History sucks

DEAD modified

“Many millenials are getting frustrated by how long it now takes to ‘get started’ in life,” Kirsten writes me. “In WWII, a young man of 16 was considered an adult, and able to find work/help support the ginormous brood his mother had given birth to. Student debt was unheard of, a car cost less than one year’s wages, and a house would cost you all of your savings. Now, we are almost considered children until sometime after we graduate university, we are graduating with debt, and buying a house will likely cost us mortgage payments for 15+years.”

Without a doubt, there’s a meme today we’re in uncharted times. Maybe we are. After all, in the 1940s 16-year-olds were enlisting. By the mid-Forties 37,000 Canadians, most of them kids, had perished. So, life was a bitch then, too, Kirsten. And nobody could tweet about it.

But while the Millennials whine, lots of Boomers gloat. Like Paul Etherington, the current prez of the world’s biggest real estate board, in Toronto. He wrote a piece for the mainstream media this past weekend – as a trusted real estate leader – telling people like Kirsten the longer they dither over buying a condo, the more impoverished their lives will be.

Are houses now averaging $550,700 overvalued, he asks? Dig this response:

“It’s easy to see how much of a strong long-term investment real estate represents by taking a look back at our city’s history. Looking back 18 years, to July 1996, the average price was $199,856, reflecting an increase of 175%… it does illustrate an indisputable truth: a sensible investment in housing provides strong long-term returns.

“Reaching even farther back, 48 years, to 1966, the average price for a new home was $22,500.  Today, a parking space in a downtown condominium can easily sell for more than the cost of a home in 1966… A Toronto home purchased 78 years ago, in 1936, could have been snapped up for approximately $8,000.”

See what I mean? The young feel bitter and disenfranchised they can’t have what they think their parents had at their age. Meanwhile the old farts just want everyone to be like them. So, buy the damn house, kid.

Let’s give some context to Mr. Etherington’s blatherings.

In 1936 there was a depression. The jobless rate hit 30% in 1933, there was no unemployment insurance and the feds operated relief camps for idle men. The average annual wage for a two-income household (which was rare) was $1,473, and the average Toronto house cost $8,000. In other words, it took 5.4 times annual income to buy – which by all measures was extremely unaffordable. The prime rate was 5.21% (almost double that of today), and mortgages were in the 7% range. And Paul Etherington says Toronto houses could be ‘snapped up.’

In 1966 the average income for men was $5,483 and for women $3,016. So a working couple making $8,499 was considered middle class and could buy a house priced at $22,500 with just 2.6 times annual income. In other words, affordability had soared with wages rising as the economy boomed. Real estate price increases were kept down, in part, by the average mortgage rate of 7.6%.

Thirty years later, in 1996, male incomes averaged $32,588 and for women it was $21,735. So with two incomes a couple pulled in $54,323, which made it fairly easy to buy a house costing $199,856. The multiple then sat at a reasonable 3.6 times family earnings. Mortgage rates were pretty consistent as well – pegged at 7.2% that year.

Today the typical Toronto family brings home $98,116, while average house prices in the Toronto area have soared to $538,530, in large part because 3% mortgages make debt easy to carry. But compared to incomes, real estate is just as unaffordable as it was in 1936 – at 5.5 times household income.

So what are the lessons?

  • History tells us houses are seriously too expensive. Most Boomers have no idea how much easier it was to score real estate three or four decades ago, or how low rates today are masking the idiocy of buying at these levels.
  • Clearly there’s a negative correlation between rates and prices. Low rates bring high prices. Ironically, interest rates are down today because the economy’s weak, keeping wages suppressed. The worst of two economic realities.
  • Today’s rates are probably an anomaly, the work of massively interventionist central banks. They will eventually revert to historic levels. In 1936, 1966 and 1996, that was 7% for a five-year loan – more than double current levels. Imagine what that will bring.
  • Therefore worry more about debt levels than ever-rising house values. They will be falling in the future. Wait.
  • Realtors like Paul Etherington, placed in a position of public trust and influence, are an embarrassment. Worse, they lead people into bad decisions with crayon economics and McFacts. To be kind, it results from ignorance. More likely, it’s greed. Unknown to this industry is the concept of duty of care. Leaders care for those who depend upon them for advice and knowledge. Predators do not.

My advice to Kirsten. Stay cynical, kid.

161 comments ↓

#1 Cow Man on 08.24.14 at 6:18 pm

Sir garth:
You phrase it so eloquently. ” More likely, it’s greed. Unknown to this industry is the concept of duty of care. Leaders care for those who depend upon them for advice and knowledge. Predators do not.”

I thought you were speaking about “Whole Life Insurance” sales people.

#2 Linda on 08.24.14 at 6:26 pm

Good comparison chart Garth – like how you included average household incomes along with house prices for various time periods. I agree the prices are not sustainable, but even if they correct by 20% it seems to me that they are still not really affordable, especially given the likelihood the properties in question will need serious money for repairs/maintenance. It seems to me that houses have replaced cars as symbols of having achieved independence. Or maybe it is just that people today can’t afford to have a car if they buy a house.

#3 TurnerNation on 08.24.14 at 6:35 pm

And education/regurgitation. From JK to Uni of undergrad this is 18-20 years of it. Then, finally, you are ready for a job as a waiter/waitress. I’ve met many. Just ask how many have degrees.

The golden elite unions are cleaning up though. Best advice to kids is: get a degree in “public policy” and become a city manger, might get up to 100-250k yr; or skip school and become a cop or parking control officer in Toronto.
Verified a parking officer made up to 140k/yr with overtime. Cops easily get 100k plus. Add paid duty time at 68/hr. 2 paid court days each month regardless of attendants. Unmatched union benefits for which no politician will dare chance.

Inflation, what inflation? The air’s great way up here, in planet Blisstonia.

http://www.cbc.ca/news/canada/calgary/alberta-considering-tuition-hikes-through-market-modifiers-1.2744918

“The provincial government legislated in 2006 that tuition cannot rise at a rate higher than inflation, which rose to 2.5 per cent in Alberta in July 2014 compared to July 2013.

However, the current legislation allows for market modifiers as a one-off increase to bring tuition fees in line with other institutions if the school looking to raise tuition can show a clear discrepancy.

If accepted, the proposed increase at the University of Alberta’s Faculty of Law would bring annual tuition to $15,995 from the current $10,121 — an increase of 58 per cent.”

#4 Retired Boomer - WI on 08.24.14 at 6:40 pm

By all means, let those interest rates normalize to 6-7-8%.

I don’t mind if the portfolio of stocks loses 10-25% on the way to normalization. Hey, it’s just me.

Then, raises will rise to meet the real cost of normal living, the debt indentured will be crushed but who gives a f$$^ about them anyway? We can gin up the minimum wage and, gosh forbid taxes as well here in the US and the world will follow suit.

Except Kansas they are different there you know.

#5 Sideline Sitter on 08.24.14 at 6:41 pm

I always say “I’d rather have a 450K mortgage at 11% instead of a 900K mortgage at 3%”… because I can pay off 450K WAY faster than 900K.

of course, my preference is to be mortgage-free – and as luck would have it, I am!

#6 David on 08.24.14 at 6:47 pm

It’s been a while since we’ve seen any leaders then, predators abound.

#7 rainclouds on 08.24.14 at 6:48 pm

Tubby’s lackey is showing “leadership” too . OMG !

http://www.forexlive.com/blog/2014/08/24/bank-of-canada-poloz-interest-rates-rising-inflation-25-august-2014/?mobile=true

#8 Jackofall on 08.24.14 at 6:48 pm

” it does illustrate an indisputable truth: a sensible investment in housing provides strong long-term returns.”

Completely unbelievable. I just don’t have words. In any other professional industry he would be charged for his overt deception and professional incompetence. Thank god this guy is not in a position to influence the general public.

Oh wait.

#9 Jason on 08.24.14 at 6:49 pm

#1 What’s wrong with “Life Insurance” sales people?

#10 hohoho on 08.24.14 at 6:51 pm

DJIA:
1936: ~150
1966: ~850
1996: ~5500
2014: ~17000
not counting costs and dividends/reinvestment etc

#11 Retired Boomer - WI on 08.24.14 at 6:51 pm

Hmmm. Let me go back into my own families history. Grandpa had 7 kids 6 lived to adulthood. My dad graduated high school in 1928. My mother did not she went to work in the depression of the 30’s and in the 40’s owned 2 houses and a business. HARD work accounted for more than any degree today.
Only 1 graduated college. Most did graduate high school.
All worked, owned homes, raised families.
On to the cousins. Most graduated college, all did high school. Today most are retired. Two well healed, the rest much more of the lower middle class. Of the two well off, one has over 5MM, the other just over 1MM.
Different outcomes, but most had the same equal start.

How does that happen?

#12 Freedom First on 08.24.14 at 6:57 pm

Very nicely put Garth.

Most unfortunate though, that the masses swallow the Blatherings as truth. However, also most unfortunate, the Americans, the Japanese, and many Europeans, among others, learned that the same Blatherings cost them dearly, but only after multi-millions of these people were financially neutered by their RE purchases at record prices. Sad, but 1 of many good reasons for me to always keep my “Freedom First”.

#13 crowdedelevatorfartz on 08.24.14 at 6:57 pm

Re the photo:
“I see dead people’s stuff, everywhere.”

Time for a dip in the pool, swealtering in Burnaby with more cloudless days to come…………..ahhhhhhh the life of a renter.

#14 Babblemaster on 08.24.14 at 7:03 pm

“Today’s rates are probably an anomaly, the work of massively interventionist central banks. They will eventually revert to historic levels.” – Garth

———————————————————-

Sure they will. Maybe when the millenials are in their nineties.

#15 totalinvestor.com on 08.24.14 at 7:04 pm

Why study history?
To know the past is to know the future.

http://postimg.org/image/dmkwbjzvd/

#16 LH on 08.24.14 at 7:07 pm

I love antiques. Especially old and heavy 18k gold cufflinks. I buy them them cheaper than what it costs to manufacture today. Why buy anything new these days?

#17 Casual Observer on 08.24.14 at 7:08 pm

I had this same conversation with an old timer and he tried saying that it’s always been difficult to buy a house.

I asked him what he was getting paid when he bought his first house. He said $1.00/hr. (about $2000/yr.)

I asked what his first house cost him. He said it was $5000 brand new.

I explained that ratio was 2.5 times one salary.

I then explained that prices today are at least double or triple what he paid in relation to his income.

He said he didn’t believe me, so I asked him if he could find me a house (not condo) for 2.5 times the average salary today.

He walked away shaking his head, muttering that it’s always been expensive, and that I was just whining and complaining about how hard it is now-a-days.

#18 Armand R. Dillhole on 08.24.14 at 7:14 pm

As a real estate agent I have a million things to do in a day.

So today’s lesson is if I’m lying to someone I must be carefull not to give them context or they might figure out that it’s untruthfull.

#19 Daisy Mae on 08.24.14 at 7:14 pm

“After all, in the 1940s 16-year-olds were enlisting. By the mid-Forties 37,000 Canadians, most of them kids, had perished….”

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

And most were lucky to have finished school, most quitting in grade 8 to help at home….or to serve. Few attended university. Couldn’t afford it. Remember the soup kitchens and bread lines?

#20 Shawn on 08.24.14 at 7:16 pm

Has anyone got a REALLY BIG one?

I suspect that there are some really giant RRSPs out there. Like $3 million or much more in one RRSP.

This might be for someone who is about 70 (not yet withdrawing) and who had regularly maxed it out and was not in a pension plan (so could contribute up to 18% of earned income) and who favored equities as investments.

In some cases people years ago were allowed to make special contributions to their RRSP. Retirement allowances before 1991 generated $2000 per year in extra RRSP room.

Does anyone have such a large RRSP or have it on good authority that they exist?

If they exist it will because of large contributions, good to excellent returns and a lot of years of tax free compounding.

#21 Mr. Reality on 08.24.14 at 7:30 pm

The industry revolving around the exploitation of buying and selling homes through manipulating people’s emotions, encouraging massive amounts of debt and encouraging ripping people off by inflating markets to inflated levels only to drop interest rates to the point that these levels, and the debt it takes to finance them are no big deal because prices will always go up….is not an embarrassment. The result when this market crumbles and its impacts on the Canadian economy will be the real embarrassment. Canada is screwed.

Mr. R.

#22 Banjopete on 08.24.14 at 7:35 pm

I can’t help but think there should be a big blanket disclosure statement that prefaces these advertisements errr newspaper articles saying something along the lines of

“TREB and the real estate industry as a whole supplies so much money to this and all newspapers in the country that we will print anything they say without question, fact checking, or moral dilemmas even when gross misrepresentation of facts and obvious conflicts of interest are present.”

Better yet, the silly “Paid Advertisement” stamp should be at the top of all the pages relating to real estate, then people might use their minds a bit when they read through it.

#23 johnsaccy123 on 08.24.14 at 7:49 pm

#10 hohoho.

Dow Jones Index move from 150 to 17000 includes a number of non performing companies removed from the index of 30 compaies with addition to movers. It is very difficult to compare the growth from 150 pts to 17000 pts that easily.

You mean like comparing house prices with no context of incomes or mortgage rates? — Garth

#24 Alan on 08.24.14 at 7:52 pm

I think it was in 1986 I bought a home in Toronto thanks partly to your article in the paper advising that it was time to buy as houses were 2X family income. Just before prices went up. You were right. Thanks Garth

#25 takla on 08.24.14 at 7:53 pm

jobsite im on the developer just let slip that their ceaseing construction on up to 10 preplanned duplex’s{asking price 645 tho each}….
Why?? lack of presales and very low walk in interest.
ive been on this site for 4 months and seldom saw the owner till the last 2 weeks.Last week he was on site pushing trades,and actually laboring himself..lol
im starting to smell fear…

#26 Entrepreneur on 08.24.14 at 7:54 pm

The stats above show only the ones that were working and able to afford at the various times. During the depression era many people from the cities would go the small farms to work for food. In the eighties many small farms from the prairies closed, many bought up by bigger corporations. In the nineties many woman had two children at the most and went to work. Now most will only have one child and find that is too expensive.

The stats mention work but not everyone fits into it. Small business is out of this equation. A friend just came back from Victoria and noticed most small stores are closed down, a eery feeling.

Politicians should look at the whole picture to operate the country properly. When ignoring others to prop themselves up only creates a one-sided viewpoint, that is not leadership. Everyone is important; everyone contributes to the community.

#27 ride sally ride on 08.24.14 at 7:54 pm

Nor was WWII a time when Canada was flooded with crooked Chinese government officials ripping up the floorboards and stealing everything that isn’t nailed down in the PRC…and then laundering the filthy lucre in places like Canada….as is reported in the latest survey. The flood of these ‘nonexistent ghosts who have no name or origin’ as Garth would call them…..has caused house prices to skyrocket as they form a tsunami never factored into the local market economics.

Sorry Garth…..HAM is a factor…even though you won’t say the ‘C’ word in public…for whatever reason.

Take your hate to another blog. You are done here. — Garth

#28 lawboy on 08.24.14 at 7:56 pm

#5 Sideline sitter
I always say “I’d rather have a 450K mortgage at 11% instead of a 900K mortgage at 3%”… because I can pay off 450K WAY faster than 900K

Not at that interest rate differential you can’t! Your obligation and payments will be approximately the same over the term…the same monthly payment, and same total obligation of approximately 1.3 million.

#29 AACI home-dog on 08.24.14 at 7:56 pm

#18 Shawn
I have about 1,500k with spousal.
How bout you ?

#30 AisA on 08.24.14 at 7:57 pm

I see some mothball huffers still imagine that if prices slip into anything that looks like a correction they will by some miracle be limited to 20% when a 164% of what most people have doesn’t actually cut it anymore. Flabbergasting really.

#31 Van Isle Renter on 08.24.14 at 8:01 pm

The comparisons are interesting, but they miss one fundamental issue: Tax burdens are far higher today than in the past. And they will continue to climb.

It would be even more interesting to look at housing prices vs. AFTER TAX income. That would be a more realistic comparator of housing affordability.

My 84 year old dad and I had a similar discussion a few days ago about housing and wages. As we discussed it, I realized something: the three main issues in a comfortable life are food, clothing and shelter. I think everyone can agree that high prices for food and clothing are bad, so why is a high price for shelter a good thing?

#32 TurnerNation on 08.24.14 at 8:01 pm

Back on topic, the cheapest Zipcar on rotation in my rental kando is now the Kia Rio. :(

Was zipping it along the Gardiner Distressway when suddenly I needed some engine braking, asap – as performance limits were reached (not hard in a Kia, “Unsafe at any speed”).
I whacked the manu-matic’s lever down its gate, from 3rd to 2nd, but the slushbox was unresponsive. Apparently that shift would have tripped the rev limiter.

(In the my glory days of driving I would have heel-toed and matched the revs no matter how high. Got 225,000km out of original clutch, in spite of spirited driving.)

#33 eddy on 08.24.14 at 8:04 pm

Paul Etherington works for the dues paying members who voted for him and pay his salary. Part of his job description is to say : “Now is the time to buy”

But there’s more to Paul’s job: he also has to say
“Now is the time to sell”

From the quotes above I’d say he is doing a great job.

#34 Don Sanderson on 08.24.14 at 8:05 pm

The Financial Post had an article that stated Europe could be in for a lost decade or worse like Japan has.

Let us hope North America and other economies stay away from such an economic calamity.

#35 Herf on 08.24.14 at 8:12 pm

From Webster’s:

lead·er
noun \ˈlē-dər\

2 : a person who leads: as
a : guide, conductor
b (1) : a person who directs a military force or unit (2)
: a person who has commanding authority or influence
.
.
.
d (1) : conductor c (2) : a first or principal performer of a group

No, that doesn’t seem to fit, unless perhaps, the performer in question is a clown.

Let’s try the following:

1huck·ster
noun \ˈhək-stər\

: someone who sells or advertises something in an aggressive, dishonest, or annoying way

Yeah, that seems to fit.

#36 Timmy on 08.24.14 at 8:12 pm

Vancouver housing Data Reveal Chinese Connection

http://www.theglobeandmail.com/report-on-business/economy/housing/vancouver-housing-data-reveals-chinese-connection/article20164662/

Globe and Mail…Wonder if Garth will delete this post as well, as it contracts what he has been saying

Old news, weak data. Posted here numerous times. Try to keep up. — Garth

#37 pinstripe on 08.24.14 at 8:18 pm

The next step to housing will be the In-fills.

Many developers in many cities are looking at infills.

This blog should do a commentary on infills.

I am 86 yo now. My first property cost 8 grand in the early 1950s. Second cost 8 grand in mid 1950s. Third cost 10 grand in 1960.

I am offered many millions for the 3 properties. I know that I could get more. I do not need the money to support my lifestyle.

#38 Nemesis on 08.24.14 at 8:27 pm

#HistorySucks… #EspeciallyWhenYou’reLivingIt…

#TheOriginalLostGeneration.

http://youtu.be/nj5ClZAQwHs

[NoteToRalph: GrandPa fought for the Kaiser. Like he had a choice… Miraculously, he survived “All’sQuietOnTheWestern…”. And promptly fled, post conflict, to Henry’s foundries on the RiverRouge. The rest, as they say, was History. NoteToGT: “Leaders care for those who depend upon them for advice and knowledge.” – In a word? Yes. I would add to that, “and their lives.”… It was a VeryGoodYear… and a VeryGood’School’. #BonusZenQuoteOfTheWeek: “Regard your soldiers as your children, and they will follow you into the deepest valleys; look on them as your own beloved sons, and they will stand by you even unto death.” – Sun Tzu]

#BonusZenForDoggieCinephiles&Historiographers:

http://youtu.be/Ciq9ts02ci4

#39 Realties.ca » History sucks on 08.24.14 at 8:28 pm

[…] Source: http://www.greaterfool.ca/2014/08/24/history-sucks/ […]

#40 coastal on 08.24.14 at 8:31 pm

Seeing more Victoria houses with reduced prices, or others supposedly priced for sale in very nice neighborhoods and languishing. One place reduced $30K in the low $800’s is right by UVIC, huge lot, nice pool, and high end neighborhood. I coulda swore the Victoria real estate ho’s were just on Victoria TV last month or so saying the Asians are coming into this hood in a big way because of the university location. Obviously more bullshit by those so called “people of public trust and influence”. If it was true this house would have sold months ago at prime pool season time.

#41 Shawn on 08.24.14 at 8:33 pm

He Showed Me His…

AACI home-dog on 08.24.14 at 7:56 pm
#18 Shawn
I have about 1,500k with spousal.
How bout you ?

*****************************************
$1,258,902 with spouse (no spousal)

Our total contributions were $138,061.

We started at age 29 for me, 31 for her and we are now both age 54.

Compound annual return calculates at 15.1%.

Sadly this is pre-tax money, so only about 60% of this could be added to out net worth, but we also got about 40% refunds an the $138k contributed. About 40% of these RRSP was effectively funded by the tax refunds and so about 40% of the RRSP will go back to the government. If our marginal tax rate stays constant, our 60% share will have grown completely tax free.

#42 Bullish on Burnaby on 08.24.14 at 8:34 pm

There is some truth to what he is saying especially in vancouver. There is no more land to build single family lots on. If you can afford it go ahead. No condos though!

#43 Hamish 42 on 08.24.14 at 8:34 pm

Just arrived in Holland, Michigan today, nice little town close to the water with some Universities downtown and industry on the outskirts.
A 3 bed starter home here, detached of course, is $210K. I simply do not understand how similar houses in Mississauga, Ontario can sustain a price level over 2 times that price, trust me this is a nicer place.
I suspect that, one day, in both places these homes will be around the $250K mark, and the real estate sections of the Toronto papers will read very differently.

#44 yeeeks on 08.24.14 at 8:38 pm

DELETED

#45 X on 08.24.14 at 8:38 pm

Hopefully QE will end soon, and the bond market will push mortgages higher….and also hoping the US economy will grind higher yet and will begin to increase rates next year. These low rates are causing the wool to be pulled over the public’s eyes….

These low rates are ultimately killing the longevity of the RE market for short term gain.

#46 Shawn on 08.24.14 at 8:42 pm

A Simple Financial Plan to Follow

Here is the financial plan that I followed and that would work out well for most people.

Simply take as much advantage of tax-assisted savings as you can.

RRSP, RESP, TFSA… max ’em out to the extent you can. Invest with a bias to equities (this can certainly be ETFs).

Never EVER touch any of the money until you are forced to.

That’s it.

For those with kids I would do RESP first as it provides free money, next is probably TFSA although it has the large disadvantage of being far too accessible for spending.

In theory RRSP comes last.

If you have little discipline and will spend the TFSA then do RRSP because it is usually easier to consider it untouchable.

Even better of course is to combine this with a job with a defined benefit pension…

#47 45north on 08.24.14 at 8:49 pm

Without a doubt, there’s a meme today we’re in uncharted times. Maybe we are.

I think we are in uncharted times. Paul Etherington is right prices have gone up consistently since World War II. My children tell me that I have done well in real estate. I tell them yes I know but that does not mean you will. I think it’s just about now that the younger generation is figuring out that they are not doing well. I mean they don’t come to the same conclusion at the same time. I heard a story yesterday about a couple in Vancouver they have two condos and a single family house. And mortgages on all three. They are truly “all in”.

Daisy Mae : Remember the soup kitchens and bread lines?

no I don’t I was born after World War II.

takla : the job site I’m on, the developer just let slip that he’s ceaseing construction on 10 preplanned duplex’s

Why?? lack of presales and very low walk-in interest.
I’ve been on this site for 4 months and seldom saw him till the last 2 weeks. Last week he was on site pushing trades,and actually laboring himself
im starting to smell fear…

that got my attention

#48 High Plains Drifter on 08.24.14 at 8:53 pm

There is only one generation for me and it was called the GREAT generation. The rest are in a big food fight. Some of the greatest were hurt by rapacious central bank rates circa 1980. Rates that were at 21% could see negative and still leave our concept of average at over 10%. Look for higher rates in the wishing well because you will not find the old normal, politically viable. We could advise, be happy with what you got.

#49 Sideline Sitter on 08.24.14 at 8:55 pm

#28 Not at that interest rate differential you can’t! Your obligation and payments will be approximately the same over the term

you’re missing my point. I guess you’re assuming that the monthly obligation is all I can afford (which, I would NEVER borrow to the max, because that’s just stupid risky).

The extra $$$ I can afford to put down each month only needs to pay off $450k, and not $900k.

SO much easier to pay off $450K versus $900K

#50 Chump on a Stump on 08.24.14 at 9:01 pm

Do real estate agents in Canada have a code which they must abide by, that includes an outline of their fiduciary duty to their clients?

It’s sad that people in such influential positions can disseminate poor information, whether from ignorance or plain deception. I’m glad Garth feels the need to dispel poor information publicly, and in turn embarrass this chump.

#51 hohoho on 08.24.14 at 9:01 pm

> … parking officer made up to 140k/yr with overtime. Cops easily get 100k plus …

both equal opportunity jobs presumably?

#52 armpit on 08.24.14 at 9:02 pm

I don’t know garth. Homes back in the 30s were lucky to have a toilet. ..a pull down chain type at best. Today’s homes have ensuite privileges. ..minimal, dry basement, totally insulated and warranty.

#53 greyhound on 08.24.14 at 9:03 pm

Another way to look at real estate prices is to consider how much house each dollar bought in 1936 and now in 2014.
Using Garth’s numbers,
In 1936, a dollar bought 1/8000th of an average house;
In 2014 a dollar buys 1/538530th of an average house.

Are houses really almost 68 times better now than they were only 78 years ago? Or has inflation eroded the purchasing power of all our dollars? And our friends in the central banks would like at least 2% inflation to continue indefinitely…

#54 Fed-up on 08.24.14 at 9:09 pm

#49 Sideline Sitter on 08.24.14 at 8:55 pm

#28 Not at that interest rate differential you can’t! Your obligation and payments will be approximately the same over the term

you’re missing my point. I guess you’re assuming that the monthly obligation is all I can afford (which, I would NEVER borrow to the max, because that’s just stupid risky).

The extra $$$ I can afford to put down each month only needs to pay off $450k, and not $900k.

SO much easier to pay off $450K versus $900K
———————————————————————–
I agree Sideline Sitter.

And, also no one locked in at 11% or 12% for 30 years. By the late 90’s, interest rates were half that and most buyers had way more equity than 0 or 5% down back then.

#55 -=jwk=- on 08.24.14 at 9:19 pm

Interest rates aren’t going up. CMHC is not going anywhere. House prices can, an will, continue to rise. They sure as heck aren’t going to go down – why would they?

#56 Uh Oh Canada on 08.24.14 at 9:25 pm

Sadly, the prices we pay today are usually for the SAME house that the previous owners snapped up for less. Factor in the maintenance and updating costs, and you’re looking at WAY more expensive housing costs.

A friend of a friend of a friend told me about a friend whose house is sinking. It will cost a fortune to fix that one.

#57 Andrew Woburn on 08.24.14 at 9:26 pm

Casual Observer on 08.24.14 at 7:08 pm
I explained that ratio was 2.5 times one salary.

I then explained that prices today are at least double or triple what he paid in relation to his income.

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

As far as I know these crazy price ratios only apply in major cities. In smaller towns and country the ratio is probably still 3.0-3.5.

In 1950 approximately 25% of Canadians lived in cities, now its about 75% and the population has about doubled. Granted metropolitan areas now include suburbs that didn’t exist in 1950 but the core cities cannot expand and that is where the price pressure is greatest. If millennials want grandpa’s affordability levels on SFH, they can’t all live in walking distance of Yonge and Bloor. Grandpa didn’t.

#58 Ronaldo on 08.24.14 at 9:37 pm

During the depression 85% of people lived on farms and 15% in towns and cities. Today, the opposite. Unemployment was 25% (not counting those on the farms). This meant that 85% of people were pretty much self sufficient as were my family and their families before. I can’t imagine what things would be like today for those people living in the towns and cities without the government aid like EI, welfare, etc. if we were to experience the same economic conditions as in the 30’s. What would the equivalent unemployment rate be today if 25% of the 85% of people now living in cities were to be unemployed vs. the 25% of the 15% of those back then? How can we accurately compare today to back in the 30’s with any accuracy? It’s a whole different ball game.

#59 Waterloo Resident on 08.24.14 at 9:43 pm

QUOTE: “Today’s rates are probably an anomaly, the work of massively interventionist central banks. They will eventually revert to historic levels.” – Garth

—————————–

Dear Garth, with the governments all around the world in debt up to their eyeballs, and people also up to debt up to their eyeballs, if interest rates should go back up to 7% then you might as well say ‘GOODBYE’ to the financial world as we know it because it will simple explode into nothingness. About 95% of the population would be without a job, or they would be working but without any pay. That’s what happens in an all-out currency collapse / financial collapse. We’ve never seen it before but believe me, it would be almost as bad as nuclear war.

Want to imagine how bad: Imagine living in a tent in a farmer’s field, with no money, no personal identification of any sort. Then imagine that you are all alone, no welfare offices, no food pantries, no grocery stories, NOTHING. All you’ve got is your bare hands and about 48 hours before you begin starving to death. Now that is what an all-out financial collapse is like because everything you and I know as society will stop functioning and you are ‘ON-YOUR-OWN’. So for heaven’s sake, lets hope interest rates DO NOT go up to 7% or we are all dead people.

#60 Tony on 08.24.14 at 9:51 pm

Re: #45 X on 08.24.14 at 8:38 pm

Hopefully will turn into hopeless as real rates turn negative in America for a long, long time.

Consensus opinion is the Fed will be raising rates in 2015. — Garth

#61 Ronaldo on 08.24.14 at 9:51 pm

#41 Shawn – it appears to me that you have created quite a tax trap for yourself given that you both have excellent defined benefit pensions. The tax man will love ya.

#62 devore on 08.24.14 at 9:53 pm

#20 Shawn

Does anyone have such a large RRSP or have it on good authority that they exist?

I don’t know, you’re the one coming up with $3.5M RRSP account examples, so you tell me.

Once RRSP is converted to an RRIF, a minimum annual withdrawal schedule applies. A 60 year old with a $3.5M RRIF will be forced to withdraw $99k annually. It’s not about how much you make, it’s how much you keep. A pile of investments which you are free to do with as you wish and is minimally taxable is better than a locked in much larger pile of money on which you are forced to pay income taxes.

There is no doubt there is value in RRSPs. It is a vehicle which encourages saving (via tax refund) and discourages early withdrawals (via penalties and taxes). Its real power for serious savers lies in the fact that you can invest your pre-tax income, deferring taxes on 60-70% of it until retirement, and things like income splitting, not that you will end up with more money had you used other investment accounts.

#63 april on 08.24.14 at 10:07 pm

– #55 – You wish … but it’s happening………

#64 devore on 08.24.14 at 10:09 pm

#28 lawboy

Not at that interest rate differential you can’t! Your obligation and payments will be approximately the same over the term…the same monthly payment, and same total obligation of approximately 1.3 million.

An increasing income, increased savings, a windfall, a bonus, an inheritance, etc, all will allow you to pay off a smaller mortgage much faster than a large mortgage, even if the monthly payments are the same.

There is a reason we say people don’t really expect to ever pay off their $1M mortgages. The days where you could tighten the belt, work hard for extra money, and pay off the mortgage in under 10 years are well behind us. Your statement is pretty foolish, but typical for the average person who cannot see past the monthly payment.

#65 Two-thirds on 08.24.14 at 10:10 pm

Garth – there is a likely typo on the third bullet: “In 1936, 1966 and 1966, that was 7% for a five-year loan”

Perhaps the third year should read “1996”?

Either way, good post and I will keep waiting to buy until rates become unbearable – while growing the investment portfolio. Cheers!

#66 The Patient on 08.24.14 at 10:13 pm

You’re curiously silent about the impact of HAM evidence, Garth:

http://www.theglobeandmail.com/report-on-business/economy/housing/vancouver-housing-data-reveals-chinese-connection/article20164662/#dashboard/follows/

You’re curiously numb. I have commented several times already on a story with no news in it. — Garth

#67 Second Class on 08.24.14 at 10:16 pm

Dear Boomers,

I was told today that buying an expensive house is smart because the people who can afford expensie houses always have money and that the price of houses doesnt drop percentage wise but an even say 100,000 across all homes.

I also got told to buy a house worth a large amount because in years it will be worth a million and expensive houses are easier to sell than starter homes. (ask those sellin million dollar plus homes right now)

And then the old houses never go down in value.

I have often been told investing is risky and I can’t win against the “big boys”.

Im sorry to any of the boomers I offend but your generation is like a heard of sheep. With the majority of your generation having absolutly no concept of reality or how to manage money you have lucked out in the history pool and were born at a time where following the heard wins.

This is why you subsidize my housing as I rent. You make between 2-5% on your rental properties in a best case situation having it paid in full and can’t sell it in an instant like an ETF for a low cost. Please stop giving financial advice boomers. Its painfully bad. That young “kid” you are trying to give advice to might be able to buy a starter home in cash if they wanted to. They would rather rent for the same price or cheaper than owning.

Sincerely,

Gen Y

#68 Capt. Obvious on 08.24.14 at 10:25 pm

#28 lawboy
“Not at that interest rate differential you can’t!”

Who says the interest rate will remain 11% for the entire payback period? Just like we can’t assume mortgage rates will remain south of 4% as they are today.

#69 West Coast on 08.24.14 at 10:32 pm

….ran across a 2008 article by Don Bryer reminding us that in Canada we fixate on interest rates but miss the big picture…to pay off a typical $250,000 mortgage over a 30 year period at 5.75% will cost $275,210 in interest alone. He claims that $870,000 earnings is required to pay off a $250,000 mortgage over 30 years at 5.75%. Here’s his math:
$250,000 (principal borrowed) + $275,210 (total interest) + $344,790 (approx. payment of income taxes on $870,000 in earnings). Sobering isn’t it!

#70 Retired Boomer - WI on 08.24.14 at 10:39 pm

#59 WATERLOO RESIDENT

QE is getting long in the tooth. It will end, and rates will probably rise to a level 2-3% higher than the current inflation rate. That has been the history of interest rates during my lifetime. Inflation 2-3% interest was 4-6% (depending on your risk as assessed by the lender.

With the high inflation of the 70’s we had high interest rates. Yes, I recall seeing mortgage money for 13% didn’t borrow any of it, but it was there.

Most of my home mortgages were between 6.5%-8.75% only after building the last in 1997 (7.5% with 20% down) did rates fall. We reified at 4% for 12 yrs before we paid it off a few years later.

7% would be in the “normal” range, but it might 5-6 years to get up there.

Just like excess debt, which can be paid down quicker with a little extra effort, so can government debt. 7% would not be a reason for world panic.

Home buyers about their 6-9th year of ownership might have a oh-$hit moment.

We just don’t know the future, never did, probably never will clearly.

#71 Sheane Wallace on 08.24.14 at 10:53 pm

Crazy times.
Burning other peoples cash.
Bond interest rates strongly negative.
Governments can’t increase interest rates as they can’t afford payments so interest rate should stay low.

run_away_from_cash.

#72 Pooh on 08.24.14 at 11:04 pm

Thanks Garth – when you’re referring to income stats, are the numbers gross or net?

Gross. — Garth

#73 Jon on 08.24.14 at 11:07 pm

Shawn big rrsp are common i know a few people that have to withdraw 10k plus a month not a bad thing to have to deal with…

#74 Kenchie on 08.24.14 at 11:18 pm

#25 takla on 08.24.14 at 7:53 pm

“jobsite im on the developer just let slip that their ceaseing construction on up to 10 preplanned duplex’s{asking price 645 tho each}….
Why?? lack of presales and very low walk in interest.
ive been on this site for 4 months and seldom saw the owner till the last 2 weeks.Last week he was on site pushing trades,and actually laboring himself..lol
im starting to smell fear…”

Hi Takla, thanks for this unique perspective. What area of town was this in?

#75 Godth on 08.24.14 at 11:18 pm

Who cares? Seriously. Who cares?

-We’re @ over 7 billion on this rock – we’re told there will be 9 billion by 2050-a short 35 yrs. from now. Think about it.

-the debt (new money creation) is a exponential curve. The final doubling of the swimming pool goes from half full to full in one fell swoop, good luck 2008 and beyond.

-oil is the absolute lifeblood of our civilization and has obviously peaked in terms of production and profit. Fracing isn’t the panacea it’s been made out to be.

-The BRICS are challenging the petro-dollar status quo.

Good luck everyone.

#76 Panhead on 08.24.14 at 11:26 pm

The yougun’s today have way more to pay for … Cell phone bills, internet bills, cable bills, expensive car bills, restaurant bills, beard trimming bills …etc…etc …etc …

#77 Kenchie on 08.24.14 at 11:26 pm

#34 Don Sanderson on 08.24.14 at 8:05 pm
“The Financial Post had an article that stated Europe could be in for a lost decade or worse like Japan has.

Let us hope North America and other economies stay away from such an economic calamity.”

Japan and Europe’s (Eurozone to be precise) problems are not all that similar, except for the aging population. But even on that front, Germany has learned to import immigrants rather quickly in the past decade or so. Japan’s wound is much more severe than Europe’s. And Europe, or the Eurozone, can fix itself if it had the political will to do it. But they are too proud of the EU to let the solutions get in the way of their pride.

#78 Tiger on 08.24.14 at 11:41 pm

67 second class
Yup you shure do seem a second class ass !
I was told a lot of stuff from good old boys ,Seems your 1 of them your so young to be so stupid boy!

#79 Tiger on 08.24.14 at 11:48 pm

If it takes you 20 to 30 years to pay your mortage off, the bank loves you!
And of course you are a looser (sheep )

#80 moneymike on 08.24.14 at 11:54 pm

Off topic but I was wondering if anyone could direct me to the post about preparing for or handling inheritances. I feel there was one not too long ago but I haven’t been able to come across it.. Thanks!

#81 Kenchie on 08.24.14 at 11:55 pm

#59 Waterloo Resident on 08.24.14 at 9:43 pm
—————————–
“Dear Garth, with the governments all around the world in debt up to their eyeballs, and people also up to debt up to their eyeballs, if interest rates should go back up to 7% then you might as well say ‘GOODBYE’ to the financial world as we know it because it will simple explode into nothingness….”

Holy moly! Your post is the definition of hyperbole!

If you didn’t know before, when interest rates go up, the market value of debt falls. Therefore, the governments of the world can refinance those debts (very easily when you have an independent central bank). The real losers will be the holders of those debt securities as their holdings will depreciation. But then again, they will only be real losers if they don’t hold the bonds to maturity.

#82 Guy on 08.25.14 at 12:29 am

Wages have not kept up with inflation. The greatest spread start when Richard Nixon closed the gold window in 1971. The first thing he did was enforce wage controls at the same time since he knew that inflation would sky rocket.

If a person was making $12/hour in 1971, that person would have to be making about $80/hour today to have the same standard of living.

Since the gold window closed, the value of the dollar has plummeted. None of these changes have helped the average person.

#83 kg on 08.25.14 at 12:35 am

@56:
The confidence smells of a complete circle.

#84 Andrew Woburn on 08.25.14 at 12:38 am

#58 Ronaldo on 08.24.14 at 9:37 pm
During the depression 85% of people lived on farms and 15% in towns and cities. Today, the opposite. Unemployment was 25% (not counting those on the farms). This meant that 85% of people were pretty much self sufficient as were my family and their families before.
================================

You are right. A true depression would be a disaster. Even in the Fifties, city people grew their own vegetables in their back yards and had root cellars. Now kids think milk comes from supermarkets. I guess we’d better learn to like food stamps.

People like my great-uncle and aunt who endured the Great Depression never really recovered from the experience. He would walk seven miles every day from the “Beach Strip” in Hamilton to the construction zone for the new access road to the “Mountain” just to find out if there was work that day. Often there wasn’t and he would walk home again empty-handed. Years later when I first knew them as a child in the middle fifties, they were still afraid to spend even though he had retired from a well paying job he got in the war years and she had inherited several houses from her mother. They spent winters in Florida when that was rare but they only ate the kind of cheap food that had sustained them through the tough years and weighed every penny as if it were gold. Debt was a word they could not comprehend.

I don’t know how we got from there to the debt-is-only-a-number generation. Only an extreme pessimist would see us back in the days of soup kitchens, bu I foresee a generational shock coming up parallel to the Depression when starry eyed optimism crashes into the downside of low interest leverage. Since we’re already at negative real interest rates, I don’t know how the BOC is going to stimulate a debt-shocked populace into borrowing their way to paradise again.

#85 Jack News Flash on 08.25.14 at 1:11 am

DELETED

#86 Fiendish Thingy on 08.25.14 at 1:14 am

On top of Etherington’s misinformation, the newspaper’s website locked the comments so no one could pull the curtain back on his deception.

#87 screwed on 08.25.14 at 1:17 am

@Takla #25
where’s the job site? Lower Mainland, BC or East?

#88 nonplused on 08.25.14 at 1:20 am

Hey Garth, spot on as always.

There is something else going on in the economy besides weakness driving the squeeze on millennials and almost everyone else. It’s a structural change that is altering the employment landscape. No, it’s not new but it is starting to reach into areas only seen in the Jetson’s before: Automation.

Professionals are still safe, and maybe hair dressers and sexy waitresses, but I would venture to say over the next 10 years nobody else is. The world is moving towards 2 classes of workers; those who automate things, and those who face every diminishing job prospects.

Case in point, the Google car. This thing has driven itself 150,000 miles at last count without ever having an accident while the computer was in charge. The car has crashed, but a human was at the wheel. Now, I probably wouldn’t buy a car with a big spinning laser dome on the top and neither would you, but what happens when they figure out how to get ride of that dome? And what happens if say some municipality decided the technology works and they don’t mind spinning laser domes on their buses? How about say maybe no more bus drivers? How about taxis that are available 24/7 because they never need a break? Or maybe you don’t need a taxi because no matter how much you imbibed your car knows where you are going and how to get you there safely? What about tractor trailers that don’t kill people because they are trying to “make time”.

I know it sounds like it’s still along ways off, but what happened to the parking meter guys? Replaced by a car with 16 cameras on it that can read license plates and GPS. What about the post office? My bank is charging me for paper copies of statements now because they want it all on line. The post office mostly just delivers flyers now and soon that is all they will deliver.

Even me! The last gig I had I worked with some programmers and we built a system that can now do the job of 2 people for a week in about an hour, more with analysis maybe a day, and with only one person! That’s 13 man days a month it saves and all it burns is a bit of electricity. Ok, it kept me in beer a few months, but what if I keep doing this? Lots of new grads out of work. And if I don’t somebody else will.

Have you seen the new cash registers at the A&W at Pearson’s? Yup you can place your order without the need of a cashier and just wait for your number to be called. So much for minimum wage. I even saw a restaurant that had an iPad tethered to every table that displayed the menu and also took your order. Which helps solve how much you should tip I might add.

Modern planes have pretty much been flying themselves for some time now. Yes they can even land we just aren’t willing to accept that quite yet.

The list goes on and on. ATM’s, Netflix, Amazon’s robot warehouses, etc. Companies are even relying on software to schedule staff based on historical cash register information (Starbucks, etc.). Gone are the days where you got to work your $9/hour job for 8 hours a day. The machine knows we need so many people from 11-2, and then not again until 5, and schedules them as such.

Everything is changing man. Everything. It’s not just outsourcing to China (I wonder what those guys building K2’s skis now think they are for?). We also have an ongoing rise of the machines, and if you aren’t the one building them, you might have a problem.

But yet I still embrace all of this. Maybe when the revolution is more complete I also might only have to work 4 hours a day. That would be nice. We just have to figure out how to organise ourselves around the new capabilities. Or maybe I could work the usual 10 hours a day and be able to hire my own team of amazons like Garth. I’d be good with that too.

#89 Finally on 08.25.14 at 1:27 am

Live in YVR. Sold 2.5 years ago. Been waiting for the correction, but I’m getting itchy. Put an offer at 850k for a house in North Van. It did get rejected, and they took another offer, but if it went thru I would have turned to the dark side and bought an overpriced house. It was nice compared to other crap houses in that price range. Subjects get removed Tuesday, if it doesn’t go thru I might be buying it. Can’t stop the train …

#90 Joe2.0 on 08.25.14 at 2:18 am

HOMEASIDE-caused by the force feeding of BS.

#91 Shaner on 08.25.14 at 3:14 am

I nominate Garth Turner in the ALS Ice Bucket Challenge….

#92 Conundrum in the Capital on 08.25.14 at 4:20 am

Hi Garth — So what do you think — I am 54, single, no dependents, have a good income (160k), have saved about 450k, not including about 150k I put on a down payment on a town house in Centretown Ottawa 5 years ago. Problem is the size of my mortage — I paid 425, so have about 280 to go — UGHH. I have been given an opportunity for a new position within the same solid company where I can work from home/live wherever I want as the entire team is mobile. I am thinking about a move to Lunenburg (yes, I watched your Whyhere.CA video). I figure I can live in a place that is affordable and buy the sea — perhaps purchase a little place and have a mortgage half of what mine is now. A good move? There is nothing tying me to Ottawa?

See you at the Fish Shack. — Garth

#93 Conundrum in the Capital on 08.25.14 at 4:22 am

Um — that’s ‘by the sea’ not buy the sea — although I understand that our government is trying to sell some off. ;)

#94 Overseas Canuck on 08.25.14 at 6:54 am

Hi Garth,

Business Insider has put together a list of over 90 charts from leading economists with their views of what they mean for the world economy, interest rates, stocks, housing, etc. It appears to be a month old so some data we know are already out of date (e.g. S&P 500 Q2 earnings outperformed estimates).

You might find it interesting, though, and I am sure many of us would be curious which charts you feel are most relevant or telling with respect to your view of how the world is going.

http://www.businessinsider.com/bi-most-important-charts-in-the-world-2014-7

#95 Cow Man on 08.25.14 at 7:38 am

# 9 Jason

Life Insurance people are virtually unregulated. FSCO is their regulatory authority in Ontario; but are virtually toothless. The Insurance Sales people can misrepresent, by omission just as conveniently as Real Estate Sales people. Having been “churned” through the complaints process for over three year, lets just say it is buyer beware. This has nothing to do with product performance. It has to do with misrepresentation at point of sale.

#96 rosie "moving forward" in the knowledge that, "this won't end well" on 08.25.14 at 7:46 am

Posted before but it’s time for a review. It’s hard to believe, but some people are dissemblers.

http://survivingthecrash.blogspot.ca/2006/09/housing-bubble-vs-great-depression.html

#97 Victor V on 08.25.14 at 8:11 am

http://www.theglobeandmail.com/report-on-business/economy/bank-of-canada-wont-follow-feds-lead-on-interest-rates-poloz-says/article20186514/

Bank of Canada Governor Stephen Poloz wants to make something perfectly clear: When the Federal Reserve starts raising interest rates, Canada’s central bank won’t necessarily follow immediately.

“The main thing people should understand is that our policy is quite capable of being fully independent, as it has been these past few years,” Mr. Poloz said in an interview at the annual gathering of central bankers and economists at Jackson Hole, Wyo., over the weekend.

He is simply talking the dollar down. Time-worn strategy. — Garth

#98 The real Kip on 08.25.14 at 8:15 am

Is it poop on Boomers week again? I’m not sure how Kirsten’s lament can transform into another Boomer bashfest but hey, this is The Greater Fool blog.

Yep, Boomers sure have had an easy time of it, like in the early 80’s when interest rates spiked to 22% and some of my friends lost houses that cost $100,000 or less.now that was a recession, a real recession, not the faux recession we just had.

Boomers rule!

#99 Mike in Toronto on 08.25.14 at 8:32 am

@76 Panhead: “The yougun’s today have way more to pay for … Cell phone bills, internet bills, cable bills, expensive car bills, restaurant bills, beard trimming bills …etc…etc …etc ….”

Don’t forget that education which is a minimum requirement for most jobs, and paid for the boomers in grants. Oh and retirement packages which don’t exist anymore.

For many people, the car is a necessity for work.

#100 Jeff on 08.25.14 at 8:33 am

pinstripe on 08.24.14 at 8:18 pm
The next step to housing will be the In-fills.

Many developers in many cities are looking at infills.

This blog should do a commentary on infills.

I am 86 yo now. My first property cost 8 grand in the early 1950s. Second cost 8 grand in mid 1950s. Third cost 10 grand in 1960.

I am offered many millions for the 3 properties. I know that I could get more. I do not need the money to support my lifestyle.

____________

guess you’re just better than the rest of us, you know, buying during a lottery era…you just sit on those properties…maybe you’ll earn even more in 20 years

#101 Jeff on 08.25.14 at 8:43 am

Don Sanderson on 08.24.14 at 8:05 pm
The Financial Post had an article that stated Europe could be in for a lost decade or worse like Japan has.

Let us hope North America and other economies stay away from such an economic calamity.

__________

yeah the US Wall Street banksters need to pay back Europe because of the toxic derivatives they sold them pre-08—remember the sub-prime fiasco?

#102 Anson on 08.25.14 at 9:07 am

As time goes on people are becoming disconnected with reality.
In the latest survey regarding student debt,students said they expect to have debt paid off in five years, however data shows it is taking an average of ten years to pay off.
Just as a number of people on this blog are anticipating(hoping for) a housing correction but have become delusional on the severe economic effect this will have on our economy as a whole.
BE CAREFUL WHAT YOU WISH FOR

#103 Rational Optimist on 08.25.14 at 9:09 am

My favourite part of your excerpt from Kirsten’s whiny note is ” a car cost less than one year’s wages.” Huh? Did it? ‘Cause minimum wage (in Ontario) is now up to eleven bucks an hour, which at full time hours and two weeks’ vacation is $22,000 a year. And you can get a Canadian-built little sedan (Civic, Matrix, whatever) for less than that, brand-new (I’m assuming Kirsten meant brand-new; I’m guessing she thinks that 16-year-old who had to drop out of school to work to feed his family drove a brand-new car).

I’m not advocating using “one year’s wages” as a good budgeting tool for how much to spend on a car, but I found it funny that Kirsten said that. I also would recommend she read “Unsafe at Any Speed.” That was written in 1965- cars today are astoundingly unlikely to kill even the stupidest drivers that somehow managed to slip past the government’s rigorous driving licensing tests. That was not at all the case in the ‘40s.

Things are great. They keep getting better. Every generation must have had a lot of members who failed to acknowledge this.

#104 Allan Teasdale on 08.25.14 at 9:15 am

Canadians are stupid.

#105 jess on 08.25.14 at 9:34 am

Who swindled who ? /Material

Sacramento federal court jury acquits 4 in local mortgage fraud case
By Denny Walsh
[email protected]
Published: Friday, Aug. 22, 2014 – 10:23 pm
Last Modified: Monday, Aug. 25, 2014 – 5:35 am

Read more here: http://www.sacbee.com/2014/08/22/6648529/sacramento-federal-court-jury.html#storylink=cpy

…”According to experts, it is the first time in such a trial that a court has allowed the defense to present evidence that lenders ignored gaping holes and blatant lies in loan applications during the years leading up to the economic meltdown.

#106 Anson on 08.25.14 at 9:36 am

To all the people who believe what central bankers say this just out.
“Bank of Canada governer says Canadian interest rate hike may not follow US lead”

What else is he supposed to say? He wants a lower dollar and this is one way to get it. — Garth

#107 Daisy Mae on 08.25.14 at 9:52 am

#47 45North: “Daisy Mae : Remember the soup kitchens and bread lines?

no I don’t I was born after World War II.”

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

Well, neither do I. But they existed because there wasn’t any welfare or UI.

#108 Westernman on 08.25.14 at 10:10 am

Panhead @ # 76,
And don’t forget, net and ever more grotesque tats every other week until they look like a Tahitian Cannibal….

#109 Calgary Rip Off on 08.25.14 at 10:38 am

What young people should remember is that by the time they retire if they retire, most if not all of the baby boomers will be dead and long gone. Many of the people I work with will be stone cold dead by the time I retire.

History tells us houses are seriously too expensive. No all rentals and buying is.

#110 Dupcheck on 08.25.14 at 10:39 am

The old question that does not apply any longer: What would you do with 1M dollars? In the boomer times that was wow a lot. Now it is a yucky 100 year old wood shack in the brainwashed TO.

#111 Shawn on 08.25.14 at 10:43 am

RRSP Math

RRSP tax refunds are a red herring and not the true benefit of RRSPs at all.

Here is how it really works.

Government says, look you set an investment account. For every $1000 you put in I the government will give you back an amount based on your marginal tax rate.

Say your tax rate is 40%. It may look like you now have $1000 invested plus $400 cash refund.

In reality government more or less owns 40% of the RRSP and you will pay back about 40% in taxes on withdrawal in the end.

In reality you have net $600 after tax value in RRPS and $400 in cash.

The real deal is that both the $600 and the $400 are invested and grow tax free. Your net worth is unchanged and has not been increased by the refund.

Years later you get to keep your 60% which has grown (hopefully enormously) tax free and the government gets 40% of tour RRSP back as taxes.

In effect you have been an investment manager for the government’s 40% share.

This is the substance of an RRSP, the refund is a red herring that means the government “owns” a share of “your” RRSP. The real benefit is tax free compounding on your share of the RRSP.

Changing marginal tax rates in retirement change the situation a bit but this is the essence of RRSP math.

It’s worth understanding and few do.

#112 Dupcheck on 08.25.14 at 10:44 am

#104 Allan Teasdale,

In some areas we might be, but you are not any better wherever the “f” you are from, since you are in Canada.

#113 Ret on 08.25.14 at 10:47 am

Re:#106 “Bank of Canada governor says Canadian interest rate hike may not follow US lead”

That’s the answer. We will devalue our currency to prosperity! That always works out well.

Maybe Poloz is looking for some stagflation as import prices rise on cars, fuel, imported food items etc. to further erode the purchasing power of Canadians.

Consumers are drowning in debt. The hope is to stimulate exports. Hence the desperation for a lower dollar. — Garth

#114 Mike in Toronto on 08.25.14 at 10:53 am

@100 Jeff
“guess you’re just better than the rest of us, you know, buying during a lottery era…you just sit on those properties…maybe you’ll earn even more in 20 years”

He didn’t even suggest anything of the sort. He only stated the facts. Just as the successful shouldn’t gloat, the struggling shouldn’t dismiss them. Most of success or failure is the luck of where, when and to what family you’re born in.

#115 tkid on 08.25.14 at 11:20 am

#103, you really are out of touch with how things are nowadays. Full time work at minimum wage is very hard to get, especially with the McJobs.

Today, you get 3 days notice of your schedule, and your schedule is amended with no notice. You don’t get the full 40 hour work week. If you are working the closing shift, you can get called in to the opening shift (they call it clopening). There was a news article in the past week, but I’ve lost the URL.

It is usually one hell of a revelation to anyone like me, who thinks ‘if anything happens to the current job I’ll make do with a McJob until things improve.’ Times have changed.

#116 aaron on 08.25.14 at 11:38 am

Low rates for longer time as expected.

http://www.bloomberg.com/news/2014-08-25/poloz-says-weak-canada-jobs-means-rates-can-stay-low.html

#117 aaron on 08.25.14 at 11:42 am

Might I also add there are about ~350K Canadians working in overseas in Asia (ie HK/China) are planning to move because geo political and environmental reasons. Also, they are usually financially well off, so prepare for more competitions in Toronto and Vancouver.

#118 Born the wrong time. on 08.25.14 at 11:45 am

I wonder how many people are out there who had the misfortune of being born at the very end of the baby boom/ beginning of Gen X. Getting a job with a decent pay cheque took years and years to get as the multitude of people born before you took all the jobs.
This delayed the usual build up of finances and for many owning your own house continues to be a pipe dream in 2014. The old adage back then was to get an education but as it turned out having an education did not factor as well as having connections if you were fortunate to have them.

Those born around 1950 had the best opportunities for financial wealth as many got good paying jobs right out of high school without having to get that education – all they had to do was exist.

Your thoughts?

#119 Au jus on 08.25.14 at 11:48 am

#20 Shawn: Has anyone got a REALLY BIG one?…Does anyone have such a large RRSP or have it on good authority that they exist?

I’ve heard that there was an individual’s RRSP valued north of $100 million back in 2007. I’ve seen an RRSP value of $35 million with my own eyes. Everything was invested in speculative resource companies…but how many people can stomach that??

#120 Chickenlittle on 08.25.14 at 11:50 am

http://www.google.ca/search?q=canadas+ranking+in+the+world+economically&btnG=

I did a google search. Canada isn’t even top 10 in the economic world. We are small potatoes. If rates rise, what does the rest of the world care if we suffer? Spain, greece, and ireland all went through the pain, but we can’t cause we are too important.

Watch a movie, see how they portray Canadians, then tell me how “important” we are in the grand scheme of things.

Get with it! Its not my fault people are stupid, so raise the rates all you want.

#121 Nomad on 08.25.14 at 11:51 am

No signs of defaults and yet we read on BNN:

“Bank of Canada Governor Stephen Poloz wants to make something perfectly clear: When the Federal Reserve starts raising interest rates, Canada’s central bank won’t necessarily follow immediately. The main thing people should understand is that our policy is quite capable of being fully independent, as it has”.

It’s extremely likely mortage rates will be no more than 3.5% in two years. That means a new buyer will be ok until 2021. Lock-in at at a low rate in 2016 and renew in 2021.

That plus the fact our country is amazing relative to places like poluted Shanghai and jobless France, I’d make a 5k bet with anyone here the average house price in Canada won’t go down even 5% until at least 2018.

I’m a renter and I think this. Imagine what optimists think out there.

Five-year money at 3.5% in 2016? That’s funny. — Garth

#122 Bullish on Burnaby on 08.25.14 at 12:04 pm

4% rate in 2016! Nothing earth shaking ! Don’t be so cocky Garth you have been wrong before!

Rates can go to zero and this market is still on eroding ground. — Garth

#123 Derek R on 08.25.14 at 12:06 pm

#80 moneymike on 08.24.14 at 11:54 pm wrote:
I was wondering if anyone could direct me to the post about preparing for or handling inheritances.

What? You lost it? Okay. It happens. But try to be more careful next time.

To find it again, go back to 2013, take the second month from the end and look out for the van filled with beer and coffins.

#124 nonconfidencevote on 08.25.14 at 12:21 pm

@# 104 Allan Teasdale

My how eloquent. Would you be so kind as to inform us of your superior lineage? American? British? Australian? Hong Kong perhaps? Nigerian? Yemeni? Turkmeni? Slobovian? Souf Effriken? Roma? Venezuelan?
Please let us know where you call “home” my intellectually challenged result of inbreeding.

#125 Rational Optimist on 08.25.14 at 12:33 pm

115 tkid on 08.25.14 at 11:20 am

“#103, you really are out of touch with how things are nowadays. Full time work at minimum wage is very hard to get, especially with the McJobs.”

It’s true that I haven’t worked a minimum wage job for a while. I know about three-hour shifts in fast food and the like, though, and the off-at-eleven/on-at-seven scheduling. A minimum wage worker is supposed to have an eleven-hour rest period by law, by the way, but you’re right that insufficient hours are the problem for them, so they’re not about to push that too hard.

Does any of what you said disprove my point, though? Most people do not work for minimum wage. The average household salary is more than $70,000 a year now. And Kirsten believes that it’s not possible to buy a car “with a year’s wages.”

#126 james on 08.25.14 at 12:34 pm

Five-year money at 3.5% in 2016? That’s funny. — Garth

Irrelevant. Support comes from people with big down payment and paying off with cash.

#127 Mike in Toronto on 08.25.14 at 12:36 pm

#118,

100% agreed about generation.

My sense of finances was strongly influenced by witessing the crash of the housing market, looking for my first highschool jobs in the early 90s, and being fortunate enough to have job during the crashing dot-com bubble after school.

I was lucky though. I didn’t do the OAC victory lap, nor the 4 year university program. Those two years of work experience were vital for the early 2000’s. Many friends never got out of the cycle of debt and underemployment. “Success” for them is still the dream of paying off the credit card and student loans so they can move out of the basement apartment.

Those a little bit older than me in tech, got wicked jobs from the Y2k bug. After the slump, they locked out the market, while outsourcing fueled a job shortage. Skipping university would have set me up a lot better.

Those a little bit younger than me… their education is irrelevant now, and their work experience is a patchwork of part time and memories of that amazing 10 month contract they had once.

#128 Nomad on 08.25.14 at 12:44 pm

#122 Bullish on Burnaby:

It’d be fun to setup a site where the posters here can bet on the rate in 2016. Track it and laugh or cry at it in the future.

In absence of such awesome technology, I saved a screenshot of my bet of 3.5% and Garth’s reply so we can see who’s right in 2016. although now I regret not picking 4%. But I’ll be a good speculator and stick with my 3.5% :)

#129 Bottoms_Up on 08.25.14 at 12:50 pm

#92 Conundrum in the Capital on 08.25.14 at 4:20 am
————————————————-
If there’s nothing tying you to an expensive city, why wouldn’t you leave?

#130 Mister Obvious on 08.25.14 at 12:57 pm

#118 Born the wrong time

“Those born around 1950 had the best opportunities for financial wealth as many got good paying jobs right out of high school without having to get that education – all they had to do was exist.”
———————————–

What utter nonsense!!

I was born in 1950. I tried my best to recall my wages since I first did summer work in a factory at 14 years of age until my retirement in 2006.

Using the Bank of Canada inflation calculator I also determined these wages in 2014 dollars. Below are 7 honest data points from a real-world boomer.

It’s pretty clear how things went for me both before and after I got an education. Before 1983, when I did mostly unskilled labor, wages were poor and the work was unpleasant.

After graduation from technical school at age 34 (paid for in advance through many years of savings) I became ‘in demand’ and was compensated accordingly. The results speak for themselves:

Year, age, type of work, wage, wage in 2014 dollars:

1965, 15, Factory, $1.20/hr, Today = $8.93/hr
1968, 17, Factory, $2.53/hr, Today = $16.83/hr
1978, 28 Labourer, $5.00/hr, Today = $15.63/hr
1981, 31 Labourer, $7.00/hr, Today = $17.63/hr

After Technical Education:

1984, 34, Technologist, 1500/mo, Today = $3101/mo
1993, 43, Programmer, 3000/mo Today = 4405/mo
2006, 56, Programmer, $7570/mo Today = $8682/mo

#131 T.O. Bubble Boy on 08.25.14 at 12:58 pm

Consumers are drowning in debt. The hope is to stimulate exports. Hence the desperation for a lower dollar. — Garth

Bingo… and, it is a nice side effect that consumer lending can continue until election time so Harper can keep lying about his smoke & mirrors economic record.

Separate question/thought: if the $CAD is falling, would $CAD bond rates (like, the Government 5-yr that sets most mortgage rates) have to rise in order to make them attractive vs. other fixed income in non-falling currencies?

#132 moneymike on 08.25.14 at 1:32 pm

Thanks Derek!

#133 Bottoms_Up on 08.25.14 at 1:37 pm

#79 Tiger on 08.24.14 at 11:48 pm
————————————–
Perhaps you can elaborate.

Scenario #1:
Rent for 15 years, leading a lower lifestyle so you can save for a downpayment. Let’s call that $150,000 for round figure purposes. But at the same time, you’ve spent $270,000 in rent ($1500/mo for 15 years). Thus on your quest to ‘not be a sheeple’, you’ve essentially come up with $420,000 over 15 yrs for housing. Now, you take your substantial downpayment, buy a $400,000 place, and pay off your $250,000 mortgage in 10 years at a cost of $330,000.

Your 25 yr living expenses are therefore $750,000, plus 10 yrs of property tax and maintenance, plus the sacrifice of the 1st 15 yrs living below your future standard of living.

Scenario 2:

You scrounge up a $20,000 dp on a $400,000 house. Get a 95% mortgage of $380,000. Pay if off over 25 yrs, at an expense of $760,000. Total living expenses of $780,000, plus 25 yrs of property tax/maintenance. Plus having a higher standard of living for an extra 15 yrs, plus not having to move residences.

#134 Ronaldo on 08.25.14 at 1:38 pm

#84 Andrew Woburn on 08.25.14 at 12:38 am

Thanks for the excellent response.

#135 peter stock on 08.25.14 at 1:39 pm

Potentially Critical argument flaw: what % of households in 1966 had 2 incomes? Few I expect. So, redo the math on to needing 4x main income to buy an average house.
Now, I’ll read on with that better number in mind.

#136 johnsaccy123 on 08.25.14 at 1:40 pm

#10 hohoho.

Dow Jones Index move from 150 to 17000 includes a number of non performing companies removed from the index of 30 compaies with addition to movers. It is very difficult to compare the growth from 150 pts to 17000 pts that easily.

You mean like comparing house prices with no context of incomes or mortgage rates? — Garth

Not really Garth, but comparable. House prices rise considering the current mortage rates and income growth is unsustainable. I also believe that when rates rise stock market will decline as well.

#137 tkid on 08.25.14 at 1:52 pm

#125 Does any of what you said disprove my point, though? Most people do not work for minimum wage. The average household salary is more than $70,000 a year now. And Kirsten believes that it’s not possible to buy a car “with a year’s wages.”

Actually, you’ve just disproved your own point with ‘most people.’ Listen to the Gen X, Gen Y, and Millennials when they say it’s hard to get the good jobs, and $70,000 is definitely a good job. But they can’t get full time with the McJobs either. Employment-wise, it’s getting harder and harder for each generation to find full time work.

And it isn’t the car price that they have trouble with; anyone can find an old beater; it’s the insurance. I’m at $2400 a year and I’m a chick in her forties. I know guys who’ve been quoted $500-$700 a month, they’ve never had accidents, etc. Toss in parking, maintenance, and gas, and then compare that to a bus pass … it is a no-brainer you go for the bus pass if you can.

#138 Mike in Toronto on 08.25.14 at 1:53 pm

#130 Mister Obvious

Taking education during the depth of recession was smart. Was it 100% grant money in 81-83? Did the grant money cover housing too?

Education paid off for the boomer generation. For the Millenials it’s mostly a liability.

#139 Bottoms_Up on 08.25.14 at 1:55 pm

#59 Waterloo Resident on 08.24.14 at 9:43 pm
————————————————
I agree, I think the real powers that be see and know this.

If rates are to go up too fast too soon, they will bankrupt the population. Think millions of Canadians out on the streets.

How would they make money then??

They are playing the “interest rate game” to ensure that deflation doesn’t set in…..there’s no way rates are going up any time soon.

#140 Debtfree on 08.25.14 at 2:05 pm

One commercial street . A door for the rich and a door for the poor . Class apartheid . Story at vice.com

#141 peter stock on 08.25.14 at 2:05 pm

Ignore my previous comment (not that I expect anyone dullness it anyway). I missed the Deprssion era calculation about 2 incomes being rare even then.

Still, the original post is not a very compelling argument against home ownership (HO). HO may well be a bad financial invesyment, but GT doesn’t make the case.

How about laying out Rent versus Buy scenarios? Ya gotta live somewhere. What about the value of tax free cap gains on principal residences?

But finally, I’d like fuller disclosure – does Mr turner put money where his mouth is? Does he own real estate himself?

You must be new here. The rent-vs-own calculations have been done many times, and renting always wins in terms of cash flow requirements. As for real estate ownership, that are significant advantages as well as significant costs and in no way do I discourage it. But having too much of your net worth in a single asset which is costly, pays no dividends or interest and is clearly at an historic price peak, is probably unwise. If you adhere to my Rule of 90, you should avoid much of the downside I know is coming. — Garth

#142 Ronaldo on 08.25.14 at 2:07 pm

#88 nonplused on 08.25.14 at 1:20 am

You are absolutely correct with the changes taking place as a result of technology and the diminishing need of workers in almost every area. I recall a few years ago when the fax machine was introduced into offices and the effect that had on communications. One in particular was the shutting down of many railway stations whereby operations were centralized to a main center and the need for operators at points along the lines were no longer required. The train crews simply picked up their orders from the fax machine and went on their merry way. The changes to the workplace from what it was in the early 80’s has been absolutely incredible. Many jobs went the way of the dino and the cycle has continued ever since. I am afraid that we are going to have to live in a world of very high unemployment for many years to come. I am waiting with great anticipation to see how this technological revolution finally impacts the jobs in our educational system particularly in British Columbia given the problems we are having between the government and the Teachers Federation. I suspect a very rude awakening is in store for that group and the sooner the better imho.

#143 Casual Observer on 08.25.14 at 2:15 pm

It looks like we’re at the capitulation stage.

“…after spending much of the last decade warning readers against the perils of Canada’s overheated housing market—I did the unthinkable: I bought a place.”

His reason…
“…I want to eventually retire with a paid-off house, and I was running out of time.”

When long-time (10 year) bears finally throw in the towel, the market is likely close to a turning point.

http://www.moneysense.ca/columns/did-i-just-make-a-big-mistake-by-buying-a-house

#144 Casual Observer on 08.25.14 at 2:43 pm

#118 Born the wrong time. on 08.25.14 at 11:45 am

I wonder how many people are out there who had the misfortune of being born at the very end of the baby boom/ beginning of Gen X.

If we assume that the baby boom lasted from 1946 to 1966, then…

Taking stock of the people I know personally, it does seem that the people who were born in the early 60’s did better financially than those born in the late 60’s – early 70’s, but I’m not sure if that’s because of when they were born, or when they bought their first house.

From what I can remember, there were brief periods in the past when house prices “shot up”, and in the space of 5-7 years or so, you could go from buying a house for $50,000 to having to pay $120,000.

So I get the sense that timing on house purchases has more to do with the financial success of the boomers or Gen X than when they were born.

#145 straight six on 08.25.14 at 2:55 pm

back to your previous blog.. who can you trust?
No one! when money’s involved, especially when the advice is free.. usually steering you towards the advice givers spider web.

No idea how people get ahead today or even ‘get by’ for that matter.
We bought our first house (full of housekeeping units & U students) in Vancouver’s Kits where I too was a student, although I had a carpenter’s ticket to buttress the application.. but with only 1K down and a demand note for 10K we were able to get a 1st M for 80K.
My wife was making 8 bucks/hr as a CT waitress evenings while going to the art school during the day.
We moved into the basement w/ 6′-6″ ceilings but were now living rent free, which was the idea.
Banks wouldn’t touch us and rates were 10%, so we went through a M broker.

Given today’s costs vs earnings that scenario would be impossible.
Little wonder we look back on the 70s with fondness.. a time when ‘stress’ was just an engineering term and idz ahll good! really was.

#146 Ronaldo on 08.25.14 at 2:56 pm

#135 peter stock on 08.25.14 at 1:39 pm

”Potentially Critical argument flaw: what % of households in 1966 had 2 incomes? Few I expect. So, redo the math on to needing 4x main income to buy an average house.
Now, I’ll read on with that better number in mind.”

In 1966 the oldest of the baby boomers (myself) was 20 yrs old. Both my parents worked but father in seasonal work (carpentry) and mother (hospitality industry). Not high paying jobs. They had purchased their first home in 61 for 6000 dollars with 800 down (total savings). Their total income at the time was not likely more than 5000 but since they both worked, owning was very affordable. Even with only fathers income, the ratio would have worked out to 2.5 times his annual income which is the same as it was for myself 8 years later. 3 of the 4 children including myself worked so we were able to purchase own clothing and school supplies and even own our own vehicle and cover those costs. As a result, my parents were able to get ahead and coupled with the fact that father was a carpenter, they were able to save enough in a short period of time to enable then to build their own home. They did this several times over during their lifetime and it was amazing how much they had accumulated and able to stash away and still live a good life even on the small wages they earned. I recall though that not many of my friends mothers worked at the time. Not sure what percentage that would have been. I do recall though that many of my boomer friends wives did work. When I purchased my first home at age 23 in 1969 (new townhouse), my salary was $666/mo and the cost of the home represented 2.5 times my own income. The banks did not consider the spouses income at that time. It was however a short time later as prices started to rise tremendously in 70 to 74 that the banks started to include the spouses income (but only 50% or so) in order to allow first time home buyers the ability to qualify for a home. We also had the 1000 home owner grant at the time that we could use as a down payment but you had to live in the place for I believe 3 years otherwise you would have to refund it back if you sold before that time. It was some time later that the full salary of the spouse was factored in to qualify for the mortgage. I believe this had a great deal to do with the rising house prices since couples could now afford a higher mortgage and as a result prices rose to meet this affordability factor. This during times when normal rates were 9 to 10 percent. You can imagine what prices would be today if rates had remained at those levels. Knock off at least half what a house is selling for today.

#147 DM in C on 08.25.14 at 2:59 pm

tkid; you’re being ripped off.

We pay $1600/yr for a <1 year old SUV and a '01 Sunfire, and we're both in our 40's. There is no transit to where hubby works, so there is no alternative. The sunfire is running til she runs no more, then we'll switch and I'll be on transit, but that could be a while yet.

#148 Singaporean Investor on 08.25.14 at 3:04 pm

Why don’t you get it, Garth? Rising rates don’t make owning real estate any cheaper. While the price may come down, your monthly mortgage payment stays high due to the higher interest rates. All in all, the cost of ownership will always be more expensive than the cost of renting.

The object is less debt, which makes real estate less costly in the long haul. Care to borrow my calc? — Garth

#149 DM in C on 08.25.14 at 3:08 pm

#118 Born at the wrong time

I’m guessing you mean 1967-69?

I’ve never had a problem, even tho I graduated in 1992…. I made sure I took a program that had co-op so I graduated with 2 years experience. Took a year longer but it was worth it. My first job after that paid $18k/yr. I’ve tracked my salary since, and it’s gone up 700%. I may be a lucky one, and I admit that things have gone very well for me, but some of that was luck and some was hard work and planning.

#150 nonconfidencevote on 08.25.14 at 3:31 pm

@#118 Born at the wrong Time.

Yup, total agreement. But 1961 was a good year….. :)-

#151 Mister Obvious on 08.25.14 at 3:37 pm

#138 Mike in Toronto

I attended BCIT in the depths of the early eighties recession. I didn’t deliberately time it that way, that’s just how history unfolded for me.

By the time I was in my mid twenties (mid 1970’s) I had become very tired of dirty jobs, low wages and no security. I began to save with the intention of entering a formal study of electronics for which I already had an aptitude.

It took me about five years to save enough to cover my tuition and living expenses for a two year diploma. I lived near the campus in rented accommodation with four other people.

I didn’t have one extra dollar for anything. All I did was study and write exams. In the end I had an honours diploma in electronics and a handful of industry contacts given me by some teachers. Oh yeah, and I was flat broke too.

The recession was not over when I graduated in June of 1983. I had to work as a bricklayer’s helper for six months before I landed a job in electronics. However, by 1984 things began to look up.

I get tired of the nimrods who think people born in the fifties just had to show up and enjoy royal treatment.

I worked extremely hard, sometimes at very nasty industrial jobs and made do with the resources I had available.

The workforce was not delighted to see me. I started at the bottom of the pecking order and took my share of abuse from petty managers and self-important co-workers with a few more years seniority.

There’s a lot of stories I could tell about ‘how it used to be’ but they would sorely disappoint more recent generations who want to believe the boomer piggy types scooped up all the good stuff before they arrived on the scene.

#152 Mike T. on 08.25.14 at 3:47 pm

#141 peter stock

this is just my situation, but it has been repeated numerous times here

I rent a 1 bdrm condo $900 all in.

The owners pay $954 mortgage
I don’t know what the strata is and don’t care, let’s call $175
Heat, hydro, water….again I don’t know….$80? less? more?
Property taxes, again you got me, let’s use $100.

Maintenance and lost investment income…..

Do you see the issue? Can you see why I rent and will continue to do so?

#153 miketheengineer on 08.25.14 at 3:57 pm

Rent versus Own

Renters – Get to party all weekend…Pro
Owners – Get to do repairs and cut grass…Con

Renters – Pay one fee per month plus Utilities…Pro
Owners – Pay Mortgage, Taxes, Repairs and Utilities…Con

Renters – Can move if the neighbors develop bad habits…very quickly…1 to 2 months…or even just leave…pro
Owners – Can take a year or more to sell…con

Renters – Can live in a rental all winter for free and stiff the owners….pro (if you got’s the guts to do this)
Owner – Try not paying your city taxes or bills….con

Renters – If you lose your job, you can move or downsize quickly …pro
Owners – can take a year or more to move…con

Renters – no headaches about bills needed to make repairs…just call the landlord….pro
Owners – Big headaches…max out your line of credit to fix all the builder F’Ups, and defects….con

Renting Wins….!
Owning Can Really Suck Big Time

#154 Holy Crap Wheres The Tylenol on 08.25.14 at 4:06 pm

Back in my day we had a saying, In for a penny in for a pound! That pretty much sums up what you have to dole out for a home nowadays!
Pray for the children.

#155 Cha Ching on 08.25.14 at 4:06 pm

As the bears collectively pat each other on the back for each unfounded zinger, Canadian homebuyers continue to enjoy a rise in property prices across the board.

http://www.thestar.com/business/2014/08/15/canadian_house_prices_continue_unrelenting_climb.html

Truth hurts.

If you do not see increased risk with higher prices in a stagnant economy, you have no counsel to give. — Garth

#156 jess on 08.25.14 at 4:18 pm

too big too fail

ghost suburbia
http://www.southchilcotin.ca/bradian.html

Bralorne-Pioneer: Their Past Lives Here

Bralorne Pioneer Museum
Gold Bridge, British Columbia
http://www.museevirtuel-virtualmuseum.ca/sgc-cms/histoires_de_chez_nous-community_memories/pm_v2.php?id=record_detail&fl=0&lg=English&ex=00000470&hs=0&rd=117563

2014 *NEW PRICE* Bralorne B.C. house for sale $82,000

=

Financial Institutions and Consumer Protection Subcommittee
U.S. Senate Committee on Banking, Housing and Urban Affairs Hearing on Debt Financing in the Domestic Financial Sector
July 31, 2014

too big to fail hearings
http://www.banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=caf60dbe-5e9f-4af9-8ddb-daf054fb1743

#157 45north on 08.25.14 at 4:20 pm

born the wrong time : Those born around 1950 had the best opportunities for financial wealth as many got good paying jobs right out of high school without having to get that education – all they had to do was exist.

I was born before 1950. Funny you assume that most people graduated high school. They didn’t. Most people finished grade 8 then did a couple of years of high school and then went to work. Over the years, the education bar has been continuously raised.

I finished university and got a job as a computer programmer. God was watching over me and guided me away from teaching. The standards of politeness and respect with which I was raised was constantly eroded in the schools. When I went to high school it was no big deal to have a male teacher throw you against the lockers if you disrespected him. Now a days that would be an assault charge, a civil rights violation and a suspension.

Andrew Woburn : People like my great-uncle and aunt who endured the Great Depression never really recovered from the experience.

They weighed every penny as if it were gold. Debt was a word they could not comprehend.

The depression had a great affect on my parents and on their generation. They made their own preserves. My wife’s cousin gave a eulogy for his mother. He told the story of his mother. She would can fruit and stack the bottles in the basement. The shelves would be filled from floor to ceiling.

For my parents debt was to be avoided. Seriously avoided. For me too.

#158 Joseph on 08.25.14 at 5:01 pm

Poloz is on a quest for a lower dollar. This has been a recurring theme through out the year.

But how viable is this solution? You have people swimming in debt, a lower dollar will only make our imports more expensive. Won’t that lead to more inflation given how much essential items we import?

I understand the argument of increasing exports and trying to stimulate the manufacturing sector and creating more jobs. And hopefully it works.

But if you are forcing a lower dollar, you better be certain that you can deliver on the exports side. And keep in mind, it actually hurts export companies in the short term because existing operations are now facing lower revenue, unless there is an immediate impact between lower price and higher volume. It might take time to realize this benefit.

What are you thoughts Garth?

#159 Linda on 08.25.14 at 6:02 pm

Talking about housing, some of the commenters mention how today’s housing is much more luxurious. I’d add that those homes have a much larger square footage as well. Unless one is talking condos, a house today is almost certainly going to be in the 1,200 – 1,500 square foot range for a basic entry home & will usually include both a full basement, at least 1.5 baths & the usual 3 bedrooms, kitchen, dining & laundry. Most people seem to be buying above the entry level basic & now you are talking 1,600 to 2,500 square feet. For two or at most 4 people. In the earlier times spoken of, families were larger & homes were much smaller – 1,200 feet was considered a very large, spacious home & many were in the 800 – 1,000 square foot range. With one bathroom though some luxury models did come with a powder room (the half bath). Some of this house cost is simply people buying far too much house & in fairness, luxury finishes like granite are going to cost more than melamine.

#160 CREIT on 08.26.14 at 11:47 am

Should I put REIT units in a registered account or non-register? And a TFSA isn’t an option.

#161 VicPaul on 08.26.14 at 3:59 pm

# 142 Ronaldo

” ….education system in BC…I suspect a very rude awakening for that group”….Which group, in your humble opinion, needs a rude awakening? I’m guessing you, like many in this province, receive your daily dose of Global Gospel (rudderless, sychophantic Liberal government cheerleader) to form your world view. As a teacher (grade 1/ music), I could recite a litany of transgressions foisted on teachers by this BC Liberal government over the last twelve years, not the least of which is a breach of our Charter of Rights and Freedoms ( Supreme Court of Canada 2005, BC Supreme Court 2011 & 2012 resulting in over 3 Billion dollars of lost public school funding – at the same time quietly increasing funding for private schools). For twelve years the BCTF, funded by the union dues of BC’s 41,000 teachers, has defended public education in the courts and won – to little but more acrimony and contempt
Conjured by Chrusty Clark. The BCLiberals we’re asked in the legislature by NDP Opposition how many millions the Liberals have spent on their team of lawyers over the last twelve years – they refused to divulge the wastefulness. There’s transparency for you. I could attempt again to educate the misinformed …..but I’m tired of it. However, my professionalism behooves me to share truth and information. This is a very well-written piece. Edify yourself. The Tyee – What’s Jamming Teacher Bargaining – Crawford Killian, August 25th.