You’re _ _ _ _ _ _ than you think!

DICK modified modified

A little over four years ago I wrote about a woman in Vancouver who was struggling deeply with selling her trendy condo. Her little family was industrious, but getting nowhere. The condo had grown in value, and was their sole asset. And while everyone was telling her it would soon double in value, she was torn asunder with doubt.

We talked. I explained how, if they sold, the invested equity could pay the rent allowing them to save and grow their net worth. More diversified, I explained, and less risk. Soon after, they found a buyer.

They also found mobility. Beth’s husband was offered a superior job on the island a year later, and they were able to move in a matter of weeks. Still renting. Here’s her report to me:

Our neighbour here on the Island just sold their house for $60,000 less than they paid 6 years ago. A slow but significant decline if you have to/want to sell. We are so glad we didn’t buy, and that we rent. Just for a lark I emailed our old realtor and asked about the value of our old apartment. The unit would sell for the same today as what we sold for 4 1/2 years ago. He said units in our old building are selling below assessed value these days. If we hadn’t crossed paths with you, financially we would be behind, but not even realize it. Instead, our portfolio has grown steadily, and we have financial security. Thank you for educating us!

Now, I don’t include her words just to make me feel good (although it did occur to me), but to illustrate a point. Real estate giveth, and it taketh away. Beth’s neighbour just got whacked for sixty grand (and much more after commission), while if Beth had kept the condo she would have paid a mortgage and strata fees for the four years she’s been living rent-free.

This brings us to an amazingly weird piece of work just published by StatsCan and slathered over by the boys in the mainstream media. You know the one – that report claiming middle class net worth has rocketed, and we’re all wealthier than we think. According to Ottawa, the net worth of Canadian families grew a stunning 44.5% between 2005 and 2012 – a period which included a recession, market meltdown and spike in unemployment. Does this even pass the smell test?

Said one researcher: “This shows the middle class isn’t withering away. It shows Canadians have money to set aside for savings, so it’s not like they are living from paycheque to paycheque, which is the way a lot of the narrative surrounding the middle class has recently been framed.”

But this “money to set aside for savings” is not supported by any statistical evidence. The savings rate is negative in the province StatsCan says net worth has exploded the most (BC). RRSP contributions have withered and most TFSAs are unfunded. Household debt, as we know, is elephantine. So where is this 44.5% eruption in net worth?

Simple. It’s real estate. All of it. Financed with $1.34 trillion in mortgage debt, up from $864 billion in 2005. That, of course, if a 55% increase in borrowing, pretty much all of it made at the lowest interest rates in history – rates which absolutely will be rising long before the debt’s paid off.

Here are more reasons the StatsCan researchers are blowing smoke:

Real estate equity doesn’t exist until it’s realized. The gain is meaningless. It can’t be used to finance a retirement, send a kid to university or buy that desperately-needed Softail Fat Boy until the property is actually sold and turned into cash. All those BC millionaires living in ugly Vancouver Specials would have to bail and move someplace far cheaper in order to experience any real increase in net worth.

Besides, a surge in real estate equity is as subjective and fickle as house prices. If one place on your block sells for 15% below appraised value because of an ugly divorce, your house loses equity. To equate this with pension or investment assets means you probably earned your researcher designation on a Nigerian web site.

A housing correction (and it’s coming) will completely skewer the findings of this report. A 10% or 20% drop in property values would erase much of the net worth gain – but none of the 55% more debt which financed it. Every dollar in borrowing would remain. As mentioned, the bulk of that indebtedness will have to be repaid at rates in excess of today’s.

Romping real estate, bloated home ownership levels and exploding debt finance costs have had a major impact on personal finances. People are less diversified than ever, blowing their wad on houses. Survey after survey spits out alarming results: 42% say they’d be in financial trouble if they missed getting a paycheque by one week. More retired people than ever before have mortgages. A third say they’ll need to live on the crumbs CPP pays.

There’s nothing happy about this report. It proves the middle class is sinking deeper and deeper into debt, as wealth is concentrated in a single asset whose value has been pushed higher by cheap money and rank speculation. As we grow less diversified, paying absurd prices for a home, risk shoots higher.

Remember Beth’s comments. Already, as I reviewed yesterday, the tide is turning in so many communities. The era of the house is over.

Some people get it.

194 comments ↓

#1 Better Days on 02.26.14 at 8:31 pm

If anything, that StatsCan report is evidence of an enormous housing bubble. You can’t make “wealth” out of nothing.

#2 sheane wallace on 02.26.14 at 8:32 pm

I read that piece of crap (stats Canada) as well.

Thank you Garth for addressing it.

#3 Rainclouds on 02.26.14 at 8:34 pm

Assessments AND Prices dropping here. In spite of the spin…….

http://vancouverpricedrop.wordpress.com/2014/02/26/weekly-drop-suburbs-february-26-2014/

#4 blase on 02.26.14 at 8:36 pm

Garth, what are your spies in Ottawa telling you the CMHC announcement is about?

#5 mitzerboy on 02.26.14 at 8:37 pm

if you don’t listen and watch the main media. you can see this is happening in Saskatchewan now
….

#6 Barry in Pickering on 02.26.14 at 8:39 pm

“To me the bigger picture is that assets remain about seven times the size of debt.”

http://news.nationalpost.com/2014/02/25/canadian-families-are-getting-wealthier-statistics-canada-study-says-as-net-worth-rises-sharply-since-2005/

“Overall, total family assets in Canada rose to $9.4-trillion in 2012, with the *** value of families’ principal home representing one third of the total assets. **** Pension assets, including employer plans and private pension plans, made up 30 per cent of the total, while other real estate holdings — rental properties, cottages, timeshares and commercial properties — represent almost 10 per cent.”

Oh my! All we’ve heard on this site for the last 6 years is that the Canadians are hopelessly falling deeper into debt. Now some actual numbers come out, and a different picture emerges.
Not only are Canadians richer (much higher net worth than 6 years ago), but family principle home only represents 1/3 of their net worth.

Wait. That’s not what we’ve been hearing here. We were told that most of the net worth of Canadians is in their houses, which they should sell and buy a portfolio instead. It’s true that most of the rise in net worth is due to house price increases, but we have been told that it’s much worse than that, and that Canadians have been borrowing against these increases and falling deeper into debt in aggregate. These Stats Can numbers don’t back that up at all.

So, Garth if RealEstate falls by the 15% that you’re predicting, that means an average house will fall by 45K, and average net worth of home owning Canadians would fall by 45K. But, according to Stats Canada their average net worth is now 300K, so 45K of that would be a 15% drop in net worth. But their net worth has risen 45% since 2005, so how is that so terrible?

#7 Smoking Man on 02.26.14 at 8:42 pm

Ha pic of Richard Large

#8 Yeah man on 02.26.14 at 8:42 pm

But many don’t!

#9 Paul on 02.26.14 at 8:43 pm

Yes richer that you think in the last nine months 80% of the home owners I have spoken with owe more now than when they bought, some have been there for15 years and longer. A small sampling for sure but it’s getting to be the same old song. Not a good sign!

#10 Cici on 02.26.14 at 8:46 pm

Oh my God, that photo is such a blast…well worth tonight’s long wait. That guy’s gotta have Smoking Man blood!

Thanks for the nightcap Garth. You rock!

#11 just an observation on 02.26.14 at 8:46 pm

Numer Einz homies…..

#12 Luc on 02.26.14 at 8:48 pm

Transunion came out with a report
http://www.huffingtonpost.ca/2014/02/26/canadian-consumer-debt_n_4857460.html
That says Canadians will have a debt of $28,853 per person by the end of 2014 and that’s without mortgage debt !!!!!!

#13 Jimbo on 02.26.14 at 8:51 pm

Garth,

Any idea what the CMHC announcement on Friday is going to be about?

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2014/02/cmhc-announces-an-announcement.html

I hear it could be a corker. — Garth

#14 NetCentric on 02.26.14 at 8:52 pm

Normally I don’t subscribe to conspiracy theories but it is just a LITTLE convenient that this study came out right after Justin Trudeau launched a focus on the squeezing of the middle class.
See http://www.youtube.com/watch?v=t5Lt43E0wCI

#15 Hillbilly on 02.26.14 at 8:53 pm

Despite all the facts, figures, graphs and arguments to the contrary given on this blog since its inception, RE prices have not discontinued their upward trajectory.

The complicit actions of the government of Canada, the Bank of Canada, CMHC, CREA, etc. have, against any sane reasoning, inflated RE prices to ridiculous levels.

The Feds could have stopped this craze a long time ago, but didn’t.

Now it is out of control and they know it, but don’t know how to stop it without losing an election or causing a serious recession.

As long as that is the case, the mania shall continue.

#16 Mark Sui on 02.26.14 at 8:54 pm

In much of BC outside the main cities RE hangs on the market for years rather than months. In Haida Gwaii, for example, some houses have been on the market since 2008. Much of the land is not worth – and will never sell at – more than 10% of its current asking price (for example, $1,000,000 for a plot with no services or even road access). Asking prices stay in the stratosphere in the total absence of buyers – and sellers refuse offers at anything close to market value.

Do you have any thoughts as to when, or if, Canada will develop a free-market economy?

#17 JO on 02.26.14 at 8:55 pm

Being on the front lines of this, I can tell you that about one third of people are completely broke and most just do not know it. Subtract 30 % off your house value and calculate your net worth and that is the number you should count on. I do not want to buy but my significant other has waited 4 yrs and now wants the home. Looking in Mississauga and east Oakville but all I see is over priced garbage.
Georgetown looks like the new Milton and commute is too long..although there are some decent prices on new homes built by a reputable builder that should drop hard by the fall I expect.
Paydown your debts folks..2016-2020, one should plan for 5-6 % on renewal. Taxes/utilities all about 20-40 % higher.
JO

#18 notagreaterfool on 02.26.14 at 8:55 pm

Garth – what do your pals in Ottawa tell you about the chmc announcement coming on Friday?

They say, ‘big deal!’. — Garth

#19 Derek R on 02.26.14 at 8:55 pm

People are seriously ill-informed. Property isn’t wealth. It’s consumption. Property looks like wealth when you pay all the rent up front and when you get a rent refund after you vacate it. But it’s not.

#20 Keith on 02.26.14 at 8:58 pm

Seven years, and 44.5% total growth. Less than 5% per year in growth, compounded. Some rocket more likely a damp firecracker. Less than 5% including all savings, all debt repayment, all growth in real estate eguity, and all growth in investments, (okay there was the big recession). This pathetic blog is not as pathetic as this characterisation of the terrible performance of the net worth of Canadians. Many are doomed.

#21 Hillbilly on 02.26.14 at 9:00 pm

Canadians have over 13% of GDP in outstanding home equity lines of credit alone! Much of this has gone to fund consumption.

Oh, you didn’t think that maybe, just maybe the Feds saw this as a way to keep the economy going?

And, oh yeah, Americans had 7.9% of GDP in the same category when RE blew up there.

#22 johny on 02.26.14 at 9:00 pm

Foreclosures Surging in New York-New Jersey Market
what happened to the housing recover ??
http://www.bloomberg.com/news/2014-02-26/foreclosures-climaxing-in-new-york-new-jersey-market-mortgages.html

#23 nnso on 02.26.14 at 9:00 pm

How equity can be realized in many ways not only in the dollar for dollar sense.
A family with two children bought the home in the Maple in 2005 for 350000. Both working minimum wage one at Timmy and other one at the gas station. No post secondary education so no student loan. They are bringing around 30k a year combined. In order to have a middle class life style they borrow (haloc)30k a year from the bank. They have to borrow to pay the mortgage. After 7 years , they have borrowed 210K. In 2012 they bought the new built house in Bradford for 320k and sold the Maple house for 750K. Since both working in the service industry they found a work in Bradford. What a nice mobility and always living in the brand new house.

#24 Freedom First on 02.26.14 at 9:01 pm

Garth, the story of Beth and her hubby warms my heart. Another 2 people saved. Beautiful…..

Reading today’s post got to thinking about diversification. How I see being diversified. If I am diversified: every time someone makes a loan/mortgage payment I get paid, every time someone makes a utility payment, I get paid, every time interest rates go up I get paid more, every time someone fills their gas tank I get paid, every time anyone makes a rent payment for commercial or residential property I get paid, inflation goes up I get paid more, deflation kicks in it is buy cheap time. And, having the asset allocation %’s Garth has freely outlined, with proper re-balancing, a person remains like Beth an her hubby, balanced, diversified, liquid, debt free, and happily content. I always put Freedom First. Thank you for your help in keeping the noise of the insane out Garth so I don’t do anything financially insane, like having only one asset, and being in debt for it on top of that. Looks painful. Never been there. Emotional control is needed to stay out of fear and greed. I like the pic of the girl, and of Big Dick too, he looks nice and relaxed. Good for him.

#25 Observer on 02.26.14 at 9:01 pm

Who gets hurt by high house prices? All of us

http://blogs.telegraph.co.uk/news/neilobrien1/100052912/who-gets-hurt-by-high-house-prices-all-of-us/

#26 shawn on 02.26.14 at 9:04 pm

Goes Both Ways?

Real estate equity doesn’t exist until it’s realized.

****************************************
Does the same apply to real estate equity losses?

#27 pitfield on 02.26.14 at 9:05 pm

We all know its lie whether its Statscan or other agencies. The issue is we can’t do anything about it.
My bet is that single family homes in major centres retain value by becoming generational homes similar to other countries i.e. the mortgage will continually be paid by the next generation’s offsprings. The condo market outside of the core becomes slums.

#28 Dr.NickRiviera on 02.26.14 at 9:05 pm

Garth, can you dedicate one of your daily write-ups on the situation moving forward in Alberta? House prices in Edmonton really don’t appear to be declining. Is it actually different here? Are we immune to the coming correction? And if not, what sort of a drop do we have to look forward to here in Oil country? Thanks!

#29 urabigone on 02.26.14 at 9:07 pm

real assets like homes are not done becuz cheal money
will be around for a long long time…maybe forever
this is the ultimate bankers game to make fiat paper cash
as devalued as possible so it keeps up all the loans
and alows inflatikn to skyrocket…if u believe the stats
issues bythe govnt u are as dumb as Garth

#30 Victor V on 02.26.14 at 9:09 pm

#163 Old Man on 02.26.14 at 5:50 pm

There will be a major announcement tomorrow morning after 9:00 AM concerning a company in Ontario about employment. I have been involved somewhat in a modest way with a player who has the final details. Am not asking, so know nothing other than the fact that a huge corporation got hooped with an unknown law in Canada. Hope it works out for the best to all concerned.

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

http://www.theglobeandmail.com/report-on-business/international-business/us-business/anxious-heinz-workers-await-word-on-future-of-ontario-plant/article17111610/

#31 WTF(Where's Terry Fudge) on 02.26.14 at 9:13 pm

DELETED

#32 edmontonguyhere on 02.26.14 at 9:13 pm

Guess I should thank you too! You had been a little peemistic on housing, and I heard you talk. IN Jan 2008 we decided to list our 1950’s 1 1/2 story 4 bedroom house. We listed for $399,000. We sold within 48 hours at $400,000 even. We were happy as we had seen lots of empty houses on the market in the fall that we taken off the market and sent empty all winter (same thing that is happening again here in Edmonton). WE wanted to beat the spring rush of listings. We did. The average house price plunged as much as $150,000 in some neighbourhoods a few months after we sold. The average 5 year mortgage back then was 5.9% or so. ANd oil hit $147 a barrel-that was suppose to be good for ALberta-but we had so much consumer debt here no one could afford gas!
Now, almost 7 years later the average house selling price still has not reach that peak we saw here in edmonton in 2007, even though you can still easily find 3.9 % mortgage rates. And, in 2007, many houses needed new roofs & furnaces in addition to all new appliances & windows. Today many of the houses I look at are much cheaper, and have new roofs, windows & appliances to help them sell.
Glad I sold when I did, glad I got out, now we have thousands of empty condo & houses for sale on the market already in edmonton, many with new windows & roofs waiting a buyer, yet we’ve grown our consumer debt, in ALberta, since the great recession to unheard of levels, who’s left to buy?

#33 hohoho on 02.26.14 at 9:25 pm

$ 9.4T in assets for a population of 34 M, is an average of $ 276,470, for every man, woman and child. Wow we really are richer than we think LOL.

#34 KG on 02.26.14 at 9:25 pm

Vancouver residents experienced the biggest increase in consumer debt, hitting $41,077 at the end of last year, up seven per cent from $38,357 in 2012.
http://www.cbc.ca/news/canada/british-columbia/vancouver-ends-2013-with-highest-consumer-debt-in-canada-1.2552029

#35 frank le skank on 02.26.14 at 9:28 pm

All these surveys or reports are either completely false or at best partial truths. I think statscan knows the truth and yet decides to publish this blasphemy so that the Canadian economy can kick the canister for a few more months. I am always surprised to see the commitment that these organizations have to hiding the truth, which is in plain view anyway. The most disappointing part is that these organizations aren’t help accountable in any way. Even if real estate in Canada lost 99.9% of its value, no one would criticize the Canadian gov, banks, etc for not being able to recognize and mitigate the risk. I don’t get it, you can’t lose if you’re flogging real estate.

#36 Victor V on 02.26.14 at 9:29 pm

Interesting commentary on the Mortgage Trends website about what the CMHC announcement could include. Here are a couple of guesses:

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2014/02/cmhc-announces-an-announcement.html

However, because of the pre-announcement of the pending announcement news release, I’d tend to think it’ll be major. My “money” would be on increasing the down payment required for CMHC (or Genworth/Canada Guaranty) insured mortgages from the current 5% to 10%.

Alternatively, my “second” guess would be increasing the amount at which mortgage default insurance would be required from the current less than 20% down to less than 30% down.

I don’t think it’ll be a relatively small announcement, like the government reducing the “cap” on insured mortgages.

#37 Big Sexy on 02.26.14 at 9:29 pm

Garth,
A year ago you suggested locking 10yrs at 3.69%.

With the bond market pseudo-rally going on now, would you counsel to go variable or 10 yr fixed?
(Rates at 4.38% according to ratehub).

I qualify and have lots of left-over cash flow for a var mortgage, but wondering if $100/mo more payment with a fixed is worth it.

Thanks

Inb4 “stay liquid” “don’t do it” etc

#38 Victor V on 02.26.14 at 9:40 pm

Royal Bank chief Gord Nixon says consumer lending slowing is ‘a good thing’

http://business.financialpost.com/2014/02/26/royal-bank-chief-gord-nixon-says-consumer-lending-slowing-is-a-good-thing/

During his 13-year stint as chief executive of Royal Bank of Canada, Gord Nixon has been one of Bay Street’s most outspoken and respected business leaders. On Wednesday Mr. Nixon, who is 57, delivered his final address to shareholders at the annual meeting in Toronto, using the opportunity to lay out the achievements of the country’s biggest bank and to thank his co-workers…

…Speaking to journalists following the annual meeting, Mr. Nixon said he believes lending to individual customers is “slowing down which I think is a good thing” because recent high growth rates are “not sustainable.”

…If Royal Bank and its peers have been enjoying good times, that has a lot to do with steadily rising consumer borrowing, mostly related to mortgages. The housing market has been on a tear for more than a decade, especially since 2009, but Canadian households are carrying so much debt that even commentators like the International Monetary Fund are warning that the party needs to stop.

#39 the jaguar on 02.26.14 at 9:45 pm

When you live on the prairies you can sometimes look off in the horizon and at a great distance observe the storm gathering….Black or purple sky, headed your way. You know it ain’t good. It feels a lot like that now.
Garth is right about what’s headed our way. It seems it might not just be about the price of homes.
The US wants to destabilize Russia so they can build an oil & gas pipeline across Syria in order to supply Europe with fuel. When in doubt follow the money trail. Every day a new story in the newspapers about the detrimental affect the oil sands is having on the environment and human health. Now scientists in our own country have confirmed tailing ponds are leaching bad chemicals into the Athabasca River. (bye bye Keystone XL).
Bitcoin collapse, lower consumer spending over the holiday season. Numerous personal anecdotes on the blog from people who know their local market and tell us things are not as they seem (despite the ramblings of the real estate cartel).
A price tag of 750,000 for a Joe Average house in the outer burbs in most parts of the country doesn’t register for what it really represents, which is ‘THREE QUARTERS OF A MILLION DOLLARS”. Joe Average hasn’t tuned in to the fact that his wages haven’t caught up with that number. Guess he got caught like a deer in the headlights from the blinding light coming off his sparkling granite countertops.
All this relentless, mindless consumption is about to catch up with those who drive without looking in the rear view mirror. Environment Canada won’t be sounding any weather alerts for what’s coming. People will have to use all their smarts and experience to navigate to a safe landing.

#40 Van Isle Renter on 02.26.14 at 9:47 pm

#26 shawn on 02.26.14 at 9:04 pm
Goes Both Ways?

Real estate equity doesn’t exist until it’s realized.

****************************************
Does the same apply to real estate equity losses?

++++++++++++++++++++++++++++++++++

Yes and no. The difference is that when you’re up, you get to decide when to get out of the game. When you’re down, the Bank usually makes that decision for you. And you have to live with the stress of knowing the Bank will likely make it at the most inconvenient time for you.

Just make sure you pay it all off in full, though, I want my Bank dividends to keep rolling in!

#41 Tiger on 02.26.14 at 9:47 pm

#32 Edmontonguyhere!
Well of course the guy to the left will buy it, I ment the lamb on the left will buy it:)

#42 eat pie on 02.26.14 at 9:49 pm

Must have been one heck of a condo if the investment can pay for a left coast monthly rent!

#43 Aggregator on 02.26.14 at 9:49 pm

#36 Victor V

Any idea what the CMHC announcement on Friday is going to be about?

It won't have nothing to do with tightening mortgage insurance as the budget explicitly stated any revisions to CMHC's role would not affect affordability. My bet is:

1) some sort of new alphabet soup named funding vehicle for private sector investors, whether for mortgage insurance or CMHC funding

2) data or transparency related. As they say, the best way to hide something is in plain sight

An odd announcement prior to releasing their annual report implies this announcement is more related to CMHC's operations, not the market.

#44 Spiltbongwater on 02.26.14 at 9:50 pm

How does the womens investments rise stedily, yet Garth claims she lives rent free? Are the investments not paying the rent? Are the investments returning so much that it is paying the rent and the investments can still rise stedily?

As stated, with investment income paying rent, employment income can augment the portfolio. — Garth

#45 Ontario's Left Coast on 02.26.14 at 9:50 pm

I’m completely with you calling foul on that whale of a tale, Garth. I know a number of responsible people with good incomes who have gone slightly into the red just to pay their home heating bills this winter! To the heavily indebted, that breathless, gushing mess of a ‘story’ was nothing more than a pat on the head and a sippy cup full of ‘Just keep spending.’ Doesn’t bode well for an already recklessly careening herd.

#46 Julie on 02.26.14 at 9:50 pm

I get that real estate isn’t always the right answer, but sometimes, it is. We bought a new infill house in midtown Toronto for $700,000. We sold it 7 years later for $1.4M. We then bought a lovely but older home in the same neighbourhood, bigger lot and better location, for $1M, mortgage free. Our house increased in value more than our investments did in that time frame and I doubt we’d own a home mortgage free if we hadn’t bought that first house. That being said, we took a loss on our previous house in a different city. But like with the markets, sometimes you get lucky with real estate!

Now yon have $1 million, earning nothing? — Garth

#47 Matt on 02.26.14 at 9:51 pm

I saw that guy in that shirt on the street here in Sydney a couple of weeks ago!

#48 Victor V on 02.26.14 at 9:53 pm

http://business.financialpost.com/2014/02/26/job-cuts-at-ibm-canadas-operations-expected-as-part-of-ceos-mission-to-offset-falling-revenue/

Workers at International Business Machine’s Canadian operations are expected to receive notice today of job cuts, according to an internal employee group.

The group, [email protected], said the company has already begun eliminating positions this year in Europe, Asia and South America, but Canadian and U.S. workers will soon receive notice of cuts as well.

The job cuts will mark the first time the employee count at IBM has dropped in a decade as the world’s biggest computer-services company reined in costs to help meet profit goals.

#49 Notta Sheeple on 02.26.14 at 10:09 pm

“…..The era of the house is over……”
=========================

Hardly.

I remember the 80’s when repo’ed homeowners where doing midnight moves, leaving their bathtubs running as a gift to the bankers the next day.

Those that weren’t waterlogged could be had for song.

That day is coming again soon. When greed and mass deception are involved, history always repeats itself. All that’s needed is a flashpoint.

#50 economictsunami on 02.26.14 at 10:16 pm

With the statement by the “researcher’ one has to wonder in amazement whether they understand correlation/ causation.

Narratives are constantly bombarding the MSM. Then HFT feeds off of the slanted headlines they themselves may have helped generate; paying handsomely for access to a pre- peak- a-boo from news wires post.

Warren Buffet no less has put a stop to this practice from agencies he owns and questions the market efficacy of their usefulness in ‘efficient’ running of various markets.

Speaking of narratives…

The Housing Recovery Myth In New York And New Jersey Ends With A Bang As Foreclosures Surge…

“Of the 54 million homeowners with mortgages — the primary repeat buyer cohort and a primary builder demand cohort — over 22 million are dead to the housing market. Of the 70 million homeowners — mortgage’d and free and clear — 33 million are Zombies. Thus, we can’t expect housing to act like it has in the past. With so many Zombies it will be impossible for repeat and new home sales to perform as expected. The past 18 month bounce — especially on prices — has been on cheap and easy money from investors looking for a dividend stock and/or Treasury replacement trade. some foreigners following their lead, and finally the ‘dumb money’ (retail) chasing into this summer.

But we are running out of greater fools very quickly, especially with first-timers sidelined and new-era “investors” who are quickly pricing themselves out of markets nationwide.”

http://tinyurl.com/olxfezg

#51 Ray Skunk on 02.26.14 at 10:18 pm

“We bought a new infill house in midtown Toronto for $700,000. We sold it 7 years later for $1.4M. We then bought a lovely but older home in the same neighbourhood, bigger lot and better location, for $1M,”
————————————-

So… you sold a smaller lot -then bought a bigger lot (more expensive), in a better location (more expensive), in the same neighbourhood (same market) for 2/3rds the cost of the smaller lot? Hmm.

After a relatively peaceful few weeks on the d**k-swinging front, here we go again.

Now where’s those 25-year-olds making $900k a year…

Eh?

#52 T on 02.26.14 at 10:20 pm

And of course if Stats Canada reported to contrary this blog would be rife with “see I told you so”.

#53 The Choir on 02.26.14 at 10:23 pm

“You’re more out of tune than you think”

God help us, this choir can’t even carry a tune.

#54 KommyKim on 02.26.14 at 10:24 pm

RE: #16 Mark Sui on 02.26.14 at 8:54 pm
In much of BC outside the main cities RE hangs on the market for years rather than months. In Haida Gwaii, for example, some houses have been on the market since 2008

Haida Gwaii? Really? Your going to use that as a typical BC rural market example?

#55 zee on 02.26.14 at 10:29 pm

hi Garth,

What do you think CMHC could be announcing. I have a feeling the news will not be material to the current housing market.

#56 pinstripe on 02.26.14 at 10:29 pm

I have posted many times about the reality on the street and yet those posts were not posted by the moderator.

The housing market decline and degrading of the middle class is a myth.

There is a lot of money floating around linked with a lot of good paying jobs around.

Many people are retiring with several million dollars in liquid assets.

Anyone who is holding back on buying a house waiting for a decline in price is a FOOL.

Interest rates will be LOW for a long time.

All the noise is Dirty Politics at play.

#57 Carl on 02.26.14 at 10:29 pm

I’ll say it again, prices and sales in the Toronto core are starting to plummet. There is nothing but cesspools in Leslieville moving right now, and even they are under asking.

#58 Julie on 02.26.14 at 10:43 pm

#46 – Garth, can’t home ownership be part of a diverse portfolio? Also, the house has increased in value around 20% so is it correct to say it’s earning nothing? We have as much in investments as the value of the house. While we do discuss renting at times, given our 3 children and pets, a decent rental house in our current neighbourhood would eat up what the $1M would bring in so it doesn’t seem like renting makes sense at this point. Perhaps once the kids begin leaving the nest – although I hear they don’t leave so quickly anymore! Are there any circumstances under which you think home ownership makes financial sense?

I was not suggesting renting. — Garth

#59 AB Boxster on 02.26.14 at 10:44 pm

#16 Mark Sui

I agree with your comments.
I have seen a property on a Gulf Island for sale for the past 3+ years.
Nice property but not worth the over 1 million asking price.
Price never gets reduced, it just gets rotated around various realtors.

Even if the BC assessed values equals listing price, if its not selling its priced too high. I don’t understand why people don’t get this.
Having a property perpetually for sale makes no sense to me if price is not one of the sales variables.

#60 Infused with Opiates on 02.26.14 at 10:44 pm

169 Linda – please re-read your post. You stated
nothing about wealth, only income (two times at that).

#61 will on 02.26.14 at 10:46 pm

Real estate equity doesn’t exist until it’s realized.

Exactly. Just when do these “investors” plan on realizing their gains? Ever? I think people are mixing up their language if they in truth love their shacks and have no intention of ever selling yet feel compelled to call the shack an investment. No one wants to appear to be stupid and the de rigueur thing these days is to appear to be RE savvy. So some greater fool buys a shack and the appraisal apparently goes up and he claims “Hey! I was right! You should listen to ME!” It’s all so very very sad. Thanks for everything Garth.

BTW, read an interesting quote the other day:

“The world is divided into three kinds of people: A very small group that makes things happen; a somewhat larger group that watches things happen; and a great multitude that never knows what has happened.” — Nicholas Murray Butler

#62 Cheep cheep on 02.26.14 at 10:47 pm

If you read between the lines, this Stats Can report is just more government posturing. 30% of this supposed net worth is in real estate (only accessible if you sell), another 30% in pension assets (which less than 40% of employees are covered by – mostly teachers and other government workers) and another 10% in more real estate. That only leaves 30% for all other assets – savings, investments, RRSPs, TFSAs, not to mention cars, jewellery, antiques etc. etc. At the same time, Stats Cans own website shows that the median income for Canadian families is less than $80,000.
Real estate is only worth something if you can live in it and afford to pay it off quickly. Or if you own REITs of course. I’m in Calgary and even here, the appraised value of my condo went down this year (as did my taxes). Semis in this very desirable neighbourhood have been on the market for over a year. SFHs moving slowly.
When I arrived here in 2006, you couldn’t buy a bathroom for less than $200k. Now I see lots of condos for sale for 130k.
And it makes no sense to quote from the past – I bought my first SFH for $40k and sold less than 5 years later for $94k. Just right timing and I’ve never seen gains like that again. We’ve hit a plateau with real estate in all metro areas in Canada. Prices will not keep going up across the board.
Thanks for all the great advice, Garth. I’ve been steadily growing my investment portfolio and will never have to worry about having to sell my home to finance my looming retirement. My fellow boomers have a lot to fear from the future.

#63 Tom from Mississauga on 02.26.14 at 10:50 pm

If BC families are so wealthy why did they blow up the government to stop HST? Probably because that wealth doesn’t pay dividends or interest but does include a utility bill.

#64 Ole Doberman on 02.26.14 at 10:54 pm

Garth do you think gold will pop when Putin invades Ukraine?

#65 DR on 02.26.14 at 10:57 pm

Carl on 02.26.14 at 10:29 pm
I’ll say it again, prices and sales in the Toronto core are starting to plummet. There is nothing but cesspools in Leslieville moving right now, and even they are under asking

oh maybe you’re talking about the Community housing ones. they’re all selling over asking.
and all crap.
Anything with new(ish) paint is over asking.

Prices through the roof. But can you explain your under asking comment?

#66 Happy Renting on 02.26.14 at 10:59 pm

“Now, I don’t include her words just to make me feel good”

Go ahead, they should make you feel good and you deserve it. You’re educating people and changing lives (and putting up with some, ah, less gracious commenters and correspondence.)

I had to Google Softail Fat Boy. See? Educating and changing lives. :)

#67 Julie on 02.26.14 at 11:02 pm

#51 – Absolutely! The lot is only 4 feet wider and we sold a larger new infill house and bought a smaller, older home. We downsized the house – happens all the time!

#68 Babblemaster on 02.26.14 at 11:04 pm

A housing correction (and it’s coming) will completely skewer the findings of this report. – Garth

——————————————————–

The predictions of a housing correction will continue to be premature until rates rise significantly. And interest rates aren’t rising (significantly) for a long, long time.

Did you miss yesterday’s post? — Garth

#69 Cyclist on 02.26.14 at 11:04 pm

The young lady would look great in spandex with those legs. Big Dick, not so much

#70 Chickenlittle on 02.26.14 at 11:15 pm

#51 Ray Skunk:

I love those 25 year olds making 900k a year, too. They went to the same college/ university as everyone else, drank the same water and ate the same food but they hit the jackpot somehow. Oh no WAIT! They just aren’t as lazy as the rest of us are! How silly of me…

Garth, MY income rose this year. I got a 50 cent raise last month. I am not joking. 2 years and 10 k for college and now I’m pulling in just under $14 an hour.

So….should I buy now or wait for the correction? With my income I should be able to afford this nice garden shed I saw at Canadian Tire last week.

#71 45north on 02.26.14 at 11:17 pm

nnso : A family with two children bought a house in Maple in 2005 for 350000. Both working minimum wage one at Timmy and other one at the gas station. They are bringing around 30k a year combined. In order to have a middle class life style they borrow (heloc) 30k a year from the bank. They borrow to pay the mortgage. After 7 years , they have borrowed 210K. In 2012 they bought the new built house in Bradford for 320k and sold the Maple house for 750K.

the thing about being lucky is knowing when to quit

#72 devore on 02.26.14 at 11:17 pm

Real estate equity doesn’t exist until it’s realized. The gain is meaningless. It can’t be used to finance a retirement, send a kid to university or buy that desperately-needed Softail Fat Boy until the property is actually sold and turned into cash.

A lot of people pointing out rising net worth (rising, but not as quickly as mortgage debt), are also conveniently ignoring the existence of lines of credit. While a simple look tells us Canadians, in aggregate, are 60% mortgage free, HELOCs have been growing on pace with mortgages.

Bank of Canada research concluded most of home equity extraction went to consumption and home renovations, with about 20% going to debt repayment (ie credit cards) and the remainder to investments, a very significant portion of which was non-financial (ie buying more RE, financing a business venture).

If you only look at mortgages, you’re missing half the picture.

#73 Ken mo on 02.26.14 at 11:19 pm

#55

Haida gwaii…. Properly known as the queen charlottes…. No wonder property is still on the market.

With the question of native land claims and the propensity of white guilt giving everything away and renaming everything on a First Nations whim it’s no wonder nobody is buying.

#74 Drew on 02.26.14 at 11:22 pm

So that photo is of a bloke who lives in Sydney. The Australian Sydney, the one which also has the Vancouver-esque housing bubble. His t-shirt messages relate to Australian TV journalists. The “Big Dick” was journalist Richard Carleton who had just switched networks.

No I don’t know why he wears them either.

#75 Smoking Man on 02.26.14 at 11:25 pm

Disappointing

No creative people on the blog..

You’re_________ than you think.

Can no one come up with something to fill in the blanks

Turner Nation?

I can but porns not allowed..

#76 Fin on 02.26.14 at 11:26 pm

I am planning on selling my primary residence and will pocket about $450K. I have another $400K in RRSP. My plan is to invest the $450K in relatively safe vehicles that produce a good dividend. I am looking at rent of about $2K per month for the next 2 years or so. With $450K invested I should easily have my rent covered by the dividends. Question – do I keep the entire amount in non-registered accounts? Is that the best way to minimize tax on the dividends?

#77 My thoughts on 02.26.14 at 11:29 pm

I see houses I thought had sold being relisted now. Relisted typically for higher dollar amounts but some are lower. Lots of the same houses from last year. Agents posting every deal on social media… Trying to brag or drum up new business. Buyers are generally more savvy now except in toronto…

#78 45north on 02.26.14 at 11:33 pm

notta sheeple : I remember the 80′s when repo’ed homeowners where doing midnight moves, leaving their bathtubs running as a gift to the bankers the next day.

my plan would be give every family who lost their house $1000 a month for a year. After they lost it and provided they acted in good faith.

#79 Thom in Etobicoke on 02.26.14 at 11:33 pm

THIS GUY GETS IT: Leslieville is a dump. The neighbourhood is iffy, and always has been for a reason. It has a giant, dirty elevated highway running down one side, a smelly major urban waste treatment plan on the other and because of low property values has been populated by people in a lower economic bracket.

#80 Capital One on 02.26.14 at 11:44 pm

#40 Van Isle Renter on 02.26.14 at 9:47 pm
#26 shawn on 02.26.14 at 9:04 pm
Goes Both Ways?

Real estate equity doesn’t exist until it’s realized.

****************************************
Does the same apply to real estate equity losses?

++++++++++++++++++++++++++++++++++

Yes and no. The difference is that when you’re up, you get to decide when to get out of the game. When you’re down, the Bank usually makes that decision for you. And you have to live with the stress of knowing the Bank will likely make it at the most inconvenient time for you.

Just make sure you pay it all off in full, though, I want my Bank dividends to keep rolling in!

———————-

Agreed – yes and no. If you’re in a city or town with one major employer/industry that starts laying people off. You could be forced to sell when house prices are very low. It doesn’t really matter what they were in the peak if you have to sell in the trough.

#81 Who knows? on 02.26.14 at 11:46 pm

As yesterday’s epistle stated, some Canadian RE markets have falling prices, others rising prices.

Generally, RE prices will fall as interest rates rise – but, judging by the record of this pathetic blog, nobody seems to know just when and by exactly how much.

Alternatively, if balanced portfolios guaranteed to return 7% or more a lot more money would move out of RE into such investments than currently.

I predict, with a high degree of confidence, that the sun will rise in the east tomorrow … and that it will be cold in Toronto. Enjoy.

Alwyn

#82 Counterpoint on 02.26.14 at 11:48 pm

There appears to be a full-on media blitz against the Statscan study reported by the National Post. It is probably fair comment to say that gloom and doom sells papers. However, it is very difficult to argue that life has improved drastically for middle income people, especially for people under the age of 30.

http://www2.macleans.ca/2014/02/26/who-belongs-to-canadas-middle-class/

http://www.cbc.ca/news/canada/canada-s-middle-class-mortgaging-its-future-with-debt-1.2548633

http://www.thestar.com/news/canada/2014/02/23/conservative_report_calls_middleclass_dreams_a_myth.html

#83 Smoking Man on 02.26.14 at 11:49 pm

All the analytics, predictions, insite, by 1% of the audience.

Showing there hand, selling a belief, not afraid.

I like that, even though 90% of you are wrong, it don’t matter.

I had something to say.. I commend that.

The peeping Tom’s who venture here but leave no trace….

Sad…. School has done a number on you…. Fear….

Frightened of a negative comment, don’t want to be the fat kid in class staring out the window dreaming about a
burger… Fries with gravey.

Cowards!!!!!!!!

#84 Longterm on 02.26.14 at 11:49 pm

If you are still holding too much real estate, then sell into this spring market. It’s hot in some places and it could be the last good chance to cash out before this gas bag ruptures.

After holding on through the aftermath of 2008, I just sold a revenue property that I bought in 2002 in Alberta for $35k over asking. One day of viewing, 20+ viewers and four offers that turned into a three-way bidding war. Another one I own is hitting the market in two weeks and hopefully it will go the same way. That will reduce my real estate to one primary residence on 5 and a half acres and a bit of commercial. The cash will be a nice addition to my liquid portfolio and the investment income will be taxed much lower than the rental income.

Here’s Joe average investor mentality for you. When I bought this property in 2002 it was 43% of the price I just accepted. Or in other words I just sold it for 2.33X what I paid for it. In 2002, it was yielding 12% and mine was the only offer after months on the market. I bought it for 15% down, which was itself borrowed money, so really I bought it for 0% down. Rental housing was so hated as an asset class that nobody wanted to touch it. Now 12 years later, the gross yield [before expenses] is 7% at maximum market rents or 4.5-5% net if you paid cash, or close to zero if mortgaged at 90%.

Interest rates are at historic lows, the long term fundamentals for rents and capital gains are terrible and the year on year numbers don’t remotely stack up. Yet there was a queue of money wielding buyers desperate to fight each other for it.

The herd loves to love what everyone else wants and loves to hate what everyone else hates. Do the opposite and you will prosper as an investor.

Liquid is so lovely and comes without the leaking pipes.

#85 TurnerNation on 02.26.14 at 11:50 pm

TLT.US continuing its basing strength of late. Things that make you go …
Dollarama said bye to the 80 level today. Good old Bain Capital: f___ing smart as they might say.

#86 Fleabitten Monkey on 02.26.14 at 11:52 pm

And the TransUnion study predicts that Canada is on the way to record personal debt in 2014 after making a small dent in 2013…..but with Vancouver, guess what?!… up 7% over 2012. I’m shocked, LOL

#87 45north on 02.26.14 at 11:57 pm

chickenlittle : With my income I should be able to afford this nice garden shed I saw at Canadian Tire last week.

I bought a garden shed to replace an old one:

http://www.rona.ca/en/garden-shed-04585002–1

I bought it at the end of season, on sale: $150

since I had to move the old one, it was the best time to repair the fence and retaining wall. Total cost $150 + $1000 = $1150

#88 DocInWaitingRoom on 02.27.14 at 12:04 am

A perfect storm is slowly brewing… banks lending less
Cmhc is going to go back to wwii origins.

Considering cuts of 2 billion and government intervention last week I am not surprised
http://m.mortgagebrokernews.ca/news/cmhc-cutbacks-announced-176507.aspx?p=2

Guess the announcement?

My guess is 10% down payments, hopefully more

#89 KommyKim on 02.27.14 at 12:09 am

RE: #75 Smoking Man on 02.26.14 at 11:25 pm
Disappointing
No creative people on the blog..
You’re_________ than you think.

Well, considering the pic of the old guy with the T-shirt… Maybe:

You’re smaller than you think.

#90 young & foolish on 02.27.14 at 12:20 am

The real question revolves around value. What will be value able 10 years from now? Will fiat money be worth less? Will equities outpace inflation? Will RE be sought after in your town?

#91 takla on 02.27.14 at 12:36 am

where are these greater fools math/addition skills .In our nabourhood property values have dropped approx 25 % from peak.Upper middle class homes,3000 sq ft ,2 level they average 8 yrs old.5000.00 per yr property tax,s and over 350.00 per month to heat.Add in a 100.00 cable bill and your average monthly cost starts to get up there{1000 per month}.Landlords had to have the furnace repair dude in twice the last few months and now with the last cold spell the plumber for frozen pipes $$$.Side walks have settled and cracked and the treated wood steps to access the patio have already started to rot and need replaceing.Roof will be next.These cost are every month and BEFORE the morgage payment!Being former home owners since 1983 i dont miss it at all!!Lets hope they tighten lending rules some more to start to put an end to this insanity

#92 Buddist on 02.27.14 at 12:44 am

But Garth, BC is different… it has a $7 Billion a year grow-op industry. It’s not a wonder the average house costs $1M, when a small grow-op brings in $120K/yr tax free. How many BC politicians do you think want to curb this, when they have ridden the wave on their property values climbing exponentially?

#93 Inglorious Investor on 02.27.14 at 12:51 am

As Homer Simpson once said during an interview with Kent Brockman: “People can come up with statistics to prove anything, Kent. Forty percent of all people know that.”

As per the Stats Can report, Doug Porter says that Canadians only hold about one third of their net worth in their primary residences. This sounds pretty good right? He arrives at this figure because the total value of primary residences is (in 2012) $3.25 trillion. While total assets are $9.4 trillion.

However, this is based on national TOTALs. In other words, these numbers are virtually meaningless. Like all stats you have to drill into the numbers to get a better idea of a specific reality.

For example, if we look at the median figures, we see that the median value of primary residences is $300,000. The median value of total assets is $371,300. So, if we use median figures rather than total figures, principle residences represent about 81 percent of assets, not the more impressive one third.

Furthermore, median pension assets and other financial assets (stocks, bonds, savings, TFSAs, etc) add up to $126,600. So if you take homes, pensions and financial assets (the three asset types common to most middle-class people), homes represent about 70 percent of total assets.

There are several ways to look at the numbers to get the results you want, both positive and negative. That’s why there are “lies, damn lies and statistics.” And like most information, by the time the report got distilled into a sound-bite for public consumption, it had no real value. Except as a tool for propaganda and as a way to encourage spending.

Are YOU actually richer than you think? You have to drill into you OWN personal ‘statistics’ to really determine that.

#94 Son of Ponzi on 02.27.14 at 1:16 am

As stated, with investment income paying rent, employment income can augment the portfolio. — Garth
—————
Only Garth can use the verb “augment” without sounding pompous.

#95 Barry in Pickering on 02.27.14 at 1:47 am

Of course the statsCan survey isn’t good news to the readers of this blog. Because it points out that there has been a huge gain in net worth of AVERAGE Canadians, but much of this is from house appreciation.

But most of the people on this blog never saw the house price rise coming, so have missed out on this 45% gain. So go for it, buy $5K of a TFSA, and get rich on the tax free yield it kicks off – $400 per year if you’re lucky enough to get 8%.

And keep kidding yourself that its the people that bought a house 7 years ago, at 45% below what they’re selling for now are the ‘greater fools’.

#96 LS in Arbutus on 02.27.14 at 1:57 am

#76 Fin – you have almost $1 million and you’re going to manage it yourself?! OMG, get a fee based adviser, like, for example, Garth.

That’s way too much to manage yourself unless you know what you’re doing…. and if you’re asking on here, you don’t.

#97 Carpe Diem on 02.27.14 at 2:09 am

#82 Smoking Man

OK I’ll leave a comment.

So with the devaluation of the loonie. In USD, did Canadians just lose 10% of net worth in the last year?

I sure like my US investments … they surged compared to people’s homes!

I’m sure the Stats Can report was relative to CAD.

I have made money on RE in the past (in Vancouver) but you got to know when to hold them, know when to fold them …

I made a good amount between 2005-2008 in Vancouver in RE. Between 2008-2010 in Ottawa RE sucked. After selling that suburban castle in 2010 to now, the stock market (within a diversified portfolio) … rocks!!!

My friends in Vancouver have been trying to sell for the last year. They are still listen to the broker and not me.

Good luck!

Carpe

#98 Smartalox on 02.27.14 at 2:47 am

@ counterpoint #81:

You don’t get it do you? There are TWO reports there, one created by a ministry of the Harper government, saying that Canada’s middle classes are mortgaging their futures to buy real estate. This report was petitioned by the Canadian Press under access to information legislation and the story timed to coincide with the Liberal convention and it’s targeting Canada’s middle class.

Not to be outshone by its own report, the Harper government released that stinker of a stats can report, contradicting its own experts, and further beggaring StatsCan’s once good name.

The transaction union came along though, with its report about Canadians surging debt levels, so the score is:

Canadians up to their eyeballs in debt: 2
Canadians richer than they think: 1

#99 unknown on 02.27.14 at 2:51 am

You’re_cockier_ than you think.

#100 angela on 02.27.14 at 2:57 am

This brings us to an amazingly weird piece of work just published by StatsCan and slathered over by the boys in the mainstream media…………………Canadian families grew a stunning 44.5% between 2005 and 2012 – a period which included a recession, market meltdown and spike in unemployment. Does this even pass the smell test? ~Garth~
so you saying StatsCan is lying ?funny when its US housing stats they are telling the truth? i thought you didn’t subscribe to conspiracy theories

#101 World According To Garth on 02.27.14 at 2:58 am

Todays blog…….sigh

And you friggin govt trolls wonder why I continue to call you useless. Not only are you vampires stealing everyone’s money, you lie through your ass in the media doing it. Shame on you !!!

#102 BluePelicanShoes on 02.27.14 at 3:14 am

Homeowners aren’t ‘sinking deeper into debt’. $9.3T in total assets and $1.4T in total debt is not sinking at all. Seriously. You guys are funny.

#103 CMHC announcement on 02.27.14 at 5:25 am

Garth you have any dirt on the CMHC announcement speculated to be announced on Friday.

http://whispersfromtheedgeoftherainforest.blogspot.ca/

#104 blase on 02.27.14 at 5:50 am

Smoking Man, found some old footage of you. http://www.liveleak.com/view?i=3da_1278122652

#105 Buy? Curious? on 02.27.14 at 6:07 am

Garth, people can sense the doom that is about to come down like a bag of hammers. There has been no recovery since the Crash of 2008. Any recovery that you talked about “Buy US, sell Canada, Facebook at $22, Justin Bieber and Selena Gomez will happyily ever after,” was just an extended dead cat bounce. Why? Because nothing has changed except gov’t bailouts and fantastic PR. Go get yourself some timbits, show your Canadada pride.

That being said, would you say that it’s a good time to buy a condo?

And a follow up question to my previous question: Who coming over to my hot tub later on?

http://www.youtube.com/watch?v=18gElAzSL4E

#106 Hillbilly on 02.27.14 at 6:37 am

comment # 46 Julie

Do you really think that it is normal for a house to double in value in 7 years?

Really?

Ask yourself;

1) Did the average wage double in that time in your locale?

2) When you bought the house, did you plan on or even think that it could double in 7 years?

No, you happened to buy just as housing prices escalated due to wildly relaxed lending criteria further boosted by dramatically declining interest rates.

In other words, you were lucky to have bought just as abnormal conditions ( very doubtfully to be repeated in your lifetime) kicked in to provide your gain.

Those days are over and Mr. Turner is trying to tell people that one cannot count on these kind of gains in the future and that a balanced and liquid portfolio over is a far more consistent and reliable way to grow wealth over time.

History bears out the truth in his strategy.

#107 Hillbilly on 02.27.14 at 6:53 am

comment # 72 Devore

Canadians lines of credit against their homes are over 13 % of GDP according to the Bank Credit Analyst. They also reflect your note about how that money was spent / used.

The US reached 7.9 % of GDP for the same metric at the very peak .

Naw…… no debt problems in Canada / sarc.

#108 led on 02.27.14 at 7:20 am

Is inflation (money printing) the answer at this point? everyone I know has huge debt. what would Keynes do? what should F do?
-raise interest rates to stop any further home price increases
– increase the money supply so that we can afford to pay back our mortgages.

#109 PJ on 02.27.14 at 7:34 am

Real estate was slow for about a year in the Ottawa region but now it’s running full steam for some reason.

#110 Dean Mason on 02.27.14 at 9:00 am

To Big Sexy #37

First Calgary Financial has 4.19% 10 year fixed rate closed mortgage rates.

Depending on the size of your mortgage balance and if you amortize over 25 years, the first 10 years it could save between $25 to 50 a month.

Manulife Bank, Manulife Trust, Scotia Bank and Alterna Savings Credit Union, Alterna Bank all have 4.39%, 10 year fixed rate closed mortgage rates.

#111 maxx on 02.27.14 at 9:02 am

One of your best Garth.

That report is more like advertising for the purpose of social engineering and less like a reasoned, verifiable summary. A statistical lollipop to keep the willfully blind calm and placated. Gotta keep that “wealth effect” going.

#112 maxx on 02.27.14 at 9:04 am

Finger on the pulse from yesterday:

Me to a realtor: “The market certainly is not what it was, is it. Prices are decidedly coming down. Do you find that in general, sellers are delusional?”

Realtor: “That’s true and yes, I do. But this property has a lot of potential!”

Me: “I’ve heard that remark from other RE agents and it irritates me, because the “potential” doesn’t belong to the seller, it belongs to the buyer. The buyer will be putting time and money into developing the “potential”, not the seller.

Realtor (sheepishly laughing): “You’re right.”

“Potential”. Hoodwink jargon…..like the “wealth effect”, it is an unrealized gain.

#113 Sean on 02.27.14 at 9:08 am

One glaring part of that statscan report (to me at least) is the part about how 20% of the population holds almost 70% of the wealth! That would say that the avg net worth # is totally skewed. That would mean 80% of the population only holds around 30% of the net worth. Does that alone not point out a huge problem?

#114 Castaway on 02.27.14 at 9:10 am

#104 Buy? Curious? on 02.27.14 at 6:07 am
Garth, people can sense the doom that is about to come down like a bag of hammers. There has been no recovery since the Crash of 2008. Any recovery that you talked about “Buy US, sell Canada, Facebook at $22, Justin Bieber and Selena Gomez will happyily ever after,” was just an extended dead cat bounce
—————————————————————
S&P up 30% in 2013 and 230% since 2009. Yup, a 5 year dead cat bounce! Good call. Oh, and FB has moved off $22 just a bit. You might want to check it.

#115 LP on 02.27.14 at 9:15 am

#73 Ken mo on 02.26.14 at 11:19 pm

With the question of native land claims and the propensity of white guilt giving everything away and renaming everything on a First Nations whim it’s no wonder nobody is buying.
********************************
No white guilt at all, except for usurping native land in the first instance and then having the gall to name it after some sea captain’s ship. Why do you sound so bitter (and bigotted too, actually)? Got property priced too high to sell there?

#116 John on 02.27.14 at 9:21 am

“Survey after survey spits out alarming results: 42% say they’d be in financial trouble if they missed getting a paycheque by one week.”

Can you be anymore dramatic?? Maybe you haven’t heard but some banks like RBC have a “skip-a-payment (or more)” option when it comes to mortgages. So do the math, skip 1 to 4 mortgage payments (interest + principal) and it’s no longer the big emergency of missing a paycheque for one week.

Check it out Garth: http://www.rbcroyalbank.com/mortgages/skip_a_payment.html

Skipping a payment is great for the banks, bad for borrowers as it only ultimately increases the debt. The data I quoted comes from the Canadian Payroll Association. It is relevant. Yours is not. — Garth

#117 The Torture Never Stops on 02.27.14 at 9:22 am

Barry said-

And keep kidding yourself that its the people that bought a house 7 years ago, at 45% below what they’re selling for now are the ‘greater fools’.

In east york I’ve seen this type of increase in FIVE years, on specific property types, there is no point saving money, and most people know it. Garth’s thesis is not for me , I come here to be amused.

#118 RVP on 02.27.14 at 9:33 am

Interesting article in the Vancouver Sun about a wrongful dismissal case highlights how CIBC helps wealthy clients from China get around the Chinese capital controls in order to get money out of China to buy real estate in Vancouver. Note that this story is from the UBC branch of CIBC (ie. Vancouver extreme West Side). From Vancouver Sun:

“The final incident that led to Ogden’s termination involved a pair of wire transfers structured to work around Chinese regulations that prohibited individuals from transferring more than $50,000 US out of the country annually. The issue was not the fact that Ogden used the work around — a practice CIBC supported, Wong wrote — but the unconventional way she did it.

In September 2010, Ogden received a panicked call in the middle of the night from a client. The client was trying to transfer $500,000 into the country for the deposit on a home, something she needed 10 separate Chinese and Canadian accounts to do. But she was short two Canadian accounts and the money needed to arrive the following day or the real estate deal would collapse. The client asked to transfer the money via two of Ogden’s own accounts. She agreed.”

http://www.vancouversun.com/Judge+slams+CIBC+firing+Vancouver+employee/9550845/story.html

#119 fixie guy on 02.27.14 at 9:49 am

#2 sheane wallace “I read that piece of crap (stats Canada) as well…”

The Cons are all about the invisible hand:

http://www.theglobeandmail.com/news/politics/statistics-canada-chief-falls-on-sword-over-census/article1320915/

#120 frank le skank on 02.27.14 at 9:55 am

#94 Barry in Pickering on 02.27.14 at 1:47 am
And keep kidding yourself that its the people that bought a house 7 years ago, at 45% below what they’re selling for now are the ‘greater fools’.
====================================
Are you one of those people Barry? Does the conversation on this site scare you? Does that explain the reason you are being over-defensive? Are you over-compensating due to insecurity and lack of confidence in real estate? Is it causing you to lash out against anonymous people online who don’t share your investment strategy of having all your eggs in one basket? Try buying an expensive sports car or order some “enhancement” pills instead of lashing out. Oh wait, you’d have to sell your house to cash out….. never mind. You can always get a 9 year car loan I guess, maybe tap into that equity and pile on some more debt. You don’t have to worry about paying it back until later on, I’m sure that will temporarily work out for you.

#121 Ralph Cramdown on 02.27.14 at 10:20 am

#50 economictsunami — “Speaking of narratives… The Housing Recovery Myth In New York And New Jersey Ends With A Bang As Foreclosures Surge…”

Speaking of zombies… I googled a sentence from your zombies quote and, surprise, surpries, it was from Zeroedge… NINE MONTHS AGO. So I guess that 18 month surge i now running at 27 months? Why are you even regurgitating stats about foreclosures in NY and NJ anyway? Are they considered bellwether states in foreclosure numbers? Or is it just a random, conveniently bad micro-stat that Zeroedge can pick up and magnify, extrapolating, without any evidence of correlation or causation, that the whole world is burning?

Here’s actual up to date nationwide US delinquency and foreclosure stats:
http://www.calculatedriskblog.com/2014/02/mba-mortgage-delinquency-and.html

If you feel that you must regurgitate prophesies of doom on this site, could they at least be current prophesies of doom, rather than stale ones?

#122 Daisy Mae on 02.27.14 at 10:26 am

#15 Hillbilly:

“I hear it could be a corker. — Garth”

“The complicit actions of the government of Canada, the Bank of Canada, CMHC, CREA, etc. have, against any sane reasoning, inflated RE prices to ridiculous levels.
The Feds could have stopped this craze a long time ago, but didn’t. Now it is out of control and they know it, but don’t know how to stop it without losing an election or causing a serious recession.”

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

The feds are backed into a corner. So the little twerp may be about to backtrack yet again…

#123 Bottoms_Up on 02.27.14 at 10:29 am

The smell test. Good one Garth. I complete agree with you on that. What are these supposed ‘researchers’ smoking???

It would almost make more sense to break down net worth by age. The people that benefited most from the housing boom of the last 15 years are likely predominantly 40-45 years and older. Sure, their net worth has likely skyrocketed. And the people holding the bag? Those whose net worth is likely negative? They are less than 40-45 years old.

#124 Bottoms_Up on 02.27.14 at 10:36 am

#63 Tom from Mississauga on 02.26.14 at 10:50 pm
————————————————–
If BC families are so wealthy, indicating good times for all, why are the young ones leaving????

With a boom in wealth net migration would be positive, not negative.

#125 Nemesis on 02.27.14 at 10:41 am

@Ralph/#113…

I’m feeling naughty this morning… let’s see, that was an order of DoomAuCourant on ToastedCiabbatta with a side of Non-GAAP, right?

[WSJ] – City of Rome Risks Bankruptcy After Aid Falls Through: Eternal City’s Financial Crisis Deals Italy’s Premier Renzi First Political Headache

http://tinyurl.com/nn9fs64

[NoteToGT: If they weren’t already preoccupied sacking Londinium I dare say the Visigoths could have had a jolly good time in Roma Capitale this weekend – [Reuters]: Germany’s Merkel tells Cameron she cannot satisfy all Britain’s EU wishes – http://uk.reuters.com/article/2014/02/27/uk-britain-germany-merkel-idUKBREA1Q00A20140227 ]

#126 Bottoms_Up on 02.27.14 at 10:49 am

#114 LP on 02.27.14 at 9:15 am
————————————-
News flash, artefacts found along Eastern North America have confirmed that Europeans in fact settled in parts of North America earlier than Asians/Natives along the West coast.

#127 Obvious Truth on 02.27.14 at 10:56 am

Nice trade number. Remember when we were a massive exporter. At least we make good tomato juice.

The anatomy of a correction continues. Incredible how one minute all catalysts are at your back and the next you’re riding into gale force headwinds.

RE industry needs to be careful. Govt can easily turn the blame. They don’t need to keep things going. Just need to find the true bad guys. Not above commercials. Ask the telcos.

Politics is messy.

#128 LP on 02.27.14 at 11:02 am

#125 Bottoms_Up on 02.27.14 at 10:49 am
#114 LP on 02.27.14 at 9:15 am
————————————-
News flash, artefacts found along Eastern North America have confirmed that Europeans in fact settled in parts of North America earlier than Asians/Natives along the West coast.
***********************************
So what? How does that relate to Haida Gwaii? There’s thousands of miles separating the two coasts.

#129 Infused with Opiates on 02.27.14 at 11:03 am

112 Sean – no not really, its to be expected. Think
about it.

#130 RVP on 02.27.14 at 11:05 am

People from Alberta keep asking on this blog, why is it that real estate prices keep going up. While Canada as a whole is seeing real estate going down, in Edmonton and Calgary we are hearing that real estate is still booming. I remember one Albertan on this blog asked, is it really different here.

I have a hunch as to one factor that might explain Alberta’s apparent continued strong real estate market: migration from BC.

I haven’t checked the latest stats on BC out migration. This is just a hunch based on what I see around me. A lot of young people are leaving BC right now. There just aren’t the jobs. Metro Vancouver has really gone downhill in recent years. The cost of living is exorbitant. The transit fares and the gas taxes and the tolls just keep going up with no end in sight. Groceries, utilities, MSP premiums, rents, mortgages–you name it, it is more expensive in BC than Alberta and it is going up. The traffic gridlock in Metro Vancouver is nightmarish and really eats into quality of life. You can fly to Alberta faster than you can drive across Metro Vancouver. The wages offered by employers here are very low. It’s just becoming impossible for a lot of young people to live here–the incomes and expenses are totally unworkable. People are being forced to leave BC and many of them are going to Alberta. It may be true that the Alberta oil industry is going through pains and that can lead to bust in Alberta. But Albertans shouldn’t forget about what is going on in BC. Even if the oil industry totally tanks in Alberta, people from BC will still go there because there are “push” factors pushing people out of BC and Alberta is often their first stop. I know many young people who have left BC for Alberta recently.

#131 Iso-Classical on 02.27.14 at 11:09 am

#46 Julie on 02.26.14 at 9:50 pm

Now yon have $1 million, earning nothing? — Garth

Hahahaha! It’s funny because it’s true! LOVE IT!

#132 Ret on 02.27.14 at 11:12 am

Our government wouldn’t lie to us… would they?

It looks like the StatsCan department can be closed. Another incompetent government operation for sure.

They literally don’t know up from down with respect to the economy. I could get more accurate information on the economy at the local bar.

#133 Brampton Suckers on 02.27.14 at 11:16 am

Thank god I unloaded my home in Brampton to someone who was willing to pay a ridiculous amount of money for it. Bought a 3700 sq ft Chateau home on Saint Hubert Cres up in the North west end of the city back in 2007 for $550K and just unloaded it for $850K. It took quite a long time almost four months but last January it went. Nice profit to take while the taking is good. I saw the writing on the wall with a lot of my neighbors selling in the last two years. I thought this market can’t last forever. With the $300K profit and a huge mortgage gone I can breath again.

#134 Just some guy on 02.27.14 at 11:37 am

Garth has painted a very clear picture in his usual compelling style. Reading his post, what concerns me is a possibly huge increase of stress upon relationships brought about by the number one thing that couples fight about: money or rather the lack of it. On many people’s horizon, as Garth clearly says, is the double whammy of a housing correction, or at the very least a long period of slow or no growth, and rising interest rates.

Both of these may also be accompanied by the problem of people spending too much money on stuff they neither need nor can afford. We can see this in the average amount of unsecured debt, most likely credit cards, that many people have.

And of course, there is the grim possibility of job loss in these uncertain times for some and wage stagnation for many others.

Simply put, in the near future, I think we are going to see increased stress on couples, lots and lots of breakups followed by division of assets, clogged divorce courts, and, inevitably, increased health care costs followed by higher and premature death rates.

Any natural system such as a river, a lake, a pack of dogs, or whatever usually has some sort of regulating mechanism to handle an imbalance: river banks overflow, flood plains get flooded, the dogs sort out who the leader is, and so on and so forth. What most people have in their financial picture is a huge imbalance. Either they correct it or nature will do the job for them. Their survival is not necessarily a given in the correction.

#135 Derek on 02.27.14 at 11:43 am

House era not over for – Leaside, Forest Hill, Moores Park, Lawrence Park, Junction, LeslieVille. Need more?

#136 John Prine on 02.27.14 at 12:02 pm

#70 Chickenlittle on 02.26.14 at 11:15 pm
#51 Ray Skunk:

I love those 25 year olds making 900k a year, too. They went to the same college/ university as everyone else, drank the same water and ate the same food but they hit the jackpot somehow. Oh no WAIT! They just aren’t as lazy as the rest of us are! How silly of me…
——————————————————————
Our late 20’s daughter graduated with an honours degree in urban planning 3 years ago. She is working in sales at $17.00 an hour, very few of her friends have found jobs that pay over $40,000 a year. Going back for Master’s as nothing else to do. Very prudent with her money, only owes a couple of thousand on her student loan….We feel her frustration and do find these 25 year olds earning hundreds of thousands a year pretty amusing.

#137 BCD (D for Dursday) on 02.27.14 at 12:12 pm

#33 hohoho on 02.26.14 at 9:25 pm

$ 9.4T in assets for a population of 34 M, is an average of $ 276,470, for every man, woman and child. Wow we really are richer than we think LOL.
___________________________________

This should speak volumes to you. Think about this statement and you start to realize how concentrated the wealth is in the hands of so few. The 1%. . .Airhead Princess, maybe you can enlighten us on what it’s like to be part of this group! Wait. . .didn’t you say you were the bottom 1%? lol

#138 airhead princess on 02.27.14 at 12:50 pm

How naive people can be. This ‘fight’ over the ‘middle class’ high ground began with the Justin Trudeau Liberals hiring American political strategists to emulate the success of the Obozo political campaign in the US. Since the hiring we have even witnessed trial balloons like the ‘ voter ID’ ballyhoo speech by Trudeaus advisor…..and reported by such flag waving rags like the Star…..( so it must be true) even though Canada has always had voter ID rules….the Americans just didn’t know that but chose to follow the script of what they had done in the US to gain votes there. That dog couldn’t hunt so they dropped it.

#139 Ogopogo on 02.27.14 at 12:52 pm

#25 Observer on 02.26.14 at 9:01 pm
Who gets hurt by high house prices? All of us

http://blogs.telegraph.co.uk/news/neilobrien1/100052912/who-gets-hurt-by-high-house-prices-all-of-us/

Love this. Exactly what Garth has often noted:

‘So many young people now live at home it even has a modern acronym to describe it as a lifestyle trend – “KIPPERS” – “Kids In Parents Pockets Eroding Retirement Savings”.’

#140 Uh Oh Canada on 02.27.14 at 12:58 pm

Hope you listened to Garth regarding Bitcoins:

http://www.latimes.com/business/la-fi-bitcoin-collapse-20140226,0,5968430.story#axzz2uXgRtNFa

As for the era of real estate, I won’t be surprised if it goes down as quickly as the virtual currency.

#141 ozy - let them fail on 02.27.14 at 1:25 pm

I say let them fail, both:
1. the snobs bidding like crazy
2. the boomers unrealizing the time-bomb

let us succeed:
-generation in between that understands the tricks

STOP TRYING TO MAKE THEM SMARTER – THERE IS A REASON THEY ARE HOW THEY ARE

THANKS

#142 dosouth on 02.27.14 at 1:26 pm

And so the illusion of Canadians spending less and getting a handle on their personal debt is all gov’t and media slight of hand….. do you think?!?

Canadian banks cash in on climbing Canadian personal debt

#143 :):(Ying Yang on 02.27.14 at 1:52 pm

#134 Derek on 02.27.14 at 11:43 am

House era not over for – Leaside, Forest Hill, Moores Park, Lawrence Park, Junction, LeslieVille. Need more?
_______________________________________________
Dont forget Bloor Islington!

#144 BCD (D for Doomer) on 02.27.14 at 1:57 pm

#71 45north on 02.26.14 at 11:17 pm

the thing about being lucky is knowing when to quit
_________________________________________

Better to be lucky then good.

#145 DM in C on 02.27.14 at 1:58 pm

CHEEP CHEEP

Perfect example of RE being VERY local. We are in YYC and in our part (Tuscany), houses are snapped up within a week — and prices and assessments (including ours) have increased 10% over last year. My brother lives in a place he bought new in 2006 for $290k and his next door neighbor just listed for $620k.

Guess it’s the new LRT station going in. I don’t know of any others in YYC that are not surrounded by businesses — ours is residential only. Must be because the PM owns a house here.

#146 Panhead on 02.27.14 at 2:04 pm

#129 RVP on 02.27.14 at 11:05 am

———————————————————–

That was well put, I am soon to retire and at the top of the heap in a good paying union job and there’s no way I could make it now if starting over in the lower mainland. Don’t know how people do it … only answer I can come up with is … DEBT. Sad …

#147 Chickenlittle on 02.27.14 at 2:06 pm

#135 John Prine:

$17 an hour?!? Sign me up!!! What does she do and in what city?? She’s doing better than I am..

45north:

If I had a yard I’d go get one, but I’m poor! I was just going to live in it…a chicken like me doesn’t take up too much space! :)

#148 gut check on 02.27.14 at 2:09 pm

So the joke is on me.

Update…

I was on here a couple of nights ago saying that renting wasn’t cheaper than buying due to all sorts of lifestyle factors plus an equal monthly payment for mortgage+taxes+heat to rent+utilities.

In order for us to inhabit the “house” we put an offer in on, we would have had to replace: the furnace, the hot water tank, the fuse panel, the dishwasher, the fridge, the gas fireplace, and at least one more pipe in the basement. You see, this house (like MANY others for sale here) is vacant. And we’ve had an ice storm.

this house had had an issue, which they told us was the dishwasher. So okay, we don’t get a dishwasher but we get a new basement floor courtesy of the homeowner’s insurance. We bargained for that when we negotiated. It wasn’t until we scheduled our inspection that we started getting the phone calls:
“Uhh, can you put off the inspection till we fix XYZ?”
“Uhh, we need to have our own plumber there, too.”
“Uhh, the gas in the fireplace needs to be jiggled just so so that it will come on.”

We wasted a WEEK on this, and clearly offered WAY too much. Now, of course, we wait for ten days to get our deposit back, too!!!

This house wasn’t a steal, by any means. It was priced near the high end for that neighbourhood. WHAT are people BUYING these days?

Maybe I’m just too experienced, and I understand what these types of things really mean to a homeowner. The shiny new flooring didn’t quite work enough magic.

the worst part of this is that this is not the first time this sort of things has happened. The last house we offered on had oil tank issues which would have cost us $16,000 to remedy and meant a month of disruption to our lives after taking possession, not to mention a loss of square footage once it was all over. The other side offered us a $5,000 price reduction for that! HA!

Today we are supposed to go see another one in half an hour – just found out the oil tank there is 14 years old. No insurance company will write a policy for that. Of course they tell us this an hour before the showing. (fuel type not listed on the listing and no one answered earlier questions till now)

Another agent just called me and the first words out of her mouth were, “Are you getting discouraged by now?”

She was being sincere, although many others of them would say that with a different meaning.

They want you to pay upwards of 20% over last year’s prices or forget it. it feels incredibly hostile out here right now. The lack of information on market action is becoming glaring.

One more note before I sign off: I did phone a rental company yesterday. they want $1550 for a townhouse on the wrong side of the tracks, and they want extra for utilities. I asked how much. They told me to phone the City to find out. I did. $305 per month average. HA! “But it’s newly built and very efficient” they said.

Right.
Well, then again, maybe that *is* efficient these orwellian days.

#149 Calgary Rip Off on 02.27.14 at 2:15 pm

Housing is not purely financial. A dwelling is where memories happen, things that have no dollar amount. There is an attempt to make things unemotional that involve people’s quality of life. Things are dire in Calgary because vacancy rates are very low and costly for rentals with zero rental controls and housing for sale increases. It is strange and stupid that various people see this as some kind of party: “Momentum appears to be continuing to build, especially in entry-level pricing of product in all neighbourhoods.”http://www.calgaryherald.com/business/real-estate/Calgary+poised+time+housing+price+records/9558531/story.html as if housing is some kind of shopping like at a grocery store. How impersonal. (What a bunch of @ holes that wrote and published this story-this is people’s lives, not some arbitrary banana at walmart for sale).

It continually amazes me that in Calgary people(some)find joy in higher prices. What do they also want the tax increase that goes along with it? What a bunch of tools.

Housing values are arbitrary. If you can pay them, fine. What counts is what housing allows you as a person to get memories. When you are dead the house and finances dont matter other than perhaps preparing you as an entity to deal with things in the spirit world.

#150 Smoking Man on 02.27.14 at 2:18 pm

#133 Just some guy on 02.27.14 at 11:37 am

Your so wrong, mother nature, God of misfortune has had me by the neck, up against the wall, trying to choke me dead.

A natural instinct kicks in, you spit in its eye, kick it in the growing, walk away, get it together and move on..

Survivor instinct, we all have it. The fear of a fist fight is far more scary than when your force to exchanging blows when you need to.

#151 BCD (D for Doomer) on 02.27.14 at 2:26 pm

#115 John on 02.27.14 at 9:21 am
“Survey after survey spits out alarming results: 42% say they’d be in financial trouble if they missed getting a paycheque by one week.”

Can you be anymore dramatic?? Maybe you haven’t heard but some banks like RBC have a “skip-a-payment (or more)” option when it comes to mortgages. So do the math, skip 1 to 4 mortgage payments (interest + principal) and it’s no longer the big emergency of missing a paycheque for one week.

Check it out Garth: http://www.rbcroyalbank.com/mortgages/skip_a_payment.html

Skipping a payment is great for the banks, bad for borrowers as it only ultimately increases the debt. The data I quoted comes from the Canadian Payroll Association. It is relevant. Yours is not. — Garth
_________________________________________

I think this data IS relevant. It shows that there are more strategies in place to allow this “real estate” party to go on and on and on. What this blog fails to realize is that increasing and postponing debt until you die does not “a failed life” make–since when you are dead you can’t take your debt into the afterlife (others are left to pay it).

Everything has a timeline. You’ve heard it before “On a long enough timeline the survival rate for everyone drops to zero”. People often fail to realize this fact. As people have pointed out in the past on this blog, you can put your life on hold waiting for a crash in prices, but in the meantime your kids still need a yard to play in, and you still need a roof over your head. You can progress living like a nomad and renting hither and thither, but when you are old and crusty (like me) you are going to want your “own”corner to sit and pout in. Most would prefer a roof they “own”. No double entendre intended lol.

#152 DM in C on 02.27.14 at 2:31 pm

John Prine: “Our late 20′s daughter graduated with an honours degree in urban planning 3 years ago. She is working in sales at $17.00 an hour, very few of her friends have found jobs that pay over $40,000 a year. ”

Our 19 year old son who dropped out of HS to bum around California and BC for a year was just hired as an assistant manager of a retail store for $14.50/hr — with a promise that he’ll manage his own store in a year. He’s the youngest manager in chain history.

Smoking man, I think he’s been reading and taking your advice. ;-)

#153 Sean on 02.27.14 at 2:47 pm

Has anyone tried signing up for commission free trading? I know the big ones are dropping fees to $10 – is that to compete with all the no commission sites now?

https://www.robinhood.com/?ref=92TcLK

#154 Smartalox on 02.27.14 at 3:02 pm

@ Barry #94:

I bought my $5500 TFSA, and added it to the $30 000 worth of investments that I’ve already accumulated there. So when I earn my 8% this year, I’ll actually add $3340 tax free to my net worth. Next year, I’ll add $5500 more, and earn $3500 more on top of everything.

With this strategy, at the end of 5 years, my net worth will have increased over $91,000! After 10 years, my net worth will have increased by $168,888!

All tax free, and no commission.

Sounds like a plan, no?

#155 Aggregator on 02.27.14 at 3:31 pm

Newswires: Quiznos expected to file bankruptcy Monday

Next…

#156 Arshes76 on 02.27.14 at 3:32 pm

@ #28 Dr.NickRiviera

Prices in Edmonton have been falling since 2008, 2007 is the peak. I had a cousin who sold her townhouse 5-7 years back? You can buy that same townhouse for about $50,000 less, my two other cousins bought house in the last 7 years or so ? Both are worth less than what they paid for them. You can buy a house now in some areas for what used to buy only a townhouse.

#157 Sean on 02.27.14 at 3:37 pm

Infused #128. Apparently you are going to have to explain your point as there really wasn’t much in it to go on. Care to elaborate? If the average net worth is so great, what does it actually translate into for the middle of the 80% sharing 30% of the total net worth? I would bet things don’t look so rosy.

#158 45north on 02.27.14 at 3:48 pm

led : what should Flaherty do?

what he’s doing

from the link supplied by DocInWaitingRoom:

However, Tuesday’s budget also announced a number of further changes to the Canadian Mortgage and Housing Corporation, which includes reducing the amount of new guarantees CMHC is authorized to provide.

tomorrow’s Friday, let’s see what the announcement is

#159 Kris on 02.27.14 at 3:56 pm

“.. the tide is turning in so many communities. The era of the house is over.” [Garth]

It’s not over till the fat lady sings. The fat lady, in this case, would be Ms. Rates, and she won’t be in singing mood for another 2 years at least..? Meanwhile, feeding frenzy could push prices higher in the GTA, and then what.. a 10% drop, to bring us back to.. today’s prices?

#160 Smartalox on 02.27.14 at 4:06 pm

Oh, and Barry, #94:

That $5500 invested in my annual TFSA contribution is less than what my landlord pays in property taxes every year!

Just, you know, for comparison’s sake.

#161 Trevor on 02.27.14 at 4:09 pm

Garth,

When you say 33% of people plan to live on CPP..

Are you saying that 1/3rd of the population plan ONLY to live on CPP (and OAS) for retirement income? Or that 33% will use CPP in conjunction with other income? I’m sure you mean the former but that is so scary I needed to clarify.

Thanks,
Trevor

#162 omg on 02.27.14 at 4:21 pm

$9.4 trillion for 34 million people – IS $270K PER PERSON or over $1 million for a FAMILY of 4

HOW MANY FAMILIES OF 4 DO YOU KNOW THAT HAVE A NET WORTH OF OVER $1 MILLION

Kind of shows that trying to use a net worth number to argue for HOW WELL OFF WE ARE is meaningless. The new worth is not spread out evenly amongst Canucks – the people in the top 10 percent hold something like 60% of the net worth in Canada. Median Canadian net worth is in the $90k range.

Its those in the bottom 50% net worth that are loading up on mortgage debt and lines of credit that have negative net worths. They could bring the happy RE bubble to its knees when interest rates rise.

OF NOTE – the US had a similar median net worth per person in 2005. Look what good that did them.

#163 Veej on 02.27.14 at 4:22 pm

153 Smartalox

How are you getting 8%? Is it a dividend or yield? if yes, then it is taxed differently than in a non-reg account, no?

#164 airhead princess on 02.27.14 at 4:23 pm

“Real estate equity doesn’t exist until it’s realized. The gain is meaningless. It can’t be used to finance a retirement, send a kid to university or buy that desperately-needed Softail Fat Boy until the property is actually sold and turned into cash.”

Yer right……take your property tax assessment notice to a brokerage and try to finance a margin account and they’ll tell you to bugger off…..your home equity is worth zero…. because it is a non-fungible asset….meaning it is worthless until sold and that sale cannot be realized 100% of the time…….and is dependent on market conditions….which we know are unreliable….and no sale is guaranteed…..( there were times in the past …1970’s, ’80’s and ’90’s) where no house sold regardless of the price….the market went completely dead for months at a time) ergo no loan from any other than a bank or second tier finance company. But that doesn’t even mean your house has any actual value…because the loan you take out is a personal note……a recourse loan where you pay back 100% regardless of what the property sells for…even when it has fallen by half.

Net worth …when used by the loan ferret at your local bank ….just means ” what much can you afford to pay back based on current income”….they really don’t give a crap what your ‘real estate asset’ is worth.

Adding your car, furniture, your kids swing and video game collection into your ‘net worth statement’ just makes the banker know that you are a complete idiot when it comes to money.

Your house is a place to live…..it should be paid off in cash. It is not an asset per se…..if you think so…..well OK junior…..whatever works for you. A net worth statement filed where the big boys play is only cash cash cash.

#165 Old Man on 02.27.14 at 4:27 pm

Worry not about earning $17.00 an hour as consider it but the earning base. Start a cottage business on the side using the computer, and identify a need in your community by importing from Asia. Just pulled this off for someone with fishing lures, as Canadian Tire sells X for $6.00 and can import the same item in small lots for $0.89 USD with free shipping, and on it goes. Now there is another small product that sells everywhere for $20.00, and we nailed that for $1.77 USD with free shipping.

#166 Derek on 02.27.14 at 4:32 pm

#68 Babblemaster on 02.26.14 at 11:04 pm

Garth is fretting over 1% in rate increase over the course of 10 years. Just different perspectives.

More like one year. — Garth

#167 rosie "moving forward" in the knowledge that, "this won't end well" on 02.27.14 at 4:33 pm

It’s all about balance.

https://secure.globeadvisor.com/servlet/ArticleNews/story/gam/20140227/RBSWCANADAHEDGIESPRINT0226ATL

#168 4 AM Sunrise on 02.27.14 at 4:45 pm

Crack Shack or Mansion?

http://vancouverluxuryhomes.com/recent-luxury-sales.html/details-3478551

Neither. Answer: brothel (back in 2007). Kind of explains the 9 bedrooms and 5 bathrooms. Some of the older ads listed 8 bedrooms. But if you’re running a brothel, I guess the dining room can be used as a bedroom, too.

Listed for $1,788,888 and sold for $949,000, by the way.

#169 Kilby on 02.27.14 at 4:59 pm

Our 19 year old son who dropped out of HS to bum around California and BC for a year was just hired as an assistant manager of a retail store for $14.50/hr — with a promise that he’ll manage his own store in a year. He’s the youngest manager in chain history.

Wage will rise to $16.50 per hour…Ready for those $1,700 a month mortgage payments, the young are so screwed…Sad.

#170 Steven on 02.27.14 at 4:59 pm

The real estate party has had a long and glorious time since the 1930s but now it must end for the good of mankind in general and me in particular. I need a place to live at the end of march and I have a water budget and not a champaigne budget.

#171 Blacksheep on 02.27.14 at 5:01 pm

Plenty of ‘debt is four letter word’ talk here lately.

Copious amounts of debt accumulation by the Cattle, is an unfortunate, but absolutely necessary, evil.

It’s required to expand the new $ supply and fuel the system. This obviously does not apply to those in the know.

“Using a commodity such as gold as money means that the quantity of money in circulation remains fixed unless more gold coinage is produced. A falling general price level is therefore a sign that the economy is GROWING. More – or better – goods and services are being produced relative to the amount of money in circulation: the value of money rises and the price of goods and services falls. This is “benign” deflation.”

“But this is very different from the way in which the quantity of money changes in a modern fiat money economy. In our fiat money economy, the quantity of money in circulation is determined principally by bank lending. When banks lend, they create an amount of fiat money equal to the amount of the loan. What we call “broad money” – which is the money actually used for transactions in the real economy – therefore expands. When the loan is paid off, the money the bank has created is destroyed, and the broad money supply therefore contracts.”

http://www.forbes.com/sites/francescoppola/2014/02/26/deflation-is-not-benign/

#172 John Prine on 02.27.14 at 5:03 pm

#146 Chickenlittle on 02.27.14 at 2:06 pm
#135 John Prine:

$17 an hour?!? Sign me up!!! What does she do and in what city?? She’s doing better than I am..
______________________________________________
Victoria…..And it’s a “Union job” they aren’t what they used to be.

#173 Van Isle Renter on 02.27.14 at 5:06 pm

“.. the tide is turning in so many communities. The era of the house is over.” [Garth]

It’s not over till the fat lady sings. The fat lady, in this case, would be Ms. Rates, and she won’t be in singing mood for another 2 years at least..? Meanwhile, feeding frenzy could push prices higher in the GTA, and then what.. a 10% drop, to bring us back to.. today’s prices?

+++++++++++++++++++++++++++++++++

Rates are not the only issue. When your debt load hits the wall, rates could be zero and you will still not be able to borrow a dime. Worse yet, the bank then asks for it’s $$ back.

All you need to do is look at Japan. They have had near zero rates for decades now and housing prices are 1/3 of what they were at the peak. Yes, a 66.67% haircut and still falling and now at 1983 prices, and that does not take into account 30 years of inflation. What would you do if the price of your house in GTA dropped back from $800K to $160K?

In the US the housing crashed at 6% interest rates and cutting them to near zero did nothing. The housing crashed anyway. And bear in mind, not everyone in the US got into trouble. Only 10% with problems brought the market to it’s knees. Why is that? Because 10% of loan value is all banks typically need to keep on reserve to backstop everything that they do. If they lose that 10% which is real $$$ and they too are bankrupt. Such is the wonder of fiat financing.

When no one will lend you any more $$ you are broke and the game is over no matter what the interest rates are.

#174 TheCatFoodLady on 02.27.14 at 5:19 pm

#147 – Gutcheck

If there’s a joke here, I’m not laughing. Instead – big thumbs up to you for being smart enough to do all the proper checks before getting screwed by unexpected expenses.

#175 Rob on 02.27.14 at 5:22 pm

“As we grow less diversified, paying absurd prices for a home, risk shoots higher.”

http://www.theglobeandmail.com/life/life-video/video-what-home-buying-is-like-in-toronto-now-bring-extra-cash/article17084682/?cmpid=rss1

515 Manning Ave. in Little Italy, Toronto – sold for $263,500 – over the asking price!

But not to worry, their grandkids will have this semi sucker fully paid off in no time – right?

#176 BCD (D for Dankruptcy) on 02.27.14 at 5:25 pm

#154 Aggregator on 02.27.14 at 3:31 pm
Newswires: Quiznos expected to file bankruptcy Monday
_________________________________

Surprising. . .but their sandwiches (IMO) were way overpriced and overhyped. A sub, drink, and meal will run you around $12-15. Subway is $8-10.

#177 stop lying on 02.27.14 at 5:27 pm

#117 – good link.

If a bank was doing things to circumvent US law there would be hell to pay. If that law was actually enforced that would do much more to curb HAM than closing down the Chinese Immigrant Investor program…

#178 jan on 02.27.14 at 5:36 pm

#59 AB Boxster on 02.26.14 at 10:44 pm
#16 Mark Sui

I agree with your comments.
I have seen a property on a Gulf Island for sale for the past 3+ years.
Nice property but not worth the over 1 million asking price.
Price never gets reduced, it just gets rotated around various realtors.

Even if the BC assessed values equals listing price, if its not selling its priced too high. I don’t understand why people don’t get this.
Having a property perpetually for sale makes no sense to me if price is not one of the sales variables.

THAT BECAUSE PEOPLE ARE VERY QUICK TO ADJUST PRICES UPWARD AND NEVER DOWNWARD.
HUMAN NATURE I GUESS.

#179 Smoking Man on 02.27.14 at 6:13 pm

19 per hour, really…..

My god I have some much more work to do here.

A lemonade stand in a good location will yield way more than 19 per hour.

Teachers really messed up people’s minds.

#180 docteurfolamour on 02.27.14 at 6:17 pm

it’s gonna be ugly around halloween this in Canada RE. A blood bath for sure. We will be like chiens de prairie!

#181 waiting on 02.27.14 at 6:21 pm

The company I worked for laid off almost everyone over a period of a year and a half. One of my colleagues who had zero savings has been out of work for most of that time. They were extremely worried about finances for the first few months , but have been more upbeat lately. I asked if they had taken some part-time work somewhere but the answer was no, living off credit cards and planning on declaring bankruptcy.

#182 jan on 02.27.14 at 6:29 pm

#77 45north on 02.26.14 at 11:33 pm
notta sheeple : I remember the 80′s when repo’ed homeowners where doing midnight moves, leaving their bathtubs running as a gift to the bankers the next day.

my plan would be give every family who lost their house $1000 a month for a year. After they lost it and provided they acted in good faith.

Huh, you want to reward these debt bingers ???
Dude, please don’t procreate !!!!

#183 Read a balance sheet lately? on 02.27.14 at 6:33 pm

#163 airhead princess

Not only is your house an Asset, it is a REAL Asset as in REAL estate (and as listed on a Balance sheet), upon which initially lenders dole out loans. It may not be a near-cash asset, but an asset it surely is.

Alwyn

#184 Happy Renting on 02.27.14 at 6:42 pm

#133 Just some guy on 02.27.14 at 11:37 am

You’re right, and unfortunately breaking up a household (and add lawyers’ fees, for divorce) is a great way to destroy even more wealth. Not good.

#185 Movin' to Montana on 02.27.14 at 6:43 pm

515 Manning Ave. in Little Italy, Toronto – sold for $263,500 – over the asking price!

——

Another aberration? No, it’s the new reality- Hipster hoods in 416 are for folks with lots of cash.

Scarborough may be next on the list for gentrification
(your joke here)

#186 Smartalox on 02.27.14 at 6:45 pm

@ Veej #162:

Taxes? I don’t pay no stinkin’ taxes – I’m talking about a TAX FREE Savings Account (used to shelter a balanced, managed investment portfolio). And the 8% figure was stipulated by someone else. In reality, my returns have been somewhat higher.

#187 Happy Renting on 02.27.14 at 7:03 pm

#146 Chickenlittle on 02.27.14 at 2:06 pm

Chickenlittle, are you in a high cost-of-living-area? $14 x 40 hours x 52 weeks = $29,120/year. If you’re in a two-income household that isn’t in Tor/Van/Calgary, that’s livable (especially if there’s any overtime available.) Any time in your week for a part time/side gig?

My last pay move was a cut. Same work for less dinero. At least +$0.50/hr = $1040 a year.

#188 Roial1 on 02.27.14 at 7:20 pm

You know, I looked at that picture for a while till it came to me. Pattaya Thailand. That’s where the old farts DO dress just like that. All that is missing is his “rent a companion”.

#189 airhead princess on 02.27.14 at 7:25 pm

“182 Read a balance sheet lately? on 02.27.14 at 6:33 pm

#163 airhead princess

Not only is your house an Asset, it is a REAL Asset as in REAL estate (and as listed on a Balance sheet), upon which initially lenders dole out loans. It may not be a near-cash asset, but an asset it surely is.

Alwyn”

You couldn’t be more wrong re re the real world amigo. I tell you what…..take your property assessment notice to the bank and tell them you want to borrow against it because you’ve just lost your job and have no savings other than your real estate agents most recent evaluation….and see what they’re prepared to lend you against your ‘real asset…..in real estate’

Your high school accounting lessons are lost on me…..I deal in real money in real time….in the real world…with real people….in real situations…..for real…..dude.

#190 Na na na na na Nosty on 02.27.14 at 7:27 pm

Aggregator — Like Quiznos, Rome is calling it kwits too.

Blacksheep — Gold causes GW, AIDS and really good breakfast sausages with Fettucine Heart Attack Alfredo. PDollar, Manipulation and Currency Wars(PDF) Boy, is this ever a mixed-up world!

#191 Infused with Opiates on 02.27.14 at 9:09 pm

156 – Hi Sean. I am going to guess here that you are young and dont consider yourself wealthy. Not to be negative, but just to know your perspective.

I ran a little simulation with investment and mortgage calculators available on any bank website. I assumed a starting net worth of zero at age 25, a constant amount saved yearly til age 65, then a draw down of savings to zero at 95. For my test I used $5500 per year saved, and a 6% rate on investments for the entire 70 years. I calculated the wealth at 10 year intervals (35, 45 etc). So in the end I had 8 points in time which could represent 8 individuals of those ages at any one time.

The wealthiest individual was the 65 year old. I think the 75 year old just eclipsed the 55 YO in $ but it was close. Those two retired people (25% of the
population) held 57% of the total wealth, even though individually everybody saved or was saving the same
amount.

This represents the most equal distribution we can get.
The Math simply works this way. The real world would
simply skew this. As you grow older, your experience should teach you that wealth accumulation takes time.

#192 Sean on 02.28.14 at 9:28 am

Infused #190 I am middle age and in decent shape financially. Judging by your post you must have a large educational background but not very good at making a point. You still havent answered my question in a realistic manner but in a mathemetical theoretical manner.

The thing about number crunching is you stull have to take reality into account. Again, the report referred to the top 20% of the population is holding 70% of the net worth. It did not refer to age (but I assume most of them are still older), but the fact of the matter is that the older crowd makes up a lot more than 20% of the population. So again, how can we determine that everyone is in good shape financially when we are sitting at record high debts (and climbing), while stating everyone is in good shape when the vast majority (80%) are only holding 30% of the net worth?

#193 Infused with Opiates on 02.28.14 at 10:58 am

191 Sean – you original post 112 only highlighted the
skew, which I have shown would exist in a totally “equal” and unchanging world. The alarming
situation would be if wealth was distributed equally.
I cannot offer an ideal or preferred amount of skew, but it would be interesting to compare Canada to other countries.

#194 b on 03.01.14 at 3:05 pm

A colleague (against my advice) just bought a house in North York a under asking. Do you think prices are finally starting to soften in Toronto (knowing there are always the examples of crazy bidding wars in downtown RE)?