#Debtshaming

GENIUS modified

In the National Gallery in Ottawa hangs a sprawling painting called “Mortgaging the Homestead”. The dude who created it (G.A.C. Reid) was modest enough to think it was a national treasure, so he donated it to the federal government. While documents are being signed at a kitchen table, it depicts family members hanging their heads in shame. Despair. Failure.

That was 1882. People hated debt. Mortgages were 3%.

Recently we got the results of a new survey on Millennials and borrowing. When asked if they worried about taking on big loans, most said no. In fact, a whopping 86% replied they “do not consider mortgages to be debt.” A majority also seem to think mortgages somehow disappear when you sell your property – which, of course, always ends up in a profit.

It’s 2014. Debt fear is gone. Mortgages are 3%.

So far we have amassed $1.2 trillion in mortgages in Canada, and another $250 billion in lines of credit secured by residential real estate. There is also $507 billion in consumer credit outstanding. By the way, a trillion is one thousand times a billion. Mortgage debt in Canada is now growing by $2.4 billion per month, which is actually a slower pace than last year.

Obviously you can tell how much families have gambled on houses, by taking on unheard-of levels of debt. This explains two things. First, with a 70% home ownership rate, everyone has convinced everyone else that real estate will rise in value forever. Second, that mortgage rates can never go back up, because if they did we’d be screwed. So, it’s all good.

This kind of thinking’s everywhere. It shows up in data showing an increasing number of people are comfortable going into retirement with unpaid mortgage balances. A CIBC poll last week found homeowners in BC, for example, don’t plan on being free of home loan debt until age 66 (which is probably wildly optimistic).

So, the wrinklies – many of whom grew up with mortgages at 14% or higher – no longer fear being in hock. And they sure have passed that on to their kids, whose primary goal in life is to be copies of their parents, getting mortgaged as soon as their hormones rustle.

Where does this leave us as a society?

If you think like the herd, believing houses will go up and rates stay low, you sleep well at night. If you know better, it’s plain scary. And wise folks are working on their personal Plan B.

Mortgage debt is unlike any other kind because it is amortized over long periods of time, typically a quarter century. That means only a portion of monthly payments go to debt retirement, and that is the smallest in the early years of the mortgage. It takes a couple of days to get into a mortgage of $500,000 (or, very typically in Toronto and Vancouver, $1 million), and yet decades to get out.

Second, mortgages reset. Rates are adjustable. Unlike the Yanks, we can’t take out a mortgage at 3.2% and still be paying the same rate in 2044. Logic tells us that today rates are at historic lows as we struggle with the residue of the 2008, and things will change. As economic growth and inflation rekindle, central banks will move to increase the cost of borrowing and bond markets will adjust. Mortgage rates will rise, gradually and relentlessly. This process will start with the US Fed, its central bank, in the second half of 2015. About a year from now.

Third, mortgages are granted as a percentage of the value of a house. As interest rates slowly rise, real estate values slowly fall – because affordability is impacted. People can buy less house when the cost of borrowing swells (the converse is exactly why houses cost so much today). But mortgage debt is intractable. It does not fall along with equity. And it’s that simple economic fact which kicked the crap out of the US middle class when their correction tanked prices by a third.

Fourth, if rates rise a little (say by 2%) and houses drop a little (like 15%) then a lot of those condo-snorfling hipsters who think mortgages aren’t actually debt, and bought with 5% down, will learn fast. After all, if markets go south and properties turn illiquid, you’re stuck.

I don’t think Canadian housing will crash, and say so often. But it doesn’t need to, in order for naïve owners to be shocked and dismayed at how real estate debt can destroy their net worth. Only a fool would believe real estate will continue to bloat when incomes are not, or that central bankers would prevent the cost of money from rising.

But, alas, fools abound.

147 comments ↓

#1 exiled on 07.24.14 at 5:12 pm

Sir Garth : We are Screwed?

#2 Nadine Lumley on 07.24.14 at 5:16 pm

I wanted to post this the other day but it seems you’re shutting commenting down on old blog posts now…

…………………………

Watch this extraordinary prime time interview with Tyler Levitan on CTV. Tyler didn’t hesitate when asked what Israel should do about Hamas to defend its own citizens.

Tyler (from Independent Jewish Voices (IJV) Canada) also has a few choice words for both the Harper government and the NDP.

http://www.ctvnews.ca/video?clipId=402990&binId=1.810401&playlistPageNum=1

……………………….

The number of dead in Gaza resulting from the Israeli assault has topped 650, and 80% have been civilians.

At what point do the numbers of dead and wounded justify self-defense? 5,000? 10,000? 20,000? At what point do Palestinians have the elemental right to protect their families and their homes?

http://www.truthdig.com/report/item/the_palestinians_right_to_self-defense_20140723

….

#3 Josef on 07.24.14 at 5:17 pm

FIRST!!! OH YEAH BABY!!! this one is for all the ladies!!!

#4 Long Time Lurker on Here on 07.24.14 at 5:18 pm

Renting comes with its own “debt” as well. If you are 30 years old and decided to rent forever. Assuming “forever” is 35 years and that rent will never go up, then 35 years @$1800 per month will cost you $648k. Yes, it may be cheaper than buying, but it is still a cost that you are stuck with.

I am against buying if one is speculating. However, I don’t see anything wrong if someone is buying for his/her own use. What goes up will always come down. Same goes the other way, what goes down will always come up.

#5 Ken R on 07.24.14 at 5:25 pm

Indeed fools abound. I had four or five as customers today.

#6 Gkingsley on 07.24.14 at 5:25 pm

Money comes from debt!

http://m.youtube.com/watch?v=DyV0OfU3-FU

#7 Liquid on 07.24.14 at 5:29 pm

Banks have been tightening their lending policy but the demand for home ownership still remains strong. Unfortunately many new home buyers are exposing themselves to long term risk that they don’t fully understand. That’s alarming how 86% of Millennials do not consider mortgages to be debt, lol. The only way a mortgage can be an asset is if you own a mortgage or a mortgage portfolio, such as a MIC fund. That way other home owners who borrowed money to buy a house will have to pay you monthly interest :)

#8 Marco from Van on 07.24.14 at 5:30 pm

You make a simple logical case relating home prices to be inversely proportional to the cost of money and proportional to accessibility or ease of getting the leverage.

Yet the whole RE industry tries to come up with illogical, complex, marketing driven and embellished stories to manipulate people into accepting that single asset (or liability depending on the net worth equation) is perfectly justifiable and the only hope to financial a success to the degree that diversification is a bad thing (as it competes against monetary availability for RE).

I remember a simple piece of advice given to me from my dad… The truth takes many less words than a lie to tell…

So far, he’s been right every time…

#9 Dominoes Lining Up on 07.24.14 at 5:31 pm

First of all, let me say how interesting it is Garth, to consider how attitudes towards the ‘deal unto death’ that a mortgage really is have shifted, just in the last twenty five years, let alone since the 1800s.

Secondly, I think I can see a tipping point coming with stuff like this, as people gorge themselves on debt – to pay off other debt.

These guys have bought up air time all over the AM channels in the GTA.

https://www.borrowwithyourcar.com/

My favourite part of this?

It’s a division of “Prudent Financial”

LOLOL!!!!!!

#10 S on 07.24.14 at 5:35 pm

Would you please define a housing crash? This term is sometimes thrown around here but what kind a pull-back would constitute such an event? Is it 20, 30, 40 Percent? 50?
I am just trying to ascertain what kind of a price turn around would those individuals who restrained themselves from investing in RE in the last five years or so (I have) need to buy a house at a fair value as you would define it. I am specifically addressing RE market in Vancouver right now. Thanks in advance.

#11 JRH on 07.24.14 at 5:40 pm

I think we are all going to be screwed !

#12 Bill Gable on 07.24.14 at 5:46 pm

I still think we should have a class in High school called “MONEY”.

I get ridiculed and belittled by house horny friends, here in Dampcouver =because we rent. I have a nice net worth and I am retired, and so why would I gamble on RE in this overpriced, pretentious, snob show?
I have friends that owe a TON and put everything in the debt pile “because our house keeps getting more and more valuable – so it’s like free money”.
Have they ever heard of a DEMAND loan? Of course not. Recourse, versus non-recource Mortgages? NOPE.
Do they gorge on BMW’s, Hawaiian Vacations and toys? Of COURSE.
Pass the plastic.

This is an era we will be reading about for decades. The on coming lights are a TRAIN, called DEBT, with cattle cars full of interest rate hikes and black swans.

This will NOT end well, for a lot of ill informed people.

[email protected] is not paid to warn people about financial potholes.

#13 Fatso Brown on 07.24.14 at 5:47 pm

All Hail the God of Debt…….The Creator……Alan Greenspan.

http://www.marketwatch.com/story/greenspan-worries-about-false-dawns-fed-exit-2014-07-24

In 2000, when the tech co’s swooned Alan had a brilliant idea……print money, crash rates and buy government bonds the government itself creates….brilliant.

In retrospect this might not have been the best idea…..unless you’re an idiot…..or…..you think of Alan Greenspan as a GOD. Now he says….”The madness can’t be stopped”…….Oh Oh……this student of economics turned people watcher has realized….that people are greedy, avaricious and stupid…..a bit late to change disciplines Alan…..cause you screwed us……really really bad.

#14 David D. on 07.24.14 at 5:47 pm

10/10 for rustling both my jimmies AND my hormones, Garth.

#15 Habs76-79 on 07.24.14 at 5:49 pm

I know this, all my money earned is essentially in one wallet. All costs in my life, taxes, fees, utilities, food, clothing, auto costs, insurance and shelter must come from money I have in my “one wallet”. So even for those deluded into thinking interest rates shall never rise and house prices shall never go down. IT MATTERS NOT! about interest rates if everything else in your life is growing more costly and in many areas at growth rates higher than reported inflation and worse higher than your growth in household income. So in time life’s costs can still squeeze those who have much too high mortgage and/or all other debt levels out of your homes and maybe onto the streets.

If emergency mortgage rates and as little as 5% down is the only way one can buy any real estate (esp. buying way more pricy real estate than you should dare own given your true income(s)), one then likely has little room for the potential explosion of daily living costs. From all levels of govts. raising any and all taxes, levies and fees, to costs of utilities, insurance, food, fuel costs you can be just as bankrupted as if the mortgage rate rising 1-2-3%.

Lets add those costs of ownership that may and likely will come up such as roof repairs/replacement, foundation repairs, leaky condo repairs, H/VAC repairs, water heater and other plumbing repairs. These can cost you out of your home if you are barely getting by today with low interest rates and over priced purchased housing.

Oh yeah let not forget the costs of WANTS. The lil Missus wants her kitchen redone (for what effing reason who knows? You probably eat out 4-5-6 times a week anyways!) and bang you take on an HELOC for $10-$15-$20+ Grand. Oh no, lill ladies don’t worry I wont forget your honey of man who wants his man cave and ta da another $10-$15-$20+Grand borrowed against the house.

Lets talk about buying too much and too costly automobiles TIMES TWO or more, after all both of you deserve the best regardless of your incomes.

HELOCS can be recalled at anytime too. Mortgages as Garth said can be called by your lender as well, especially if/when they sweat over your remaining costs minus lost prices in home values if/when markets fall and or if/when mortgage rates go up.

Also see how long YOU own your home if you fall into financial troubles bad enough and can’t pay your property taxes. See how long you get to stay in your home once the govt. forcloses on it to get the back taxes.

So no folks, even if by magic mortgage rates NEVER go up, if you have too much debt to income ratio, all other costs in life may still push your out of your home. Financial stress may mean that honey you vowed to spend the rest of your life in loving matrimony may not be so loving and then it’s all the hassles and costs of divorce too.

Debt can be ok if kept in balance and at times is a part of life. Too much debt of any sort including mortgage debt is toxic and can destroy your future.

As Garth said, it takes mere days to get into huge mortgage debt but many, many years to get out of it. It takes mere hours to borrow too much to buy too much of a friggin new car(s) to your pay scale, but 5-6-7-8 years to pay it all back. Run up your CC debt buying too much sh*t you did not need and in reality often did not really want but bought on impulse and you could be paying back that CC debt for years.

So no folks, too much debt even if interest rates stay low can effectively still kill your financial future along with all the other costs in life.

#16 calgaryPhantom on 07.24.14 at 5:52 pm

Been following your blog/advice for a lot of years. If i bail now and buy a house, down the road, would you point your fingers at me and lol?

#17 Hmmm... on 07.24.14 at 5:53 pm

JRH on 07.24.14 at 5:40 pm
I think we are all going to be screwed !
————————————————————–

That’s what I thought in 2007-2008…. 6 years later, no luck…

#18 Londoner on 07.24.14 at 5:58 pm

It was another beautiful night in London. We’ve been having a bit of a heat wave the past couple of weeks. Today was one of those Thursdays where the pubs were busy by 4pm and the girls kept their flats in their bags and let their office heels out for the night. I trekked it out to Canary Wharf from the City to meet up with a few of the Barcap boys. What a disaster these last few weeks have been for them. At least it will keep the Reg guys busy for a while.

People in the UK are equally as fearless about taking on mortgage debt. Especially here in London where the property market has gone crazy in the past year. The BoE interferred with the natural correction cycle and this is the result.

#19 Basement dweller on 07.24.14 at 6:00 pm

Why are bonds yeilds less than a year ago when stocks markets are reaching highs?

The fixed rates may go dramatically higher
But the overnight rate or prime rates will probably
Hit 4-5%.
And then you will have the variable rate of
Prime minus 1

#20 Mister Obvious on 07.24.14 at 6:07 pm

For those who have trouble conceptualizing their millions, billions and trillions, I find it helps to remember this:

One million seconds = 11 days
One billion seconds = 31.7 years
One trillion seconds = 31,710 years

#21 gladiator on 07.24.14 at 6:11 pm

Nothing but a perfect storm brewing in Canada.
I mean, just look South and see what mortgage debt did to our neighbours. Moreover, there are examples all over the world! But nope. We are special and it’s different here/this time.

When I am ridiculed at parties because of my opinion that this debt-binge will end badly, I just say that yes, I am wrong… for now… but I will definitely be right and will not be happy about it, along with millions of fellow Canadians. At least it will not hit my pocket. Whether I want it or not, this craziness will end with a loud bang. Not gonna be pretty, I must say.

#22 gladiator on 07.24.14 at 6:20 pm

@2 Nadine Lumley:

You want to say that Palestinian-fired rockets selectively targeted Israeli military compounds and were not intended to kill civilians?
Palestinians had to think about the consequences to their actions before Israel’s invasion. They knew very well that the retaliation will come down hard on them. Firing rockets into civilian Israeli settlements expecting no response was a bit naive. Now let them bite some dust. Next time they should know better.
Time to learn that playing with fire is dangerous.

#23 Happy Renting on 07.24.14 at 6:23 pm

#12 Bill Gable on 07.24.14 at 5:46 pm

You need better (and more financially astute) friends.

—–

I wonder if people realize all the additional nice stuff they could buy if they didn’t have interest expense from funding their consumption through debt. Kind of like the old illustration that shows you paid for your house twice over, due to mortgage interest. It’s a permanent sale if you pay cash for things: same stuff, lower final price compared to buyers using credit card debt or HELOC.

#24 So No Crash? on 07.24.14 at 6:34 pm

From Globe and Mail:

“There were four areas in the region where index prices for detached homes exceeded $1-million in June: Vancouver’s west side ($2,257,100), West Vancouver ($2,053,300), Burnaby South ($1,015,200) and North Vancouver ($1,010,000).”

So, no reversion to the mean? Incomes don’t have anything to do with Prices?? Then why have we wasted years talking abut CMHC???

#25 R on 07.24.14 at 6:37 pm

I had a long exasperating discussion with a friend once, who insisted that a mortgage is not a liability, to the point where I had to google it and read her information verbatim.

The sad part is, she had a mortgage, I rent.

#26 earthboundmisfit on 07.24.14 at 6:40 pm

“We’re so screwed” (Only in Ontario, you say)
Earning 13% on a balanced portfolio (as advocated by the sage GT)…home and two vehicles debt free. Offspring launched.
Nah…. I’m good, thanks.

#27 Marco from Van on 07.24.14 at 6:43 pm

Londoner…

Having sold and left London for Vancouver 4 years ago (renting)… I so agree with you. London (not UK) is a micro image of the Canadian story… Enhanced by Carney’s policy influence, gov’t mortgage guarantees (hmm year before election?)…

Barcap brings so many memories, they were such a great customer of mine… Took several millions out of them over a few deals…

#28 crowdedelevatorfartz on 07.24.14 at 6:44 pm

@#2 Nadine Lumley

Pray tell, what does the endless senseless turmoil in the Middle East have to do with this particular blog?

Please take your soap box and screech your diatribe somewhere else.

#29 Sideline Sitter on 07.24.14 at 6:50 pm

#23 – using a CC is only cheaper if you don’t pay it in full.

with so many opportunities for “bonus miles” as late, I’ve racked up enough points for a free flight on bonuses alone (yes, I know there are taxes, but the bonuses outweigh the annual fee).

G.

#30 I'm stupid on 07.24.14 at 6:50 pm

#23 Happy Renting

And if you think about the future value of a dollar it becomes much more fun. I quit smoking, for fun I estimated how much I spent for the pleasure of killing myself. I estimated an average price per pack at $7 since they cost $3 when I started and $11 now. I did a standard 7% annualized growth and my number was 117k. You live you learn.

#31 Sideline Sitter on 07.24.14 at 6:51 pm

woops.. hit submit too soon. I was going to finish with:

Getting a flight for free is worth it :)

#32 Mark on 07.24.14 at 7:02 pm

3% mortgages may have existed in 1882, but weren’t they repayable in gold? So if you borrowed 100 ounces of gold, you had to pay back an extra 3 ounces each year.

So let’s say you borrowed 1000 ounces of gold @ $500/ounce back in 2000 to buy a house. And pledged to pay 3% interest.

Today, that loan would have grown approximately 50%. So 1500 ounces of gold owed. But today gold is at $1400/ounce, so the total repayment obligation, in fiat money, is approximately $2.1 million.

Today’s 3% might seem low as well, but when investors lose confidence in fiat money, interest rates can easily shoot to the moon. Today’s below-average rates will eventually give way to tomorrow’s above-average rates. The numbers may very well end up being similar to the poor borrower who took out a hypothetical 3% gold loan in 2000, only to have to repay it in somewhat more expensive gold. Borrowers be ware!

#33 Smoking Man on 07.24.14 at 7:04 pm

Fourth, if rates rise a little (say by 2%) -Garth my word Smith ideal.

Dude, do you know you are in conflict with your main theses.

Your main point is boomers will stop spending, down size, this if true will be negative to GDP. Young ones get paid nothing.. Without spending, no job growth. Without job growth, no pressure on wage gains, no wage gains no rate hike….
………

On another note. The Ukrainian govt folded today.. Huh. What are they running from.

As predicted just the other day… MSM silenced, know that it’s obvious the Ukrainians shot down the plane.

Just imagine if real estate actually started to die, MSM then pumps out with the same furfure they attempted to demonize Russia and the speratist..

Track6ers will swallow, just as they hate Russia now.

#34 Victoria Real Estate Update on 07.24.14 at 7:05 pm

Through the first half of 2014, single family home sales across Greater Victoria have been extremely weak.

Single Family Home Sales Totals
. . . .(January through June). . . .
. . . . . Greater Victoria. . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
2007…******************
2014…****
2013…*
2012…***
2011…*
2010…********
2009…*********
2008…**********
2006…**************
. . . . . . . . . . . . . . . . . . . . .
. . . . -35%. . . . . . . . . . . . 0%

This chart compares single family home sales totals of recent years (January through June) to 2007’s total, which was (at best) average for Greater Victoria.

2014’s SFH sales total (January through June) is well below Greater Victoria’s long term average.

In June 2007, 5-year mortgages rates were 5.79%. In June 2014, 5-year mortgage rates were 2.78%. With today’s extremely low rates, SFH sales in Victoria should be at all-time record highs. However, this obviously hasn’t been the case. SFH sales in Victoria are extremely low because Victoria’s housing market is extremely weak.

Downward price pressure has been the name of the game in Victoria since 2010 and that weakness has continued into 2014. With today’s extremely low rates, house prices in Victoria should be soaring to new all-time highs every month. This is the case in many other Canadian markets. Again, this points to the fact that Victoria’s housing market is extremely weak.

Weeks ago, I put together a price chart for Victoria highlighting the fact house prices in Victoria were lower than at any point since August 2007 (except April 2014, when prices were slightly lower). This was based on Brookfield RPS data.

Recently I pointed out examples of houses in above average areas of Greater Victoria that have been sitting on the market (at asking prices well below assessed values) for extended periods of time. For example:

Grange Road in West Saanich:
*Asking price: $549,900 ($82 K below assessed value)
*5 beds, 2 baths, large, private lot, water views, water access nearby
(located here)

This is an average house in an above average area of Greater Victoria. It continues to sit on the market at almost $100 K below assessed value. There is absolutely nothing wrong with this house. It hasn’t sold because Victoria’s housing market is extremely weak and prices are falling.

Assessed house values across Greater Victoria have fallen for 3 consecutive years. At the peak in 2010, this house may have been assessed at nearly $700 K. If it had been listed at that time, it probably would have sold within a month at close to assessed value. Victoria’s housing market has weakened substantially since then.

Incomes in Canada and the US are comparable so house prices should be comparable as well. Obviously this is not the case as Canada’s housing bubble continues to inflate as a result of excess housing market stimulus.

Let’s take a look at house prices in Port Saint Lucie, Florida.

House criteria:
* min. 3 bed, 2 bath
* min. 1800 sq. ft. of above ground primary (main) living space
* 2004 or newer
* attached double garage

In Victoria, a house like this would probably cost $700 K or more.

In Port Saint Lucie, the combined value of these 6 houses (that fit the above criteria) is about $678 K.

$94 K ( 3 beds, 2 baths, 2,306 sq. ft.) (click on the pink dot on the map)
$105 K ( 3 beds, 2 baths, 2,216 sq. ft.)
$104 K ( 4 beds, 2 baths, 2,189 sq. ft.)
$128 K ( 4 beds, 2 baths, 2,194 sq. ft.)
$125 K ( 3 beds, 2 baths, 2,300 sq. ft.)
$122 K ( 3 beds, 2 baths, 1,885 sq. ft.)

Girls and guys, remember to carefully consider the source of your housing market information. Those who make a living from the sale of houses have a tendency to cherry-pick and present only those parts of the overall data that might make the housing market look stronger than it is.

The size of Victoria’s housing bubble is comparable to the bubbliest housing markets in the US (Los Angeles, San Diego, Phoenix, Las Vegas, Miami, etc. ) at the peak of the 2006 US housing bubble. Economic fundamentals (incomes and rents) do not support house prices in Victoria. History has shown us many times that whenever a housing market becomes extremely overvalued the way Victoria’s is right now, house prices revert to the mean and that always involves a deep, multi-year price correction.

If you buy now you will be forced to deal with the severe economic stress that is associated with buying near the peak of a major (deflating) housing bubble. Millions of American families regret buying near the peak of the 2006 US housing bubble. Don’t make the same mistake they did.

Until next time – Cheers!

#35 Harvey Lipshitz on 07.24.14 at 7:05 pm

Some people deal with debt problems same way as they avoid a hangover….keep drinkin’

#36 james on 07.24.14 at 7:09 pm

Can we knock of the commentary on the Middle East?

This is a housing blog. It is not a foreign affairs blog. I have strong opinions about many issues, but I don’t see fit to spam this comment thread with my thoughts about a topic that is completely irrelevant to housing.

#37 Victoria Real Estate Update on 07.24.14 at 7:15 pm

The link for the location of the discounted house didn’t work in my last post.

new link

#38 Stopped Making Sense on 07.24.14 at 7:28 pm

#4 Yes, it may be cheaper than buying, but it is still a cost that you are stuck with.

Huh? “I have to buy potatoes either way, so I might as well get them from the overpriced gourmet store instead of the No Frills.”

#39 Guy on 07.24.14 at 7:29 pm

Challenging peoples normalcy bias, tisk tisk :). Be scared when someone makes claims of the new normal. Buy high and sell higher, not the best plan for investing.

#40 GTA Observer on 07.24.14 at 7:31 pm

Pricey Thornhill Woods in Vaughan, Ontario has more than 50 houses on MLS for sale in late July … that’s a lot. The number crept up all spring.

Also a lot of houses in neighbouring Richmond Hill had to drop their asking prices before they sold.

That’s all I got.

#41 Sheane Wallace on 07.24.14 at 7:46 pm

The only way the housing market will not crash in nominal (but it surely will crash in real) values is for the currency to crash.

I short both.

#42 Daisy Mae on 07.24.14 at 7:48 pm

“By 1909 land values were soaring to dizzy heights. The city — Vancouver — became a second Klondyke, one in which land was gold. “Buy city lots and grow rich” was the cry. Our citizens bought and sold. Property changed hands over night, each successive sale at an increasingly fantastic price. Our newspapers told the world of the great days in store for those who would become our citizens. Population mounted from 24,750 in 1900 to 61,000 in 1907….”Move her! Move her! Who? Vancouver!” screamed banners of a real ‘band wagon’ parading city streets.”

#43 Smoking Man on 07.24.14 at 7:55 pm

#35 Harvey Lipshitz on 07.24.14 at 7:05 pmSome people deal with debt problems same way as they avoid a hangover….keep drinkin’
……..

True, but in my case I have to wait till 9pm every day.

I’m disciplined drunk…

#44 Lala Vegas on 07.24.14 at 8:19 pm

Nicely put!
Beware you “condo-snorfling hipsters…”

#45 Tony on 07.24.14 at 8:34 pm

Re: #4 Long Time Lurker on Here on 07.24.14 at 5:18 pm

As housing falls in price so will rents. The owners of property in Canada will see huge increases in property taxes to fund the ever growing national debt. Renters win both ways.

#46 Renter's Revenge! on 07.24.14 at 8:36 pm

@ gladiator

Of course Garth would be invited to the wedding! I’d probably ask him to be the justice of the peace LOL

#47 Fatso Brown on 07.24.14 at 9:19 pm

Not so fast #26 EBM..

Earning 13% on a balanced portfolio (as advocated by the sage GT)…home and two vehicles debt free. Offspring launched.
Nah…. I’m good, thanks”

Gas, groceries, meat, direct and indirect government fee’s , taxes and services, hydro, cable, a new pension scheme in Ont…etc etc etc ……are all going up way faster than 13% a year. If you’re good with your lifestyle right now you might want to hedge and put up a few tons of Kibbles in the attic. Inflation is getting so bad you might want to ask you’re employer to pay you twice a day. Otherwise amigo…at 13%…you’re going backwards…..fast.

And Jeez Louise I hope you’re not falling for that annualized returns malarkey. We have no idea whats going to happen in the second half. Could be a disaster and the market falls 50%…we just don’t know when a big fat ugly black swan named Ralph is going to tear through the screen door and start screwing your puppy. If I lived in Ontario I would go to bed every night afraid of what the PTB will dream up to tax overnight. 100% taxation is inevitable…..so don’t be so smug. Call back when you’ve lost 13% and your still hanging on.

#48 Freedom First on 07.24.14 at 9:26 pm

#17 Hmmm

Canadians are screwed. Consider what has happened to the debt levels in Canada and the the rise of RE prices in the last 6 years you mentioned as merely awesome foreplay prior to coming.

#49 Nemesis on 07.24.14 at 9:31 pm

#TrueWesterns. #RealHistory. #Homesteaders,Bankers&OtherBandits. #Majestic.

http://youtu.be/6m9a3TeYXao

#50 Bottoms_Up on 07.24.14 at 9:32 pm

#131 Calgary Rocks:
“Always the people that work and save that get the short end of the stick.”
———————————————————
Actually no. Many people that are in the “top 20%” know they are there because of birthright or luck or a combination of both. They know that many of the low net worth folks work hard and do their best to get by — but by a combination of their birthright and/or (bad)luck are where they are.

THAT is why CPP should be forfeited by people that don’t need it, to ensure those that do need it get it.

#51 Bottoms_Up on 07.24.14 at 9:42 pm

#4 Long Time Lurker on Here on 07.24.14 at 5:18 pm
————————————————-
The long term case for buying is strong. Your scenario only puts a 30 yr old living to 65. 30 yr olds today can reasonably expect to live to 85. So they will in fact spend 1.2 million (not adjusted for inflation) in rent. Might as well spend that to own, and have an asset at the end.

#52 Keith on 07.24.14 at 9:46 pm

@#42 Daisy Mae

Bing Thom, Vancouver based architect. Vancouver was built on immigration, illegal drugs, and real estate speculation. Today Vancouver runs on immigration, illegal drugs and real estate speculation.

#53 Marco Polo on 07.24.14 at 9:52 pm

I would have thought these blog comments would have more to do with housing and finance, and less geopolitics.

On the geopolitics, there’s some common and repeated conspiracy theories regarding Ukraine. One must keep in mind the viewpoint of the accuser of these stories. Mr. Putin was a Lt. Colonel in the KGB, something no other foreign head of state can claim. He is well trained in agitprop and deception.

On the economic side, I fear we’re in a very similar situation to the beginning of the second world war. A disinterested America, a scared and reluctant Europe, and a ruthless foreign ruler who loves his propaganda
on RT.

This bond bubble could burst, and burst quickly. This isn’t the 1940’s any longer. A serious war in Europe will now have loss of property and people in North America. Most likely in the most deniable and confusing way possible, like Crimea. This Russian bear is backed into a corner, and it’s horrible.

#54 Bottoms_Up on 07.24.14 at 9:53 pm

#21 gladiator on 07.24.14 at 6:11 pm
————————————–
It wasn’t the mortgage debt that did the US market in, it was the lending to people that couldn’t pay…and the exotic mortgages with rates that reset at 200 and 300% higher.

Canada is different in that respect where Canadian banks verify that the mortgage can be serviced, and there are no exotic mortgages. Yes we are exposed because of our mortgage debt and potentially higher rates in the future, but that’s quite a different beast than what happened in the USA.

#55 Freedom First on 07.24.14 at 9:56 pm

#34 Victoria Real Estate Update

Once again (as it has been a long time), I thank you for your updates. Although I think that the “it’s different here” crowd would probably like you to go away. I am glad, thanks to Garth’s recent polls on the dawg’s incomes and assets though, to know that Garth and his financially sane readers can appreciate the fiscal insanity taking place in Canada you reveal to us on a regular basis. Keep on keeping on with what you do. It’s all good!

#56 -=jwk=- on 07.24.14 at 9:59 pm

Rates are not going up. Not ever. The only thing that will stop the Canadian market is dismantling CMHC. And that won’t happen either, not while Stevie is in charge.

We own in 3 different US states and in China. If we sold all 6 properties we could not buy the house we rent in Toronto!

#57 Rainmaker on 07.24.14 at 10:07 pm

#2 Nadine Lumley

Thanks for posting the interview with Tyler Levitan. I found it very informative.

#58 Ford Prefect on 07.24.14 at 10:28 pm

#34: Victoria Real Estate Update:

Being an Island Dweller, (Comox Valley), I greatly appreciate your efforts. However I am surprised at the high sales volume this year compared to 2011 – 2013. The increase you document for Victoria has occurred here as well. Any idea why?

#59 Worried on 07.24.14 at 10:44 pm

Let us not forget Reid’s sequel “Foreclosing of the Mortgage.” Debt has to be paid and mortgage is debt. Not paying debt has consequences.

#60 Dienekes on 07.24.14 at 10:53 pm

I think of a billion this way.
You spend 1000 dollars an Hour the moment you drop to the floor from your mothers womb till you are 100 years old, you still wont have the billion spent.

#61 randman on 07.24.14 at 10:54 pm

Nadine Lumley

Take your self righteous anti Israel Bs somewhere else…maybe Stormwatch….you people are all the same
poor little Gaza and the Palestinians …your views are very obviously anti israeli like the rest of your kind that float around the internet

I wonder…where is your indignation about the fighting in The Ukraine? … The Health Ministry announced Thursday that 478 people had died in eastern regions affected by the unrest since April.

Ah..no jews to blame there…not much fun for you

oh and how about ….the fighting in Africa ? what? not a peep from you

Oh and look at North Korea and the horrific toll that government takes on their people there…alas no jews to blame.

Do us all a favour and stop cherry picking your favourite cause of the day here …this is a Real estate blog ….not the place for you to flog your obviously racist agenda…grow up

#62 Ayn Rand Army on 07.24.14 at 10:55 pm

#28 crowdedelevatorfartz on 07.24.14 at 6:44 pm

@#2 Nadine Lumley

Pray tell, what does the endless senseless turmoil in the Middle East have to do with this particular blog?

Please take your soap box and screech your diatribe somewhere else.
——
Don’t listen to these bozos who say it’s not real estate related or not welcome. I’m glad you posted it and i watched the link and was glad to finally see somebody talking truth to the criminal isaelis mass murder.

Garth, what’s with all these early posts, you know you’re getting old when you eat dinner at 4pm, hit the sack by 9 and wake up at 12, 3 and 6 to pee? haha

#63 Cici on 07.24.14 at 10:58 pm

Funny, Douglas Porter now vying for Rolling Stones rockstar fame (check out “Sympathy for the Doomster”).

Just a couple of weeks ago he was putting pressure on Poloz to raise rates, saying the high inflation numbers could no longer be ignored, but now he’s done a complete 180, claiming interest rates will remain low until 2020, at which time they will only rise slightly. If you believe him (which I totally don’t), the Canadian housing market is not only alive and well, but perfectly healthy.

Personally, I’m wondering whether the bankers aren’t smoking more crack than our friend Rob Ford.

#64 OneMoreThing on 07.24.14 at 11:01 pm

Remember, like in the USA it was moderate inflation of debt then the same followig with the extraction of the middle class – Debt them up then slowly change the game to as to not tip the market but still get the middle class to give up $100 or $200 per month you can barely understand the pound of flesh coming off by year end.

There will be a point however for Canucks where monthly budget adjustments by the consumer to keep paying OR minor interest rate changes and shortened work hours or job losses will begin to give no more wiggle room and it will tip.

Almost 50M individuals on food stamps in the USA with the unemployment rate posted at 7%+ NO WAY! Real unemployment is 30%+

An real-estate was where all American had their money stashed. How soon we all forget a good lesson!

#65 Cici on 07.24.14 at 11:16 pm

You’re right, and it’s awful, but it’s not going to stop.

Israel will stop at nothing to create a larger and more secure state, and will always view the Palestinians as a threat to the security of their nation.

The only remaining hope in this crisis that some rich multi-billionaire or country with hectares and hectares of fertile land (somewhere not in the middle East or at least not close enough to launch rockets into Israel) give it to the Palestinians to create their own nation.

If I had the land I would totally do it just to bring a peaceful conclusion to this horrific ongoing saga.

#66 Cici on 07.24.14 at 11:17 pm

#3 Josef

Late bloomer?

#67 John in Mtl on 07.24.14 at 11:23 pm

“Re: #4 Long Time Lurker on Here on 07.24.14 at 5:18 pm

As housing falls in price so will rents. The owners of property in Canada will see huge increases in property taxes to fund the ever growing national debt. Renters win both ways.”

I’ve rented most of my life, and I’ve NEVER seen rents go lower. They always rise (in Quebec anyways) 1 to 3% per year, minimum. If per chance, property taxes go higher, the rent WILL go higher. Paid hydro goes up = rents go up. Big expensive repairs? = the rent goes up. Up and Up and UP.

At some point, depending on what kind of rental housing you like to live in, it is more financially sound to buy rather than rent, even if as a homeowner you have operating expenses. Good buildings with sound management and responsible owners don’t come cheap. Some are even more expensive than SFH or a condo.

When trouble comes and as homeowners ditch their sinking ark, they’ll have to live somewhere and that means renting. Simple supply vs demand dictates that rents will become more expensive as the housing deflation moves along and more people look for living quarters.

Renters don’t always come out on top, its all relative.

#68 Blacksheep on 07.24.14 at 11:24 pm

To anyone without the interest or stomach to discuss events taking place in Gaza, please just skip the relative posts, as this issue is far to heinous simply to ignore.

I should state, I have no dog in this fight, but in order to try to understand what’s taking place, watched a video talk by an Israeli generals son. He recounts first hand experiences being an Israeli with many Palestinian friends and gives a condensed, big picture explanation of the Palestinian / Israeli conflicts in history.

Miko Peled attempts a difficult task:

http://www.youtube.com/watch?v=etXAm-OylQQ

Jimmy Carter is almost dead, so he just lays it all out:

http://www.youtube.com/watch?v=uvtC_qzHVM4

War crimes are being committed against children, right now. Not in some history book, decades ago, but right now, as I type.

If you believe a your house value, net worth or portfolio is more important than this topic, that’s your choice, but please don’t attempt to sensor those whom want to bring some awareness to the situation.

This blog has a very large readership and getting people talking is the first step in changing false perceptions spread by the corporate media of what is actually taking place.

#69 213 fool on 07.24.14 at 11:31 pm

A friend told me she bought a semi in Newmarket recently. She kept telling me that paying for rent is same as paying for the mortgage. Not a word about taxes, insurance, or maintenance. She sounded so happy, I could only tell her congrats and good job!

Is it still gambling if the people are not aware of the risks?

#70 Nemesis on 07.24.14 at 11:38 pm

#TelegraphRoad. #DireStraits.

http://youtu.be/-8sLmx2Oz6Y

#71 Kenchie on 07.24.14 at 11:54 pm

“So far we have amassed $1.2 trillion in mortgages in Canada, and another $250 billion in lines of credit secured by residential real estate. There is also $507 billion in consumer credit outstanding.”

This math is off. The $250 billion in LOC is unsecured. The HELOCs you speak of are rolled into the $1.2 trillion figure. Total household debt is circa $1.76 trillion (rather than $1.2 trn + $250bn + $507bn).

Source:
http://credit.bankofcanada.ca/householdcredit

#72 Kenchie on 07.25.14 at 12:06 am

“First, with a 70% home ownership rate, everyone has convinced everyone else that real estate will rise in value forever.”

Homeownership in English Canada (provinces at least) is higher than 70%. Only when Quebec is included does it average out to about 70%.

This is from 2011, it’s probably gotten worse (aka higher) since:

http://www12.statcan.gc.ca/nhs-enm/2011/as-sa/99-014-x/2011002/c-g/c-g02-eng.cfm

#73 Nomad on 07.25.14 at 12:11 am

About access to price data:

“Canada’s top court won’t hear an appeal of a case about whether the country’s largest real estate broker group must give wider access to price data.”

Bloomberg:
http://www.bloomberg.com/news/2014-07-24/canada-s-top-court-declines-to-hear-toronto-realtor-case-appeal.html?cmpid=yhoo

#74 Kenchie on 07.25.14 at 12:14 am

Quick question: What does “Tnl” stand for? I get the “@tb” part.

My guess for “Tnl” is “The noobie loaner”?

#75 LTRFTW on 07.25.14 at 12:14 am

# 20 Mister Obvious

Or to simplify it more:

1 Million seconds = Almost a Pay Period.

1 Billion seconds = Time spent working if your lucky !

1 Trillion seconds: Go back to the last Ice Age !

#76 BCD on 07.25.14 at 12:15 am

Wow. . .haven’t been here in awhile. Too busy actually living in the real world and dating hot women. Nice to see there are still a bunch of old rich men on here arguing over how many angels the Pope can sit on the head of a pin.

Ahhhh the stories I could tell. . .Dan Bilzerianesque. . .

Someone here should sponsor my playboy lifestyle? I can write you some interesting stories. . .c’mon! Any takers? Garth?

#77 Hash on 07.25.14 at 1:35 am

So I used to be a regular visitor of this blog. I completely agree with the principle that debt is ever increasing, rates will rise, house prices will fall. But this never came (Garth does not control the market or economics that our government controls). But as house prices continued to rise, I held off buying. Then I just stopped coming to the blog regularly as although I do understand the logic of what Garth says, it seems this is not happening in Canada. I thought in 2009/2010 the tune was different, there will be a major correction in Canada also, and now since about a year or so, we only expect a minor drop in prices or stabilization of the horniness. The way I look at it, I’m screwed.. I should have bought a house in 2009/2010. I would be better off even if there was a 15% drop in prices.

I am 38, married with a 2 year old. We live in a Bayview and Sheppard condo (since 2007) and have recently sold our condo. Soon I will be sitting with about $300K in cash. My intention is to rent for 2-3 years, and still hoping there will be a minor correction 10-15% in the next few years. So basically I am gambling. What am I saving by selling my condo, well $490 in maintanence fees, $200 in taxes and about $75 in monthly mortgage interest (I have a all in one type account). Therefore my cash outflow due to renting $1950 condo will be $1185. What I would love is to get about 4% out of the equity so that net effect is almost 0. One problem, I cannot take much risk with the market. Stocks are at a all time high. What if that is a bubble too? Therefore I think $225 has to be in risk free investments (yes Garth I know you hate that). I will have to try moving money around to get promos from different account to at-least get 2% on avg. $50K I want to put into good quality stocks that give out dividend and $25K into risky stuff such an income funds etc.

I have one question to anyone who can help out. Its mentioned numerous times that invest in Bank Preferred. What do you guys think about ZPR? Yield is about 4.35%. Another example I want to use is BMO preferred shares BMO.PR.L The yield of this share is 5.48% These shares are trading at $26.52 while it is redeemable for $25 by the bank. What happens if I bought this now and was redeemed at lower price by the bank? Also what happens if the stock markets go down again like in 2008 and the shares are worth $16. Wont I be screwed? Therefore how are preferred shares safer?

On a Side note, between me and my wife, we have about $50K in RRSPs, $15K in TFSA and $7K in RESP.

Would love to receive any suggestions or advice. (and yes I intend to maximize the TFSA’s once I get the cash)

#78 Laikaman on 07.25.14 at 1:48 am

Hi Garth,

Canadian real estate has continued going up unreasonably yet you say there will be no crash?
Does the economic ‘reverting to mean’ law not apply to Canada? Is our country different or special?

Thanks,

#79 devore on 07.25.14 at 1:49 am

#38 Stopped Making Sense

Huh? “I have to buy potatoes either way, so I might as well get them from the overpriced gourmet store instead of the No Frills.”

I prefer to own the farm. Buying groceries from a store is for losers.

#80 Andrew Woburn on 07.25.14 at 2:14 am

#42 Daisy Mae on 07.24.14 at 7:48 pm
“By 1909 land values were soaring to dizzy heights. The city — Vancouver — became a second Klondyke, one in which land was gold.
========================

In the early eighties, I used to know an older architect in Victoria who told me that property speculation in the prime waterfront areas there prior to 1914 reached such a fever pitch that prices were never matched again, even in nominal terms, until the 1950’s.

#81 BillyBob on 07.25.14 at 2:15 am

#4 Long Time Lurker on Here

Renting comes with its own “debt” as well. If you are 30 years old and decided to rent forever. Assuming “forever” is 35 years and that rent will never go up, then 35 years @$1800 per month will cost you $648k. Yes, it may be cheaper than buying, but it is still a cost that you are stuck with.

I am against buying if one is speculating. However, I don’t see anything wrong if someone is buying for his/her own use. What goes up will always come down. Same goes the other way, what goes down will always come up.

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

It is becoming clearer why Canada is so screwed, if this is indicative of the level of financial ignorance out there.

Paying your expenses with money you have already earned is actually the opposite of debt. So no, renting does not “come with its own debt”. Signing a contract with a bank for $648k in 2014 is not the same thing as paying $648K after 35 years.

If people can’t see the difference between the two, then…well, never mind. Obviously most can’t.

#82 Londoner on 07.25.14 at 4:35 am

Here’s a story for you guys. A colleague of mine, mortgaged up to her eyeballs, sees the value of her Edgware Rd flat creep up in value over the past few years. Decides to “release some equity” and buys an £850k rental property in Elephant & Castle. A few months later she finds out she’s pregnant with her 3rd child. She’s mid forties… begins to panic. Luckily the parents step in. They decide to sell their house in Hampshire, downsize and give the proceeds to their children to help with their “investments”.

#83 Edward on 07.25.14 at 4:42 am

I don’t see the problem with taking advantage of these low interest rates, especially if you’re buying a property in an area that hasn’t seen the ridiculous price increases that have become commonplace in some areas.

How hard is it to budget for an interest rate increase?

#84 saskatoon on 07.25.14 at 7:05 am

new ontario budget passed.

new ontario pension plan = new tax.

easy to spend money…when it isn’t yours.

#85 saskatoon on 07.25.14 at 7:09 am

this may sound like a silly question (i assume the answer if “no”) but:

can a person commute a pension AFTER retirement?

any help or links on this would be appreciated. thanks

Generally, no. All plans are different, and some may not allow commuting. Always get a copy of your RPP and learn the facts. — Garth

#86 raider on 07.25.14 at 7:24 am

Btw, this is how a property bubble looks like in a more sane part of the world :D

http://www.bloomberg.com/news/2014-07-24/german-thrift-damps-lending-as-cheap-money-is-distrusted.html

Whenever, I visit our folks in old Europe and they’re telling me that their housing valuations are unsustainable, I have to bite my tongue hard not to tell them what’s happening here…

#87 Waterloo Resident on 07.25.14 at 7:29 am

HERE’S THE FACTS, THE PURE HARD TRUTH:

1 – Houses go up in price because of demand.

2 – Men marry women because men want sex and a family.

3 – Women want a man ONLY if he is ready to ‘Commit’ (women want ‘COMMITMENT’) , and that means women want the following things, otherwise they will go and find some OTHER GUY who will give them these things: MARRIAGE, A BABY, BUY A HOUSE.

If you don’t believe me, then listen to this lady say it all here at time 1:40 (Why Women Cheat…..10 Reasons Why https://www.youtube.com/watch?v=Q0oUSPH-1jM )

You see; women don’t want to get into huge amounts of debt, but if men won’t buy the wife that big new house for the babies to grow in in then the women will divorce him faster than a rat running out of a burning building. In her own words: “women want a fairy-tail ending, and if you as a man cannot step up to the plate, we as women might say ‘bye-bye’.”

So you see, as long as men want to be with women men will need to buy houses, and it doesn’t matter if the house costs $100,000 in Ohio or $2 Million in Toronto, in either case the man simply has to work harder to earn that extra money to buy the house, otherwise his wife will leave him. And I don’t see a lot of men who want their wife to leave them in a nasty divorce case, so for that reason and that reason alone, house prices in Toronto will ALMOST NEVER FALL IN PRICE, at least not in my lifetime. It is because men want to keep their wives happy and keep their marriages intact.

I pity you. — Garth

#88 MoneyMyHoney on 07.25.14 at 7:30 am

“Mortgage rates will rise, gradually and relentlessly. This process will start with the US Fed, its central bank, in the second half of 2015. About a year from now”

It is either a mirage or the writer is dreaming in technicolor. Reason: Economics is not a science at all.

Come back next autumn. Bring crow. — Garth

#89 maxx on 07.25.14 at 7:33 am

#140 Reasonfirst on 07.24.14 at 2:54 pm

“RE: Garth CPP comment: “Why should people who do not need the money receive it?””

“People without kids pay school taxes. It helps society. Same theory. — Garth”

Canadians are largely very decent people and most have no problem paying their (very healthy) tax burdens to “help society”. I for one have zero problem with that.

I do however, believe that any claw-back should always and forever be based on income via an individual’s tax return. Cutting off benefits because someone has been responsible does not help society at all. It helps government continue bad policy and strengthens the floor for wasteful spending.

#90 RayofLight on 07.25.14 at 8:27 am

#2 Nadine Lumley:
Save it for another blog, one that I don’t read.

#91 Sparky on 07.25.14 at 8:35 am

#87 Waterloo Resident

Holy shite dude you need to get out of the house more and quit reading things on the internet!

If your happy hooking up with this kind of woman then you will deserve what you get.

I know there are women like this and men who are miserable trying to keep them happy.They will never be happy with anything living like that.

I can assure you there are women who aren’t like that and to find one you have to have convictions of your own that you never sway from, and the search for happiness being one of them.

There are awesome ones out there, if you dont just fall for the window dressing you will spot them.

#92 sue on 07.25.14 at 8:37 am

#77 Hash This blog does not replace having a good financial advisor. You need to find one that only charges 1% flat fee. 300K gets you around 1800 a month in dividends I believe. Don’t be cheap and foolish, just get one.

#93 Ducky on 07.25.14 at 8:49 am

I don’t think Canadian housing will crash, and say so often.-Garth

What do you mean it won’t crash?
Are we different?

My belief (expressed here often) is that we will have a pricing correction, then a very disappointing market (for those who recently bought, but not for buyers) for several years. — Garth

#94 crowdedelevatorfartz on 07.25.14 at 9:04 am

@#62 Ayn Rand Army
“Don’t listen to these bozos who say it’s not real estate related or not welcome. I’m glad you posted it and i watched the link and was glad to finally see somebody talking truth to the criminal isaelis mass murder…..”

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

Hmmm, you admit its not real estate related, you slither into name calling and then you misspell “Israeli”.

At the risk of repeating myself ad nauseam …… Perhaps you and “Nadine” can take the relentless endless(2000 years and counting) Middle East diatribe to a blog that cares? I hear the Western Provinces of Waziristan are wonderfully cool this time of year. Say hi to the Taliban for me.

#95 Derrick on 07.25.14 at 9:07 am

So far we have amassed $1.2 trillion in mortgages in Canada, and another $250 billion in lines of credit secured by residential real estate. There is also $507 billion in consumer credit outstanding.

Obviously you can tell how much families have gambled on houses, by taking on unheard-of levels of debt. This explains two things. First, with a 70% home ownership rate, everyone has convinced everyone else that real estate will rise in value forever. Second, that mortgage rates can never go back up, because if they did we’d be screwed.

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

It’s true Canadians have a lot of different kinds of debt but you just need to look at the numbers you disingenuously left out of the picture: nearly HALF of the 70% who own real estate have paid off their mortgage and for those who are mortgaged, only have a tiny 0.3% default rate (that’s exactly 13,650 mortgages in arrears and over 4.6 million mortgage that aren’t) . How high were defaults in the US a few years ago? Probably 10 times higher than what were seeing here and maybe more.

It’s the same thing with credit card debt. Canadians have a TON of it, but scratch below the surface numbers and you’ll find only 0.8% are in arrears and a whopping 70% of all credit card holders pay off their cards in full every single month! Now compare with the US stats on credit card arrears and you’ll see a far different picture. Don’t take my word on it, check it out for yourself.

#96 crowdedelevatorfartz on 07.25.14 at 9:12 am

@#87 Waterloo Resident.

The solution is sooooooo easy to your problem! You dont need to buy a house to please your “Stepford” wife.
Rent and buy an inflatable wife!
It worked for Ayn Rand…………….

#97 Londoner on 07.25.14 at 9:17 am

#77 Hash

Use a yield to call calculator to determine the actual yield on preferreds. Also read the prospectus and supplement for any preferred shares issue and all your questions will be answered. There are usually fixed prices for early redemption by the issuer, which are higher then the issue price. Make sure you understand the convertibility clause when you do your risk assessment.

#98 annek on 07.25.14 at 9:22 am

“I don’t think Canadian housing will crash, and say so often.”
Hello Garth,
I am not sure I understand this statement.
In your past blogs, you have shown graphs where you compared home prices in the US before the crash and home prices in Canada . It clearly showed that we are close to a major correction , possible similar to the US
So what is the definition of a crash and a correction ?
If there is a housing “correction”, Canadians who have bought more than one property for investment ( I know many people who have done so, especially condos) may panic when their so called investment is not doing well. They will sell, causing a surplus of properties for sale in the market, which may cause a downward spiral.
This may be self perpetuating.
Would this not be a crash?
I remember people who did this in the 80s , who owned many condos.
When the prices crashed, they sold , and lost lots of money.
But people have short memories.
So every day, I hear people chatting about buying an extra property such as a condo for investment, for their kids to live in while in University instead of residence.
I hear them speaking about it being a win win situation.
I keep quiet, because I know that they don’t want to hear someone comment about how perhaps it may not be a wise decision.
So what is a crash and what is a correction?
Please explain.

#99 Bottoms_Up on 07.25.14 at 9:33 am

#98 annek on 07.25.14 at 9:22 am
————————————–
A crash does not necessarily have to happen. Prices can stay stagnant for a long time (already have in Ottawa for 2 yrs), while inflation marches on, thus causing a loss in real terms of the value of real estate. This has also happened in Canada frequently, and is happening right now.

#100 Bottoms_Up on 07.25.14 at 9:37 am

#87 Waterloo Resident on 07.25.14 at 7:29 am
—————————————–
Dude that was a crazy rant that I hope was inspired by a heavy dose of narcotics.

#101 Bottoms_Up on 07.25.14 at 9:51 am

#78 Laikaman on 07.25.14 at 1:48 am
—————————————–
Because something is high in value doesn’t mean it’s going to crash. If the vast majority of Canadians continue to service their mortgages (i.e., no substantial job losses or increase interest rate shock), there will be no crash.

There may be a ‘slow melt’ as Garth has called it, but no widespread crash (without a black swan event).

#102 Bottoms_Up on 07.25.14 at 9:53 am

#77 Hash on 07.25.14 at 1:35 am
———————————-
you should call Garth and hire him as your financial guru.

#103 rosie "moving forward" in the knowledge that, "this won't end well" on 07.25.14 at 9:55 am

On first reading this was infuriating. Then I got it. Disruptive thinking at it’s finest.

http://www.sfgate.com/realestate/article/Squatters-don-t-sit-well-with-Airbnb-hosts-5631952.php

#104 Calgary Rip Off on 07.25.14 at 10:12 am

Easy to give advice when your mortgage is paid for. This argument is very very one sided and once again you havent examined all variables. Do you really think people always want to acquire a mortgage? And if the mortgage is less than rent why wouldnt they? Yes that is correct if you buy with little down then of course come renewal time if your financial income doesnt line up and the bank isnt satisfied good luck on renewing. So is the solution of course just to wait? That doesnt make much sense either as it is pure reactive thinking.
Price correction? Where, Ontario? Go to the mls site and view Calgary. Prices have gone up like $50,000 since 2011 and the vacancy rate for rentals is very low. Given the amount of bitumen up in Fort McMurray, say will last for the next 300 years(at least) plus the gas reserves, where is the drop in prices?

You are looking once again at net worth with numbers only regarded to current financial status. That is nonsense as the ability to hold onto net worth and income is related in large part to decision making which later influences subconscious processes which subsequently influence conscious decision making. Some people are able to handle large amounts of wealth, others are not. Given that everything could be taken away in a millisecond, financial status is irrelevant beyond the ability to provide some illusion of security for the present moment with clean food, air, and drinking water. Look at the present reality that the majority of Canadians live like Kings if compared to 200 years ago when many of the modern seen necessities where unavailable and not conceptualized. So this tired blog about the necessity of finances while seemingly important isnt a balanced view and should be so given your long history of operating in politics, you should know much better for a guy that helped run things. Perhaps instead of posting a blog daily give it a rest until some substantial material that is not tired is available.

If you want to buy into the highly volatile and inflated Calgary market, be my guest. Just have the courage of your own convictions. You don’t need to diss me to feel manly. Do you? — Garth

#105 -=jwk=- on 07.25.14 at 10:15 am

@derek #95. Are you quoting the USA stats from 2005? Because that is exactly where they were in 2005. Very low delinquencies on mortgage debt, most homeowner own outright , almost no credit card balances, no problems to report, all is good, carry on!

I believed they peaked at about 5% mortgage delinquencies, in 2008 but they got into real trouble at the 1% rate.

At .36 (your number) you need lawyers, judges etc. to handle the foreclosures. At 1% you need three times as many – where is that infrastructure going to come from? How many eviction notices can a sheriff serve in a day? The result was massive delays in foreclosure which made the problems worse (See robo-signing).

We don’t need to get to 5%, we only need to get to 1% and inertia will take over…

#106 Effluence greasy on 07.25.14 at 10:21 am

#95 Derrick — “It’s true Canadians have a lot of different kinds of debt but you just need to look at the numbers you disingenuously left out of the picture: nearly HALF of the 70% who own real estate have paid off their mortgage and for those who are mortgaged, only have a tiny 0.3% default rate (that’s exactly 13,650 mortgages in arrears and over 4.6 million mortgage that aren’t).”

I think you should rethink your position. For a given national level of debt to income, the least dangerous state would be if it were spread out equally, with everybody having the same debt to income ratio. If half of homeowners have no mortgage, then the other half is carrying twice what the average would be under a more even distribution. More stressed owners means more likely forced sales, regardless of whether the 50% with paid off homes never need to sell.

Default rates are a trailing indicator: People lose jobs and a few months later, they stop paying the mortgage. Three months after that, they’re 90 days delinquent. In a high market, they can always sell. If they have significant equity, they can refinance with a subprime lender (and only the prime lenders, the Canadian banks, are included in your default rate statistic).

By the time default and delinquency rates start ticking up, it’s way too late.

N.B. I just looked at First National’s quarterly and annual reports, and it appears they don’t disclose their delinquency, default or loss rates, or even their provisions for losses. They just report their mortgages outstanding net of provisions for losses. Seriously? Good luck with that one, investors!

#107 Dupcheck on 07.25.14 at 10:54 am

I pity the blue collar fools which show off their new Lincolns and Cadies driving to their dirty factory jobs, showing off to their managers and the neighbours.

While the neighbours and managers make twice their income and drive Toyotas and Hondas. Ignorance has no limit. It was ignorance that put J.C. on the cross. It is ignorance that is going to bastardize R.E.

Usually you can easily spot ignorants by their deep auger voice, they are the loudest and like to be the centre of attention where ever they are.

Que the song by the “Police”: Englishmen in NY.

#108 Beans on 07.25.14 at 11:14 am

@ 107 Dupcheck

I find it funny that you think the neigbours and managers make more than the blue collar workers. In my extended group of friends (early 30’s) the highest income earner is an industrial electrician (120k/yr). Many of the professionals in the group have half those wages and no opportunity for side jobs/over time etc. I agree with you on not wasting money showing off but please don’t slam “blue collar” as poorly paid and unthinking, there are many broke professionals leasing bimmers to try to fool us.

#109 Max on 07.25.14 at 11:35 am

Not sure you all noticed but interest rate will always raise ‘Next year’. Now they are set to raise in 2015. When we reach 2015 they will be set to raise early 2016, when we reach 2016 it will be second quarter of 2017…

Governments have the biggest mortgage of all and they are the one who can set\manipulate interest rate. We will need some kind of crisis where they loose control otherwise they will not raise the rates… well it will always be next year

Actually it will be the autumn of 2015 for the Fed. Come back then and repent. — Garth

#110 :):(Ying Yang on 07.25.14 at 11:39 am

#43 Smoking Man on 07.24.14 at 7:55 pm
#35 Harvey Lipshitz on 07.24.14 at 7:05 pmSome people deal with debt problems same way as they avoid a hangover….keep drinkin’
……..
True, but in my case I have to wait till 9pm every day.
I’m disciplined drunk…
……………………………………………………………………….

Smoking Man there is no such thing as a disciplined drunk! Don’t worry though we are not judging you, if you drink, you drink, OK by me! When I have a few drinks at the bars sometimes I get loaded then the girlfriend gives me the evil eyes (your an asshole) look. I don’t care though on my time off work I do what I want.
Any way haven’t been to Casino in almost two months, at least here I should say. Traveling back and forth to Europe and far east, really sucks. No more flights for a few months now, ahhhhh.

#111 Dupcheck on 07.25.14 at 11:53 am

#108 Beans

Off course not all blue collar workers are paid the same. My point is at factory workers. I am pretty sure they do not make more than their supervisors do. The same time the average technician or technologist does not make more than the average professional engineer at the same company. If they did that would not make any sense.
Now it is true and I agree with you that some of the trades are well compensated such as the electricians, plumbers, etc, but not all of them get company pensions or benefits, and most are self employed, and also their income is not stable year by year. If you cant afford it don’t buy it. You can’t easily fix ignorance and stupid. Dominance at any cost by means of debt is their addiction.

#112 Rapier Wit on 07.25.14 at 12:02 pm

This are distressing data from the US relative to the Canadian stats discussed yesterday. Seems our generation took the “live for today” anthem pretty seriously. I’m not convinced by the argument that one would delay taking SS cheques – CPP equivalents, one presumes. Any thoughts?

http://online.wsj.com/articles/what-to-do-when-youre-short-on-retirement-savings-1405816660?mod=WSJ_hpp_sections_yourmoney

#113 Son of Ponzi on 07.25.14 at 12:02 pm

#72

Homeownership in English Canada (provinces at least) is higher than 70%. Only when Quebec is included does it average out to about 70%.
——————–
Makes sense.
The Brits and their “Your home is your castle” BS.

#114 omg on 07.25.14 at 12:07 pm

#41 Sheane Wallace
The only way the housing market will not crash in nominal (but it surely will crash in real) values is for the currency to crash.
—————————–

Agreed, I see a long downdraft in Canada RE in real terms, where inflation gradually wears away real values by 2 – 3% compounded annually.

This could be the saviour of the Canadain economy as people do not understand the concept of real versus nominal. So they will not feel that the value of their house is diminishing and they will keep spending like drunken sailors.

——————–
Case in point about people not understanding real/nominal – had a friend of mine that bought in London ON in 1989 for $225k and sold in 2013 for $300k. He thought he had made $75k on the house when in real terms he had lost upwards of 20%. (ignoring what the $225k would have been worth invested at 6% annually for 24 years.)

Yes I recognize that it gave him a place to live – but since we as Canadians now look at real estate as an investment it needs to be analyzed as an investment.

#115 april on 07.25.14 at 12:20 pm

#87 – So why do we have housing busts if that’s the case? Why would this time be any different since women, according to you, are the driving force. As far as a housing correction goes people have many reasons for wanting to get rid of their home…get sick, loose jobs, get divorced, [high divorce rate] want to sell the home for various reasons, etc. Nothing goes up forever. When prices continue upwards less people are in a position to buy so more supply, less demand, falling prices.

#116 Derek R on 07.25.14 at 12:21 pm

#74 Kenchie on 07.25.14 at 12:14 am asked:
Quick question: What does “Tnl” stand for? I get the “@tb” part.

Obviously too long since I last posted a link to The GarthFAQ. Check it out for the answers to that and a lot of other questions you didn’t know you had.

#117 Hmmm... on 07.25.14 at 12:23 pm

My belief (expressed here often) is that we will have a pricing correction, then a very disappointing market (for those who recently bought, but not for buyers) for several years. — Garth

Dagger !!! .. for the people who have been waiting for 8 years for real estate to crash….

It already did. In 2009. You didn’t buy then? — Garth

#118 Hmmm... on 07.25.14 at 12:35 pm

It already did. In 2009. You didn’t buy then? — Garth

If that’s what you call a crash, the herd will be disappointed… On top of that , you are calling for just a correction in the near future and not a crash…. It would have been a riot, if not for a blog.

#119 Hmmm... on 07.25.14 at 12:55 pm

If you want to buy into the highly volatile and inflated Calgary market, be my guest. Just have the courage of your own convictions. You don’t need to diss me to feel manly. Do you? — Garth

Calgary market inflated ???? The average salary is $40,000 more than Toronto and yet more than $200,000 cheaper …. I get population is more, but there are jobs in Calgary….high paying ones. It has still ways to go…

#120 Shawn on 07.25.14 at 12:57 pm

Are we Richer than we think?

Here is a list of Canada’s most expensive neighborhoods by price of houses.

http://www.canadianbusiness.com/lists-and-rankings/richest-neighbourhoods/most-expensive-home-prices-2014/

Number 10 on the list is King George Park neighborhood in Montreal where the average house value is $2.39 million and the average net worth is $9.12 million.

So, a $2.4 million house puts you into the league of the top 10 neighborhoods in Canada. Puts you into the league of neighbors with net worth that average close to $10 million.

But consider that the idea of buying a house for a $ million dollars or close to it has become sort of normalized. Not an outrageous thing for say a pair of teachers to look at doing. And the net worth needed to do that? $50k will do as long as the income is there.

Perhaps there has actually been a flattening in house prices by income strata. The top 0.1% have on average $2.5 million houses while the middle class is buying $1 million houses. That is pretty flat.

Hmmm at this rate we can have maybe 10% of us will have houses as valuable at the 0.1% or 0.01%. who live in these neighborhoods.

I found it interesting too that the net worths in these top ten neighborhoods averaged as low as $10 million. And some would be far below the average.

From the recent survey, quite a number of the people visiting this blog appear to be headed for $10 million portfolios.

… See you round the Bridal Path someday…

#121 Zepp on 07.25.14 at 1:00 pm

#34 Victoria Real Estate Update

Thanks for your very useful info. I always look for your posts. Keep up the good work.

#122 Bob Rice on 07.25.14 at 1:07 pm

“Put your money in REITs not condos”

http://www.bnn.ca/News/2014/7/25/In-Toronto-Calgary-Put-your-money-into-REITs-not-condos-.aspx

#123 bigtown on 07.25.14 at 1:12 pm

One advantage immigrants do have over Canadians is their ability to retire and move back to their original country of birth. Canada is a very high cost country and has hard winters for seniors.

It is impossible to find any place in Canada able to compete in terms of costs of housing; health care; and climate with such fabulous countries as India; China; the Caribean; Middle East; Pakistan; Latin America and South America. So really immigrants have a lot to look forward to which could mean in the near future a lot houses for sale by immigrants wanting to retire in a cheaper senior environment.

#124 Waterloo Resident on 07.25.14 at 1:15 pm

@ #96 crowdedelevatorfarz
(first of all, your handle-name = eeezz, crowded elevator farts, YUK !!!
Funny, but Yuk.

You said:
Quote: “The solution is sooooooo easy to your problem! You dont need to buy a house to please your “Stepford” wife.
Rent and buy an inflatable wife!
It worked for Ayn Rand…………….”

Well, I rent a nice house and I have a happy friendly pet cat. When women find out that I don’t own my house and that I simply rent a house, they drop me like the proverbial hot potato. I tried telling one lady that I owned the house and then after a while she wanted to see proof that I owned it, something like my mortgage papers or property tax assessment. When I could not give that to her SHE ALSO dropped me like a hot potato. Yes, maybe there are women out there who are not ‘house-happy’, but so far I have not found any lady like that.

And Garth’s comments: Quote: “I pitty you”.
Yeah, me too, I pitty myself also. I get killed every time I try to date a normal lady who is not seeking a man who owns his own house. When I talk about the economy and how housing is overprices I get given the number to a mental therapist because they say that talking like that is crazy. I have had women as me what is my future career prospects, what are my investments, how much savings do I have, what are my spending habits, and everything that is associated with money and how it might affect HER in the future. When I ask WHY is she only talking about money, I get that look like I must be really strange to even ask that question. One lady said “Because I want to find a good provider, why else do you think I ask these questions, you moron.”

You see, with the cost of housing in Ontario going ever higher and higher, but job prospects as bad as they are (like Garth said), there is only one way to get a house, and that is to go after savings for a massive down payment. That is why people are becoming so ‘focused’ on money and everything revolving around money, and on dates the women really don’t care much about the guy or his feelings or his personality, everything all boils down to “Will you be able to buy a house over the next 12 months or not?” That’s what more and more people are fixated about in Ontario right now, all due to the ever-ballooning housing prices.

#125 Holy Crap Wheres The Tylenol on 07.25.14 at 1:18 pm

#107 Dupcheck on 07.25.14 at 10:54 am

Don’t fool yourself with cars, many of my neighbors here in Oakville own companies that may or may not employ you. The range of vehicles out here is from Bentleys to Kias. Also some of those Hondas and Toyotas are not cheap either when you load them up with junk. Myself I drive a Ford Edge, generic basic, comfortable, roomy enough and has power. I could afford the Bentley but why waste $300K in a bad investment. By the way I have two neighbors that are in construction and have lived here for 40 years in the hood. They drive a mix as well, one has a ten year old minivan and the other a newer Caddy. If that’s what they want to drive then God Bless them, they earned it, so what! Unless they drove a dangerous car that was a potential risk to my life I don’t care. To each his own and do all of the people out there actually own a car? Lease, make payments? I lease 100% write off to uncle Sam or Cousin Steven H.

#126 Holy Crap Wheres The Tylenol on 07.25.14 at 1:21 pm

#107 Dupcheck on 07.25.14 at 10:54 am

Oh yes, well off neighbour had a Toyota Yaris for basic transport to GO train as he worked in financial district downtown, got rear ended and almost died, now that was a dangerous car. He now drives a full-size pickup truck.

#127 X on 07.25.14 at 1:29 pm

Actually it will be the autumn of 2015 for the Fed. Come back then and repent. — Garth

The bond market should push mortgages higher early next year as well.

#128 Mark on 07.25.14 at 1:37 pm

“I pity the blue collar fools which show off their new Lincolns and Cadies driving to their dirty factory jobs, showing off to their managers and the neighbours. “

A relative is a pharmacist. His technicians, who make 1/3rd of what he does per hour, are buying very nice houses in his same neighbourhood. Campers. The whole nine yards. Only possible through abnormally cheap credit.

“To each his own and do all of the people out there actually own a car? Lease, make payments? I lease 100% write off to uncle Sam or Cousin Steven H.”

If you buy for business purposes, you get 100% deductibility over the life of the asset. So really, no big difference.

#129 Mark on 07.25.14 at 1:41 pm

” The same time the average technician or technologist does not make more than the average professional engineer at the same company. If they did that would not make any sense.”

You’d be surprised. The local electric utility has the technicians/technologists earning more than most of its professional engineers. The technician school around here places nearly 100% of its graduates into employment, while the professional engineering jobs get 50+ applicants chasing the same job.

The P.Eng., if he can keep his job and move up the ladder, might make it into a VP position where the pay blows the technologist/technicians’ pay away. But that is well into a person’s 40s and 50s. Until then, the techs and even tradesmen soundly beat the engineers compensation-wise from what I’ve seen.

#130 prairieboy43 on 07.25.14 at 1:57 pm

Drive Ford Trucks! Like Sam did. Sam Walton that is. Walmart Founder! Godspeed Sam!

#131 Happy Renting on 07.25.14 at 1:58 pm

#124 Waterloo Resident on 07.25.14 at 1:15 pm

I guess it’s time for the GF Matchmaking Service. (Good initiative shown by Renter’s Revenge yesterday.)

#132 Johnny Canuck on 07.25.14 at 2:24 pm

Civil service pensions so lucrative that no matter how big you screw up in life the taxpayer has you in clover for life…..where do we all sign up…eh?

http://business.financialpost.com/2014/07/25/68-year-old-civil-servant-who-lost-all-her-savings-in-two-desperate-bets-struggles-to-pay-off-six-figure-debt/

And…like most ‘retired’ civil servants ( teachers are notorious for this) they ‘contract’ back into their old jobs after collecting the first pension and double dip as ‘consultants’. It would be nice if those jobs became available to new grads who need the work….eh?

#133 bill on 07.25.14 at 2:25 pm

#2 Nadine Lumley on 07.24.14 at 5:16 pm
usual load of anti- Israeli crap.
you should heed the advice of the others who have asked you to take it elsewhere.

#134 chapter 9 on 07.25.14 at 2:31 pm

#53 Marco Polo
Mr. Putin was Lt. Colonel in the KGB, something no other head of state can claim.
Jan.30 1976-Jan.20 1977 George H.W.Bush was the Director of the CIA.

#135 Exiled on 07.25.14 at 2:40 pm

To Waterloo Resident @ 124: I also am in Waterloo! You are doing it all backwards. Don’t date the Princesses, ask out the waitresses. And tell them up front that you rent! Makes you more believable. What can be better, having a woman whose already use to picking up after you, even if it incurs a tip.

#136 Mister Obvious on 07.25.14 at 2:57 pm

#129 Mark

You are correct.

I am (actually, was) a technologist. I worked for quite a few years in systems software with many other technologists and engineers. We tended to be lumped together simply as ‘engineers’ and paid according to our skill level and productivity.

I never tried to represent myself as an engineer. That would have been fraud. It was management that sometimes called me an engineer. They didn’t tend to value such distinctions.

If work was completed on time and on budget management was delighted. If not, we all became ‘losers’ regardless of our professional designations.

#137 Son of Ponzi on 07.25.14 at 3:19 pm

#4 Long Time Lurker on Here on 07.24.14 at 5:18 pm
Renting comes with its own “debt” as well. If you are 30 years old and decided to rent forever. Assuming “forever” is 35 years and that rent will never go up, then 35 years @$1800 per month will cost you $648k. Yes, it may be cheaper than buying, but it is still a cost that you are stuck with.
I am against buying if one is speculating. However, I don’t see anything wrong if someone is buying for his/her own use. What goes up will always come down. Same goes the other way, what goes down will always come up.
—————
The realtors must love you.

#138 Long Time Lurker on Here on 07.25.14 at 3:36 pm

RE:#81 BillyBob
It is becoming clearer why Canada is so screwed, if this is indicative of the level of financial ignorance out there.

Paying your expenses with money you have already earned is actually the opposite of debt. So no, renting does not “come with its own debt”. Signing a contract with a bank for $648k in 2014 is not the same thing as paying $648K after 35 years.

If people can’t see the difference between the two, then…well, never mind. Obviously most can’t.
===========================

When I said renting comes with its own debt, I was merely giving another perspective for the same idea. You can look at it as if you are obligated to pay rent for the rest of your life, which is true 99% of the time unless you decide to live under a bridge or in your parents’ basement.

Also, the debt which you are hating on, when used properly is what makes companies and economy prosperous. It’s called leveraging.

#139 rosie "moving forward" in the knowledge that, "this won't end well" on 07.25.14 at 3:59 pm

Can the government have any influence on who the CRA investigates for tax fraud?

http://www.huffingtonpost.ca/tom-henheffer/canada-charities-audit_b_5620754.html?utm_hp_ref=canada

#140 Delusion on 07.25.14 at 4:09 pm

http://www.youtube.com/watch?v=CB2SluAUWJA

Australian Property Bubble: AustrIreliand

#141 stop lying on 07.25.14 at 4:32 pm

#132 – if you call a $33,050 a year pension lucrative then you’ve failed at life.

#129 – this is true for other fields as well. as long as the grunt gets overtime and/or on-call they can make as much or more than their managers.

#118 – i remember new home builders having to drastically cut prices for a while at that time, if you ask them it was a crash. people who bought a new build then have made a fortune today.

#142 Victoria Real Estate Update on 07.25.14 at 4:34 pm

#121 Zepp

“Thanks for your very useful info. I always look for your posts. Keep up the good work.”

No worries, glad to hear that you find the information in my posts useful.

#143 saskatoon on 07.25.14 at 4:37 pm

record revision to US homes sales:

http://money.ca.msn.com/video/?videoid=10db02ad-c806-448d-b954-c729295946f8

drop of 8.1% drop

#144 BillyBob on 07.25.14 at 5:12 pm

@ Long Time Lurker on Here

When I said renting comes with its own debt, I was merely giving another perspective for the same idea. You can look at it as if you are obligated to pay rent for the rest of your life, which is true 99% of the time unless you decide to live under a bridge or in your parents’ basement.

Also, the debt which you are hating on, when used properly is what makes companies and economy prosperous. It’s called leveraging.

——————————————————————

So now buying a home is akin to owning a company and investing in a business, is that it? Since you like to toss around financial terms, I’m sure you’re familiar with the fact that leverage is very powerful both when it works for AND against you? As many will find out.

My situation is not typical of most Canadians – I don’t live in Canada. I haven’t paid income tax since 2003. My employer gives me an accommodation allowance that exceeds my rent by about 2400CAD/month. That’s completely aside from salary. So I’m quite content to rent and patiently watch the slow motion train wreck that is Canadian RE. My comments are more academic, in your case pointing out that calling rent “debt” is asinine.

Why is that those who actually HAVE money find real estate in Canada ridiculous, while those with no real prospects and not much more than a whole lot of debt, think it’s a great idea? I have a theory that it’s due to the fact that for the vast majority in Canada, large sums of debt are just an abstract concept, while to the wealthy large sums of money are their reality.

Just a theory.

Incidentally, although it doesn’t appear it will be necessary any time soon, I would rather live under a bridge than be a bank’s bitch for 20 years to own some poorly constructed depreciating asset.

But one man’s slavery is another man’s paradise, I suppose.

#145 aaron on 07.25.14 at 5:36 pm

My belief (expressed here often) is that we will have a pricing correction, then a very disappointing market (for those who recently bought, but not for buyers) for several years. — Garth

Basically you just confirmed buying for the past 5 years was the best decision ever.

I doubt you will feel so in five years. — Garth

#146 the Jaguar on 07.25.14 at 6:11 pm

I suppose it might be a first for Garth’s blog, but here I go …….

“BillyBob……will you marry me?”

Not for the money but for your fine mind. I’ll sign a prenup if you want.

#147 the Jaguar on 07.25.14 at 6:32 pm

we could get married in the Mojave Desert, aboard flight 143, which took off on July 23, 1983 infamously. How romantic.