Predictions

SAD BRIDE modified

He was getting a tad testy with me. “Shouldn’t there be a shelf life on predictions?” he asked. “Why do you think what you wrote about in 2008 didn’t happen?”

I expected this. Six years after I popped a book warning what faced house-horny US families could be replicated here, there’s a sequel. Hilliard MacBeth, a financial guy from the flat part of the country somewhere past Hamilton where the roads end, is on the book-flogging trail, telling reporters house values could fall by half. It’s an extreme statement, but sexy enough to get attention. So Hilliard knows how to push the buttons of a reporter like Gary Marr, of the Financial Post. Marr’s a skeptic. He decided to take it out on me.

“So,” he snarled, “what happened to the crash you predicted?” Actually I don’t think there will be a crash, I said (again). But the market will correct and go seriously squishy. People who bought with little equity or have most of their retirement dollars in a house will regret it.

“Why are you people so focused on housing?” Because, I pointed out, 70% of households have one. They’ve taken on massive debt to get there. They’ve gambled and put most of their net worth into one asset. It’s the most-owned thing in Canada. Duh.

“So why weren’t you right in 2008?” First, because there was a financial crisis, I reminded him. Then central banks crashed mortgage rates. Then Ottawa told everybody things were okay, so the buying orgy began. Then we got 0% downpayments and 40-year loans. And because of 2008 most people were afraid of stock markets and saw houses as riskless. I can’t help it if they’re myopic wusses.

He wouldn’t give up. “Well, it looks like a doomer industry to me, all you people trying to sell books about it.” That was six years ago, I said. Besides, we have a three-city boom. Go ask people in Halifax and Montreal why they can’t sell their houses. Or talk to the OECD, the World Bank, the big ratings agencies like Fitch or Moody’s, Morningstar, Capital Economics, The Economist or Robert Shiller. They all look at the Canadian housing market and put on their wellies and goggles. This could be messy.

MARR modified  The convo was similar to many I’ve had. Media folks (little attention spans, big egos, nice hair – except Gary) believe housing has two speeds. Boom. Bust. I guess Hilliard thinks it, too. But that’s unrealistic and flawed. Unlike, say, bond yields, house prices are determined by human emotion. Being greedy little suckers, people (especially FSBOs) inflate the value of their real estate taking the last sale on the street as their base price, then adding some pixie dust.

When markets change and buyers fade away, sellers are loathe to drop their price. They inch lower over many months or (more typically) take their house off the market, “until things get back to normal.” Hence, there’s no tipping point when a crash starts – unless we have a giant event, like an interest rate spike or asteroid hole where Manitoba used to be.

The likely scenario now is what you see in a market like Montreal – the second-largest in the land. That’s a soft economy and lousy job creation creating less buyer confidence, slagging sales and gently falling values. Listings start to pile up, and houses get more illiquid – despite mortgage rates being at record lows.

This is what to expect in a country with record household debt, incomes trailing inflation and an economy barely growing. So, in most of Canada the long and relentless scaling-back of real estate excess is well under way. Finally, despite cheap money and vats of hormones, we have markets in which price/rent and price/income ratios may look normal in a few years.

Sadly, though, people like Gary and Hilliard talk about real estate in general when they really mean three cities. But even here, and despite the headline sales and price numbers being pumped this week, there’s trouble.

This week crude oil prices crashed down through the $90 mark, amid all kinds of technical weakness. Supply is starting to swamp demand, with global growth pared back and fracking madness adding to US reserves as few had expected. I hope those people buying particle board palaces in Calgary are aware of how close we are to the no-go price for oil sands production, and how crude could be ten bucks a barrel cheaper in the future. Lots of risk here.

In Vancouver sales are up, but listings are ballistic. The number of properties on the market has just swelled by a third from August – an additional thousand homes. At the same time sales have jumped and the average detached home price has hit $1.26 million. All this in a city where the average household income is just $73,000. Unbelievable risk here.

And in Toronto, 416 is hot (sort of) while 905 is not. The market’s segmented, with activity still bubbling in the hipster sub-$900,000 range, but buyers now fewer and farther between above the million-dollar mark. Newcomers and kids still storm the suburban low-rising new-home sites, but the new condo market has died on the vine. The changes are palpable, and unhealthy – even as prices, and debtloads, march higher.

So, I’m sticking with my thing. This is the time sane people should reduce their real estate exposure, especially in these three vortexes. You will not like what happens in 2015. Already those who thought houses would go up forever in Regina, the Peg or Kelowna have discovered reality.

But there won’t be a 50%-off sale. Nor will Van houses go to $ 2 million.

Plus, we should all pity those pathetic people who write about this every day. Hey, wait…

203 comments ↓

#1 DreamingInTechnicolour on 10.02.14 at 6:59 pm

http://www.theurbandeveloper.com/housing-bubble/?omhide=true

#2 Derek R on 10.02.14 at 7:02 pm

Predictions are hard. Especially when it’s a prediction that is likely to change what will happen. Predicting the weather is easy by comparison.

#3 VanRant on 10.02.14 at 7:09 pm

‘I don’t see a bubble’: Joe Oliver says three big markets distorting housing numbers.

Why doesn’t spineless joe pressure CMHC to put a cap of $400.000? That will cool the three big markets instantly.

#4 totalinvestor.com on 10.02.14 at 7:09 pm

You should have mentioned this article titled “Is Canada Next? Housing Bubble Threatens ‘Financial Stability’ ”

http://totalinvestor.blogspot.ca/2014/10/is-canada-next-housing-bubble-threatens.html

#5 Van Isle Renter on 10.02.14 at 7:13 pm

My wife and are are taking the plunge. We decided to start looking for a house… in August 2015. Maybe some sanity by then.

#6 james on 10.02.14 at 7:15 pm

“Why are you people so focused on housing?”

Uh, because that’s just about the only asset that Canadians hold. Very few have anything in their registered or non-registered investment accounts.

It makes perfect sense to focus on the big stuff. We spent untold billions regulating other financial instruments, but do nothing about housing.

#2: yes, good observation. Complex adaptive systems with strategic elements (e.g., humans) are nasty in that respect.

#7 crowdedelevatorfartz on 10.02.14 at 7:16 pm

Meanwhile in California, Calpers ( California govt employee pension plan) has lost the 1st round with Stockton California’s bankruptcy judge.

Govt employees everywhere take note.
Gold plated pensions are starting to tarnish.

“Greater Fools Gold”?

http://dealbook.nytimes.com/2014/10/01/judge-rules-that-bankruptcy-invalidates-calpers-lien-against-stockton-calif/

#8 mark on 10.02.14 at 7:20 pm

Garry and his goons don’t like criticism either. Left a comment on his article before I even knew it was written about here. The comment never made it up.

#9 omg on 10.02.14 at 7:24 pm

THERE ARE 2 KINDS OF CORRECTIONS – nominal and real

Ya, I have been of the opinion on this blog since 2009, that the Canadian crash will be long, slow and grinding.

It will be a generational thing and manifest itself more as an erosion of the real value of property rather than an outright decline in nominal prices. It could take as long as 20 years.

For an example of this just talk to people in south western Ontario that bought houses in the late 1980s for say $200K and can sell them now for maybe $240K which is about 30% less than what they paid in real terms.

So more than anything, real estate is likely to be just a crappy negative return investment.

Its called REVERSION TO THE MEAN and the market absolute loves the MEAN. The MARKET will absolute CRUSH anyone who does not take this seriously and will GIGGLE whiles it does so.

#10 TEMPORARY® Foreign Prime Minister on 10.02.14 at 7:26 pm

“……Gary Marr, of the Financial Post. Marr’s a skeptic. He decided to take it out on me………”
=================================

Isn’t it ironic?

You’d think that a guy who scribes for the Financial Post, that great right-wing staunch defender of supply/demand and free market principles, would acknowledge that the Canadian housing market has been subjected to anything but?

Then again, I guess a hair follicle isn’t the only gauge in the man’s head showing empty.

For the full text (including comments by effervescent potty-mouth Brad Lamb) click here:

http://business.financialpost.com/2014/10/02/nobody-blows-bubbles-like-these-real-estate-writers/

#11 mrcommonsense on 10.02.14 at 7:27 pm

CMHC should not exist period. Not complicated. Banks should not be bailed out. Would this mean banks would crash? No, it would mean they would actually have to start being vigilant about who they lend money to, how they invest their money, and possibly live with lower profits. It’s not the role of a nation’s citizens to backstop Banks and help boost their profits. We need to get back to a society were savers, not debtors, are rewarded

#12 Alex T on 10.02.14 at 7:28 pm

Will rents ever come in line with housing prices?

The condo I’m renting in Burnaby would have to fall by 50% sale before it’s at the extreme upper limit of what’s acceptable, and it would need a 75% sale before it’s a good price. (Last sale price $450k, $250/mo strata fee, rent $1,500/mo.)

I suppose rental prices could shoot up like they have in some parts of the US but prices are so irrationally high and rents are so cheap relatively that even a big drop of 20% wouldn’t come close to making this a good investment.

#13 West Coast on 10.02.14 at 7:33 pm

Brokers in Vancouver are noticing a definite cooling now that 5% mortgages are no longer available. There are not too many locals able to scrape together a 20% down-payment these days.
Check out this article by Pete Martin….to see why many Vancouverites can’t really afford to buy- stats might be a bit dated – same reality.

“The national median income in 2011 for those with bachelor’s degrees or better, according to the figures Yan received from Statistics Canada, was $50,981.
In Metropolitan Vancouver, it was $41,981: exactly $9,000 less than the national
median.

http://www.vancouversun.com/opinion/columnists/Pete+McMartin+Vancouver+Lotus+Land+Lowest+Land/10253972/story.html

#14 a prairie dog on 10.02.14 at 7:34 pm

Real men don’t wear pink shirts.

#15 Gab on 10.02.14 at 7:34 pm

Hi Garth,

I’ve been following you every day since 2008. You are still as relevant as the first day I discovered the reference of your blog in a book called “Un chez moi à mon coût” (http://www.amazon.ca/product-reviews/2921500299). As in your blog, this book is sharing useful tips and facts about real estate and financial information.

On Vice.com, I just stumble upon another interesting book that may interest you and your readers. Canada as many country in the world is probably following the same path as Britain. Maybe it could be an inpiration for your next book … Who knows?

Here are the references:

http://www.vice.com/en_ca/read/how-corporations-carved-up-the-uk-for-private-profit-921

http://www.amazon.co.uk/Private-Island-Britain-Belongs-Someone/dp/1781682909

Thank you for your help in providing me with the tools to gain financial knowledge and empowerment.

Cheers!

#16 TEMPORARY® Foreign Prime Minister on 10.02.14 at 7:35 pm

#7 crowdedelevatorfartz on 10.02.14 at 7:16 pm
“…..Govt employees everywhere take note……Gold plated pensions are starting to tarnish…..”
=========================

Except of course, those for federal MP’s…

#17 to_be_frank on 10.02.14 at 7:36 pm

I’ve been lucky. I sold my house in March 2009 at the bottom of a short-lived real estate slump. I invested the proceeds in a conservative balanced portfolio with a heavy weighting in preferred shares. It didn’t matter that I sold at a bad time.

#18 Uh Oh Canada on 10.02.14 at 7:37 pm

Witnessing the market stall here in Montreal’s West Isle. Just noticed a house that was listed for several months drop its price down by 50K. Let’s see what 2015 and the winter brings.

#19 Trojan House on 10.02.14 at 7:40 pm

“Being greedy little suckers, people (especially FSBOs) inflate the value of their real estate taking the last sale on the street as their base price, then adding some pixie dust.”

That’s why you need a real estate agent when buying.

#20 Rebecca on 10.02.14 at 7:41 pm

I live in Vancouver, I’ve got money in the bank, no debt, make nearly double the average household income, and I would not even contemplate buying property here unless prices dropped at LEAST 50%.

The RRSP fairy visited our office recently to explain how much we should be saving. Her numbers assumed we would be living in a paid-off home. I just input my own assuming that I will be renting until the Reaper takes me.

#21 mortgagebrokeron on 10.02.14 at 7:41 pm

next month I am renting a nice 4 bedroom home big one, in the country, with a dug well, just outside of Ancaster ON, I know this home was purchased a few months ago for around 500000. property taxes around 400 per month…

I am renting it for 1300 per month (includes water and septic)….. I am going to purchase again, With rising rates over the next few years, and a lower oil price these are two huge factors in the downward “soft” ( I am positive 20% minimum ) drop in the price of a home…. the 500000 house is going to drop to 400000 over the next 5 years at a minimum

#22 What about CMHC? on 10.02.14 at 7:45 pm

Time for a quiz:

Who said this? “There is no Canadian housing bubble”, “Duffy is a good man”, “Canadian economy is best in the world”…

Clue: Harper.

#23 Randman on 10.02.14 at 7:47 pm

Ha Garth being called a doomer!!! that’s rich!!

#24 crowdedelevatorfartz on 10.02.14 at 7:51 pm

Yo Smoking Man
Can you explain the time portal that occasionally occurs here on the “comments” section.
The comments sometimes list more than there actually are………
Have I lept forward in time?
Am I suffocating in this elevator?
Can I pick the winning lotto numbers?

Help me S.M. as only you know how.

#25 Tony on 10.02.14 at 7:52 pm

Re: #5 Van Isle Renter on 10.02.14 at 7:13 pm

Seven years before you get your credit rating back after declaring personal bankruptcy if you buy a house in Vancouver. Look what happened to Agincourt in Ontario.

#26 mortgagebrokeron on 10.02.14 at 7:52 pm

sorry I meant drilled well not dug….

#27 Victoria Real Estate Update on 10.02.14 at 7:54 pm

. . . . .Total Single Family Home Sales. . . .
. . . . . . . . . .Greater Victoria. . . . . . . . .
. . . . . (January through September). . . . .
. . . . . . . . (Compared to 2007). . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007…*********************
2014…*******
2013…***
2012…***
2011…***
2010…******
2009…***************
2008…***********
2006…****************
——————————————————-
. . . .-40%. . . . . . . . . . . . . . . . 0%

* 2014’s SFH sales pace (January through September) is 29% slower than 2007‘s pace. 2007 was, at best, an average year for Greater Victoria (after population adjustment).
* 2007’s yearly SFH sales total was 38% lower than 1989’s total (after adjusting for almost 20 years of population growth).
* 2014’s slow SFH sales pace is even more alarming when mortgage rates are added to the equation. In 2007, Canadian 5-year fixed mortgage rates were as high as 5.89 %, compared to just 2.99% in 2014.

Previously I pointed out that (median) SFH prices across all areas of Greater Victoria fell significantly from 2010 to the end of 2013. For example: Oak Bay ( – 15%), Victoria ( – 13%) and Langford ( – 21%).

Since the end of 2013, house prices across Greater Victoria have continued to fall (based on Brookfield’s house price index). Brookfield’s most recent (August) data also shows that:
* prices were lower in August 2014 than in August 2013
* we would have to go back to 2007 to find prices this low in Victoria

Canada’s housing bubble is significantly larger than the 2006 US housing bubble. The following comparisons make this clear:

* Overall increase in house prices (first chart):
Canada: +124% (2000 to present)
US: +53% (2000 to the peak in 2006)

* Increase in household debt-to-income ratio (third chart):
Canada: +53% (2000 to present)
US: +41% (2000 to peak)

* Increase in price-to-income ratio (first chart):
Canada: +56% (2000 to late 2011)
US: +24% (2000 to peak)

* Increase in price-to-rent ratio (second chart):
Canada: +73% (2000 to late 2011)
US: +35% (2000 to peak)

The bigger the housing bubble, the bigger the potential price correction.

Prices in most US cities are higher than they were in 2000 but some US markets don’t appear to be bubbly. In contrast, prices in bubbly Victoria are clearly detached from economic fundamentals (incomes and rents).

Price increase since September 2000:

Chicago: +22%
New York: +61%
Las Vegas: +30%
Dallas: + 34%
Phoenix: +40%
Detroit: -7%
(Victoria: + 129%)

House prices in Canada and the US should be approximately the same, considering that incomes in the two countries are comparable. A look at house prices in several US cities gives us an idea of how massive Canada’s housing bubble is. For example:

$235 K, Holiday, FL (5 beds, 3 baths, 3,072 sq. ft., built in 2005, attached 3 car garage, located in a gated community with a fitness center and pool)

$228 K, Laveen, AZ (5 beds, 3 baths, 3,024 sq. ft., built in 2006, attached 3 car garage, pool)

$275 K, Fort Worth, TX (5 beds, 3.5 baths, 3,747 sq. ft., built in 2004, attached double garage, pool)

$239 K, North Las Vegas, NV (5 beds, 3.5 baths, 3,247 sq. ft., built in 2006, attached 3 car garage)

$196 K, Atlanta, GA (6 beds, 3 baths, 3,486 sq. ft., built in 2006, attached double garage)

$296 K, Mount Juliet, TN (5 beds, 3 baths, 2,969 sq. ft., built in 2004, attached double garage)

Girls and guys, it would have been financially foolhardy to buy a house in the US in 2006. For the same basic reasons, it would be unwise to buy a house now in Victoria.

Stay out of the market and enjoy renting (risk-free) as house prices continue to fall in Victoria. You have nothing to lose and everything to gain by waiting for Victoria’s housing bubble to deflate more. Renting for now is a no-brainer.

Until next time – Cheers!

#28 Sheane Wallace on 10.02.14 at 7:54 pm

http://marketsanity.com/canadas-truly-magnificent-housing-bubble-next/

#29 José on 10.02.14 at 7:54 pm

In early 2013 the OECD recommended that Canada raise interest rates by just a quarter of a point to discourage a property bubble from forming even larger.

Newly appointed Poloz chose to ignore this advice, talked costantly about lowering rates in order to sink the Loonie and try to resuscitate manufacturing. But, he also expanded the Canadian housing bubble and debt levels with dirt cheap interest.

Ed Devlin from PIMCO says that he better introduce tightening language fast or risk a crippling housing bubble to burst in Canada. Which will be devastating for the economy.

http://business.financialpost.com/2014/10/01/housing-bubble-will-force-bank-of-canada-to-renew-rate-hike-warnings-soon-pimco-says/

#30 Brian Ripley on 10.02.14 at 7:58 pm

#9 omg “THERE ARE 2 KINDS OF CORRECTIONS – nominal and real”

Thank you omg, I knew there was a reason to track “real prices” which I do for Vancouver, Calgary & Toronto or what Garth calls the “three-city boom” here:

http://www.chpc.biz/real-price-of-housing.html

We may not see any big reversals in the real price until the CPI drops again with commodities stair stepping down (they peaked in 2011)

#31 JSS on 10.02.14 at 8:04 pm

I am looking forward to reading Hilliard MacBeth’s book. Perhaps he is correct.

#32 Smoking Man on 10.02.14 at 8:04 pm

Shit, wtf…

Gartho, your essay was dead smack on the money today..

I’m speechless..

#33 Sheane Wallace on 10.02.14 at 8:05 pm

Harper is the best thing that could happen to Canada.

We deserve him 101 %

#34 Mean Gene on 10.02.14 at 8:05 pm

Hindsight is easier than foresight.

#35 Sheane Wallace on 10.02.14 at 8:06 pm

I will donate to the conservative campaign 1 % of my investments.

It would be the sweetest revenge.

#36 Sheane Wallace on 10.02.14 at 8:08 pm

#11 mrcommonsense

Ya think so?

I would say let’s insure all the mortgages in the world for free. We have the best economy after all.

#37 blue steel on 10.02.14 at 8:16 pm

I read that article by Mr. Marr in the FP. It seems a point the article is trying to make regards hyperbole from real estate writers.

If Mr. Marr is going to talk about hyperbole, he should also write about condo developers ethically responsible ads touting double digit returns.

I tried posting this comment in the FP, but it was deleted. I wonder why?

#38 Ben on 10.02.14 at 8:21 pm

In Montreal. I have my boots on, I’m ready to wade in when it gets real messy. I won’t be getting out my seat until then.

#39 Happy Renting on 10.02.14 at 8:24 pm

A slow melt/sideways market is the kind of correction we should hope for, as it won’t create panic. It doesn’t occur to most people to include inflation or opportunity cost in calculating the return on their house (indeed, most people wouldn’t consider investing instead in a diversified portfolio. Way too “complicated and risky”.)

#40 Mrs Hubris on 10.02.14 at 8:28 pm

Coincidentally, just read Marr’s latest piece prior to coming here.

http://www.financialpost.com/index.html

Sent it to my other half titled ‘Shame on Gary Marr’. Madani, Schiller, Garth, the IMF, Deutsche Bank, the OECD and the World Bank, to mention but a few, do their research. Hardly investigative journalism, son, when none of that research is cited or refuted. More like name calling on behalf of vested interests. On that note, Mr B Lamb supplies the final paragraph (do they know one another?). ‘Horseshit’ he cries. Well at least neither quoted further figures from CREA. Onward Garth and meantime…. back to The Economist.

#41 joe schmoe on 10.02.14 at 8:44 pm

The fact remains Garth has been loftily wrong the past 6 years about housing prices.

But his prudent approach to asset management has been bang on. Balanced investment take the bumps out of cycles.

A house is just an asset.

#42 Shawn on 10.02.14 at 8:44 pm

Predicting the Future is easy (in hind sight, that is)

Heed Warren Buffett who in his July 12, 1966 letter said “the future has never been clear to me”. This was in regards to predicting the stock market. He said the same thing many times before that and hundreds of times since then.

Just today in an interview he explained how he NEVER looks at macro economic events when he things about buying a business.

#43 Shawn on 10.02.14 at 8:46 pm

How to Stiff the government

When your RRPS goes down $1000 on a bad day, your share of that is about $600 and the government’s share is about $400 since ultimately you will likely face tax on the RRSP of 40%.

#44 Wendy Copper on 10.02.14 at 8:48 pm

<<<>“Why are you people so focused on housing?” Because, I pointed out, 70% of households have one. They’ve taken on massive debt to get there. They’ve gambled and put most of their net worth into one asset. It’s the most-owned thing in Canada. Duh.>>>>

Not me….I’m a school Vice Principal and my house is paid for. Maybe households should put more emphasis on higher education and the importance of education in earning a well paid job?

#45 Shawn on 10.02.14 at 8:53 pm

How to Reduce Exposure to real estate

It’s tough when you have just one house.

Hard to sell half your house. Taking out an equity line and investing that will increase risk even if it adds to diversification. You remain at risk for fluctuation in the whole value of the house whether your equity is 100% or 5%.

Could sell and downsize but the transaction costs are brutal. Not to mention moving costs and the family disruption. Houses are just not something you generally sell and then buy back in the short term.

No, for most with a house it is not realistic to downsize.

If you have two or more houses that is a different story.

If your house has three floors that is also another story. But you can’t sell one floor off either.

And if you have no house you can refrain from buying.

But most people simply cannot reduce their exposure to their one and only house.

#46 Vancouverite on 10.02.14 at 8:54 pm

BC new car dealers are reporting a record 2014 for sales….. With the high house prices and maxed out credit where are all these sales coming from? I think most people in VAn can withstand a mortgage increase just fine…. New cars Gucci bags and the restraunts and bars are full every night of the week…..I wouldn’t worry if you just bought a SFH Your fine

#47 Tiger on 10.02.14 at 8:59 pm

32 smoking man!
An educated essay, something your not capable of comprehending!
No wonder your speechless .

#48 the Jaguar on 10.02.14 at 9:05 pm

Gary Marr? Just another shill for the Real Estate Cartel, Garth. There is no free press anymore in North America. If there was they would have the courage to ask the hard questions and report the facts. Remember how Michael Moore took on Wolf Blitzer on CNN about the irresponsibility of the media over Iraq? It’s Deja Vu all over again in Canada with the Cartel.

They write about job numbers, home starts, whatever statistics CMHC barfs up to sound reassuring, but values are down in so many areas of the country outside of GTA, Lower Mainland, and Calgary. People don’t have good full time jobs in many of the smaller cities and communities. Ontario has many small towns where local jobs have evaporated. These are people with lives. Families. Serious issues for serious people. Not jerks like Gary Marr who want to call out people like Garth for raising legitimate concerns and welcoming debate and opinion on his blog or other forums. Real estate bubble debate aside Garth helps so many people by providing helpful financial advice.
There have been warning signs for some time about real estate. Salaries have not kept pace with price increases. It’s a no brainer. Just a matter of when and by how much the prices will fall. And if rates rise and affordability issues fall over homeowners, especially those with high levels of non mortgage debt….” RUN, DON’T WALK, TO THE NEAREST EXIT.”
In other words Gary Marr: PISS OFF!

#49 Victor V on 10.02.14 at 9:10 pm

#64 Smoking Man on 10.01.14 at 10:02 pm

#61 Victor V on 10.01.14 at 9:33 pm

Dude, I’m a busy guy, run two small business, while at tax farm for 11 hours a day, it’s a hobby that funds my wife’s gambling addiction, and restricts by bottle time..

If I go on Twitter, I’m not chirping Realtors…

@nude selfies is where it’s at..

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

I bet you might not mind chirping this realtor:

https://twitter.com/PlatinumHD/status/512787810831458305

#50 Cow Man on 10.02.14 at 9:11 pm

Sir Garth:

The proof of how far out of line Canadian Housing prices are, is evident in this comparison.

Pittsford New York, a University town suburb of Rochester, has a median household income of $85,000 and median housing price of $188,000. Pittsford is the prettiest town of it size I have ever seen.

http://www.townofpittsford.org/home-discover

Compare that to your numbers for Vancouver, average household income of $73,000 and average house pice of $1,200,000.

#51 Victor V on 10.02.14 at 9:15 pm

SM, correction, here is your tweet:

https://twitter.com/PlatinumHD/status/512792909586763776

#52 Sheane Wallace on 10.02.14 at 9:15 pm

you have to read this:
http://marketsanity.com/feds-follies-alan-greenspan/

Yet none of this carnage was inexorable or necessary. In fact, a housing bubble of the fantastic magnitude that unfolded during the Greenspan era could not occur on the free market.

………………………..

US housing bubble was of a fantastic magnitude according to David Stockman,
Former Director of the Office of Management and Budget under Reagan.

The question is how to call the housing bubble in Canada that puts the Yankees to shame?

#53 LuckyRenter on 10.02.14 at 9:25 pm

http://www.cbc.ca/news/business/housing-market-a-bubble-set-to-burst-hilliard-macbeth-says-1.2784511

Hilliard MacBeth says the Canadian real estate market shows all the classic signs of an asset bubble: a rapid rise in prices, feelings of regret expressed by those who feel they missed out on a buying opportunity, intense media coverage, and a broad fixation on the asset in question.
—————————————————————
I think that He is absolutely right .

#54 Sheane Wallace on 10.02.14 at 9:29 pm

#50 Cow Man

That makes Vancouverites 6 times stupider than the folks in Pittsford.

That is to me understatement, I believe the actual number is 10+, so expect house prices in Van city to keep rising!

#55 Ben on 10.02.14 at 9:29 pm

Shawn: “Just today in an interview he explained how he NEVER looks at macro economic events when he things about buying a business.”

And just today he said he made a “huge mistake” buying shares in UK supermarket Tesco. If he’d looked at the UK economy he’d have realised that it’s in a real mess and that people are shifting from cheap Tesco to bargain Aldi.

But I guess he didn’t fancy that. Tesco down 50% since he bought in case you are interested.

https://www.google.ca/search?es_sm=122&q=Buffett+admits+huge+mistake+on+Tesco&oq=Buffett+admits+huge+mistake+on+Tesco

Oh and why is the UK economy in a mess I hear you ask? It’s the housing bubble, silly!

#56 Setting the Record Straight on 10.02.14 at 9:45 pm

Walrii for those who think the world is ending

‘Blatant nonsense’: Media hyped walrus climate scare stories debunked – Claims recycled year-after-year – A Climate Depot Rebuttal

Walrus Key Points:
Zoologist Dr. Susan Crockford: Mass haulouts of Pacific walrus and stampede deaths are not new, not due to low ice cover – ‘The attempts by WWF and others to link this event to global warming is self-serving nonsense that has nothing to do with science…this is blatant nonsense and those who support or encourage this interpretation are misinforming the public.’

http://www.climatedepot.com/2014/10/01/media-hyped-walrus-climate-scare-stories-debunked-claims-reclycled-year-after-year-a-climate-depot-rebuttal/

#57 Panhead on 10.02.14 at 9:48 pm

#46 Vancouverite on 10.02.14 at 8:54 pm
I wouldn’t worry if you just bought a SFH Your fine

Not so shure … sold my Pa’s house for him a few months ago with multiple offers (14 I think) on the table in East Van. His next door neighbour’s house has been on the market now for a month and already he’s dropped his price by a hundred g’s.
Smells different to me …

#58 Kenchie on 10.02.14 at 9:58 pm

Ahhh, the trusty District Line. It takes you to so many fine places across London and has more standing and head space than the Central Line and the Northern Line.

Gotta love the craziness of the Underground.

This is pretty funny:
https://www.facebook.com/video.php?v=10202893013670793

#59 OttawaMike on 10.02.14 at 10:06 pm

A handsome devil like Gary should be a radio announcer.

#60 Smoking Man on 10.02.14 at 10:09 pm

#47 Tiger on 10.02.14 at 8:59 pm

Ha, chirping me cause you can’t get enough Smoking Man, even my haters are addicted to the most original word Smith this century… Even though I suck, people still love it, including you..

I love you too brother….
Sorry I can’t say more..

#61 Godth on 10.02.14 at 10:11 pm

When markets change and buyers fade away, sellers are loathe to drop their price. They inch lower over many months or (more typically) take their house off the market, “until things get back to normal.”
——————————————————-

…or drop their price (repeatedly) and then drop the listing altogether after a year or more. Welcome to my neck of the woods.

No one is bragging about real estate round here anymore. The magic mantras still persist but their luster is waning for sure.

#62 Shawn on 10.02.14 at 10:13 pm

How to Stay Poor

Ben (at 55) sees Buffett in an interview. The greatest investor in the history of the world.

Does Ben learn anything?

No Ben wants to teach Buffett how to invest by trying to predict the future like Ben apparently can (although its not clear Ben actually made his prediction in advance.)

Just unbelievable. If Ben had a son in hockey and Wayne Gretzky happened by to give advice I wonder would Ben say no because Wayne had surely made some mistakes along the way.

I should thank God that there are people like Ben in this world. And many of them. I need people like that because in order for me to beat the market (such as by learning from Buffett) I need there to be people like Ben who are crazy enough to fault Buffett’s investment acumen. UNBELIEVEABLE.

You can lead a horse to water. But apparently you simply cannot lead some people to wealth.

#63 Kenchie on 10.02.14 at 10:15 pm

#15 Gab on 10.02.14 at 7:34 pm

“On Vice.com, I just stumble upon another interesting book that may interest you and your readers. Canada as many country in the world is probably following the same path as Britain. Maybe it could be an inpiration for your next book … Who knows?

Here are the references:

http://www.vice.com/en_ca/read/how-corporations-carved-up-the-uk-for-private-profit-921

Holy shiza! I know those crappy council flats in the pic on vice.com! I used to live very close by! Walking through them was one of only two times I actually felt scared in the UK.

One thing that very much surprised me about the UK economy was how many companies were owned by PE firms. It is astonishing. Thank god Canada doesn’t have PE firms to the same degree.

#64 saskatoon on 10.02.14 at 10:20 pm

#27 Victoria Real Estate Update
#50 Cow Man

bingo.

of course there will be a drop of AT LEAST 50% (in many, if not most) populated areas of the country–though, most likely, this will take place over many, many years–as the mass delusion breaks.

case in point:

OSHAWA 2 bedroom SEMI built beside/on top of the old battery disposal yard 100 ft. from one of the world’s biggest auto. factories:

$242,500 CAD

http://realtor.ca/propertyDetails.aspx?PropertyId=14833290

(though it includes some sweet purple, blue paint work)

OR

VREU’s 3000 sq ft. FLORIDA 5 bedroom, 3 bath detached in gated community with fitness center, pool, tennis courts, sand volleyball court…a few minutes from one of the U.S.A’s TOP 10 BEACHES.

251,400 CAD

http://www.zillow.com/homedetails/1914-Oswego-Dr-Holiday-FL-34691/69063638_zpid/

WTF CANADA?!?!!?!?!?!?!?!?!?!!?!?

(?!?!!??)

#65 NEVER GIVE UP on 10.02.14 at 10:22 pm

#11 mrcommonsense on 10.02.14 at 7:27 pm

CMHC should not exist period.
___________________________________________
Totally agree with you.
Our good government has used this tool to practically criminal extent in order to get elected.
More crony capitalism, with the banks.
More manipulation of the herd.
I am tired of it.
I wont be voting for these thugs.

#66 Smoking Man on 10.02.14 at 10:24 pm

56 Setting the Record Straight on 10.02.14 at 9:45 pm

Dude, climate change extremists are wacked,, it’s a religious movement.

Calling for jailing, stoning, killing climate change deniers..

Climate always changes, but it’s the sun that does it..

You can’t even talk to them..

Now from a smoking man prospective all you need to do is blend in with the bastards, take there money. They are gullible as shit…

#67 chapter 9 on 10.02.14 at 10:25 pm

Stephen Roach the former chief global economist for Morgan Stanley New York pegged the housing collapse in the US as early as 2004. Was he labelled a “doomer”of course not. His prognosis of the carnage to come in the US and the fall out globally to follow was pretty much based on the premise “people buying crap they don’t need with money they don’t have.”
But we are different here “Right Garth”

#68 Smoking Man on 10.02.14 at 10:29 pm

#49 Victor V on 10.02.14 at 9:10 pm

You are correct, man I enjoyed that clip.. Hated the house, no character…

#69 Bottoms_Up on 10.02.14 at 10:36 pm

Average prices in Ottawa are roughly the same as 18 months ago.

That’s a loss of roughly 3% just based on not keeping pace with inflation.

Also, there’s a condo being built downtown that has had a “75% sold” sign on it for over 1 year. Prices were initially advertised as “from the mid-200’s”, then “from the low 240’s” and now “as low as 210”.

That appears to be a price reduction of around 15%.

#70 Smoking Man on 10.02.14 at 10:36 pm

#44 Wendy Copper on 10.02.14 at 8:48 pm<<“Why are you people so focused on housing?” Because, I pointed out, 70% of households have one. They’ve taken on massive debt to get there. They’ve gambled and put most of their net worth into one asset. It’s the most-owned thing in Canada. Duh.>>>>

Not me….I’m a school Vice Principal and my house is paid for. Maybe households should put more emphasis on higher education and the importance of education in earning a well paid job?
……..

Ha, a well paid job….well keep up the good work teacher.
Keep churning out, obedient slaves, who can’t think. Are honest, no need to hide my customer list from them and worry about them opening shop across the street from mine..

Good job at giving then no financial sensibility, pure stupid consumers.. Who go into debt to by my products.

Well done.. Teacher.. Well done..

#71 Kenchie on 10.02.14 at 10:38 pm

#41 joe schmoe on 10.02.14 at 8:44 pm
“The fact remains Garth has been loftily wrong the past 6 years about housing prices.”

It’s not Garth’s fault. Low rates have kept the weaklings in the market when they should have been pushed out over the course of a normal economic cycle. Now that QE is ending (and unless a new one starts), there will be a paradigm shift in the capital markets and housing market. The previous 6 years are an anomaly in economic history.

#72 Bottoms_Up on 10.02.14 at 10:40 pm

#53 LuckyRenter on 10.02.14 at 9:25 pm
————————————————-
He’s not right. There are way too many people waiting to jump into the housing market ‘at the right moment’.

Garth’s right. The slow melt is on.

#73 Sean on 10.02.14 at 10:42 pm

I don’t know, man.. other than thinking we’re special, I can’t see why we wouldn’t have 50% or greater. We are that out of whack with historical norms, and with the rest of the world. We talk about sub900k like it is almost reasonable – it isn’t! Canada, and especially TO and Van, just don’t have the economy to even justify a premium. I think it will be a miracle if we only meander our way to a 50% reduction in real terms.. and again, I’m not sure there’s any real reason to expect that we’re special enough to deserve a miracle.

#74 Bottoms_Up on 10.02.14 at 10:43 pm

#50 Cow Man on 10.02.14 at 9:11 pm
———————————————
The 73,000 household income is only what is ‘claimed’ as income.

They’re not reporting the $30,000 basement rental suite, nor the vast proceeds from their grow ops.

#75 Bottoms_Up on 10.02.14 at 10:45 pm

#46 Vancouverite on 10.02.14 at 8:54 pm
———————————————–
Had to buy a car 8 yrs ago ’cause my rust bucket had seen better days.

At that point in time I believe finance rates were around 5%, requiring a down payment and 4-5 yrs to pay it off.

Now you can get into a new car at 0% financing for 8 years, no down payment.

No wonder car sales are off the charts.

#76 Mike S on 10.02.14 at 10:48 pm

“When markets change and buyers fade away, sellers are loathe to drop their price. They inch lower over many months or (more typically) take their house off the market, “until things get back to normal.””

this is how risk builds up. the more it lasts the higher the risk gets and there is a bigger correction to expect

#77 Raging Ranter on 10.02.14 at 10:48 pm

Here in Ottawa only the new builds are going quickly. Resale homes are piling up on the market. Condo town homes in my neighbourhood (Chappel Hill) have dropped by a good 10% already. Units in my complex that would have been snapped up for $290,000 3 years ago are now sitting on the market for 6 months or longer and going for $260 to $270 if they go at all.

And whenever one does sell, the neighbours make comments like, “They’re nuts for letting it go that price. It’s worth way more than that. No way would I let my place go for that.” They can’t get it through their heads that the market has changed drastically here. They’ll find out soon enough.

#78 Bottoms_Up on 10.02.14 at 10:50 pm

#40 Mrs Hubris on 10.02.14 at 8:28 pm
————————————————-
Not many people know this, but The Economist made a mistake in calculating the loftiness of Canada’s housing bubble.

They didn’t use actual market rental rates but rather artificially low rents from rent-controlled apartments.

Taking actual market rents compared with cost of buying drops Canada significantly down the bubbly list.

Link? — Garth

#79 young & foolish on 10.02.14 at 10:53 pm

Housing is shelter, not an investment and therefore should be calculated as an expense/liability.

Still, as somebody said above, it’s not exactly easy to reduce your exposure to RE if you own a single family house.

But if you rent in these heady times, then you are among the blessed.

#80 Kenchie on 10.02.14 at 10:56 pm

#56 Setting the Record Straight on 10.02.14 at 9:45 pm
“Walrii for those who think the world is ending

‘Blatant nonsense’: Media hyped walrus climate scare stories debunked – Claims recycled year-after-year – A Climate Depot Rebuttal…”

The source the climatedepot uses seems to be on the payroll of the Heartland Institute.

http://www.desmogblog.com/directory/vocabulary/4186

http://heartland.org/about

Therefore the source is not very credible…

#81 Nomad on 10.02.14 at 11:11 pm

“Nor will Van houses go to $ 2 million.”

The upper bound Garth sets here makes me nervous. I would have prefered to see 1.5 because that’s a 50% increase from the current average price of a detached in Vancouver. Meaning he thinks the insanity could go on for a looooong time. Hopefully that was a random upper bound.

I hedge my contrarian view of realestate with Genworth and HomeCapital stocks. Just in case the music keeps playing for years.

Financials are quite off their lows. Always surprising looking at those low PE ratios. Smart money must really believe a shitstorm is coming, rather than simply slowing loan growth. Otherwise the shares would get picked up like hot buns.

#82 Kenchie on 10.02.14 at 11:11 pm

#57 Panhead on 10.02.14 at 9:48 pm
“#46 Vancouverite on 10.02.14 at 8:54 pm
I wouldn’t worry if you just bought a SFH Your fine

Not so *sure … sold my Pa’s house for him a few months ago with multiple offers (14 I think) on the table in East Van. His next door neighbour’s house has been on the market now for a month and already he’s dropped his price by a hundred g’s.
Smells different to me …”

Indeed. There’s a retail centre in Surrey that is just under 400k sq ft that was marketed to a select few institutional investors earlier this summer.

Initially, it was expected to reach just under $500 psf, or about $190m – $195m. The bids in the first round weren’t accepted by the vendor.

So a month or two later, the broker got back in touch with the “interested” parties for another round. This time it was expected about $180m – $185m. Once again, no bids were accepted by the vendor.

Then again in September, it was marketed at about $170m. We’ll find out in the next month or so if it is a done deal to one of the very few institutions that can sink that much money into a retail centre. That’s quite the drop over a relatively short period of time for a retail property in Metro Vancouver, which is often sub-5% cap. At $170m, this will be north or 6%.

#83 Inglorious Investor on 10.02.14 at 11:12 pm

It’s the difference between managing risk and timing the markets.

It’s always prudent to properly manage risk, no matter what the actual outcome is, for the simple reason that no one can predict the future. It’s better to miss some gains than to lose money.

Garth was both right and wrong. His position that real estate had become too risky for the average family was correct IMO, but his prediction on prices was apparently wrong. He blames the financial crisis, extreme interest rates and lax mortgage rules. Fine. But that’s exactly my point: no on can possibly account for or even foresee all the potential variables that may come into play. Markets and the forces that drive them are far too complex.

Years ago, I said on this blog when so many other commentators were warning against home ownership, that if one wanted to purchase a home as a lifestyle choice, AND they could truly afford it (as I define affordability, not as the RE humpers define it) AND they could manage the rising risk of a potential downturn, loss of a job, etc. that they should buy the house and ignore the predictions of both the bulls and the bears.

You buy a home because it suits your circumstances and chosen lifestyle, not because prices are going up or down.

As for an impending correction, it may not require a jump in interest rates, or any specific economic event. Mostly, bubbles just pop on their own, without much warning. They simply run out of gas, but the tank is opaque so you can’t see the end coming.

That said, I also suggested on more than one occasion that while I believe homes, as assets, are now dead money, high general inflation could mask a real drop in values in homes––nominal prices could remain relatively stable, but in real terms home values may erode substantially. In other words, the housing market just got way ahead of reality and it’s time for reality to catch up. On the other hand, an all out crash and burn scenario would not surprise me in the least. High volatility may be the norm moving forward.

Who the hell knows?

#84 Kenchie on 10.02.14 at 11:19 pm

#74 Bottoms_Up on 10.02.14 at 10:43 pm

“The 73,000 household income is only what is ‘claimed’ as income.

They’re not reporting the $30,000 basement rental suite, nor the vast proceeds from their grow ops.”

Exactly! People outside of BC forget that it is the province’s largest export (although hard to verify). Growing up, the richest people I knew were drug dealers and kids with parents working in Taiwan, HK or China. Two different kinds of wealth, but both derive from non-CRA approved sources…

#85 Inglorious Investor on 10.02.14 at 11:27 pm

#17 to_be_frank on 10.02.14 at 7:36 pm

“I’ve been lucky. I sold my house in March 2009 at the bottom of a short-lived real estate slump. […] It didn’t matter that I sold at a bad time.”

The paradox of investing: one can’t time the market, yet timing is everything.

#86 prairie person on 10.02.14 at 11:33 pm

http://www.theglobeandmail.com/report-on-business/chrysler-dealerships-a-hot-commodity-in-saskatchewan-as-local-economy-grows/article20898332/#dashboard/follows/

I hate to say it but the message isn’t getting through.

#87 Inglorious Investor on 10.02.14 at 11:38 pm

As for climate change. I hope people don’t fall for the nonsense that gets spewed from either side of the debate, as each is only serving their own purposes with their respective positions. It’a about money and control, not the climate.

Climate change is natural. It’s normal. The climate is ALWAYS changing. Sometimes change happens quickly, sometimes it takes a while such that we humans, with are pithy lifespans, don’t even notice. Any attempts we make to ‘correct’ climate change will only make things worse. All we can really do is respond to it. Adapt.

On the other hand, pollution is something we can actually do something about because there is no debate as to who is causing that. And, IMO that the REAL issue.

Let’s stop wasting time, energy and resources looking for ways to beat Mother Nature or the Sun God at their own games. We will lose every time.

Instead, let’s look at how we can reduce the environmental damage we know we are actually causing.

#88 Exurban on 10.02.14 at 11:47 pm

#64 Saskatoon

You’ve got a point, but there are significant annual fees in gated communities. My mother stays in one in Gulf Coast Florida with golf courses and swimming pools where 2-3 bedroom units sell for about $250k but the fees are about $13k a year.

#89 Kenchie on 10.02.14 at 11:49 pm

#123 gladiator on 10.02.14 at 12:45 pm
“@109 Kenchie:
it’s not global warming, it’s climate change.
How about this for your “thin ice”?”

A) I never said “global warming”. B) since the article says ‘This creates thicker, longer-lasting ice, while exposing surrounding water and thin ice to the blistering cold winds that cause more ice growth.’, thus the variability in the size of the sheet will likely increase because the edges are, literally, thinner ice. C) article also says “The overwhelming evidence is that the Southern Ocean is warming”. Hence, some shit is happening that is not likely good for the earth. Which also means “climate change deniers” stand on thin ice with their ideology.

And lastly, and most importantly to Canada, the US and Europe: “In sharp contrast, in the Arctic, there seems to be a relatively straight forward relationship between temperature and ice extent.”

And

“Thus, in the Antarctic, we shouldn’t necessarily expect to witness the kind of steep decline in ice that has occurred in the Arctic.
“…the seeming paradox of Antarctic ice increasing while Arctic ice is decreasing is really no paradox at all,” explains Climate Central’s Lemonick. “The Arctic is an ocean surrounded by land, while the Antarctic is land surrounded by ocean. In the Arctic, moreover, you’ve got sea ice decreasing in the summer; at the opposite pole, you’ve got sea ice increasing in the winter. It’s not just an apples-and-oranges comparison: it’s more like comparing apple pie with orange juice.”

Thanks for sharing this article that proves my point.

#90 A Yank in BC on 10.02.14 at 11:51 pm

Average detached in Vancouver now 1.26M? You gotta be kidding me. The Mother of all Canadian Real Estate bubbles.

I wish there was some way to short this.

#91 Waterloo Resident on 10.02.14 at 11:51 pm

Quote: “asteroid hole where Manitoba used to be.”

COOL, NOW THAT’S I’VE GOT TO SEE !!!!!

As for oil prices; Its odd that just a few years ago it really did appear that the peak of world production of oil in 2012 would have oil prices rising through the roof by now. Even with America pumping out oil like crazy the world production of oil is now 2% less than it was in 2012, and will be 5% less in another 8 years. But world demand for oil is falling even faster than falling supply, so that’s keeping a lid on global oil prices. What people don’t understand is how lucky we are to have a situation like this because our food costs are directly proportional to the cost of oil, so if oil doubles in price so will our food. We cannot live without cheap oil, we will starve to death, so this global slowdown in the world economy is literally SAVING OUR LIFE here in Canada.

I was talking to a guy who is a student in a community college here. He’s a new immigrant to Canada and work only part time as a security guard. He showed me a picture of a Mercedes AMG and he said its a cool car and he plans to buy one soon. I asked him how can be buy a $150,000 car on a security guard’s salary and he told me that he will simply just buy a house, flip it a few years later for a few hundred thousand dollar’s profit and he will have more than enough money to buy that car. He already has looked at 3 houses last weekend and he wants to put an offer on 2 of them, he actually plans on buying BOTH with no money down, primarily because he doesn’t have a penny to his name. And he’s a full time student, age 42, with lung problems, arrived from some place in Africa (not the Ebola zone though, thank God).

#92 The Patient on 10.02.14 at 11:55 pm

Off topic I know but, heck, Garth, even the South China Morning Post says that certain foreign buyers are “dominating” the real estate market in Vancouver.

I mean, sheesh!

http://www.scmp.com/comment/blogs/article/1589161/no-chinese-asiatics-or-negroes-racist-rules-vancouver-pioneer-are

#93 Kenchie on 10.03.14 at 12:02 am

Saw this after hitting the submit button:

#124 gladiator on 10.02.14 at 12:52 pm
“continuation (sorry – hit the Submit button a bit too early):
There are global warming deniers, not climate change ones. Only very obtuse individuals will deny that climate change exists. It always existed and always will – with or without humans. It always killed some species and created conditions for the appearance of new ones.
You cherry-picked the story about walruses to prove your point. I cherry-picked the one about Antarctica ice to prove mine. We are both right – the climate keeps changing.
What did you want to prove?”

That the dogs on this blog that deny climate change is occurring are ideologues in the worst sense of the word. If you want to go into the semantics about the difference between global warming and climate change, then that’s a different discussion. The important point is that climate change, regardless if it happens sans human activity, HAS increased in speed since the industrial revolution. It’s not any one country’s fault. Placing blame is asinine and counter-productive. It’s a global issue that requires a global solution.

Personally, I benefit from a high demand for oil (in particular) and primary-resource extraction (like most Canadians). But it’s not about me. Or you. Or Smoking Man. It’s about the world’s population (current and unborn) unable to adapt fast enough to the problems that are coming from climate change. Some people are more eff’d than others. Thank god Canada’s probably the best suited land mass for the effects of climate change. Hopefully our children, and their children, won’t be significantly worse off due to things that are more or less able to be minimized.

#94 45north on 10.03.14 at 12:08 am

When markets change and buyers fade away, sellers are loathe to drop their price. They inch lower over many months or (more typically) take their house off the market, “until things get back to normal.” Hence, there’s no tipping point when a crash starts

I would agree that when a crash starts there is no tipping point. Like right now – a little here, a little there – no big deal. But a year from now, there is a tipping point. It so much depends on the Government which can stimulate the housing market in many ways – one obvious way is to crank up CMHC guarantees – raise the ceiling on total mortgages backed – raise the limit past $1 million or relax down payments. The Liberals and NDP don’t offer much criticism of CMHC because that’s what they would do.

So will Stephen Harper really hang tough and watch the real estate market suffer serious price reductions? I’d say that it depends on the discipline Stephen Harper is willing to impose.

#95 Kenchie on 10.03.14 at 12:14 am

#130 Exurban on 10.02.14 at 1:38 pm
quoting
‘#120 Mister Obvious

BTW, I noticed a new trend in Vancouver yesterday. At a Fourth Avenue bus shelter I saw a huge advert for rental apartments in the West End in brand new 24-story purpose-built tower.

Someone has seen the future.’

Saw a similar thing at West 13th near Birch (in between the hospital and South Granville). A totally-renovated rental apartment building, so totally I would have thought it was new construction, completely unoccupied with a large sign out front advertising rental apartments. Long time no see.”
———————————–

It’s due to a couple of things. First, developers that normally do condos have been forced to add low-income housing by the City for “excess density” (i.e. bigger condo buildings). Secondly, developers build them as “strata titled” so if the multi-family apartments aren’t as successful as they hoped, the units can be sold off piece-meal. Third, demand for purpose-built rentals is very high because a lot of the condo-investor stock is unstable as they get sold off to owner-occupiers and the management of rental buildings (institutionally-owned ones) is superior to local DIY landlords. Lastly, the City sees multi-family apartments as a low-cost way to lower the unaffordability problems in Vancouver because they increase supply of housing (thus less profit for income-driven condo-investors and speculators).

I’m sure others can add to this list.

#96 UVZ on 10.03.14 at 12:16 am

I propose that official Canadian RE price statistics are very unreliable, almost to the point of meaninglessness.

For one thing, RE is local. Another thing is that there is a conflict of interest embedded in the information system.

Even if there were a 50%-off sale by some objective, rigorous calculation, you wouldn’t know it from the formally advertised numbers. 50% off what?

So, as long as prices are widely acknowledged to have “adjusted” (the media have to be on it too), both Garth and Hilliard will be right. A landing is a landing. Whether it is hard or soft will likely be unprovable in a proper way.

#97 Herf on 10.03.14 at 12:20 am

Gary who?

#98 Christopher Lackey on 10.03.14 at 12:34 am

And yet the infallible, god like condo deity brad lamb said on that article

“Of course prices will come down eventually”

Very revealing from someone who flogs condos with promises of compound returns

#99 crowdedelevatorfartz on 10.03.14 at 12:43 am

@#16 temporary PM

As long as federal MP’s are safe……..
A little closer to home.
Here in Canada pension plan deficits cause municipal employees to “riot”
Just dont take a job as a Montreal municipal employee.
Your pension plan contributions are goin UP!
Bill 3

http://www.cbc.ca/news/canada/montreal/bill-3-pension-reform-talks-between-minister-and-unions-constructive-1.2760751

#100 crowdedelevatorfartz on 10.03.14 at 12:48 am

Bill 3 in Montreal.

To all other federal, provincial and municipal employees take note…….

The cruel reality of unsustainable, deficit producing pensions coming to a pension plan near you.
Can you say increased employee contributions?
Can you say reduced benefits?
I knew you could.

Dont hate me because I’m the messenger.
Hate me because I’m smelly.

#101 bdy sktrn on 10.03.14 at 1:16 am

Nor will Van houses go to $ 2 million.
————————-

when was the last time you were out here? they already did.

currently MLS has 1218 detached freehold properties listed in city of van.

540 or 44.3% are asking UNDER 2M

678 or 55.7 % are asking OVER 2M

number 609 , the *median*, is 2.369M

listings are few and far between in NE /comm dr , as they have been for 15yrs. always snapped up quick by ‘locals’.
most listings are westsiders , trolling for a really big fish.

the HK’ers will drive the next mil, over the next 3 yrs. it’s bloody crazy, but there it is.

meanwhile, it’s still warm here, the sun keeps shining and the scenery at he park was excellent today. sunbathing in october. i can’t remember that in flin flon, kingston or halifax.

#102 Victoria Real Estate Update on 10.03.14 at 1:27 am

# 88 Exurban

“You’ve got a point, but there are significant annual fees in gated communities. My mother stays in one in Gulf Coast Florida with golf courses and swimming pools where 2-3 bedroom units sell for about $250k but the fees are about $13k a year.”

Over the past number of months I’ve posted examples of houses in Florida and other states with backyard pools, priced around $200 K to $250 K. These houses all had at least 5 bedrooms, at least 3,000 sq. ft., were all built within the last 10 years and all had attached 2 – 3 car garages.

Examples:

$212 K, Port St. Lucie, FL (5 beds, 3 baths, 3,350 sq. ft., built in 2006, 10,018 sq. ft. lot, attached double garage, backyard pool)

$249 K, Kissimmee, FL (6 beds, 3 baths, 3,132 sq. ft., built in 2005, attached double garage, backyard pool)

#103 Son of Ponzi on 10.03.14 at 1:27 am

A. Shuchart who prides himself to be a Realtor who speaks his mind has joint the sheeples:
Shame on him. Can’t trust a Realtor.
————

Home sales activity picks up the pace in September
Home buyers were active in Metro Vancouver last month, with home sales well exceeding the 10-year average for September.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 2,922 on the Multiple Listing Service® (MLS®) in September 2014. This represents a 17.7 per cent increase compared to the 2,483 sales in September 2013, and a 5.4 per cent increase over the 2,771 sales in August 2014.

Last month’s sales were 16.1 per cent above the 10-year sales average for the month and rank as the third highest selling September over that period.

“September was an active period for our housing market when we compare it against typical activity for the month,” Ray Harris, REBGV president said.

New listings for detached, attached and apartment properties in Metro Vancouver* totalled 5,259 in September. This represents a 4.6 per cent increase compared to the 5,030 new listings in September 2013 and a 33.5 per cent increase from the 3,940 new listings in August. Last month’s new listing total was 0.4 per cent above the region’s 10-year new listing average for the month.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 14,832, an 8 per cent decline compared to September 2013 and a 0.4 per cent increase compared to August 2014.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $633,500. This represents a 5.3 per cent increase compared to September 2013.

“Gains in home values are being led by the detached home market. Condominium and townhome properties are not experiencing the same pressure on prices at the moment,” Harris said.  “Individual trends can vary depending on different factors in different areas, so it’s important to do your homework and work with your REALTOR® when you’re looking to determine the market value of a home.”

Sales of detached properties in September 2014 reached 1,270, an increase of 24.1 per cent from the 1,023 detached sales recorded in September 2013, and a 113.8 per cent increase from the 594 units sold in September 2012. The benchmark price for detached properties increased 7.3 per cent from September 2013 to $990,300.

Sales of apartment properties reached 1,188 in September 2014, an increase of 16.7 per cent compared to the 1,018 sales in September 2013, and a 75.7 per cent increase compared to the 676 sales in September 2012. The benchmark price of an apartment property increased 3.3 per cent from September 2013 to $378,700.

Attached property sales in September 2014 totalled 464, a 5 per cent increase compared to the 442 sales in September 2013, and an 88.6 per cent increase over the 246 attached properties sold in September 2012. The benchmark price of an attached unit increased 4.2 per cent between September 2013 and 2014 to $477,700.

#104 Vanecdotal on 10.03.14 at 2:04 am

Waaay back in 2006, I worked on a project that required extensive research of the types of housing available in and around Los Angeles. I started with their local real estate listings, which were numerous, and at first thought I was seeing page after page of SFH listings riddled with typos. Such as “Previously Listed at $1.2 million (USD), price reduced to $625k, Or “$2.2 million PRICE REDUCED to $595k…. etc. Words like”Motivated Seller”, “Foreclosure”, and many, many “Short Sale” bylines. It was shocking to say the least, when I realized these weren’t typos, and this was years before the term “GFC” had even made it to the msm. Financial trouble had been brewing long enough in enough households, likely for at least a few years, prior to 2006 to cause a cascade downwards in prices in a short period of time from sellers desperate to get out. This had been previously a super hot RE market right up until… it wasn’t. Sounds rather familiar… Valuations at the time were almost identical to comparable homes to the Vancouver area. I have been following our local markets carefully ever since. After hearing the recurring meme for the last 3 years amongst my peers, and our boomer relatives, of listing their homes, then de-listing, then re-listing, yet still not being able to “get their price”, so they de-list again, wait, rinse & repeat, I think we’re at the end of the cycle. August surge in MLS listings looks eerily similar to what preceded the 2006 crash in LA, (and the rest of the US), it hints at the beginning of fear creeping in. Once that replaces greed as the dominant motivator, watch out below. I think many will be surprised at the speed of the turnaround.

#105 bdy sktrn on 10.03.14 at 2:19 am

with maybe 60k detached houses left in van and 300k cdns in hk, which way do you think prices will go once Beijing starts with the hardball.

#106 Charles Ponzi on 10.03.14 at 2:58 am

Never underestimate the destructive power of an avalanche. There is a lot of kinetic energy stored up in overpriced real estate. Prices have a long way to fall.

#107 jane24 on 10.03.14 at 3:03 am

Garth I was a RE agent in Toronto for the late 1980’s RE dump. It wasn’t a slow decline. The tap of buyers just turned off over night. One day hot phones, the next day silence.

The lemmings all decided together that houses were too expensive. Some kind of joint mind think at work.

I was prepared for it having moved out of RE personally literally a few weeks before but many colleagues in my office had fingers in RE pies and were burnt quite badly. At least half left the business over the next year.

#108 Smoking Man on 10.03.14 at 7:59 am

#80 Kenchie on 10.02.14 at 10:56 pmhttp://www.desmogblog.com/directory/vocabulary/4186

http://heartland.org/about

Therefore the source is not very credible…
……..

Thanks for the link to heartland Institute.. I just made a nice donation..

Wow a group dedicated to finding market solution to world problems..

#109 Yuus bin Haad on 10.03.14 at 8:09 am

I’m currently enjoying a guaranteed 36% return on one of my investments with Brad Lamb. Some of the other investors got a bit nervous when he was quoted as saying “Prices will fall at some point”, but not to worry – Brad promised to give us a heads-up well in advance of that happening.

#110 Ben on 10.03.14 at 8:13 am

“I should thank God that there are people like Ben in this world. And many of them. I need people like that because in order for me to beat the market”

Course you beat the market Sean. Course you do.

How is life knowing you don’t add real value but rely on dumb people to feed your family? What would the world be like if everyone did this? What we should be thankful for then is that everyone is not like you. And we know they are not because real work gets done, real things get made and life really does get better.

#111 Rick on 10.03.14 at 8:29 am

Winnipeg ground Zero!

http://www.winnipegsun.com/2014/10/02/housing-market-cooling-off

…….consider information recently released by the Winnipeg Realtors Association. It reported that sales had fallen to 1,137 while listings topped 5,100 at the end of August. The WRA President said “buyers are taking “¦ more time” and that the situation was good for buyers. Nationally, listings fell and in the hot markets sales to listings increased. Here, listings grew and the ratio of sales to listings fell to just below 20%. Trouble!

#112 mark on 10.03.14 at 8:45 am

It was an very spineless move to outsource the conclusion to Brad Lamb.

#113 Rational Optimist on 10.03.14 at 8:50 am

Sun Life in Kitchener-Waterloo just sold their headquarters. This is a building that houses 2600 employees- the original part of the building has housed the company (or some iteration thereof) for over a century. It’s in a part of KW smack dab between the two centres (in Kitchener-Waterloo’s Midtown), an area for which that the region generally has very high hopes.

So why are they selling? We don’t know what the purchase price is, but whatever it is must be a fortune, and Sun Life says it can use the money more effectively doing business, than sitting dead in an old office building and parking lots (even if that office is necessary to them). They’ll lease it back from the new owners on a term of 20 years, since the new owner is owned by pension plans and need predictable returns. No employee will notice when it closes- maintenance and control of the building will remain with Sun Life.

Sun Life is collectively a lot smarter than I am, and smarter than most other people I have met in Kitchener-Waterloo are. They see this as a great time to divest themselves of their largest real estate holding. Yet everyone I talk to continues to say this part of the region will see huge appreciation. I wonder who will turn out to be correct.

#114 Grantmi on 10.03.14 at 9:10 am

Here comes US interest rate hicks!!

Here comes Super Yellen

The U.S. jobless rate declined to a six-year low of 5.9 percent in September and employers in the U.S. added more workers than projected, signs of more vigor in the labor market that will help sustain faster economic growth. http://bloom.bg/1E8KndN

#115 };-) aka Devil's Advocate on 10.03.14 at 9:17 am

How do you write Blog Dawgs so well?

#116 Kenchie on 10.03.14 at 9:22 am

Go Saskatchewan go. Although it used $240m in federal gov’t subsidies, if it’s successful and able to be replicated, it will be money worth spending.

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/saskpower-unveils-worlds-first-carbon-capture-coal-plant/article20898736/#dashboard/follows/

#117 GTAHouseHunter on 10.03.14 at 9:32 am

Garth,
I have been following this blog for almost 5 years or more now and I am completely frustrated with predictions of an imminent real estate Fall/Crash/Slow Down/Soft Landing.Whatever you might term it nothing of that happened (atleast in GTA )and seems to be in a remote corner as time progresses.

So much so that I think people who had bought detached houses five years ago are sitting on equities of more than 150K – 200K.

Why do you think Madani and Macbeth would not be wrong. Macbeth goes and even gives a specific date.

Somehow deep down I feel the Govt. of Canada will avert the RE crash by doing something or the other. As they have successfully done in the last 6 years.

What do you think ? Can the Govt. Canada avert a CRASH?

#118 Kenchie on 10.03.14 at 9:41 am

Another article on CC. This time talking about the cuddly white bears that inhabit the north.

http://www.theglobeandmail.com/technology/science/shrinking-polar-bears-a-barometer-for-the-climate-sensitive-north/article20904215/#dashboard/follows/

#119 Not a Teacher on 10.03.14 at 9:47 am

#70 Smoking Man on 10.02.14 at 10:36 pm
#44 Wendy Copper on 10.02.14 at 8:48 pm<>>>
Not me….I’m a school Vice Principal and my house is paid for. Maybe households should put more emphasis on higher education and the importance of education in earning a well paid job?
……………………………………………………… ……..

Ha, a well paid job….well keep up the good work teacher.
Keep churning out, obedient slaves, who can’t think. Are honest, no need to hide my customer list from them and worry about them opening shop across the street from mine..
Good job at giving then no financial sensibility, pure stupid consumers.. Who go into debt to by my products.
Well done.. Teacher.. Well done..
…………………………………………………………………….

WTF Smoking wacko! Holy shit you’ve got a real hard on for teachers here. What the hell happened to you in your past? So you were not the teachers pet, so you failed, so you hated school, put in the corner with the dunce cap, peed you pants in front of the class, big deal we’ve all been there but come on buddy get over it already. I’m sure it’s been more that a few years since you were kicking cans in the schoolyard. Every opportunity you get on this blog you’ve got to get your two cents in about “teachers, farm slaves and sheep.” So we get it already you don’t like teachers and you don’t like the system. If you were a really smart guy you would perhaps create an alternate methodology of teaching for those like yourself that appear to have a hard on for the contemporary establishment. Conversely your kind either can’t obey the rules or don’t understand them. That’s OK but stop having a pity party. Holy shit stop with the teacher bashing and put your energy into more constructive disparagement. Get on with your novella and prove everyone wrong by your creative artistic side with the Smoking Man story of life. Come up with a new shtick, as the teacher-hating thing is getting old and so are you.

#120 Editrix on 10.03.14 at 9:50 am

Just from looking at your photos, I’d rather sleep with you, Garth, than Gary.

#121 };-) aka Devil's Advocate on 10.03.14 at 9:51 am

#204 Snowboid on 10.01.14 at 5:59 pm

For some reason my response to your post never did get posted? No matter.

There was a time I was firmly entrenched in the gloom and doom quadrant to which the bulk of the Blog Dawgs belong. I will admit that. It was a dark place and I did truly believe we were headed for the worst. But that was 2007/08 and this is 2014 and I have moved on learning from the events of the last 7 years.

What’s it they say “The definition of insanity is doing the same thing over and over again expecting a different result”?

I don’t think people understand how close to the brink we truly were in the fall of 2008 (pun intended). But the takeaway is; we overcame that near catastrophic experience as we have so many more before and we will the next as well.

Life is what happens when you are busy making plans for the future. – John Lennon

Ours is not to see what lies dimly at a distance but to deal with what lies clearly at hand. – Thomas Carlyle

#122 Kenchie on 10.03.14 at 10:01 am

The editors of Toronto Life seem to be morphing into blog dogs.

http://www.torontolife.com/informer/toronto-real-estate/2014/09/30/real-estate-mania/

#123 Pete on 10.03.14 at 10:06 am

Something odd going on in the Oakville housing market. September 2014 shows a Y/Y unit decline of -20%. This follows a Y/Y unit decline in August of -16%. The Sept 2014 unit sales are by far the lowest in 2014, except for January.

In addition the last time Sept unit sales were this low was in Sept 2006.

In the meantime though, average prices in Sept compared to Sept 2013 were UP +20%. This seems to have been skewed by 20 sales over $2M in September 2014, vs only 3 such sales in Sept 2013. It would be interesting to know how many, if any, of the $2M+ sales are overseas investors vs locals.

Looks to me like the Oakville market is dying, except at the very high end.

I told you. This is a three-city story. — Garth

#124 Rational Optimist on 10.03.14 at 10:25 am

45 Shawn on 10.02.14 at 8:53 pm

“But most people simply cannot reduce their exposure to their one and only house.”

Even people who own multiple properties might not be wise to sell one or more. As you point out, transaction costs are brutal.

One way to reduce exposure to real estate is to defer maintenance and improvements. Maintenance you can’t defer forever (some people seem to think you can), but improvements you definitely can. In a rising market, improvements might make a lot of sense- they might have a positive return on investment in many cases, realizable upon sale or refinancing using a new appraisal. In a more typical real estate market, their return is negative. If you think we’re heading there, deferring them makes a lot of sense.

So that’s one way that’s accessible to everyone in various degrees- before improving your home (or cottage or rental property), consider the fact that the cash spent would be better put to use in another asset class.

#125 Alex n Calgary on 10.03.14 at 10:27 am

Predictions are hard, markets are so complex, so many variables. I’ve been coming to this site for almost as long as you’ve had it, but the constant turnover of getting booted from rental house to rental house has to end. So we’ll see if we can find something reasonable in Calgary in the winter sell season, I still see bid wars and competing offers on edge of town upgraded townhouses, but you do see houses priced to sell sometimes, not just optimistically priced places that go off the market, then up then off, switch realtors (last ones are morons of course) eventually ending up with ReMax on the lawn.

And I start a new job at an oil and gas place on monday, all too well aware of the fluctuating price of oil and how they could just put the hold on projects here at any moment, and we’re looking to get a house! but you know we pay so much in Rent, it would be almost the equivelant for a reasonable house that is not too far away from downtown. Even if we break even over 10yrs, at least I won’t be a slave to these moron amatuer landlords anymore, its depressing to think that I”ll be locked into this crazy frozen place, but when it comes to Canada we don’t have that many options really. Van island doesn’t have any jobs and its tricky to get a Visa to live in the USA.

My request is for someone, to compile a list of all your best advice on how to buy houses and investment advice, what things to avoid, when I get ready to look I”ll have to sort through a lot of your old posts for the best juicy advice on how to avoid the scammers! did someone already do this?

Nice rationalization for buying something at its peak value. — Garth

#126 Toronto_CA on 10.03.14 at 10:28 am

“U.S. cranks out 248,000 jobs, pushing jobless rate to lowest since recession”

vs.

“Canada plunges to unexpected trade deficit ”

Is that an 85 cent Loonie I see in the near future?

#127 Andy on 10.03.14 at 10:33 am

Hey Garth , its coming..the interest rate hike.. I see it coming

Did you get a chance to look at his yet…
http://money.cnn.com/2014/10/03/news/economy/september-jobs-report-unemployment-below-6-percent/index.html?hpt=hp_t1

#128 Rational Optimist on 10.03.14 at 10:36 am

#78 Bottoms_Up on 10.02.14 at 10:50 pm

“Not many people know this, but The Economist made a mistake in calculating the loftiness of Canada’s housing bubble.

They didn’t use actual market rental rates but rather artificially low rents from rent-controlled apartments.”

Your ‘market rental rates’ are actually what’s artificial if no one is able to get them. Rent control is a fact of life in most of the country- property managers likely know what rent, if vacated, an apartment would command. But they know even more clearly what rent they are actually getting. It makes a lot more sense to use actual earned rents, than what rents would be if all renters decided to move to allow owners to reset their rents.

#129 Westcdn on 10.03.14 at 10:44 am

I am thinking the selling in the equity markets is coming to a close and it will be soon time to go shopping. I lucked out when I decided to convert my RRSP to a RIF and now have cash on hand. As Garth has stated many times, the US economy is slowly strengthening. It won’t last forever but I am going to bet the North American economies hold up for several more months so collect the dividends while I can. Actually I am down to trusting my instincts when I try to guess the future.
In the medieval times, kings used astrologers or shamans to predict the future. Today, that role seems to be supplied by economists; reminds me of a joke. In the days of recent past, the Russians held a parade to show off their weapons of destruction. An American was standing by Brezhnev observing the show. The last item in the parade was an open top limousine with 3 men in the back seat waving to the crowds. The American asked Brezhnev who the 3 men were – “Oh, they are economists”.
Joking aside, I think the Bank of Canada should raise interest rates now by 0.25% while the getting is good. The Cdn RE debt is too large and needs to be deflated. I am sure that Harper doesn’t want that to happen before an election as it might disrupt his balanced budget plan. As much as he is a popsicle, I can’t vote for change until I see policy statements. I am simply against a nanny state.
Time to go back to my personal issues – like why does TD Waterhouse think they should withhold 30% for tax on my withdrawals (part of the reason I have cash on hand), why my CPP has been delayed and just managing my lifestyle.
Also, I agree with the comments made by Glorious Investor @ #83. As for the climate change debate – Spanish Inquisition anyone?

#130 saskatoon on 10.03.14 at 10:47 am

#102 Victoria Real Estate Update
#88 Exburban

the “gated community fee” is nominal: in the above case the H.O.A. (Home Owners’ Association) fee is $115.

additionally, if you declare this FLORIDA house to be your “homestead”, feel free to knock another $500 off the listed property tax rate.

…thus, the overall tax obligation FOR THE OSHAWA property is much, much higher.

hence, let me repeat:

(WTTTTFFFF CANADA!!!!!!!????!?!?!?)

(!!!!???!?!??!?!!?)

#131 Son of Ponzi on 10.03.14 at 10:56 am

#90 A Yank in BC on 10.02.14 at 11:51 pm
Average detached in Vancouver now 1.26M? You gotta be kidding me. The Mother of all Canadian Real Estate bubbles.

I wish there was some way to short this.
———————-
There is.
Keep on renting.

#132 Inglorious Investor on 10.03.14 at 10:56 am

“Here comes US interest rate hicks!!”

“Dagnabbit, Gomer, we gotta git ’em dang interst rate hacks goin’ up like Becky Sue’s skirt at a hoedown!”

;)

#133 Jeff in Moose Jaw on 10.03.14 at 10:57 am

Morning Garth and fellow blog dogs (its 9am here).
Was watching this old but interesting video, thought I would share. Have heard the term Despotism before but didn’t know the full meaning.

Despotism vs Democracy – 1946 Encyclopedia Britannica educational film
https://www.youtube.com/watch?v=eLlLEtWEY4Y

#134 Sparky on 10.03.14 at 10:59 am

“All markets cycle and are independant of how many times the earth rotates around the sun.” Warren Buffett

I am still amazed at how many people cannot grasp the concept of why our interest rates are so low. Do they not realize it is because the global economy is shaky and governments are trying to stimulate business investment? You know, the entities that create jobs and incomes.

Low interest rates should be utilized properly. Buy what you can truly afford and pay it down quickly because money is cheap. Not borrow as much as you can because low interest rates increase the total amount you can now borrow.

Housing is supposed to be a symptom of the economy, not the main show. If incomes are healthy people buy houses. What we have now is a large Ponzi scheme in the housing industry.

#135 Bdy sktrn on 10.03.14 at 11:01 am

#115 Kenchie on 10.03.14 at 9:22 am
Go Saskatchewan go. Although it used $240m in federal gov’t subsidies, if it’s successful and able to be replicated, it will be money worth spending.
……………..

What a damn shame. Sickening that we waste tax dollars on unproven and foolish, alarmist bunk.
There are real problems we need to solve.

The ‘scientists’ behind this lie were absent from the classes taught in thermodynamics, heat transfer, fluid mechanics, energy transfer, etc (the actual science involved) and made a model based on future funding goals.

Funny that the people who can actually do heat/energy calcs are the biggest deniers (engineers), while the arts loving crowd eat it up.
Year after year the climate models become more spectacularly wrong, and the English lit grads continue to eat it up.

#136 Bottoms_Up on 10.03.14 at 11:09 am

Here’s the Economists interactive chart for Canada’s (and other cities) housing bubble (updated in Aug.):

http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

They show their sources are OECD, Teranet and National Bank. The question is, where do they get their rent figures from?

When they did this analysis a year ago, although I cannot track down the source where I read it, they used a rent price database that was either outdated or only included controlled rents (possibly StatsCan database?). If they were more forthcoming in the numbers it would be easier to judge, but at least this ‘error’ would be consistent back to 1975 (their base year)…so, relative to the ‘average relationship since 1975’ current house prices are 76% over-valued relative to rents.

#137 Inglorious Investor on 10.03.14 at 11:14 am

#115 Kenchie on 10.03.14 at 9:22 am

“Go Saskatchewan go.”

Yeah, carbon capture and sequestration. Another brilliant idea along the lines of seeding the atmosphere with sulfur (you know, the shit that causes acid rain).

Why don’t we just plant more trees? Capture the carbon. Produce more oxygen. Prevent erosion. Give Mother Nature’s little creatures a place to live. Cool the earth (that’s for all you panic-stricken global warming muppets). And they look nice too.

But no, we’d rather dump the carbon into the earth like so much excrement. Maybe they can dump it into depleted fracked wells and prevent the giant sink holes that may be coming.

#138 Nomad on 10.03.14 at 11:28 am

On BNN: “416 detached house up 11% to 950k”

I got to give one to the the house bulls, even if there is a correction, say 20%, with that kind of price appreciation, that’s not a big deal.

That is down $60,000 from April. Score one for the media and the realtors. — Garth

#139 Mister Obvious on 10.03.14 at 11:46 am

#116 GTAHouseHunter

“…I think people who had bought detached houses five years ago are sitting on equities of more than 150K – 200K.”
—————————

That’s exactly right. The are “sitting on equity”. Lots of it. They lack the nerve to harvest gain and thus break the rules of balance and diversification. Their financial hands are tied to their dwellings. It’s largely an emotional experience.

The definition of real wealth is liquid assets that spin off income. It’s an essentially heartless exercise in risk management and raw capitalism. One needs to bring their own altruism to the table if they are so inclined.

Large equity in a residential home at the peak of a market is ‘wealth’ that benefits no one. However, it can provide the collateral for further debt. Many house rich people tend to go that route. Bad idea.

#140 Smoking Man on 10.03.14 at 11:46 am

#131 Inglorious Investor on 10.03.14 at 10:56 am

Sure… 4 out of 5 jobs created are min wage..

Fed and stats dept trying to spark a spending spree, problem, no water in the well of the middle class.

They fail to see the obvious.. Two dings down, one ding up

#141 Mike in Toronto on 10.03.14 at 11:56 am

136 Inglorious Investor

“Why don’t we just plant more trees? Capture the carbon. Produce more oxygen. Prevent erosion. Give Mother Nature’s little creatures a place to live. Cool the earth (that’s for all you panic-stricken global warming muppets). And they look nice too.”

Only new growth captures carbon. It’s best to cut it all down and regrow it every 20 years or so.

As for what to do with the wood? Thicken up the floor joists, increase the thickness of floors, bring back the thicker 2×4, encourage the newly approved 6 story wood residential structures, build lots of decks, outlaw carpet, require a minimum thickness for hardwood floors, build wood-lined shopping malls, office towers, cubicle walls, wood furniture of every kind and of course Irish pubs. Lots of Irish pubs. Everywhere.

Carbon capture. We owe it to future generations.

#142 broadway skytrain on 10.03.14 at 12:02 pm

#140 Mike in Toronto ……..Carbon capture. We owe it to future generations.

———————————–
another poetry grad , i assume

#143 Doug in London on 10.03.14 at 12:09 pm

As others have said many times: predictions are always hard, especially when they are of the future. Yes, Garth’s timing was off but whenever there is a bubble it is IMPOSSIBLE to predict where the peak will be. I recall that as far back as October 1999 (possibly earlier) it was obvious there was a bubble in tech stocks. Anyone who sold off their holdings then looked like fools in the short run when the NASDAQ (which during the tech wreck the NauseateDAQ) looked like fools when the NASDAQ shot up to 5000. How many people predicted the peak would occur in early March 2000? Then how many predicted that after a drop it would rally again in mid 2000 then start the big decline at the end of the year? The same goes for trying to predict the peak of housing.

@Inglorious Investor, post #79 and Kenchie, post #93:
Yours are some of the best comments I’ve read here about climate change. Sure beats some of the rubbish posted here.

#144 Doug in London on 10.03.14 at 12:19 pm

@Mike in Toronto, post #140:
Good points you make. All those trees grown and cut down will be needed to provide lumber to rebuild houses and other structures damaged by those more frequent storms we likely will have. A few extra Irish pubs wouldn’t be a bad idea also. They’ll be visited in the evening by construction workers, who were busy all day rebuilding those damaged houses and other structures!

#145 pinstripe on 10.03.14 at 12:22 pm

I couldn’t believe what I heard this morning at the coffee shop.

the “dump harpo group” was discussing the tfsa increase to 10 g proposal by harpo sometimes this fall. with this one announcement everyone in the group is now a harpo loyalist.

if this is any indicator, the next election belongs to harpo.

I think harpo et al is making a fool out of the feedback in this blog.

#146 Ogopogo on 10.03.14 at 12:25 pm

I’ve just left a few comments on the Financial Post article comments section. The passive-aggressive tone of Marr’s article bespeaks of a journalist with the integrity of a Mafia loan shark.

#147 Jim B on 10.03.14 at 12:31 pm

Despite being referred to as a “crash,” the housing decline of the early 1990s was more of a slow grind downwards (at least in Toronto). Average prices across the GTA fell by 27.6% between the 1989 peak ($273,698) and the 1996 trough ($198,150), an average of about 4.45% per year for seven years. But bear in mind that the previous four years had seen a ridiculous run-up of 151% (an annual average of 25.8%) from the 1985 average of $109,094. And while GTA prices are certainly stretched here in 2014, it should be noted that it took sixteen years for prices to rise that same 151% from the 1996 nadir (the average price in 2012 was $497,131). So fifty percent down? Not a chance. Twenty-five percent down over the next decade? That looks far more likely.

#148 Holy Crap Wheres The Tylenol on 10.03.14 at 12:44 pm

#139 Smoking Man on 10.03.14 at 11:46 am
#131 Inglorious Investor on 10.03.14 at 10:56 am
Sure… 4 out of 5 jobs created are min wage..
Fed and stats dept trying to spark a spending spree, problem, no water in the well of the middle class.
They fail to see the obvious.. Two dings down, one ding up
_____________________________________________
Yes but 4-5 aint bad. Its a positive rather than a negative. Would you prefer 1 middle class and zero min wage? Always look on the bright side of life Smoky.
And yes we get it two dings down, one ding up, hell my grandson knew that when he was six.

#149 devore on 10.03.14 at 12:45 pm

#73 Sean

I don’t know, man.. other than thinking we’re special, I can’t see why we wouldn’t have 50% or greater. We are that out of whack with historical norms, and with the rest of the world.

50% would be a biblical disaster. But if the slump lasts long enough, we could easily see 50% in real terms after 15-20 years.

#150 Holy Crap Wheres The Tylenol on 10.03.14 at 12:48 pm

#140 Mike in Toronto on 10.03.14 at 11:56 am
136 Inglorious Investor
“Why don’t we just plant more trees? Capture the carbon. Produce more oxygen. Prevent erosion. Give Mother Nature’s little creatures a place to live. Cool the earth (that’s for all you panic-stricken global warming muppets). And they look nice too.”
Only new growth captures carbon. It’s best to cut it all down and regrow it every 20 years or so.
As for what to do with the wood? Thicken up the floor joists, increase the thickness of floors, bring back the thicker 2×4, encourage the newly approved 6 story wood residential structures, build lots of decks, outlaw carpet, require a minimum thickness for hardwood floors, build wood-lined shopping malls, office towers, cubicle walls, wood furniture of every kind and of course Irish pubs. Lots of Irish pubs. Everywhere.
Carbon capture. We owe it to future generations.
____________________________________________
All this talk about wood is making me horny for some grainy dark mahogany!
http://www.youtube.com/watch?v=-gwXJsWHupg

#151 Mike T. on 10.03.14 at 1:01 pm

‘Why don’t we just plant more trees? ‘

simple – the entities running the planet do not want to stop the degradation of Earth, just make you think they do

ALSO

Yikes

Gold = $1192 as of this post

#152 Jim B on 10.03.14 at 1:05 pm

#50 Cow Man, what in the world does a university town in western New York (population 1,347) have to do with anything, let alone the “Canadian” RE market (some 26,000 times larger)? Why not compare Vancouver (or anywhere else) to another university town, let’s say Ann Arbor, Michigan? Median household income there is $53,184 which is about five-and-a-half times the median home price of $285,172. So well above the Pittsford ratio and well below that of Vancouver. In other words, a totally meaningless comparison.

http://www.bestplaces.net/economy/city/michigan/ann_arbor

http://www.aaabor.com/members-top-menu/364-august-activity-shows-steady-market-article.html

And why do you say Canadian house prices are “far out of line” but then cite Vancouver prices/incomes, the highest in the land?

#153 Canaries Fan on 10.03.14 at 1:11 pm

#73 Sean, what do you mean by “the rest of the world”? Sub-Saharan Africa? Argentina? Ukraine? Lebanon? Or perhaps Manhattan, London, Hong Kong,…. It’s a wide world, my friend.

#154 devore on 10.03.14 at 1:16 pm

#93 Kenchie

Right now, this very second, Victoria is spewing thousands of gallons of raw sewage into the ocean. Large areas of China are an environmental disaster, and water from the great lakes is undrinkable for parts of the year. If you showed as much concern for that as you do for walruses occupying an island (something they do every year, regardless of how much sea ice there is), I would buy your story. I’m with Inglorious Investor, it is more than within our means to address real and lasting environmental damage, that is actively killing you today, that will not go away on its own. That doesn’t mean climate change isn’t one of those threats, but for pete’s sake, leave the walruses alone. Here’s one thing you can take to the bank: the walruses will be just fine.

#155 Inglorious Investor on 10.03.14 at 1:19 pm

For all those responding to comment #131.

Weren’t me, Pa. Were Son of Ponzi.

#156 TurnerNation on 10.03.14 at 1:20 pm

The T-T financial team has the best hairdos of them all. (Must be some kind of award out there.)
From hirsutism to wild untamed flowing locks.

Actually my hair is like blog dog Scott’s but not quite as long (yet?). My motto is use it or lose it. Gel budget is through the roof.

#157 Smoking Man on 10.03.14 at 1:20 pm

#147 Holy Crap Wheres The Tylenol on 10.03.14 at 12:44 pm

If you dig into the Labour stats, youth got crushed, the biggest present of the job gains where the 55+

I see the battle lines being drawn, millenials vs boomers.

#158 Rational Optimist on 10.03.14 at 1:20 pm

136 Inglorious Investor on 10.03.14 at 11:14 am

“Why don’t we just plant more trees?”

The answer to this question is actually simple: international climate change protocols will give us insufficient (or no) credit for reforestation. This was one of the United States’ logical arguments against Kyoto: that they would not be credited for the vast amount of reforestation they have done.

Trees are natural and efficient carbon capture. For this and a myriad other reasons, we should be planting them like there’s no tomorrow (for people really serious about climate change, take that phrasing to heart). The problem with this is that reforestation means taking farmland out of production. And the way to do that is to increase yields. Many of the same people who are otherwise into environmental protection are also into intentionally reducing farm yields (I’m not myself saying that every way of increasing yields should be done), which necessitates an increase in the land under cultivation, and a decrease in forested areas and other ecosystems. That’s the head-scratcher for me.

#159 devore on 10.03.14 at 1:31 pm

#128 Rational Optimist

We see this all the time. Any rental study based on ASKING rents is bound to produce very misleading results. No one cares about asking rents, except delusional amateur landlords, as no one cares about asking house prices, except delusional owners and FSBOs. Even the REOs don’t report asking prices, although asking:sell ratio can be useful, no one is tracking such a metric for rents.

#160 FLAWED on 10.03.14 at 1:35 pm

In other news Caesar Harper is going to bomb people in Iraq from above which will continually fuel HATE for the west. Why don’t these crusaders ever learn. Where do you think all these ISIS fighters came from? They are the boys of the parents murdered by US, Cdn and British bombs over the last 12 years……what an embarrassment.

#161 Mister Obvious on 10.03.14 at 1:42 pm

#95 Kenchie

“…the management of rental buildings (institutionally-owned ones) is superior to local DIY landlords.”
————————

Vastly superior, I’d say. I have lived in one such building four years now after having lived in my own SFH for 25 years.

The managers here are no-nonsense, down to business types. There is a set of reasonable and equitable rules by which we all abide bringing peace to this valley.

I didn’t dislike living in my own home. I simply got older and wished to use my remaining time doing something other than paying municipal taxes and doing home maintenance.

In one sense I still have my home. It now exists in the form of investments. Four years later, the original capital has in fact grown. I have been extracting a fairly reasonable income in the meantime.

I now have copious time to post comments on various blogs. I’ve never looked back.

#162 Canaries Fan on 10.03.14 at 1:43 pm

#142 Doug in London: Remember Alan Greenspan’s oft-quoted “irrational exuberance” line? Pundits still dredge it up to show how brilliant “The Maestro” (shades of Seinfeld) was. Problem is, he said it in early December 1996, when the S&P500 was around 745. As we all know, the market more than doubled over the next three-and-a-bit years, with the S&P reaching an intraday high of 1552.87 on March 24, 2000. As John Maynard Keynes said, “Markets can remain irrational a lot longer than you and I can remain solvent.”

#163 Inglorious Investor on 10.03.14 at 1:43 pm

#157 Rational Optimist on 10.03.14 at 1:20 pm

“[…] international climate change protocols will give us insufficient (or no) credit for reforestation.”

I guess what you’re saying is there is no money in trees? I’ve been saying all along that the climate change scare (specifically, anthropogenic climate change) is a scam for govs to tax and Wall Street to skim more money out of the economy.

I’m not sure I buy the farmland argument, as I don’t accept the notion that more trees and farmland are necessarily mutually exclusive. I would need to see proof of that.

It’s claimed that the Amazon rain forest is a major source of global oxygen. By that logic, we simply need more trees in aggregate. They don’t necessarily have to be planted at the source of the emissions. In other words, think globally. But if arable land is really that scarce, maybe we can plant cactus orchards in the deserts. (?)

#164 devore on 10.03.14 at 1:52 pm

#151 Jim B

#50 Cow Man, what in the world does a university town in western New York (population 1,347) have to do with anything, let alone the “Canadian” RE market (some 26,000 times larger)? Why not compare Vancouver (or anywhere else) to another university town, let’s say Ann Arbor, Michigan?

Speaking of meaningless comparisons, Vancouver IS NOT a university town. Ann Arbor is. Waterloo is. A university town is one whose economy is dominated by its educational institutions, by necessity it must be small, hence the emphasis on TOWN.

#165 happity on 10.03.14 at 1:57 pm

” You will not like what happens in 2015.”

Maybe negative interest rates all around?

#166 Canaries Fan on 10.03.14 at 1:58 pm

#114 Grantmi (and others): Let’s look at the real numbers presented by a real economist.

http://krugman.blogs.nytimes.com/2014/10/03/wages-and-the-fed/?_php=true&_type=blogs&_r=0

#167 Blacksheep on 10.03.14 at 2:03 pm

“But there won’t be a 50%-off sale. Nor will Van houses go to $ 2 million.”
————————————-
If I was a betting man (I am), I would put money on Van houses hitting 2 mill, before they dropped 50 %.

Gold down, through $1200 support and Silver, sub $ 17, everything’s coming up roses : )

#168 Blacksheep on 10.03.14 at 2:21 pm

Well…other than, North Amercan Ebola, faux war on PJ ICEASS Ninja dudes, HK protestas, stalling global economy (USA excluded) and those silly climate weenie’s.

#169 Son of Ponzi on 10.03.14 at 2:25 pm

#159
gotta make room for the new bombs arriving from the bomb factory.

#170 Rational Optimist on 10.03.14 at 2:30 pm

158 devore on 10.03.14 at 1:31 pm

“We see this all the time. Any rental study based on ASKING rents is bound to produce very misleading results.”

Exactly right. Luckily, in this case, there was no study based on asking rents. The Economist used actual rents earned, as it should, and Bottoms Up would prefer they use what he thinks rents “should” be.

#171 saskatoon on 10.03.14 at 2:33 pm

#159 FLAWED

To respond: Here’s where your “ISIS fighters” come from:

http://thediplomat.com/2014/09/how-the-us-made-isis-a-threat/

http://www.globalresearch.ca/isis-made-in-usa-iraq-geopolitical-arsonists-seek-to-burn-region/5387475

http://www.counterpunch.org/2014/09/19/how-the-us-helped-create-al-qaeda-and-isis/

http://www.huffingtonpost.com/tom-engelhardt/how-america-made-isis_b_5751876.html

http://timesofindia.indiatimes.com/world/middle-east/For-many-Iranians-the-evidence-is-clear-ISIS-is-an-American-invention/articleshow/42239806.cms

#172 FLAWED on 10.03.14 at 2:35 pm

Canadian Forces in Iraq –

From the PMs office “We will maintain Special Forces in Iraq (boots on the ground) but will not commit to boots on the ground in Iraq” – Caesar Harper

??????????????????????????????????????

Guess we are all stttooooopidddd and don’t understand english according to the CONservatives.

#173 Shawn on 10.03.14 at 2:37 pm

Those Who Beat the Market are Free Loaders?

Ben said to me:

Course you beat the market Sean (Shawn). Course you do.

How is life knowing you don’t add real value but rely on dumb people to feed your family? What would the world be like if everyone did this? What we should be thankful for then is that everyone is not like you. And we know they are not because real work gets done, real things get made and life really does get better.

******************************************
I have beaten the market quite consistently and by a wide margin in the past. The future is yet to be told.

Imagine that some stocks are destined to beat the market and imagine that I can somehow pick a few of these.

Some other stocks are going to trail the market.

Let’s same someone sells one of the destined to be great stocks today and buys a stock destined to trail the market. Call him unlucky or dumb it does not matter.

Now someone has to buy his great stock that he is selling and reap that gain.

It might as well be me.

Of course I feel no guilt about this.

Making money in stocks feels great, believe me.

In the long term most stock gains come from profitably serving customers. I certainly feel great about that.

The part of the gain that comes from beating the market comes from beating other investors. I am sorry for their losses or below market gains, but I feel no more guilt about that than I would in winning a foot race (i.e. none whatever).

To each his own.

Read, think, learn, read some more, think some more.

Be careful who you believe. To be rich learn from rich people. Choose your friends wisely.

#174 liquidincalgary on 10.03.14 at 2:49 pm

Mike T. on 10.03.14 at 1:01 pm

‘Why don’t we just plant more trees? ‘

simple – the entities running the planet do not want to stop the degradation of Earth, just make you think they do

ALSO

Yikes

Gold = $1192 as of this post

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

remember, if it does not hold 1180, next support is 700!

#175 };-) aka Devil's Advocate on 10.03.14 at 2:51 pm

#142 Doug in London on 10.03.14 at 12:09 pm
As others have said many times: predictions are always hard, especially when they are of the future. Yes, Garth’s timing was off but whenever there is a bubble it is IMPOSSIBLE to predict where the peak will be. I recall that as far back as October 1999…

SHIFTS are rarely predictable enough to even come guarantee the good outcome of a speculation. You can’t time the markets to that degree. However SHIFTS do occur with enough regularity within the well know 7 to 10 year cycle pattern to have known that in the 7 years following the crash of 2008 that there would be little to no chance of another in the immediately following 7 to 10 years.

Another crash looms upon the horizon as sure as, but without the predictability, each of the seasons will come and go.

GTAHouseHunter is not so wrong at #117 when they wrote;

Garth,
I have been following this blog for almost 5 years or more now and I am completely frustrated with predictions of an imminent real estate Fall/Crash/Slow Down/Soft Landing.Whatever you might term it nothing of that happened (atleast in GTA )and seems to be in a remote corner as time progresses.

So much so that I think people who had bought detached houses five years ago are sitting on equities of more than 150K – 200K.

Of course, now, Garth might as well stick to his guns for certainly he is a lot closer to having made an accurate prediction now that he ever was. Will it be next year or the year after? And how much of a correction will we see, how much will the economy take back as it seeks equilibrium and how much will the government allow before manning the levers of fiscal and monetary policy to combat it?

Way too many variables.

Moral of the story:

The winners in the real estate game are they who buy and hold strategic properties that are sure to increase in value over the long run and provide a return of some acceptable kind in the meantime. The losers in the real estate game are they who speculate – trying to predict, with any kind of accuracy, when what we all know will happen will happen.

Typically the economic cycles follow a 7 to 10 year pattern (8 years plus or minus 2 years?). Here we are, six years hence from 2008. Based on history, I think we can expect a correction sometime in the next 1 to 4 years. Hardly accurate enough to bet on!

#176 liquidincalgary on 10.03.14 at 3:00 pm

….and the US$ just broke through a trend line. next stop, 100 (against basket of currencies).

BOOM! go the metalheads

#177 Son of Ponzi on 10.03.14 at 3:13 pm

Just heard about Elliot Waves.
Shawn, Mark any comments about the theory?

#178 Rational Optimist on 10.03.14 at 3:16 pm

#162 Inglorious Investor

“I guess what you’re saying is there is no money in trees?”

Pretty well. Someone else put it more succinctly.

“I’m not sure I buy the farmland argument, as I don’t accept the notion that more trees and farmland are necessarily mutually exclusive. I would need to see proof of that.”

There aren’t that many different “uses” for land. Development; cultivation; and all of the different natural ecosystems, of which forests are one (about a third of our total land area). We plow (or drain) natural ecosystems to put it under cultivation. If we no longer need that land under cultivation, we can turn it back into a natural ecosystem (though it’s not entirely simple to do it well). There’s only one way this can happen since our population doesn’t shrink, and that’s to increase agricultural yields. This actually has happened in the eastern United States, where some farmland has been given back to nature to grow trees that sequester carbon.

I don’t think arable land is scarce. But, if we for some reason took a conscious decision to decrease yields, it might become so.

#179 Son of Ponzi on 10.03.14 at 3:18 pm

#172 Shawn
Be careful who you believe. To be rich learn from rich people. Choose your friends wisely.
—————–
Once there was a rich man called Nelson Skalbania.

#180 liquidincalgary on 10.03.14 at 3:30 pm

Blacksheep on 10.03.14 at 2:03 pm

“But there won’t be a 50%-off sale. Nor will Van houses go to $ 2 million.”
————————————-
If I was a betting man (I am), I would put money on Van houses hitting 2 mill, before they dropped 50 %.

Gold down, through $1200 support and Silver, sub $ 17, everything’s coming up roses : )

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

you may get your wish on silver. did not hold 17.50. next support is 8 – 10 (2009 levels)

#181 Doug in London on 10.03.14 at 3:37 pm

@Canaries Fan, post #161:
Yes, I remember it well. The stock markets dropped some, and I took that opportunity to buy more units of the equity funds I was investing in at the time. I’ve given up trying to time markets, but when a good buying opportunity comes along, I have the presence of mind to dive in head first and take advantage of it. It’s like the governor I described in previous comments, which responds to a drop in speed by giving the engine more fuel-air mixture.

#182 Kenchie on 10.03.14 at 3:40 pm

US manufacturing since the recession in a nutshell

http://www.businessweek.com/articles/2014-10-03/manufacturing-jobs-are-falling-as-a-share-of-the-u-dot-s-dot-workforce#r=lr-sr

#183 Ben on 10.03.14 at 3:50 pm

Son of Ponzi – exactly. Shawn reads like the four or so blow-hards you get on every finance site who apparently always win in the stock market and yet in spite of their riches still find it worth their time to come and brag on a small forum. Any abstract debate immediately drops down into “you are jealous, I have more money than you do, etc”.

Tiresome and pointless as it’s unprovable. I’ve made plenty in the past few weeks by getting into cash and out of the FTSE100. Can anyone prove/disprove that? Does anyone care?

Seen it all before. Will see it all again. Every generation has it’s share of real-estate free-loaders who think they are a genius.

I guess the advantage of bragging on here is your mates (if you have any) can’t call you out on it…

#184 Jan on 10.03.14 at 3:58 pm

Ben Bernanke was denied mortgage refinancing.
Crap, he should come to Canada…LOL

#185 Jan on 10.03.14 at 4:13 pm

#27 Victoria Real Estate Update on 10.02.14 at 7:54 pm
. . . . .Total Single Family Home Sales. . . .
. . . . . . . . . .Greater Victoria. . . . . . . . .
. . . . . (January through September). . . . .
. . . . . . . . (Compared to 2007). . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007…*********************
2014…*******
2013…***
2012…***
2011…***
2010…******
2009…***************
2008…***********
2006…****************
——————————————————-
. . . .-40%. . . . . . . . . . . . . . . . 0%

* 2014’s SFH sales pace (January through September) is 29% slower than 2007‘s pace. 2007 was, at best, an average year for Greater Victoria (after population adjustment).
* 2007’s yearly SFH sales total was 38% lower than 1989’s total (after adjusting for almost 20 years of population growth).
* 2014’s slow SFH sales pace is even more alarming when mortgage rates are added to the equation. In 2007, Canadian 5-year fixed mortgage rates were as high as 5.89 %, compared to just 2.99% in 2014.

Previously I pointed out that (median) SFH prices across all areas of Greater Victoria fell significantly from 2010 to the end of 2013. For example: Oak Bay ( – 15%), Victoria ( – 13%) and Langford ( – 21%).

Since the end of 2013, house prices across Greater Victoria have continued to fall (based on Brookfield’s house price index). Brookfield’s most recent (August) data also shows that:
* prices were lower in August 2014 than in August 2013
* we would have to go back to 2007 to find prices this low in Victoria

Canada’s housing bubble is significantly larger than the 2006 US housing bubble. The following comparisons make this clear:

* Overall increase in house prices (first chart):
Canada: +124% (2000 to present)
US: +53% (2000 to the peak in 2006)

* Increase in household debt-to-income ratio (third chart):
Canada: +53% (2000 to present)
US: +41% (2000 to peak)

* Increase in price-to-income ratio (first chart):
Canada: +56% (2000 to late 2011)
US: +24% (2000 to peak)

* Increase in price-to-rent ratio (second chart):
Canada: +73% (2000 to late 2011)
US: +35% (2000 to peak)

The bigger the housing bubble, the bigger the potential price correction.

Prices in most US cities are higher than they were in 2000 but some US markets don’t appear to be bubbly. In contrast, prices in bubbly Victoria are clearly detached from economic fundamentals (incomes and rents).

Price increase since September 2000:

Chicago: +22%
New York: +61%
Las Vegas: +30%
Dallas: + 34%
Phoenix: +40%
Detroit: -7%
(Victoria: + 129%)

House prices in Canada and the US should be approximately the same, considering that incomes in the two countries are comparable. A look at house prices in several US cities gives us an idea of how massive Canada’s housing bubble is. For example:

$235 K, Holiday, FL (5 beds, 3 baths, 3,072 sq. ft., built in 2005, attached 3 car garage, located in a gated community with a fitness center and pool)

$228 K, Laveen, AZ (5 beds, 3 baths, 3,024 sq. ft., built in 2006, attached 3 car garage, pool)

$275 K, Fort Worth, TX (5 beds, 3.5 baths, 3,747 sq. ft., built in 2004, attached double garage, pool)

$239 K, North Las Vegas, NV (5 beds, 3.5 baths, 3,247 sq. ft., built in 2006, attached 3 car garage)

$196 K, Atlanta, GA (6 beds, 3 baths, 3,486 sq. ft., built in 2006, attached double garage)

$296 K, Mount Juliet, TN (5 beds, 3 baths, 2,969 sq. ft., built in 2004, attached double garage)

Girls and guys, it would have been financially foolhardy to buy a house in the US in 2006. For the same basic reasons, it would be unwise to buy a house now in Victoria.

Stay out of the market and enjoy renting (risk-free) as house prices continue to fall in Victoria. You have nothing to lose and everything to gain by waiting for Victoria’s housing bubble to deflate more. Renting for now is a no-brainer.

Until next time – Cheers!

YES DEAR.
WHAT YOU DON’T UNDERSTAND IS THAT CANADIAN RE MARKET IS UNREGULATED,RIGGED AND MANIPULATED UNLIKE THAT IN THE US.
5 YEARS FROM YOU’LL WHINING STILL EXCEPT THE FIGURE WILL PROBABLY %200 HIGHER FOR VICTORIA OR MORE.
JUST STOP THIS AS IT ONLY DRIVE YOU CRAZY WITH NO END IN SIGHT.

BTW – IF THOSE GREEDY OWNERS OF THAT 11,000,000.00 LISTING MANAGE TO FIND A GREATER FOOL GUESS WHAT THAT WILL DO TO THE AVERAGE VALUES THAN…..GOOD GRIEF…..

#186 Inglorious Investor on 10.03.14 at 4:15 pm

#181 Kenchie on 10.03.14 at 3:40 pm

The article reports pretty much exactly what I predicted on this blog over many posts over a number of years. Namely that there would be a so-called manufacturing renaissance in the US post GFC. That, the South, with cheap labour and cheap land would be the focus of that renaissance. BUT, we would not see 1970’s scale employment in manufacturing because of the shift to advanced manufacturing processes, which require less line labor. In fact, it’s partly the technology that is allowing much manufacturing to return to American shores as China begins to lose its edge due to much lower labor costs.

Furthermore, I said that by granting all those licenses to frack oil and gas (the technology has been around since, like, the ’50s or so, and the timing was not coincidental) the US would off-set their waning military influence in the Middle East and prop up the petro-dollar by just producing the stuff at home. Seen the US dollar lately? Look for export restrictions on oil to be relaxed further.

As for Canada? I said the new threat to Canadian manufacturing labour would be the American South due to––again––cheaper land, cheaper labor, higher productivity. Not to mention, higher innovation as well. Why do you think the Can gov bends over backwards for the oil industry and the FIRE industry? ‘Cause, take those away too and what’s left? Tim Horton’s?

#187 Shawn on 10.03.14 at 4:16 pm

Son of Ponzi says:

Just heard about Elliot Waves.
Shawn, Mark any comments about the theory?

Once there was a rich man called Nelson Skalbania.

******************************************
I consider Elliot waves and all forms of looking for cycles and patterns in the market to be a great way to lose money. I thank god that some people follow this because they usually will trail the market allowing others to beat the market.

Nelson Skalbania made and lost a couple of fortunes and ended up with not much in the end.

Of course you have to be selective in which rich people you follow.

Nelson Skalbania sold the oilers which I think came with Wayne Gretzsky to Peter Pocklington. Peter Pocklington made and then lost a fortune and in the end ended up near broke and has a hard time even staying out of jail these days.

I don’t like to see a guy kicked when he is down. Peter Pocklington has some bad points to be sure but he did a lot for Edmonton and I don’t think he needs to be vilified quite to the extent he is. He walked with giants for a decade or two. It was certainly a sweet run while it lasted. But yes he does deserve some vilification for sure as he did stiff some people. The mob vilifies him for selling Gretzsky to the LA Kings. That was just a business decision and while it was an emotional leaving for Wayne he was glad of it in the end and his California wife certainly wanted the move.

#188 learningfromyou on 10.03.14 at 4:33 pm

Thank Garth for this blog.

Garth, we know that the gas price is the fact or the excuse for the increment in price of all the products we buy on the daily basis, (Gas included)

I understand that when international it goes up we see an increment in prices of everything.
I also noted that the gas stations populated in the past that 37% of the price was exclusively TAX.

Now, my problem, when international the price goes down it’s like nobody has internet service or access to the news because I noticed that in the best case scenario the gas prices stay the same. The same applies to the price of all the products we buy.

I see a conflict of interest between the governement who has to regulate it and the amount of taxes collected.

You that worked for the government, could you please explain this issue?

I could be because my IQ is not high enough to understand it, in this case I’m agree that I could get operated to increase the cavity size under my skull and finally get the point about it.

?Do the elected officials in Ottawa drive?

#189 Retired Boomer - WI on 10.03.14 at 4:36 pm

This is an OLD story by now. Arguing when the prices of RE will change. It all depends. Not on the PRICE of Depends, though that might well be a factor…

It Depends on the cost of money.

At 3% money the asking price of RE can be higher (much higher) than one could ask when the cost of money is twice that 6% or three TIMES that 3% or 9%. Yes, been there to see it from 3% to 14%.

We are not moving to 14 anytime soon, but I can just about guarantee you there will be no 3% going forward.

People’s earnings, their outlook on forward earnings, the credit availability (Bank’s willingness to lend) and recency of experiences in all things financial are thrown into this mix.

Asking me how the typical millennial thinks is a question I am not qualified to answer. Ask he how a Boomer thinks I have a pretty accurate gauge of that question – I think…

#190 Son of Ponzi on 10.03.14 at 4:43 pm

The woman in the picture is distraught because she missed her wedding because of another SkyTrain breakdown.
Apparently, it was caused by a faulty modem.
World class, not.

#191 Son of Ponzi on 10.03.14 at 4:50 pm

Forgot to mention:
The faulty modem was made in China.
Translink can’t fire the worker who made the modem.

#192 Dominoes Lining Up on 10.03.14 at 4:52 pm

Garth, look at this!!

What does it say that the former US banker in chief can’t get a mortgage renewal , and still has a $700K mortgage, unchanged for the last decade?

What a house of cards the condo economy is!!

http://www.theglobeandmail.com/report-on-business/top-business-stories/after-the-crash-even-ben-bernanke-cant-refinance-the-mortgage/article20906823/

#193 Victoria Real Estate Update on 10.03.14 at 5:02 pm

#184 Jan

“WHAT YOU DON’T UNDERSTAND IS THAT CANADIAN RE MARKET IS UNREGULATED,RIGGED AND MANIPULATED UNLIKE THAT IN THE US.”

What exactly do you mean by “rigged” and “manipulated”? How? I’ll assume (for the Canadian housing market) that you are referring to the housing market intervention (mainly through CMHC) since 2000.

Fannie Mae and Freddie Mac were used in the same way in the US from 2000 to 2006. If the Canadian market is “rigged”, then so was the US market. Look what happened there. This is where you will probably try to tell me that the feds won’t let property prices fall in Canada. To say that you would have to argue that the Americans intentionally let property prices fall. This is where your (ridiculous) argument would end.

The Canadian and American housing bubbles were formed in the same basic way – through lax lending standards (beginning in 2000) along with CMHC (Freddie and Fannie) My post shows how the Canadian bubble is much larger than the 2006 US bubble was. Bubbly housing markets always go through major, multi-year price corrections. It isn’t different in Canada.

“5 YEARS FROM YOU’LL WHINING STILL EXCEPT THE FIGURE WILL PROBABLY %200 HIGHER FOR VICTORIA OR MORE.”

5 years from now I will probably be writing about how house prices in Victoria have been steadily declining over the past 9 years. I doubt you will even bother to look at Garth’s site any longer, knowing that Garth was right about Victoria.

“JUST STOP THIS AS IT ONLY DRIVE YOU CRAZY WITH NO END IN SIGHT.”

Prices in Victoria have fallen 12-15% from peak. I’m actually enjoying this. From the tone of your comment, it’s safe to say that you are the one who is being driven crazy. Are you underwater on a mortgage?

“BTW – IF THOSE GREEDY OWNERS OF THAT 11,000,000.00 LISTING MANAGE TO FIND A GREATER FOOL GUESS WHAT THAT WILL DO TO THE AVERAGE VALUES THAN…..GOOD GRIEF…..”

What property are you talking about?

It doesn’t matter. You said it, only a greater fool would buy that property (or any property in Victoria right now).

#194 Herb on 10.03.14 at 5:11 pm

#160 Mr. Obvious,

please disabuse yourself of the notion that renters don’t pay property taxes. Instead of sending separate property tax cheques to the municipality, renters remit property taxes monthly to their landlords in the form of about 20% of the monthly rent they pay.

You don’t escape by renting; you merely change the tax rate (which may be higher for multi-residential buildings), as well as the method of payment. Rest assured that landlords don’t pay your property taxes out of their profits.

#195 young & foolish on 10.03.14 at 5:18 pm

“The definition of real wealth is liquid assets that spin off income. ”

Hmmm … what is a liquid asset anyway?

Rents compared to RE prices … are they not sort of like P/E attached to equities? Rent = Future Earnings?

#196 Inglorious Investor on 10.03.14 at 5:33 pm

#187 learningfromyou on 10.03.14 at 4:33 pm

Oil prices can be very volatile, both up and down:

http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp

The cost of energy is one factor, and a very important one, as you have observed. In the case of oil however, we use it for many things besides fuel, so yes, the price of oil is very important to the general price level.

Taxes are taxes. My rule of thumb on taxes is they are too high. Nothing new. The gov always wants a piece of the action. And then more.

Ottawa politicians don’t care as much about gas prices as you are I do because you and I are paying for their gas. If prices go up they just take more from you and I.

I sincerely wish we had more Garth Tuner in Ottawa for this reason. I don’t always agree with Mr. John Garth Turner, but I believe him to be a straight up guy who really has the interests of We The People at heart. The fact that Stephen Harpoon doesn’t like him just proves it.

#197 };-) aka Devil's Advocate on 10.03.14 at 5:45 pm

#27 Victoria Real Estate Update on 10.02.14 at 7:54 pm

My experience has been; you can say whatever you believe to be true, backing it with as many cherry picked statistics, (and let’s face it unless you include them all those you do include are cherry picked), as you like, it doesn’t necessarily mean people will believe it’s true nor that it is, in fact, true.

Take the advice given you by #183 Jan on 10.03.14 at 4:13 pm “5 years from now you’ll be whining still except the figure will probably be 200% higher or more for Victoria . Just stop as it will only drive you crazy with no end in sight.

#198 Crowdedelevatorfartz on 10.03.14 at 5:49 pm

@#141 broadway skytrain

another poetry grad…
Reminds me of an old poem…..

“Sir, I admit your general rule…
That every poet is a fool…
But you, yourself, may serve to show it…..
That every fool is not a poet……”

#199 Shawn on 10.03.14 at 5:53 pm

The Definition of Real Wealth

Mister Obvious at 138 posted an incorrect definition of real wealth saying:

“The definition of real wealth is liquid assets that spin off income.”

***************************************
That incorrect definition would exclude any common shares that don’t pay a dividend. By that incorrect definition Warren Buffett would no longer be on the list of Billionaires since about 99% of his wealth is in Berkshire stock which does not pay a dividend.

It would exclude from real wealth a million dollars sitting in a bank account that is paying zero interest.

This definition is patently incorrect.

Not all wealth is liquid and not all wealth produces an income.

#200 };-) aka Devil's Advocate on 10.03.14 at 9:08 pm

#194 young & foolish on 10.03.14 at 5:18 pm

“The definition of real wealth is liquid assets that spin off income. ”

Hmmm … what is a liquid asset anyway?

Rents compared to RE prices … are they not sort of like P/E attached to equities? Rent = Future Earnings?

Any families of real wealth I know of, and I know a few, own a fair bit, as in “a lot” of real estate which I don’t think the person who said that considers to be a “liquid asset”. That said put the right price on anything you can flog it off just that quick AND if you need cash quick for whatever reason the bank is usually pretty receptive to lending it to you based on your equity in land. Stock and bond? Not so much.

#201 };-) aka Devil's Advocate on 10.03.14 at 9:19 pm

#198 Shawn on 10.03.14 at 5:53 pm
The Definition of Real Wealth

Mister Obvious at 138 posted an incorrect definition of real wealth …

I’m likin’ that I am finding myself agreeing with more and more on this blog. Is it me or are there more like thinkers to me here of late.

#202 Snowboid on 10.03.14 at 11:07 pm

#192 Victoria Real Estate Update on 10.03.14 at 5:02 pm…

You likely got under the skin of a Victoria RE agent, who else but agents use CAPS like that?

I have to agree with your assessment of Victoria as I watch the listings around the area we lived in prior to 2010.

We know from comparable sales that the new owner of our former home is down at least 15% from the price we got – probably closer to 20%.

Anyone that thinks Victoria RE will be 200% more in five years need their heads examined.

Even our local GG of RE here in the Okanagan wouldn’t dare post a ridiculous claim!

#203 Marlee on 10.04.14 at 7:10 pm

I wish we could up or down vote on this site. Some of the comments are so interesting. Is that a possibility in the future?