Generations

GENERATIONS modified

Josh sells real estate in urban Toronto. “Fourteen years now,” he says, “since I was 21. And in all that time, there’s been only one really crappy time – six years ago now.”

In 2008 the market shuddered to a halt as global finances fell into turmoil. Sales that summer tumbled almost 20% from the previous year and sellers panicked. But all that’s but a distant memory these days. And the emergency interest rates which emerged to save us from the economic wreckage turned housing bust into bubble.

Josh’s clients are mostly people his age – the sub-40 set. The average deal is around $800,000, he says, “but one in four, I’d say, range from one-two to one-four.” Of those spending more than a million, Josh figures the average mortgage is about 80% – taking into consideration CMHC insurance is no longer available for seven-figure deals.

“Used to be that a million-dollar mortgage was a big deal,” he adds. “Now I see them all the time.”

By the way, to carry $1,000,000 today with a variable-rate mortgage at just under prime is about $4,500 a month. With insurance and property tax, it’s a little over $5,000. The land transfer tax in Toronto on a $1.2 million so-so house needing serious renos in the north end is $40,200. So to close on that with 20% down would require cash of about $290,000, and then a million in financing. After that you can get a LOC of $130,000 for a new kitchen.

No wonder RBC came out with that report last week. The bank found people between 35 and 44 have far more debt than their parents did at the same age – and more leverage than any other group in society. Mortgage rates today may be 3% instead of the 14% they were in 1993, but the amount of debt has ballooned so dramatically that monthly payments eat up far more of disposable income.

As a result, people in this age group are more dependent on real estate than any in the past. As I reported days ago, almost 100% of the increase in net worth for Josh’s cohort has come from housing appreciation, since they’re saving and investing virtually nothing outside of their walls.

While real estate augments, they win. When it declines, they’re screwed. That could happen because the economy’s weak and jobs scarce (see Friday’s post), when interest rates rise (fixed mortgage rates will be likely higher this autumn – a taste of the future) or as many house-rich, pensionless Boomers start dumping their properties so they can enjoy hip transplants and retirement in Elliot Lake.

Speaking of the wrinklies, another bank survey is worth referencing. BeeMo says the old farts are now 400% better off than their parents were thirty years ago, and the relative gap between Boomers and Millennials is turning into a vast chasm. Now, as much as we all hate giving more ammunition to the whiny, snively, entitled, self-absorbed offspring of nauseating helicopter parents, facts are facts. Boomers may go down as the last generation whose finances were a quantum leap ahead of both their parents and their kids.

The reason? Real estate, mostly. The Boomers lived large through three decades of inflation, rampant economic growth, galloping financial markets and bloating house values. It looks increasingly like that party’s fundamentals ended in 2008. Now we have slow-growth, no-growth or tinges of deflation, combined with negative demographics and a serious debt overhang. Were it not for cheap money and desperate central bankers, this blog would be utterly irrelevant (and it’s pathetic enough, already).

Sadly, though, the kids didn’t get the message. They just want to turn into their parents, which means buying residential real estate, even at obscene levels with swollen mortgages, to the exclusion of all else. The results (say the bankers) are evident. Boomers’ median net worth has risen 312% in the past twenty years. And now the wealth gap between old and young has more than doubled since 1984. By the way, three-quarters of Boomers own houses – which I hope scares the crap out of their kids who just bought. #tsunami.

Finally, it’s worth understanding what happens to people like Josh’s clients once they have seen a disaster. In the US these days the appetite for house-buying is sinking with regularity among the young. A decade ago 40% of all purchasers in the States were first-timers. Today is it 27%. In Canada the number exceeds 50%, and is rising.

So either the American kids are wusses and might suffer, or the kids here are naïve and could implode.

Being old sucks, but this should help.

116 comments ↓

#1 walking dead on 08.10.14 at 6:15 pm

The new generation will face decades of headache and financial problem, ruined indeed.

#2 Singaporean Investor on 08.10.14 at 6:16 pm

The average households in big cities in Canada should not be able to afford a house. That’s just the sad reality caused by wealth imbalance globally.

#3 Millenial on 08.10.14 at 6:16 pm

Hey Garth,

I came upon this today, it’s a spreadsheet of Toronto’s Land Transfer Tax revenue for past 5 years:
http://www1.toronto.ca/City%20Of%20Toronto/Information%20&%20Technology/Open%20Data/Data%20Sets/Assets/Files/municipal_land_transfer_tax_revenue_summary.xls

In 2009 revenue was $178.5million. In 2013 the revenue was $356.8million. Exactly double, lol! If it keeps on doubling at this rate one day we won’t even need to pay property taxes in this city, right?!

P.S. You ever keep in touch with Erin Bury, you know, from Garrison Point? How she doing?

#4 LH on 08.10.14 at 6:21 pm

Millennials are so screwed. And I say this as a 30-year old who is on track to be mortgage free by my fourth decade. On all eight SFHs.

LH

#5 Shanks on 08.10.14 at 6:21 pm

We’re screwed.

#6 TS on 08.10.14 at 6:25 pm

The worst part is that about a $400,000 mortgage is that you owe $4000 more per year every time you renew at 1% higher rate.

2% interest rise would screw most people. Where are you going to find an extra $8000 a year? You’d have to make close to $14,000 extra.

#7 jas on 08.10.14 at 6:26 pm

Dear Garth,

Should I wait for how much longer before buying?

#8 totalinvestor.com on 08.10.14 at 6:30 pm

“Used to be that a million-dollar mortgage was a big deal,” he adds. “Now I see them all the time.”

I just picked myself up from the floor after reading that one.

http://postimg.org/image/pk2nwolef/

#9 T.O. Bubble Boy on 08.10.14 at 6:35 pm

Of those spending more than a million, Josh figures the average mortgage is about 80% – taking into consideration CMHC insurance is no longer available for seven-figure deals.

“Used to be that a million-dollar mortgage was a big deal,” he adds. “Now I see them all the time.”

Absolutely insane.
This will not end well.

#10 LH on 08.10.14 at 6:36 pm

Seems to me like the best trade is to have the health of a young whippersnapper millennial, but the income/portfolio of a septuagenarian chairman emeritus :)

And given the surveys floating around it seems this blog is full of such young overachievers. One day, after the boomers kick the bucket, we shall inherit this world!

LH

#11 TNF on 08.10.14 at 6:36 pm

FHB’s hovering around 9-12% in Australia – how the hell can your fhbs have so much money? Or is it that the whole market is aiming at them? Here we are in the grips of an investor led market (45-55%) – I think here the fhb can spot the greater fool haha

#12 eddy on 08.10.14 at 6:54 pm

Mark typed:
“Doesn’t matter, Leaside is not a representative nor statistically relevant part of the GTA’s RE marketplace”

Leaside (C11) is ‘Central Toronto’ not representative?

Try this: call an agent and tell them you are a qualified serious buyer and want to buy in the beach, wannless park, leslieville, springbrook gardens, little italy, whatever and that you want to pay less than Dec. 2013, then hold your breath for the call back.

#13 Linda Mulligan on 08.10.14 at 7:00 pm

First, the photo is a total AW for the day. Second, I don’t know how or why so many are willing to take on so much debt. I get that people want their goodie & want it now. So Garth, what are the rules for a housing implosion? Can all these buyers just walk away from the places they bought, are they able to declare bankruptcy & get out from under that way? I know you used to be able to do just that, but have the laws been changed to prevent this from happening? In which case, the buyers are simply going to bail if the bubble bursts, yes? I suppose if it were bad enough, the banks could just do a massive write off or somehow set up long term mortgages so the buyers keep on paying, albeit at a much reduced rate. Better some cash flow than nothing & this way you get ‘lifers’ paying for a place to live…..

#14 Turtle on 08.10.14 at 7:05 pm

Nobody is going to get screwed. It is going to be different. Kids of 35-44 y.olds will live in their parents houses and will add their paychecks to the mortgage pot. Not a single income household like in a past, and not a double income household like it is now, but three-income household and maybe four-five income household … when kids get married and bring their spouses to the basement.

People have to see the change in their future lifestyle. The change is coming inevitably.

That is why you need 3 bathrooms in a house that you buy today.

#15 JO on 08.10.14 at 7:14 pm

I have issued several mortgages of 600-900k this year. Some of the applicants are strong and will be fine but quite a few of them, well over a half of all recent buyers are broke. I have a huge number of retired or almost retired mostly public sector workers I deal with daily. I get to work with them on their finances. There is no doubt on average the boomers and their parents are very well off, especially the public sector ones.

-they bought housing at low inflation adjusted prices
-thanks to the massive cmhc subsidies and the junk monetary policy, the massive boom in RE fuelled by the artificially cheap debt has handed these 2 groups a major windfall. When the pick up in defaults happen over the next 10 years, the bill will be mostly paid for by the young ones
-many of the lucky ones on db pensions have paid little into these plans and in some cases the retired since about 2010 will enjoy inflation protected pension benefits for the rest of their lives. For many of the younger workers, they are now paying massively increased pension contributions of over 10% of their salaries in many cases in addition to losing guaranteed COLA increase. The pension defaults have already started. Witness the Montreal police and NB health cafe workers recently as well as the Ontario teachers. Promised pensions will be reduced over time by well over 50 percent in inflation adjusted terms.
-income splitting: many retirees significantly lower their effective tax rates thanks to the disastrous income splitting they are allowed. This simply means that younger working people have to pay more. To
Make matters even worse, the retirees get thus major tax break at the same time their cohort sees rapidly rising health care expenses.
-it is inevitable the standard of living will collapse for most especially the retirees so not to worry the system will take back what it giveth

save yourself and reduce as much as possible any reliance on gov’t assistance or support

#16 Financial Freedom at 40 on 08.10.14 at 7:17 pm

@12 eddy
Leaside (C11) is ‘Central Toronto’ not representative?
————
Leaside is an established, desirable double-income executive area. It is not a fly-by-night, up’n’coming slanty semi hood that takes off in a bubble and falls hard in a bust.

Again, difference between buying prominent, brand name areas, they have something of a price floor and may always be in demand by a certain established cohort that manages and passes down money well, versus hipsters and flippers trying to make something out of nothing.

Many Toronto hoods are quite unique and respond as such – all real estate is local after all. Not sure what would be ‘representative’, whatever you are trying to argue, you can probably find an example for. Flemingdon Park is a block east…

#17 the jaguar on 08.10.14 at 7:28 pm

Dog carrying dog in a basket – priceless.

#18 drydock on 08.10.14 at 7:29 pm

Renee Zellweger’s house in Connecticut going for $1.6 million.
Uh oh, something seems out of wack.

http://paid.outbrain.com/network/redir?p=%2BkIzkCASEP1bPf60R3mFZyDCHs6%2FPHACqaJpBMmlb3LOP44w8%2Fo1iIC0upYvkhyierglK9sg4RBXwvu8JzyrcEFOmbkmojEQwWSMbizhhCV%2BpMUhpWc7dq2NsoFXUNhJozeRoBT2Y27Aw4v6%2Bbtjfj3N%2BXxlpZ9D1W0cfNTX6uPdCPtL7daXnNGo99fm%2Bs6OmeevskefCsDHKapKR72tlBRJN7U66d0Rscsnj%2Bf8btU%2Ff8kfRSrHeqyr7GCGDdnBxYg%2BcWYOBjTSf%2BVptsneGz1MWIVdT%2BgTogfPDfV5ATyHkwkvKRp96ViqgiEfnHs2RF0fIybeXsD1vUeYhmH8iBzKA3rp02R48BF7IHnINPV2oMkh%2FSeEJTqazY1vXKp48ZakRPRQ8zjggpHByqDk6vLElsPIzu3TnqIFhGj2zZJIQ3P6bmb8bLGdIc9SuwFCnSVVcdK1RH6SxKRZoveRTCBV31fJiHG%2BZnGwiPYmAok%3D&v=2

#19 kothar on 08.10.14 at 7:31 pm

The freedom of having a $100k mortgage to pay off vs a million dollar mortgage. That is 10x what I currently owe!!!!!!! Mind boggling!

#20 And then what? on 08.10.14 at 7:34 pm

I would be very interested to see your thoughts in a blog post on how Canada couod, or would/will likely, recover from a serious housing market correction. I take it that if Canada were to try something dimilar to QE, the CAD would tank dramaticalky, that is, unlike the US we are too small to get away with that without a currency drop. Would you agree? But if that is the case, what would bring Canada bacjk on track again? It will take many years to bring manufacturing back to where it was, if possible at all. So we would just hope for lots of foreign investment, and start selling off parts of Canadian properties, interests, and resources?

#21 Smoking Man on 08.10.14 at 7:39 pm

No wonder RBC came out with that report last week. The bank found people between 35 and 44 have far more debt than their parents did at the same age -Garth
………..

That’s the prime show off age… Where people talk with their things.. Up one man shipping each other costs money..

The superficial cocktail parties… The golf and yacht club memberships…

Neutral they would be the most in debt…..

#22 Mark on 08.10.14 at 7:41 pm

Insane. And to think that if a person borrowed a million bucks, and put it into even just a modest investment such as an index fund, they’d have earnings from that investment, at current prices, close to $70k/year after-tax. Or over $100k/year pre-tax.

Leaside (C11) is ‘Central Toronto’ not representative?

Of course its not. Its just one neighbourhood, of literally hundreds in the GTA. And a higher end one at that. Look, I don’t live in Toronto, but I do spend enough time there that you can’t pull the wool over my eyes.

#23 seeing it from both sides on 08.10.14 at 7:48 pm

So much has been debated over HAM floating the Vancouver market, but no attention seems to be paid to this highly paid group of immigrants.

http://www.timescolonist.com/silicon-valley-north-vancouver-tech-surges-as-u-s-immigration-reform-idles-1.1305431

#24 Realties.ca » Generations on 08.10.14 at 7:54 pm

[…] Source: http://www.greaterfool.ca/2014/08/10/generations-2/ […]

#25 The Jewellery Buyer on 08.10.14 at 7:56 pm

Have you seen the latest Harold the Jewellery Buyer’s ad on TV?
He is offering to take your house and contents off your hands for slightly lower than market. Closing in 60 days.

#26 Cow Man on 08.10.14 at 7:57 pm

Sir Garth:
So how does the debt binge end? I listened when you were our Halton MP and you told me to stop the inflationary spiral, unemployment would have to go to 14%. You were right on then. Please tell us how we escape the debt trap.

#27 Temporary Foreign Prime Minister on 08.10.14 at 8:05 pm

“….The bank found people between 35 and 44 have far more debt than their parents did at the same age – and more leverage than any other group in society……”
=========================

Crocodile tears from an industry whose annual record profits have been back-stopped by taxpayers for over a decade.

#28 JimH on 08.10.14 at 8:09 pm

“In the US these days the appetite for house-buying is sinking with regularity among the young. A decade ago 40% of all purchasers in the States were first-timers. Today is it 27%.”
}
My daughter and her fiance in Houston would agree. They’re quite content to rent and save until they accumulate for a decent down payment.

#29 West Coast on 08.10.14 at 8:10 pm

http://www.macleans.ca/economy/realestateeconomy/the-dark-side-of-the-renovation-boom/
One national publication which doesn’t seem to have ‘real estate funds’ in its back pocket.
“A Bank of Canada report two years ago found an average of $8 billion in annual renovation spending between 1999 and 2010 was financed through debt, including loans borrowed against the existing value of real estate through home equity lines of credit, or HELOCs.”

#30 Ben on 08.10.14 at 8:17 pm

Go to RBC, put in that you earn 120K and see what they come back with, then wonder no more about where the problem lies.

Limit LTV, limit loan to (single not household) income and bring in land value tax.

Or go down the UK route of having serfdom coming back.

ps love the morons who think living multi-generations to a house is reasonable. What – you run out of land in *Canada*! Someone doesn’t understand that available credit, not housing supply / demand sets house prices. Just wake up.

#31 Freedom First on 08.10.14 at 8:23 pm

For the Boomers, like Garth always tells us and I totally agree, it will be about income when they stop working. People with work pensions, Gov. Pensions, debt free and a nest egg will be ok. Boomers with a house paid off, no debts, and no work pension but have OAS & CPP who sell while prices are high will be ok. Boomers with no assets, or highly leveraged assets, a house for instance, and no work pension have cause to worry. I am not a wealthy man at all by the blog dawgs standards revealed in Garth’s 2 polls, but I shudder at the thought of having only OAS and CPP to rely on, especially with the average CPP payout being so low, as Garth revealed several times to us. The idea of having worked decades and end up in that position is sad, and I really do feel empathy for people who end up there, as life happens, and many people do face some hardships throughout living their lives. However, I can see the maxed out young people are not diversified, and do not consider the idea that things may not go according to their plans. That, is the tragedy.

#32 Temporary Foreign Prime Minister on 08.10.14 at 8:23 pm

“….the relative gap between Boomers and Millennials is turning into a vast chasm….Boomers’ median net worth has risen 312% in the past twenty years. And now the wealth gap between old and young has more than doubled since 1984….”
=========================

Unfortunately for our children, and to the delight of the Big Five Banks, this situation is now completely irreversible, as no political party in their right mind will ever let trillions of voter pyramid home equity evaporate for the benefit future home affordability.

#33 nonplused on 08.10.14 at 8:31 pm

One of the ways city councils and large developers keep the market up is by restricting the number of lots that come on the market per year. Carma has been doing it for years in Calgary and Edmonton. They basically owned all the land around Calgary for years.

Everywhere you turn there are restrictions. R1 zoning near downtown, bans on basement suites, bans on non-compliant basement suites where they are allowed, etc. I can understand the window part but can anybody explain to me why a basement suite needs to have separate heating? Why is a basement bedroom with an insufficient window allowed but not a suite? Why does the city get to decide how many stoves I have and where I put them?

To me it’s not much different than the way the city of Calgary restricts parking downtown. By limiting the stalls available, they keep parking rates nearly the highest in North America outside New York. Why? Having to pay $500 a month for parking is almost another tax. I suppose it’s to make $6 a day plus $75 a month for park and ride transit look good. All of it combines to make Calgary less attractive to business. When people can’t afford to get to work they won’t go to work.

Same thing with taxis. For what reason do we need to limit the number of licences? It costs me $60 to get home from downtown if I need to take a cab and $75 from the airport. This is ridiculous. It’s a 20 minute trip! How much gas is that hybrid using? And try and get a cab during Stampede week or on New Year’s! Taxis are now more expensive per hour that doctors, and approaching lawyers.

And now you can’t even cut down your own tree without paying a $4000 tax to the city! Pardon me? It’s my frickin tree!! If I don’t want it there anymore, I have to pay $4000 for the right to cut it down? Go plant some trees in the parks if you are so damn worried about it. It’s just a money grab. Every tree has to come down eventually and they know it.

Where I live the lots cannot be smaller than 2 acres. We have one acre nicely gardened and we use it, but all we ever do with the second acre is mow it and trap voles. But can I sell it off? Nope. And we are only 300 meters from a school and community center so it makes sense for this area to be more densely populated. You aren’t allowed to have a horse on 2 acres anyway so what’s the point of the restriction? And why is Carma growing hay on a mile of land between the city limit and our community?

#34 JSS on 08.10.14 at 8:38 pm

Perhaps if boomers would retire from their senior management jobs, and make room for the next generations to move up – this might help.

#35 Sheane Wallace on 08.10.14 at 8:42 pm

#20 And then what?

Corporate Canada would be generally OK specially companies with Business abroad.

People would be screwed.

Manufacturing in Canada? In what world do you live in?
We would be slowly pushed out of every market except commodities and food.

Look at Embraer, the Brazilian plane manufacturer. How much time do you think Bombardier has?
Not much.

Do manufacture staff you need engineering, manufacturing skills, we instead choose so syphon all the money in non-productive investments aka real estate.

There would be no manufacturing recovery.

#36 TO Renter on 08.10.14 at 8:48 pm

RE #13 Linda Mulligan
+++++++++++++++++
No, bankruptcy does not discharge your mortgage. Alimony, child support and mortgage debt must still be paid. The trustee may work on helping you keep your home, while liquidating much else – a roof over your head being a basic dignity.

#37 BZLA on 08.10.14 at 8:48 pm

There’s no GF forum, so I’ll post this here:

http://vimeo.com/101819495

Very interesting perspective on a very unique real estate market! Greater Fool’s are everywhere…

#38 crowdedelevatorfartz on 08.10.14 at 8:48 pm

@#33 nonplused

Geez. Sell the place already!

#39 james on 08.10.14 at 8:49 pm

#23

That is a truly terrible article. The idea that Vancouver is going to supplant Silicon Valley for innovation, venture capital, talent (etc) is a complete and utter joke.

My favourite part was where it said ‘silicon valley is a terrible place’.

Really? Mild climate, lots of daylight hours, cheaper housing market than Vancouver, decent food, MUCH higher salaries, far better health care, better sports teams, similarly crappy traffic, 30% cheaper consumer goods, etc etc etc.

Just about the only place Vancouver has the South Bay beat is rents and scenery, but only if you live in selected areas of the city.

Those new employees in Vancouver are also temporary, waiting for their chance to get into the USA. They are probably sending most of their money abroad, or to US accounts in anticipation of their visa approval.

#40 james on 08.10.14 at 8:53 pm

ah, one more thing from that crappy article:

“The province boasts lower corporate tax rates than the U.S., as well as enticing personal income tax rates.”

This is a total puff piece, not journalism.

Enticing provincial income tax rates?

Compared to what I pay in Washington State? Zero?

Yeah, real enticing. 30% higher consumer goods, higher taxes, lower salary, crappier jobs, more expensive housing and a reduced talent pool. Let me move home pronto.

The carrying costs on my Seattle home come to be $1400 per month after tax deductions. No pre-payment penalty either, so I can put in extra each month, or wipe it out in a few years.

Hold me back from Vancouver and its 1.3 million dollar crack shacks.

#41 Mark on 08.10.14 at 8:57 pm

“So much has been debated over HAM floating the Vancouver market, but no attention seems to be paid to this highly paid group of immigrants. “

Probably because they’re not highly paid. The Vancouver IT job scene is relatively dismal compared to that of Silicon Valley. Most mortgage brokers and RE agents likely out-earn those individuals, and even modest IT jobs in most major Canadian cities receive many dozens of qualified job applicants.

#42 will on 08.10.14 at 8:57 pm

cbc cross country checkup today posed the question “Can you afford to buy a house where you want to live?” Host was Danielle Bochove. Comments by Benjamin Tal a little past half way through. Government must be getting fidgety about RE in Canada to even allow this question on national radio. Podcast is here:

http://podcast.cbc.ca/mp3/podcasts/checkup_20140810_18851.mp3

Did they invite you to participate Garth?

#43 Sheane Wallace on 08.10.14 at 9:01 pm

Huge number of signs for sale, I have never seen so many houses for sale in North York, Oakville ever.

It seems nothing got sold this spring.

Early indications (from RE estate agents, flippers) are for at least 5 % price decline from the top. Some flippers, including few friends of mine are starting to become desperate as there are almost no views at the ‘reasonable’ prices they ask for.

The market is done even without interest rates changes, it is literally done.

#44 Mark on 08.10.14 at 9:02 pm

“Look at Embraer, the Brazilian plane manufacturer. How much time do you think Bombardier has?
Not much.”

Are you kidding? With an airplane (the C-Series) that burns 20%-30% less fuel than the nearest competition? There’s a huge gap between the regional jets/Q400s and the 737/A320s which is being nicely filled by the C-Series.

Bombardier is actually one of the Canadian manufacturers I’m personally most optimistic about because they’ve carved out a nice proprietary niche with almost no meaningful competition. Contrast this with, for instance, the auto industry that mostly produces foreign designs with foreign-supplied tooling and often, foreign managers.

#45 Miser Obvious on 08.10.14 at 9:03 pm

#27 Temporary Foreign Prime Minister

“no political party in their right mind will ever let trillions of voter pyramid home equity evaporate for the benefit future home affordability.”
——————————-

Let’s suppose a future government is NOT in its right mind. That’s not really too far fetched. It’s the lack of a ‘right mind’ that led us here to begin with.

Or, let’s suppose instead that such a government finds themselves entirely powerless to prevent a real estate correction, right mind or otherwise.

#46 Fred on 08.10.14 at 9:26 pm

When it hits, I shall let the millenials cry on my shoulder while my right hand takes the house keys from their pants pocket…. Might even take their dog if it matches my couch.

#47 Son of Ponzi on 08.10.14 at 9:26 pm

Pics of dogs eating ice cream and carrying their litter in a basket.
Are we becoming more like dogs, or are dogs becoming more like us?
I sure hope not.

#48 Kits388 on 08.10.14 at 9:28 pm

Garth,

Wow, you really are working hard to paint me as a racist. You want details? Here you go. The people we have spoken with on our block are mainland Chinese. They live in 2.5 to 5.5 m homes. Almost all of the households have kids under 10. Grand parents often walk with the mothers pushing strollers. We never see the fathers. I would say 80% of our neighbours are Asian, of which the majority are from Mainland China. I know of two rentals owned by mainland Chinese investors (we rent one of them). The three empty houses each have a couch strategically placed in front of the living room window to make the home lived in.

Btw, I don’t really care how much real estate foreigners buy. I convinced myself years ago that the local market was governed by local incomes. It did not pan out because the areas that we wanted to live in were desirable to foreign investors (Chinese, Iranian and Russian, principally). So, to deny the phenomenon is irresponsible.

Do you know what ad I heard on the radio last week on the way to a meeting? One of the big banks advertising to foreigners who may want to open investment accounts. Seriously, why on earth would a big bank do that unless there was a market?

My guess is that your colleagues manage money for this market segment.

#49 betamax on 08.10.14 at 9:32 pm

I know someone in Vancouver who bought a $3.2 million house, taking out a $2 million mortgage to do it. Insane.

#50 devore on 08.10.14 at 9:58 pm

Finally, it’s worth understanding what happens to people like Josh’s clients once they have seen a disaster. In the US these days the appetite for house-buying is sinking with regularity among the young. A decade ago 40% of all purchasers in the States were first-timers. Today is it 27%. In Canada the number exceeds 50%, and is rising.

Not only are they not buying expensive houses, but they are also moving to where life is cheaper, instead of worrying about being priced out forever, or making observations of questionable validity about Asians.

#51 Waterloo Resident on 08.10.14 at 10:09 pm

If Garth is correct, Boomers are close to death and will soon be dropping like flies, with their kids having to sell the houses into a real estate future where morgage rates are rising each month, scaring most buyers away from even ‘thinking’ of buying ( in about 4 years from now ), then what’s going to happen when the Millennials themselves have to sell thier place to chase a job they they need to get to pay the mortgage, or because their mortgage renewed at a much higher rate; one they cannot afford to pay without a 30% wage increase?

#52 Italians love real estate on 08.10.14 at 10:16 pm

So either the American kids are wusses and might suffer, or the kids here are naïve and could implode.-Garth.

No , there just aren’t as many Italian and Asian kids as there are here.

#53 Roy on 08.10.14 at 10:17 pm

Another month of poor job numbers… well this does not bode well. Wasn’t it the loss of jobs (to over-indebted homeowners) that began the US housing crisis?

I forgot… can’t and won’t happen here… the Canadian mentality. Financial crises are events that happen elsewhere in the world, to people’s not so bright or as “conservative” as we are.

Maybe Canadians have an addiction to lying to themselves, or are they just plain decadent, ignorant and naïve?

Oh well, I guess our boomer era economics will last into eternity…. or at least so presume “the kids who just want to turn into their parents.” Hmmm, maybe it is the other way around? The parents who just wanted their kids to turn into them? And gave their entitled adult-children big down payments on over-inflated homes?

Oh well it really is so great our care providers I mean bankers continue to be “there for us” while we “take advantage of low rates” and rack up world-class debts. They really do care about us and our housing needs (chuckle)

How An Aging Population Means Trouble For Canada’s Debt
http://www.huffingtonpost.ca/douglas-hoyes/canada-debt_b_5662749.html

#54 prairie person on 08.10.14 at 10:19 pm

The selling off houses is starting to happen. Two people I know have sold their houses and are renting.
A third will close next week. He plans on renting. These were long time house owners. All retired now. Buyers:
from Germany, from China, local builder wanting a tear down to build a mansion on spec. Two different cities but all three sales just slightly under assessed value.

#55 Italians love real estate on 08.10.14 at 10:25 pm

#4 LH.

What part of Italy are your parents from?

#56 45north on 08.10.14 at 10:40 pm

The bank found people between 35 and 44 have far more debt than their parents did at the same age

While real estate goes up, they win. When it goes down, they’re screwed.

And then what happens? : how Canada could recover from a serious housing market correction?

Miser Obvious : let’s suppose instead that such a government finds themselves entirely powerless to prevent a real estate correction

we have never been here before. I mean where people between 35 and 40 as a group suffer long lasting reduction in net worth. I suppose that during the depression they did but that’s 80 years ago.

men and women must come forward who offer hope but not false hope. In my mind they must have consistently warned about the danger of debt.

#57 Mark on 08.10.14 at 11:14 pm

“The average households in big cities in Canada should not be able to afford a house.”

Are you kidding? In a country with zero land scarcity, one of the lowest population densities in the world — you believe that even an ‘average’ household shouldn’t be able to afford home ownership?

Seriously…. Give you head a shake. Sure, not all Canadians will be able to own in the highest enclave possible, but there’s no excuse whatsoever for housing to be an excessive multiple of income, other than the fact that there is a housing bubble largely due to excess subprime credit in the economy.

#58 nonplused on 08.10.14 at 11:38 pm

#38 crowdedelevatorfartz

And then do what? For now we like that our son can walk to school so we are staying put. And when the arborist tells me a certain tree needs to come down we just don’t tell anybody about it. So I guess that makes me a criminal, but I’m comfy in my skin not complying with the tree tax. I mean if I was cutting their trees on public land I suppose they can charge whatever they want. But my trees on my land? I had one that had been planted in a wire basket many years ago and the people who planted it didn’t cut the wires (tip: cut the wires) so it was now many years later being strangled. The arborist said it needed to come down or it could land on the house eventually. So I had them buck it and add it to the fire wood and said squat. I am not going to pay money to cut down a dying tree that is a hazard to my house. Other than what I paid the arborist.

#59 take away CHMC on 08.10.14 at 11:57 pm

Take away CHMC and see what the free market does to the biggest housing bubble in the world. Shady realtors, mortgage brokers on this blog are true Scum and useless eaters that add no value to society. The numbers are so off the charts that realtors haven’t used numbers in years to justify a purchase as the market has detached from reality. When the market comes back down as it will Canada will be in an economic world of hurt. Businesses are hurting all over Canada as manufacturer close and open up in half price USA. Good job realtors

#60 I worked as a Computer Scientist in the US and it paid well on 08.11.14 at 12:06 am

@#41 Mark on 08.10.14 at 8:57 pm
If you know of educated people with degrees or diploma’s in computer science please tell them to go to the US. I made millions there in IT. Canadians with those educations are far superior to many Americans in the industry. They’ll move up the food chain quickly; that’s where the jobs are that pay exceedingly well. I’m retired now and came back to Canada to live, but I’m seriously rethinking that. Canada’s housing crisis is ridiculous and really it might be better to take your brains south. The US is a great country with beautiful reasonably priced homes.

#61 stop lying on 08.11.14 at 12:09 am

“No wonder RBC came out with that report last week. The bank found people between 35 and 44 have far more debt than their parents did at the same age – and more leverage than any other group in society.”

35-44 have more debt than their parents at the same age, however they also probably have 2x the cash flow since they both have jobs, instead of mom staying at home. They feel more comfortable with leverage than other age groups as they enter the higher paying years and expect them to last 20+ years. They also know the geezers in upper management won’t last forever and it will be their turn soon. Someone has to get those jobs and it will most likely be them.

Of course if they’re trying to get by on a 800k mortgage they’re nuts. I’m hopeful that only those with good earning power can qualify for one.

#62 Alberta Guy on 08.11.14 at 12:15 am

Caption for todays pic…

“Where are we going? And why am I in this handbasket?”

#63 Babblemaster on 08.11.14 at 12:29 am

“Were it not for cheap money and desperate central bankers, this blog would be utterly irrelevant (and it’s pathetic enough, already).” – Garth

————————————————————–

Desperate banker? I don’t think so. This is a FIRE economy and bankers are in charge. They’ll always get what they want as the system caters to them.

#64 james on 08.11.14 at 12:30 am

#tsunami. That is cute. Boomers sure owns houses. And they sure will pass it on to their kids. So no tsunami.

#65 Mark, get your IT friends to go to the US on 08.11.14 at 12:46 am

@#41 Mark on 08.10.14 at 8:57 pm
If you know of educated people with degrees or diplomas in computer science please tell them to go to the US. I made millions there in IT. Canadians with those educations are far superior to many Americans in the industry. They’ll move up the food chain quickly; that’s where the jobs are that pay exceedingly well. I’m retired now and came back to Canada to live, but I’m seriously rethinking that. Canada’s housing crisis is ridiculous and really it might be better to take your brains south. The US is a great country with beautiful reasonably priced homes.

#66 Roman on 08.11.14 at 12:46 am

Was playing yesterday with buy or rent calculator
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

650k
20 down
4% morg rate

Mmm, looks like its easier to rent, for us at least.

Although renting might be slightly more expensive in the current situation. But looking at houses in Toronto I find them utterly junk and I just can’t image buying any of it.

Its just beyond my understanding how people buy this crap with max leverage, especially those dusty and ugly places like a typical house in Toronto.

But what really bothers me is that the calculator basically says you get free mortgage if RE appreciates 7-10% year, like what we’ve been watching in Canada major cities last 10 or so years.

But, but – how’s that even possible that bunch of people got basically completely _free_ houses, especially in _this_ country? It’s literally one in a lifetime situation which I think should resolve itself and make people pay for what’s been so easy to get and enjoy.

#67 cynically on 08.11.14 at 1:05 am

Okay Mark @ 44, you’ve mentioned one meaningful manufacturer in Canada (Bombardier) but you have four more fingers on that hand and five on the other so start listing.
#35 is right . Canada is not a manufacturing country -hewers of wood and drawers of water has stuck with us for ages. It isn’t just manufacturing we lack but some big businesses in general.
As an example when comparing Vancouver and Seattle, population nearly equal, Seattle is HQ to at least five huge corporations (at least 3 worldwide) whereas Vancouver can only boast(?) of high world reknown real estate prices. I would however, have to give it the nod in pretty cities and I won’t get into big league sports.

#68 JimH on 08.11.14 at 1:36 am

#44 Mark
Re: Bombardier

You are aware, I’m sure that tests on the C-Series are tentatively scheduled to resume sometime soon (?) after that rather catastrophic un-contained engine failure? So far, they have just made repairs: there may very well be design deficiencies.

I wouldn’t get too excited just yet on an aircraft still in flight testing. The C-Series has yet to complete it’s flight testing and certification; there is many a slip ‘tween the cup and the lip as they say.

http://online.wsj.com/articles/bombardier-sees-cseries-test-flights-resuming-in-weeks-1405241817

It is also naive to claim that the Bombardier C-series is in any way set to occupy an unoccupied market niche. With a payload of around 30,000 lbs and max 125 passengers (CS-100) or 160 passengers (CS-300) the C-Series are in direct competition with the Airbus 318, 319 and 320 series, and the Embraer 195. It is a mid-size passenger jet; no more and no less, with a 1,700 nm range.

The fuel burn that is at present ESTIMATED to give .84 nm/gallon is impressive; (estimates are always attractive), but we’ll see if that holds up through certification.

As an investment, BDRBF doesn’t get me excited; not yet, anyway. But then I am attracted to winners.

Bombardier’s profitability, earnings and balance sheet quality have been questionable. Sales and revenue are both negative. The valuation is currently okay, mainly because the price momentum has been god-awful. YOY stock price is down -~25%; YTD, the price is down 19.26%.

I know mother market can be cruel and irrational, and BDRBF has been thrashed worse that it deserves, and just might at present be undervalued. But… I would see what 2015 brings before getting too excited.

Right now there are prettier girls waiting in line with better balance sheets, less debt issues, and proven performance.

#69 Suede on 08.11.14 at 1:49 am

http://www.vancouversun.com/business/commercial-real-estate/Vancouver+rises+heights/10052905/story.html?__lsa=1ec9-81f7&__federated=1

Boom!

9th in the world baby.

#70 jack be nimble on 08.11.14 at 2:27 am

Hey Garth…..apparently there is Chinese Government money behind the campaign to shout down anyone who even mentions HAM in Vancouver?

http://ottawacitizen.com/opinion/columnists/the-continuing-corruption-from-beijings-dirty-money

A long time ago I warned against being on the wrong side of history on this issue…….and now it’s coming around like a freaking asteroid on the return trip.

#71 Mark on 08.11.14 at 2:36 am

“we have never been here before. I mean where people between 35 and 40 as a group suffer long lasting reduction in net worth. I suppose that during the depression they did but that’s 80 years ago. “

Perhaps the crash will make housing so cheap for Millenials that the Millenials will be the driving force in the economy. After all, households that aren’t spending huge bucks on housing have lots of money to invest, start businesses, etc. And the Millenials will actually benefit from boomer retirements, something that the 35-40-year-old crowd really hasn’t (yet).

Think of how much $$$ families would have if they could pick up a house for 1X income in Markham, and could invest the rest after paying off a modest loan? I know, Markham Realtors will swear up and down that housing will never go that low, but I’m sure a decade they would’ve never argued that it would ever go so high. Mean reversion sure bites on the downside.

#72 Mark on 08.11.14 at 3:01 am

” It did not pan out because the areas that we wanted to live in were desirable to foreign investors (Chinese, Iranian and Russian, principally). So, to deny the phenomenon is irresponsible. “

So your claim is that these ‘foreign investors’ come to Canada in significant numbers and plunk their ‘money’ in the most expensive asset class (long-term bonds perhaps excepted) known to man-kind?

The problem, consistently, with that ‘theory’ is that it defies common sense. And the ‘money’ can’ be found either (because it sure as heck isn’t pushing up local incomes, or reducing systemic leverage in the RE market!). But what we do have throughout Canada is a credit bubble.

For some reason, I doubt you were ‘talking’ to Mainland Chinese. You were likely talking to Canadian citizens of Asian descent. Who made their money in Canada, and perhaps emigrated from China many, many years earlier, built a business locally, and have done well. Or, like large numbers of other Canadians, merely went out and rented a heck of a lot of money and bought their current lifestyle on credit.

#73 Pooh on 08.11.14 at 3:33 am

So ya, there are a plenitude of reasons why things are looking dire for future generations – both young and old.

I agree with 99% of them… but, I don’t buy it that we’ll see all the bad come to fruition. Things just have a funny way of balancing out.

So the question is; is a major reversion of house prices back to the mean the conduit to which a rebalancing occurs?

#74 Future Expatiate on 08.11.14 at 4:24 am

Silver lining is…. any home built before 1970 will soon reflect its true value: worthless. Like Detroit, only worse. Enough people will finally have wised up to the true “value” in a heart of the city century old pos that’s endured at least 4-7 flip to the next loser “ef you” renos with tons of nasty surprises behind its walls.

#75 Will on 08.11.14 at 7:06 am

It took a massive financial disaster along with millions losing jobs in the US & across the world to produce a slight and temporary correction in overheated real estate markets here, there doesn’t seem to be much prospect of future corrections unless the US is headed towards another huge recession.

Let me guess. You’re not an economist? — Garth

#76 Chickenlittle on 08.11.14 at 7:54 am

#6

A 400k mortgage is nothing these days!!!!!

Can you imagine finding MORE money than that every year?!?!? Nope! Then again, there is always a Jarvis St. corner For those in serious trouble…..

#77 The real Kip on 08.11.14 at 8:17 am

“Speaking of the wrinklies, another bank survey is worth referencing. BeeMo says the old farts are now 400% better off than their parents were thirty years ago, and the relative gap between Boomers and Millennials is turning into a vast chasm.”

Im 55 years old, met my financial planner at CIBC this past April and they informed me I’m a millionaire. I don’t feel like it but that’s what they and the net worth papers say. Boomers are not as stupid as you make us out to be.

#78 sunnybatra on 08.11.14 at 9:16 am

DELETED

#79 };-) aka Devil's Advocate on 08.11.14 at 9:24 am

SHIFT happens.

I remember the first time I saw a $10.00 burger. I thought THAT was insane. After all a Big Mac back then was what $5.00?

Millennials have no frame of reference like their parents. Of course they don’t remember 18% interest rates either.

Things change. Like Turtle says @ #14

Nobody is going to get screwed. It is going to be different. Kids of 35-44 y.olds will live in their parents houses and will add their paychecks to the mortgage pot. Not a single income household like in a past, and not a double income household like it is now, but three-income household and maybe four-five income household … when kids get married and bring their spouses to the basement.

People have to see the change in their future lifestyle.

The change is coming inevitably.

That is why you need 3 bathrooms in a house that you buy today.

While I don’t know that Turtle has pinpointed the way it will unfold, which remains to be seen, there does seem to be a bit of a sub thread in today`s blog comments of people who agree; things change and while it seems ridiculous to those of us with our heads stuck in the paradigms of yesteryear somehow things tend to work out without nearly the negative consequences we arm chair economist old farts anticipate.

SHIFT happens.

#80 Henry Rearden on 08.11.14 at 9:25 am

Enjoying watching the daily price drops here in Nova Scotia on ViewPoint.ca. Real estate is not moving here as everyone is afraid to catch a falling knife. Still an inflated market for the job market here.

#81 };-) aka Devil's Advocate on 08.11.14 at 9:30 am

http://bigmacindex.org/

#82 Bottoms_Up on 08.11.14 at 9:40 am

I have yet to see an in-depth breakdown of when the tsunami of boomer listings will hit the market and how this might influence the market.

My cursory analysis puts the ‘peak’ listings around 2040-45 (in other words, 25-30 yrs from now), when boomers/estates are forced to sell due to their declining health/death.

But with immigration to Canada at approximately 1% of our population, another 10 million people will join us by 2040-45.

The peak in boomer listings should therefore be mitigated by increased demand.

I hope no one around here is waiting 25-30 yrs for this peak.

Boomers hitting 60 will be selling within five years, as they lack the pension income or liquid assets to do otherwise. Health plays no role. — Garth

#83 Life's a supermartingale on 08.11.14 at 10:01 am

Hmm… looks like income smoothing to me. Garth, all the assets in the country have to be owned by someone. Given that the boomers own a lot of it now, as surely as night turns to day, their children will take hold of those assets in the future. They may inherit the assets or buy them, but one way or the other ALL the assets and ALL the wealth that the boomers own will be transferred to the next generation. So, if you know this, you might find it rational to take on a large mortgage to move the consumption forward and income smooth even if it means lower future returns. Garth, it is completely rational to take 60 cents on the dollar if I can smooth my consumption sufficiently. It’s bad enough that our wages increase through our lives in a fairly predictable way (wages go up with tenure even if wages across the country remain stagnant), thereby already creating an income smoothing problem – the boomer wealth transfer makes smoothing even more difficult. I’m not so sure the run up on housing debt is anything but an income smoothing phenomenon.

#84 Peacecraft on 08.11.14 at 10:16 am

@Jim H

Not to mention that the median cost of a SFH in Houston is $214,000, and the average cost is $283,697.

The median SFH price in the GTA is $450K. And in the 416? An average of $950K.

Welcome to Toronto.

#85 kipboter on 08.11.14 at 10:21 am

#76 The real Kip on 08.11.14 at 8:17 am

“Im 55 years old, met my financial planner at CIBC this past April and they informed me I’m a millionaire. I don’t feel like it but that’s what they and the net worth papers say.”

” Boomers are not as stupid as you make us out to be.”

You were unaware you were a millionaire till the CIBC informed you?

#86 Retired Boomer - WI on 08.11.14 at 10:35 am

Went back to the old hometown for their big corn fest weekend. Met up with numerous old classmates from 45 years past. Most on the cusp of retirement, and most ill-prepared for it. Well, we have all seen the numbers in the US for near retired boomers – not pretty. Yet so easily prevented in truth.

Some money is better than no money, not just just counting on your government allotment known as Social security.

Yes, some will get private pensions, or government pensions.
Both of those have been extensively altered beginning in the early 80’s, shifting the payout from ‘guaranteed’ to market performance, and your selection of risk tolerance.

While some have saved well, most have done little, or less.
Amazing to me, that knowing what was coming down the road at us, so few took any actions in their best interests. Makes you wonder how they drive successfully?

Even if you have only 5 years yet before retirement ,start getting your stuff together NOW!! It will make a nice difference later on!

Poverty, like old age SUCKS!!!

#87 Rational Optimist on 08.11.14 at 10:37 am

6 TS on 08.10.14 at 6:25 pm

What a great comment. This succinct bit of truth should be on the front cover of everyone’s mortgage documents. I honestly believe that many people do not understand this.

#88 Bottoms_Up on 08.11.14 at 10:57 am

#15 JO on 08.10.14 at 7:14 pm
———————————–
Given your line of work you have an interesting perspective.

We’re mid-30’s, a dual upper-income family, and we pay approximately 30% of gross income in federal and provincial taxes (no income splitting or any other way to ‘save’ on these). This amounts to approximately $46,000.

Then, we pay 5% of net income to municipal taxes, 25% to childcare, 20% to mortgage, 15% to food, 10% to various bills/running a household, and 8% to db pension. The rest is taken up with car/gas/insurance payments and servicing LoC debt.

I am living first hand the “debt for consumption now, with reduced consumption in the future”. I feel we will be OK once the childcare bill subsides, but we will still be heavily exposed to interest rates.

The $51,000 of income/property tax that goes to various levels of government already includes the various tax discounts we get for childcare.

We are literally “m(t)axed out”, and just at the beginning of our career and raising kids.

#89 Daisy Mae on 08.11.14 at 10:58 am

#58 NonPlussed: “….So I had them buck it and add it to the fire wood and said squat.”

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

As my neighbour always used to say: “JUST DO IT….and apologize later.”

#90 :):(Ying Yang on 08.11.14 at 11:12 am

#73 Future Expatiate on 08.11.14 at 4:24 am

Silver lining is…. any home built before 1970 will soon reflect its true value: worthless. Like Detroit, only worse. Enough people will finally have wised up to the true “value” in a heart of the city century old pos that’s endured at least 4-7 flip to the next loser “ef you” renos
with tons of nasty surprises behind its walls.

………………………………………………………………………

Absolutely true, anyone who purchases a pre 1970’s home that has been fully renovated is an idiot. Looked at some nice little homes down south of Lakeshore this spring almost everyone of them had makeup plastered all over the outside and inside. You can really tell when you walk into the basement renos though when that musty dank, dogpiss smell hits you in the face like a freight train. I always make sure I don’t have a cold when I’m house hunting. Its’ better to purchase a old home that has no renos! Then your down to the bones and can get at least an idea of how much $$ you have to through into it before you get mould disease. It takes some serious cash to properly keep those old block foundations from sucking in water and the closer you get to the lake the higher the water table.

#91 chickenlittle on 08.11.14 at 11:23 am

The worst thing a Gen X or Millenial can hear from their parents is “At your age I had a house, 2 kids, money in the bank, etc..”

Most of them don’t know that the world is different….they live in the past.

True. But the past also teaches. — Garth

#92 Victor V on 08.11.14 at 11:36 am

http://www.theglobeandmail.com/report-on-business/rise-in-asset-values-push-up-canadians-wealth/article19983236/

The analysis also showed the growth in household debt last year was entirely due to a 3.3 per cent increase in mortgage debt, while consumer debt such as credit cards and other loans was unchanged from 2012, which suggests growing restraint about taking on new debt.

Mr. Miron said it is also encouraging to see mortgage debt growing a lower pace than real estate values, which means many people are unwilling to ratchet up borrowing to match the pace of growth in house prices. Previously, he said mortgage debt was growing faster than real estate values.

“That’s actually a pretty positive sign in the grand scheme of things,” he said. “That’s a very unusual thing – we haven’t seen that happen before.”

Note that this is a decrease in the rate of debt growth. Not a decrease in debt. It is still increasing. — Garth

#93 Screwed on 08.11.14 at 11:43 am

The Boomer parents are carrying the Millenials. Many Boomers have re-mortgaged their houses, give the proceeds to the latter to get into the RE game, and (in some cases) make monthly mortgage payments to keep the latter afloat. Talk about over-investment in RE.

#94 Dual Citizen In Canada on 08.11.14 at 12:02 pm

#14 Turtle on 08.10.14 at 7:05 pm
Seriously, why would anyone want to live in their parent’s basement to keep a house? Grow a couple and find your own place for you and your family to live. This is a big planet.

#95 bigtown on 08.11.14 at 12:04 pm

Oceanfront condos in Myrtle Beach, South Carolina for under $75k and bungies for under $100. Ya gotta luv America. Kind of makes you wander why folks up north feel compelled to pay $500k for a closet on Lac Ontario where the wind howls for months in the winter?

I read the Toronto Star Homes Section this weekend with the comments added by the selling realtor: this home is such a sensible FIRST TIME BUYER HOME AT ONLY $832k….when my fam brought our first bungie in Hamilton back in the late 80’s for $85K my spouse was having heart palipations due to the reg mortgage with 25% down. We were pulling in $60k together per year back then which I understand is presently the typical annual income in Canada.

As a boomer I must be missing something.

#96 marnic on 08.11.14 at 12:44 pm

Really, hip transplants?

#97 Sheane Walace on 08.11.14 at 12:52 pm

Mark, look at the trend…

http://business.financialpost.com/2013/08/26/embraer-poised-to-extends-lead-in-regional-jet-sales-over-bombardier/

#98 Panhead on 08.11.14 at 12:59 pm

#89 :):(Ying Yang on 08.11.14 at 11:12 am
#73 Future Expatiate on 08.11.14 at 4:24 am

Depends how far back you go … I had an old house that was built in the 30’s. Constructed of CLEAR fir, not a knot in the house. Real oak parquet floors too … Would have stood forever but alas it was too small for today’s family so met the wrecking ball when I sold it. The family next door had exactly the same house and raised 5 kid’s in it …

#99 :):(Ying Yang on 08.11.14 at 1:12 pm

#97 Panhead on 08.11.14 at 12:59 pm

Agree but extreamly rare to find a gem. Its the mouldy smell that you just can not get rid, ever.

#100 JimH on 08.11.14 at 1:29 pm

@#83 Peachtree

Yes, and Houston is one of the fastest growing cities in the US and the surrounding suburbs (Harris County) are growing at an even faster rate!

Yet, housing remains relatively affordable; rents seem high to me, though.

#101 bdy sktrn on 08.11.14 at 1:30 pm

Depends how far back you go … I had an old house that was built in the 30′s. ——————–

like all the old timers here in van, our 100+yo house is also made of first growth fir, clear and rock hard – 5x stronger than any lumber avail today and perfectly preserved

fir : framing, sheathing, flooring, doors, windows, trim, lath etc.

#102 Mark on 08.11.14 at 1:45 pm

So the question is; is a major reversion of house prices back to the mean the conduit to which a rebalancing occurs?

I think so. Boomers and the elderly hold a disproportionate amount of the wealth, and its mainly in either houses, or the GICs that fund most housing loans. And even those few Millenials lucky enough to find a job and buy a house over the past decade, all smug in being ‘ahead’ of their relatively unemployed peers, won’t be too smug as housing prices continue to go down.

Similar deal with the public servants. The sort of austerity the government is going to be forced to engage in to pay the CMHC subprime guarantees is going to be brutal to Ottawa RE values, and even to pension perks.

All told, I personally believe that the equity risk premium is going to re-emerge, with a vengeance, after being absent the past 30-35 years in Canada. Which should be quite positive for the younger crowd over time.

#103 Entrepreneur on 08.11.14 at 1:55 pm

“…economy weak and jobs scarce…” in the article above.

I thought the HST was suppose to bring in jobs?????

When the GST came into effect we heard and know a lot of businessess that moved to the States or to Alberta (Alberta only has the PST). Then came along the HST and that really did small business in, a lot just hangin in.

Small business turns the economy around but not in a hostile environment. This is where the money comes from, goods and services. No business; no jobs; no money.

#104 };-) aka Devil's Advocate on 08.11.14 at 1:57 pm

Boomers hitting 60 will be selling within five years, as they lack the pension income or liquid assets to do otherwise. Health plays no role. — Garth

I, for one, have no intention of retiring. I may be kidding myself but for several reasons retirement just is not something I foresee in my future. I will work until the day I die because that inevitable day I can’t work is the day I figure my life has pretty much run out as my body won’t be able to do anything else I want to do.

Most everyone I know who has retired seems to have shortened their remaining life dramatically.

I like my work. Sure it has it’s ups and downs but so too does any job and the ups in mine far exceed those of most any other I’ve seen.

I can’t afford to retire in the lifestyle I’d like to. I’m not complaining. I lead a pretty good life. My needs are simple and I have a lot more than I need.

The older we get the more expensive travel becomes.

The older I get the more I appreciate our family home that is the headquarters of our generational family gatherings. We thought about downsizing but… it’s paid for and it works for us better than some gated retirement community with a bunch of old farts looking for things to complain about.

As Richard Branson put it when asked “How do you differentiate between work and play” Bransons response… “I don’t think of it as “work” and “play”. I think of it all as “LIFE”.

There are many who agree and plan on living out their remaining lives similarly.

#90 chickenlittle on 08.11.14 at 11:23 am
The worst thing a Gen X or Millenial can hear from their parents is “At your age I had a house, 2 kids, money in the bank, etc..”
Most of them don’t know that the world is different….they live in the past.
True. But the past also teaches. — Garth

I am glad to hear you day that Garth for if you honestly believe that you must also agree that if we continue doing the same thing we will get the same result. Carrying that logic forward you must agree that SHIFT does indeed happen with some degree of predictability. After all we continue to do the same damn thing time after time. That said we are due for another recovery as indeed is and has happening for a few months now. And, yes, that will ultimately lead to another economic failing (correction) as you obviously know – based on the historical cycles probably due to start in 2017/18.

Of course the paradox is we never seem to learn from the past just as Millennials are hell bent and determined to learn by their own mistakes instead of heading the advice of their Boomer parents who have already paid for those lessons. Ultimately though, they just as did we at the end of the day, will persevere and be just fine.

SHIFT happens… it’s one of the cycles of life.

#105 Sebee on 08.11.14 at 2:13 pm

Looks like someone figured out a business model to generate some revenue while helping to sell those higher value unloved homes. Coming to Canada soon for lingering invenotry of homes above 1.3M?

http://money.cnn.com/2014/08/11/smallbusiness/showhomes-rent/index.html?iid=HP_Highlight

#106 Sheane Wllace on 08.11.14 at 2:22 pm

big Canadian banks downgreated to negative by S&P.. wow!

https://ca.finance.yahoo.com/news/ratings-agency-p-takes-more-cautious-look-canadas-170934433.html

Playing catch-up with Moody’s. Old news. — Garth

#107 Sheane Wllace on 08.11.14 at 2:23 pm

downgraded…

#108 Mister Obvious on 08.11.14 at 4:09 pm

Re: Old timer houses in Vancouver.

In the early eighties I worked renovating those old 1920’s and earlier houses on Vancouver’s west side.

The best thing about them by far was the wood. It was straight, clear, seasoned first growth fir. It was also hard as iron. You couldn’t drive a nail into it or pull one out. Burrowing insects didn’t stand a chance.

I’d also say that the carpentry skills of the men who framed these houses (often using only hand tools) was superb. I saw beautifully fit compound cuts everywhere. Those skills are now obsolete.

However, just about everything else about these old places was crap. Corroded plumbing, dangerous knob and tube wiring, drafty window frames, two layers of duroid roofing over two earlier layers of rotting cedar shingles, little or no insulation, crumbling lathe and plaster walls, cracked and porous foundations and so on.

The only heartbreaker was having to toss large quantities of that wonderful framing wood into the waste bin. People did try to reclaim some of it but gave up in frustration when they found it almost impossible to extract the nails which made it useless for most purposes.

#109 Smoking Man on 08.11.14 at 4:14 pm

Ying Yang your are correct….

I had to rip out all the walls, Insulate moisture barrier.

But it’s sweat now…

#110 PeterfromCalgary on 08.11.14 at 4:45 pm

How dependent is the Ontario government on that land transfer tax? Ontario’s finances seem to be in bad shape already. Real estate crashes usually start as sales crashes (which would kill land transfer revenue) before sellers smarten up and lower prices. As Garth says “this won’t end well.”

#111 NoName on 08.11.14 at 5:02 pm

#73 Future Expatiate on 08.11.14 at 4:24 am

“Silver lining is…. any home built before 1970 will soon reflect its true value: worthless.”

nothing like offgassing on osb fumes from particle boards in newer homes.

#112 Shane on 08.11.14 at 5:23 pm

I guess I’m not one of the average with networth of 442k this country’s rich

#113 Gainsaywhodare on 08.11.14 at 6:53 pm

“Used to be that a million-dollar mortgage was a big deal,” he adds. “Now I see them all the time.”

People get desensitized about money these days. If you talk to somebody who used to have a $60k mortgage back then, they would have told you how they worked like a dog to pay that amount off. Fast forward to 2014 and some first-time home buyers won’t even flinch at taking out a $600k mortgage. I don’t think some people even have a good concept of how much money that is. And after 5 years of $170k worth of payments, you still owe the bank $513k (plus interest). But hey it’s justified because we all have to get in the game or be left out forever. Besides, who doesn’t want to be paper rich?

#114 Joseph on 08.11.14 at 10:04 pm

Of course, it’s worth mentioning that once the Boomers start selling, you will likely see a glut of housing, in which case it would become a buyers market, thus increasing the decline in house prices. If this happens, the first Boomers who are lucky to get out and get top $$ will be laughing, but not the rest who will either have to take a loss, or stay put and put off their windfall, hoping for a rebound before they die off. Then again, I could be wrong.

#115 Nick Roerich on 08.12.14 at 8:55 am

The recent revelation below just adds more fuel to the fire of middle class wealth destruction … as well as to the 1% wealth accumulation.

“New Toxic Derivative Launch By Goldman Sachs: “The Credit Bubble’s ‘Final Frontier’”

http://themillenniumreport.com/2014/08/new-toxic-derivative-launch-by-goldman-sachs-the-credit-bubbles-final-frontier/

#116 ‘A decade ago 40% of all purchasers in the States were first-timers. Today is it 27%. In Canada the number exceeds 50%, and is rising.’ | Vancouver Real Estate Anecdote Archive on 08.12.14 at 11:01 am

[…] Josh sells real estate in urban Toronto. “Fourteen years now,” he says, “since I was 21. And in all that time, there’s been only one really crappy time – six years ago now.” … Josh’s clients are mostly people his age – the sub-40 set. The average deal is around $800,000, he says, “but one in four, I’d say, range from one-two to one-four.” Of those spending more than a million, Josh figures the average mortgage is about 80% – taking into consideration CMHC insurance is no longer available for seven-figure deals. “Used to be that a million-dollar mortgage was a big deal,” he adds. “Now I see them all the time.” By the way, to carry $1,000,000 today with a variable-rate mortgage at just under prime is about $4,500 a month. With insurance and property tax, it’s a little over $5,000. The land transfer tax in Toronto on a $1.2 million so-so house needing serious renos in the north end is $40,200. So to close on that with 20% down would require cash of about $290,000, and then a million in financing. … No wonder RBC came out with that report last week. The bank found people between 35 and 44 have far more debt than their parents did at the same age – and more leverage than any other group in society. Mortgage rates today may be 3% instead of the 14% they were in 1993, but the amount of debt has ballooned so dramatically that monthly payments eat up far more of disposable income. As a result, people in this age group are more dependent on real estate than any in the past. Almost 100% of the increase in net worth for Josh’s cohort has come from housing appreciation, since they’re saving and investing virtually nothing outside of their walls. While real estate augments, they win. When it declines, they’re screwed. … [And] it’s worth understanding what happens to people like Josh’s clients once they have seen a disaster. In the US these days the appetite for house-buying is sinking with regularity among the young. A decade ago 40% of all purchasers in the States were first-timers. Today is it 27%. In Canada the number exceeds 50%, and is rising. So either the American kids are wusses and might suffer, or the kids here are naïve and could implode. – from Generations, by Garth Turner, greaterfool.ca, 10 Aug 2014 […]