P/Case-Shiller index of property values in 20 cities
rose 13.4 percent from December 2012 after increasing 13.7
percent in the year ended in November, the group said today in
New York. It was the first deceleration since June.
Price appreciation is slowing as rising mortgage rates
combined with harsh winter weather to cool home purchases over
the past few months. Smaller increases mean more homes will
remain affordable as the labor market improves, helping maintain
the rebound in residential real estate that has boosted growth. — Garth

#167 Aggregator on 02.25.14 at 1:50 pm

Everybody is running scared from bitcoin. That's a buy signal for me.

#168 airhead princess on 02.25.14 at 1:56 pm

Is this a ‘parasitic bubble’…where many parties have a vested interest in encouraging more speculation? Read this very adroit analysis of ‘the bubble’ over time.

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invfables/bubbles.htm

I would suggest this is so. Our governments addiction to higher price/high taxation is at the root of the problem.

#169 pinstripe on 02.25.14 at 1:59 pm

Who do you trust?

Is the drama in the red chamber kept at a very low key for a reason?

http://www.cbc.ca/news/canada/manitoba/cheating-students-punished-by-the-1000s-but-many-more-go-undetected-1.2549621

#170 Dupcheck on 02.25.14 at 2:04 pm

@ #14 London, Ontario, Calling

Property taxes for that home are probably 8,000$/year. That is almost rent money for some.

London has one of the highest property taxes in Ontario.

#171 World According To Garth on 02.25.14 at 2:18 pm

So the power of greedy public servants to “steal our money” is what gives “digital” sovereign money legitimacy? That has to be the saddest explanation of money I have ever heard. And from Garth? Blasphemy. You hanging around Herb Garth? You need to cut down on your meds. How’s the leg healing by the way?

Bitcoin like ALL US, Cdn, UK DIGITAL currencies must be declared and/or converted to your home currency on a tax declaration if cash is earned.

As far as the people that keep referring to “Mt Gox” as being “all bitcoin”. Lehman, Barrons and “John the thief Corzine’s” MF Global all collapsed. It didn’t mean all banks collapsed. I wish people on this blog would stop cherry picking.

158 Son of Ponzi on 02.25.14 at 1:16 pm
#157
That is the problem with a “currency” that is not backed by a centralized bank.
——————–
No currency is backed. it’s all just FIAT money.
And you can’t even drive it.

Of course it is backed. States issue currency which is rooted in their power to tax, and moderated by its central bank. There will never again be a commodity-based currency in a major nation. — Garth

#172 BCD (D for Doomer) on 02.25.14 at 2:26 pm

#67 Happy Renting
I’ve told my spouse that if we make a move on a Toronto house, it’ll be when the market corrects, and that will likely come at a time when it feels like the financial sky is falling. At that time our jobs might feel insecure (or we may have already been laid off.) It will take balls of steel to jump in when things look so dire… But that’s the reason why houses will be on sale. Anyone waiting for a price drop needs to be aware it probably won’t be happening while the economy is going gangbusters.
______________________________________

Sounds like you are living in some sort of “end of days” fantasy land. Reading between the lines your moniker doesn’t seem so apropo. If you have balls of steel you should jump in now and buy big guy, not wait for a correction that will never happen. Garth. The house that sold for 900K in a bidding war is on it’s way to 2.6 million as one poster suggested. Right or wrong. You probably know this yourself. Will it go down again? Of course, but not enough to inspire the happy renters from jumping in—they jumped ship long ago believing their money was better then everyone else’s.

As for investors that sit in cash, let’s apply the rule of “once bitten twice shy” here. Markets up 170%. . .really. . .that doesn’t strike anyone as bubbly. . .but yet RE is bubbly? So everyone just keeps making huge % gains in the financial markets and in housing while the world keeps going deeper in debt and countries are more and more strapped for cash? Come on! Only a fool would believe this scenario will go on and on. Good guy never wins.

Staying in cash is the lesser of two evils. All the smart people know this. Protect what you have. Leave the speculators to their fates. Being cynical is a gift.

#173 RockStar on 02.25.14 at 2:37 pm

#160 supermike wrote:
However, staying on the sideline for ever will just make you a loser or whiner.

So true.

#174 monkeyevolved on 02.25.14 at 2:51 pm

Survey of Financial Security, 2012

According to this Statistics Canada release today, Canadians are doing quite good. If you take a simplistic look at the data, essentially only 20.7 per cent of Canadian Households have a principle residence with a mortgage (62.5% have a principle residence, 33.8% of those have a mortgage on that principle residence) and that median mortgage amount is only $145,000. Meanwhile, the median value of those principle residences is $300,000.

So…4 out of 5 Canadians have no mortgage or have paid their mortgages off. And a 50% correction in real estate would leave the “median” Canadian household still above water.

WTF?

#175 Vince on 02.25.14 at 3:05 pm

Re #8 Pitfield


Someone can correct me if I am wrong on this:

The loan for the portfolio would effectively be unsecured; while the mortgage is secured to the house. I’m not saying that it makes complete sense, for the situation where housing implodes, but banks are willing to treat the house as a reasonable stable form of security.

That’s not to say that a basket of PCG, cigarette companies, and conservative banking institutions wouldn’t be able to hold it’s value.

On top of all that, the banks want to steer their customers into debt servitude through mortgages, not to independent wealth through balanced investing. The private sector needs low/middle-class workers that are scared of losing their jobs because of mortgage payments and thus unable to negotiate a better deal for themselves.

/rant

#176 Bill Gable on 02.25.14 at 3:21 pm

Another brick in the wall? Just announced.

“JPMorgan Chase to lay off 8,000 employees”.

Why? Just like Mr. Turner has been warning us –
“Biggest U.S. bank expects less loan financing as interest rates rise”.

Add this to a growing number of Entire Countries that are having systemic banking problems, and we have a fun scenario ahead.

Link: http://tinyurl.com/la4ua6r

#177 Aggregator on 02.25.14 at 3:22 pm

#168 pinstripe

Cheating students punished by the 1000s, but many more go undetected

See no evil, hear no evil. Otherwise this could happen…

Riot after Chinese teachers try to stop pupils cheating

What should have been a hushed scene of 800 Chinese students diligently sitting their university entrance exams erupted into siege warfare after invigilators tried to stop them from cheating.

Alas, the hidden agenda of provincial governments appears again as they try to inflate the student bubble by not updating curriculums and welcoming cheaters in order to pass as many students as possible. Hence why Ontario's high school graduation rate has rising from 68% to 83% in under ten years and trending towards 100% within the next decade or so.

What's a degree worth if everyone has one and technology is outpacing public education systems?

#178 Obvious Truth on 02.25.14 at 3:23 pm

Did anyone read the BMO economic review and outlook in the release today?

#179 Iso-Classical on 02.25.14 at 3:26 pm

#3 Role on 02.24.14 at 8:39 pmHas anyone really been far even as decided to use monies even go want to do look more like house?

What language was that? — Garth
_______________________________________________

I literally cried…man was that funny! Love the dry humour!

#180 Old Man on 02.25.14 at 3:27 pm

It would be interesting if there was a demographic breakdown of home buyers in Toronto to ascertain what is fueling this market forward detailed with types of property. There are the obvious elements at play so taking 1978 as a young couple buy forward to 2013 this equates to three trade ups every decade, thus at about ages 55+ might become the final buy before retirement. In this case would not be buying with debt, but with massive equity earned; hence the price would not be of a concern, but rather the home itself and are willing to pay a premium. Now if a modest mortgage is needed they hoop cheap money as a combo factor for their dream home as well. Hmm!

#181 Sotiri on 02.25.14 at 3:34 pm

CP24 – “Royal Bank predicting a rise in mortgage rates at some point this year”
Garth what do you think?

#182 Smoking Man on 02.25.14 at 3:38 pm

#168 pinstripe on 02.25.14 at 1:59 pmIs the drama in the red chamber kept at a very low key for a reason?

http://www.cbc.ca/news/canada/manitoba/cheating-students-punished-by-the-1000s-but-many-more-go-undetected-1.2549621
……………

Great link man, inspirational to my writing.. Huge!!!!!!

Going to pick it apart, show you dogs in great detail why University is ridiculously priced, the skill.

Memorize Regurgitate, Obey!!!!!!!!!!

Talked about a code Smith who copied some code from a fellow student… Tar and feathered him.

In the real world, Code Smiths don’t keep archives of cool code anymore, they Google it, instant codification…..

What would any sensible human, waste valuable bio hard drive space, only remember key words. Leaves a lot more room up top for important things to remember, like the hottie at the pool in Vegas.

Hell with technology and instant info, your mind can be completely blank, so you can focus on writing a best seller…

University is so redundant…..

#183 Smartalox on 02.25.14 at 3:58 pm

Stats Can Survey on Financial Security released today.

News Media in BC breathless about how everyone’s net worth is skyrocketing, so I decided to read the study and have a closer look. This is what I see:

Assets: Principal residence still key asset, but large increases in other real estate
The total value of assets held by Canadian family units in 2012 was $9.4 trillion, composed of financial assets
(pension and non-pension), non-financial assets and equity in business. As in 1999 and 2005, the principal
residence was the largest asset in 2012, representing one-third of the total value of assets. For those who owned
their principal residence, the median reported value of their residence was $300,000 in 2012, up 83.2%
from 1999 and 46.6% more than in 2005.

Other real estate such as cottages, timeshares, rental properties and other commercial properties
represented 9.9% of total assets held in 2012. About one in five Canadian family units owned these properties, with
a median value of $180,000. The median value has more than doubled since 1999.

Garth, I’m betting you’re going to cover this report tonight, but I just want to see if I’m reading this right:

People’s net worth is up, in part because so many hold so much real estate – up to 40% the value of assets held!

Sure, some real estate is still backed by mortgages, but if median net worth of families is in the $300k range, it’s hinting that houses have still appreciated far ahead of what’s owed on mortgages (at least for those bought since 2005).

But I have some questions, and I couldn’t find answers in the report:
– If the value of residential real estate (primary, investment and cottage properties) represents such a key piece of Canadians’ net worth, how were the property values determined? Were values cross referenced from municipal property value assessments? Or did survey takers self-assess the value of their assets? If so, did the study correct for over-estimation bias by non-experts / wishful thinkers?

I’m also wondering about the role of insurance policies in net worth determination: these are financial assets, but I don’t see where these assets would be assessed under the breakouts for net worth. Other Pension?

Here’s the link to the Stats Can Report:
http://www.statcan.gc.ca/daily-quotidien/140225/dq140225b-eng.pdf

And as interpreted in the mainstream media:
http://www.cbc.ca/news/canada/british-columbia/b-c-families-wealthiest-in-country-says-statistics-canada-1.2550886

#184 Rexx Rock on 02.25.14 at 4:00 pm

Toronto is a desirable city just like Vancouver,Calgary and Victoria.High income,higher prices.People will pay what they can afford.Until rates rise ,which they won’t for many many years , just keep holding until you make a nice profit.Real estate has been a great invest for many Canadians like myself.I feel terrible that I did’t go full blown on buying real estate over last 5 years but fear got a hold of me which cost me financial freedom.

You equate a mortgage with ‘financial freedom’? Weird, even for a real estate agent. — Garth

#185 Ralph Cramdown on 02.25.14 at 4:18 pm

#170 World According To Garth — “As far as the people that keep referring to “Mt Gox” as being “all bitcoin”. Lehman, Barrons and “John the thief Corzine’s” MF Global all collapsed. It didn’t mean all banks collapsed. I wish people on this blog would stop cherry picking.”

There’s no need to cherry pick. Mt. Gox was the biggest bitcoin exchange, and its creditors look to be getting zero. It’s as if JP Morgan disappeared overnight with all its assets and employees.

Lehman creditors got back nearly 30 cents per dollar owed, MF Global creditors recovered 94 cents on the dollar, Bear Stearns bondholders and account holders were made whole, but Mt. Gox customers are looking at zero, and even holders with their bitcoins in a safe place are down over 50% from highs of less than six months ago. Some store of value.

No need to cherry pick, the complete and unvarnished truth is quite bad enough.

#186 jess on 02.25.14 at 4:26 pm

Subsidy Tracker 2.0.
Subsidy Tracker now contains parent-subsidiary linkages for more than 25,000 entries with aggregate values of $110 billion, or 75 percent of the total dollar value of all the entries in the Tracker universe. Those entries have been connected to 965 parent companies drawn from the Fortune 500, the Forbes list of the largest private companies and similar lists. The Fortune 500 alone account for more than 16,000 awards worth $63 billion, or about 43 percent of total Tracker dollars.

http://www.goodjobsfirst.org/showusthesubsidizedjobs

David Cay Johnston, an investigative reporter who won a Pulitzer Prize while at The New York Times, is a best-selling author who teaches the business, tax and property law of the ancient world at Syracuse University College of Law.
http://america.aljazeera.com/opinions/2014/2/corporate-welfaresubsidiesboeingalcoa.html

#187 Aggregator on 02.25.14 at 4:30 pm

#182 Smartalox

If the value of residential real estate (primary, investment and cottage properties) represents such a key piece of Canadians’ net worth, how were the property values determined? Were values cross referenced from municipal property value assessments? Or did survey takers self-assess the value of their assets? If so, did the study correct for over-estimation bias by non-experts / wishful thinkers?

Are you ready for this one? StatsCan uses their NHPI, which only surveys new SFHs sold by contractors. No resales, no condos. Nada.

Yes. It's that bad. But hey, it's great for pumping up expectations and getting reelected.

#188 Peter on 02.25.14 at 4:38 pm

#155 Daisy Mae

I SO agree, I enjoy working on and improving my house as a hobby, good for the brain and keeps me out of trouble , (gardening not so much but it makes a property look healthy), the fact that it adds value is great but it is not why I do it. I spend on bird feeders and feed and bird baths , and I have a regular rabbit that shows up nightly (from nearby railway lines) . Good for the soul .

#189 Vancouver RE agent. on 02.25.14 at 4:48 pm

RUBBISH. Garth compares 1M of LEVERAGE with 1M in savings placed in portfolio. And also he assumes that you create your portfolio to win. Majority of ppl loose in the paper market so keep that in mind. Here in Van you can buy 1.5M house with ZERO down (borrow downpay from the bank) and then flip it in 6 months with at least 400K profit. Garth has been preaching crash/slow burn for 10 years now (watch his youtube vids) meanwhile everybody I know here in Vancouver have become millionares simply by owning a house. Not bad!

People like you play a huge role in denying home ownership to so many. Shame. — Garth

#190 45north on 02.25.14 at 4:49 pm

Steven : I read your “10 stories from the cold” thanks

Christopher Lackey : People who think this is going to ride 4-5% per annum all the way to 2.5 mil need to ask themselves who is going to pay that ?

that’s as far as you have to go

Blasé the notion that it’s all a bubble, that market prices could be that far off fundamentals, stretches belief. What? You think home prices in California could fall in half? That’s crazy!

I’m thinking housing will crash this spring and Flaherty will let it. for sure real estate agents are not going to signal a downturn. the banks have already tightened mortgages and that’s as much a sign as you’re going to get.

Aggregator : Everybody is running scared from bitcoin. That’s a buy signal for me.

me too

#191 Old Man on 02.25.14 at 4:50 pm

#179 Old Man – Now attitudes in youth from the early 20’s change drastically with what one needs for the final retirement buy in their mid 50’s. So taking my theory of the final buy with massive equity earned from trade ups rather than debt lets flip the coin a bit the other way. What about a trade down with massive cash equity? This too would buy for a premium in a lower end of the real estate market, so old cash might be fueling this market over the past few years as well. I say they are willing to sacrifice some equity earned in the past to make the sale for the final buy.

#192 DR on 02.25.14 at 5:01 pm

3 Ross St Sold: $1,308,880
Toronto, Ontario C01

List: $829,000

Really?

#193 Dual Citizen In Canada on 02.25.14 at 5:20 pm

We are all just reinforcing what agent Smith has condemned us to be.

http://www.youtube.com/watch?v=-Na9-jV_OJI

We all need money to spread and consume resources.

#194 Blacksheep on 02.25.14 at 5:20 pm

All you ‘FIAT’ hating Dogs, the truth is hiding in plain sight. (not the car)
——————————————————
“Of course it is backed. States issue currency which is rooted in their power to tax – Garth”
——————————————————
Garth’s sharing (alluding to?) one of the deepest darkest secrets any ‘sovereign in control’ can have. If you new, I mean really understood, you would never look at currency, or the system the same way.
——————————————————
“There will never again be a commodity-based currency in a major nation. – Garth”
——————————————————
Then he throws you this juicy bone. Come on people, connect the dots!!!

PS: It’s all about perception, S.I.C.’s really don’t need your dirty money.

#195 BCD (D for Dingle) on 02.25.14 at 5:22 pm

I’ve been reading this blog for years. Mostly, I like the comment section because it is entertaining and some folks exhibit some signs of intelligence (although I’d rather have a laugh than read something intelligent).

The problem with this blog as I see it is not that it trumpets a never-materializing-cause (read here: RE crash to end all crashes) with often mind-numbing regularity. . .but that Garth and several other religious elders rather arrogantly assume that 99% of us are complete and utter idiots (backed by all kinds of nefarious, worked-over, statistical data-games).

Perhaps everyone is overspending and taking out HELOC loans to finance testicular massages, Starbucks lattes, and the latest Thai nail art. BUT MAYBE, just MAYBE there is more wealth, savings, and financial competence in the general population than Gartholics give credit to.

My hunch is that the Boomers that everyone keeps talking about are not eating pigeon kibble and drinking pee-water. . .they are sitting on mattresses full of cash.

Nothing mystifying about the recent survey on financial security. . .but go ahead people, and poke some holes in it and pretend you are higher on the evolutionary scale.

Gee, you didn’t even try to make up some stats. Convincing. — Garth

#196 Hawk on 02.25.14 at 5:37 pm

#142 Mr. Frugal on 02.25.14 at 11:17 am

I agree that people should buy smaller houses in accordance with their means, but getting away from teeming metropolis isn’t practical for a very large percentage of society.

Regrettably two major advantages of the city are jobs and social life (people you know).

#197 Stickler on 02.25.14 at 5:39 pm

@ #58 OffshoreObserver on 02.24.14 at 10:23 pm

Sorry, I made mistake in last reply “Who” = “Whom”:

My hospital bill was 695,000 Don = about CAD$35.

My new 19 year old GF told me this morning–she stayed the night–100,000 Dong, then I found the receipt for 695,000 Dong.

Again, I had two physicians and 15 nurses attending, not including my 19 year old GF’s “therapy.”

——————————————

Shouldn’t that read 695,000 Dongs?

#198 DR on 02.25.14 at 5:43 pm

That post BCD (D for dingle) would sound so much better if agent smith was reading it.

#199 april on 02.25.14 at 5:46 pm

# 188 – full of BS.

#200 Vangrrl on 02.25.14 at 5:48 pm

#103: She may have been referring to ING index funds which do well.

#201 Old Man on 02.25.14 at 5:51 pm

One last point if you will, because over the past few years a hidden dynamic has been supporting that real estate market in Toronto, and its called equity earned.
Now couples in their 30’s some 20 years ago bought summer cottages up north as a trend; driving up was a breeze; taxes were low; and prices went through the roof. The bud fell off the rose eventually as aging has changes, and so did the traffic and property taxes. So how many in their 50’s sold out adding more cash into their bank account? Just some thoughts to ponder!

#202 Ralph Cramdown on 02.25.14 at 5:52 pm

“My work is done here,” says F.

So who in cabinet do you see as finance minister material, Garth? Maybe the control freak takes on that portfolio himself?

#203 Republic_of_Western_Canada on 02.25.14 at 5:55 pm

#160 supermike on 02.25.14 at 1:23 pm

Somebody might say you can rent a very huge mortgage trying to pay off some outrageously overpriced detached house, if you spend more than 2000 thousands or 3000. Well, what can I say? if you have enough money you can do whatever you want, right? But we hard-working people normally don’t live this way.

Anyway, my point is simple. You can rent property directly for as long as you want. An own home is a place to live, not a physical house. It is independent of property deeds. Can you imagine having to re-shingle your roof when you are 80s?

supermike talks a lot. But he has been missing 2 keys to investment: Research and diversification. I understand that greedy people get slaughtered. However, renting overpriced mortgage money for ever will just make you a loser or whiner.

#204 4 AM Sunrise on 02.25.14 at 6:09 pm

The CFO of BeeMo just said on BNN that “housing is still affordable because interest rates are low.”

Theatregoers, chuck your peanuts.

#205 Nosty in The Kinks' Yellow Submarine on 02.25.14 at 6:13 pm

#131 Holy Crap Wheres The Tylenol on 02.25.14 at 10:22 am — “You should introduce SM to Iron Butterfly then see what he writes in his novel.”
— and —
#143 bill on 02.25.14 at 11:20 am — “did you see the home movie they made?”

Iron Butterfly may be a little too far-fetched for SMan. Saw Zappa and the Mothers at a bullring in Barcelona in the early ’70s. That was a hoot — everyone (incl. the cops) were as high as kites!

Was the movie “I Am Curious — Blue”?!

#206 Smoking Man on 02.25.14 at 6:18 pm

 Nosty in The Kinks’ Yellow Sub

Iron Butterfly,?

In the garden of eden?

Went well back in the coke days… Cola of course…

#207 Son of Ponzi on 02.25.14 at 6:29 pm

Everyone were as high as kites.
—————
That’s so seventies.
Now it is: everyone were as high as RE prices in Vancouver and Toronto.
Keep up with the times, man.

#208 Stickler on 02.25.14 at 6:33 pm

“The U.N.’s Edible Insects report warns that population growth coupled with climate change will make feeding the world extremely difficult in the future.”

Doesn’t the fact that the UN has an “Edible Insect Report” say it all.

#209 gut check on 02.25.14 at 6:41 pm

Well.. interesting comments on this post. I haven’t really seen them this down to earth in a lllllooooooonnngg time.

I am with Sophia and the people who “get where she is coming from.” Lots of great posts that really have already said what I am about to say:

In spite of both my partner and I working as self employed we were approved for an equity mortgage. So we looked around at the homes for sale. Being that we both work from home, “home” has to be pretty particular. It needs space, quiet, internet and it needs to be well maintained so that neither he nor I have to work on sinks and floors instead of bringing home the bacon. This combination was surprisingly difficult to find in our price range.

So, we looked instead at renting. I wrote into this blog a while back and most respondents recommended that we rent. Well..

For all of the reasons already eloquently articulated in the earlier comments we have come to the conclusion that renting is just senseless for us. Yes, I did the numbers. I do lots of numbers lately. :)

Renting would *not* be ‘cheaper than owning’ for us, in fact in the three scenarios that I ran there was less than a $100/mo difference in any of them. The biggest difference was that in the renting scenario I would have to count on investment income to make the numbers work.

So we asked ourselves this: What life do we want?

Do we want to:
A. Rent and wonder when the landlord would ask us to move, drag his/her feet on repairs, refuse us a pet or make our friends smoke outside, forego landscaping (which gives us pleasure) and have too little room to properly carry on our businesses;

or

B. Buy and have a lower monthly payment than while renting, have the space and control we need but have to suck up the maintenance costs & risk a downturn in the market.

We have chosen option B. Why? Because we want to LIVE our lives, not sit and wait till we are ‘safer’ to buy. What is safer, anyway? Life is risky. this economy is completely unpredictable. Jobs / income is unpredictable. Markets are. Pensions are not even something that we, as people in our early 40s, really count on. We will save as much as we can and that’s that.

If renting were actually stable, freeing and affordable we might feel differently but that’s just not the case today. Landlords no longer cut lawns & shovel snow. They don’t want long term tenants. They paid too much for their properties and need to cover their expenses plus put cash in their banks every month. And half the time although they don’t want the smell of cigarette smoke anywhere near their front doors they can’t be bothered to fix a leaky tap.

Anyway, that’s my two cents. It ain’t worth much, but there it is.

#210 Role reversal on 02.25.14 at 6:51 pm

# Role: Has anyone really been far even as decided to use monies even go want to do look more like house?

Elor – House like more look do to want go even monies
use to decided as even far been really anyone has?

#211 Goldie on 02.25.14 at 6:53 pm

For the difference in price between the asking price and winning bid on that house I could continue to rent my house for another 10 years and 3 months. Crazy.

#212 I'm stupid on 02.25.14 at 7:01 pm

The problem with Canada is the same as the rest of the world, poor education. Why isn’t it mandatory for high school kids to take a personal finance course? Why doesn’t it even exist? Why the hell are these kids wasting their time with Drama, geography, gym etc etc etc.

I watched that doc zone about kids being screwed after post secondary education. Well that’s no surprise. A degree in under water basket weaving is of no use to anyone. (General arts degree)

The outcome is a society that has no clue about how to manage their personal finances. They don’t understand leverage and debt and will ultimately live on cat food in retirement. Now you need to. “Compete for homes” with irrational dumb asses, that will cry when they see their 5% equity vanish in a heart beat.

Houses have become a status symbol of wealth for poor people.

#213 Vlad the Inhaler on 02.25.14 at 7:23 pm

“It’s how we got the 1%”

The idea of ‘the 1%’ is a myth for TV watchers. Can 1% of Toronto’s population afford the Bridal Path?

In reality it is a LOT less than 1%.

Anyone who is allowed to lend-at-interest eventually owns the entire world.

#214 reasonfirst on 02.25.14 at 7:27 pm

#183 Rexx Rock

If you had bought in Victoria 5 years ago you would be down about 10%.

#215 Rabbit One on 02.25.14 at 7:34 pm

> #208 Gut Suck

I understand, I believe everyone who can afford to own who are currently renting are frustrated.

2 comments.

One : if your calculation concluded owning and renting is not much difference maybe one of (or both) 2 factors.
Either your prospect property is less than $1MM, and / or your projection of Mortgage rates are low like at current level – not counting increased in future.

Two : I agree that these days, landlords don’t want long term tenants, which in one time was more favourable if you run as a business.
I saw so many short term renantals (many a few month to less than one year, amateur landlord, while they are renovating suites on newly bought house for more money in future)

To me, only this trend already tells real estate price came to the very risky points.
Many property owner has no holding power any more.
Those who do, won’t (no need to) to have someone living in one of your floor / suites in your $500K, $700K, $1MM house.

They bought something they cannot afford to live themselves, and hoping for huge capital gains in future.
In my opinion, this is gamble, not investment.

#216 Rabbit One on 02.25.14 at 7:35 pm

> Gut Check
Sorry, No intention on mis-type your name…..

#217 Bottoms_Up on 02.25.14 at 7:41 pm

#203 4 AM Sunrise on 02.25.14 at 6:09 pm
——————————————–
The bank’s CFO should have clarified.

The monthly payments are affordable due to low interest rates.

Followed by:

The affordability of housing (median price of SFH to median income) is atrocious in many Canadian cities.

#218 Smartalox on 02.25.14 at 7:59 pm

@#188 Vancouver RE Agent:

It’s you and your kind that are the GREATEST fools, driving prices ever higher, chasing fewer sales only to to force more agents into the poorhouse. If an agent doesn’t sell, an agent doesn’t eat. Why not encourage clients to price 20% less, and make twice as many sales? Sure, your paycheque per sale would be less, but by making more sales, you’d end up ahead in the long run!

With that kind of thinking, it’s only a matter of time before you blow the whole thing up.

#219 Cici on 02.25.14 at 8:06 pm

#120 Detalumis

Absolutely false. Sorry.

Children need a roof over their heads and a warm, safe to sleep and that is all.

My sister raised my neice in a two-bedroom apartment. She’s now 13 and they are still in the same rental unit. She is healthy and happy and active, and has everything she needs to survive.

Meanwhile, Sis is an actively participating member of the workforce (a nurse), and has managed to put away some $150,000 in those last 13 years.

Does she want a house still? Yes. But will she fork over ridiculously insane amounts of personal savings and become a debt slave to do it? No.

She’s rather keep on saving and have more $ for her and her daughter to enjoy the finer things in life: surfing and other recreational activities, music lessons, and eventually university or college. Oh yeah, and early retirement of course :-)

#220 JIM on 02.25.14 at 8:27 pm

#208 gut check

What you say is very relevant but to each their own.

Buy if you can afford and by afford I mean in the future also. I have no problem with renting my house, landlord is responsive to our needs, wants to keep us. He was a former real estate agent, said the market is dead and wants to keep us happy – to stay.

So it all depends on when you are about to buy. I have heard individuals say that they have waited 8 year or so and the market has yet to fall. What happens if the market falls in the 9th year. In any event it is unaffordable as it is and to get even more unaffordable it can go up, but then it must come down. Patience is a virtue and real estate is local. Port Alberni on Vancouver Island has a billboard on the east side of the Island advertising it as affordable living which it is, problem is the lack of jobs and the somewhat hard to navigate road which keeps both families and retirees out. Prices have changed little since the 90s.

If you want to buy – roll the dice – but do so knowing that it is already unaffordable and the downturn is on its way – as this is not sustainable – anyone that looks at the past markets would tell you. Problem is most who did not experience past downturns and grew up in a boom period think the opposite and I can tell you when human nature is involved the past always repeats in some manner.

And don’t believe what you here from those who have a vested monetary interest in the current market.

#221 Cici on 02.25.14 at 8:36 pm

#91 Kyla

Awesome! Good for you :-)

#222 30 yrs of poodle bites on 02.25.14 at 8:37 pm

poodle chews it..
wow, Markham is hot. Houses like that have low ceilings, and home depot finishes when new, now after 30 yrs of wear and tear ,, is it worth fixin’ ? cuz you cant make those ceiling higher and the room sizes and layout are unchangeable- forever a subdivision house

#223 bill on 02.25.14 at 8:46 pm

nope .they shot it at the Edgewater Inn …a dancing lesson I believe…

#224 DonDWest on 02.25.14 at 8:50 pm

“While the top 1% of the population, by net worth, has less than 8% of its assets in real estate. . .”

Where did you grab this statistic? A quick glance at the top 100 wealthiest Canadians reveals that most are either in real estate or entertainment as their primary source of business.

Perhaps they’ve only designated 8% of their “personal wealth” towards real estate, but when most of their business dollars are going towards real estate, it’s a bit far fetched to argue the top 1% are not heavily invested in real estate.

#225 Daisy Mae on 02.25.14 at 9:18 pm

“How’s the leg healing by the way?”

*******

Been wondering that myself. You’re getting to your office every day — hobbling on crutches, of course?

#226 Daisy Mae on 02.25.14 at 9:47 pm

#199 april: “# 188 – full of BS.”

***********

I don’t think the #188 post contained anything too very heavy. LOL

#227 BCD (D for Doin' it) on 02.25.14 at 9:53 pm

@195 BCD

Gee, you didn’t even try to make up some stats. Convincing. — Garth
———————————————

Study says 60% of women are bisexual. This goes along the lines of my own personal experience. But I better stop there before everyone thinks I am bragging like Smoking Man…or lying.

http://shine.yahoo.com/love-sex/study-says-most-women-are-bisexual-2584654.html

#228 buh-by_MtGox on 02.25.14 at 11:23 pm

MtGox … The Bre-X for this generation?

for those who are too young to remember:
http://en.wikipedia.org/wiki/Bre-X

#229 gut check on 02.25.14 at 11:47 pm

#215 Rabbit One
:) that’s a funny reading of my screen name! thanks for clearing that up, I felt picked on for a moment there.

Yes, the house is well under 1MM and will be affordable even if rates rise at our renewal. Now, we do risk some belt tightening if there are emergencies coupled with rising costs for taxes, heating, etc. We all run that risk, though, really.

#220 JIM – I hear you. If I could find a home that would work for our self employment needs, that was located in a truly quiet neighbourhood, had parking and a yard, allowed me a small dog, AND I knew we could stay for 3 years at least I’d rent, too. Well.. I would if monthly payments were the same as mortgage+taxes, anyway.

Equity loss doesn’t scare us too much in the case of a market correction since we would be buying in the same environment as we would sell in so it ought to come out fairly even, all told. And, unless the correction is 50% we don’t risk being under water.

I agree with you on the big point: to each his/her own. cheers!