The epiphany

BALL modified modified

So why are most Boomers screwed, with their children slavishly plodding in their footsteps?

Financial illiteracy, for sure, along with the seductive [email protected], plus leftover hippie brains. But mostly it’s real estate. Some is fine. I own property. But when you evolve to have the bulk of your net worth in a house, the asset can turn into a big liability. As I keep saying (and as yesterday’s post was meant to emphasize), it’s not shelter that will give you a happy life, it’s cash flow.

Amazingly, however, people keep trading all of their money for houses they could live in anyway, while keeping their money. Renting is cheaper than owning in every major Canadian city, even with 3% mortgages. In the US, in contrast, owning is now 35% cheaper than renting in the ten largest urban areas, and yet home ownership levels keep falling.

Why? Because Americans came face-to-face with the beast. They learned the hard way what happens to real estate when times turned troubled. Over-investing in one asset, eschewing diversification, is a monumental risk – especially when it’s a house.

This is the basis of my Rule of 90. The correct amount of exposure to real estate (in terms of net worth) is 90 minus your age. So a 60-year-old wrinklie who has $200,000 in an RRSP and $900,000 in a house is asking for grief, and should downsize. The correct amount would be $330,000 in property (move to Chatham) and a balanced portfolio of $770,000 generating $50,000 a year in income, while maintaining the principal.

Of course, nobody listens to me. I’m like the guy who gives you the colonoscopy. You know when you hear the rubber gloves snap you should have eaten way more fibre. It’s the epiphany.

These days, in a volatile world, real estate’s more emotional than logical. People equate it with security, even as the risks mount. They buy beyond their means then rationalize it as being their ‘forever house’, when that almost never happens. They think because city properties sell fast now that there’ll always be buyers. But there are no guarantees.

In fact, given that house prices are extreme, borrowing costs are generationally low and home ownership levels are nearing saturation as the population ages, there’s way less risk in a financial portfolio that can throw off enough cash to rent a similar place. Especially for the wrinklies, who should be past the emotional claptrap of children.

Anyway, as I said, I like real estate. Definitely will continue to own it. Carefully.

But if you haven’t bought some yet, here are 10 reasons to wait. Email them to your mom.

(1) Houses suck off all of your cash when you buy them, especially now with fatter insurance premiums and land transfer taxes. Just don’t get sick, get pregnant or get fired.

(2) Buying today also takes a massive amount of leverage. Mortgages have never been bigger, nor rates this temporarily low. Interest has only one direction in which to go, which means you cannot control future costs, unless you heap more money against the mortgage.

(3) When the economy turns lousy and jobs are hard to find, houses usually go  illiquid – at the precise moment you might need the most flexibility.

(4) Half of your mortgage payment is interest. This is one lousy way to ‘save’ money through building equity.

(5) Unless you buy with at least 20% down, any routine housing correction can wipe away all of your equity. The last major one in Toronto, twenty years ago, dropped prices by a third.

(6) Houses don’t stabilize living costs. That’s a myth. Property taxes constantly increase, as does insurance and maintenance costs along with utilities. NatGas in Ontario is about to rise 40%.

(7) Buying a house means a massive investment and big debt in an immoveable object, and yet you have no control over the neighbourhood, the street or the asshole next door. Renters can move.

(8) In a financial crisis, real estate tanks and often becomes impossible to sell. You can exit an entire financial portfolio in 30 seconds.

(9) Buying a house means you trade freedom for obligation. Freedom to move, to chase a better job, go to a better community, to have a financial cushion, to retire with cash flow.

(10) Canadian real estate’s never been more costly. Why buy something that will be cheaper later?

(And why not sell when it’s worth the most?)

Snap, snap.

179 comments ↓

#1 Jas Girn on 03.20.14 at 8:18 pm

We are so screwed!

#2 AisA on 03.20.14 at 8:19 pm

If you haven’t bought any yet, please don’t forget reason number 11….

YOU CANNOT possibly afford it with what’s coming at us in the days ahead. Notice reason number 11 doesn’t mention any particular level of income. Even the rich can’t afford to heap hundreds of thousands into a hearth to warm themselves for an hour.

#3 dave b on 03.20.14 at 8:22 pm

First!!!

#4 Tiger on 03.20.14 at 8:26 pm

Brilliant post GT!

#5 Smoking Man on 03.20.14 at 8:28 pm

So why are most Boomers screwed, with their children slavishly plodding in their footsteps?- Garth
…………..

Not mine… I brought them up a bit different than most…

#6 ts on 03.20.14 at 8:28 pm

Garth needs to start posting chicks in bikinis again. I heard F is going to start a rival blog (thegreaterF.com) full of amazon ladies in bikinis.

This place is going to be a ghostown!

#7 Musty Basement Dweller on 03.20.14 at 8:28 pm

“Of course, nobody listens to me. I’m like the guy who gives you the colonoscopy. You know when you hear the rubber gloves snap you should have eaten way more fibre.”

You are rockin Garth. Thanks for the roll on the floor laughing and concise summary of the state of the real estate nation.

“Frameable” it is.

#8 Finally on 03.20.14 at 8:28 pm

#1?

#9 Fed-up on 03.20.14 at 8:32 pm

I’m not a boomer but I sold this past October in the 416. My investment portfolio has gone up almost 10% since Nov 1st.
Feels amazing!!!

#10 LH on 03.20.14 at 8:32 pm

Preparing another 80k prepayment
Already prepaid some 150k YTD
At this pace, mortgage free within several years
Hopefully in time for my 35th birthday

Floating rates are 100% the way to go

LH

Are you paying off a 2.5% mortgage with money that could make 7-8%, to fund an asset that will be worth less in a few years? — Garth

#11 Derek R on 03.20.14 at 8:32 pm

I hear ya. Some day I may buy again but for just now owning a cheap house in Nova Scotia and renting an expensive one in Calgary will do me. The rule of 90 is the rule for me!

#12 Hickster on 03.20.14 at 8:32 pm

“Renting is cheaper than owning in every major Canadian city, even with 3% mortgages.”

Maybe Regina is not included as a major city? If it is, this claim is false. Using Etienne’s Garth-endorsed calculator and nearly any other I can find, buying comes out ahead here. That’s assuming zero price appreciation.

We have Vancouver-level rents, with 1/3 Vancouver home prices. It’s just a numbers game.

This is not general contrarianism. If I were in Van, TO or Calgary, no question renting wins.

Nope, not cheaper when you include the lost opportunity cost of the equity. — Garth

#13 Forzudo on 03.20.14 at 8:33 pm

At the very least, wait until you have 20% down.

For the “underwater” reason Garth mentioned, and because paying CMHC insurance to protect your financial institution is pure stupidity.

#14 Pounding sand in Peachland on 03.20.14 at 8:34 pm

I liked her when she starred on Charlies Angels

#15 Smoking Man on 03.20.14 at 8:35 pm

Art imitating life…..

True Detective..

Rust Chole, drives same truck as I do, his daughters name Sophia, my dogs name Sophia. His wife’s name, same as mine, the real one.

Philosophical wise, identical to mine. Shared views to a bloody tee. In the greater fool archives, things I’ve said, you will find direct quotes to dialog presented in the show. Marty wearing Pink Floyd tee shirts.

Either Nic and I are conjoined twins sharing the same brain and connection to the UCC or he’s a blog dog… And I inspired the character.

Either way…. Show rocks, on my 3rd viewing of the series.

The beauty behind it, it goes head on against consensus behavior shaping, let the not perfect individual shine through and be celebrated.. In real life that person is mobbed and flushed out with the trash. Teachers make sure of that.

True detective is going to win in almost every category at the Emmys.

Guaranteed….

#16 Most Valuable Plumber on 03.20.14 at 8:35 pm

So…should we be buying enbridge?

#17 DocInWaitingRoom on 03.20.14 at 8:43 pm

SNAP!

Unfortunately have heard many stories of homes recently being sold due to illness, older folk unable to pay bills or take care od themselves, and evwn divorces selling to clear equity from failed marriages.

Sadly this will be the trend for years to come with increases financial stressors and increasing agingdof the population.

For a politician you aint so bad

#18 Rod Forb on 03.20.14 at 8:45 pm

Would it not be prudent to have house paid, use heloc to invest and enjoy the tax deduction?

If you understand, and accept, the risk of leverage. — Garth

#19 pinstripe on 03.20.14 at 8:47 pm

Many people do not understand “Cash Flow”.

Any attempt to educate these people is a waste of energy and time.

OTOH, these same people enjoy it when someone takes them to the cleaners.

#20 TheCatFoodLady on 03.20.14 at 8:53 pm

Thanks – my butt may unpucker enough to have a normal bowel movement by mid-2017. I’ll go to bed tonight trying to get the sound of Nitril gloves snapping out of my demented head…

#21 Assquatch on 03.20.14 at 8:55 pm

#15 Smoking Man on 03.20.14 at 8:35 pm

WTF!? A whole entry by Smokes without a spelling error.

Third viewing of season 1? I didn’t know people do that…

#22 DocInWaitingRoom on 03.20.14 at 8:55 pm

Man my lanlord is making another 40k this year amazing considering he spent 40k on roof, patio, carpet, water main, and walls. Also I had rent returned for 3 months of 12 due to repairs and issues. So he made a bundle lmao

I should own too what an idiot I can earn rent plus the bank will throw me another 50k when my house goes up, I dont even need to sell! Amazing

Do you earn more than your house does?Bank of Montreal’s chief economist poses a question reminiscent of the Toronto housing market’s heyday in the late 1980s: Who makes more, you or your house?“One quip during the late 1980s housing boom in Toronto was: ‘Last year, my house made more than I did, and it just sat there and did nothing all day,’” Douglas Porter says in a look at real estate prices vs. weekly earnings.“Well, that was nearly the case for many folks again in 2013.”Mr. Porter noted that average house prices in the Toronto area rose by some $43,000 last year. Compare that to average weekly earnings in Ontario, which amount to $48,000 a year on an annual basis.

Rent plus earnings lmao

#23 Drill Baby Drill on 03.20.14 at 8:55 pm

Dear Pathetic blog : your sage advise is the very same I am giving my kids who happen to be in their late 20’s. Unfortunately some of our friends are circumventing this advice by paying for down payments on mini chip-board chateaux’s for their blessed special off-springs thereby temporarily sheltering them from mortgage payment, taxation, maintanance and oops I am knocked-up reality.
I pray for them.

#24 Retired Boomer - WI on 03.20.14 at 8:56 pm

Entirely off topic for once.

Tonight, is the weekly drawing at our local pub. Three weeks ago while we were on vacation in Florida we won.
As our son paid our $1 a week for the drawing we won half the pot $565.50 Tonight my wife drops me off for a few adult beverages, and fun and she won the pot.
Oi course, she wasn’t present so won only half the pot $733.25 today. What fun!!

Sure beats RE investing, and being rather maggoty right now. who cares?

Live life to the full, regardless of your finances you’ll never get out of it alive anyway. Do be careful though!!

Does this mean i have to report the income??

#25 Ralph Cramdown on 03.20.14 at 8:58 pm

There were a number of comments yesterday about how much money and assets boomers have. As a cohort, yes. Individually, not so much.

When investment advisors talk about boomers having lots of money, they’re talking about boomers that come to see investment advisors… who tend to have money. Likewise, when real estate agents talk about boomers’ kids often getting parental help with the downpayment, they’re seeing the kids who can afford to buy, not a representative sample of all boomers’ kids.

It is quite difficult to get a handle on asset distribution, because many reports use averages rather than medians, and they’re always skewed high by the richest. The typical, median boomer has below average income and wealth compared to his cohort. When reading a report, you need to know whether it is based on the whole population, or a survey. If it’s a survey, it tends to underrepresent the very rich, as a) there’s so few of them, and b) they are more likely to screen calls, have unlisted numbers and be less willing to waste time answering a survey.

If you’re the child of a boomer who can’t or won’t help with your downpayment, it’s of little consolation that, on average, they have lots of money.

#26 Andrew on 03.20.14 at 8:58 pm

“My goal is to buy one condo every year.”

This quote is from a Globe & Mail article this week titled “Is home ownership a financial priority for millennials?” The quote is from a newly minted 22 year old homeowner in T.O. named Victor Godinho. He says his dad took him to real estate investment seminars when he was a kid to teach him about the value of real estate.

Amazingly, the kid went on to become a financial planner (!).

And how does he know real estate fool proof? “My group of friends understands the value in real estate,” he says.

He prefers to invest in something “tangible” and secure. What about a portfolio of stocks? “Your money is at risk.”

As delusional as he is, what’s even more frustrating is that the Globe would run an article like this without mentioning the current state of the condo market in Toronto (i.e. slumping sales, 50k new construction condos will be coming onto the market in the next two years). Just when I thought the standards of journalism couldn’t sink any lower, this article hits a new low. My blood pressure went through the roof when I read this piece.

Bottom line: we’re screwed.

Garth: hope the leg is doing better.

– Andrew

#27 Jimmy on 03.20.14 at 8:59 pm

SM,
Please share what you thought of the last episode of True Detective. Especially around the last 10 minutes.

You should fix your taillight if you drive the same truck.

#28 Ron on 03.20.14 at 9:00 pm

What if I have the properly diversified non-cowboy portfolio but never want to own real estate?

#29 Freedom First on 03.20.14 at 9:01 pm

Marvelous post Garth!

And I like the pic too. Can’t see the balloon coming, and then it hits.

#30 Shawn on 03.20.14 at 9:02 pm

And Another Thing…

(11) Today’s mega mortgages are almost immune to being paid off early because they are so large in comparison to income.

If the mortgage was 1 times family income (as mine was approximately in 1995) and you manage to save up 10% of income to pay on the mortgage then 10% gets whacked off the principal. If the mortgage is 5 times family income then save up an extra 10% to pay on the mortgage and just 2% gets nicked off the mortgage principal. Futility defined.

#31 Ford Prefect on 03.20.14 at 9:03 pm

Garth, in many respects your blog is one long example of why the vast majority of people need a nanny state. They will not save voluntarily no matter what the incentives.

I remember a lifetime ago doing payroll at a relatively large contracting company. The workers, all men, made considerably more than most people and calculated to the penny what should have come off their pay checks including CPP. But some of them in more candid moments admitted that they were pleased to be forced to save via CPP because otherwise they would blow every cent they made. That is why programs such as TFSA and RRSP are ultimately only going to benefit the few savers, read the rich. The people who could most use these programs will not do so.

I sometimes think the above is one of the key differences between liberal and conservative thinking. Liberals take people as they are. They know they won’t save, hence CPP for example. Conservatives want people to look after themselves, a totally unrealistic assumption in light of human nature. Hence TFSA for example.

#32 May on 03.20.14 at 9:04 pm

Can’t stay… I need to go turn down the thermostat and find that box of wine I stashed somewhere.

#33 T.O. Bubble Boy on 03.20.14 at 9:04 pm

Nope, not cheaper when you include the lost opportunity cost of the equity. — Garth

For a super-easy (dumbed down) comparison of the monthly cost of {mortgage + investment gains of down payment}, I simply type in the full purchase price to any mortgage calculator… this essentially assume that your down payment could at least be earning the same rate of return as the mortgage rate.

i.e.
$500,000 house w/ $100,000 down payment
The monthly payment on a $400k mortgage @ 3% w/ 25-yr amortization is about $1897. But, if you assume that the $100k could be making that same 3% rate if invested elsewhere, make the mortgage amount $500k and you get $2,371 per month.

Sure, it’s after-tax mortgage payments vs. pre-tax investment dollars, but I would also expect a return higher than 3% (as I said, it’s a dumbed down approach).

#34 AK on 03.20.14 at 9:06 pm

North Dakota wants you

#35 T.O. Bubble Boy on 03.20.14 at 9:07 pm

@ #30 Shawn on 03.20.14 at 9:02 pm
And Another Thing…

(11) Today’s mega mortgages are almost immune to being paid off early because they are so large in comparison to income.
————————–

Agreed. And, most banks have maximum payment rules that limit how much someone can increase the monthly and/or do lump sum payments… yet another barrier to people paying off quickly.

#36 Victoria Real Estate Update on 03.20.14 at 9:13 pm

. . . . . . . . . . . . Greater Victoria. . . . . . . . . . . . . .
. . . . .Total Yearly Single Family Home Sales. . . . .
. . . . . . . . . . .(Percent Below Peak) . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1989.***********************************
1986.*********************
1987.**************************
1988.****************************
1990.******************
1991.*****************************
1992.*************************
1993.******************
2002.*****************
2003.*****************
2010.*******
2011.*****
2012.****
2013.*****
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . -60%. . . . . -40%. . . . . -20%. . . . . 0%

(Source: board)

In this chart, yearly sales totals have been population adjusted and compared to 1989’s SFH sales total, which was the peak sales year for Greater Victoria.

Total yearly single family home sales across Greater Victoria are a fraction of what they used to be. This has been true for the last 4 years.

Single family home prices have been declining since 2010. There have been 39 consecutive months of (year-over-year) price declines for Greater Victoria single family homes. (Source: index)

However, house prices in Victoria remain in bubble territory. A much deeper correction will be necessary to bring house prices down to the level where incomes and rents can provide price support.

Incomes and rents generally support house prices in a normally functioning housing market that isn’t in a bubble.

At the peak of the 2006 US housing bubble, house prices in many cities were far above the level where incomes and rents could provide price support. Naturally, house prices corrected back to the level where incomes and rents were able to provide price support. The same will happen in Victoria.

In the States, house prices shot into bubble territory leaving rents and incomes far behind. This is how all housing bubbles form. Canada’s housing bubble formed in the same way, however, in Canada, house prices shot higher and left incomes and rents further behind than in the US. Canada’s housing bubble is much larger than the 2006 US housing bubble.

Increase in price-to-income ratio (first chart):

Canada: + 56% (2000 to late 2011)
US: + 24% (2000 to peak)

Increase in price-to-rent ratio (second chart):

Canada: + 73% (2000 to late 2011)
US: + 35% (2000 to peak)

Increase in house prices (first chart):

Canada: + 124% (2000 to 2013)
US: + 53% (2000 to 2006)

Girls and guys, house prices in Victoria are extremely overvalued and will continue to correct. If you buy now, you will be forced to deal with the financial problems associated with holding an underwater mortgage. Millions of US families continue to deal with severe financial stress as a result of buying at or near the peak of the 2006 US housing bubble. Don’t make the same mistake. Renting for now is a no-brainer.

Until next time – Cheers!

#37 Happy Renting on 03.20.14 at 9:15 pm

Agree with #7, the below paragraph was BRILLIANT.
===================================
Of course, nobody listens to me. I’m like the guy who gives you the colonoscopy. You know when you hear the rubber gloves snap you should have eaten way more fibre. It’s the epiphany.

#38 Smoking Man on 03.20.14 at 9:20 pm

#27 Jimmy on 03.20.14 at 8:59 pmPlease share what you thought of the last episode of True Detective. Especially around the last 10 minutes.

You should fix your taillight if you drive the same truck.
………

It’s an anthology, was the best way to kill of Marty and Rust. The underlying theam of Nic’s writing is, shit happens, people fall, I should know.

But then after a long hard battle using the resources and skills you have to achieve a goal.

You change, perhaps that’s why I still haven’t submitted my manuscript, not ready to change just yet.

#39 Happy Renting on 03.20.14 at 9:21 pm

#22 DocInWaitingRoom on 03.20.14 at 8:55 pm

I get your point but the numbers aren’t really comparable. I’m sure the average earnings of Toronto home owners is higher than overall average income in Canada. Nevertheless, if your house appreciated $43k it certainly earned the equivalent of a livable after-tax wage.

—————-
#24 Retired Boomer – WI on 03.20.14 at 8:56 pm

Making money while boozing? You, sir, are living the dream. :)

#40 ozy -wake up Guys on 03.20.14 at 9:21 pm

go on Bedford Park Ave and count the new infill mini-mansions…

check the kids in john wanless – plenty

big cities, top HOODS attract young & rich alike

i do not give 2 cents on scaremongering stats, i see reality with my eyes at starbucks

#41 2CntsCdn on 03.20.14 at 9:22 pm

#29 Freedom First
“Can’t see the balloon coming”
Balloon?! That’s the good’ol “utility ball”. Usually red, low air pressure and made of rubber. In the old days they used to let kids play murder ball in school. You line half the class up on one side of the gym and half on the other … when you get hit, you’re out. It was fun to catch someone looking the wrong way ….. they mad an amazing sound when they hit someone in the face just the right way …. and they stung. No murder ball in schools any more …. heck ….. now’a’days gym is optional in most high schools …. kids today!!! wusses! ….. don’t get me started!

#42 Blase on 03.20.14 at 9:25 pm

#31 ford perfect

Very interesting post! It’s so true, we are all mostly slaves to our nature. My nature is to save and to spend a lot of time doing un-diligent things. Others work their asses off and can’t save anything. Most of is need saving from ourselves at some point.

#43 Tired of It on 03.20.14 at 9:26 pm

Ok, here goes the thrice monthly ‘don’t put all your eggs in one basket schpeel.’ Yes, we know that Mr Turner, you’ve been saying it for years. Unfortunately you fail to recognize, unlike you, most Canadians are not wealthy and do not have the proess to financially diversify as you speak. (Other than you loyal minions, who, for some reason sound like a the largest congregation of Warren Buffets on the planet!)

THEREFORE!! Most Canadian will do with their money what is most important to them and/or their family; buy a home for purely emotional reasons. It is what it is and will always be.

And they will reap what they sow. — Garth

#44 Pope Snugglebums Cheezwhiz the 666lb (aka Nosty) on 03.20.14 at 9:26 pm

#211 Smoking Man on 03.20.14 at 5:23 pm — “IMF = Austarity. Or I’m F-ed. Then Greece, Spain, who knows.”

Supposedly, next are Moldova, NZealand, Taiwan and Venezuela. See what China has to say about Taiwan!

BTW, it was Brzezinski who laid out the plans for Ukraine’s takedown in 1997, but no one told Crimea.

Kickstart for the New Madrid Fault? 1870s West’s fall from grace?

#45 Patches O'Houlihan on 03.20.14 at 9:28 pm

The 5 rules of real estate

Dodge, duck, dip, dive, and…………………………dodge

#46 Spaccone on 03.20.14 at 9:41 pm

“Young homeowners in Britain are fast becoming a disappearing species.”

hxxps://twitter.com/TheEconomist/status/446436492278525952/photo/1/large

#47 JL on 03.20.14 at 9:41 pm

Nope, not cheaper when you include the lost opportunity cost of the equity. — Garth

With 5% down and a $300,000 purchase, we’re talking about $15K. At 7-8% that’s only $100 per month in lost opportunity cost. Go out for dinner one less time a month then the renter and own your own home and be proud of it.

Plus $9,000 for mortgage insurance, and closing costs. The point was owning is not cheaper than renting, as your poor example shows. — Garth

#48 SmallTownSteve on 03.20.14 at 9:44 pm

I just wanted to say:
Alison Redford good riddance your hypocrisy was monumental. If you tryed pulling that crap working for a private firm you would be in jail for embezzlement!

#49 bdy sktrn on 03.20.14 at 9:52 pm

supreme mis-spending of tax dollars. obscene. hard to believe.
———————————
Pete McMartin: The Portland Hotel Society — Oh. My. God.

Not only has the non-profit destroyed its reputation, but it’s put the government’s entire system into question

BY PETE MCMARTIN, VANCOUVER SUN COLUMNIST

I don’t know where to start.

There’s just so much that jumps out at you that’s egregious, hilariously improbable and, in the context of a social welfare agency the efforts of which should be entirely concentrated on the poor and marginalized, obscene.

Almost $9,000 in limousine charges. In one year.

Stays at the best hotel rooms — some of them approaching $900 a night — in Paris, Istanbul, Ottawa, Vienna, Los Angeles, New York City. (Personally, I can’t afford to stay at the Plaza.)

Almost $70,000 in restaurant bills! Charges for flowers! A trip to freaking Disneyland! A $900 baby shower! A $7,024.72 Celebration of Life for a deceased employee! Monthly expenses of $1,600 charged by the executive directors for use of office space within their personal residence! I am running out of exclamation marks and italics and I’m beginning to hyperventilate!

Appalling. Indefensible. And all of it conducted within a corporate culture where the accounting was seemingly written on a napkin. The audit and financial review of the Portland Housing Society by Vancouver Coastal Health and BC Housing make for the best reading of the year, if you like horror stories.

For instance:

“We found no evidence that the PHS Board is monitoring or authorizing PHS executive management expenses and payroll advance.”

Or:

“We also identified approximately $9,600 in apparent cash advances over the three-year period of our review for which we were unable to obtain any supporting receipts and documentation.”

——-

#50 Trojan House on 03.20.14 at 9:55 pm

Re: …NatGas in Ontario is about to rise 40%

Even renters will have to pay this.

Re: …renters can move.

Sure, but who wants to keep moving all the time? Moving is a pain in the a$&!

#51 Son of Ponzi on 03.20.14 at 9:55 pm

#13
At the very least, wait until you have 20% down.

For the “underwater” reason Garth mentioned, and because paying CMHC insurance to protect your financial institution is pure stupidity.
——————————
Always put down the lowest down payment possible.
If you croak, CMHC (The Canadian Taxpayer) will bail you and your lender out.

#52 Raf on 03.20.14 at 9:58 pm

Garth,

your Rule of 90 is intriguing. Do you also have a suggested ratio for mortgage liability:household income?

Thanks

#53 Alex on 03.20.14 at 10:00 pm

Garth. I love how you make me feel better for renting rather than owning. I can’t possibly scrape together enough cash to buy a place of my own and, at 40 and with two little kids, you’re the only guy in Canada who can make me feel okay about being this way. This is a damn hard side of the fence to be on, when so many of my peers have their palaces and RSXs and trips to Bermuda and kids in private school.

But I know in my heart it’s the right side.

Write on.

#54 2or3orsometimes7 on 03.20.14 at 10:03 pm

Re: Rule of 90 – how to apply for young people with less net worth? (ie. 30 year old is allowed 60% in real estate, but they’ve just bought the house so they don’t have more than 10-20% paid off yet)

Then don’t. — Garth

#55 devore on 03.20.14 at 10:04 pm

#28 Ron

What if I have the properly diversified non-cowboy portfolio but never want to own real estate?

You can still have exposure to real estate without directly owning any.

#56 DreaminginTechnicolour on 03.20.14 at 10:09 pm

Biggest mistakes I ever made – buying a house so there would be a backyard for the kids – it turned out that they never wanted to play in it !! – they wanted to be out on the driveway all the time to see their friends (should have chosen a townhouse instead) – Next biggest mistake – buying a new minivan to take the kids around in !! – it turned they never wanted to go anywhere together (should have bought a “nothing fancy” used car to get from point “a” to point “b” car – my advice to young couples – the kids should not come first when it comes to big ticket items- do what is best for those who have to pay for them. Don’t fall for the ever present ads and marketing shticks and trying to recap your childhoods through your own kids. Most kids don’t even want to take their eyes off the screen these days to go outside.

#57 Renter's Revenge! on 03.20.14 at 10:09 pm

@29 Andrew

My goal is to buy one condo’s worth of railway, pipeline, cell tower or transmission line every year. I too believe in investing in tangible assets.

We’ll see who comes out ahead, me or Victor Goof-inho.

#58 Dee on 03.20.14 at 10:22 pm

I guess this is part of 6, or call it reason 11: when you own property, and anything goes wrong, it’s your problem.

I rent a place in a trendy downtown 416 neighbourhood for half what it would cost to own. When this neighbourhood goes back to being the post-industrial hellscape it was 5 years ago, I can move. But more importantly, when the pipes in this 100-year-old house burst last winter, flooding the basement with sewage (tear down to the concrete and rebuild) and requiring the entire front yard to be torn up and pipes replaced, I didn’t pay a dime.

In fact, my landlord paid me for the few days my place was uninhabitable, plus the five-figure cost of repair.

So, that’s 6-12 months of rent wiped out for them. I was only out the cost of the sort of crap one keeps in a 100-year-old basement — not even enough to be worth the tenants’ insurance deductible.

Meanwhile, ask me about the fully funded, diversified TFSA and the 10%+ it gained over the last year . . .

#59 Cici on 03.20.14 at 10:24 pm

Totally agree 100% with everything you just said…but now how to convince the man? Trying to get him to read this blog, but our friends keep buying and parading their beautiful dwellings, making it all seem so natural, innocent and serene, arghhh!

#60 Waterloo Resident on 03.20.14 at 10:28 pm

Its all because of STUPID SILLY EMOTIONS.

– People buy houses and then get destroyed when the economy fails all because of emotions.

– Men marry women and then get destroyed when the wifey changes her mind about marriage, all because of emotions.

=======

I tell the guys “Don’t buy a house, just rent one”.
I tell them that if the economy was to suddenly turn around and smack them in the head with a layoff notice, they won’t lose their shirt with bankruptcy.

They tell me that I am too pessimistic and that I will never be happy unless I trust the economy 100%.

I tell the guys “Don’t get married, just live with a woman without getting married, in 2 separate residences. She has her principal residence (and her mail goes there), and you have yours, legally separate personal residences, but you live in one place in happiness as if you were living together married.

I tell them that living together 3 years in one place they are considered to be legally married if she does not have her own separate place, so that’s a must.
I tell them that if the marriage was to suddenly turn around and she was to smack them in the head with a divorce notice, they won’t lose their shirt with Alimony and division of assets.

They tell me that I am too pessimistic and that I will never be happy unless I trust the woman 100%.

======

I give up trying, it’s like trying to teach a pig to sing: It just wastes your time, and it annoys the pig.

#61 Smoking Man on 03.20.14 at 10:33 pm

#58 Cici on 03.20.14 at 10:24 pmTotally agree 100% with everything you just said…but now how to convince the man? Trying to get him to read this blog, but our friends keep buying and parading their beautiful dwellings, making it all seem so natural, innocent and serene, arghhh!
……….

Interesting, usually it’s trying to convince the woman not to get sacked in.

Please tell me your man does not have a man purse…

#62 Cici on 03.20.14 at 10:33 pm

#53 Alex

Be extremely happy and proud that the most important thing in your life is your kids and their well-being, which you are preserving thanks to foresight and financial responsibility, and not trips to Bermuda, fancy palaces, RSXs and private school.

Your kids don’t need or care about those things, and if their friends are making them feel like they should, find new friends with more smarts and better values.

All kids need are food, basic shelter, love, support and good role models, and by the sounds of it you are excelling in all of these areas ;-)

Keep putting yourself and your family first and you will see, it will all work out for the better in the end. You will slowly but surely accumulate wealth that actually belongs to you, and you will teach your children that hard work and perseverance lead to long-term gains.

#63 devore on 03.20.14 at 10:33 pm

#42 Trojan House

Sure, but who wants to keep moving all the time? Moving is a pain in the a$&!

No one wants to move, but sometimes you have to. Sometimes it’s the best option.

And who said anything about KEEPING moving all the time?

#64 Bottoms_Up on 03.20.14 at 10:37 pm

Now the CREA is trying to control how we post links to their website:

“All links to any CREA website must be accompanied by a prominent notice which makes it clear to a browser that the link leads to a website of The Canadian Real Estate Association.

This notice may make reference to the domain name itself (e.g. REALTOR.ca or ICX.CA) or may refer to CREA.
No materials, names or marks may be used with the link to give the erroneous impression to a user that the individual, entity or website is somehow affiliated with CREA or any of CREA’s web sites;
Unless CREA expressly agrees otherwise, all links to any CREA website must connect to the home page of the website;
All links must be displayed in text, or by using the graphic buttons provided by CREA.”

#65 2or3orsometimes7 on 03.20.14 at 10:39 pm

Re: Rule of 90 – how to apply for young people with less net worth? (ie. 30 year old is allowed 60% in real estate, but they’ve just bought the house so they don’t have more than 10-20% paid off yet)

Then don’t. — Garth
———————————————-
I don’t understand. Let’s say I buy a $500,000 house with $100,000 down. I have $100,000 in other investments. 500K/600K is 83% exposure to real estate. Too much at 30 years old by this rule of 90. Did I do that right?

#66 sheane wallace on 03.20.14 at 10:40 pm

#26 Andrew
………………………..
Canadian ‘journalism’? Which world do you live in?
These are the people that made F and M.C. media stars, enjoying media comfort while destroying the economy and the savers.

A whore has more dignity.

#67 joblo on 03.20.14 at 10:44 pm

So ya tell the kids the rule of 90.
Then they get the big O&G job at 35 in Cowtown.
Avg. house is $400 K
No buy til net worth hits $730K
yeah that’ll fly

#68 Smoking Man on 03.20.14 at 10:52 pm

#21 Assquatch on 03.20.14 at 8:55 pmThird viewing of season 1? I didn’t know people do that….
………….

I never watch TV, I’m coding
drinking or trying to write. Stumbled on true detective by accident.

You see your spirt being portrayed on the screen kind of arouses your curiosity..

You get hooked and wonder.

The perfect spelling was out of respect for Nic, writter of the
show.
He use to be a prof at a university teaching story writing, they get
anual with typos. Someone talked him out of being a slave
trainer in academia and he went to Hollywood, locked himself in a hotel room and did
True Detective.

#69 AfterTheHouseSold on 03.20.14 at 10:54 pm

#50 Trojan House
“Moving is a pain in the a$&!”

Only if you are bogged down with crap. Purge!

“NatGas in Ontario is about to rise 40%. Even renters will have to pay this”.

Not our experience. Always make a point to rent from older people who are most likely to be mortgage free,
just looking for extra pocket change or cover that extra gas bill.

#70 Jughead on 03.20.14 at 10:55 pm

Renting is cheaper than owning in every major Canadian city

Not in Windsor.

Major city. — Garth

#71 Silent the People on 03.20.14 at 10:55 pm

Bravo! You say it well!

#72 I'm stupid on 03.20.14 at 10:59 pm

#10 LH

Have you ever gotten laid? I mean with a woman you didn’t have to pay. One that wanted to be with you? it seems to me that either your lonely so you try to get attention here or you realize that all you have is houses and your not happy or your lying to make up for your failures.

Let me give you some advice, don’t worry it’s free. I can name 10million people that have a higher net worth then I do, Warren Buffet can name 2 or 3. The point is that I’m happy. I live a very comfortable life, stress free. I have people that love me and I don’t need to worry about financial problems. At what point are you going to be happy? 5million 10million 1billion 1trillion? If all you worry about is more money you will find that you wasted your life.

You’re like a boy in a locker room for the first time, trying to size himself up against everyone else. You don’t realize that no one cares. You should really try to have balance in your life. Work should never be the driving force of your life.

#73 jan on 03.20.14 at 11:00 pm

NatGas in Ontario is about to rise 40%.

Me -yes but if you rent you still have to pay for nat gas bill.

#74 Gigi on 03.20.14 at 11:03 pm

# 53 Alex

Alex you’re not alone. We also have 2 small kids and we keep renting. We had a house and it was a nightmare, it was sucking all of our cash flow. Keep in mind that what your friends are showing is a lot of credit. Keep saving as cash is king!
“it’s not shelter that will give you a happy life, it’s cash flow.”
Thanks Garth.

#75 Rod Forb on 03.20.14 at 11:14 pm

You have made it sound so simple and easy. Top 50 Canadian, top 500 U.S. Foolproof no??

#76 Kilby on 03.20.14 at 11:14 pm

Good points tonight but the intangibles are always there, we hate renting and like working in and around our home and being able to remove a wall or install a wood burner, planting trees, having a greenhouse, a shop set up for our needs etc…That being said we have been without a mortgage for 23 years so no financing stuff. All the advice here is dead logical and we adhere to a lot of it (Sold last 3 years ago and are currently renting…and waiting) But like being owners…No excuses and I know a lot that aren’t interested in renting no matter how financially practical it may be.

#77 Andrew Woburn on 03.20.14 at 11:19 pm

As I read the Gen Y rants about evil boomers and their stranglehold on RE, I wonder if they ever stop to realize that Gen X is running the companies that make the robots that are eating Gen Y’s jobs. Boomers will die, RE will revert to the mean, but robots won’t ever give your job back. House prices are irrelevant if you can’t buy anything.

Bashing boomers is clean, cheap fun but it might be smarter to start organizing collective political action now if you don’t want to end up on a welfare reservation twenty years out.

#78 J on 03.20.14 at 11:31 pm

Good post tonight, Garth. Perhaps you could comment on the story below. Dont know how credible it is but if so would have a big impact on the RE market in Vancouver. Not so HAM…

http://www.zerohedge.com/news/2014-03-19/music-just-ended-wealthy-chinese-are-liquidating-offshore-luxury-homes-scramble-cash

#79 Snowboid on 03.20.14 at 11:33 pm

“…Renting is cheaper than owning in every major Canadian city, even with 3% mortgages. In the US, in contrast, owning is now 35% cheaper than renting…”

This is clearly the case in our economic situation, renting is far less expensive than owning in Kelowna.

With the costs of owning a home in Phoenix added to the rent it’s still about the same as the cost to own and maintain our former home in Victoria.

It’s quite simple, and we can thank the sage advice of the esteemed Professor for unlocking the power of the Victoria homes’ equity.

Plus we were lucky to buy when we did down south.

#80 Bcd on 03.20.14 at 11:37 pm

@ #30 Shawn on 03.20.14 at 9:02 pm
And Another Thing…

(11) Today’s mega mortgages are almost immune to being paid off early because they are so large in comparison to income.
————————–

Agreed. And, most banks have maximum payment rules that limit how much someone can increase the monthly and/or do lump sum payments… yet another barrier to people paying off quickly.
—————————————

Not true. When is the last time you had a mortgage? My mortgage was very average and it allowed me to make 10% of total mortgage lump sum payments every year against the principle…in addition I was allowed to double the payments as often as I liked. On the contrary new mortgages are different from days of old where you got penalized for paying off early.

#81 IC on 03.21.14 at 12:13 am

@ #12 hickster

Way cheaper to rent in Regina for me. Not sure where you’re looking.

#82 Waterloo Resident on 03.21.14 at 12:36 am

(Oh-oh, I broke the Blog)

#83 Tony on 03.21.14 at 12:41 am

Number 6 is what will kill home prices most. As the budget deficits in all Canadian cities goes through the roof so will property taxes. This will drive down the cost of rent and the price of houses.

#84 Realist on 03.21.14 at 1:34 am

In my opinion, once the 60-70 years stop selling real estate to one another were “hooped” in Canada in the major cities. It remains to be seen how long this lasts. I have 21 cousins in their 30’s-40’s and many with good jobs i.e. 100k plus, none can afford to buy 2nd homes. For that matter, none can afford to live in the more high end neighborhoods which our Aunt’s/Uncles could easily affordable with middle class incomes. That age category has all the money, purely from real estate appreciation over the years.

#85 Republic_of_Western_Canada on 03.21.14 at 1:59 am

#50 Trojan House on 03.20.14 at 9:55 pm

Re: …NatGas in Ontario is about to rise 40%

Even renters will have to pay this.

Re: …renters can move.

Sure, but who wants to keep moving all the time? Moving is a pain in the a$&!

Renters don’t have to worry about heating fuel increases when that’s part of an ‘all-in’ package. Common in larger buildings when the cost of installing separate meterage for each resident is unfeasible.

Where utilities are separated out, usually as just another kind of cash-grab, they are a lot less than for a whole house.

Furthermore, mortgage junkies don’t move much less than renters. Just with bigger problems and costs.

#86 Republic_of_Western_Canada on 03.21.14 at 2:15 am

#43 Tired of It on 03.20.14 at 9:26 pm

[…] most Canadians are not wealthy and do not have the proess to financially diversify as you speak.

Then they shore as hell don’t have the proess[sic] to leverage into a (half)-million dollar chipboard doghouse either.

A 20% down-payment (which is still less than the 1/3-down which it should be) on a half-mill is 100K. If you start with that at 5% return after favourable dividend taxation that’s 5,000 bucks a year compounded for the rest of your life. Pretty nice return just for holding your water.

THEREFORE!! Most Canadian will […] buy a home for purely emotional reasons.

Like smoking or obesity – until they learn better, or are forced to abstain. The interest-rate hike and job-loss coronaries are closer than you think. Then it’s no more flashy housing crap for YOU after bankruptcy court.

#87 Republic_of_Western_Canada on 03.21.14 at 2:28 am

#31 Ford Prefect on 03.20.14 at 9:03 pm
[…] Conservatives want people to look after themselves, a totally unrealistic assumption in light of human nature. Hence TFSA for example.

Not unrealistic. Just requires education and training, instead of the saturation advertising which conditions people to buy a bunch of flashy or easy crap.

A lot of otherwise ignorant consumerist urban dweebs will actually learn to survive if you drop them off alone somewhere remote with an axe, matches, and rifle.

Pick them up 5 years later, if they’re still alive, each will have a tremendously improved outlook on life and the frugality and foresight needed to stay that way.

#88 Freedom First on 03.21.14 at 4:30 am

#43 Tired of It.

You just don’t understand that prudent financial management is wise no matter what income level a person/family is at. Garth does though, and he is giving you a free blog. Thankfully, some people who come here listen and learn and prosper from this free information. I hope you can open your mind, or you will remain “Tired of It”, as in having your financial gonads keep getting squeezed until they are crushed. “Count On It”. No charge.

#89 Pulp Faction on 03.21.14 at 4:41 am

I just met ANOTHER guy who got a big, fat inheritance and sunk it all into “as much house as he could buy with it”. Every nickel…….

#90 Buy? Curious? on 03.21.14 at 5:25 am

Yo Garth! Check out what prices for houses are going for in parts of Chicago.

http://www.huffingtonpost.com/2014/03/20/englewood-dollar-lots_n_5001251.html

Looks like an opportunity!

https://www.youtube.com/watch?v=4vaN01VLYSQ

Toronto home prices are not going down. It’s a hub city. “Smart” people move there for opportunities that places like *ahem* Chatham don’t provide. Your theories are correct on paper but in practice, well, you can’t predict stupid.

Rob Ford 2014! What? Are you really going to vote for John “4th time’s a charm” Tory or Olivia “Kensington Market photo opp” Chow for Mayor? Pluh-ease.

#91 Steven on 03.21.14 at 5:35 am

So why are most Boomers screwed, with their children slavishly plodding in their footsteps?

The real answer is that they are all programmed to obey the law and example of others. To be like folks and do much the same thing as everyone else.
If anyone steps out of line and does something or says something unorthodox the offending person will be shouted down and punished by their peers.
It really is that simple Garth. Humans as always are easily herded.

#92 Steven on 03.21.14 at 6:44 am

#43 you are correct about Canadians not being universally wealthy. Still without advertising to the contrary it would be more difficult to justify the high rents, high house prices and high vehical prices.
With out those high prices there would be fewer big loans for bankers to make and less electronic currency in circulation. The suffering of the greater fool is the vigor of the FIRE economy. Do you ever notice how government is chasing the poor out of what ever affordable shelter they manage to find? Government doesn’t give a damn about the poor. The government cares about supporting high real estate prices because that is what they are insuring and that is what their loyal voters believe in. Nothing matters to them but money and power, all other priorities don’t matter.

#93 Steven on 03.21.14 at 7:49 am

It doesn’t take any personal courage to buy a $60 to a $80 thousand dollar home back in the 1980s and turn around and multiply the price by 5 to 10 times 30 years later. It is easy as long as you can hang on and make the payments. Your prospective customer has to live some where and all your peers are playing much the same game so basicly there is no real competition between suppliers of real estate for customers.
For the home buyer it is either pay rent at rates he can not afford or buy a house he can not afford. The alternative is camping out somewhere and in winter that can be deadly. In Canada the system is staunchly opposed to those seeking to escape from high costs.

http://www.comoxvalleyrecord.com/news/251054241.html
Whistler, B.C. carpenter’s secret treehouse at risk
http://www.youtube.com/watch?v=6ONLyd2gmV8&feature=player_embedded

There is a term called hydraulic despotism and it refers to a situation in the middle east where those with the power to control a life giving resource control society for their benefit. Instead of water we have real estate/land and access to it.

#94 T.O. Bubble Boy on 03.21.14 at 7:51 am

@ #80 Bcd on 03.20.14 at 11:37 pm
@ #30 Shawn on 03.20.14 at 9:02 pm
And Another Thing…

(11) Today’s mega mortgages are almost immune to being paid off early because they are so large in comparison to income.
————————–

Agreed. And, most banks have maximum payment rules that limit how much someone can increase the monthly and/or do lump sum payments… yet another barrier to people paying off quickly.
—————————————

Not true. When is the last time you had a mortgage? My mortgage was very average and it allowed me to make 10% of total mortgage lump sum payments every year against the principle…in addition I was allowed to double the payments as often as I liked. On the contrary new mortgages are different from days of old where you got penalized for paying off early.
————————-

That’s actually exactly what I was referring to… 10% lump sum per year is a limit, is it not? If you are on 25-yr amortization, you still basically have to keep on the mortgage for the full 5-year term (i.e. putting max payments and max lump sums still leaves a balance after 5 years).

Of course, I understand that someone on a 25-yr amortization mortgage doesn’t magically come up with cash to simply pay off a house in full… but with so many people using mortgages as general-purpose loans (i.e. taking the max mortgage to maintain “flexibility”), it forces you into a longer term.

Also – if you did pay off early, there are the IRD (interest rate differential) penalties, etc.

There are

#95 Mingeford on 03.21.14 at 7:52 am

Dee at #58

Ever heard of building insurance? Your landlord probably only paid a deductible and the rest was covered, including the payment to you for being displaced.

#96 X on 03.21.14 at 8:15 am

re #65 – then don’t buy if you are below the recommended level required. Or buy less house. Or save more….

GTA rents are about 30% less to buy comparable places. Not even close if you look at the numbers. Which basically tells me (with the rare exception) that most RE investors have no clue what they are doing.

#97 Rob on 03.21.14 at 8:35 am

Hello Garth,

Would you be able to do an article on registered disability savings plans?

#98 Detalumis on 03.21.14 at 8:43 am

1. Rule of 90 is that contrary to popular belief most people don’t live that long and those that do are the losers not the winners. The life expectancy after 65 has only increased 4 years in the last 50, when there was no treatment at all for anything heart related.

2. Boomers, the women in particular, look like they won’t live as long as their mothers, my 2 college girlfriends both died of odd cancers like pancreatic before 55 so never even got to retire. I think it’s the stress of working long hours as well as looking after kids that did them in but who knows, canary in the coalmine? My hometown neighbourhood in Hamilton has a life expectancy now of 66.5. The people there won’t live long enough to collect OAS.

3. The average age of widowhood hovers at 60 not 80 so more than half of all couples have no retirement together. Nothing is sadder than watching half a tied-at-the-hip couple after their partner has died.

4. Don’t move to Hooterville if you’re a Manhattan girl. Nothing ages you faster than living in the back of beyond, hanging out with old folks and waiting to die. Stick to areas you enjoy.

5. #60 Waterloo guy, try marrying a woman based on her earning capacity and kindness not her “hotness”, the former doesn’t fade and you won’t be hit by the alimony arrow, in fact you may even collect, now that’s a thought . Those nerds you overlooked in college are the ones who end up making the most kaching and they age better as well.

#99 WhiteKat on 03.21.14 at 8:53 am

For any unfortunate Canadian ‘US persons’ who are just finding out that they are considered ‘US taxpayers’, and have just found out about the new American FATCA law being applied to all financial institutions in the world, keep in mind that the intergovernmental agreement recently signed by the Canadian government to legislate the American law FATCA in Canada has the following exemptions (as per Canadian Bankers Association website):

“Will financial institutions have to disclose information about registered plans?
The following registered plans will be exempt from reporting:
Registered Retirement Savings Plans (RRSPs)
Tax Free Savings Accounts (TFSAs)
Registered Disability Savings Plans (RDSPs)
Registered Pension Plans (RPPs)
Registered Retirement Income Funds (RRIFs)
Pooled Registered Pension Plans (PRPPs)
Registered Education Savings Plans (RESPs)
AgriInvest Accounts
Deferred Profit-Sharing Plans”

Thus if all your money is in one or more of the above listed registered investment vehicles, Canadian financial institutions WILL NOT BE RATTING YOU OUT!

As a side note, LIRAs (locked in registered accounts) are NOT on this list. This means that if you ceased employment at a Canadian company, and had a pension plan that was rolled into a LIRA, if the value of the LIRA is 50K or more, it is FATCA reportable. Note that LIRAs can be unlocked at age 55. Also note that it if the AGGREGATE balance of all your accounts at one bank is 50K or more, then all these accounts are FATCA reportable. For example, if you have a LIRA worth 40K and a savings account worth 11K, these accounts are FATCA reportable.

#100 Dupcheck on 03.21.14 at 9:03 am

There are people that would rather die out of hunger than move where they do not like it. They would complain as wrong was done to them by Gov or else when the simple solution is move to where you can afford it. People never learn. No sorry for the ones that have choices and ignore them.

#101 WhiteKat on 03.21.14 at 9:07 am

Re: my prior post, to clarify one point about FATCA reporting. The aggregate 50K balance I refer to, applies only to those accounts not on the FATCA exempt list. For example, if you have 100K at one bank, and 60K of the 100K is held in registered vehicles on the FATCA exempt list, then you will NOT be FATCA reportable.

A word of caution about the 50K aggregate threshold. Although financial institutions are not required to report on Canadian US slaves with aggregate account balance of less than 50K, nothing STOPS them from doing so. Some people are concerned that banks may report on them anyway just to be safe, and to make their computer systems less complicated. As it is banks are spending huge sums of money becoming FATCA compliant(as is the Canadian government), the costs of which will be passed on to all bank clients and all Canadian taxpayers.

#102 moneymike on 03.21.14 at 9:10 am

What does [email protected] mean?

#103 WhiteKat on 03.21.14 at 9:13 am

@ScienceMonkey,

I almost missed the questions you had for me, since I don’t read Garth’s blog that often anymore. Anyway, I did respond to them in the ‘Baby Doomers’ post towards the end of the commments (#222, 223, 224).

#104 Dupcheck on 03.21.14 at 9:24 am

Garth does such thing exist:
One time capital gain tax free up to 100K. To what does it apply? How do you go about doing it?

#105 WhiteKat on 03.21.14 at 9:30 am

I had to share this letter written by a Canadian RCMP officer to his MP Scott Armstrong, who hopefully with have an ‘epiphany’ of his own.

Dear Mr. Armstrong;

In 1958, my Canadian parents crossed the US border and attended the nearest “maternity home” where I was born before we all returned home to Canada. Since that time, I have never lived, worked or voted in the US. I have always lived, worked, voted and paid taxes in Canada. I also bank here, where I continue to live.

As someone who has voted for you in the past, I would request that you answer the following questions, the answers to which will determine if I ever vote for you again:

1. Do you consider me to be a Canadian who was born in the US, or a “US person” who lives in Canada?

2. Based on the fact I am Canadian, have always lived and worked in Canada, and do all my banking here in Canada where I live, do you consider my bank accounts “offshore” and the business of any foreign government?

3. According to the Master Nationality Rule, a Canadian living in Canada is only Canadian. Do you believe this, or do you believe that a Canadian living in Canada can also be American or Eritrean, and thus be subject to the laws of those nations while in Canada?

4. Do you believe that might makes right (i.e. that the US can do what it wants inside Canada, because of its might, but Eritrea is not allowed to do the same thing) or that Canada should stand against all foreign marauders?

5. Do you support the Canadian Charter of Rights and Freedoms and its guarantees to protect people from unlawful search and seizure and to not be discriminated against based on national origin?

6. Do you support the FATCA IGA, which assists the IRS in a fishing expedition which, while allegedly aimed at tax cheats, will actually result in a massive by-catch of honest, law-abiding Canadians (and we know what becomes of the by-catch on a fishing expedition)?

7. If you answered “yes” to 5 and 6 above, how do you reconcile that, considering that the IGA violates the protections guaranteed in the Charter?

8. Do you honestly believe that there will ever be reciprocity, when all the US is promising to do is “to pursue legislation to provide reciprocity” or do you accept that Canada will get nothing from this except to maintain the status quo (i.e. avoid economic sanctions)?

9. Do you believe that Canada is a sovereign country, and should not acquiesce to the extortionist demands of foreign powers?

10. Would the Conservative government be so quick to sign an IGA that violated the Charter rights of any other group except “US persons”, or is the political calculus that Americans are unpopular enough that trampling on their rights will have little political fallout?

11. When the enabling legislation for FATCA is tabled, do you intend to support it or to take a stand for Canadian sovereignty and the Charter rights of all Canadians?

Thanking you in advance for your prompt reply.

Canadian Cop

#106 AfterTheHouseSold on 03.21.14 at 9:33 am

#102 moneymike
[email protected]

Nice lady at the bank.

#107 drydock on 03.21.14 at 9:34 am

More bad news for mouth breathing,knuckle dragging,the earth is 6000 years old and most definately flat as well as the center of the solar system neocon religious right fanatics who persecute and stifle scientists and will probably start accusing people of being witches next.
Read the link and watch the video.
I always thought we would legalize weed first because of the LeDaine Commision Report recommendations,instead the Americans are doing it and our glorious leaders want to build prisons to house people for simple possesion.
Lots of money for that but none for mri machines or other technology to bring our hospitals into the 21’st century.
As a nation we are starting to look like real assholes.

http://iacknowledge.net/watch-biologist-explains-how-marijuana-triggers-suicide-of-cancer-cells/

#108 Vangrrl on 03.21.14 at 9:47 am

#102: It means ‘Nice lady at the bank’.

#109 gladiator on 03.21.14 at 9:53 am

Another renter with wife and 2 small kids here.
Diligently budget all income and expenses, save 25% of pre-tax yearly family income (around 100k). Once-a-year vacations in decently-priced places, usually Mexico. Spending lots of time with the kids and wife outside and not watching TV at all. Enjoying life to the fullest and not by accumulating stuff, but by spending time with people I love and respect: family and friends.
If I die tomorrow, I will not regret the life I’m living now. I’m 37.

#110 Victor V on 03.21.14 at 9:58 am

Seven ways Jim Flaherty changed the Canadian mortgage market

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/seven-ways-jim-flaherty-changed-the-canadian-mortgage-market/article17600143/

Many people are now asking: What happens next under newly installed Finance Minister Joe Oliver? With his Bay Street roots and arguably more free-market mindset, some anticipate a more hands-off approach to the mortgage market.

“We do not expect any further mortgage rule changes, although the new minister will obviously review the file,” Mr. Murphy says. “Mr. Flaherty and the government seem content with where the housing/mortgage market is ‎now.”

In protecting Canadians homeowners from themselves and lenders from excesses, Mr. Flaherty ultimately made it harder for millions of families to get mortgages. But he also reinforced the very foundation of Canada’s banking system. We ended up with a safer mortgage market because of him.

#111 Penny Henny on 03.21.14 at 10:00 am

#50 Trojan House on 03.20.14 at 9:55 pm
Re: …NatGas in Ontario is about to rise 40%
———————————————————–
my gas bill was $110.47 last month. Gas supply charge was only $47.42. So if the cost of natural gas goes up by 40% then my gas supply charge goes up to $66.39 and my total bill up to $129.44.
Hardly a 40% jump, more like a 17%. Your results may vary.
The point I’m trying to make is that everyone, and mostly the media, likes to take things to an extreme. People need to stop and think and not believe everything they are told. Drama queens.

#112 Ralph Cramdown on 03.21.14 at 10:05 am

Everybody’s getting on the new craze of lending money to deadbeats and former deadbeats, it seems.

“The competitive landscape in the Canadian non-prime automotive finance industry increased significantly during the year with start-up finance companies introducing products which compete directly with Carfinco as well as competing with Canadian financial institutions providing near-prime financing. The non-prime auto finance industry in Canada has become one of the most competitive it has been historically which has had an impact on the Company’s loan origination volume and growth.”

http://www.newswire.ca/en/story/1326215/carfinco-announces-year-end-results

I liked the stock when it was cheaper, and it liked me.

#113 Infused with Opiates on 03.21.14 at 10:14 am

94 TOBB – the 10% pre-payment is common, but try to get the deal where it is allowed for every calander
year, hence a total of 60% of principal payback in
addition to regular payments over the term. At the end
of the term you can pay the balance off if you have the
money.

#114 Mr Happy on 03.21.14 at 10:24 am

#24 Retired Boomer – WI on 03.20.14 at 8:56 pm
Entirely off topic for once.

Tonight… in Florida we won… we won half the pot $565.50… so won only half the pot $733.25 today. What fun!!

Does this mean i have to report the income??

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

You do now…. ;)

#115 Smoking Man on 03.21.14 at 10:27 am

#105 WhiteKat on 03.21.14 at 9:30 am

Well done Sr….

#116 Nemesis on 03.21.14 at 10:38 am

#FunnyOldWorld

…Who’d a thunk it… but LabradorRetrievers may soon join colonoscopes in your gastroenterologist’s surgery… Seriously. An added bonus… certain DoggieBehaviours may now be re-labelled as diagnostic enquiries…

[UK Independent] – Giraffe kisses dying zoo worker final goodbye

…”Various studies have suggested animals can sense illness in humans, including diseases with no visible symptoms.

Marine, a labrador retriever, was successfully trained in 2011 to detect people suffering with bowel cancer. Sniffer dogs have also proved successful in identifying patients with lung cancer.

A 2007 study in the New England Journal of Medicine found one cat could identify people who were dying of a terminal illness at a nursing home.”…

http://www.independent.co.uk/news/world/europe/giraffe-kisses-dying-zoo-worker-final-goodbye-9207114.html

#BonusZen

[UK Independent] – Man assaulted and locked wife in shed after she kept singing ‘ding dong, the witch is dead’ when his mother died

http://www.independent.co.uk/news/uk/crime/man-assaulted-and-locked-wife-in-shed-after-she-kept-singing-ding-dong-the-witch-is-dead-when-his-mother-died-9207765.html

#117 shocked! on 03.21.14 at 10:46 am

Understanding, and accepting the risk of leverage…
Baby Boomer here!…if possible, please explain the difference between the risk associated with leveraging to invest, versus the risk associated with investing with actual dollars…

#118 gladiator on 03.21.14 at 10:47 am

clarification to my earlier post: income is 100k, not the 25% savings.

#119 shocked! on 03.21.14 at 10:49 am

That is, leveraging in the financial market…not real estate!

#120 };-) aka Devil's Advocate on 03.21.14 at 11:07 am

#210 James on 03.20.14 at 5:07 pm
Surveys consistently indicate between a third and half of the cohort plan to sell real estate to finance cash flow needs. That is more than enough to significantly impact the housing market. — Garth

Just like you consistently say not to invest in RE because a correction is coming for the past 5 years. He is just as right as you are wrong.

Learn to read. I have nothing against owning a home, but doing so at the expense of accumulating financial assets is a big mistake. As I said, a large number of Boomers are discovering this. — Garth

Couple quick words; “bought and paid for”. Take all the fancy schmancy cypherin’ out and after all is said and done, and some hard time paying for it compounded by paying for the use of other peoples money to get it initially you own it and don’t have to pay rent or be beholdin’ to anyone for a roof over your head from then one.

KYes things can happen, but that’s life and there is more to it than sitting’ on a wad of cash thinking ignorantly that now you’re safe. You’re less safe because now you’ve got to protect that precious bounty you so lust after. Savings can evaporate as quickly as a fool can and will be parted from their money. The land endures. You need the land to survive, just as you need air and water, but you don’t respect those things so much as the mighty buck. And in your pursuit of loot you rape that which is most important… The land.

The only thing money is good for is showing off. Show offs are the greatest fools.

#121 BillyBob on 03.21.14 at 11:12 am

#67 joblo on 03.20.14 at 10:44 pm
So ya tell the kids the rule of 90.
Then they get the big O&G job at 35 in Cowtown.
Avg. house is $400 K
No buy til net worth hits $730K
yeah that’ll fly

—————————————————————-

Err..I don’t think you understand the Rule of 90. In your example, all it means is the kiddies shouldn’t have more than 90-35= 55% of their net worth tied up their house. So if they’re worth 100k, shouldn’t have more than 55,000k in equity in the house without another 45,000k in something more liquid and diversified. It’s just a rule of thumb that (obviously) builds in less RE exposure as you age.

Now, the wisdom of having only a 22% equity stake in property that could depreciate that much or more, that’s another issue. Basically you’re rolling the dice on the O&G industry. How’s that worked out for AB in the past?

But to hear most rig pigs brag, shouldn’t be a problem to pick up the house, cash, right?! lol

#122 Dual Citizen In Canada on 03.21.14 at 11:13 am

#101 WhiteKat on 03.21.14 at 9:07 am
Not having the Canadian Banks rat you out doesn’t mean the IRS won’t recognize gains in plans like TFSA and RDSP as non taxable from the US side. I cancelled my TFSA and my tax accountant is looking at my son’s RDSP. Be complaint! If you have nothing to hide, what is there to worry about?

#123 Ret on 03.21.14 at 11:16 am

Amazing. Not a murmur from a HST collecting politician across the land. Now tell me again why natural gas prices are jumping 40%.

http://www.cmegroup.com/trading/energy/natural-gas/natural-gas.html

I love the way that they quote the four month 2005 price spike to bolster their case for a huge price increase.

http://www.msiutilities.com/nymex_settlement_data-i-23.html

US prices also expected to rise up to 100% by 2015. I don’t see it in the futures quotes out to 2016.

At the same time, not a day goes by (Larry Kudlow) without talk of exporting LNG to Europe because the US has such abundant supplies.

Prediction: We raise prices for NG 40%, the US doesn’t. They get another couple of hundred thousand Canadian jobs as companies have yet one more reason to relocate.

It happened with hydro so why not the same scenario with NG?

#124 jess on 03.21.14 at 11:18 am

…the wrinkles can always sell their plasma.
============
The Staircase

Why did Howard Davis resign from the London School of Econ?
Oct 2011
http://woolflse.com/dl/woolf-lse-report.pdf

======
http://www.taxjustice.net/2014/03/21/cambridge-university-new-ukraine-scandal/

#125 BillyBob on 03.21.14 at 11:18 am

Further to my last post, even the example given, with a modest $100,000 net worth, isn’t the way things work in the real world, is it? More likely, they’ll scrape together the 10% down payment (not so easy to save when you have to get that loaded F150), borrow it from the parents, whatever. That’s 40k. So now they have 100% of their really small net worth in one asset, that could easily depreciate by that amount if/when the industry slows as it regularly does. Unfortunately, they’re still left with the $360,000 mortgage.

They better hope the job holds. They’ll need it for a long time.

#126 Aggregator on 03.21.14 at 11:24 am

#64 Bottoms_Up

Now the CREA is trying to control how we post links to their website

That doesn't surprise me and it's probably SEO related so that recent search engine news doesn't get directed to blogs like this.

I could be mistaken, but I believe CREA may have changed their monthly PR reports since last month's report didn't include statistics (from my sources). It's possible they may have created different levels of reporting for members, media and subscribers.

Regardless, their latest control freak scare tactics only enforces a motive to keep data from the public for their interest. That's not a good manner when the competition bureau is on setting up the next case against them.

“What makes organized real estate in Canada the envy of many other countries is that it had the vision to create the MLS system and provide restricted consumer access via the mls.ca website and so avoid disintermediation that would inevitably have occurred otherwise.” —CREA 2005

#127 Stickler on 03.21.14 at 11:54 am

@ #77 Andrew Woburn on 03.20.14 at 11:19 pm

As I read the Gen Y rants about evil boomers and their stranglehold on RE, I wonder if they ever stop to realize that Gen X is running the companies that make the robots that are eating Gen Y’s jobs. Boomers will die, RE will revert to the mean, but robots won’t ever give your job back.

————————————

Generation X is the first generation predicted to do worse then the previous.

Gen Y is just the same, but with more expensive housing & more a expensive tech addiction.

#128 Aggregator on 03.21.14 at 11:59 am

This might explain why organized real estate is squabbling over housing data.

Competition Bureau Seeks Comments on its Draft Price Maintenance Guidelines

March 20, 2014 — OTTAWA, ON — Competition Bureau

The Competition Bureau today published its draft Enforcement Guidelines — Price Maintenance (Section 76 of the Competition Act) for public consultation.

The draft Price Maintenance Guidelines describe the Bureau’s general approach to enforcing section 76 of the Competition Act, including with respect to common business practices, such as minimum resale pricing, manufacturer-suggested resale pricing and minimum advertised pricing.

The issuance of these draft Guidelines supports the Bureau’s Action Plan on Transparency, which aims to promote the development of a more cost-effective, efficient and responsive agency, while providing Canadians with more opportunities to learn about the Bureau’s work.

Interested parties are invited to provide comments on the draft Guidelines by email, fax, or regular mail no later than June 2, 2014, to:

If you want to complain about organized real estates' monopoly over housing data information and retailers' price gouging, here's your chance.

This would make a nice post Garth, and extend a warm thank-you to CENSORED.

#129 :):(Ying Yang on 03.21.14 at 12:04 pm

#38 Smoking Man on 03.20.14 at 9:20 pm
#27 Jimmy on 03.20.14 at 8:59 pmPlease share what you thought of the last episode of True Detective. Especially around the last 10 minutes.
You should fix your taillight if you drive the same truck.
………
It’s an anthology, was the best way to kill of Marty and Rust. The underlying theam of Nic’s writing is, shit happens, people fall, I should know.
But then after a long hard battle using the resources and skills you have to achieve a goal.
You change, perhaps that’s why I still haven’t submitted my manuscript, not ready to change just yet.
……………………………………………………………………….

Smoking Man my brother Hulu’s this program in Singapore, hes really into it. I have only watched a few episodes. So confusing when you’ve missed some in between. Agree this show looks like a winner. I heard Brad Pitt may be on board in the next season. Girlfriend and I going to Seneca Sunday afternoon. I will be broke on Monday unless she wins. Went to Casino Niagara last weekend no good investments there at all.

#130 :):(Ying Yang on 03.21.14 at 12:05 pm

Smoking Man hows the creative writing course you are taking going?

#131 sciencemonkey on 03.21.14 at 12:15 pm

Thank you for the reply Whitekat.

@122 Dual Citizen, yeah I emptied my TFSA. Which sucks because I would like to use it. :( The thing is, it might be possible to use it if our brokerages could prepare a tax form for it like they do for our regular accounts, but my big blue direct investing brokerage did not want to prepare such a form.

I won’t have life obstacles (children) so no RESP and hopefully I won’t need an RDSP.

#132 Cici on 03.21.14 at 12:15 pm

#61 Smoking Man

No, no man purse. He’s as manly as they get: T&A all the way, action & horror flicks, cars & hockey, beers, farts & burbs, and all the usual good stuff.

But he hates renting: he wants to be king of the hill.

It’s going to be a hard fight and he’s more stubborn and strong-willed than I am. And while he’s usually very good about money and savings, he hasn’t got a clue about investing, doesn’t want to learn, and thinks real estate–even at these ridiculous levels–is sustainable, albeit a royal piss-off. I on the other hand, don’t want to overpay for an overvalued asset, or be one of the last greater fools holding a hot potato.

Maybe I should convince him to buy a BMW instead? Seems like a more sound “investment.”

#133 Bottoms_Up on 03.21.14 at 12:17 pm

#111 Penny Henny on 03.21.14 at 10:00 am
————————————————
The point is not that media takes things to extreme. The point is that a profitable company is looking to pad shareholders wallets with an increase in a resource where there is an overabundance of supply.

At what point do we start caring more about our neighbours, our kids, our local stores and economies, and less about padding the bank accounts of investment bankers, shareholders and overly profitable companies?

#134 Bottoms_Up on 03.21.14 at 12:18 pm

#123 Ret on 03.21.14 at 11:16 am
————————————
Who can we write to to fight this increase?

#135 Son of Ponzi on 03.21.14 at 12:21 pm

You are wrong.
The Italian currency is no longer the LIRA.
They are using the Euro now.
I know, I was there recently.

#136 myheadhurts on 03.21.14 at 12:37 pm

#120 DA
“Take all the fancy schmancy cypherin’ out and after all is said and done, and some hard time paying for it compounded by paying for the use of other peoples money to get it initially you own it and don’t have to pay rent or be beholdin’ to anyone for a roof over your head from then one.”

This is barely comprehendible. Is this how your thoughts are? Read a book.

“You’re less safe because now you’ve got to protect that precious bounty you so lust after. ”

This is bad logic; you’re less safe because you have money? How does having a pile of money make you less safe than not having a pile of money?

“The only thing money is good for is showing off. Show offs are the greatest fools.”

Tell me again why a family of 3 should buy a 3500 sq ft home?

#137 Renter's Revenge! on 03.21.14 at 12:38 pm

@ };-) DA

“And in your pursuit of loot you rape that which is most important… The land”

So, in order to pay for a piece of your precious overpriced land, what should new buyers rape instead?

#138 Ralph Cramdown on 03.21.14 at 12:42 pm

Well, you’ve seen them before on this blog — middle class people who say they can’t save because tax rates / low wage gains / inflation! / have to borrow just to make ends meet.

Now you can peruse the statistics! Presenting your broke-ass, middle class neighbours!

Results are similar here in Canada, as detailed in the report:
http://www.brookings.edu/~/media/projects/bpea/spring%202014/2014a_kaplan.pdf

#139 Son of Ponzi on 03.21.14 at 12:42 pm

The Canadian passport should always be earned, not paid for.
http://www.scmp.com/news/china/article/1453230/chinese-welcome-canadas-new-investor-visa-stricter-rules-apply

#140 T.O. Bubble Boy on 03.21.14 at 12:48 pm

@ #65 2or3orsometimes7 on 03.20.14 at 10:39 pm
Re: Rule of 90 – how to apply for young people with less net worth? (ie. 30 year old is allowed 60% in real estate, but they’ve just bought the house so they don’t have more than 10-20% paid off yet)

Then don’t. — Garth
———————————————-
I don’t understand. Let’s say I buy a $500,000 house with $100,000 down. I have $100,000 in other investments. 500K/600K is 83% exposure to real estate. Too much at 30 years old by this rule of 90. Did I do that right?
——————————–

I had asked Garth this question many times, and I believe that he’s referring to the home equity vs. the total house price.

So, a $100k down payment and $100k in other assets is considered 50% in RE (under the max of 60% for a 30-yr-old).

There would be many other rules to govern the house price & mortgage debt size (like: mortgage no more than 2x-3x income etc.), but I don’t think Garth’s Rule of 90 is intended to cover that.

#141 Son of Ponzi on 03.21.14 at 12:53 pm

#128
it’s ironic.
The Internet was supposed to make information more readily available to the unwashed masses.
What happened?
I guess there will always be shepherds and sheeps.

#142 Calgary on 03.21.14 at 12:54 pm

Listing C3604300 in Calgary just sold for $20000 over asking in a bidding war, no end in sight to the insanity. Will a housing correction in Calgary mean that we just wont have bidding wars?

#143 WhiteKat on 03.21.14 at 12:54 pm

@DualCitizeninCanada

Re: “Not having the Canadian Banks rat you out doesn’t mean the IRS won’t recognize gains in plans like TFSA and RDSP as non taxable from the US side. I cancelled my TFSA and my tax accountant is looking at my son’s RDSP. Be complaint! If you have nothing to hide, what is there to worry about? ”

If you have nothing to hide, why wear pants?

Seriously though, my situation is not yours, and we all have varying risk tolerances, and varying senses of injustice and ethical IQs.

I have never been US tax compliant since I have been unaware of my ‘US person for tax purposes status’ as a Canadian living in Canada for 50 years from the age of one. I had no clue that my birth in USA to Canadian parents while they worked there for a short stint, made me a US tax payer for life on my Canadian income.

Nor did I realize that my Canadian bank accounts up the street are considered ‘foreign’ bank accounts and required to be reported annually along with US tax returns. The fines for non reporting of ‘Foreign bank account reports’ (FBARS) were designed for money launderers and wealthy tax cheats living INSIDE USA, but are likewise applied to people like myself regardless that I live OUTSIDE USA and earn no US income.

To come into compliance now, is an expensive and risky proposition for someone who has never been in the IRS system and has lived life as a normal Canadian for decades. You cannot just call up the IRS and say, ‘ooops’, and all is forgiven.

Yes, I am well aware as I have repeated over and over in several comments here that gains from TFSAs, RESPs, RDSPs and other such ‘foreign trusts’ are taxable in the USA, and so are gains from RRSPS unless a special form is filled out annually.

My plan is to stay under the IRS radar. Its not that hard. It is brutally unfair, requires dealing with multiple financial institutions, keeping your savings in registered vehicles that are not FATCA reportable, relying our your spouse for protection, buying real estate (sorry Garth), etc. I figure FATCA will be a boost to the real estate industry in Canada.

I am confident that eventually the Charter Challenge that is underway by a group of concerned Canadians will strike down FATCA in Canada. Even IF my accounts get reported in the interim, Flaherty has said over and over that CRA will not collect penalties or taxes on Canadians who were assessed those penalties or taxes during the time they were also Canadian citizens. I have been a Canadian since birth so CRA will not collect on behalf of the IRS (at least this is what they say now – who knows the kind of arm twisting by IRS that will happen down the road).

If I was younger, and just starting out in life, and could easily come into compliance(no RRSPS, RESPs, TFSAs, or Canadian mutual funds – the dreaded PFICS), I would do that and then formally renounce US citizenship. Many are doing this now, and renunciations of US citizenship is soaring (though we have evidence it is being drastically under-reported by the US government – go figure).

It is impossible for me to be a good US slave and come into compliance at this point in my life without risking penalties for prior non-filing, huge accounting fees for catching up on past years of non-compliance, marital problems regarding my spouse’s refusal to submit our private bank account balances to the USA, etc.

So, yeah I have something to hide and not ashamed to admit it! The money in the bank accounts I hold jointly with my Canadian only spouse was earned in Canada (mostly by him!), and has already been highly taxed by the Canadian government. USA has no moral right to know what is in them, never mind apply penalties to them for non-reporting. USA is being a HUGE BULLY, and I have a HUGE PROBLEM with that (likely stems from being bullied as a kid).

Even if I did spend the 20K or so I have been quoted to come into compliance, I would likely owe no taxes, but risk penalties for prior non-filing, and risk the private financial details of myself and my spouse being shared with other 3 letter organizations in the United States (ID theft comes to mind).

With FATCA, the USA is looking for a penalty bonanza on the life savings of Canadians who did not realize USA was the only country in the world (with one exception -Eritrea, a dictatorship in Africa) that considers those who neither earn nor live there to be taxpayers based on an accident of birth.

All Canadians (not just those born in the USA) should be royally PO’d about theCanadian government agreeing to pass the account balances and transactions of Canadians with a US connection to the IRS. My spouse is not a ‘US person’, but his association with me makes his accounts FATCA reportable. If USA collected on the penalty bonanza, millions of families would be wiped out financially, our tax base eroded, and our welfare system strained. As it is, bank customers and Canadian taxpayers are paying for Canada to become enforcers for the IRS.

IRS can go F8c& itself as far as I am concerned! If I get a penalty notice in the mail, I will happily frame it and hang it on my wall. It would make for an interesting conversation piece, don’t you think?

#144 Son of Ponzi on 03.21.14 at 12:56 pm

People are living longer now.
I think the rule of 90 should be the rule of 95 now.

#145 fixie guy on 03.21.14 at 1:09 pm

#127 Stickler “Generation X is the first generation predicted to do worse then the previous”

Don’t you mean since the Depression?

#146 Son of Ponzi on 03.21.14 at 1:10 pm

Some interesting points from the Village at the edge of the rainforest.

Numerous articles have been written about the tremendous debt that is being created world wide, and in China specifically.

Many are wondering if the ‘Minsky Moment’ is at hand for China.

The Minsky Moment refers to the moment at which a credit boom driven by speculative and Ponzi borrowers begins to unwind. It is the point at which Ponzi and speculative borrowers are no longer able to roll over their debts or borrow additional capital to make interest payments. Minsky states this usually occurs when monetary authorities, in order to control inflationary impulses in the economy, begin to tighten monetary policy. The PBOC’s latest Q4 Monetary Policy Report indicates it intends to continue to tighten liquidity in order to control the excessively fast growth of shadow banking credit.

Of the $1.8 trillion in Trust Loans provided by the shadow banking sector, nearly $600bn, or RMB 3.6 trillion will come due in 2014.

Defaults or near-defaults have begun to occur with regularity over the past three months and are likely to pick up in quantity significantly over the next year. As it is becoming more clear that investors may not get all of their money back, interest rates on trust products, wealth management products (WMPs), corporate bonds, and bank loans have risen by roughly 200 basis points in the last year.

Earlier this month China experienced it’s first ever corporate bond default.

And the fallout has begun. WKZO notes: As credit tightens at home, Chinese sell Hong Kong luxury real estate.
HONG KONG (Reuters) – Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

Wealthy Chinese were blamed for pushing up property prices in the former British territory, where they accounted for 43 percent of new luxury home sales in the third quarter of 2012, before a tax hike on foreign buyers was announced.

The rush to sell coincides with a forecast 10 percent drop in property prices this year as the tax increase and rising borrowing costs cool demand. At the same time, credit conditions in China have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan ($565.25 million) heightened concerns that financial risk was spreading.

“Some of the mainland sellers have liquidity issues – say, their companies in China have some difficulties – so they sold the houses to get cash,” said Norton Ng, account manager at a Centaline Property real estate office close to the China border, where luxury houses costing up to HK$30 million ($3.9 million) have been popular with mainland buyers.

Property agents said mainland Chinese own close to a third of the existing homes that are now for sale in Hong Kong – up 20 percent from a year ago. Many are offering discounts of 5-10 percent below the market average – and in some cases as much as 20 percent – to make a quick sale, property agents and analysts said.
Is it a precursor to what we are about to see in Vancouver? If so ponder this chilling quote:
“Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago,” said Joseph Tsang, managing director at Jones Lang LaSalle. “But now they want to cash in as liquidity is quite tight in the mainland.”
Panicked Mainland Chinese appear desperate for cash:
In a nearby development called The Green – developed by China Overseas Land and Investment – about one-fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainland Chinese in 2012.

China Overseas Land was not immediately available to comment.

“Some banks were chasing them (Chinese landlords) for money, so they need to move some cash back to the mainland,” said Ricky Poon, executive director of residential sales at Colliers International. “They’re under greater pressure from banks, so they’re cutting prices.”

In West Kowloon district, an area where mainland Chinese bought up close to a quarter of the apartments in many newly-developed estates, some Chinese landlords are offering discounts on the higher-end, three- to four-bedroom apartments they bought just a few years ago.

This month, a Chinese landlord sold a 1,300 square foot (121 square meter) apartment at the Imperial Cullinan – a high-end estate developed by Sun Hung Kai in 2012 – for HK$19.3 million, 17 percent less than the original price. The landlord told agents to sell the flat “as soon as possible,” said Richard Chan, branch manager at Centaline Property in West Kowloon.

“The most important thing for them is to sell as soon as possible,” Centaline’s Chan said. “In the past two weeks, those who were willing to cut prices were mainland Chinese. It is going to have some impact on the local property market, that’s for sure.”
It will be interesting to see if this selling frenzy occurs on our shores as well.

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

#147 WhiteKat on 03.21.14 at 1:15 pm

Re: above post, to clarify there are an estimated 1 million Canadians living in Canada with ‘US person’ status, the vast majority of whom are NOT filing US tax returns, and among those who are, most of them have never heard of ‘foreign bank account reports’ the non-filing of which will be revealed through FATCA and will be the source of penalty revenue for the IRS if it can figure out a way to make people pay up.

Thus USA could potentially apply penalties to up to a million ‘US persons’ NOT MILLIONS as I mistakenly wrote above. However, when you factor in that each ‘US person’ has say an average of 3 close family members who would also be negatively affected by the financial hit, the number of affected Canadians could be in the millions.

#148 Old Man on 03.21.14 at 1:34 pm

#143 WhiteKat: – you are missing the big plan that was signed years ago, and blame Caesar with his reformist gang of clowns. He has become an Amigo which is part of a three ring circus called integration of the whole, and its been implemented. Now while you are looking at just one tree you are missing the forest which will surprise you when the trigger is pulled from an agreement that eventually will be signed into law.

#149 World Traveller on 03.21.14 at 1:39 pm

#105 WhiteKat on 03.21.14 at 9:30 am

***

Awesome, nothing more needs to be said.

#150 WhiteKat on 03.21.14 at 1:56 pm

@ScienceMonkey,

From Elizabeth May, “Island Times” March 20, 2014: What’s up with FATCA? An issue that should concern more than those Canadians with ties to the US.

http://elizabethmaymp.ca/news/publications/island-tides/2014/03/20/whats-up-with-fatca-an-issue-that-should-concern-more-than-those-canadians-with-ties-to-the-us/

#151 KR on 03.21.14 at 2:05 pm

“Are you paying off a 2.5% mortgage with money that could make 7-8%, to fund an asset that will be worth less in a few years? — Garth”
—————————————————
Garth your arguments suck. all the assumptions you make to say that investing in the market is better than investing in real estate right now could be applied to the pro-real estate as well. I assume prices will go up. you assume prices will go down. I assume not everyone will get messed up by high interest rates (some will, but that happens anyway for people who are over leveraged and you show me no stats on debt ratios now vs in the 80’s hay day of toronto real estate). you are ruining my evenings as my husband reads your assumption-full blog and i find holes in your stuff and we argue about our difference of opion. bottom line, you really annoy me. that is all.

I am fulfilled. — Garth

#152 kommykim on 03.21.14 at 2:09 pm

RE:#104 Dupcheck on 03.21.14 at 9:24 am
Garth does such thing exist:
One time capital gain tax free up to 100K. To what does it apply? How do you go about doing it?

It is more limited in scope than it used to be:
http://www.taxtips.ca/smallbusiness/capitalgainsdeduction.htm

#153 Old Man on 03.21.14 at 2:15 pm

#147 WhiteKat: – I just hit a search engine with 3 key words to see what was in the forest, and there are 100 million (trees) or website responses. Now that would keep you reading forever with many sleepless nights. I am not going to tell!

#154 WhiteKat on 03.21.14 at 2:19 pm

@OldMan, I am not sure what you said exactly, but yeah it is a corrupt, doomed world run by selfish, uncaring people. I fear for the future of my 3 daughters who are just now becoming young women. So I cannot stop fighting even though I feel sometimes that it is pointless. I keep hoping that a different, more generous spirit amongst men will spread like a tsunami before we’ve made this planet uninhabitable, but I won’t hold my breath.

#155 2or3orsometimes7 on 03.21.14 at 2:24 pm

#140 T.0. Bubble Boy

Thanks!! That makes sense.

#156 Aggregator on 03.21.14 at 2:32 pm

This is interesting…

First National Financial GP Corporation v. Maritime Residential Housing Development Ltd.

Docket No. 393909

[5]   In the counterclaim filed by Mr. MacDonald [the defendant] and his company, there are numerous allegations, including the following:

i.  That CMHC operates by virtue of the oath of secrecy pursuant to s. 13 as a ‘secret society’.

[9] The defendants’ claims can be summarized as follows:

i.   CMHC approved an insurance policy to the defendants’ “financers”, which insured against the defendant’s default on the mortgage loan;
ii.  the defendants failed to make monthly payments on the mortgage loan;
iii.  no mortgage arrears resulted from the defendants’ failure, however, as any arrears were paid out under the policy of mortgage loan insurance provided to First National by CMHC; and
iv.  First National, or its agent(s), continuously and wrongly insisted that the defendants pay these arrears, effectively seeking to achieve some sort of double compensation. 

[35]  I agree with the plaintiff that the defence and counterclaim amount to an attempt to frustrate the plaintiff’s attempts at foreclosure.  It is interesting to note that there was a parallel proceeding on or about April 30, 2012, when Maritime Residential and MacDonald commenced an action in Antigonish, Nova Scotia, against a number of named individuals allegedly connected to First National GP Corporation, including Karen Kinsley, President of CMHC and CMHC itself.  A review of the pleadings attached to the affidavit of Rebecca L. Hiltz LeBlanc, reveals that the two proceedings are substantially identical.

—-

Now what is the relationship between CMHC and First National? If you said subprime mortgages, you are correct, because First National was CMHC's numero uno MBS issuer last year with a whopping net issuance of $4.2 billion dollars, larger then any of the five major banks. Chart

#157 Investment Virgin on 03.21.14 at 2:38 pm

It would seem Regina’s RE market is getting weirder. I’ve never heard so many realtor and home builder ads on the radio before a few weeks ago….actually, I don’t think I’ve ever heard an ad on the radio before. It just seems so desperate.

Is Regina’s market entering troubled times?

#158 happity on 03.21.14 at 2:39 pm

where to invest your labor is granular, and has a prerequisite…

Step back, look at the creation of money, the debt being created out of thin air, global machinations and what that may mean. Then go granular and decide what to do with what you were given for your labor.

#159 xman on 03.21.14 at 2:44 pm

Hello Garth and fellow blogers this is the only site I have the courage/time to actually post on its both informative and funny.
I tell my children as I was told ” everyone thinks they know it all but most everybody is wrong half the time”
The life we live is almost like a gambling casino!
We take chances every day we wake up and dont know how the day will end, if it ends good we’re smart if it ends bad we’re stupid or just blame it on someone else.
I am trying to say we just human and there are things in life beyond our control.
Have a Great Garth Day everyone weather U get it or not! (peace)

#160 NoName on 03.21.14 at 2:45 pm

#142 Calgary on 03.21.14 at 12:54 pm

Probably people that paid 200k over asking price are also buying those ( http://m.imgur.com/IczIWu9 ) for their kids to teach them about money…

#161 Strapon on 03.21.14 at 2:52 pm

Garth, time for a new book! Any time soon?
Real estate in NS is seriously nosediving, by the way.

#162 Smoking Man on 03.21.14 at 2:55 pm

#130 :):(Ying Yang on 03.21.14 at 12:05 pmSmoking Man hows the creative writing course you are taking going?
…….

Got kicked out, missed the first 3 classes

I’m going tonight…. What else is new

#163 Smoking Man on 03.21.14 at 2:58 pm

#132 Cici on 03.21.14 at 12:15 pm

If your going to do it, buy a dump in long branch, fix it up, you won’t lose…

South of lakeshore.

#164 pastbeyond60 on 03.21.14 at 3:10 pm

@WhiteKat
You nailed all of it. It is so frustrating when so few “get it” Canada is now the 51st state with the CRA and our banks an extension of the IRS. So many will be hurt by this, many of us seniors bankrupted, at least 90 billion robbed from Canadian assets plus the cost of our welfare. Canadian constitutional lawyers are screaming and STILL no body is listening. This is just beyond frustrating, the world has gone mad.

#165 Fortune500 on 03.21.14 at 3:31 pm

Garth you seem to be hitting a nerve these days. There is a new thread dedicated to you and your ‘crazy fanatics’ over at Redflagdeals.com.

I didn’t think you were participating in this year’s Top Canadian Investment Blog contest …

I am not. It is a traffic-generating scheme for another site. — Garth

#166 TruthHurts on 03.21.14 at 3:43 pm

#154 WhiteKat on 03.21.14 at 2:19 pm

If you’re reluctant to start such a spread of generosity, why should others? You’re the same as everybody else. Might as well just click ‘like’ on feel-good comments in social media.

#167 Calgary Owner (2nd. Round) on 03.21.14 at 3:55 pm

#12 Hickster on 03.20.14 at 8:32 pm

This is not general contrarianism. If I were in Van, TO or Calgary, no question renting wins.

_____________________________________________

Actually, the same spreadsheet reflected that it was cheaper for me to own in Calgary until the 16th year, when renting finally caught up.

But do keep in mind, owning a place does not mean you won’t ever invest any money. From a net worth perspective, owning makes a lot of sense in the short and in the long run as well.

#168 Humpty Dumpty on 03.21.14 at 4:24 pm

“Creative Distruction” epiphany…

Because Putin is standing up against Western aggression – not only in Ukraine, but also in Syria and Iran. Ongoing Western attempts to destabilize these and other countries are just the most recent examples of a decades-old pattern of aggression. The long-term goal: Total destruction of traditional nations and values, and the creation of a New World Order global dictatorship.

Since the 1953 CIA-MI6 coup in Iran, the West has been using the same formula to overthrow legitimate but uncooperative leaders: First, sabotage the country’s economy. Then bribe corrupt military officers and thugs and pay rent-a-mobs to create chaos in the streets. Next (this step is optional) incite violence by paying snipers to fire into crowds – and maybe set off some bombs. Finally, send the corrupt military units and gangsters to overthrow the target nation’s legitimate leader, murder or imprison his supporters, install a Western puppet in his place – and announce that “order has been restored.”

http://www.presstv.ir/detail/2014/03/19/355259/putin-puts-fear-of-god-in-nwo/

#169 James on 03.21.14 at 4:40 pm

Are you paying off a 2.5% mortgage with money that could make 7-8%, to fund an asset that will be worth less in a few years? — Garth

The FEDs will pro up housing if it ever crashes this time unlike in the 80’s. You if people wants to own RE in major cities, SFH is risk free.

#170 Snowboid on 03.21.14 at 5:26 pm

#136 myheadhurts on 03.21.14 at 12:37 pm…

Stopping feeding him, it will only get worse!

#171 noclue on 03.21.14 at 5:40 pm

“Are you paying off a 2.5% mortgage with money that could make 7-8%, to fund an asset that will be worth less in a few years? — Garth”

How do I make 7-8% a year on my savings when savings accounts pay 1 or 2% interest? If you say, invest in the market, why do you think the market will be in any better shape if the economy collapses due to housing?

Also where do we invest to get 7-8% returns? Can you explain why playing the market is not gambling, and how I can make money for nothing as you constantly recommend. I am not a financial genius, and have no plans to become one. I do not want to make my life revolve around finances, nor do I want to stay up late at night worrying about yet another stock market crash. Thanks.

Where did I mention buying stocks? — Garth

#172 World Traveller on 03.21.14 at 6:01 pm

#168 Humpty Dumpty on 03.21.14 at 4:24 pm
“Creative Distruction” epiphany…

*****

Agreed, but neither side are angels, people need to stop picking sides in this and see it for what it is, another proxy war in the making.
As usual the regular people are caught in the middle.

#173 WhitetKat on 03.21.14 at 6:32 pm

@TruthHurts, #166 re: ” If you’re reluctant to start such a spread of generosity, why should others? You’re the same as everybody else. Might as well just click ‘like’ on feel-good comments in social media.”

If the truth hurts, I try not to look at that as a bad thing. Pain can be positive if you use it to reflect on yourself as opposed to attacking others or stuffing it away somewhere and refusing to look at it.

As far as your suggestion that I be more generous, I agree. I don’t have a lot of money but I do have some time to spare. I am thinking of doing something relating to the environment or animals. The FATCA grass roots movement I have been obsessed with for the past 18 months or so has grown a lot, and doesn’t really need me so much anymore. I think its time to spread my wings. Good luck to you in your ‘generosity’ endeavours.

#174 WhiteKat on 03.21.14 at 8:27 pm

I’m done here, promise Garth…lol. I typo’d again, and meant to say I have been obsessed with the ‘ANTI-FATCA grassroots movement’. Lord knows I am not PRO-FATCA. Only someone who is either ignorant, and believes that FATCA is really about catching tax cheats or could care less about human rights (bankers or politicians who want to keep their jobs perhaps) would be PRO-FATCA.

Thanks for allowing my intrusion on your housing and investment blog, though I suspect you see the connection with FATCA and its not a positive one for investors.

#175 AACI Home-dog on 03.21.14 at 10:23 pm

Good posts lately. Garth ! Thanks.
I have a fairly big portfolio, but even when it was baby size, my advisor had me into equities, strip bonds (which were sexy in the day), etc.
Now, a very diversified portfolio stocks & REIT’s with healthy dividends are doing great. Enough to live off.
Never had a preferred share, but fine anyway without.
Cheers !

#176 wallflower on 03.21.14 at 11:57 pm

WhiteKat and FATCA cronies : —

yes, time to move along, nothing to see here…

#177 WhiteKat on 03.22.14 at 9:34 am

@WallFlower

I will miss your inspiring, enlightening comments too!

#178 Victor V on 03.22.14 at 5:05 pm

Rent or own? We asked Torontonians which route they’ve chosen

http://www.theglobeandmail.com/life/life-video/video/article17587794/

#179 renting sucks on 03.23.14 at 8:24 am

Again all these pro renters. This is a pro rent blog. Any home owners here are finished. I just like to say that living in a shelter and paying for it for the rest of your life ie. Renting. Is not wise. You are getting older and older and still renting while home prices are getting more and more expensive. At some point you want to OWN your shelter so you’re not constantly paying every month for your shelter. Furthermore renting what an apartment filled with people that you don’t know that your sharing the elevators. Elevators that don’t work half the time. Apartments just smell period. Renting a home ok go and see how much that runs you in and around Oakville Burlington forget about Mississauga. You see so at so what are you going to do. I know stop your whining and start owning your property. NOW! Go buy now b4 its too late. And again reading everyone’s comments here well let me tell you that 90% of them are pathetic telling people how your renting is so lovely. Pathetic.