Balance

DUDE modified

If you turn left after Banff, fall over a few mountains and take the only road, you get to Invermere. Steve’s the editor there, turning out a fresh edition of the Invermere Valley Echo each week.

Steve and the guys have been listening to local realtors yammering about how great the housing market’s going to be in the next few years, mostly because of what’s going on in Calgary (280 km and three-and-a-half hours away). As you know, people who live in Cowtown think it’s different there. They have all the oil. And trucks with balls.

But the numbers talk, too. BC Assessment says the median house price in the Upper Columbia Valley was $400,000 in 2012. Last year it fell to $394,000. Now it’s $359,000. A 10% drop over the same period in which Calgary (and Vancouver) markets advanced, while mortgage rates fell, is not exactly bullish news.

Still, the cowboys climb in their Silverados, G-wagons and Range Rovers, and flood into the valley this time of year. The 9,000 locals get swamped by about 20,000 cottage and ski chalet owners, and everybody more or less agrees that without the Albertan cash, houses would probably cost a lot less. But the question du jour is where’s the market going in a place like this – no big city, no population mass, no concentration of industry, no major employers? In many ways Invermere is like a lot of the country outside of the major markets, with one exception. Realtors.

Anyway, Steve got in touch to ask me a few questions for a story he’s writing about house prices. Imagine that. A reporter who seeks balance. “The BC Assessment people and Landcor Data people are painting a rosy, holding-steady or rising prices picture for B.C.,” he says, “and we’re looking for comments on a more cautionary, housing market-is-due for a correction kind of note.”

Now when was the last time the Vancouver Sun, Calgary Herald or Toronto Star sought both sides of the argument when writing about real estate? These days most beat reporters take the latest Re/Max or Royal LePage media release, cut, paste and slap their byline on it. The effect is palpable. It’s why many small children can actually mouth the words, “Phil Soper”, before they learn to say anything else.

Well, Steve asked the following: How likely is a housing correction in Canada the next few years? Any areas of the country immune to it? Our local branch of BC Assessment and local realtors are painting a picture of real estate stability for our specific area.

Answer: A housing correction in Canada is not likely, it’s certain. This does not end well for vast numbers of people who bought in the last few years, either borrowing heavily to do so, or putting most of their net worth into their houses. Abnormally low mortgage rates, cheerleading realtors and a casino mentality among investors have led to bidding wars, record valuations and inflationary expectations in many places. Add in greedy bankers who will lend to anyone who bleeds, thanks to CMHC, along with rampant financial illiteracy, and it’s the perfect storm, Stevo.

Prices can’t keep going up when wages don’t and the economy stutters. All gains in the last few years have been fueled by debt, which means if anything happens – rates edge higher, jobs fade, or we get an external shock from deflating Europe or those fun Chinese – families are in trouble. And troubled people don’t buy houses.

Steve asks: With what you know about our area, is this a good place to buy a house at this point?

Answer: What I know is that, like rural Nova Scotia or Muskoka, this part of BC doesn’t actually have an economy. Sure, people live there and get by, but things are heavily seasonal and service-oriented. Without all those yahoos tearing up the Kootenay Highway, there would be seriously less cash slopping around. That makes this a volatile real estate market, when external demand is a far greater factor than activity generated by the permanent population base. If you want to live in Invermere, then buy a house. But if you don’t have a fabulous gig editing the Echo, with a reserved table at Tim’s and a company moose at your disposal, why would you?

And Steve asks: “Do the large number of second-home owners make our area much less stable in terms of housing prices than areas not filled with vacation homes? Or somehow more stable?”

Answer: See above. Less stable. First, you can’t trust Calgarians. They have two known economic conditions: boom, or holy-shit. The Albertan economy is linked to one of the most volatile commodities on the planet, and the extremes are legion. These days the gutters are running yellow with testosterone, which suggests in a year or two (especially as the US gains more energy independence) we might see exactly the opposite.

Second, in any economic downturn, or a housing correction, it’s always the recreational properties that get jettisoned first. This is because most are purchased with equity sucked out of urban principal residences – and now more than ever, with dirt-cheap HELOCs and mortgages available. When people retrench, the chalet gets punted. And in a market like yours it doesn’t take a lot of listings to swamp the natives.

Well, there you go. The Invermere property report. In many ways, Steve, you are representative of scores of communities across the country. If there’s one thing that unites us, it’s house lust. And this pathetic blog.

166 comments ↓

#1 Mark on 06.18.14 at 6:32 pm

“A 10% drop over the same period in which Calgary (and Vancouver) markets advanced, while mortgage rates fell, is not exactly bullish news.”

Calgary and Vancouver markets did not advance in the past year. Only the sales mix of what the Realtors were actually selling changed.

Comparing assessment data, which values literally every property (albeit using formulas, not actual market transactions), and a very limited sampling of what the Realtors happen to be selling in a particular year, in light of the dramatic change to the sales mix, will lead one to a rather erroneous conclusion as to where things are moving.

One thing that is encouraging is that the oil equities are starting to move again higher. Suncor and Talisman, two of the big ones, are no longer seemingly stuck at less than half of their long-term highs despite record oil prices. Still a long ways to go though.

#2 dosouth on 06.18.14 at 6:35 pm

Steve should look as close as the Okanagan. We lived there with two or three properties until 2010 and then we left, sold it all and left. Now we moved out of the OK and are renting as the Okanagan and others in the province sink slowly into the sunset.

Prices will never reach their Utopia again and yes, we depended on Albertan’s to buy our places and all were bought by Albertan’s. Thank you oil patch….

#3 Babblemaster on 06.18.14 at 6:38 pm

“Answer: A housing correction in Canada is not likely, it’s certain.” – Garth

————————————————————-

Maybe, but how much of a correction? Even with a 20% correction, the vast majority would still be on the positive side of the ledger.

Hardly. Wiping away that much equity is not without consequence. — Garth

#4 Shawn on 06.18.14 at 6:40 pm

Greedy bankers?

Add in greedy bankers who will lend to anyone who bleeds, thanks to CMHC, along with rampant financial illiteracy, and it’s the perfect storm, Stevo.

*****************************************
When you say that, it sounds like you think Greed is less than good.

We are basically ALL greedy. Few saints walk or blog among us.

Banks respond to economic signals and incentives. What else should they do? They work for their owners within the bounds of regulation. They are not social agencies.

Well managed or greedy? Same thing?

#5 Calgary Owner (2nd. Round) on 06.18.14 at 6:42 pm

I bought a place last March in Calgary (inner city). Nice house, nice neighborhood. I saw a For Sale sign at the house next to mine and I checked the price on realtor.ca They are asking for $120k more than I paid. If that actually flies, I’m seriously thinking of selling and go on the other side, with everyone who’s waiting for a correction to occur soon. Any thoughts? Thanks!

#6 House Relief on 06.18.14 at 6:43 pm

Why do people think a 20% correction will have no consequence. Those that bought at peak will be affected immensely and it will hurt housing sales and renos across the board.

#7 Blacksheep on 06.18.14 at 6:47 pm

Pipeline is coming.

No down turn.

Just higher prices.

For oil and houses.

#8 R on 06.18.14 at 6:51 pm

The T Star declares the number of Canadian Millionaires climbed to 320 000!

These ‘high net-worth’ citizens have gained from recent climbs in RE..

Oh but wait: Garth, maybe we need another lesson in assets vs. liabilities?

#9 sheane wallace on 06.18.14 at 6:54 pm

We would have interesting times in the next year or two.

By next June/2015 I am thinking of:
1. Food and gas inflation of 25-30 %
2. Oil permanently at 130-140 per barrel, litter gas at 1.80-2.00. Better take a picture of the current price – 1.41+ in Toronto, won’t see it again.
3. Silver at $ 40, gold at 1.800
4. GDXJ triples.
5. Interest rates up at least 2 % from the current levels, potentially shooting up 5% in the next 2 years, maybe 8-10 % from current levels in the next 3 years.
6. Houses down 60 + percents in the next 3 years. CMHC losses 250 + billions.

so lock your mortgage and buy some energy companies. We are going on a roller coaster.

#10 TurnerNation on 06.18.14 at 6:58 pm

Cottage? They call them ‘cabins’ out that way.

#11 JSS on 06.18.14 at 6:59 pm

“First, you can’t trust Calgarians. They have two known economic conditions: boom, or holy-shit.”

I’ve lived in Alberta for only the last 10 years, and have no clue what it’s like here when the economy is a bust.

Can long-time Albertans tell me what it’s like here during bust times.

#12 LH on 06.18.14 at 7:02 pm

Buy urban not suburban. Ideally city center of top dog city. Ergo C01 or C02.

My problem is that someday I may need to switch my SFH’S to a SFH in London or NY, top dog cities of the world. Je suis le 0.1 percent!

#13 ILoveCharts on 06.18.14 at 7:03 pm

The story of Albertans buying second houses in BC is not covered frequently enough and it’s very interesting. Thanks for the post tonight.

#14 Jay on 06.18.14 at 7:06 pm

A loss of liquidity in housing has huge ramifications for individuals, i agree #6. My dad tried selling his home in the late 90s and couldn’t unload it for years at a loss. He needed to move to advance his career but couldn’t, so it was a big burden. Imagine if the plant closed entirely and he was stuck in an illiquid home with no job.

The “a hard landing doesn’t matter” folks haven’t lived through one. It isn’t just money.

#15 Exurban on 06.18.14 at 7:06 pm

Lots of new condos for sale near Dude Chilling Park (a real place, on E. 8th Avenue east of Main in Vancouver — although I think the sign is the work of the Western Front art collective).

Definitely a situation in interior BC. If not for Alberta investment, RE would be dragging way lower there. Things are different where there is offshore money coming in. Here’s an important developing story:

“China’s ‘Naked Officials’ Not so Naked Anymore”, Lu Chen, Epoch Times, June 17, 2014.

“Over 1,000 Chinese communist officials… had a stark choice recently: be demoted, or call their families back from overseas to China. …

“Naked officials,” as they are called, have for some years been the most potent symbols of a government so bereft of legitimacy that its own officials choose to move their families and their assets overseas. …

… Only 200 or so elected to have their families return to China…

Having family members overseas gives Chinese officials a convenient way to transfer money out of China, and means they can quickly escape the country if they spot any political difficulties—like an anti-corruption investigation… Once they are in the United States or Canada (two common destinations) the officials can begin procedures for investment or family immigration.

By 2011, China had at least 4,000 corrupt officials escaping China… They took over $50 billion with them, close to $16 million each on average…”

That kind of money can buy a few politicians and pump up some RE. How serious can this latest anti-corruption drive be, in a country swimming in corruption? Hard to say, but apparently CCP corruptocrats are unloading RE across southern China:

Chinese Officials Dump Real Estate to Avoid Attention

For the past year, and especially over the last few months, owners of high-end apartments around China have been quietly putting out the word to brokers: Sell now. Cash only. Cut prices.

“Within the industry, we’ve reached the consensus that they are mostly officials. The higher the levels they are, the more mysterious they appear to be.” The source was not identified by name, a common practice given the political sensitivities associated with discussing corruption in China.

The “mysterious” clients invariably hire agents to sell their real estate for them. They never appear in person. And they demand physical cash in order to avoid providing bank information. Sometimes they use the cover of shell companies to carry out the transactions.

They are also often in a rush to sell, and won’t hesitate to drop the price if it will effect a speedy transaction, according to Lin Jingjing, a property consultant who deals with high-end real estate in Shanghai, speaking to the same newspaper. Sometimes the price cuts can be over a million yuan ($160,259), undercutting comparable apartments in the same area.

These people need a diversified investment portfolio, Garth. Only problem is they need to keep it very confidential.

#16 crowdedelevatorfartz on 06.18.14 at 7:11 pm

@#11.
I lived in Cowtown in 1980…… It was fug-ly.

#17 Bast on 06.18.14 at 7:14 pm

#11 JSS

It’s hell. I moved to AB in 1994 in the middle of the deep Klein cuts. A 21% operating budget cut for the UofC over three years. That is devastating. People got LWOP days (Leave without Pay) and people were hitting the stress wall having to cover so many other tasks. And that wasn’t even a bust – it was a manufactured economic downtown to try and pay down the debt. The 1980s bust was horrific – we left for Ontario in 1973, so I never lived through that one, but many of our friends did. Jingle mail – keys to the house just left on the bankers’ desk. Pray it doesn’t happen in your lifetime – but I wouldn’t bet the house on it…

#18 dude on 06.18.14 at 7:15 pm

DELETED

#19 nonplused on 06.18.14 at 7:16 pm

It’s not just Invermere. Anywhere 4 hours from Calgary in BC is going to be hit, I would expect, twice as hard as Calgary. The whole area survives on Albertan tourism. They used to have logging, but that’s gone mostly. But they still have some fine lakes and ski hills.

It’s not like north-eastern BC, which has oil and gas activity. There just isn’t much going on in the lower east corner of BC besides Calgarians looking for powder, fish, or boating opportunities. Once Calgarians can’t afford new boats, I think it goes down.

There is this development going in on the east side of Lake Kucanusa, something like 2500 units. It’s going to double the population of the Jaffray area in the summer. Almost all of the buyers are Albertan. And the lake isn’t even that great. It’s a reservoir. It can be absolutely gorgeous in August, but in June and into July it’s full of trees that wash down with the run-off. Come September the water level starts to drop to the point where it’s a dune buggy area for most of the winter. That said, there is a lot of skidooing and off-roading to be done in the area, but it isn’t real close to Fernie, the nearest ski area. It’s more driving to go to your place in Jaffrey and then Fernie for 2 days on the weekend than to just drive to Sunshine or Louise and back both days. Or stay over night in Banff! It’s way better than Fernie. Banff is too expensive or you can’t get a room? Canmore is also way better than Fernie. Or Invermere. Actually compared to Banff south-eastern BC kind of sucks in the winter. Fernie saves it, but only if it snows and only for people that don’t know about Castle.

There is a lot of pot growing in those hills though! You’ll never go without. Just be careful to by it from it’s rightful planter, if they catch you “self-harvesting” they get a wee bit cranky.

#20 waiting on 06.18.14 at 7:19 pm

“company moose”
you kill me …

#21 nh on 06.18.14 at 7:25 pm

Garth, what are your opinions on traditionally “good”/”desirable” neighbourhoods? Do they experience as much fluctuation? I’m guess not totally immune, but will they be affected less in a downturn?

#22 Another Calgarian on 06.18.14 at 7:26 pm

#7 Blacksheep
By pipeline, I assume you mean Northern Gateway. Pipeline is not coming. Not that one anyway. It’s going to take a lot more than King Stephen giving his blessing (sorry for the mixed metaphor) to get a shovel in the ground on that project.
Having said that, things are picking up in the oilpatch. More jobs opening up after what’s been a couple of rather miserable years (not holy-shit, but definitely not boom).
And as lovely as Invermere is, it takes money and time to get out there and own or rent a cabin or chalet in the area. If prices are going down now, when Calgary is in pretty good shape, heaven help them when things go south with oil.
Real estate in Calgary, as in SFH, is insane considering the way the city is spreading like a virus across the landscape in every direction. Fortunately (or not), it’s not hemmed in by water or greenbelts etc. like Toronto and Vancouver. Calgary is the definition of suburban sprawl.
But all good things will come to an end and this bubble will burst. I bought my first house in 1982 (remember the interest rates then?) and have witnessed firsthand both booms and bust in real estate. Keep a roof over your head, by all means, but don’t allow that home to get YOU in over your head!

#23 Rainclouds on 06.18.14 at 7:27 pm

Cowtown in the early 80’s. Bust! For Sale signs popping up like mushrooms in the rainforest.

Invermere must be hell in the summer for the locals, tolerating babbling Tea Party idiots is draining…………

#24 what is up with that on 06.18.14 at 7:37 pm

The following has absolutely nothing to do with real estate…
It has recently come to my attention that a Men’s Rights Meeting at the University invited a speaker and the speaker was unable to make her presentation due to Feminist protestors banging on drums, blowing horns and yelling (https://www.youtube.com/watch?v=rOnuZsXRwTA). This is blatant intolerance. I do not need to bore you with the bare faced double standards but what is more troubling are the assertions that requests for equal treatment are really attacks of some sort. Are these projections by feminists really indicating their own true motives? What has the University been harboring and nurturing these past 4 decades? Universities have been a key component in the legitimization and propagation of much of the mythology of feminism which in turn directly contributed to the state of boys in all levels of school in North America. The University accepting money from our government to provide this current state of affairs on campus is approaching fraud.

#25 Nemesis on 06.18.14 at 7:39 pm

#’Texans’&OtherViceroys. #AThinkingMan’sFilter. #ASmokingMan’sTaste.

http://youtu.be/LkQKwqYoBQk

#26 brainsail on 06.18.14 at 7:43 pm

#11 JSS on 06.18.14 at 6:59 pm

“Can long-time Albertans tell me what it’s like here during bust times.”

I can, but it was a long time ago. 1982 after Trudeau announced the National Energy Policy thingy. The next day business phones went dead and people were phoning from office to office to see if their phones were still working. This was Edmonton. I was working with a professional degree and suddenly I was unemployed. Wife departed.

I picked up a part time job at a stereo store and worked nights as watchman at a construction site. I could not keep up to the mortgage payments because the interest rates were 18%. Cardboard signs went up on my neighbor’s townhouses asking half of what the mortgage I owed.

I crossed the border in 1983 and have never looked back. The sad thing is that my family and relatives to this day do not know what exactly happened to the economy then. MSM did not report all of the facts and I am still treated like a loser.

#27 the jaguar on 06.18.14 at 7:58 pm

Much of the BC interior does have a healthy, robust economic engine, Garth. It’s called BC Bud. Especially around Nelson, where you see an inexplicable amount of wealth from no identifiable source. Send some Rev Can guys out there undercover, please.
Albertans own lots of property in the east Kootenays, BC interior especially Okanogan Lake areas, and retire in big numbers on various parts of Vancouver Island.
Basically they hate us. The ugly Albertans arrive in droves every spring & summer. Big trucks, big boats, beer drinking, loud music playing cowboys who want to cut loose from a ‘live to work province’ in a ‘work to live province. Not all Albertans are flush with cash from their oil company bonus or buyouts but many are and yes they own a lot of choice property. We have mountains and lakes of our own, but they are mostly glacier fed or minor league hangouts. The weather is warmer on the other side of the continental divide.
The two provinces are populated by different people. We think they are lazy & marry their first cousins too much and they think we are loud, boorish and flash too much money around. Like Garth’s response on the millenials debate….”I agree”.
Our fortunes are both tied to the Alberta economy. But this is true of much of the country. Ontario is on the ropes because they don’t manufacture much anymore. Those big bad banks are the big employers with other financial services providers in the GTA. What happens to them if TSHTF on mortgage and consumer debt? And most interestingly (to me anyway) is that the big cities are increasingly being abandoned by those who can afford to move to smaller, more rural, more affordable communities where some great bargains can be found in real estate. Who will be left in Vancouver, Toronto, and Montreal when the music stops? And could Calgary really become a one trick pony Detroit type town?
Guess we’ll all find out. Appears sooner rather than later.

#28 Mr. Reality on 06.18.14 at 8:01 pm

#8 R on 06.18.14 at 6:51 pm

“Oh but wait: Garth, maybe we need another lesson in assets vs. liabilities?”

I think you need to understand that a house (an illiquid asset) is a liability. At a market top, which we are passing through right now, you better start understanding what the value in being liquid and that fact that a house/home/condo can turn into an ugly liability very very quickly.

But, as with so many people, this is a topic that will only be fully grasped after the correction is in full swing…..

Sheeple…..

Mr. R.

#29 Realtor # 1 GTA on 06.18.14 at 8:07 pm

why is the “correction” always two years away?

Is it because you believe interest rates will rise?

Never try to time the market people! Dow and TSX and all time highs – and yet bond yields still low

We are in an era of low interest rates.

So much for … monies flowing out of bonds and into equites
…..the equities correction

#30 Harden on 06.18.14 at 8:07 pm

Great post, except the claim that “All gains in the last few years have been fueled by debt”. All gains?
What about foreign cash? Right, no proof, we’re so often reminded. It’s all just a little too “challenging” to track foreign investment activity, according to CMHC in today’s Globe and Mail.

#31 GsAmazon on 06.18.14 at 8:08 pm

#11 JSS on 06.18.14 at 6:59 pm

Watch FUBAR – see? it won’t be so bad ;)

#32 Cici on 06.18.14 at 8:08 pm

#10 TurnerNation

So funny, I was thinking the same thing…

In Quebec, it’s a “chalet.”
In Ontario, it’s a “cottage.”
Out west, from Alberta to BC, it’s a “cabin.”

Hmmm…not sure about Saskatchewan and Manitoba though…

#33 boom 'er bust on 06.18.14 at 8:14 pm

“Can long-time Albertans tell me what it’s like here during bust times.”

I was working in cowtown during the NEP experiment at an international oil firm.

Bust happened, and EVERYONE was scared of being called into ‘the meeting’, followed by an escort to your cube to collect personal things, and an escort out the front door.

One day my boss came by to assemble a crew to help him upstairs. We all piled into the elevator and he selected a floor that I had never been to. I just figured it was some other company on that floor. Nope. The entire department (3 entire floors) of the company was sacked & sent home in a day. Everything was left untouched for over a year, so now we had to remove the end-of-lease computers, printers, photocopiers &tc. so they could be sent back.

Quite eeeery to see the entire floor as it was – a snapshot in time – the last time anyone was working there.

Fortunately there was no ‘stink’ and dust of old unused space, since nobody bothered to tell the cleaning company that this floor (and several others) was unoccupied. Must’ve made it quick & easy for them to keep it clean every night.

#34 Peter on 06.18.14 at 8:18 pm

So Poloz concerns of external shock is virtually vanished by this guarantee:

http://www.bloomberg.com/news/2014-06-18/li-says-china-will-avoid-hard-landing-while-limiting-stimulus.html

#35 Michele on 06.18.14 at 8:18 pm

#32 … a shed :)

#36 Old Man on 06.18.14 at 8:19 pm

#23 what is up with that – this is very easy to explain as the Association For Equality held this event at the University of Ottawa. There is no place for equality under a Reformist Government except what Caesar decrees to be created as such. Thus he ordered his female youth movement to trash the gig by gagging it with a protest.

#37 nonplused on 06.18.14 at 8:20 pm

Oh and I forgot another important point. I have a friend who lives in Jaffray. He pays something less than $300 a month in property taxes. However, if I were to buy his house, as a non-resident, I would get to pay $3,000. The deal the government has with the locals, because secretly the locals hate the Albertans, is that second homes are taxed at a much higher rate such that, as the locals put it, “if you are going to come enjoy our summers you should pay for our schools and hockey rinks”.

Ya, I don’t see it either. I would never buy in a place that has a 2-tiered property tax system.

Anyway you can see the mentality. They believe all these “Albertans” are “rich”, and therefor should pay more for everything than they do. despite that without the Albertans, the economy of south-eastern BC would collapse.

#38 nonplused on 06.18.14 at 8:22 pm

Note I meant year not month. He pays $300 a year, I would pay $3,000 a year if I bought his place. Not month. Oops.

#39 Gotta laugh on 06.18.14 at 8:25 pm

“cabin” is the basic model – generally the same price as your car;
“cottage” has another zero in the price;
“chalet” has two more zeros in the price.

#40 Inglorious Investor on 06.18.14 at 8:29 pm

#9 sheane wallace on 06.18.14 at 6:54 pm

I don’t know about the numbers you forecast, but I too think that at some point we are going to have an inflation shock. Not necessarily hyperinflation (though many will claim it is just that as it is happening) but a sudden, short-term surge in prices that will, in a very short time span, achieve a new plateau in the general price level (of course CPI will be rigged to dampen the official numbers). There’s a lot of ‘pressure’ in the system just waiting to cause a break out. Keep your eye on money velocity. When it starts to pick up and break trend, watch out.

#41 Smoking Man on 06.18.14 at 8:30 pm

Still alive, but barley….

Usdcad tanks after yellin talk…

Guaranteed, Poloz taking the safety latch off the lower the rate button….

Higher Rates need growth, a shrinking Labour pool, where is growth coming from, the 45 million good old boys on food
stamps….

The trillion in student debt….

Housing correction only posable with a hockey stick chart, mass job losses or big spike in rates..

Good news for basement vultures in waiting that live in Ontario.

Wynne is brining in her job killing budget, the one that aims to pad pensions…

Bye bye jobs…

#42 Randy Randerson on 06.18.14 at 8:39 pm

“First, you can’t trust Calgarians. They have two known economic conditions: boom, or holy-shit.”

That’s GOLD, Garth!

#43 DM in C on 06.18.14 at 8:41 pm

So funny, I was thinking the same thing…

In Quebec, it’s a “chalet.”
In Ontario, it’s a “cottage.”
Out west, from Alberta to BC, it’s a “cabin.”

Hmmm…not sure about Saskatchewan and Manitoba though…

And the ROTC you missed, back East in the Maritimes we call it a ‘camp’ :-)

#44 Inglorious Investor on 06.18.14 at 8:42 pm

#24 what is up with that on 06.18.14 at 7:37 pm

People only want equality when they have less power. But as soon as they attain equality they will want more power. And then more power. Soon, if given the chance, they become the oppressors.

“All animals are equal, but some animals are more equal than others.”

History is one long power struggle. It is not about equality. It is about power.

#45 Hulot on 06.18.14 at 8:43 pm

Hey Garth, remember your friend from Boston that started the Hedge Fund shorting Canadian banks and housing. You know, the one that you devoted at least two blog posts to. How is he and the fund doing?

If he were my friend he’d tell me. — Garth

#46 [email protected] on 06.18.14 at 8:45 pm

You gotta see this link …loewengroup.ca/Blog/How-to-buy-a-home-when-you’re-broke-Burlington-Loewengroup.html?fb_action_ids=10152083023822003&fb_action_types=og.likes&fb_source=other_multiline&action_object_map=%5B478186198950840%5D&action_type_map=%5B”og.likes”%5D&action_ref_map=%5B%5D

#47 Old Man on 06.18.14 at 8:46 pm

#41 Smoking Man – this just goes to show you the intelligence of Wynne because that budget was especially written for the NDP Party. Two things have been accomplished by this brilliant political gesture. She has gained the respect of the NDP voters and has thrown their leader under the bus as revenge is so sweet is it not.

#48 sheane wallace on 06.18.14 at 8:53 pm

#40 Inglorious Investor on 06.18.14 at 8:29 pm
…………………………………………….
What you describe was the situation in Italy and Germany when they established the euro zone.
One time shock of 60-100 % and life goes on.
But they did not have the reserve currency…

It may work as you suggest.
I can only imagine what the world would be with 150-250 $ oil.

I still think that we are going to see much higher, shockingly higher interest rates as otherwise the capital (Das Kapital) will simply fly away.

Let’s enjoy the horrible ‘deflation’ wherever it is, it won’t last long.

#49 Aggregator on 06.18.14 at 8:55 pm

Speaking of Landcor. How did residential dollar volume for the City of Vancouver drop 25% y/y in April while REBGV reported a 25.8% y/y increase for Greater Vancouver? Chart1  Chart2 

I told you already. The tree huggers, organized real estate and corrupt governments are dictating everything.

#50 Karla on 06.18.14 at 9:03 pm

#37, 38

I live in Fernie, and the difference between propery tax for a local and property tax for a non-resident (and I have been both) is only about $400-$500 on a $500,000 home. The numbers you have provided for your friend’s property tax in Jaffray do not sound correct.

#51 Daisy Mae on 06.18.14 at 9:05 pm

“When people retrench, the chalet gets punted.”

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

Most Canadians will be ‘retrenching’…so just WHO is going to buy these chalets?

#52 Drill Baby Drill on 06.18.14 at 9:14 pm

#23 Rainclouds

“Tea party Idiots” your statement really exposes your IQ level as well as knowledge of Albertans. It was meant as a put down by someone without the intelligence to truly discern the difference between writing a blank check for every liberal cause out there and actually having a semblance of some monetary discipline. We are not in good shape in this country called Canada and we never will be with low rent visions and attitudes like yours. Please get educated #23.

#53 sheane wallace on 06.18.14 at 9:15 pm

But the Europeans have:
1. Very well indexed government pensions
2. Free quality health care
3. Free quality education
and their citizens will never be left in the dirt.

We only have ‘free’ health care for now.
My bills for visiting US doctors in the last 3 years as I could not wait for the ‘free’ care here with the waiting times: in the 5 digits (USD)

#54 45north on 06.18.14 at 9:16 pm

What I know is that, like rural Nova Scotia or Muskoka, this part of BC doesn’t actually have an economy.

according to google maps, Calgary to Invermere is 3 hours, 21 minutes. Melody Road (where I went to school) to Bracebridge is 2 hours, 3 minutes. The ties between Invermere and Calgary are tenuous, worse there is no half way point, if you want to drive only 2 hours you end up in nowhere.

Exurban : from your link: China’s ‘Naked Officials’ Not so Naked Anymore

Democratic countries don’t do this, because they have an electoral system, multiple political parties, an independent media, a separation of powers, and so on—a series of mechanisms to avoid official corruption.

democratic countries like Canada

Bast : The 1980s bust was horrific – we left for Ontario in 1973, so I never lived through that one, but many of our friends did. Jingle mail – keys to the house just left on the bankers’ desk. Pray it doesn’t happen in your lifetime – but I wouldn’t bet the house on it…

Ontario has never had that kind of bust. I mean since the 2nd World War.

#55 Keith in Calgary on 06.18.14 at 9:26 pm

So…..I am sitting in the airport in Grande Prairie right now, quafing overpriced beer, in their generic fried food joint they have the nerve to call a restaurant. This town in a shithole. Their claim to fame is that they are “the biggest city between Edmonton and Faribanks, Alaska…..ROTFLMAO !!!

Just spent a few days in Fairview, and then Grimshaw, Alberta……..there are 90 houses for sale in Fairview right now (about 10% of the total homes sitting on the ground) and an internet blog about it, because absolutely nothing is moving out there……..yet they are right in the middle of the northern Alberta oil boom…..no ???

Once again, boots on the ground intelligence trumps realtor bullshit.

#56 Drill Baby Drill on 06.18.14 at 9:31 pm

Dear Pathetic Blog ; we are experiencing an inflation hit. Look at the price of a litre of gasoline, electricity, whole foods and property taxes. I am from Alta so it must be much worse proportionally in the rest of Canada. Wait when interest rates go up then inflation will really bite.

#57 underpaid accountant on 06.18.14 at 9:32 pm

Canadians have already spent a good chunk of their leveraged paper gains. With 1.3 trillion mortgage debt and 225 billion HELOC debt – average person has ATM’d 17% of their house. Throw in a 20% correction and we’ve got ourselves a storm.

#58 R on 06.18.14 at 9:35 pm

#28 Mr. Reality

I was actually trying to make the same point as you, but I realize I worded it in an ambiguous way.

It is a liability as you say, in fact, I had a large heated discussion with a friend on this topic one day.

#59 Drill Baby Drill on 06.18.14 at 9:38 pm

#33 boom ‘er bust : you are asking what a bust is like with a handle like yours? Let me tell you what a bust is like in Alta. They happen quick without warning (other than this pathetic blog) I have lived in Calgary for 41 years. The worst bust was in the mid 1980’s when people were selling there homes for 1 dollar. There was an old antiquated law that allowed this to occur. Anyway it took at least 4 yrs and a lot of gov’t spending (ie: Husky heavy oil upgrader in Lloydminster) to get this economy turned around. We have had smaller sized busts since then but all act as resets on home prices.

#60 Son of Ponzi on 06.18.14 at 9:47 pm

In Quebec, it’s a “chalet.”
In Ontario, it’s a “cottage.”
Out west, from Alberta to BC, it’s a “cabin.”
—————–
In Germany, it’s a Scheisshaus.

#61 Anton Novak on 06.18.14 at 10:05 pm

I don’t understand why you call your blog “pathetic”. Why?

You can never be too humble. Even when omniscient. — Garth

#62 Old Man on 06.18.14 at 10:15 pm

#54 45North – did you attend H.S. in Bracebridge? I have heard some wild stories about you all as knew several who bused to H.S. there.

#63 Piccaso on 06.18.14 at 10:15 pm

Saw a black bear running across a farmers field half way from Edmonton to butt hole Bonnyville today. Haven’t seen that before.

I left First Nation Wetaskiwin to come up here. I’s all part of my $20 an hour contract job with Telus, hitting these no place towns in Canada.

At least I get 70 hours a week which I don’t mind because there’s fuc$ all else to do in these one dog towns besides work.

I might make 70K this year in Canada vs the 130K I made with AT&T in Texas working 30 hours a week.

#64 cowtown cowboy on 06.18.14 at 10:17 pm

Ah yes, Invermere, been out there a lot in the last few years, buddy bought a ‘cabin’, actually it’s just a house..but I digress, so luckily I don’t have to drop 1/2 mil for the privilege, but he paid cash so money isn’t his biggest concern, to go along with his acreage in springbank and 911, all courtesy of cashing out a ton of options with an O&G that shall remain nameless…but has stunk for the last few years. Plenty of corporate malfeasance going around….

The lake is just a widening of the river and is either freezing cold, even after several weeks of +30 weather, or full of guys and their 75k+ wakeboats making it pointless to even bother going out on the lake, yet its banks are lined with millionaires and the odd billionaire..

I was just out there for a little golf weekend and Eagle Ranch was charging $145/round, they just love us Albertans rolling into town, so much so that there is usually a police escort from Castle junction all the way to the Radium turn off…

We’ve thought about a place out there but I really don’t feel like making that drive every weekend, but for some, their wife and kids spend the summers out there, and the daddy comes out on the weekends and for a week or two. Hell I know a guy who works in cowtown and takes the red eye to TO on weekends to his secluded island…lots of money washing around still, but lots pretending as well, ( I think I belong in the later category!).

#65 Mr. Frugal on 06.18.14 at 10:18 pm

I wonder how long before the baby boomers flood the market with cottages. Doesn’t make much sense that a cottage in Muskoka goes for several times the price of a house in Michigan. It’s just a matter of time before these are passed down to the next generation and they will be dumped on the market. I keep telling my kids (ages 18 and 16) that they don’t need to worry. Houses will be cheap 10 years down the road.

#66 Chapaterco on 06.18.14 at 10:21 pm

Now I know who Phil Soper is!
Apparently his people will take a bullet for him!
Read on: http://www.remonline.com/difference-makers-phil-soper/

#67 Bast on 06.18.14 at 10:26 pm

#54 45 North

Um, yes, I believe that’s what I said. I left AB in 1973 for ON, and so didn’t live through the AB 1980s bust. Well aware that ON didn’t suffer the same fate. Hated ON as the Evil East for years, as I had been well inculcated by my AB NEP pals. Still not a fan of ON – too humid – and came back to AB in 1994. Now looking at BC. Not a fan of what has happened to Calgary over the past 20 years. Civic pride has tipped over to civic arrogance. A fall would be good for this Cowtown.

#68 Inglorious Investor on 06.18.14 at 10:29 pm

#48 sheane wallace on 06.18.14 at 8:53 pm

“What you describe was the situation in Italy and Germany when they established the euro zone.”

Yes, when they switched to the euro, they effectively cut the people’s purchasing power in half, literally overnight. I fear the same thing will happen here with the US dollar.

This is nothing new. They did it in 1933 when they confiscated the people’s gold in order to reprice gold from about $22 to $35, which resulted in a corresponding devaluation of the US dollar. In 1971 they just gave up completely, casting all currencies to the winds of speculation.

——————

“I can only imagine what the world would be with 150-250 $ oil.”

That all depends on what wages/salaries will be. Remember, it’s not the nominal that matters. Only the real. That said, wage inflation always lags monetary inflation, so the people are always playing catchup on a perpetual treadmill that goes faster and faster. That’s our economy: infinite growth in debt with an infinitely receding repayment horizon.

What I do know is that real growth requires real productive gains and cheap energy, so unless we see real wealth grow apace with debt (or even faster), the average person will simply become poorer and poorer.

With so many people blowing their wads on mortgages, they may be completely unprepared for the potential shock in the cost of living that may be coming.

#69 Old Man on 06.18.14 at 10:30 pm

#63 Piccaso – the last time I was in Minett saw a black bear for the first time in my life at about 11:30 PM. It was chasing the resort manager down the street who was screaming in terror. He climbed a tree and the bear could climb too, so he moved on a limb jumping on the women’s rooming dorm. They screamed too and all was covered up because it was not good for business with 500 clients staying there.

#70 Obvious Truth on 06.18.14 at 10:41 pm

Linear one way projections on things like inflation are pointless. Price is what should lead decisions. I’d love to see inflation at four or five percent. But it may not happen. We could get an inverted yield curve or even stagflation.

Not sure oil can stay high forcing some cost push inflation. There is a lot if capital being spent getting it out of the ground. Production is ramping up. Alternatives are becoming more mainstream. Could the world actually be producing too much oil. We could be looking at the same situation gold was in during its rise. What happens if oil goes to $80. Or lower. How many Canadian producers are underwater.

#71 Millenial-Falcon on 06.18.14 at 10:46 pm

Oil is not getting any cheaper and they are not making anymore of it, the pipline is going through and the oil in the sands is coming out no matter what. calgary wll be fine

#72 Happy Renting on 06.18.14 at 10:59 pm

#63 Piccaso on 06.18.14 at 10:15 pm

Congrats on being gainfully employed and, with overtime, making a decent living. I know you can’t help but think back to the good old days where you made double for half the work, but industries change, demand for workers and their skills change. You are fighting and surviving and I respect that. It’s far, far better than being the 50-something laid-off worker who’s completely obsolete, never finds employment again, and is forced into an early, impoverished retirement. Sitting on the couch all day, being depressed, leads to an early grave.

Sounds like you get to some really out-of-the-way places. You should start an entertaining research project. Start a catalogue of which small towns have the worst dives, serve the crappiest menus of beer, have the ugliest singles (or “professionals”), or best home-cooking restaurants, fastest drives from one end of the village to the other, or best spots for some real solitude. You won’t be doing this forever and may look back and laugh at some of the interesting things you’ve seen during this contract job (like the bear.)

#73 Montellino on 06.18.14 at 11:03 pm

When you say trucks with balls do you mean those irritating dangling balls at the rear bumper or are you talking about horsepower…

#74 Retired WI Boomer on 06.18.14 at 11:09 pm

Inflation certainly seems to be heating up. Food, gas, even insurance (auto).

Zero pegged interest rates don’t help either. I would like to see that overdue “Normalization” of interest rates. In today’s world what would a 4.5 – 5% US interest rate do to business? to over extended consumers? To our MASSIVE US DEBT -which we have NO plans to payoff immediately.

Hmmm beyond my pay grade, but interesting none the less. Well, even if the Janet Yellin were to begin raising short rates a bit, it would take quite a while for the longer term rates to normalize. We wouldn’t want an inverted yield curve would we.

As for the prior oil patch Boom bust cycles, the one in the later 80’s was quite nasty in KS, TX lots of ‘jingle mail.’ I recall a gent I worked with, who walked away from his KS home in 1986. He perished in the OK City bombing in 1996 took a lot to just give up, and move on. (sigh)

I really prefer not to see anyone have to go through that again, but cycles persist, as does human greed, and poor decisions. Maybe that’s just called life?

#75 Inglorious Investor on 06.18.14 at 11:13 pm

I’ve read that oil reserves are currently at an 80 year high. But that on its own says very little. What about demand? What about the cost of production? Oil in the ground means little. What really matters is the flow rate–how quickly and cheaply you can get it to market.

I find it shocking what some claim is the average break even price for oil today, considering that only about 15 years ago or so a barrel of crude changed hands for less than 20 greenbacks.

#76 chapter 9 on 06.18.14 at 11:23 pm

#11 JSS
National Energy Plan You can thank Justin Trudeau’s old man Pierre and Marc La Londe for the economic carnage that brought this province to it’s knees virtually over night. The losses to my client base on average eight to twelve company’s a week Gone! Receivership,bankrupt,took the keys back to the bank,lock and walk,and some committed suicide.Who knows how many marriages went down the tubes I know mine did. I got slaughtered financially, new show home, two kiddies at home and my income dropped by 60%. Three times I walked into BMO with the house keys and three times I walked out. Cut every house hold expense to the bone and took on odd jobs anything to bring in money. And as #59 commented on people were selling their homes for $1 buck. Northlands and Canadian commercial bank went broke and Bank of B.C. and Continental bank were taken over.
The name Trudeau to this day boils my blood and now his snot nosed, never worked a day in his life kid could have a shot at running Canada!!! Like father like son.

#77 S on 06.18.14 at 11:25 pm

#11 JSS on 06.18.14 at 6:59 pm

Try a convoy of vehicles leaving town (happened in Ft. Mac in the 80s) for weeks on end. Empty houses for sale everywhere and homeless dogs roaming eerily empty streets. I guess people were leaving in such hurry they forgot to take their animals with them. (I adopted a couple of those.)
I don’t predict such crash will happen again, or at least it will not be as brutal, but it really was a sight to see. This latter Alberta boom is lasting a very long time…

#78 Piano Man on 06.18.14 at 11:30 pm

Makes you wonder why Tara Perkins at The Globe and Mail doesn’t seem too interested in balanced reporting on Canada’s housing market. Is it really that difficult to find the other side of the story?

Garth’s blog isn’t pathetic. It’s pathetic that people have to come here for independent thought on Canada’s housing market.. Our ‘journalists’ are doing us a severe disservice.

#79 Shawn on 06.18.14 at 11:41 pm

Golden Exaggerations

Sheane Wallace said:

This is nothing new. They did it in 1933 when they confiscated the people’s gold in order to reprice gold from about $22 to $35, which resulted in a corresponding devaluation of the US dollar. In 1971 they just gave up completely, casting all currencies to the winds of speculation.

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

Doomers and the Tea Part and such always call what happened with gold in 1933 confiscation. In fact I believe people were required to turn intheir gold for the then going rate of $20 or $22 per ounce and then the government allowed the dollar to devalue against gold so that gold was about $33, but in any case was illegal for Americans to own. (strange in the land of the free, but there it was)

But did the dollar really devalue in terms of goods and services? Well, there was right around zero inflation in 1933 and 1934 a bout of DEFLATION from 1929 to 1932 that total almost 25%. So paper dollars appreciated by almost 25% in the years leading to 1933 and then were flat when people were forced to turn in their gold for the old standard price arouse $22.

I am not seeing much harm here.

I suppose I have this wrong?

And what are you saying? that currencies should be centrally planned rather than cast to the winds of speculation (in other words priced in the market).

Yeah the world has done just awful since 1933 and 1972 hasn’t it? Supports twice the population or something at a much higher average living standard. Canadian Standard of living is up about 100% since 1972 alone by my observation. (two cars instead of one, house twice as big with twice the bathrooms and half the occupants). Just look at the size of grocery store square footage per capital, it’s easily double what it was in 1972 when supermarkets were novel. Just awful eh?

#80 old Phartz on 06.18.14 at 11:47 pm

It’s a wonder B.C allows any Albertan fun seekers in when their parks people have to deal with this.

http://www.huffingtonpost.ca/2014/05/21/alberta-campers-koocanusa_n_5366675.html

I sure wouldn’t want to own a cabin anywhere near alberta oil money

#81 Don Derc on 06.18.14 at 11:50 pm

Wow – this comment sent shivers. Invermere’s future is the past of a lot of towns across the country to date. Look at other cities other than Vcr/Cgy/Tonto. A lot of Cdns are feeling extreme heat already but don’t tell anyone – ya might scare the masses. Sheane Wallace reminds us of being in our 5th year of the “takeaway decade” – so soft and silent Cdns have no idea they are being gouged at every turn. Comatose in life AND at the voting booth. Even for the non-house horny cdn, you need a low mortgage, very little debt, and a solid cash position to survive the next 5 years. The slow silent death, as garth points out, has already begun.

#82 Phil Indablanque on 06.18.14 at 11:57 pm

#24 what’s up

I think #36 Old man knows wuzzup

nice change from “this won’t end well”

#83 Mister Obvious on 06.19.14 at 12:04 am

#32 Cici

“In Quebec, it’s a “chalet.”
In Ontario, it’s a “cottage.”
Out west, from Alberta to BC, it’s a “cabin.””

—————————–

In the Gulf Islands it’s a “ball and chain”.

#84 Same story since 2007 on 06.19.14 at 12:06 am

Oh my God, When Garth predicts a negative outcome for Alberta, everyone is ecstatic ….HeHeHe…..Jealous much ???

#85 Cici on 06.19.14 at 12:10 am

#25 brainsail

“The sad thing is that my family and relatives to this day do not know what exactly happened to the economy then. MSM did not report all of the facts and I am still treated like a loser.”

Well if it means anything, I for one pity your family for their lack of insight. You are definitely a winner; who fought hard to keep yourself together after the wife departed and to hold down adequate employment to support your RE, and when you realized it was a no-win situation, you cut your losses and moved on to greener pastures, even if unknown.

That takes a lot of balls and insight. Many would have given in to depression, or worse. Good thing you are strong enough to not need anyone else’s approval, and I’m sure that your take-away from that situation is that if you can make it through that, you can probably handle almost anything.

#86 Steve on 06.19.14 at 12:17 am

The okanagan is like Calgary. Same attitude problems but the only oil we have is “oil of old lady” and it’s way past it’s due date brother. I’m hoping to see a bit of insanity here

#87 Pope Nosty666fmVlad the Snugglebombed on 06.19.14 at 12:17 am

#9 sheane wallace on 06.18.14 at 6:54 pm — “1. Food and gas inflation of 25-30 %
5. Interest rates up at least 2 % from the current levels, potentially shooting up 5% in the next 2 years, maybe 8-10 % from current levels in the next 3 years.”

Good estimates, and add on rising food / gas / electricity prices. This is an expensive world to live in.
*
Another take on MH 370, but this one names Michael Hastings, who was murdered after he he found out about it. Apparently, Ed Snowden was about to be knocked off as well, but high-tailed it out, and this — Clandestiine ISIS could be part of the overall fuddle-duddle as well.

Whitekat, you may be interested — FATCA and drug money laundering (tied together).

#88 bill on 06.19.14 at 12:27 am

A company moose Garth?
wow they really step wide in the upper Columbia valley eh?

#89 Canaan on 06.19.14 at 12:29 am

Yes, I remember Calgary in the 1980’s. I’ve lived in Calgary most of my life and those of us who remember the late 70’s and most of the 80’s remember the extreme downturn that happened in construction (vacant and half finished buildings) and the for sale signs on real estate as foreclosures happened quickly and were numerous. Those that survived were flexible – they re-educated themselves into better occupations and moved to where employment was available. Many of my friends moved away – to Vancouver, Toronto and elsewhere. All the friends that I knew who had moved from New Foundland and the East moved back home, without exception. I moved to Fort McMurray and then Edmonton, and when the time was right (5 years later), back to Calgary in the early 90s. Lots of us changed careers – away from oil and gas and into financial services, technical services and other occupations that were not dependent on oil and gas. The oil companies downsized drastically in the 80s – Suncor in Calgary (who I worked for in the early 80s) went from around 600+ employees down to less than 100 and that was only one oil company. Layoffs were massive and everything came to a grinding halt in Calgary. The young (in their 20s in the 80s) were the best off as they had no ties to real estate and could move. Those that were inflexible and could not adapt were worse off. Interest rates in the 80s were brutal. When I tell younger people that the first new car I bought cost me 22% interest they laugh. Hah! It could happen again. I learned from that period of time. To this day I live beneath my means and always make sure I can survive if I lose my job no matter what. I have also learned to make sure I stay flexible in terms of employment and am always thinking ahead to the next catastrophe, just in case.

#90 Arithmetics is a bitch on 06.19.14 at 12:41 am

20% drop requires a 25% up to restore the old equity. A 30% drop will need a whooping 43% reviriment. And all that taking time, years and inflation, and taxes and maintenance, making the equity restoration an elusive target. You need another mania like this to get back where we are now even after a 20% drop. A 5% yoy will not get anywhere. Unless this batshit craziness continues without loosing one single beat, year after year, the real RE prices (in loafs) will not be seen again by our mortal eyes.
Fingers crossed.

#91 kilby on 06.19.14 at 12:52 am

The tax difference in BC is not because we hate Albertan’s, it applies to everybody and is called a homeowner’s grant. You get it (about $520.00 I believe) for your principle residence. We had two homes in BC for 11 years and got the grant on the one we lived in and paid full taxes for the other, it’s a nice break.

#92 Freedom First on 06.19.14 at 1:39 am

Garth says: “They have all the oil. And trucks with balls.

This is true. As true as the fact that people who only invest in 1 asset, especially when leveraged, never learn that is a very dangerous financial strategy until they lose
everything. Including their balls.

Time for the financially insane to do some homework. Research and learn from Garth, and yes, some of the comments from today from people who have witnessed first hand and suffered from busted economies from the past. The fallout comes in many ways, far to numerous to list here. It is a living hell. Just like described in those comments. This is what Garth and the aware people commenting here are trying to save Canadians from. I have been fortunate to not ever have been a victim to a self induced financial nightmare. Sound financial principles that Garth teaches, plus keeping yourself from falling prey to either “Fear”, or “Greed” will allow you to always keep your balls. I always put freedom first. It is priceless.

#93 Harry Wilson on 06.19.14 at 1:41 am

In yesterday’s post, “Stubborn”, Rosie Moving Forward at comment #117 posted a link to a nice math-for-dummies article on why Vancouver houses will soon fetch $7million. The article reminded me of a favourite quote from Mark Twain on the subject of recency, which some of you may enjoy.

Sorry if it’s a bit long.

Here’s the link to the article:
http://www.biv.com/article/20140604/BIV0111/140609973/do-the-math-vancouver-house-prices-will-reach-7-million

—————-

Here’s the gem of the article:

“If [the current] trend continues, in the year 2024 the average price for older [detached housing] stock could be greater than $2 million on the Eastside and $7 million on the Westside of Vancouver. We are not saying this will happen, we are simply applying the math from the past decade and extrapolating forward to the next decade,” said Pedro Tavares, Altus Group’s director of research, valuation and advisory.

—————-

From ‘Life On The Mississippi’, Mark Twain’s 1885 memoir:

In the space of one hundred and seventy-six years the Lower Mississippi has shortened itself two hundred and forty-two miles. That is an average of a trifle over one mile and a third per year. Therefore, any calm person, who is not blind or idiotic, can see that in the Old Oölitic Silurian Period, just a million years ago next November, the Lower Mississippi River was upwards of one million three hundred thousand miles long, and stuck out over the Gulf of Mexico like a fishing rod. And by the same token any person can see that seven hundred and forty-two years from now the Lower Mississippi will be only a mile and three quarters long, and Cairo and New Orleans will have joined their streets together, and be plodding comfortably along under a single mayor and a mutual board of aldermen. There is something fascinating about science. One gets such wholesale returns of conjecture out of such a trifling investment of fact.

#94 Herf on 06.19.14 at 1:48 am

Imagine that. A newspaper/dinosaur media reporter who asks intelligent questions.

Here’s an undated opinion column from the National Post that summarizes what happened to Alberta in the ’80s as a result of the bust:

http://www.nationalpost.com/opinion/columnists/story.html?id=6045395d-1cad-4f43-812e-8b02ae9cd7b0&k=4016

#95 Mark on 06.19.14 at 2:57 am

“Maybe, but how much of a correction? Even with a 20% correction, the vast majority would still be on the positive side of the ledger.”

Its not so much that equity would be the problem (although it would be for a lot of people). Lender confidence would be the problem. After all, why stop at 20%? Why not 30%? 40%? 60%? When assets start going down, lenders start to perceive more risk, and they demand a higher risk premium accordingly for lending.

This is why, for instance, Garth can claim correctly that interest rates on mortgages are likely to rise over the next few years, while at the same time, most rational economists believe that the BoC will be on hold, or may even lower policy rates in response to domestic deflation. As lenders start to sour on RE as an asset class, they will start to pull away.

Perhaps then, and only then, will the sheer irrationality of firms like BCE (a job creator and probably Canada’s largest single high quality employer!) being forced to pay 3.51% on 5-year term debt, while residential home-borrowers with mortgages pay 2.5% will finally be resolved. And economic growth in Canada ex-FIRE will start to improve.

#96 Mark on 06.19.14 at 3:02 am

Record high for the tsx and Canadian housing still booming.I think the central bank will do the right thing and raise interest rates.Emergency rates for 6 years has been long enough.

Canadian house prices have been going down for the past year, and the TSX is only hitting levels first reached 6 years prior (with a modest P/E at the time, and no meaningful earnings growth since!). If anything, these metrics call for BoC policy rates to be dropped, as inflation is practically non-existent at the moment, and will be even more non-existent as the RE decline continues to accelerate and takes consumer confidence with it.

#97 Harry Wilson on 06.19.14 at 3:32 am

re #11 JSS

“Can long-time Albertans tell me what it’s like here during bust times?”

Next month marks my first quarter-century in Alberta. While I haven’t been paying a lot of attention, here are the two things that I remember about the last downturn, which hadn’t been mentioned as of Mr. Turner’s nightly cut-off:

1 – You may have seen those bumper stickers that say “Please, God, let there be another oil boom; I promise not to piss it away this time”. People still say that, but they ain’t laughing (including the provincial government).

2 – The news of the downturn takes a very long time to become general knowledge across the country. Up to a year or two after the party has ended, people are still arriving in Alberta expecting the streets to be paved with gold. I may have noticed it more than others, due to the neighbourhood in which I live (across town from Easy Street), but in the years after the downturn, there was a large spike in the number of people living in their cars. Jobs dried up quickly, but rents stayed at their boom levels.

If anyone is thinking of making the move, make sure that you have enough for a return ticket. Too many unfortunates went all in, and were stuck here at the worst possible time.

#98 Hillbilly on 06.19.14 at 4:29 am

underpaid accountant – comment # 57

another way to express your point is;

In Canada, Heloc’s (Home Equity Lines Of Credit) are about 13.7 % of GDP (Gross Domestic Product).

In the USA, at the peak of their housing bubble, that metric was 7.9 %.

Source: The Bank Credit Analyst (sorry could not post the link, but go to their website, search it and you will find the article).

And Americans are considered to irresponsible debt hogs!

People make a big deal about 43 % of Canadian homes being “mortgage free”.

HELOCS are not considered to be mortgages in that metric, so the 43 % figure does not reflect the true picture of “homeloaner” indebtedness.

You have presented this fact in an alternative, but very illustrative manner. Good work!

#99 Hillbilly on 06.19.14 at 4:38 am

45 North – comment #54

“Ontario has never had that kind of bust”

Not too sure about that.

I believe it was about 1980 to 1982.

Ask Garth , I believe he had to accept on a condo or two on a RE trade or something and posted about it.

Garth, could you please provide your experience back then for us again, I could not find the post in your archives. Thanks.

#100 Sheane Wallace on 06.19.14 at 6:40 am

#80 Shawn

I said that? When? Are you in a business of labelling people?

#101 Bob Rice on 06.19.14 at 7:00 am

“he Albertan economy is linked to one of the most volatile commodities on the planet, and the extremes are legion. These days the gutters are running yellow with testosterone, which suggests in a year or two (especially as the US gains more energy independence) we might see exactly the opposite.” — G. Turner

Umm… not so sure bout that, Gathster…

http://business.financialpost.com/2014/06/18/canadian-oil-sector-a-beneficiary-of-prolonged-iraq-crisis-analyst-says/?__lsa=54c1-a87d

Four decades of oil output decline in the US has been reversed in just 5 years, with that country now approaching energy self-sufficiency. And you send me an article saying, “A prolonged Iraq crisis could fuel spending in Canada’s energy sector.” That’s funny. — Garth

#102 OttawaMike on 06.19.14 at 7:21 am

#26 brainsail on 06.18.14 at 7:43 pm

MSM did not report all of the facts and I am still treated like a loser.
————————————————-

I have to agree with that statement. I had relatives living in Calgary at that time. They bought in ’82 right at the top and had to hold until ’92 to break even.

There were the famous dollar brokers who would buy houses for a dollar to take over the title and mortgage rather than the owner returning it to the bank. The dollar guys would then proceed to strip the house of millwork and copper.

Even the stately Mount Royal neighbourhood had screaming bargains as the market flooded with foreclosures.

Being 30 years ago, most have long forgotten this sordid part of Calgary’s real estate history. Does anybody remember the name Dome Petroleum? The largest oil company to flame out during that period, leaving thousands out of work.

#103 OttawaMike on 06.19.14 at 7:22 am

Correction: My relatives held until 1998 to break even not ’92.

#104 Sparky on 06.19.14 at 7:28 am

“You can’t trust Calgarians. They have two known economic conditions: Boom, or holy shit.” Garth

I was living in Calgary in the early 90’s. Work was getting pretty slow in Ontario so I headed out. Im in the trades so I was able to find work, but I couldn’t pick and choose like today, nor was the pay comparable to what it is today. But, the one thing that has always stood out in my mind was the amount of bumper stickers that read;

“Please God let there be another boom, I promise not to piss it away this time!”.

I wonder how many heeded their own advise? How many remember those times? Same goes for Ontario. Rae days anyone? I was watching journeymen taking $5/$6 hour paycuts to stay working (non union). I can’t understand how people don’t remember these things. I remember.

#105 Finally I understand on 06.19.14 at 8:29 am

#61 I don’t understand why you call your blog “pathetic”. Why?

You can never be too humble. Even when omniscient. — Garth

Every day, I look forward to reading your blog. Every time, I ask myself “how can he possibly produce an article per day and keep the reader’s interest?”

Now that I know of your infinite knowledge, I understand!

Keep up the great work Sir.

#106 maxx on 06.19.14 at 9:05 am

“If there’s one thing that unites us, it’s house lust. And this pathetic blog.”

The day at which this blog trumps house lust, and it’s coming quickly, the Canadian economy will begin returning to good health.

There are no miracles, no neat tricks, no pain-free methodologies and no get out of jail free cards for tptb.

Every economic quick-fix gimmick this party has tried has failed spectacularly.

#107 Shawn on 06.19.14 at 9:13 am

Sheane Wallace said what?

Sheane at 101 indicates I mis-attributed a quote to him at 80. Sheane, see post 68, I thought Inglorious Investor was quoting you and I repeated that.

#108 RVP on 06.19.14 at 9:15 am

@ brainsail #26

“The sad thing is that my family and relatives to this day do not know what exactly happened to the economy then. MSM did not report all of the facts and I am still treated like a loser.”

That is such an important point and it is so rarely discussed. The same thing is happening today with young people who are struggling to find jobs and struggling to afford a home. The way the economy is structured right now it’s just really hard for a lot of people in their 20s to get good-paying jobs. But family members do not consider macroeconomic conditions–they still judge you as a loser and compare you to your grandfather who walked 20 miles to school in the snow. I feel judged by family members that I don’t own a home. It’s the worst when your 90 year old grandmother is lecturing you about getting a steady job for life so you can buy a house. She didn’t flee Europe during World War II so her future generations could live in basement suites and work in low-wage service jobs. You end up feeling like you’ve let down your grandmother’s aspirations for the family and what motivated her to come to Canada in the first place. Really, that is the worst part about this real estate bubble, so it is surprising that it is rarely discussed. I don’t mind living in a basement suite myself, but the look on grandmother’s face can be crushing.

#109 Shawn on 06.19.14 at 9:21 am

Alberta in the 90’s

Scary times. I believe oil got as low as about $10 per barrel around 1997.. It’s hard to believe now.

If you had a good job, you had to keep your head down to a certain extent. Almost no one was leaving on there own as there were few good jobs to go to.

If you got let go, especially over age 40 or so, it was not clear you would ever get back into a good job. Imagine government workers who were let go mid-career. It was UGLY.

Edmonton downtown was full of empty lots where buildings had been torn down simply to avoid paying property tax on an older empty building. They then sat as parking lots for 15 or 20 years in many cases. Sometimes the concrete floor of the old building was still there.

The balance of power was firmly with the employer. Sometime in the early 2000’s things changed dramatically. By 2007 many people had their choice of jobs. Employers had to treat people better to keep them. ’twas nice then for employees. Still pretty decent today, but not like 2007.

#110 Ralph Cramdown on 06.19.14 at 9:23 am

#76 Inglorious Investor — “I’ve read that oil reserves are currently at an 80 year high. But that on its own says very little. What about demand? What about the cost of production? Oil in the ground means little.”

“Reserves” means stuff you can get out of the ground and sell at today’s price, and make money* doing it. They go up and down, for the marginal producers, with the price of the commodity. There’s plenty of stuff that we know is in the ground that isn’t reserves because at today’s price, it would be uneconomical to mine it.

* – I don’t know what you call a resource that is economical to extract if you build a $3bn mine, but the mine ends up costing $4bn. I do know that the CEO gets paid and the shareholder gets kicked in the bits dangling from his trailer hitch.

#111 Ronaldo on 06.19.14 at 9:36 am

”In Quebec, it’s a “chalet.”
In Ontario, it’s a “cottage.”
Out west, from Alberta to BC, it’s a “cabin.”

In Saskatchewan it’s a “shack”.

#112 Ralph Cramdown on 06.19.14 at 9:40 am

#92 kilby — “The tax difference in BC is not because we hate Albertan’s, it applies to everybody and is called a homeowner’s grant. You get it (about $520.00 I believe) for your principle residence. We had two homes in BC for 11 years and got the grant on the one we lived in and paid full taxes for the other, it’s a nice break.”

It’s a way of transferring some of the costs of society from average home owning residents to renters, rich people with recreational properties, and people from elsewhere. Popular with voters since renters are less likely to vote and foreigners can’t.

#113 Ralph Cramdown on 06.19.14 at 9:53 am

#109 RVP — “It’s the worst when your 90 year old grandmother is lecturing you about getting a steady job for life so you can buy a house. She didn’t flee Europe during World War II so her future generations could live in basement suites and work in low-wage service jobs.”

I had a grandmother like that. Eventually, I outlasted her. Drive safely, and you will too.

#114 Terry on 06.19.14 at 10:03 am

Great post Garth! I was wondering when Invermere would get some attention. I grew up there, living up the valley now, after a decade in Alberta. I remember watching the news in Red Deer about Invermere having the highest priced lake front property in the whole country! I knew then that prices had nowhere to go but down. I moved back in ’07, 6 months later the economy crashed and the mill I was working in (canal flats) shut down. You should see what prices are just outside Invermere now, places in the flats have lost over 50% of their value, even though the mill is back up & running. In Radium (mill shut down in ’09? and just got back up & running last year) condo construction hit a stand-still and some units, after sitting 6 years may have to be demolished. You should count all the abandoned condo projects between Radium and Canal flats. Basements sitting with 3′ high weeds in them, or pre-fabbed walls piled up rotting. People in Invermere (contractors & home owners) think prices won’t go down because it’s a resort town, isn’t that what everyone in Vegas and Florida said too? I’ve been watching prices steadily go lower, every time a property is re-listed. I happen to work for a guy here (Golden, where things are just as bad) who can’t retire until he sells his house for a crazy price. His real estate agent told him to quit calling to list until he cuts his price in half! I guess I’ll be putting up with him for a few more years.. dang realtors! lol. Things in Invermere were slow 6 years ago, and are just slowing down more it seems. Lots of people under water. Check out the 99 year lease res-condo’s up by Tim Hortons on the highway. When I moved back the cheapest one was $240, now you can get them under $100. Their not built well because on the res you don’t have to build to code. Many people lost tons of equity there and the bottom is yet to come.

#115 Calgary Rip Off on 06.19.14 at 10:13 am

This blog is non applicable to Calgary. Look at real statistics since 2006: Most of the costs of housing has appreciated. Rentals if you can find them are priced ever higher, often more than mortgages. Renting vs. mortgage ownership? That depends on personal variables of the end goal, rather than speculation that prices of properties may crash. Given the oil and gas sector that is very dominating in Calgary that seems unlikely. So for those that are planning on living in a place for 40 more years in the same location it makes zero sense to rent given interest rates and cost of rent vs. mortgage. Yes prices may drop. Prices may also increase. What then if a person waits paying ridiculous rents and then is stuck renting forever? Is that a solution? To say on a blog that certain rules apply in all situations is nonsense. Buyer beware is the best rule. Look at housing without emotions. And realize that a person needs a place to live. That is what owning a mortgage really is: A place to live, it is not about investment. After about 7 years in Calgary the rent vs. buy question becomes one of owning a mortgage as being more profitable. What this blog would be better served is to systematically outline the rent vs. buy equation for all provinces and all regions.

Nobody lives in the same house any more for 40 years. This blog is about prudent diversification and holistic planning. A one-asset strategy is suicide, no matter where. — Garth

#116 45north on 06.19.14 at 10:33 am

Harry Wilson : The news of the downturn takes a very long time to become general knowledge across the country.

the way news of the downturn propagates across the country is like electrical impedance. It’s very complicated – it’s so complicated that electrical impedance is described (in part) by imaginary numbers. I’m not making this up!

http://en.wikipedia.org/wiki/Electrical_impedance

Hillbilly : In Canada, Heloc’s (Home Equity Lines Of Credit) are about 13.7 % of GDP (Gross Domestic Product).

In the USA, at the peak of their housing bubble, that metric was 7.9 %.

that got my attention!

“Ontario has never had that kind of bust”
Not too sure about that.
I believe it was about 1980 to 1982.

yeah prices in Ontario did decline but nothing like they did in Alberta

#117 Dual Citizen In Canada on 06.19.14 at 10:34 am

#106 Finally I understand on 06.19.14 at 8:29 am
Garth keeps hammering away the message to all of us. The human mind and body works on repeatitive signals, eventually learning muscle movements and forming synapses in the mind which are use to perform repetitive tasks and exhibit behaviour . The ability to practically apply knowledge is the basis of how the human races evolves and survives.
Garth, keep pounding your message into minds which have been programmed to follow the herd. Hey, it works for Apple sheeple!

#118 DWS on 06.19.14 at 10:36 am

Alberta’s economic cycles are far less severe than the 70s and 80s. And pipelines aren’t required to keep the economy moving; the lack of pipelines will just slow the growth.

Real estate prices in Calgary might drop for several reasons (radical loosening of restrictions on secondary suites or land development, sharp rises in interest rates, etc.) but probably not because of a bust.

#119 Pete on 06.19.14 at 10:39 am

When you say trucks with balls do you mean those irritating dangling balls at the rear bumper or are you talking about horsepower…
—————-

For the unsophisticated / uninitiated they are called Truck Nuts…..

#120 Derek R on 06.19.14 at 11:06 am

#110 Shawn on 06.19.14 at 9:21 am wrote:
Edmonton downtown was full of empty lots where buildings had been torn down simply to avoid paying property tax on an older empty building. They then sat as parking lots for 15 or 20 years in many cases.

A very good reason why property tax should be levied on the value of the lot, not on the value of the building.

#121 Inglorious Investor on 06.19.14 at 11:17 am

#80 Shawn on 06.18.14 at 11:41 pm

See the following: http://en.wikipedia.org/wiki/Executive_Order_6102

From the article: “In 1934, Congress passed the Gold Reserve Act of 1934 which ratified President Roosevelt’s orders [Executive Order 6102 of 1933]. A new set of Treasury regulations was issued providing civil penalties of confiscation of all gold and imposition of fines equal to double the value of the gold seized.”

They did not send black-hooded agents to break into your house in the middle of the night to seize your bullion. But it’s confiscation just the same.

The US was on a gold standard at the time. By incrementally increasing the official price of gold from $20.67 to $35 the government officially devalued the US dollar by almost 70%. No prices did not suddenly rise 70%, but eventually, over the years, they rose much more than that as currency was created faster than real wealth. There are of course many, many factors (e.g. war), and blaming it all on gold is wrong, as the value of a currency is measured against a nation’s overall real, available wealth and the government’s ability to enforce obligations. But without some kind of restraint, which gold was supposed to provide by imparting present value to currency rather than just future potential value, that allowed governments and banks to create too much currency (faster than the growth in real wealth). The result is a perpetual game of catch-up where the average person simply tries to minimize losses due to inflation rather than achieve real gains through hard work, savings, and sound investment. And don’t forget that the higher the inflation, the more tax you pay, so the costs gets compounded.

Yes, the standard of living for most Americans is probably much higher today. But how has it been paid for? Oh wait, it hasn’t! Because it’s mostly been purchased with debt. Look it up: Consumer debt. Government debt (local, state, federal). Unfunded liabilities. That’s not wealth. That’s spending. As Garth often says. Truly wealthy people have assets, not debt. So if we, as a society, have already spent trillions of dollars of future wealth, how wealthy are we truly at present, in any currency?

#122 Inglorious Investor on 06.19.14 at 11:30 am

#111 Ralph Cramdown on 06.19.14 at 9:23 am

“Reserves” means stuff you can get out of the ground and sell at today’s price, and make money* doing it.”

The original article did not clarify whether they were talking about proven, unproven, strategic reserves, or all combined, so the number has little value, hence my skepticism.

#123 Son of Ponzi on 06.19.14 at 11:30 am

#113
It’s a way of transferring some of the costs of society from average home owning residents to renters, rich people with recreational properties, and people from elsewhere. Popular with voters since renters are less likely to vote and foreigners can’t.
——————-
which foreigners?
We are being told foreign ownership of RE is insignificant.

#124 Mixed Bag on 06.19.14 at 11:38 am

#109 RVP on 06.19.14 at 9:15 am

When you have relatives like this, you learn quickly to dismiss their opinions, to save your own psyche. Not necessarily outwardly, and you can try to explain that when everyone has a degree, so you don’t stand out as someone special anymore. If they don’t want to understand, not much you can do, except move on. It’s a lesson I’ve learned, it’s disappointing, but you learn, and appreciate those who do have a view of the world as it is today, not as it was fifty years ago.

#125 Gary on 06.19.14 at 11:39 am

So another condo development here in rainy Vancouver – The Amazing Brentwood, in Burnaby, BC, apparently has begun presale of some sort because I noticed about 5-6 tents set up right outside the showroom front door this morning.

Interestingly enough, it rained last night and yet these tents looked amazingly dry! Isn’t it amazing? One of the young lads that got up from the lawn chair to go nearby Starbucks was in shorts. He must be in great shape to be able to withstand about 11C temperature overnight in shorts.

Now if you’ll excuse me, I must go line up or I will be priced out of the market forever.

#126 Nuke on 06.19.14 at 11:43 am

I still can’t see a connection between personal real estate and investments. The place I sleep and eat in is not an investment. It has value both personal and possibly financial, but to put a price on it is pretty silly.

In my retirement, I simply tack together three defined benefit plans, a defined contribution plan my CPP/OAS and my RRIF and non-reg income. I look at my after-tax “guaranteed” retirement income to be 100 to 110% of current take home. Any other income or assets above that is fun money.

How could one possibly do a retirement projection 5-10 years out depending on one’s house as the core asset? Impossible and foolish.

As for real estate crashes. I remember Albertans plowing houses down and Toronto client’s being leveraged with multiple condos in developement losing everything. I think this time, it is a lot worse and is systemic to our banking and government modeling.

#127 Doug in London on 06.19.14 at 11:47 am

@Sparky, post #105:
I remember those things you mentioned. If my memory serves me right the economy was quite slow in economies dependent on oil production, like in Alberta and Texas in the early 1980s. I showed up in housing price drops in places like Calgary and Houston. As for here in Ontario, I also remember the bust of the early 1990s. Housing got hit hard during that period. As for Rae Days, I thought it was an EXCELLENT way to deal with budget cuts. What’s wrong with having extra days off (it wasn’t actually that many) to do whatever you want? To this day, I don’t know why the union rejected Rae Days. Bob Rae was way ahead of his time with this great idea.

#128 Rainclouds on 06.19.14 at 11:50 am

@52

I know many albertans, lived in Cowtown and the common thread emanating from the local mythology is how fiscally responsible, independent, and astute politically they are.

when the economic winds change the city will empty as it did in the 80’s leaving the dry dessicated landscape available to Drill Baby Drill……….

The Flat earth society should stay there and continue the good work on behalf of all Canadians………till 2015

#129 pinstripe on 06.19.14 at 12:07 pm

Garth, what is your analysis on this?

http://www.cbc.ca/news/world/wikileaks-publishes-secret-draft-of-world-trade-agreement-1.2680771

#130 RainBird on 06.19.14 at 12:09 pm

Can someone explain why REITs can pay out in dividends more than their EPS?

Isn’t that a pyramid scheme? How can you pay out more than you earn?

#131 Alex n Calgary on 06.19.14 at 12:16 pm

From someone who’s been in calgary for 7yrs.
First off BC, all assuming people from AB are rich, that place is outrageously expensive in the summer, they think money grows on trees in AB, the truth is that most people here work at jobs that are comparible wages to other cities in Canada, its just easier to get your foot in the door. Rig Pigs do exist sure, but it isn’t as rich here as you’d think, its an illusion, most of the money goes right to the shareholders and top brass, not the grunts on the ground. After being raked over the coals for a few wedding trips in BC, we haven’t been back in 4yrs, rediculous, stop having your damn weddings in BC, I don’t want to drive 9hrs to be at your wedding.

The general attitude (ignorant, readin takes work) here is that oil will be great forever. Of course if you do any kind of reading you can see the bigger picture. Like Garth says, the US is on its way to energy independence, they have found out they can hydro-frack and find good, sweet crude oil all over the place, not garbage, thick, Bitumen like here. A large % of US refineries (over half of the 145 or so) are setup to process thick garbage oil like Bitumen. So they buy this Bitumen at a steep discount and mix it with cleaner oil for refining, and its cheaper. They also burn the crappy bitumen Coal in the powerplants for cheap but increased emmissions.

WELL, the race to get natural gas to china is going to be Won by Australia, Russia, USA, not canada, that pipeline to BC is never gonna get build. The Keystone XL is never going to be built, and the US gov is putting pressure on high emission Coal powerplants (Recent Obama Speech) and US refinieries to Refit to process American hydrofracked Crude oil, Bitumen’s days are numbered, not that the massivly overfinanced crew in AB would know anything about that. You realise when you travel to the USA, how the bubble crash affected them, then I see AB with all brand new Super Duty trucks and houses financed after being in AB 6 months on your horrible, sit in the field for 3 weeks, Rigger job.

When I talk to people about why house prices are so high, they all assume that people make so much money in Calgary thats how they afford 800k houses, I mean just not them of course. They don’t realize that nobody really is making the Big $$$, its mostly working class, no education people busting their ass in Flooring, windows, granite, legal secretaries (doing house deals) Mormon IT guys who never went to school, its a lot of them, this place will be ground Zero…

#132 Vamanos Pest on 06.19.14 at 12:29 pm

#11 JSS

It’s like the Maritimes.

#133 Ralph Cramdown on 06.19.14 at 12:38 pm

#127 Nuke — “I still can’t see a connection between personal real estate and investments. The place I sleep and eat in is not an investment. It has value both personal and possibly financial, but to put a price on it is pretty silly.”

You put a price on it when you bought it. And I think you’re pretty silly.

#134 Old Man on 06.19.14 at 12:40 pm

#123 Inglorius Investor – there are hidden reserves which have been drilled, tested, proven, and capped. The costs are small and the purity means little to be refined and can easily be shipped. There are three huge fields all unique to each other with many more yet to be discovered. No need to search as the three as a composite alone are the largest in the world; lots of oil and natural gas in hiding waiting. Keystone is a joke as not needed and the oilmen know this too.

#135 Nemesis on 06.19.14 at 1:23 pm

#SpeakingOfDudeChillingParks #HumiliatingOmniscience&OtherCuriousJuxtapositions #TheDragonMadeMeDoThat,Honest!

[XinhuaNet] – Chinese premier arrives in Greece for visit

http://news.xinhuanet.com/english/china/2014-06/19/c_126644740_2.htm

[UK Telegraph] – Greece’s great fire sale: From pristine beaches to palaces, entire islands and its London embassy, a nation in crisis is selling its assets, writes Harriet Alexander.

http://www.telegraph.co.uk/news/worldnews/europe/greece/10007606/Greeces-great-fire-sale.html

#136 Captain Sensible on 06.19.14 at 2:20 pm

Gold up $80 over the last few days!
What up with that?

#137 MC on 06.19.14 at 2:36 pm

#11 JSS on 06.18.14 “Can long-time Albertans tell me what it’s like here during bust times.”

Grew up here since the mid-70’s. Bust of the 80’s, mom worked at UofA labs of health, her dept had staff of over cut 20 cut in half and the rest taking a 40% paycut.
Dad worked on electric motors for the oil and other heavy industries. Laid off and drove a cab for 2 years until economy recovered somewhat, then took same job for 20-30% pay before losing it.

Also the kicker, interest rate on our Mill Woods home spiked to the 20% mark. That’s when the dad lost his hair :P

After riding through that, they were wiser and rode through the 90’s recession with ease compared to others.

#138 Ogopogo on 06.19.14 at 2:45 pm

#29 Realtor # 1 GTA on 06.18.14 at 8:07 pm
why is the “correction” always two years away?

Only a realtor would make such an asinine comment. Come to the Okanagan to experience the correction first hand. Or go to Halifax. Or Windsor. Or many other smaller urban areas, etc.

It’s fear that drives your ignorance. And vice-versa.

#139 Captain Sensible on 06.19.14 at 2:49 pm

Electric Harley.
no more po-ta-to po-ta-to

http://www.theglobeandmail.com/report-on-business/international-business/us-business/harley-davidson-to-test-drive-electric-motorcycle-in-us-but-no-sales-planned-yet/article19235664/

#140 tkid on 06.19.14 at 3:05 pm

RVP, tell Gran you bought the house in whose basement you are currently living, and the folks upstairs are paying you rent?

#141 :):(Ying Yang on 06.19.14 at 3:05 pm

#136 Nemesis on 06.19.14 at 1:23 pm
#SpeakingOfDudeChillingParks #HumiliatingOmniscience&OtherCuriousJuxtapositions #TheDragonMadeMeDoThat,Honest!
[XinhuaNet] – Chinese premier arrives in Greece for visit
http://news.xinhuanet.com/english/china/2014-06/19/c_126644740_2.htm
[UK Telegraph] – Greece’s great fire sale: From pristine beaches to palaces, entire islands and its London embassy, a nation in crisis is selling its assets, writes Harriet Alexander.
http://www.telegraph.co.uk/news/worldnews/europe/greece/10007606/Greeces-great-fire-sale.html
……………………………………………………………………..

Just returned from two miserable weeks in Athens for business. What a cesspool and the Greek economy is a sham. Its all underground, dirty and everyone is on the take. Not going back there for anyone. They are going to crash hard again. Bye bye Greece, say hello to the new owners Mr Wong! Ha and I am Asian decent too!

#142 liquidincalgary on 06.19.14 at 3:21 pm

@ #9sheanne wallace

…guess you better load up on inflation-linked GIC’s, eh? quickly now boy-o!

#143 liquidincalgary on 06.19.14 at 3:29 pm

“They have all the oil. And trucks with balls.”

garth-man, they’re called ‘truck-nuts’.

my i fed-ex a set for your cycle?

#144 Old Man on 06.19.14 at 3:47 pm

# 140 Captain Sensible – those bikes will never sell except for sissy men, as a real man needs vroom vroom and a lady holding tight.

#145 AfterTheHouseSold on 06.19.14 at 4:05 pm

#109 RVP
“I don’t mind living in a basement suite myself, but the look on grandmother’s face can be crushing”.

I tried to read your post aloud to hubby but was barely able to choke out the last line.
In the great downturn of 1990 our contract work dried up. For the next four years we took every odd job we could get to pay the mortgage and make ends meet. Most of those jobs involved lots of slogging manual labour.
My late FIL, a german immigrant, never failed to admonish his son to get a “real” job, that he mustn’t be trying hard enough. He could not grasp that the 30 yr job and house, even back then, was on its way out. His words still sting today.
We sold that house almost 2 yrs ago, are liquid, mobile and currently spending the summer in central Ontario. There is an ill wind blowing here; lots of boats and campers for sale along the road side, vacancy signs and empty store fronts.
Be grateful RVP that you do not own real estate. Your mobility will hold you in good stead for what is coming.
Take care.

#146 Crowdedelevatorfartz on 06.19.14 at 4:08 pm

@#52 Drill Baby Drill
““Tea party Idiots” your statement really exposes your IQ level as well as knowledge of Albertans…..”

Well, considering that most of the people I met when I lived in Cowtown were from everywhere else in Canada…….
The only “true blue” Albertans were about as rare as an intelligent uttering from Mayor Ralph Klein. Who was later elected “King” of the Province Peter Lougheed built…….
How IS that Alberta Heritage fund doing anyhow?

But I digress. Alberta has, and always will be, the 51st state of the Union. Just ask any of the American workers on the rig next to you…… Yeehaw!
Lets Git ‘er done!

#147 Inglorious Investor on 06.19.14 at 4:10 pm

#135 Old Man on 06.19.14 at 12:40 pm

“[…] there are hidden reserves which have been drilled, tested, proven, and capped. […] lots of oil and natural gas in hiding waiting.”

Yes, I’ve mentioned on this blog before how the US Geological Survey probably has it all mapped out and ready to go just as you say. You’d think they’d be crazy not to have done so, given how important the stuff is for the US economy and global domination. Of course the Americans (and British) likely began cataloging every scrap of useable natural resource as soon as possible during the conquest of North America.

Of course this is nothing new as people have been claiming the capped well idea for decades. And of course there are other very large sources around the world and new sources (e.g. off of Israel, an abundance of methane hydrates in the oceans, etc.). So, now, there probably is no shortage of energy available. The question is, at what price?

Fletcher Prouty, the famous real-life Mr. “X” from the film JFK, who worked with the CIA, the Air Force and the Pentagon said that petroleum is abiotic and virtually limitless. He asserted that from the very beginnings of the oil industry Rockefeller et al schemed to promote the idea of scarcity in order to get a higher price. Old scam.

Conspiracy theories abound surrounding Deep Horizon/the Gulf of Mexico, Alaska North Slope, etc. If any of it is true, than the shale boom is just a joke. Maybe it is mostly just a real estate scam play as some claim. Fracking has been around for decades.

I don’t know. I guess whatever the truth is, the only thing that really matters to Joe Gastank is how much the stuff costs at the pump. That is, in the end, the only true reality.

#148 Son of Ponzi on 06.19.14 at 4:15 pm

Yin, Yang
Mr. Wong goes to Athens.
I was on the Acropolis in 1977.
Busloads full of Mr. Sakimotos.

#149 Tony on 06.19.14 at 4:19 pm

Re: @ #9sheanne wallace

Everything will fall in price except the precious metals. Oil will likely fall one hundred dollars short of his estimate at 30 to 40 dollars a barrel U.S. not 130 to 140. Interest rates especially long term rates will plunge. All commodities except the precious metals will plunge. Canadian housing will tank U.S. housing will take the second leg downward now that the dead cat bounce is over.

#150 JSS on 06.19.14 at 4:23 pm

Homebuilding industry an economic driver for Calgary

42,600 jobs in new home construction, renovation and related fields

http://www.calgaryherald.com/business/Homebuilding+industry+economic+driver+Calgary/9955468/story.html

#151 Habs76-79 on 06.19.14 at 4:32 pm

BALANCE, is the title of this post from Garth.

Just a few thoughts.

In BC we have a teachers strike as collective bargaining between the BCTF and the Govt. is going rough. I take no definite sides here as both have good points, both have bad points, both sides are full of self-righteousness and political bull flop. However the news here broke down salaries. I have no beef with previous bargaining yielding said salaries. New teachers start at $50,000. Most long term teachers earn about $83,000. the avg. is $71,000. All these figures are PLUS benefits. Now I hear that many teachers are finding it hard to make ends meet, strike pay has run out and talk is, setting up special food banks for them. This gets me to my point.

NOBODY in their right mind would say teaches at any level are impoverished here in BC. Their wages and benefits put them in the upper regions of middle to upper middle class. Yet many are finding it hard to live without pay. It just reaffirms my thoughts ta income is irrelevant once you arrive at an ability to survive with the basics. It’s all about how you use/spend and save/grow monies earned. The fact that many teachers are finding it hard to make ends meet with their current salaries and benefits tells me that too many of them, like all too many of us ARE LIVING BEYOND THEIR MEANS! As such if they continue to do so no amount of future wage increases will help them.

Quite simply one or more of these things can/will happen if one keeps living beyond their means.

1: If you cannot see that you are living beyond your means and keep doing so, financial strife and ultimate bankruptcy will soon arrive to you. THAT WILL BE A GIVEN! if you cannot stop living beyond your means.

2: If you see that you are living beyond your means and that now you begin the measures to stop, correct and repay such heavy debts, you will in time find balance again and monies earned will be better spent, saved and invested. There shall be some pain but once you get accustomed to a balance income/lifestyle paradigm your quality of life will improve.

3: Once you see that you are living beyond your means, begin to correct it. If you desire to keep living a higher lifestyle but thus see you need to improve your financial means (improving work income, business income and/or investment income) you can the readjust income to match this lifestyle that you are currently living beyond. But if you do not heed living beyond you means the added income may only push you to higher levels of living beyond your means.

This said ITS’ ALL ABOUT BALANCE IN LIFE! The pendulum swings back and forth but balance keeps it swinging in a narrower arc.

So whether you earn $25,000-$75,000-$250,000-$2million, if you live beyond your means without STOPPING SUCH! YOU WILL IN TIME BE DEVASTATED FINANCIALLY, then likely psychologically and socially.

BEWARE OF UNFETTERED DESIRES IN LIFE!

#152 Hillbilly on 06.19.14 at 4:37 pm

RVP – comment # 109

You are worried about what a 90 year old granny thinks?

What are you – 7 years old?

Grow a set fer chrissakes !

No wonder you live in a basement.

#153 Old Man on 06.19.14 at 4:40 pm

#148 Inglorious Investor – Deep Horizon/Gulf of Mexico was no theory because what the media was feeding the public was nonsense. I spent many a night until 4:00 AM with my computer screen filled with an array of underwater robots. What you saw on TV being repaired was a staged event as there were two explosions as the co-ordinates changed from one to another. It was show time and what I saw live was beyond the pale and this was all documented by others.

#154 Crowdedelevatorfartz on 06.19.14 at 5:03 pm

@#151 JSS
There’s an abundance of house construction…..down by the Bow River in the flood zone?

#155 David W on 06.19.14 at 5:09 pm

ETF GDXJ (junior gold minors) has been makin big moves up. Is anyone familiar with this one and can offer insight – is it worth buying.

#156 Inglorious Investor on 06.19.14 at 5:30 pm

Old Man on 06.19.14 at 4:40 pm

“Deep Horizon/Gulf of Mexico was no theory […]”

So, do you think Matt Simmons was murdered?

#157 Old Man on 06.19.14 at 5:43 pm

#156 David W – its rolling the dice and no investment because you can make a lot or lose everything. I studied these mines in the 1960’s using the book called The Northern Miner and rolled the dice with logic. It was interesting that certain mines took a run from 10 cents to a dollar about once a year, and the same directors and officers were involved. In other words the system was rigged for them to make money and the herd to follow. Save your money!

#158 tell it like it is on 06.19.14 at 5:51 pm

#156 David W on 06.19.14 at 5:09 pm
______________________

the almost 6 year bear market is over … this next move will be explosive. you should hold a couple of etf`s, and some royalty shares. they will make new all time highs soon

#159 randmanl on 06.19.14 at 6:29 pm

Habs 76-79

Well said, all this moaning and gnashing of teeth by the teachers and their supporters is just more of the Me ME
attitude here. ( notice how 80% of them are women?)

They want over 1/2 billion worth of new benefits…..screw that…i’m not gonna pay for it believe me…no one else wants to either …other than those ultra lefties who think money magically appears from the arse of Christy!

#160 pypes on 06.19.14 at 6:35 pm

Great article but I have not seen a slowdown in Victoria and housing are back up since people believe the debt is lower here since more have a heavy pocket size.
It seems also the rest of Canada is following suit to lower debt.
Is this really happening? “Canadians’ household debt ratio drops as mortgage borrowing slows to 5-year low”

http://business.financialpost.com/2014/06/19/canadians-household-debt-ratio-drops-as-mortgage-borrowing-slows-to-5-year-low/

If this is truly happening Garth I have been a loyal read of your blog and we can’t always be right for everything. Great article but I have not seen a slowdown in Victoria and housing are back up since people believe the debt is lower here since more have a heavy pocket size.
It seems also the rest of Canada is following suit to lower debt.
Is this really happening? “Canadians’ household debt ratio drops as mortgage borrowing slows to 5-year low”

http://business.financialpost.com/2014/06/19/canadians-household-debt-ratio-drops-as-mortgage-borrowing-slows-to-5-year-low/

If this is truly happening?

#161 Shawn on 06.19.14 at 7:02 pm

Raging Granny?

Hillbilly said: RVP – comment # 109

You are worried about what a 90 year old granny thinks?

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

You have obviously not met his grandmother, have you?

#162 espressobob on 06.19.14 at 7:10 pm

#156 David W

ETFs like GDXJ are ‘sector plays’ and have a nasty habit of turning rabid and taking a hunk out of you!

Broader based ETFs rock over the long haul.

Rebalancing doesn’t hurt either! Good luck.

#163 Nemesis on 06.19.14 at 7:24 pm

#TriptychOdeToSmokingMan’sGranny. #”ByThunder,Jed-That’sGoodSmoking!”

http://youtu.be/SpuW-aREDgA

http://youtu.be/aVZ9OyOlRYI

http://youtu.be/xEx44ETP8Ac

#164 Bobby on 06.19.14 at 8:30 pm

I have a condo for sale at Panorama and couldn’t give it away. Nothing is selling. Bought it new in the late 90’s and the price hasn’t recovered.
Recreational property is in the toilet. Don’t believe the realtors.

#165 David W on 06.19.14 at 9:31 pm

Thanks for your tips folks, much appreciated. I’ll hold off on this one for the time being and keep looking.

#166 crowdedelevatorfartz on 06.20.14 at 6:22 pm

@#52 Drill Baby Drill

I wanna be a “true blue” Albertan like these guys…..

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&cad=rja&uact=8&ved=0CCYQFjAC&url=http%3A%2F%2Fcalgary.ctvnews.ca%2Fcalgary-man-fighting-alongside-terrorist-group-in-iraq-1.1878796&ei=uLOkU_ShAdH-oQTS_IHYBw&usg=AFQjCNEaa9fZ-kGOnsi8ft8Ngpdudg8Ruw&bvm=bv.69411363,d.cGU

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&cad=rja&uact=8&ved=0CB8QFjAB&url=http%3A%2F%2Fwww.calgaryherald.com%2Fnews%2Fcalgary%2FPolice%2Bchief%2Bwarns%2Brise%2Bhomegrown%2BJihadists%2F9941821%2Fstory.html&ei=ArSkU_-QIoLxoAT39YGwDA&usg=AFQjCNF39gvdxU5mN3Z88wHEh6c7gfqnzQ&bvm=bv.69411363,d.cGU

Born and raised Calgarians ;)