In extremis

BBQ modified

If yesterday’s little tale didn’t scare you, then you’re too horny or too distracted. This is late-market behaviour in extremis, when speculation and panic turn buyers into fetishizing fools and realtors into predators. It’s hard to believe a thousand people would descend on a 90-year-old beater Toronto house, that fifty offers of more than a million dollars would materialize, or the agent running the auction (and privy to all the bids) would prompt his own client to pay double the asking price.

This is as normal as Miley Cyrus. We may be closer to the zombie Apocalypse than I feared.

As you know, we’re not the only ones to have gone through this real estate obsession, leading to irrational acts and herd hysteria. The US lived it nine years ago, with a price/sales apex, then a 32% decline in average prices, followed by seven years of hurt, and finally a robust price recovery, but with dramatically fewer people willing to give housing a second chance.

This week we learned how deep it all cut. The homeownership rate in the States is at a 19-year low, down to 64.8%, which is where it was back in 1995 before Bill Clinton started pumping houses. The peak was 69.2%, reached in 2004 when everybody was convinced prices would continue to rise for a generation. They didn’t. (About 9.2 million Canadian households currently own homes. That’s 69%. Interesting coincidence.)

The immediate reason for the precipitous fall is that US houses cost too much, now that mortgage rules have been tightened. Prices have been rising steadily – up 12.9% in the last year – even while sales have been declining. Hmm. Like here.

And it will all get worse, says a big US apartment REIT executive, with the US rate plunging to 55% over the coming years. The reason? People are delaying, postponing or denying marriage and children. The number of married Americans has been falling for a decade. Meanwhile all those Millennials in Florida, California and Nevada want nothing to do with the asset that ate their family’s net worth. It’s a backlash with bite.

“The deferral of marriage has such a staggering impact on real estate and I just don’t think people focus on it,” Sam Zell, the REIT exec told a housing conference. “I don’t think the multifamily market has ever had a better set of future demographics.”

Well, more to think about when all of your friends buy houses, flaunt their bloated mortgages, and make fun of your pathetic renter’s life. Today we have groupthink in broad display, as everyone around us pretty much apes those Americans circa 2005. And the fascinating part is that Canadians are so steeped in housing propaganda they actually think they’re doing a wise thing financially in buying assets at values which will likely decline, with money borrowed at rates destined to rise.

Of course, they don’t believe either. But we know better. And here are a couple of things to say that will really irritate your (former) friends.

Real estate a better investment than, say, stocks? Hardly. Not even in the biggest market in the country. Between 1988 and 2013, the TSX gave an average return of 7.09%, even including the worst market crash since the 1930s. During the same period of time, the average GTA house price increased by 5% annually, which includes the most gaseous property bubble in Canadian history.

By the way, stock prices in Canada are not at their historic peak. House prices are.

The average condo in the GTA costs $386,800 to buy and $2,465 a month to carry after putting $20,000 down and accepting a $380,000 CMHC mortgage. You can rent the same place for $1,600. No debt. Ouch.

And when the correction comes (as it already has in a growing number of places), real estate turns cold and illiquid, plus costing you money to own. Your financial assets are always liquid, and pay you.

There is a reason tens of millions of Americans fell out of love with houses, even after rates and prices fell. They learned something. Your friends are still waiting.

190 comments ↓

#1 Bill Clinton on 04.29.14 at 8:21 pm

FUUUURST!

#2 T.O. Bubble Boy on 04.29.14 at 8:21 pm

Garth is hard hitting tonight on the bubble mania… tell us how you REALLY feel!

#3 CPG on 04.29.14 at 8:21 pm

“The real question is why over the past thirty+ years, did the Fed have to constantly lower interest rates to ever-lower levels with each successive recession?”

The following link is to a blog post which has a chart on it which tracks (the United States) effective federal funds rate versus its total credit market debt to real gdp ratio over the last 40 years.

Please be advised the blog post contains some foul language.

http://ponziworld.blogspot.ca/2014/04/globalization-game-over-man.html

#4 Bob Rice on 04.29.14 at 8:24 pm

Germany and Switzerland, among the richest, most robust economies on the planet, have home ownership rates of about 50% +/-

Amazing… so, high home ownership rates don’t necessarily = prosperity

#5 David Lee on 04.29.14 at 8:24 pm

Garth,

Sorry, I should have waited for your post today to ask this question on the 50 year bonds from the Feds:

Doesn’t the issue of these long bonds confirm that rates are going to go up significantly over the long haul (and maybe even sooner)? After all, if I was the Feds, I’d want to get my hands on money before the price of it goes up.

However, if the answer is yes to the above, then I don’t understand why investors would fork over money for these bonds if they know rates are going to go up and therefore, get more for their money if they hang tight for a bit (unless investors think that rates are going to stay low for a really long time).

It seems like the Feds (through the BOC) are telling everyone that rates are going to be low for a long time. Yet their actions (vis-à-vis these really long bonds) say the opposite.

Of course governments are tapping into funds so cheap they may not come this way again for a long time. Consumer rates will rise, of course, and it will certainly be prior to the expiration of a five-year mortgage taken out today. As for bond investors, there are always buyers since these are 100% safe and 100% liquid. — Garth

I think I’m missing something.

Thanks in advance.

#6 Fed-up on 04.29.14 at 8:25 pm

Primo?

No need to keep comparing us to the USA circa 2005.

We are far worse than they ever were.

#7 Mishuko on 04.29.14 at 8:25 pm

Strong words, I was speaking with colleagues and discussed the potential of buy vs rent and we all agreed that it’s situationally dependent. Then again, under current conditions it’s not worth it when, as you so graciously pointed out, renting is cheaper than owning a similiar place.

Oh and a bit late but Shangri-la also had that benz gimmick of giving a c250 for purchasing a condo there. Guess those who like open air concepts (queue windows falling) with a mediocre car. Then the whole insurance thing.

#8 shane on 04.29.14 at 8:26 pm

Garth, what places are in correction mode?

Already mentioned a bunch. You must read every post, or be spanked. — Garth

#9 Retired Boomer - WI on 04.29.14 at 8:30 pm

Yes 2007 stock market peak. 2007 was about the last gasp for Real Estate in the frothy markets.

Where I live 2008 spring was the start of prices declining, but they only went down 15% overall, but if you bought more than you could PAY FOR you were out on your ass!

Foreclosures hit records in 2009 2010, near record in 2011 because of jobs lost that were not coming back, plus lousy lending standards. Sorry, that was the way it WAS!

Prices and stability back to where it was before GFC. Not all people were so lucky. WI is a non-recourse state, but not all of them are.

Trashed credit hurts your future renting, as well as your ability too get a job, buy a car…lots of entrails to house horniness stupidity.

#10 devore on 04.29.14 at 8:31 pm

The average condo in the GTA costs $386,800 to buy and $2,465 a month to carry after putting $20,000 down and accepting a $380,000 CMHC mortgage. You can rent the same place for $1,600. No debt. Ouch.

Amazing. That’s almost exactly the situation I was in. $375,000 condo in downtown Vancouver, cost around $2300/month to carry, incl ownership costs, even more so if you count the $9000 special assessment. Meanwhile, in the mailroom, I was deluged with for rent ads, flogging same units, some even nicer, with better finishes, for $1400-$1500.

Eventually I stopped being depressed, started doing math, and sold.

#11 Waterloo Resident on 04.29.14 at 8:33 pm

DELETED

#12 Cici on 04.29.14 at 8:36 pm

Well, while 1,000 fools did take a tour, only 72 put in offers, and who knows how many of those offers were actually serious.

That’s one of the major problems with these auction-style bidding wars: you get pushed and pressured into making a high offer, but you have no idea what other offers are on the table or how high they are.

And, you’re pressured to hand over the cash without delay or an inspection:

http://www.cbc.ca/news/canada/manitoba/woman-who-bought-1m-mice-infested-house-sues-ex-owner-agent-1.2625237

With the end result being that you PAY, and then PAY AGAIN, and then you REALLY PAY.

#13 T.O. Bubble Boy on 04.29.14 at 8:38 pm

A link to the U.S. home ownership story:
http://www.cnbc.com/id/101624168

#14 T.O. Bubble Boy on 04.29.14 at 8:44 pm

@ #10 devore on 04.29.14 at 8:31 pm
The average condo in the GTA costs $386,800 to buy and $2,465 a month to carry after putting $20,000 down and accepting a $380,000 CMHC mortgage. You can rent the same place for $1,600. No debt. Ouch.

Amazing. That’s almost exactly the situation I was in. $375,000 condo in downtown Vancouver, cost around $2300/month to carry, incl ownership costs, even more so if you count the $9000 special assessment. Meanwhile, in the mailroom, I was deluged with for rent ads, flogging same units, some even nicer, with better finishes, for $1400-$1500.

Eventually I stopped being depressed, started doing math, and sold.
——————————-

Similar story for me in T.O.
My old condo was near $400k, with high maintenance fees, and would have rented around $2000/month.

$400k w/ $20k down is a $380k mortgage.
@ 3% with 25-yr amortization, that is $1,802/month mortgage payment. Add in $500 condo fee and $300 property tax, and you’re at $2,600/month. Not quite as bad as Garth’s example, but clearly out of whack by 30% or more.

#15 Dean on 04.29.14 at 8:45 pm

who cares ? if you have a detached house in Canada, at retire age, it will worth two million dollar

#16 4 AM Sunrise on 04.29.14 at 8:45 pm

“Already mentioned a bunch. You must read every post, or be spanked. — Garth”

I always knew those Amazons had a, um, dominant streak in them!

#17 Lebowski on 04.29.14 at 8:48 pm

First

#18 Rt Hon Stephen Harper on 04.29.14 at 8:49 pm

Garth,
Glad to see you are keeping busy with your little blog. No hard feelings.
Stephen
ps: you are still fired

#19 Maxamillion on 04.29.14 at 8:53 pm

Wendy Ji, 26 is pissed that her condo building isn’t directly connected to the Don Mills subway or Fairview Mall. So she is suing the developer. Her 2 bedroom condo was purchased in 2010 for $460,000. Shouldn’t she be more pissed about the price?

http://www.thestar.com/business/2014/04/27/north_york_condo_developer_faces_30million_lawsuit.html

#20 Johnny on 04.29.14 at 8:55 pm

Hi Garth
You always say 70 % home ownership in kanakistan but.
What about all those folks who own multiple properties,are they also in that 70% included or it is less the 70% because they own more than one…thanks

#21 Detalumis on 04.29.14 at 8:56 pm

#11 Rule number one. The smart bulls go for the educated cows, you know the cows who make good money on their own and don’t rely on bulls for their livelihood. Rule number two, no matter how much the cow cries and pleads to stay home with the calves just say NO.

If you are really smart you find a cow that makes a lot more than you do and then if the marriage falls apart YOU can be paid alimony for life. If bulls thought with their big head they would be saved a lot of grief in life.

I have never met any bulls that at least in their first marriage ever follow rules number 1) and 2) though, but they do all cry about the unfairness of it all afterwards.

#22 visorman30 on 04.29.14 at 8:57 pm

Any interest once your feeling better in making public appearances? I missed it last year.

#23 Mark on 04.29.14 at 8:59 pm

The important thing that the TREB and others are not commenting on is the sales mix. The evidence is fairly clear that the lower-end has dropped out substantially, hit by the tightening of CMHC standards in the past year due to F’s 2013 Budget changes. Medium to higher-end houses are still moving at a brisk pace.

As a result of this shift in the sales mix, Toronto prices on “identical properties” are actually down, while the average prices on the houses actually moving are up.

The Realtors will try in vain to convince people that house prices are going up, but the only thing is going up and narrowing is the houses actually selling. For actual owners of Toronto houses, the past year has been actually one of declines. Because people don’t own an ‘average’ house, they own an individual house in an individual neighbourhood (or two or three of them at best in most cases!).

#24 Johnny on 04.29.14 at 9:00 pm

#15 Dean on 04.29.14 at 8:45 pm
who cares ? if you have a detached house in Canada, at retire age, it will worth two million dollar

Dude..give yer brain a bath because it reeks bro…lol

#25 Happity on 04.29.14 at 9:02 pm

According to the Bureau of Labor Statistics, 20 percent of American families do not have a single person that is working. Nada, zip, http://www.zero.com, zilch.

Yup, another fact backing the usa economic renaissance *theory* ….

#26 HD on 04.29.14 at 9:04 pm

Gen Y here.

Personally no intention in getting married or/and having kids. Ever.

But, to each their own.

Best,

HD

#27 Smoking Man on 04.29.14 at 9:05 pm

40 thousand words in a little over a week. Pull away from it for a few minutes to add my two cents.

So finally the amazing house of Garth finally understands the Herd. Gives it weight,
acknowledges it’s power and puts away the slide ruler and fundamental calculator. You have come along way.

Speaking of herd and hypocrisy.

Billionaire buffoon team owner tells his fortune hunting girly he don’t like her hanging out with black people. I took it as Mr happy envy. He’s an old senial
basted. Who should not be taken seriously.

Well talk about lyinch mob, everyone putting the boots the this guy. And yes he does deserve a slap.

There are more young black men in the USA serving life sentences for petty crime. I’m sure many are there just cause they’re black, cops plant a little bag of weed cause Jr was a bit chirpy.

These kids are forced to work in private prisons for 5 dollars a day. Hugely disproportionate to the population of the USA, and off the map by world standards.

Rampant, systemic hard core racism, real racism.. No one sees it, no one cares…

Like the crazy, singing dancing bastatad I talked to yesterday on Bay Street.

Everyone frightened, if he was black, and in some American town. I’m sure it wouldn’t take much imagination for a cop to set him up and have him making license plates for the next 10 years.

Back to the book…. Cheers..

#28 Yitzhak Rabin on 04.29.14 at 9:05 pm

Good news for Ontario people earning $150,000+ per year, your taxes are going up in the next budget.

What is not discussed hardly anywhere is the enormous fiscal problems developing at the provincial level in Canada. The cheap borrowing for them will end too with both higher interest costs, higher taxes and a few less 6 figure Kindergarten teacher jobs.

Public utilities will also see price increases with that new money raided to cover up some overspending. This has been going on in Manitoba for years, SASK Power just raised their rates this week too.

#29 Nemesis on 04.29.14 at 9:11 pm

“People are delaying, postponing or denying marriage and children. The number of married Americans has been falling for a decade.” – HonGT

No worries AuldPol… EddieCantor got that one figured out, like, a long time ago [talk about, “In Extremis!” TeeHee!]:

http://youtu.be/ANRPmTZRqkg

“We may be closer to the zombie Apocalypse than I feared.” – HonGT

FearNot, SaltyDogz… CaptainNemo [“ahem”] is OnWatch – BriefPrologueAsideToSaltierDogz: And you always thought your Granny was a Prude… seriously? – Well, have I got news for you – she was a JitterBug! – JustCheckOutThoseMoves & StayTunedToTheEnd for TheBonusZen: #Don’tFenceMeIn:

http://youtu.be/OWk4y6dph7Q

[ToConclude – ADistanceLearningCourse for HommeDuTabagisme: Have a smoke, a JD… and during that brief pause… ask the BigBigQuestion that all hacks needs must ask when reflecting upon the next scene – i.e. “What if?” Here’s a practical example, “What if Dorothy, yes – that Dorothy – was a VeryNaughtyGirl?” Let’s say she emptied TheCookieJar, ditched ToTo at the shelter and hopped a GreyHound to SantaMonica vs. a Twister to Oz… no WickedWitches – just a bar packed with {ahem} LonelySailors… CutTo: http://youtu.be/OUhQZSxccmc AndScene.]

#30 hohoho on 04.29.14 at 9:12 pm

> … the bank creates money out of thin air …

does private (ie. non bank) lending and re-lending create money?

#31 World View on 04.29.14 at 9:24 pm

I think the Canadians have learnt something different from the real estate crisis in US. As they see house prices appreciate again in US and reaching pre crisis levels, the Canadians might feel that all they need to do is withstand a correction and then the house prices will rise again. So any price will appear reasonable as long as they see house prices appreciate again. That is precisely why there never is a “soft-landing” in any real estate market. It is because people see prices rising once again (in other countries or historically after a correction) and extend themselves even more until they simply cannot withstand even a small correction. And then the downward spiral occurs until people change their beliefs about real estate.

US Prices are 20% below pre-crisis levels. — a Garth

#32 Millennial-Falcon on 04.29.14 at 9:24 pm

I think the it’s hard for most people to understand the rent vs buy argument. I hear the same thing again and again why are you paying someone else’s mortgage ?
Me: yah but I’m investing the monthly savings in a balanced portfolio
Boomer: but the banks aren’t paying anything! The rates are so low. Ur better of in real estate don’t be scared it always goes up looks at our house we bought in 1985!
Me: I’m not buying gic’s
Boomer: Stocks are so risky!!

#33 Ben on 04.29.14 at 9:25 pm

Come on someone badmouth Montreal condos…

#34 notagreaterfool on 04.29.14 at 9:29 pm

Poloz said today low rates (relative to historic values) are required and the household imbalances residual risk is growing. Only way to slow the house market is via OSFI/CMCH.

PS: Hearing the Ontario government is investigating bidding wars with TREB consulted.

#35 notagreaterfool on 04.29.14 at 9:31 pm

That OSFI / CMCH comment is my editorial and not what Poloz said :)

#36 Pope Sexsixpackkitten Snugglebums the ???tb (aka Nosty) on 04.29.14 at 9:32 pm

#27 Smoking Man on 04.29.14 at 9:05 pm — “Billionaire buffoon team owner tells his fortune hunting girly he don’t like her hanging out with black people. There are more young black men in the USA serving life sentences for petty crime. These kids are forced to work in private prisons for 5 dollars a day. Hugely disproportionate to the population of the USA, and off the map by world standards. Rampant, systemic hard core racism, real racism.. No one sees it, no one cares…”

Yo there SMan! It appears he will be a helluva lot wealthier sooner rather than later.

Ain’t free publicity grand!

#37 KatieBird on 04.29.14 at 9:34 pm

Husband and I (house-horny millennials) bought a 100+ yr old row house in Riverdale (you’d probably refer to it as a “termite-infested dump”, Garth) almost 2 years ago for $580K. We both read your blog religiously, and felt sick with worry about the imminent crash… Two weeks ago, a property identical to ours sold for $765K. Even with a 20% – 30% correction, seems like we’ll be okay in the end. Boy, am I glad we didn’t wait. No way could we afford our neighbourhood today. There isn’t going to be a giant crash, people. At least not for single-dwelling family homes in Toronto.

Based on a sale on your street? — Garth

#38 MB on 04.29.14 at 9:39 pm

Real Estate vs Stocks
Getting a $400k mortgage at 3% is very easy.
Getting a $400k loan for investing in stocks/ETFs is almost impossible without other significant assets, and the interest is going to be higher.

Seriously? Now I’m scared. — Garth

#39 JC on 04.29.14 at 9:41 pm

Re Marriage:

http://www.youtube.com/watch?v=rlvMAS_20K4

#40 Mark on 04.29.14 at 9:44 pm

“Real estate a better investment than, say, stocks? Hardly. Not even in the biggest market in the country. Between 1988 and 2013, the TSX gave an average return of 7.09%, even including the worst market crash since the 1930s. During the same period of time, the average GTA house price increased by 5% annually, which includes the most gaseous property bubble in Canadian history.”

3 problems with this:

a) The TSX’s gains were taxed at capital gains rates and dividend rates. Housing’s income and price gains aren’t taxed at all.

b) Appreciation on housing doesn’t include amounts for imputed rent or actual rent.

c) Minimal opportunities for leverage in the stocks, while there has been plenty of opportunity to juice returns through leverage in RE. Credit against RE seems to be far easier to obtain (HELOCs) compared to much less available and far more expensive margin lending in comparison.

There are no taxes on financial asset capital gains until a sale occurs. Houses have property taxes. Stocks don’t. You need to insure and maintain real estate. Not so with ETFs or bonds. You pay land transfer tax to buy property and a massive commission to sell it. Not the case with a REIT or a fund. Houses take months or years to sell. Equities take seconds. — Garth

#41 World View on 04.29.14 at 9:45 pm

“US Prices are 20% below pre-crisis levels. — a Garth”

Well I was making an argument about the direction of the crisis. I didn’t mean to imply that Canadians have learnt the right thing!!! What I meant was that the Canadians have probably wrongly interpreted the direction of prices after the crisis in US as a signal that nothing can probably go wrong with real estate in the long run!!

#42 Old Man on 04.29.14 at 9:48 pm

#19 Maxamillion – that is a very interesting case as there are structural changes that deserve an adjustment; she needs to check the square footage as was never mentioned. The judge will have a hard decision to make in regards to the subway; the shopping center is another matter. I saw the brochure given in evidence and it clearly says direct access, and there is a difference between direct and indirect by definition. I have seen the indirect access, and if I was the judge would rule in favor of the builder because it is not material enough to matter.

#43 Piccaso on 04.29.14 at 9:52 pm

#37 KatieBird

No way could we afford our neighbourhood today.

…………………………………………………………………………

BINGO !

#44 Smoking Man on 04.29.14 at 9:53 pm

36 Pope Sexsixpackkitten Snugglebums the ???tb (aka Nosty)on 04.29.14 at 9:32 pm

The old bastard should have gone the rental route.

But it astounds me, all the bandwagonairs. The moral ones, the high priests of righteousness, the forces against even, hell the damn president trashing this guy while an extream tragedy of the oppressed black youth taking place right in front of their faces…

I’m definitely from another planet

#45 JOE on 04.29.14 at 9:54 pm

You guys forgetting that 69% ownership in USA is different that 69%in Canada (only 38million souls…)
so no comparison….

#46 An Importation on 04.29.14 at 9:58 pm

This desperado is trying to dump his hamster cage for almost three years now: http://montreal.en.craigslist.ca/reo/4446632230.html

Carrying costs must drive the moron crazy but lowering price does not seem to cross his mind. And no, it is NOT in Westmount.

BTW, I have noticed all kinds of crazy prices on Craigslist for Montreal, lately…

#47 Bob Rice on 04.29.14 at 10:07 pm

@# 37 “There isn’t going to be a giant crash, people. At least not for single-dwelling family homes in Toronto.”

Katie, you are obviously young… typical under 40 whose memory bank extends to the Y2K Bug… you do realize the housing is cyclical, right? SFH homes in Toronto dropped nearly 30% in last down cycle… if we even got close to that, you wouldn’t be so smug… especially if you had to unload your home.

#48 Steve on 04.29.14 at 10:08 pm

#37 Katiebird

……sell now

#49 Linda Mulligan on 04.29.14 at 10:09 pm

“Even a broken clock is right twice a day”. So here is the question. Say yes, the housing market dives off the cliff OR it drifts down like a snowflake to some lower level. Equity wiped out – maybe – depends on how much you have at the time the correction occurs. But say the asset is now worth far less than what you paid for it. So your choice is to sell at a loss IF you can anyone to take the asset off your hands OR hold on to said asset until you can eventually sell for what you bought it for. Which could take quite a long time & here is hoping you can remain in said digs for decades without wanting or needing to move somewhere else.

Meanwhile, you are presumably without cash, having to feed the mortgage. Maybe you can get out via bankruptcy, maybe not. Main point is, no cash. So what does a housing correction do to the stock markets if anything? If the economy is dependent of housing, does the market also do a dive? Does it recover, how does this affect peoples plans to retire, take a sabbatical, ensure they don’t have to stake out a likely dumpster now? What if ‘all’ that happens is that the elderly boomer masses all try to sell their houses at the same time? What is likely to be the effect on markets & is that effect just a sniffle or will it be pneumonia?

#50 -=jwk=- on 04.29.14 at 10:10 pm

@ #37 “No way could we afford our neighbourhood today.”

Lol. were you being sarcastic? If you cant afford it, who can? This is a sign prices will have to come down until you can afford it again.

#51 Nemesis on 04.29.14 at 10:14 pm

#LosFabulousWhoopeeEpilogue

http://youtu.be/ZKlCtzUhPiI

[NoteToGT: Nope. Not tellin’. Oh… AllRightThen: Wow. Pretty much sums it up. Shot in Seattle at the ‘ol RoyalOlympic, SaltyCinephiles. Now it’s just a Fairmont.]

#52 gut check on 04.29.14 at 10:24 pm

“The immediate reason for the precipitous fall is that US houses cost too much, now that mortgage rules have been tightened. ”

Is that the only reason? Could it not be that institutional and other all cash investors have driven the prices mad? Rental rates have skyrocketed, too.

In recent months one of the largest institutional investors, Blackstone Group, has pulled the plug on its buying. Could that be one of the other reasons for the sudden decrease in prices (in some hoods) ??

And let’s not forget that mortgage rules may *have been* tightened, but that isn’t the case as of right now – TD Bank itself is offering American Buyers “Second Chance” home loans, where only a 3% down is necessary (and that downpayment does not even have to have been saved by the buyers in order for them to qualify). Other banks are jumping on the bandwagon, too.

A sane market will never return as long as the central planners continue to listen to bankers who love their socialism (for the rich) and capitalism (for the poor).

#53 Johnny on 04.29.14 at 10:25 pm

29 Nemesis on 04.29.14 at 9:11 pm
“People are delaying, postponing or denying marriage and children. The number of married Americans has been falling for a decade.” – HonGT

No worries AuldPol… EddieCantor got that one figured out, like, a long time ago [talk about, “In Extremis!” TeeHee!]:

http://youtu.be/ANRPmTZRqkg

“We may be closer to the zombie Apocalypse than I feared.” – HonGT

FearNot, SaltyDogz… CaptainNemo [“ahem”] is OnWatch – BriefPrologueAsideToSaltierDogz: And you always thought your Granny was a Prude… seriously? – Well, have I got news for you – she was a JitterBug! – JustCheckOutThoseMoves & StayTunedToTheEnd for TheBonusZen: #Don’tFenceMeIn:

http://youtu.be/OWk4y6dph7Q

[ToConclude – ADistanceLearningCourse for HommeDuTabagisme: Have a smoke, a JD… and during that brief pause… ask the BigBigQuestion that all hacks needs must ask when reflecting upon the next scene – i.e. “What if?” Here’s a practical example, “What if Dorothy, yes – that Dorothy – was a VeryNaughtyGirl?” Let’s say she emptied TheCookieJar, ditched ToTo at the shelter and hopped a GreyHound to SantaMonica vs. a Twister to Oz… no WickedWitches – just a bar packed with {ahem} LonelySailors… CutTo: http://youtu.be/OUhQZSxccmc AndScene.]

What is wrong with you ?????

#54 Ontario's Left Coast on 04.29.14 at 10:26 pm

Love the photo – Okay, that’s the smallest deck I’ve ever seen… I said deck!

#55 Smoking Man on 04.29.14 at 10:34 pm

I’m not even going to way in on this black racism thing on Facebook..

Would be like being brought up in Toronto and supporting the habs.

My white family and friends are racist, they try and hide it. But it seeps out..

I hate stupidity, humans are farted out everyday. If your skin is black. Might as well try and walk up a hill with a jeep strapped to your back.. It’s not easy, your teacher will preach inclusion, but her body language will be singing a different song.

It sucks… I quit the country club.. On this issue..

Black Kids need guys like Bill going on your blog and saying, I liked your story, even though it sucked.. To motivate you to do better. Give you hope and a purpose.

I hate humanity

#56 T.O. Bubble Boy on 04.29.14 at 10:48 pm

I’m going to be lazy for the $900k House of the Day tonight… just one listing:

http://www.realtor.ca/propertyDetails.aspx?propertyId=14322371&PidKey=-1394138214

$999,700 (just under the magic $1M ceiling)

The place looks nice enough, but the listing says that it is all glossing over the old house (“Only The Skeleton Is Original.”).

And, the description is deceitful: “Minutes To Downtown” from Dixie & QEW? Maybe at 4am.

#57 Will on 04.29.14 at 10:54 pm

What do you think will happen to Home Capital Group if interest rates go up or values drop? How much market exposure have they gained since CMHC won’t insure mortgages over 1mil?

#58 Sam on 04.29.14 at 10:55 pm

My friend in similar jobs in I.T make at least 30% more than me and their cost of living is half than mine. Their health insurances are covered by their corps. So we factor this, it boggles my mind how Canadian are still able to afford this housing menace.

#59 chapter 9 on 04.29.14 at 11:00 pm

#37 KatieBird
The human capacity for self delusion is absolutely amazing!!

#60 Obvious Truth on 04.29.14 at 11:07 pm

# 38

Is it just me or is the opposite of what you wrote actually true?

How come you never mention what a house actually cost you after the 25 year loan.

You compare compounding returns to debt service.

Try to be more realistic about assessing housing.

#61 Humpty Dumpty on 04.29.14 at 11:10 pm

Amerikan Erudition…

BEAVER, Pa. – A widow was given ample notice before her $280,000 house was sold at a tax auction three years ago over $6.30 in unpaid interest, a Pennsylvania judge has ruled.

http://www.cbsnews.com/news/judge-says-it-was-ok-to-sell-widows-home-over-6-bill/

#62 Grantmi on 04.29.14 at 11:11 pm

waiting for your response Joe.. stop with all your ramblings.. and nothingness!…

ANSWER THE QUESTION!!!!!!!

#72 Grantmi on 04.27.14 at 8:15 pm

Again Joe! Answer the question!!!!!

#175 Grantmi on 04.26.14 at 3:44 pm

#2 Joe on 04.25.14 at 5:51 pm
Buy a second house rent and in ten years you will make money on the sale..

Of course you’re claiming the rental income, and the appreciation increase over the 10 years of your non-principal property on your income taxes… ….. Right, Joe????

#63 Obvious Truth on 04.29.14 at 11:12 pm

Forgot to add #40.

#64 Shawn on 04.29.14 at 11:12 pm

The Life of Leisure has Arrived for some?

Happity at 25 reports:

20 percent of American families do not have a single person that is working.

******************************************
Wow, that’s cool for them. Are they mostly living on dividends then and other savings and investments?

#65 4 AM Sunrise on 04.29.14 at 11:18 pm

#56 T.O. Bubble Boy on 04.29.14 at 10:48 pm

1. They didn’t specify *how many* minutes it was to get downtown.

2. For that price, they should at least throw in a jet pack to get me downtown in “minutes”.

#66 ozy -Let's stop the ORGY - before it destroys the inherent value and pride of Real Estate on 04.29.14 at 11:31 pm

unfair comparison, in GTA houses did make 10% a year, not 5% and they made even more in better areas. Plus you can’t live with a family in a stock market. Plus when you sell your primary residence – e.g. move to Nova Scotia in retirement – all hefty capital gains -are ZERO taxable.

HOWEVER, HOWEVER, however – this ORGY ORGY orgy is more than insane, the usual stability attribute of housing it’s being gambled – as fueled by gov. and the banks.

It’s time that we make this a HOT ELECTION item – any MP capable of raising this properly – will make it to the history books.

TW, If you choose to run as independent, dear Garth – you will get 10000 volunteers, you just need someone dynamic to put them to work, no old passive fellas, anymore- come on – this country is DYING and FAST.

Let’s stop the ORGY – before it destroys the inherent value and pride of Real Estate.

#67 KommyKim on 04.29.14 at 11:35 pm

RE: #5 David Lee on 04.29.14 at 8:24 pm
As for bond investors, there are always buyers since these are 100% safe and 100% liquid. — Garth
I think I’m missing something.

When you want to park billions of dollars in a safe place you buy bonds from governments with a AAA credit rating. That’s why pension funds, who have a very long investment time horizon, buy these for the fixed income portion of their portfolio.

#68 ozy - to #55 Smoking Man on 04.29.14 at 11:35 pm

Don’t worry, Smoking Guy, there are plenty of non-racist whites and we do instill happiness, hope and proudness in the human race when we shake other races hands. I just wish, everyone was a bit more open (less konstipated you could say) overall in Toronto

Mingle my kids, mingle… (god’s voice)

Don’t hate the humans, they are Pentium5 Ape Model – in progress. Karmic laboratory to roll out improved versions every decade.

#69 Mike T. on 04.29.14 at 11:49 pm

Lying to other people is part of the game on Earth…part of the deception – figuring out who is lying helps you evolve.

Lying to yourself is in-excusable. Worst thing you can do….believe your own lies.

#70 Nemesis on 04.29.14 at 11:51 pm

HeHeHe…

http://youtu.be/fz86g-S3OJI

[NoteToRalph: Merle wouldn’t do it… So we went with puppets.]

#71 Stef on 04.29.14 at 11:54 pm

#55 smoking man

I’m a Habs fan born and raised in Toronto. Why? cuz I was raised right! I’ll also have a reason to watch the playoffs in a couple of days. How ’bout you? Maybe next year big guy

#72 4 AM Sunrise on 04.29.14 at 11:56 pm

#64 Shawn on 04.29.14 at 11:12 pm
The Life of Leisure has Arrived for some?
——————————————

Maybe some of them are what I call the “idle class”. On this board we call it The Thing In The Basement. There IS a cohort of debt-free Boomers out there who can afford to support a modest lifestyle for their unemployed adult children (and sometimes fund their indie bands, too). When the Things do their taxes, does the government count them as a separate one-person “family”?

#73 BCD on 04.30.14 at 12:05 am

#37 KatieBird on 04.29.14 at 9:34 pm
Husband and I (house-horny millennials) bought a 100+ yr old row house in Riverdale (you’d probably refer to it as a “termite-infested dump”, Garth) almost 2 years ago for $580K. We both read your blog religiously, and felt sick with worry about the imminent crash… Two weeks ago, a property identical to ours sold for $765K. Even with a 20% – 30% correction, seems like we’ll be okay in the end. Boy, am I glad we didn’t wait. No way could we afford our neighbourhood today. There isn’t going to be a giant crash, people. At least not for single-dwelling family homes in Toronto.

Based on a sale on your street? — Garth

_____________________________________________

Wow. . .people giving Katie Bird a hard time. . .rent much?

Seriously. . .why H8 on the girl for getting in at the right time. Our story is similar. . .I was convinced in 2003 (yes 2003, this housing crash nonsense goes back that far for me) that house values would sink. I refused to buy. . .lucky for me the wife had other ideas, we were with child, a house it was. Since that time we’ve paid off most of the house (put a third down when we bought it) and in the meantime it has increased in the neighborhood of Katie’s, AND also like Katie we could not afford this neighborhood now, at least not with a “sane” mortgage. Sure you will say the fact that people can’t afford it is reason enough for it to go down. . .but since 2003 (and the foreseeable future) you have been wrong, wrong, wrong. While you were knee deep in fear and trepidation life happened these last 10 years for me (kids etc.) If we hadn’t bought when we did I would be so bitter it would be unbelievable!

Renters will keep crying because they have an eternal horizon line etched into the back of their retinas (from waiting for that boat to sail back in). The bitterness in Vancouver among hipsters and millennials must be epic. . .so glad I am not cool enough to count any as my friends, getting drunk with them and their wives must be about as entertaining as a wake.

#74 KILLABOY on 04.30.14 at 12:06 am

So when exactly will the housing price bubble burst? A month from now? A year from now? 5 years from now?

#75 joe on 04.30.14 at 12:08 am

#62
Buy a second house using cash and collect your retirement at $2000 per month , …..and sell for 5mil in ten years ….:)
did I answer your question? :)

#76 joe on 04.30.14 at 12:35 am

Anyway, my friends bought expensive houses in Toronto,
range 700000 to 1mil and saying that in few years prices will double…..”Man this is Toronto” houses have only one way up/////So if they are right ….they are winners…

#77 KommyKim on 04.30.14 at 12:44 am

RE: #49 Linda Mulligan on 04.29.14 at 10:09 pm
OR hold on to said asset until you can eventually sell for what you bought it for. Which could take quite a long time & here is hoping you can remain in said digs for decades without wanting or needing to move somewhere else.

Personally I’d rather do the sell/move/buy in a down market than in a frothy one.
ie: Your 500K house drops to 300K, you sell, move, and buy an equivalent house elsewhere for 300K. Less taxes and commissions on a 300K house than a 500K one.

#78 Transplant on 04.30.14 at 12:49 am

#37 KatieBird

I hate to disturb your reverie, but don’t count your chickens before they hatch. I hope you can weather a 20%-30% drop in real estate prices but this still does not guarantee that your home will regain its purchase value anytime soon after this degree of devaluation. I will use my own situation as an example, one that is not an aberration but rather a typical example of what happened to real estate prices in the USA.

I purchased my current home in late 2012 and paid 28% less than it was valued in 2006. According to Zillow my home has appreciated by 15% since I bought it, but even so it is still priced 17% lower than it was in 2006. If a piddly down payment of 5% were made, given these figures, then a “homeowner” who bought in 2006 at peak price could be facing a serious problem. Even if a larger down payment were made a difficult situation still might not be avoidable. My house is still worth less than it was 8 years ago but thankfully for me this has worked to my advantage. The point is, it can take an awfully long time to recover from this type of financial shock. For some people this might not be a problem, but for many if not most home buyers, this will be a very tough situation resulting in loss of mobility, loss of spending power and diminished ability to fund retirement plans and children’s college funds among other things.

I understand that Canada is not the USA, but there are enough similarities that general comparisons can be made. The US market in 2006 and the current Canadian market share some common factors-easy credit, lax lending standards, low interest rates, largely government-backed (i.e. taxpayer funded-CMHC vs Fannie Mae/Freddie Mac) mortgages and bank officials, Finance Ministers/Treasury Secretaries and real estate gurus assuring everyone that all is well. What we apparently do not have today but thought we had in 2006 are well-paying plentiful jobs and a thriving economy.

An increase in interest rates would of course cause plenty of grief but there are so many other factors, known or unforeseen, that can cause the same effect and should give a prospective home buyer pause.

Nonetheless, I sincerely hope that everything works out for you and your family and that my concerns are proven to be unfounded.

#79 guru right twice? on 04.30.14 at 1:05 am

start at 35:40

https://www.youtube.com/watch?v=VBPZ58dzjfE

#80 Larry1 on 04.30.14 at 1:26 am

Let’s say there is a Canadian RE crash that starts gaining momentum. How does one profit? What can be learned from USA 2008? Long duration Canadian bonds? Doveishness? Gov balance sheet expansion? ZIRP? Asset appreciation, dollar depreciation…?

#81 blase on 04.30.14 at 2:25 am

http://finance.yahoo.com/news/homeowners-regrets-buying-a-house-redfin-163113390.html

#82 Freedom First on 04.30.14 at 2:31 am

Debt is the money of slaves. No exception.

Garth, the way you deliver the truth about the soon to be reality for many Canadians is very kind. I really enjoy the comments from the people who hear your message, see the insanity of what they have done to themselves, and flee the smoking hot Canadian RE market before it turns into a raging fire and burns them into submission, too late.

#83 Buy? Curious? on 04.30.14 at 4:24 am

Garth, if it wasn’t for stupid people we’d all be poor. How else would we be able to make money off the labour of the majority if they weren’t stupid? If I take out a mortgage, I’m using someone else’s hard-earned money to buy an assest. If I rent, I’m using my own money to live in someone else’s assest. The rise or fall of the assest is only a concern at the point of sale. If you’re a family with kids, you’re not going to be moving much because of the kids’ schools, and other things that got you to buy in the first place ie. transit, parks, Club Wicked, etc. That stat you occasionally throw out (People on average move every 7 years) has to be the most irrelevant stat in the history of Stats! Even if it was slightly credible, it would skewed towards renters, “mobile workforce” condo dwellers or younger people. To the vast majority of homeowners, once they buy a place, they’re going to be there for a while. Everyone of my friends who have bought, and I have a lot, only two have moved. One, because he bought right out of high school, paid off his mortgage, sold his house and used all that money to buy a bigger house down in the beaches. He ain’t going anywhere, ever. And the other guy, he’s been buying big crappy homes, fixing them up while he living in them, at his own place, then flipping them. The friends that are renters go from paycheque to paycheque, ask for separate cheques if we go out and family vacations consist of weekends at other people’s cottages.

https://www.youtube.com/watch?v=giJCL_jhnsE

Rob Ford 2014! I love you, Bro.

#84 drydock on 04.30.14 at 5:19 am

Darwin’s, “Origin of Species” was published in 1859, 155 years ago.
It still causes people to foam at the mouth and shriek with rage despite fossil evidence.
A large segment of the population are irrational (bidding wars).
Can the burning of witches and scientists be far behind?

#85 April in Paris on 04.30.14 at 5:40 am

About 9.2 million Canadian households currently own homes. That’s 69%. Interesting coincidence.

Canada is middle-of-the-pack in a list of home ownership rates by country.
http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate

#86 neo on 04.30.14 at 6:09 am

Garth quote:

“And it will all get worse, says a big US apartment REIT executive, with the US rate plunging to 55% over the coming years. The reason? People are delaying, postponing or denying marriage and children. The number of married Americans has been falling for a decade. Meanwhile all those Millennials in Florida, California and Nevada want nothing to do with the asset that ate their family’s net worth. It’s a backlash with bite.”

Well this is rich. I made this exact point about family formation a year ago and you pooh poohed it saying I was an alarmist and it had no bearing on would be a sustainable housing recovery. hmmmm.

80% of condo purchases in Florida, Nevada and New York are cash purchases. The gap between have and have nots in the U.S. has never been greater and that simply has to be addressed for a recovery in housing and the overall economy to truly take hold.

#87 Realtor # 1 GTA on 04.30.14 at 6:48 am

Please enough with ownership rate.
There are plenty buyers out there and thats the issue.
Even when there is a housing bust listing fall but stay on longer. Until market conditions change where buyers leave the market either because of job loss or lenders issue it will remain the same.

Interest rates are the same as last year however prices
are higher. Only explanation – more buyers

#88 saskatoon on 04.30.14 at 6:55 am

#84 drydock

or…it could be that people don’t like eugenics/social darwinism…

…or men who marry their first cousin.

subtitle of darwin’s famous book:

“preservation of favoured races in the struggle for life”

#89 eddy on 04.30.14 at 6:59 am

There are many examples of the “KatieBird” narrative in 416. There is no reason to make one up. “KatieBird” just sounds made up to me.

#90 TurnerNation on 04.30.14 at 7:04 am

I’ve ordered some replacement water filter cartridges(triple-filter system). Until then don’t expect any great posts from me.
#fluoridated

#91 OttawaguyRenting on 04.30.14 at 7:08 am

#73 BCD

“Life happened to me…”

Well sir. That is your definition of “life”. Sounds grand. Does your cow milk all day or provide?

Are your kids super fantastic awesome?
Goooooood. You have have that life. I don’t have kids.

I’ll be stumbling home to a wife that earns. I’ll be working at a job that pays nice with bens in the privvy sector. I’ve climbed the ladder when not out eating at fine restos and investing in small business.

I rent. I have money. I have more money in my pocket at those nights “at the wake” when Jack is complaining his kids are costing him a fortune. He never has money to pick up the tab.
He has a cut from a tomato box house and a snot making brat.

Step down from that high horse BCD.

Its guys like me that cut the legs off it one day…

Fit. Happy. Skinny Jeans and Raybans.
Thats the look of a guy that keeps your wife dreaming of guys that are not you.

#92 TurnerNation on 04.30.14 at 7:20 am

Why would someone earning top .1% income level even need a kitchen? Surely their time is too valuable for that. Hire someone.

As GS Elevator Tweets said:

https://twitter.com/GSElevator
#1: Poor people eat so much fast food you’d think their time was valuable

#93 EastEnd on 04.30.14 at 7:53 am

#37 – KatieBird

Well Played !!

#94 Blase on 04.30.14 at 8:31 am

OttawaGuyRenting, you sound like an incredible fool.

#95 T.O. Bubble Boy on 04.30.14 at 8:34 am

So, correct me if I’m wrong, but the Ontario Liberals’ economic plan seems to be:

A) Get every public sector employee on the Sunshine List

B) Realise you can’t pay all of the Sunshine List employees, raise taxes on top tax bracket to pay for it

Rinse & Repeat

#96 Big Brother on 04.30.14 at 8:42 am

#44 Smoking Man on 04.29.14 at 9:53 pm
36 Pope Sexsixpackkitten Snugglebums the ???tb (aka Nosty)on 04.29.14 at 9:32 pm
The old bastard should have gone the rental route.
But it astounds me, all the bandwagonairs. The moral ones, the high priests of righteousness, the forces against even, hell the damn president trashing this guy while an extream tragedy of the oppressed black youth taking place right in front of their faces…
I’m definitely from another planet

……………………………………………………………………….

MKULTRA knows your not from another planet. You’re from here. You attended West Toronto Collegiate Institute and failed English! Sorry for the English failure that’s when we started programming you. We did program you to be a free thinking spirit, however we may have gone a little too far on that neuron excursion.

#97 Mark on 04.30.14 at 8:44 am

I went to the website of the condos that were supposed to be connected to the TTC at Don Mills and Sheppard.

To advertise a “opportunity” to get a 1.99% mortgage they show a balloon about to be popped… probably not the best image choice…

See for yourselves: http://emeraldcitylife.ca/

#98 neo on 04.30.14 at 8:49 am

#73 and #37

I think the point that is being missed here is that it isn’t about the absolute cost of the home per se. It is about “LEVERAGE” used to make the purchase. I don’t know about Katie, but you mentioned you put a hefty down payment and have aggressively paid down the mortgage. If I was confident that everyone was as disciplined and steadfast as you have been I wouldn’t be concerned. The problem is there are far too many people overleveraged? A $1,000,000 home in a vacuum doesn’t mean anything without the context of your age, income, interest rate and downpayment added to the equation.

Leverage cuts both ways. Only a fool does not get that. — Garth

#99 T.O. Bubble Boy on 04.30.14 at 9:03 am

$900k house of the day for Wednesday, April 30th:

3 Finalists
1) $995k “Executive” house near Islington/Finch *** in same family for 3 generations ***
2) $969k unremarkable split-level in Scarborough
3) Basic $898,700 Mississauga bungalow that happens to have a big shed/garage.

WINNER:
Another tough choice between 3 basic burbs houses that apparently are all worth near $1M, despite having minimal improvements beyond standard (required) maintenance updates over the last 30-50 years.

I’m going with #1, just because I found it hilarious that the “Executive” house was filled with old parquet floors and 1980’s oak cabinets. (and that it had 2 jacuzzi tubs!)

#100 Just the facts Ma'am on 04.30.14 at 9:10 am

Today’s photo goes to prove that for every problem there is a solution.

#101 Noobs make the market what it is on 04.30.14 at 9:10 am

The whole issue about the listing price is really how the final sale price is advertised to the public by the media . That is the bullshit part about real estate in Toronto and what suckers newbies into over bidding on homes. They actually think it’s cool now to blow money on a house and say they “won a bid”. Meanwhile they will get roasted in the long run when rates head back up to 6% and prices correct. Oh and $2 litre gas pretty soon for your leased Merc.

My biggest concern is the whole percent of list price advertising. Considering many listings start higher than the actual price it sold from. Lots of houses have been reduced 5 times in a year, yet you dont see an ad saying ” sold at 50% of original list price 1 year ago”.

The market and the media are geared to over hype sales of homes in “nicer” hoods. Sucking in the noobs for multiple offers. The whole business is like a carnival now and realtors know it and take advantage of it. Can’t really blame them though, there’s money to be made off stupid buyers.

#102 maxx on 04.30.14 at 9:24 am

…over 25 years, at 7% you end up with 693,693.70…the price of the condo PLUS an additional 300K. This doesn’t account for rent increases, however that would be more than neutralized by special assessments, condo fee increases and likely potential drops in re values.

Anyone over 40 should really think about this conundrum. With 25 or so years left before “freedom”, powering savings into your coffers ought to be priority #1. Not stocking up on illiquid assets.

Who knows what the world will be like in 25 years, or how much social safety net will be left, and for whom???

#103 Buy Low Sell High on 04.30.14 at 9:24 am

Here is an example of the problem with buying real estate at all time market highs:

Property: 992 Ossington Ave. Toronto (Semi Detached) in the Dupont & Dufferin area

Sales History:

September 1987 sold for $230k (listed for $249k)

April 2005 sold for $295k (listed for $299k)

April 2014 sold for $715k (listed for $599k)

So, in 18 years from ’87 to ’05 the owner made $65k or 28%. If we assume a very modest inflation rate of 2.5% then a simple calculation of $230k * 1.025^18 = $358k. The 1987 purchaser did not even keep pace with inflation, which ironically, has always been an argument for buying housing in the first place! If the homeowner had of kept the house until 2014 (27 years!) and then sold for $715k then his annual compounded rate of return would have been 4.3%.

It’s the homeowner who bought in 2005 that made the nice gain having more than doubled their money in 9 years. The 2005 purchaser made a gross $420k (pre selling costs) tax free which equates to 10.33% annually compunded. In the stock market they say it’s time “in the market” and not “timing the market”. Unfortuantely, real estate cycles move at glacial speeds and really, you’re better served by buying at the right time, i.e. not at an historical all time market high.

This house was chosen because it was in original condition throughout the 3 transactions making for an apples to apples comparison. Renovations make for a more murky comparison over a set period of time.

Also, had there been a transaction in the mid nineties, the house probably would have sold for below the 1987 sales price of $230k making for an even more dramatic return from market trough to current market peak.

So, for the purchasers of all the Leslieville semi detached houses that just sold in the last 2 years for $700k – $800k, how long are you going to have to wait to come out ahead of inflation? Also, today it is very difficult to pay off a home in 10-15 years which was not the case 20 years ago and further back. Longer mortgage carrying time will further diminish returns.

Patience, what a beatch! Irrational market exuberance lasts longer than patience!

#104 GDPumped on 04.30.14 at 9:24 am

US Q1 GDP up 0.1%. Robust recovery.

#105 Aggregator on 04.30.14 at 9:26 am

Toronto commuters face more than two years of Gardiner lane shutdowns because of repairs

Following spring maintenance work that closed the Gardiner Expressway this weekend, the city has launched a series of long-term repair projects that will shut down parts of the highway for more than two years.

You wanted United Nation's densification and sustainable devleopment plan? You got it.

Next, Toronto hikes parking ticket fees and gas and fuel taxes to reap the rewards of self-inflicted congestion while realtors blame C1 condo sales on highway repairs. Oh, and good luck driving home to your condo everyday without waiting hours in traffic while you're burning $1.40/L gas on idle, and soon $1.50-60/L.

#106 Ralph Cramdown on 04.30.14 at 9:29 am

#95 T.O. Bubble Boy — “So, correct me if I’m wrong, but the Ontario Liberals’ economic plan seems to be […]”

Not that I think they’re doing an inspired job, but…

Who’s doing better? The economically strongest province, Alberta, is running a fat deficit (if you can even understand the budget). The Harper government ran a $5.1B surplus in February. For the great Canadian balance sheet to balance, that surplus has to be offset by deficits somewhere else, and the choices are the budgets of other levels of government, households, or net foreign investment.

#107 Jason on 04.30.14 at 9:38 am

Yes! Now instead of the deep sigh I produce before a rant about the housing market, the other costs associated they do not consider other than just the ‘price’ of the home, I can just point my friends to this article when they ask “Why are you renting?” Even my own mother was questioning why I haven’t bought a home. Talking to my ex-girlfriends brother awhile back about index investing he stopped me and had the audacity to ask, “Well why don’t you buy a house instead?” AHHH! It’s almost as if the U.S. housing bubble didn’t even happen in their minds. But I can’t blame my fellow Canadians. I do remember “Rick Mercer talking to Americans”. A lot of them thought their northern neighbours lived in igloos and took dog sleds to work. We’re oblivious outside of the border I guess.
Thanks. Awesome post!

#108 drydock on 04.30.14 at 9:39 am

#88 Saskatoon

or…it could be that people don’t like eugenics/social darwinism…

…or men who marry their first cousin.

subtitle of darwin’s famous book:

“preservation of favoured races in the struggle for life

Taken out of context, here we go just proves my point.

#109 PoltawaDiva on 04.30.14 at 9:45 am

#83

The 7% figure on average that people move is just that.

When takin fan advanced course on US social history at the University of Michigan in 1972, the prof wanted to make a point about the mobility of American society. She asked the 150 students in the lecture the lecture hall to raise their hand if they had never moved up to the time they came to university (age 18). A few hands went up.

The next question: How many of you moved at least once in the first 18years of you life? Two times? Three times?

The number of times kept increasing and the number of hands staying up kept decreasing. When she reached 15 times (in 18 years) there were still some 5 hands up.

sure, this was over 40years ago and in the US. However, society has not become less mobile, and you don’t know where in that pool of averages your lot will fall’

#110 DocInWaitingRoom on 04.30.14 at 9:54 am

https://ca.finance.yahoo.com/news/homeowners-regrets-buying-a-house-redfin-163113390.html

1 in 3 regret house purchase under 100k

#111 Roger_Home_Inspector on 04.30.14 at 10:01 am

#56 T.O. Bubble Boy on 04.29.14 at 10:48 pm

Good pick for today. It’s telling of the sales tactics that agents use to gloss over a potential turd. This one here is doubly as worrying for me as it looks to have flat roofing systems. Not a great concept in our climate for residential buildings as they are very expensive to repair, maintain and god forbid replace.

Just a tip- If you ever consider a home that’s been “Completeley Renovated!”be sure to ask for the receipts for the work completed. Most people won’t have them either because

a) they are flipping the house and did the work themselves or

b) they buffed the turd up for sale

In either case, you typically end up loosing as the potential buyer because the work has been rushed and in many cases major concerns such as outdated mechanical systems still exist. Only difference now is that they have fresh drywall and granite over them. But a turd is always a turn no matter what you wrap it in.

I often see ads from agents themselves as well as their larger brokerages suggesting that their agents can help you with your “wealth” and “financial future”. Really? I’ve met agents before who couldn’t add without counting on their fingers. I think Realtors should have to present their clients with a disclosure document explaining in simple terms that they are simply a sales person (not a financial adviser), and in many cases their (the agent’s) best interest runs contrary to the client’s.

Plus, I think if we stick with a commission based system, the agent should need to be paid by the involved parties directly. Most people see a Realtor as a “free” service because they don’t ever see a bill. I can guarantee you if people were forced to write a check for the service directly the average fee would drop dramatically. And let’s not talk in percentages any more for commissions- let’s have everything quoted in dollars.

Here’s another beef of mine- the actual way that RE brokerages are structured. If you look at your typical RE office, there are tons of people and other resources in place that provide little or no benefit to the average client, they simply represent bloated overhead. Do we really need 4 or 5 partners in each office, plus managers and then a raft of clerical people? A big chunk of the commission that you pay when you employ a RE agent gets flipped to owners, brokers, managers and maintaining flashy buildings that add little or no value in the average transaction. And remember too, a lot of the higher ups in these brokerages try and live a rock star lifestyle with trips to every convention and meeting they can sign up for and again that cash is coming out of the brokerage’s pockets. Or yours, depending on how you look at it.

I think we need smaller and more efficient brokerages. In the past 10 years or so I’ve seen a lot of smaller “discount” brokerages pop up and oddly they provide good service but for a much lower commission. Often they are family run and operate out of a home so overheads are very low.

I often hear “full service” agents dismissing “discount” brokerages, saying that they don’t offer the same “advertising” or “services”. Here’s the fact- when your “full service” agent advertises, they may have your home listed with a little picture below their ad but that’s secondary. They already have YOUR business. They are advertising their name to get the next client. And they actually want a buyer to call them directly about your home so they can double end your deal and really stuff their pockets while representing neither party well.

Wanna have some fun this weekend? Call a few agents and have them come to your home saying you’re wanting to list. They’ll tell you why they are the best and #1 for some reason…blah blah blah. When they’re done their sales script, get down to the brass tacks. Have them calculate out the exact commission and then ask them to generate a comprehensive marketing plan including what will be done and the costs associated with each item. Then haggle them on the commission percentage and indicate to them that you’d like a clause installed stating that they will not be able to double end the deal, nor have any affiliation or association with the agent representing a potential buyer.

Sounds fair, right? This would be a fairly straight forward process when negotiating any other business deal. You’ll soon find that your agent’s eyes will gloss over and their original “pep” is all but gone. They want your business on their terms, not yours. And god forbid you ask them to justify and lay out their marketing plan. If you listen really closely you’ll actually hear their little heart break.

Wanna have a really good time? Get three agents to come over at the same time. Just put plastic down first because there will be blood….

#112 Tony on 04.30.14 at 10:01 am

Re: #31 World View on 04.29.14 at 9:24 pm

The dead cat bounce is over pal American real estate will mirror the Japanese real estate market. Get a clue.

#113 Tony on 04.30.14 at 10:06 am

Re: #104 GDPumped on 04.30.14 at 9:24 am

I wonder what the real figure was? Things are certainly changing fast now with the loss of Ben Bernanke at the helm.

#114 liquidincalgary on 04.30.14 at 10:07 am

@ #45 JOE

joe, read this slowly…69% is 69%. no matter what the population is. it is relative in percentage terms, which makes it a fair comparison

#115 Kenneth2 on 04.30.14 at 10:08 am

Re JC #39:

Thanks for the link.

#116 Grantmi on 04.30.14 at 10:11 am

Nope. you didn’t answer my question!

#75 joe on 04.30.14 at 12:08 am

#62
Buy a second house using cash and collect your retirement at $2000 per month , …..and sell for 5mil in ten years ….:)
did I answer your question? :)

I was asking you THIS!

Of course you’re claiming the rental income, and the appreciation increase over the 10 years of your non-principal property on your income taxes… ….. Right, Joe?

#117 Tony on 04.30.14 at 10:12 am

Re: #40 Mark on 04.29.14 at 9:44 pm

You fail to find the relevancy of the question. Look toward the future and the question will read Canadian real estate or stocks? Which one will fall the least over the next decade? Without a doubt Canadian housing will fall less than stocks.

#118 OttawaMike on 04.30.14 at 10:17 am

#105 Aggregator on 04.30.14 at 9:26 am
..waiting hours in traffic while you’re burning $1.40/L gas on idle, and soon $1.50-60/L.
————————————————-
Thanks for reminding me why I abandoned T.O.

Sometimes I forget.

#119 Toronto_CA on 04.30.14 at 10:39 am

Wynne wants to hike taxes on those making $150k+ in Ontario AND increase jet fuel taxes, making Pearson (already the most fee/taxed airport in North America or the World, I forget which) more expense to use.

I wish the Cons in Ontario had a better figurehead than Hudak, because I really don’t want another round of Liberals in the province.

Too bad almost every province is run by fools these days. Hearing good things about Austin, Texas…if only Americans didn’t love guns so much.

#120 T.O. Bubble Boy on 04.30.14 at 10:51 am

@ #106 Ralph Cramdown on 04.30.14 at 9:29 am
#95 T.O. Bubble Boy — “So, correct me if I’m wrong, but the Ontario Liberals’ economic plan seems to be […]“

Not that I think they’re doing an inspired job, but…

Who’s doing better? The economically strongest province, Alberta, is running a fat deficit (if you can even understand the budget). The Harper government ran a $5.1B surplus in February. For the great Canadian balance sheet to balance, that surplus has to be offset by deficits somewhere else, and the choices are the budgets of other levels of government, households, or net foreign investment.
——————————–

I agree – Ontario’s *results* aren’t that much better or worse than most other provinces.

However – why can’t we look ourselves in the mirror and come up with broad solutions to the problems vs. defaulting to “tax the top bracket” or other lazy approaches?

I would feel far more comfortable handing over more in taxes if I knew it wasn’t just going to pay Sunshine List employees who already have far better benefits than most in the private sector.

#121 Calgarian on 04.30.14 at 10:54 am

I am sorry Garth but we have been hearing these since 2008 and the bubble is yet to burst. Will Canadian house prices go down? Certainly. Will it be excessive? Depends where/when you bought and how much you paid. Will you lose money? It depends if you have to sell right away.
I learned one thing with all my investment experience: Living with the fear of losing money is way worse than actually losing money. Those who listen to you have been living in fear for past 6 years, many of them asking themselves everyday “When will the hell break lose so I can buy a house?”
Renting is easy for a 25 year old yahoo. He can live in a condo, he can move out whenever his landlord becomes unreasonable and find another equivalent condo in the same area. Now add a wife and three kids to that yahoo and let’s see how easily he can find a big enough house in a good neighborhood for rent and how often he will manage to move before he gets a divorce or his kids go into depression since they are changing schools every other year. Buying a house is not a mere investment like you are trying to convince people.

My message is simple: diversify. If you hold the bulk of your net worth in one asset, especially bought at an inflated level and with the potential of illiquidity, you are assuming significant risk. Don’t diminish it. By the way real men don’t blame things on the wife & kids. — Garth

#122 maxx on 04.30.14 at 10:57 am

#6 Fed-up on 04.29.14 at 8:25 pm

“No need to keep comparing us to the USA circa 2005.

We are far worse than they ever were.”

Americans are also showing serious signs of learning from their mistakes by taking better care of their finances. I’ve spoken to some who view debt as a horrible disease…..lucidity lives here.

Canada, sadly, is still irretrievable. A society seriously addled by re addiction, with a severe and growing lack of individual fiscal resources due to debt, with increasing family and social instability.

As with so many Canadians, our real economy is at nowhere near the stage whereby it can begin reversing its fortunes- it continues to melt, largely because of RE dependency.

Unfortunately, individuals are not the only economic segment addicted to RE and its support industries.

Therein lies critical lack of responsibility.

#123 That Stigma about Renting on 04.30.14 at 11:09 am

#99 the dated “executive” house

Apparently anything that is larger than a shoebox these days gets branded as an “executive home” – and apparently the population of the GTA has a very large number of “executives”

We looked at a rental house whose agent said she was showing it to potential renters the calibre of a … wait for it … “bank senior vice president!”

The house sat for months after that and the asking rent dropped before it went off the market. What is a Canadian bank senior VP doing looking at nondescript rentals?

#124 souvereigninternational on 04.30.14 at 11:28 am

Excellent assessment of US RE market on Zero Hedge in Garth-esque style. As I said before there is a good chance that correction in Canada’s market will be drawn into the vortex of US housing (as well as economic) retraction, multiplying it’s effects and crashing the market well below expectation:

http://www.zerohedge.com/contributed/2014-04-29/mortuary-7000000-foreclosures-and-counting

#125 Ralph Cramdown on 04.30.14 at 11:34 am

#120 T.O. Bubble Boy — “However – why can’t we look ourselves in the mirror and come up with broad solutions to the problems vs. defaulting to “tax the top bracket” or other lazy approaches [in Ontario]?”

It’s a failure of the electorate. We commissioned the Drummond report. I only read summaries of it, but Don Drummond seems a bright and thorough man, and I don’t doubt his report was reasonable. It went nowhere, because the government knew that they’d be turfed if they implemented it.

Every voting taxpayer is looking for a free lunch, and every politician is looking for one at 50% off. To put it another way, I have a friend originally from eastern Europe, and his take is that (and I paraphrase) “the academic type politicians will endlessly argue among themselves about the best way to govern, but eventually some demagogue will stand on a chair promising free bread, and win the election.”

The most conspicuous current example in Toronto (and basically, by extension, Ontario) is transit. The incumbent mayor won by, and basically all running for mayor and premier are all about promising transit without mapping out how they’ll pay for it. Essentially, it’ll be free. Obviously, this isn’t true, but our electorate is so stupid that we all agree, essentially, that we need more transit (even if its to get others off the road so we can drive our cars), but we don’t need more taxes, or spending cuts in other areas. And apparently pollsters have convinced the leaders that we’ll vote for such an impossible scenario. And we probably will. An intelligent solution would be to say we need to spend $x billion, indexed to inflation and population growth, on transit every year, and specify how it would be paid for and how the standing committee on spending it would be constituted. We remain stuck in endless ad-hoc plans, cancellations, elections as referendums, power struggles and funding spats. Nothing gets built. Maybe this is why houses close to the core appreciate?

Likewise, every major government spending program seems to have to involve money from all three levels of government, even though our constitution only specifies two (municipal governments are entirely created creatures of the provinces) and generally splits powers between them. Still, nothing can be built without three politicians from three levels of government at the ribbon cutting ceremony, even though funds for all come from the same taxpayer pockets.

Eh, I could rant for days.

#126 BCD on 04.30.14 at 11:36 am

#91 OttawaguyRenting on 04.30.14 at 7:08 am
#73 BCD

“Life happened to me…”

Well sir. That is your definition of “life”. Sounds grand. Does your cow milk all day or provide?

Are your kids super fantastic awesome?
Goooooood. You have have that life. I don’t have kids.

I’ll be stumbling home to a wife that earns. I’ll be working at a job that pays nice with bens in the privvy sector. I’ve climbed the ladder when not out eating at fine restos and investing in small business.

I rent. I have money. I have more money in my pocket at those nights “at the wake” when Jack is complaining his kids are costing him a fortune. He never has money to pick up the tab.
He has a cut from a tomato box house and a snot making brat.

Step down from that high horse BCD.

Its guys like me that cut the legs off it one day…

Fit. Happy. Skinny Jeans and Raybans.
Thats the look of a guy that keeps your wife dreaming of guys that are not you.

___________________________________________

Lol! My wife makes as much as I do. Between the two of us we are in the 180K range. . .and probably have less debt then you.

As for my kids, no one can convince me that they were a mistake. Sure, they are trying at times, but fatherhood is probably the best decision I have made.

As for going out, we eat out whenever we want to. I can go out with the boys and drop $200 anytime I want, I just don’t do it much because I am not into that scene.

Not sure why you are so bitter. I can even show you a picture of my abs that would make you slink away like a beaten dog. Yes, I am very fit and could probably whip you in bench press and 5km. But seriously. . .

Okay. . .done justifying myself to someone who is totally insecure. Stop hating on the winners, keep renting strong bro.

#127 Calgarian on 04.30.14 at 11:44 am

#10 and #14

Obviously you are not that good about “finance”. Carrying cost of a condo/house cannot be based on mortgage+tax+fees. Real carrying cost is interest+tax+fees. Your mortgage payment includes payment on the principal amount and you receive that back when you sell your property, assuming that your property preserves its value.
Your actual carrying cost of a $380K mortgage for 5 years is less than $1500/month so $1600/month rent is not as bad a deal as it looks like, especially if you have just 5% down.
Garth’s math is intentionally deceiving, you guys are falling for it and thinking that you are smart.

“Assuming that your property preserves its value.” So much for that argument. — Garth

#128 OttawaMike on 04.30.14 at 11:47 am

VIX is flat for the past few days no matter what the news.
Way too much complacency in the US market these days but then waiting for a meaningful S&P correction is a fool’s game.

Even Rose has turned into a bull for the TSX.

#129 Bottoms_Up on 04.30.14 at 11:49 am

#7 Mishuko on 04.29.14 at 8:25 pm
————————————-
In general, I disagree.

If renting vs. owning were numerically equal, the Pro for renting would be flexibility, and the Pros for owning would be that you build equity and eventually own the home, and as owner you have say over what goes on, in and around the house.

Given the above, it makes sense that owning is more expensive.

So yes it is very situationally-dependent, and each person/family needs to consider all the factors in deciding whether to rent vs. own.

#130 Pre-retiree on 04.30.14 at 12:17 pm

#77 KommyKim on 04.30.14 at 12:44 am RE: #49 Linda Mulligan on 04.29.14 at 10:09 pm
OR hold on to said asset until you can eventually sell for what you bought it for. Which could take quite a long time & here is hoping you can remain in said digs for decades without wanting or needing to move somewhere else.
________________________

I agree completely with this statement. Buy and sell at the right time, and you could do okay. One needs to consider that house ownership is not entirely a financial decision if one can afford it, and is capable of having other decent investments at the same time. As the “Aussie” pointed out yesterday in one post, sometimes you want a house with particular features, or in a particular location, and renting just does not work.
Having said that, I agree with Garth and many others that this is just a wrong time to buy a house in many markets.

Personally I’d rather do the sell/move/buy in a down market than in a frothy one.
ie: Your 500K house drops to 300K, you sell, move, and buy an equivalent house elsewhere for 300K. Less taxes and commissions on a 300K house than a 500K one.

#131 DreamingIntechnicolour on 04.30.14 at 12:36 pm

Hold a fresh $ twenty (20) dollar bill in one hand – then hold 50, 000 other fresh $ twenty (20) dollar bills in your other hand – that is what $ one million (1, 000, 000) dollars actually is – and people actually give that up and all it can do for their lives and families with a stroke of a pen – just to say they own a pressboard box, some drywall, 2×4’s and nails etc. ?? Have people gone NUTS!!!!!!!!

#132 GDPumped on 04.30.14 at 12:49 pm

Why no more stories about the incredible revival of the US economy, and why their real estate market has healed…

The recovery continues in the same fashion – halting, slow and relentless. — Garth

#133 Mixed Bag on 04.30.14 at 12:51 pm

Roger_Home_Inspector, I like your posts from the field.

#134 Old Man on 04.30.14 at 12:55 pm

I thought the month of April had 31 days – silly me -, but fear not, as am doing my taxes now. Wish me luck as am in a panic mode and that box 42 will go nowhere.

#135 Edmontonian on 04.30.14 at 12:56 pm

One in 4 home owners regret buying a home!
https://ca.finance.yahoo.com/news/homeowners-regrets-buying-a-house-redfin-163113390.html

#136 OttawaMike on 04.30.14 at 1:00 pm

Looks like Harper is getting his Thatcherite legacy and his hero Maggy would be proud, were she still above ground and of sound mind.

http://www.cbc.ca/news/business/top-1-taking-lion-s-share-of-global-growth-oecd-says-1.2627154

Steve met with her in London during his first year in office but went away disappointed as the Iron Lady was already well into dementia that would result in her eventually demise.

http://blogs.canoe.ca/davidakin/main-page/harper-meets-thatcher/

#137 DM in C on 04.30.14 at 1:00 pm

KatieBird: a 100 year old row house for $580k? You got screwed.

Move to Calgary. We got this view on a quarter acre for $540k.
https://www.dropbox.com/s/5fay6cfvkk452g6/2014-04-18%2013.17.13.jpg

#138 notevenclose on 04.30.14 at 1:04 pm

The recency effect of an epic collapse in USA RE prices has nothing to do with Canada….except that maybe ‘someone’ watches too much American TV and thinks that we’re living through some type of continental mind shift.

All things considered, none of the factors that culminated in a US ‘loans collapse’ exist in Canada. What drove US prices to collapse was a lack of credit after a few big banks failed to maintain any semblance of ethical behavior and collapsed in what was known as ‘the sub-prime scandal’. Prices had nothing to do with why the banks collapsed.

If you compare apples to apples low interest rates will not bring down the market in Canada, the opposite is true. Housing prices will continue to inflate indefinatley as the BOC cannot raise rates to a point where the GOC can no longer pay it’s own debt on the self issue bonds it has printed. That rate has been set in a recent 50 year bond issue at 2.67%.

The government will continue to underpin a false economy of civil service hires ( now at 20% of the pop and increasing….this will eventually lead to 100% taxation) ) and increased immigration ( to say nothing of turning a blind eye to the massive money laundering schemes that flood our country will ill gotten gains) . Bit don’t look for a rise in rates to break the camels back any time soon. As long as rates remain low richly paid civil servants and foreign crooks will an ever increasing up spiral of real estate prices.

OMG. — Garth

#139 Nemesis on 04.30.14 at 1:07 pm

#HomeOfTheBrave-LandOfTheTolled:WhatWouldIkeSay?

[WaPo] – White House opens door to tolls on interstate highways, removing long-standing prohibition

http://www.washingtonpost.com/local/trafficandcommuting/white-house-opens-door-to-tolls-on-interstate-highways-removing-long-standing-prohibition/2014/04/29/5d2b9f30-cfac-11e3-b812-0c92213941f4_story.html?tid=pm_pop

#Bob’sYerUncle:DagenHamMemorial

http://youtu.be/DkyCu7ryu-w

#140 meslippery on 04.30.14 at 1:10 pm

Buying right now ? maybe not.
Selling and renting and investing the money no.
MPAC say my house is worth $260 000(paid $190 000)
10 years ago Paid for.
Taxes 258.00 Insurance 92.00 Hydro 265.00 Nat Gas
220.00 set aside 250.00 maintenance thats it.
$1085.00 less rent from offspring in nice basement apt
$650.00 =$435.00 per month. Investments pay that.
All other costs are the same rent or own.

#141 Mixed Bag on 04.30.14 at 1:32 pm

#134 Old Man on 04.30.14 at 12:55 pm

Old Man, you have until May 5th this year, due to the shutdown of the electronic submissions for five days due to the Heartbleed bug.

#142 shawn on 04.30.14 at 1:34 pm

What does $1 million look like?

Dreaming in technicolour at 131 provided a nice mental picture of $1 million.

he said:

hold 50, 000 other fresh $ twenty (20) dollar bills in your other hand that is what $ one million (1, 000, 000) dollars actually is…

Wow, 50,000 20’s how thick is that? How many bundles of bills? (How many 20’s in a bundle?)

Even with $100 bills it takes 10,000 to make a million. That is an excellent mental picture, thank you.

It also points out that our economy simply is not driven by paper dollars. It’s all about electronic dollars. We really do little business in paper dollars theses days.

Try bring $1 million cash to a closing. It won’t even be accepted.

$1 million for a house, good thing it is not real money. Just a signature and a bank transfer.

#143 Network Admin on 04.30.14 at 1:39 pm

> #134 Old Man on 04.30.14 at 12:55 pm
> I thought the month of April had 31 days – silly me -, but fear not, as am doing my taxes now.

FYI, CRA extended the deadline to May 5, 2014. http://www.kpmg.com/ca/en/issuesandinsights/articlespublications/tnf/pages/tnfc1429%202.pdf

#144 Just the facts Ma'am on 04.30.14 at 1:40 pm

#127 Calgarian on 04.30.14 at 11:44 am
#10 and #14

Obviously you are not that good about “finance”. Carrying cost of a condo/house cannot be based on mortgage+tax+fees. Real carrying cost is interest+tax+fees. Your mortgage payment includes payment on the principal amount and you receive that back when you sell your property, assuming that your property preserves its value.
Your actual carrying cost of a $380K mortgage for 5 years is less than $1500/month so $1600/month rent is not as bad a deal as it looks like, especially if you have just 5% down.
Garth’s math is intentionally deceiving, you guys are falling for it and thinking that you are smart.

“Assuming that your property preserves its value.” So much for that argument. — Garth
——————————————————–
The assumption was that it will preserve it’s value, keeping in line with inflation. That’s not unrealistic. As a matter of fact it may appreciate at a much greater rate than inflation.

#145 GDPumped on 04.30.14 at 1:42 pm

How did the number GDP number come out 10 times lower than the latest estimates of the economists.. Lots of guessing going on in lots of places. Just a different perspective.

#146 Just the facts Ma'am on 04.30.14 at 1:44 pm

#134 Old Man on 04.30.14 at 12:55 pm
I thought the month of April had 31 days – silly me -, but fear not, as am doing my taxes now. Wish me luck as am in a panic mode and that box 42 will go nowhere.
——————————————————
Tax deadline May 5th this year due to CRA website being shut down.
Silly Old Man.

#147 souvereigninternational on 04.30.14 at 1:47 pm

@ #121 Calgarian on 04.30.14 at 10:54 am

Moving frequently is good for your kids teaches them character and they learn to cope with change and adjust well to new paradigms. Not that I expect people like you to understand.

#148 souvereigninternational on 04.30.14 at 1:57 pm

#121 Calgarian on 04.30.14 at 10:54 am

Response to all those people saying:

…we have been hearing these since 2008 and the bubble is yet to burst.

physics, read this for analogy:

http://auto.howstuffworks.com/auto-parts/towing/towing-capacity/information/truck-tow-over-capacity.htm

#149 Ralph Cramdown on 04.30.14 at 1:59 pm

#127 Calgarian — “Obviously you are not that good about “finance”. Carrying cost of a condo/house cannot be based on mortgage+tax+fees. Real carrying cost is interest+tax+fees.”

You can tell yourself whatever story you want, and I understand what you’re trying to say, but if you don’t pay the bank the contracted mortgage interest plus the contracted mortgage principal repayment for three months in a row, you’ll be sitting at the curb next to all your furniture. Characterize the principal portion as paying yourself, but it’s a payment that if skipped, even though it may be to yourself, will result in your being outdoors.

#150 souvereigninternational on 04.30.14 at 2:03 pm

now suggestions to all those lucky enough to be able to retire with a paid off particle boards:

sell here buy this

http://www.inmobiliaria24.com/panama-en/category-177/casa-de-playa-en-ibiza-beach-residences/3420587

#151 Ralph Cramdown on 04.30.14 at 2:06 pm

#134 Old Man — “I thought the month of April had 31 days – silly me -, but fear not, as am doing my taxes now. Wish me luck as am in a panic mode […]”

Good news, Old Man. April has 35 days this year.

“You have until midnight on or before May 5, 2014, to file your 2013 income tax and benefit return and pay any balance owing. As a result of the five-day service interruption in April, interest and penalties will not be applied to individual taxpayers filing their 2013 tax returns by midnight on or before May 5.”

http://www.cra-arc.gc.ca/nwsrm/txtps/2014/tfsk25-eng.html

I’m thinking they might mean before midnight May 6th, but who am I to question the competence of the Harper government.

P.S. The procrastinators are organizing a thing, just as soon as we can get organized.

#152 HD on 04.30.14 at 2:07 pm

#134 Old Man on 04.30.14 at 12:55 pm

I thought the month of April had 31 days – silly me -, but fear not, as am doing my taxes now. Wish me luck as am in a panic mode and that box 42 will go nowhere.

—————————-

You have an extension until May 5th this year I believe due to the heartbleed bug ordeal.

Best,

HD

#153 Angela on 04.30.14 at 2:16 pm

Based on a sale on your street? — Garth

She has a point. Given the run up in prices for the past 5 years, you will be lucky to find homes falling back to 2010 levels in Toronto.

On some streets, of course you will. — Garth

#154 bigrider on 04.30.14 at 2:23 pm

#111 Roger home inspector

Loved your post and am in complete agreement.

One comment/question about renos and dressing up a turd.

Don’t the various issues revolving around shoddy renos and bigger problems as you mention, really get emphasized with really old homes, like you find in the core of the city.

I mean , other than some foundation cracks and maybe a few minor leaks in the roof and a furnace that’s just too old, what really expensive item to repair ,can be found in a home that’s 40 years old or younger. I mean no knob and tube wiring there or asbestos ?

I appreciate your insight

#155 Dupcheck on 04.30.14 at 2:53 pm

Smoking man you are being ignorant. Stop diverting the theme of this blog. Every time i see smoking man comments i skip them. They are like spam. So annoying.

#156 Ry YYZ on 04.30.14 at 2:57 pm

#120 T.O. Bubble Boy

Better wages, better benefits, and way better retirement plans than the great majority in the private sector. Of course, it’s always been so in socialist systems – the party hacks at the top (and their lapdogs) always live well on the backs of the proletariat.

#157 Alistair McLaughlin on 04.30.14 at 2:57 pm

#37 KatieBird

No way could we afford our neighbourhood today.

And you cite this as evidence that there can’t be a crash? Can you see the flaw in that logic? I can.

#158 Smoking Man on 04.30.14 at 3:02 pm

Any Realtors out their, that little shit bungalow on James Street has a sold sign…

What it go for?

#159 Old Man on 04.30.14 at 3:04 pm

Says who, the Reformist Government of Canada? I will not believe now or ever anything they say, as they might change their minds and you will get hooped in the end. Or they will say a mistake was made, or some will qualify and others not because of this and that. I am off to the mail box now.

#160 Linda Pearson on 04.30.14 at 3:16 pm

#154 bigrider on 04.30.14 at 2:23 pm

…other than some foundation cracks and maybe a few minor leaks in the roof and a furnace that’s just too old, what really expensive item to repair ,can be found in a home that’s 40 years old or younger.
************************************
How about:

– repair or re-line cracked chimney
– drafty fireplace – replace with insert or convert to gas
– replace warped or rotting walk-out sliding door
– replace all other exterior doors & garage door
– replace all glass slider windows
– replace all flooring, from broadloom and sheet vinyl
– replace original tubs and sinks
– replace cracked laminate counters, baths and kitchen

Shall I go on? I think with that list we’re up to $50K or more and that’s not with high-end replacement goods. Of course, many or most of those items SHOULD have been part of an on-going maintenance program but that doesn’t always happen.

#161 Blacksheep on 04.30.14 at 3:17 pm

shawn # 142,

“Wow, 50,000 20′s how thick is that? How many bundles of bills? (How many 20′s in a bundle?)”
—————————–
Would be 2″ thick bundles. 100 bundles. 500 bills per bundle, 1 million $ cash.

#162 chapter 9 on 04.30.14 at 3:17 pm

Back in the late part of 2007 the debt/income ratio for Americans was at 135% an all time high. Spending and borrowing orgy the likes that have never been seen before. The next year the party ended and the pain started. Fast forward six years later Americans have been able to reduce their debt/income ratio down to present rate of 109%. Still along way to go.

Canadians debt/income ratio is a staggering 164% All it will take is an external correction/event/issue out of our control and the folks that are in debt up to their eyeballs–done!!!

#163 Just the facts Ma'am on 04.30.14 at 3:27 pm

great write up on the 699k house that sold for 1.36M
http://www.torontorealtyblog.com/archives/what-everybody-is-talking-about/10966

#164 Old Man on 04.30.14 at 4:06 pm

Oh really, as watch for the fast ball! I know all about the extension period, but what if this only applies to those that have established a precedent in the past. I am sure many like me have never filed online, and will sit back and relax to enjoy the grace period. Will this be checked under Caesar? I for one am not taking the chance of a misunderstanding as the taxman rules; had lots prepared yesterday and took it to the post office as my date is April 30th.

#165 BillyBob on 04.30.14 at 4:11 pm

@BCD,

I call bs. Anyone who rises to the bait the way you have, is trying too hard to prove something. 180k is decent money, but I make more than that myself. So? Who cares. Your story sounds false all the way over here in Dubai.

The fact that you and “KatieBird” (fake) wouldn’t buy in your own neighbourhood now is only supporting Garth’s thesis – real estate in certain markets is incredibly overvalued.

Enjoy your kids and abs or whatever lol. But I think OttawaGuy owned you.

#166 Aggregator on 04.30.14 at 4:16 pm

Month-End Window Dressing Sends Fed Reverse Repo Usage To $208 Billion: Second Highest Ever

As I noted in an earlier post: Now that the Fed has accepted TD Bank's long awaited primary dealer application since 2009, and the Big Five's membership with the largest repo trading partner (hedge fund) in the world is now complete; one must ask what is the next step since posting billions of collateralized mortgages and bad debt will pretty much guarantee, that like Europe, Canada Big Five are now at the mercy currency fluxuations and margin calls set by the Federal Reserve.

One possiblity, is what Canadian journalist, Diane Francis has already started talking about: The Merger of the Century

Video: McLaughlin Group Forecasts US-Canada Will Merge by 2050

#167 angela on 04.30.14 at 4:28 pm

Fed Tapers $10 Billion, Says Economy, Consumer Demand “Picked Up” but 1st quarter GDP revised down to 0.1 percent LOL awsome fundamentals

Strong rebound in consumer spending after the Winter from Hell. — Garth

#168 Old Man on 04.30.14 at 4:33 pm

I just checked the taxman’s official government site declaration, and within context it addresses those who have filed online. They will have a precedent established as a matter of record to qualify for the grace period that will be checked. Now what about the others who have always filed in a traditional manner, as this was never addressed or clarified?

#169 neo on 04.30.14 at 4:35 pm

#98 neo on 04.30.14 at 8:49 am
#73 and #37

I think the point that is being missed here is that it isn’t about the absolute cost of the home per se. It is about “LEVERAGE” used to make the purchase. I don’t know about Katie, but you mentioned you put a hefty down payment and have aggressively paid down the mortgage. If I was confident that everyone was as disciplined and steadfast as you have been I wouldn’t be concerned. The problem is there are far too many people overleveraged? A $1,000,000 home in a vacuum doesn’t mean anything without the context of your age, income, interest rate and downpayment added to the equation.

Leverage cuts both ways. Only a fool does not get that. — Garth

Ummm. That is EXACTLY what I am saying. Did you not read what I wrote. I am basically saying if a house is a million dollars and you want to buy it, the fact that it is a million dollars is irrelevant. What matters is your particular situation. What is your income? $500,000/year good. $100,000/year bad. What is your downpayment? 35% good 5% bad. Interest rate of 3.00% good, not budgeting for a change in interest rates in the future, bad. I think you obviously didn’t get what I was trying to say.

#170 Mixed Bag on 04.30.14 at 4:40 pm

#168 Old Man on 04.30.14 at 4:33 pm

Sounds like you owe Caesar money.

#171 Calgarian on 04.30.14 at 4:46 pm

My message is simple: diversify. If you hold the bulk of your net worth in one asset, especially bought at an inflated level and with the potential of illiquidity, you are assuming significant risk. Don’t diminish it. By the way real men don’t blame things on the wife & kids. — Garth

Wow, that was a cheap shot Garth. We are talking economy and facts of life here, not measuring manhoods. It looks like you cannot even handle the fact that some people have different views. Not everybody’s lifestyle can handle house/condo hopping every other year. That is not blaming wife and kids, that is a fact.
I live in a house that I own, that is my choice. I respect your views about the housing market and have been reading your blog for years, even I find your style borderline fear mongering. I wrote maybe three comments versus your thousands of articles and you blame me not being a real man? Wow. Good job! Keep going. I will shut up so you get your way, or at least you think so.

Mission accomplished. — Garth

#172 Calgarian on 04.30.14 at 4:54 pm

#147 souvereigninternational
“Moving frequently is good for your kids teaches them character and they learn to cope with change and adjust well to new paradigms. Not that I expect people like you to understand.”

Well, wise ass, I moved 13 times with my parents when I was a child and I lived in three different countries and 5 different cities as an adult. I am a first generation immigrant and I saw more of Canada (and of the US for that matter) than most people born in Canada. So “people like me” know exactly what they are talking about. Before giving lessons about character, you should get one and stop insulting people that you do not know anything about.

#173 TakingResponsibility on 04.30.14 at 5:00 pm

#166 Aggregator on 04.30.14 at 4:16 pm
Re: “The Merger of the Century”

Yes. Can definitely see that coming down.

At least Canadians will get to vote for a President or have some say in the Politics and Economics that do, indeed, already govern us.

#174 shawn on 04.30.14 at 5:01 pm

A million dile pile of dough

Blacksheep said a million in $20’s:

Would be 2″ thick bundles. 100 bundles. 500 bills per bundle, 1 million $ cash.

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

Okay so to picture $1 million, picture a stack of $20’s 17 feet, 8 inches high.

Or if Hundreds, it’s

three feet four inches high of $100’s

Again, no one buys a house for literally cash.

I mentioned on this blog one time I had a hard time withdrawing $7,500 in cash to buy a diamond ring at Costco. I had to go to two separate branches to get the cash as they limit the amount they will give out at any one branch.

Paper cash is way old fashioned. Will be pretty much extinct in a decade.

#175 Johnny on 04.30.14 at 5:16 pm

Are the most people here renters ?
Why is it that people who rent and have no real money always moan how expensive houses are while people who have coin not so much.
Seems all the moaners here are fighting 70% of population ( homeowners ) plus 20% of the economy plus the entire Canadian government.
DON’T YOU FOLKS HAVE ENOUGH.

#176 Johnny on 04.30.14 at 5:37 pm

A QUESTION FOR SMOKING MAN.
Hey bud, i have a question for you.
Where do you think might be a good area to do a RE flip on a property assuming i could carry it for a year or two….cheers mate.

#177 clara on 04.30.14 at 5:45 pm

On some streets, of course you will. — Garth

Not high demand areas. Which is mosy downtown core.

Obviously you have not experienced a downturn. — Garth

#178 AB Boxster on 04.30.14 at 6:00 pm

Johnny #175

It’s a little disingenuous to call 70% of people homeowners, when what many of them have is a massive debt on an overpriced place to live.
They may have the right to be an actual owner of a house some time in the next 25-30 years once they have paid back the huge debt plus interest, (which if/when rates rise will be ridiculous compounded over the length of the mortgage) but it ain’t ‘owned’ until its paid for.

#179 Johnny on 04.30.14 at 6:09 pm

#178 AB Boxster on 04.30.14 at 6:00 pm
Johnny #175

It’s a little disingenuous to call 70% of people homeowners, when what many of them have is a massive debt on an overpriced place to live.
They may have the right to be an actual owner of a house some time in the next 25-30 years once they have paid back the huge debt plus interest, (which if/when rates rise will be ridiculous compounded over the length of the mortgage) but it ain’t ‘owned’ until its paid for.
\
DUDE….not all 70% homeowners have a 25 – 30 year mortgages, besides, some have no mortgage at all.

#180 OttawaguyRenting on 04.30.14 at 6:11 pm

BCD

Honey buns you called out
“The bitterness in Vancouver among hipsters and millennials must be epic. . .so glad I am not cool enough to count any as my friends, getting drunk with them and their wives must be about as entertaining as a wake.”

So continue your trek to awesome land. You deserve it all and much much more.

Thanks for stopping in on the wake. You painted a broad picture with your bench pressing biceps and a broad brush.

I did the same. We can move on from here, I know we can. Ill just have to remember what is burned in my retina..
It is the image of guys like you, who get it. So much so you worry about about what the “hipsters” are doing.

We are burying your old school economy and making everyone else re-write the business plan.

#181 Blacksheep on 04.30.14 at 6:59 pm

Shawn # whatever,

“I mentioned on this blog one time I had a hard time withdrawing $7,500 in cash to buy a diamond ring at Costco.”

“Paper cash is way old fashioned. Will be pretty much extinct in a decade.”
————————————-
Try to be a little less obvious.

It only works, if they don’t know your feeding them propaganda.

#182 AB Boxster on 04.30.14 at 7:25 pm

#179 Johnny,

Yep.
them that have no mortgage might be called homeowners.
Them that have a mortgage are called in debt.
Those that bought in the past 5 years in an overpriced market are called indentured slaves.
Pretty sure 70% of population are not homeowners eg debt free (your stats not mine)

#183 The 'renters are poor, owners are rich' fallacy on 04.30.14 at 7:27 pm

#175 Johnny on 04.30.14 at 5:16 pm
Are the most people here renters ?
Why is it that people who rent and have no real money always moan how expensive houses are while people who have coin not so much.


Why is it that most people who have been ‘buying’ houses recently have no real money and have to take out big insured loans from the bank instead?

#184 Roger_Home_Inspector on 04.30.14 at 9:16 pm

#154 bigrider on 04.30.14 at 2:23 pm

So let’s assume we’re looking at something built between 1970 and 1995. Big ticket items I’d likely see are:

1) Asbestos materials, specifically in the stuff built in the 70’s. And they got sneaky with it too. You can find it in popcorn ceilings and wall texturing compound, ceiling tiles, vinyl flooring materials and flooring adhesives, in heat shielding of the HVAC system, fireplaces and in vermiculite insulation. Most of this stuff is fine if left alone (except vermiculite) but as soon as you disturb the materials and the fibers can become airborne it ca be damaging to the health of the occupants.

2) Windows and doors. Especially wood framed windows or older vinyl windows that lacked UV resistance. You often find leakage around poor quality or deteriorated windows and doors, so if the units are in bad shape prepare to deal with what lurks below…

3) Mold in attics. Sounds weird but it’s a huge problem in houses built between the oil crisis in the 70’s and the mid 90’s. In reaction to higher fuel costs, energy efficiency of our homes began to matter. A lot. So we started to tighten up the building envelope with vapor barriers and other non permeable materials and installed tighter fitting windows and doors. What we didn’t do was ventilate the moisture from our homes that now became trapped and we didn’t focus on attic venting. The result is the moisture from our homes, carried by warm air, began to push on the upper floor ceiling. Since the vapor barrier installation was in its infancy, we left lots of penetrations in them, from light fixtures etc.. The warm air from the home convected out of these poorly sealed openings. When the moisture came into contact with the cold sheathing and framing, it condensed and wet the materials. Wet, natural materials sustain mold growth. Plus, with poor venting, when the moisture formed it tended to hang around for a bit. This can be really messy. Lots of remediation or a whole new covering including all new sheathing.

4) EIFS stucco. This is the synthetic stucco you see installed very often on the exterior of commercial buildings like strip plazas. But it’s also used in residential construction. Looks nice, and is very versatile, but we made the assumption that the material is waterproof. I guess technically is is but that is until it cracks or it gets installed improperly and water can flow behind it. This stuff can be a nightmare. There are actually companies that do nothing but maintain and fix this stuff full time. The worst part is it can look great from the outside but you can suffer massive water damages beneath. Most of the stuff now is installed well with drainage points to let water out that may get in but some of the original installations or materials installed by fly-by-nighters can be problematic. Here’s some home inspection porn for you:

http://www.weccusa.com/eifs.htm#Damage_to_EIFS_House

5) Older HVAC to a lesser extent. New furnaces and air conditioners are not built to the same standard as an old conventional furnace for example. But that being said remember two things. First, if the old equipment is running fine and is safe I’d generally say leave it alone and let it dye a natural death. Second, New HVAC components such as high-eff furnaces and air conditioners are relatively inexpensive. Shop around and you can pick a decent pair up for between $3500 and $5000.

6) Termites, wood destroying organisms and rot. More likely to occur in some places than others but you always have to be aware. I’ve seen 20 year old houses with rotten sill plates because the contractor elevated the foundation too low and was forced to grade over the brickwork to meet the city plan. Water runs in the weeping holes and the rest went downhill from there. I didn’t even want to know how much that one would costs…

7) Structural defects. Twisting or shearing of the building. Uneven settlement of the structure or differential settlement. You also get some walkouts that like to try and slide down the hill they’re built into.

8) Aluminum wire. Generally installed between ’72 and ’78. Lots of people say it’s a terrible and dangerous material but a lot of electricians and the Electrical Safety Authority of Ontario agree- if it’s installed and maintained property it’s safe. I remind clients all the time that any electrical system can be unsafe if improperly installed.

Those would be my big 8 looking at homes of that age.

#185 Spectacle on 04.30.14 at 11:57 pm

Thanx G.

My response to :
#105 Aggregator on 04.30.14 at 9:26 am

“Toronto commuters face more than two years of Gardiner lane shutdowns because of repairs

Following spring maintenance work that closed the Gardiner Expressway this weekend, the city has launched a series of long-term repair projects that will shut down parts of the highway for more than two years.

You wanted United Nation’s densification and sustainable devleopment plan? You got it.”

Big Thanks Aggregator. Great connection of United Nations Agenda -21 and the in-plain-site massive corruption! People on here think real estate or their RRSP’s are important.

That is Nothing compared to the real focus they should be paying attention to! People think agenda-21 is about green, or sustainable……….big wrong.

Your appreciated on here aggregator, keep up the postings.

Regards all

#186 Doug in London on 05.01.14 at 11:44 am

What a strange paradox. In 2004 when house prices were high (or Canada at present) home ownership was at an all time high in the United States. Now that prices have come back to reality, home ownership is lower and falling. Shouldn’t the opposite be true, with more people rushing in to buy a house at cheaper prices? Truth really is stranger than fiction.

#187 Derek R on 05.01.14 at 12:26 pm

#184 Roger_Home_Inspector on 04.30.14 at 9:16 pm gave us a lot of really useful info.

Thanks, Roger! Your comment is one of the reasons that I don’t just read Garth’s daily posting. Apart from the entertainment value, now and again people like yourself slip in useful stuff like this little gem.

Cheers!

#188 forirony on 05.01.14 at 2:57 pm

landed in my inbox today–hilarious propeganda I just had to share: https://bmodreamhome.com/#en

#189 Victoria Real Estate Update on 05.01.14 at 8:32 pm

Please do not post.

$117 K (3 beds, 2.5 baths, 2,127sq. ft.)

#190 Geminigirl on 05.01.14 at 10:50 pm

In the last stretch of my pursuit of a real estaste licence. Write the exam for COURSE 3 on Sat May 3. I have spent a lot of time over the last 6 months studying and immersing myself in all things real esate. But most of it at this point is theory, and my own interest to be informed. I fully realize that in practice , on the front line of this or any other industry is where the real learning happens.

But with regard to the transaction you refer to in this post, it raises just so many questions for me , from someone who has just spent many, many hours trying to learn and understand how the real estate business operates.

So David, or anyone else , could you answer or Comment on a few questions from an interested student.

In Toronto at the present time the whole concept of an accurate appraisal,( the so very important aspect of selling a house, according to everything I have been studying) would seem to me to be meaningless and unnecessary.
An accurate appraisal and establishing a saleable list price ( supposedly one of the important functions of a good real estate agent ) , along with good marketing and strong people skills ( also honesty, integrity and disclosure) is a main focus in all the courses. How is any of that relevant in the current Toronto market ?

To me this transaction is better described as ” an auction” with a minimum bid. And from what I have learned you don’t even neen a real estate licence to auction off houses!!

To me just too many people are being negatively affected by transactions such as this . The view that he got the best price for his client and that is his job, at what cost ? I think the industry needs to play a role in stopping this. Listing a house for what it is worth and working to promote and sell it in an open process is a reasonable expectation. The procees in this instance and I guess many others , seems like a game of some sort. And the winners in this case , will be losers down the road because what comes around goes around a lot of the time.