What could go wrong? (2)

WRONG

“I have a car-buying company,” says Paul. “Lately I have seen a strange phenomenon. Most of our customers are trying to sell their vehicles to pay their household debt. The problem is that 70-80% of their vehicles have loans. Too much debt!!!! I feel sorry but we cannot help them.”

While a lot of people who come to waste their time reading this pathetic blog have high net worth and the income of potentates (as opposed to potatoes), debt is a massive national problem. It could bring us all down, especially if deflation has legs.

For example, look at what the kids are doing. Since Boomer parents messed so much with their heads, young people continue to think that buying real estate they can’t afford and shouldering massive, low-rate debt, is what adults do. Sad, but pervasive. Here’s an example from this past weekend.

Casey sounds like a smart 23-year-old, working in IT for an outfit he likes. He sent me this:

“My newlywed wife and I live in Victoria BC and are looking to take the next step at building our future. We are currently renting, paying $1200 per month on a decently sized two bedroom, one bathroom apartment. We don’t hate the place, but we have found a condo we like and think we can afford. The builders have yet to break ground on the project and estimate 2.5 years to completion. The place we are interested in is about $450,000 with $340/mo in strata fees. My question to you is, is this a smart decision? Do you predict that our home will be worth the same value or more when it comes time to close? Is it smart to lock into a builder rate of 4.99% now in case interest rates shoot up between now and closing? We are hoping to be approved for 5% at signing and then take the 2.5 years to build up enough of a down payment to avoid CMHC costs at closing.

“I was all gung ho to go out and sign the papers when I woke up this morning, but since talking to a co-worker today and reading your blog thanks to his recommendation, I clearly haven’t thought things through enough. I need you to help explain how we can assess Canada’s economy and the predictions of the big-D.”

So I wrote back, to learn more. When I asked Casey what assets he and his babe have to contemplate buying a $450,000 unbuilt condo, and what their financial position will be afterward, this was his reply:

“Great to hear back from you. The only assets we have now are a car with a payment of $500/mo. Because this is a new development, and we expect to get approved for the initial 5% signing down payment instead of the 15% signing DP over 9 months, we can currently afford to pay the 5%. My wife and I both earn about $65k each. She is trying to get another casual position so she can pull in a bit more than that. And currently we have no plans to start a family.”

There you go. A typical situation these days – young adults who figure they can go from zero to a half-million-dollar home in one step. How should I respond?

Obviously I could remind Casey and his new wife they’re gambling and speculating in buying a housing unit which is unbuilt, unknown and with a contract which typically gives the builder all the cards – the right to delay closing, to change floor plans and materials, or even not to build if pre-sales sputter. They should know that over the course of two or three years everything could change. Rates could rise. The economy sink. Pandemic hit. Markets fall.

The kids need to be reminded we’re in the final throes of boom housing market that cannot last, which means they’re probably buying at the top. Or that Victoria already (like most major cities) has too many condos coming to market, in buildings hastily and cheaply-built whose future problems will be manifest in special assessments and illiquidity.

I could ask them why they’d trade being young, free and mobile with a shiny new life ahead, for debt, obligation and financial servitude – and still not have a back yard, if babies arrive. Or simply, I could remind Casey and wife that by buying they will likely double their living costs (to about $2,500) compared with their current rent. If the new condo doesn’t appreciate every single year they own it, this will be a money pit tainting the rest of their lives. Why would anyone want to start a marriage that way?

This is what easy debt does. For that we must blame gutless policy-makers, omnivorous bankers and misguided helo parents. Household credit – loan and mortgages – are on the rise again, swelling at twice the pace of income growth. And while seeping deflation now suggests interest rate increases will come slowly, we have a greater threat to ponder – economic torpor. Without steady job growth, expanding GDP and higher family incomes, this giant pile of debt is a giant threat. If Casey & his squeeze buy this place, their consumer spending will go to zero, and their savings along with it.

Kids without assets ready to buy a half-million-dollar apartment? I shouldn’t even have to write about this.

191 comments ↓

#1 Waterloo Resident on 10.19.14 at 12:37 pm

With the Canadian economy running on nothing but CONSUMER DEBT for so long, we are quickly finding that we are just running on fumes right now. I go shopping and I see that not many people are buying anything.

For that couple who are thinking of buying that condo in BC: DON’T ! My advice is this: keep renting, maybe even try to find a cheaper place to rent that is father out in the sticks, and have a kid or two before its too late.

And what do I mean about ‘too late’; This is what I mean by ‘too late’ :

http://www.dailymail.co.uk/news/article-2798086/mutant-ebola-warning-leading-u-s-scientist-warns-deadly-virus-changing-contagious.html

Seems that the Ebola virus has already mutated into a much more contagious form and it getting more contagious by the day.

Quote: “Leading U.S. scientist warns deadly virus is already changing to become more contagious.”

Quote: “three nurses, two in the U.S. and one in Spain have caught the infection while treating Ebola patients, despite wearing protective suits.”

Lets hope this is all just a bad nightmare and will quickly go away. I think that the stock market will be going up this week as people get ‘Ebola Fatigue’ and just don’t want to think about it anymore.

#2 Shanks on 10.19.14 at 12:38 pm

Wow early… Could I be first today?
Where’s nosty been? Enjoying the cosmos I’m sure.

#3 ozy - stop preaching to the kids on 10.19.14 at 12:40 pm

haha – stop preaching to the kids, they won’t listen anyway, and we need them to work (pay big debt) so we can have a good economy ;)

#4 pravchaw on 10.19.14 at 12:42 pm

I hope they listen to you Garth . . .
With divorce rate of about 50%, they get to know each other to see if they are in the right side of the 50%.

#5 Financial Poodle on 10.19.14 at 12:48 pm

DON’T DO IT!

(But that’s just *my* opjnion)

#6 Burls on 10.19.14 at 1:06 pm

Here is my balanced investment portfolio plan for the upcoming year. Can anyone suggest any improvements?

10% S&P 500 Large Cap Index – VOO
10% S&P 600 Small Cap Index – IJR
20% Developed World Equity – VEA
10% Canadian Dividend – ZDV
10% Canadian REIT – ZRE
10% Canadian Discount Bond – ZDB
10% Canadian Financial Income – FIE
10% Can Short-Term Corp Bond – VSC
10% Canadian Aggregate Bond – VAB

Burls

#7 sixtyfourk on 10.19.14 at 1:06 pm

A quick search of MLS shows that even in Victoria’s inflated market you can get a detached house with a yard for that kind of money.

Also consider that the $340 strata payment is like having a perpetual $75,000 mortgage added to the purchase price. The main difference being the strata payment is almost guaranteed to go up the longer you own the property.

#8 David McDonald on 10.19.14 at 1:09 pm

The average Canadian is financially illiterate (me included but I have improved since I started reading Garth’s blog). This probably didn’t matter back when housing was relatively cheap and borrowing was restricted. Paying down the mortgage was a reasonable strategy that everybody could understand. There were few investment decisions to make since there is was no extra money.

Today young people have many more options carrying lots of risk so they need to be better informed. True there is lots of information on the web but which opinion is to be trusted? By luck this young couple heard about Garth; I hope they listen to his advice.

#9 JO on 10.19.14 at 1:19 pm

I do a lot of lending in my job and see this all the time.
Mostly young recent buyers or would be buyers who are flat broke, yet think they need to gamble on RE with prices at a record and rates at lows. I do not work on commish and usually educate people about risks but they don’t care for the most part. The approval guidelines are a joke for insured mortgages and even if they get declined some of them end up finding a sneaky broker who can usually work out a deal.
Just wait for the hordes of suddenly broke borrowers come begging for a bailout screaming it’s not fair and homeowners deserve a break, blah blah blah
In between the siginifcant number of soon to be insolvent borrowers, government workers and govt retirees and the growing mass of non govt retirees all wanting their income splitting and ” free” unlimited healthcare, you have the basis for a shocking and persistent campaign to raise taxes and cut non health care benefits to help pay for rapidly mounting interest costs and the essentials for the growing number of govt dependants.
It will all collapse eventually but the trip there will be brutal for many of us.
JO

#10 DM in C on 10.19.14 at 1:20 pm

“My question to you is, is this a smart decision? ”

No.

Why are you so intent on locking your lives down? You make $130k together and want ANOTHER job? What about work/LIFE balance? You only have one life — stay in the apt, bank the rest and go see the world — you won’t be able to afford anything else once the condo is built.

Go through past posts on this site about buying unbuilt condos.

Casey, why do you want to own so badly?

#11 Ben on 10.19.14 at 1:21 pm

Kids think dropping $450k on a crap flat is normal because they have decent jobs and expect to have a decent standard of living. Little do they know that living standards have collapsed but are being held up for the boomers+ through asset prices. Those at the back of the queue (the young) take all the load on their shoulders.

The boomers+ are the king-makers for politicians. That’s why we have no action. Raise rates – tank asset prices – boomers cry. Inflate, tank savings – boomers cry. Sit and pray – boomers cruise.

Renting is a no-brainer right now. I’d also add that anyone who buys a condo must be nuts. $340/month in fees! That’s $4,080 a year, over a 25 year mortgage term that’s $100K. And that’s without factoring in the inevitable increases which will doubtless be above inflation (and therefore well above wage inflation).

Sit tight, wait to see which way the tree falls. One way or the other you will hear TIMBER soon.

#12 Renter's Revenge! on 10.19.14 at 1:27 pm

Casey, my comments will sound very harsh, but they need to be said. There are so many things wrong with your email to Garth, you need to read it back to yourself to see how you sound.

“looking to take the next step…”

The first of many clichéd phrases. Is it the next step? What about all the other things you could be doing, like travelling and going on adventures together to build your relationship? Think about how much fun it will be to be around each other when you’re exhausted from both working two jobs to pay your mortgage.

“…at building our future”

The second clichéd phrase. You won’t be building your future by buying a condo. You already live in an apartment. This is a step sideways at best and instead of renting your home from a landlord you’ll be renting it from the bank. Not to mention the opportunity costs. Don’t even get Garth started on those!

“we don’t hate the place”

You’ll never hate your place, as long it keeps the rain and the raccoons out. You’ll also never love your place, no matter how nice it is. You’ll get bored of it and want to upgrade it, or move, or just go outside for a walk. It’s just the way people are. They aren’t evolved to appreciate what they have. (it’s probably some survival mechanism to never be satisfied with your material possessions).

“we have found a condo we like… the builders have yet to break ground…”

So you mean you like the builder’s pretty conceptual drawings, which they can change later on as they feel fit, as per their standard contract.

“We are hoping to be approved for 5% at signing…”

Screw getting approval from other people! Save some money and let the banks fight for your business when you find a place that’s already built and can be inspected and found to not be a total piece of junk!

C’mon, you’re only 23! How are condos even interesting to you? Shouldn’t you guys be going on road trips and shirking responsibility and forming indie bands and playing crappy music in divey bars or some such tomfoolery?

#13 not 1st on 10.19.14 at 1:31 pm

This young un showed his lack of knowledge in his second paragraph. Imagine a guy that writes software for us doesn’t know that a car is a liability unless you live in the boondocks and have no other means of transport or actually use your car for work.

So you basically have no assets and got approved for $450k. Just lovely.

#14 Yb on 10.19.14 at 1:50 pm

Worst mistake ever. Learn to live with her first. I got my first house at 31 y.o. and had to sell it 2 years after due to a divorce, even after 9 years of marriage. Took me another 7 yrs before i could buy another one.

Those kids, start reading around and stop being so horny for everything that comes out on the market. If it is not the BMW, it is the latest cell phone, latest tablet or whatever. Have no clue about saving money.

I am renting now and I am 56 y.o. and I can afford to travel with my better half. Can afford restaurants if we feel like, can afford about anything but I am putting some good money monthly for the old days. I have money in the banks, money in different funds with good returns. GOSH, wake up kid, do not be part of the statistics.

Get some good advices, do not listen to the horny ones, making 130K a year, travel the world and take time to see if you can make it together for at least the next 10. By then, you will have enough maturity to decide what to do next……

#15 dave c on 10.19.14 at 1:50 pm

Casey, at least you are being smart in having a working spouse. You should have no problem saving up the 5% over the next 30 months.

Isn’t it better to live under a roof where you are the boss instead of paying down someone else’s mortgage?

I think you should get out there and buy something ASAP but be sure that this developer is solid and will provide you a decent home 30 months from now.

Myself, I’d rather but something that I could see and touch right now though, not an unbuilt place.

Keep up on the right track and you’ll join the ranks of home owners (vs renters) soon!

Renters are like zombies, moving aimlessly from place to place because they don’

#16 dave c on 10.19.14 at 1:50 pm

t control their own destiny.

Be a human owner, not a zombie renter!

#17 Millenial on 10.19.14 at 1:52 pm

‘omnivorous bankers?’

haha…

#18 Andrewski on 10.19.14 at 1:57 pm

To Casey & newly-wed wife:

DO NOT BUY NOW. WAIT.

#19 Villagemoron on 10.19.14 at 2:00 pm

By now the bankers and realtors must all be saying

“thank god for idiots”.

#20 Roial1 on 10.19.14 at 2:00 pm

Go ahead buy it. The numb brains in any condo agreement just love to have the power over other numb brains.
All condo agreements surrender of the right to ANY individually.
You almost have to get permission to sh*t.
Don’t believe me?
Just try to, oh, say hang out your Canuck flag.

A pack of trained pitbulls would be less painful.
At least they only bite you. They don’t know how to employ a lawyer to do the dirty work.

#21 not 1st on 10.19.14 at 2:04 pm

Being married with a mortgage at age 23 is something people back in the 1950s did. Except then, houses cost $5,000 and one person could earn enough income for the entire household and plastics were ascending.

Some advice, 23 is a very unstable age to make these decisions. Ideally, you should wait another 5 years because you will be much more settled at that time. Lots of 23 year olds hate what they trained for in school and go back again to retrain. Even being married at that age is tricky unless you are Garth.

#22 blueb on 10.19.14 at 2:08 pm

My brother and his wife did the same thing as our young couple in Victoria, about 12 years ago.

He placed a deposit on an un-built $450,000 condo (Songees Project in Victoria) and waited a couple of years for completion.

He lived in it for a couple of years only to realize he didn’t enjoy living there, as well as strata rules, etc. so he bought a house while he rented the condo out for less than his mortgage payment.

Recently he was having a hard time justifying 2 mortgages (he was having a difficult time finding a tenant). He decided to try and sell the condo for less than he had paid 12 years earlier, but no luck.

So he ended up selling his house and moving back into the ‘said’ condo… to be honest he is not a happy camper since it has put a big dent in his retirement plans.

#23 You are too young to become a house slave on 10.19.14 at 2:09 pm

If my experience can be of help to the young ones:

You are smart enough to ask for advice before jumping into a potentially regrettable situation. You have that going for you! I wish I had that going for me at that age. But even if I did ask for advice, I would not have had Garth to pop a question to….

I bought my first condo in 95 with my common law partner. It became the yoke around my neck for the next 8 years: many special assessments, being railroaded to be on the strata council because no one else was willing (it was a small building) and the lack of flexibility to move change my life (rental restrictions). The relationship ended and I could not sell the place due to a dip in the market. Eventually I got out, with no profit. I think of it all as a waste of money and a big bunch of unnecessary stress for a young person.

If I were you:
– exploit your talents to earn as much as you can
– keep your living expenses as low as possible
– save as much of your income as possible
– plan for that great sabbatical or round the world trip that you DEFINITELY SHOULD DO before you have kids. It will broaden your mind and give you amazing memories. Priceless.

Oh… and about “having no plans to have kids”: You are a guy…. in reality you have almost no say in the matter.

#24 hp on 10.19.14 at 2:23 pm

Instead of buying, consider a nicer rental. I am renting in Victoria and have been looking for a new, improved location. Here is an example, a beautiful townhouse in downtown Victoria. It’s expensive at $2,750/month but similar to monthly costs of the unbuilt condo.

http://www.devonprop.com/victoria-rental-listings/listing/?id=1819

http://www.devonprop.com is a good place to look for nice rentals.
http://www.padmapper.com covers a wider range of rental properties.

#25 Nemesis on 10.19.14 at 2:31 pm

#DecisionsDecisionsDecisions… #MortgageYourSoul… #OrSetItFree,Instead… #&PlayHouseTogetherInA…VW #SomewhereOnFantastyIsland:

http://youtu.be/D-OF9LzClbU

#26 Nemesis on 10.19.14 at 2:39 pm

#BonusTomFoolery… #JustForRentersRevenge:

http://youtu.be/tezjznL9NzM

#27 Purrpurrjones on 10.19.14 at 2:48 pm

RE:

Here is my balanced investment portfolio plan for the upcoming year. Can anyone suggest any improvements?

10% S&P 500 Large Cap Index – VOO
10% S&P 600 Small Cap Index – IJR
20% Developed World Equity – VEA
10% Canadian Dividend – ZDV
10% Canadian REIT – ZRE
10% Canadian Discount Bond – ZDB
10% Canadian Financial Income – FIE
10% Can Short-Term Corp Bond – VSC
10% Canadian Aggregate Bond – VAB

Burls

Just buy this CDN ntrl balanced fund (look at cost and 08 downside) as a one ticket solution
http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05OHI&region=can&culture=en-CA

In conjunction with http://quote.morningstar.ca/quicktakes/fund/f_ca.aspx?t=F0CAN05MRR&region=can&culture=en-CA

And call it a day. One ticket solutions giving you access to all of the above asset classes rebalanced for you with low costs.

#28 Retired Boomer - WI on 10.19.14 at 3:11 pm

It must be in the water these days. I’m talking about stupidity, not ebola.

Simple answer: NO!!

What ever happened to that condo developer in Toronto, who went back to Korea, and the Lawyer gave up the deposit money? BC has better protections, eh? Tell them that story.

Just because we CAN do something it doesn’t mean we SHOULD do it. Wait, you haven’t been married long enough yet, she might snore, you might snore, besides you have DEBT, and NO MONEY!!!

Call back when you have $65 Grand in CASH!

#29 Mr. White on 10.19.14 at 3:16 pm

If you can’t make the proper 25% down payment save it up until you can. Then, even if you time the market poorly you will still have an actual equity cushion to get you through.

Don’t buy a condo. Period. Your home becomes the whim of some under occupied (usually civil servant) goofs who rule the board for their own benefit and would not know a fiduciary duty if it bit them on the butt.

Keep renting until renting becomes more expensive than the house you can afford. You will rent for a long time.

#30 spaceman on 10.19.14 at 3:16 pm

A condo for 450K ? Must have a golden toilet, or be a Penthouse, this is a bit much.

My mortgage on a 4BDR House, in Glanford Victoria, is
$1760.00, and you rent an apartment for $1200? Where the Songhees?

My house would rent for $2500/month easy right now, its too expensive not to buy in Victoria. I paid $440,000 2years ago…

Happy as a clam, don’t even care if it drops another 15%….

#31 Panhead on 10.19.14 at 3:19 pm

Man, see this all the time at work. All young guy’s (gal’s too now) making good dough. Big mortgages, income property, diesel truck’s, high end cars, I whatnots. Not only does the bank own them, so does the company. They will not be able to afford to fight to keep their current wages and benefits. Just the way it is out here on the west coast, day of reckoning coming though …

#32 I have a headache on 10.19.14 at 3:27 pm

A car with a five hundred dollar a month payment is what passes for assets now a days huh? Wow!

#33 Retired Boomer - WI on 10.19.14 at 3:33 pm

Garth,

Will you elaborate HOW debt “could bring us all down, especially if deflation has legs.”

Yes, I can see how the indebted, especially the ones I’ll call “terminally indebted” would be crushed.

I don’t see where the impact would be very severe on the financially fit, especially the retired financially fit?

#34 LTL_FTC on 10.19.14 at 3:46 pm

#12 Renter’s Revenge! on 10.19.14 at 1:27 pm

Totally agree, plus adding to your response to:

“we have found a condo we like… the builders have yet to break ground…”

Also, so you mean that you have carefully considered every existing new and ‘used’ condo in Victoria already, and none meet your wants and so you’ve switched to buying a non-existent future promise?

Remember Yogi Berra’s quote ‘It’s tough to make predictions, especially about the future.’

#35 Oh Boy! on 10.19.14 at 3:58 pm

Time to break out in song and dance for the young man. Sang this in a previous blog.

There is a house in Vancouver town
They call it the Rising Price
Its’ been the ruin of many a poor boy
And God, I know, I’m one….

My Mother was a saver
Opened my first account
My father was a family man
Down in Vancouver town

The only thing a saver needs
Is 5% to sign
You’ll never-ever be satisfied
You’ll never be fully paid

[Organ solo, take it away]

Oh Children, tell your Mother
Don’t do what I have done
Spend your life in misery
Chained to the House of the Rising Price

Well, I got one foot in the debt pit
The other foot in a pay-cheque
I’m goin’ back to Vancouver town
To live in a slump, by the dump

Well, there is a house in Vancouver town
They call it the Rising Price
It will be the ruin, of many a poor boy
And God, I know, I’m one

#36 Freedom First on 10.19.14 at 3:59 pm

Casey and his wife pay $1200mo./rent, and make $130,000/year. They are young, still in the honeymoon phase, and are financially set to go, if they manage their finances with sanity. Yes, Garth should not have had to write this, but he explained gently and tactfully(well, a lot more tactfully than I could do), why he did write this. Debt fueled financial suicides for many will be plentiful. Past and recent world wide history proves this is the truth. I always put my freedom first. Priceless.

#37 Rexx Rock on 10.19.14 at 4:12 pm

Victoria is a boring dead end town.So many people leaving because of low paying jobs and high cost of living.When a coffee chain part time job have over a 100 people apply for 1 position you know things are really,really bad.
Go ahead and buy the condo.My friend bought a 2bd 2bth condo for $309 000 with $190 maint. fees a few years ago ,now its worth maybe $275 000 and $320 maint, fees.

#38 Bill Gable on 10.19.14 at 4:23 pm

NO, Casey – DON’T, whatever you do, get into this potential glue pot.

Mr. Turner is trying to save your financial future with his advice – listen to the man.

Good luck – and keep renting. You will NOT regret it – and don’t let any house hog say you are throwing away money.

They are the ones that are chucking money over the side, as their “nest egg”, (*the house) drops in value, by the HOUR.

Too much debt everywhere. Deflation stalking the land, and inflation pushing our food prices.

No time to get fancy.

#39 Ex-Cowtown on 10.19.14 at 4:24 pm

#12 Renter’s Revenge! on 10.19.14 at 1:27 pm

You’ll get bored of it and want to upgrade it, or move, or just go outside for a walk. It’s just the way people are. They aren’t evolved to appreciate what they have. (it’s probably some survival mechanism to never be satisfied with your material possessions).

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

Well said. Never thought of it from an evolutionary perspective, but we must be hard wired to be dissatisfied on some level. Otherwise we would have never climbed down out of the trees or invested in a balanced diversified portfolio!

To Casey: Just because the bank will lend you a cool half mill doesn’t mean that you now have a half million real dollars to spend. Borrowing a half million isn’t the same as having a half million free spendin’ dollars in the bank. All you’ve really bought is a half million sleepless nights. Don’t tie yourself down yet. The Rat Race is a long one and don’t get in a hurry to sign up.

When I was where you are, my live-in girlfriend and I were looking at buying a house. We were heading down the bridal path and my parents were going to give us the down payment as we’d more or less settled on a house. She then made the mistake of asking “If we split up can I keep the house?”

I looked at her for a split-second, then the next words I said were “I’m going to work now. When I get home have all of your stuff moved out.” She did. Haven’t seen her since.

I still think fondly of all the good things (+20 year happy marriage and two great kids) times that that house gave me. Thank god for real estate!

#40 SWL1976 on 10.19.14 at 4:37 pm

Selling your car to pay household debt??? That my friends is one sour pickle

Thanks again Garth for all that you do and your closing sentence summed things up quite nice

#41 Future Expatiate on 10.19.14 at 4:39 pm

How in the heck can anyone know what they like until they see it, built, in front of them, and walk through it?

Clueless.

#42 Derek R on 10.19.14 at 4:52 pm

#16 dave c on 10.19.14 at 1:50 pm wrote:
Be a human owner, not a zombie renter!

I dunno. It’s illegal to own humans in Canada, so you could be storing up a mess of trouble if you do that. Better to just hire them when you need them.

As for renting zombies, just… NO!

#43 Kenchie on 10.19.14 at 4:58 pm

#129 SWL1976 on 10.18.14 at 5:30 pm

“#95 Kenchie

If the SEC wasn’t around to police the financial markets, regardless of efficiency of their crime solving skills, Madoff and his ilk would get away with their heinious schemes without suffering much punishment for their actions

——————————————————–

This is like the fox looking after the hen house

Go easy on Cato he brings lots of good points to the table”

I wish I could. But he says something like this:

“Madoff committed FRAUD – fraud is illegal and not allowed in a free market with the rule of law.”

Yet he doesn’t specify which group of human beings are going to enforce the “rule of law”. Is the NYPD going to do investigations into insider trading, financial fraud, LIBOR manipulation or metal manipulation by global banks? No, they don’t have the expertise or the jurisdiction.

And he says:

“They exist to protect pharmaceutical companies from start-ups that would develop new drugs to displace their positions in the market.” Yet the big pharma companies, and the thousands of small companies developing drugs, have the same goal: Make money. It’s a symbiotic relationship that allows Big Pharma companies to acquire new drugs for their pipeline, while allowing investors and entrepreneurs to cash out by being bought up. People, such as Cato, may think that all entrepreneurs want to build the next Pfizer or Google, but he has no evidence to show that that is every entrepreneur’s goal. Some, perhaps, just want to build a $100 million company (or higher) and sell out. Or several $100 million companies and sell out because, perhaps, that’s their competitive advantage (research) rather than lead the transition into large, bureaucratic corporations.

But giving the individuals in question the freedom to choose what they want to do with their companies would, of course, disagree with Cato’s idea of regulation strangling thousands of small biotech and tech companies. So that can’t be acceptable.

Of course, I could go on about more examples of Cato making statements that may sound plausible on a superficial level, but make almost zero sense, or are entirely contradictory, when considered in more detail. But I’m watching football.

#44 Bottoms_Up on 10.19.14 at 4:58 pm

Casey you don’t have to prove anything. Especially not through an unbuilt unit where you don’t have a dp saved yet.

Think about this: what was your mindset and lifestyle 5 years ago (when you were 18?). How about 5 years before that (13)?

Big changes will come your way over the next 5-10 years, and the last thing that should be on your mind is a honking pile of debt to finance a box in the sky.

Prove to yourself that this is what you want: spend the next 5 years renting, and save the difference between cost of rent and cost to buy (let’s say that’s $1200/mo). After 5 years you’ll have saved about $75,000 (more if properly invested), you’ll be 28, you’ll know you can live that type of lifestyle with those expenses. You’ll likely be in a much better position to make a smarter choice with your future (especially regarding potentially starting a family), and you’ll likely look back and kick your 23-yr-old self saying “WTF were you thinking??”.

#45 Linda on 10.19.14 at 5:05 pm

Don’t buy Casey – keep on renting while you build your downpayment. And look for a house instead of a condo if you ‘MUST’ buy. Condo fees are like perpetual rent even when (if) you pay off the initial mortgage. Seriously, I’ve never understood the condo thing. Maintenance is not that difficult unless you are disabled & for $340 plus per month, I’m sure you could hire the services of a company or three to do all the ‘hard’ work of mowing the lawn – living on the coast, you don’t really need to worry much about shoveling the walk come winter. As for the condo board or condo rules, I heard some real horror stories – one woman (Google if you don’t believe me) was being threatened by lawsuit by her condo board because – I kid you not – they had regulated the height of the flowers that could be planted. The board went berserk when the woman planted seeds for sunflowers her grandchildren had given her – sunflowers being way over the height limit the condo board had legislated. Not all condo boards are control freaks but heaven help you if your condo board contains the critter. Though there are neighbours who are just as bad – read recently about a control freak couple who took their neighbours to court because anything said neighbours did was not to their liking – the judge threw the case out & had very harsh words for this couple, but imagine living next door to them. Yikes!

#46 Bottoms_Up on 10.19.14 at 5:06 pm

#7 sixtyfourk on 10.19.14 at 1:06 p
———————————————-
That perpetual strata cost would be very annoying…because homeowners usually have the ability to postpone a house repair/upgrade…but $340/mo is a reasonable amount to spend on maintenance and repair, regardless of whether it’s a monthly budget for maintaining a house or a condo strata fee.

#47 Bottoms_Up on 10.19.14 at 5:09 pm

#4 pravchaw on 10.19.14 at 12:42 pm
—————————————————–
The divorce rate is 50% over a lifetime…let’s say that’s 1% per year of married couples get divorced. They have awhile to go to get to know each other and figure out whether divorce is the way to go. It’s a good point though…people change…what are they going to be like, going to want from life, that is, how much will they change, by the ages of 30, 40, 50, 60? These are the great, perpetual, unknowns with respect to partnership.

#48 Sheane Wallace on 10.19.14 at 5:19 pm

half a million dollars is a great town house or apartment on a golf course in southern Spain (100 k) + 400 k at 5 yearly % dividend = 20 k income, sufficient to live and never work again in Spain.

#49 Sheane Wallace on 10.19.14 at 5:24 pm

Buy Casey!

Show some guts, are you an Canadian or not?

#50 Sheane Wallace on 10.19.14 at 5:28 pm

Steve said no housing bubble here.

Don’t you trust you leader?

#51 Temporary® Foreign Prime Minister on 10.19.14 at 5:33 pm

“……Or simply, I could remind Casey and wife that by buying they will likely double their living costs (to about $2,500) compared with their current rent……”
=========================

Despite the blatantly obvious, I bet 10 to 1 Casey goes ahead and blows his marital brains out anyways. The stigma of ‘renting’ is a birthmark too hideous to show in public.

My coworker did exactly the same, even after we crunched the numbers. Condo euphoria lasted about a month, followed by buyer’s remorse, a daily four-hour round-trip commute, and a wife who won’t talk to him oanymore.

It is said that cliff-jumping lemmings follow a multiple year cycle. Thinking we’re currently on an upswing…

#52 Renting and Loving it on 10.19.14 at 5:44 pm

Since when is a car (that depreciates every day) with a $500 monthly payment considered an asset?

Casey, you and your wife keep renting. BTW, Kids are rarely “planned” for. I’m glad you’ve got the 5% to put down. 130K combined salaries and I’d be saying WTF otherwise.

Keep building up REAL assets (namely – CASH, TFSAs). You make a combined 130K a year and she want’s to get another job? Oy.

What happens if she should suddenly be expecting?

Max out your TFSAs, using them to buy the things Garth recommends here in this pathetic blog, and then after you’ve maxed them out, with the other money you’ll be saving by NOT buying, purchase some of the same items outside your TFSAs. You can use that money to help pay for your monthly rent. Make your money work for you.

I used to work for a builder and have purchased a freehold house from a builder. I’d never do it again and I don’t work for any builder any more. My house wasn’t delayed but it should have been so things could be done right. I could have done a better job on things than some of the sub-sub trades did.

#53 devore on 10.19.14 at 5:45 pm

Obviously I could remind Casey and his new wife they’re gambling and speculating in buying a housing unit which is unbuilt, unknown and with a contract which typically gives the builder all the cards – the right to delay closing, to change floor plans and materials, or even not to build if pre-sales sputter. They should know that over the course of two or three years everything could change. Rates could rise. The economy sink. Pandemic hit. Markets fall.

First time buyers should really not buy pre-build condos. They are committing to close on a very expensive contract years in the future.

In addition to the risks you mentioned, even simple regular life events could cross their plans completely. Like having kids. Twins. Yeah, they don’t plan on having kids, but they happen all the same. They could get divorced. Who continues to make payments on the condo, and who closes on it? A great career opportunity could come up for one of them across the country.

2.5 years, and more realistically 4 years, is a very long time in a young and dynamic life. That’s almost enough time to go from partying every night to dropping the kids off at preschool in the morning.

And it’s not like there is a shortage of condos anywhere in the country, and they’re definitely not poised to take off in price in the foreseeable future.

#54 james on 10.19.14 at 5:48 pm

“My wife and I both earn about $65k each.”

Hey, for 23 in Victoria that isn’t bad at all. No wonder they feel they should buy a condo, as they are doing well for their age.

#55 Cici on 10.19.14 at 5:59 pm

All of your points are extremely valid Garth, but the first thing I would have asked him is: “WTF…you are both making $65,000 and haven’t saved a cent?”

It seems that they are not managing their money or budgeting adequately, and would soon find themselves in a financial mess and probably even defaulting on the mortgage if they did take the plunge.

Perhaps they should try saving (as in not touching) AT LEAST 10% of their salaries for a good two years before they even contemplating buying real estate. Then they’d have a modest down payment and an idea of the pain that it took to build it, and would probably think twice about condo homeownership.

#56 Kenchie on 10.19.14 at 6:04 pm

#11 Ben on 10.19.14 at 1:21 pm

“The boomers+ are the king-makers for politicians. That’s why we have no action. Raise rates – tank asset prices – boomers cry. Inflate, tank savings – boomers cry. Sit and pray – boomers cruise.”

Concurred. But a tipping point will come eventually. I estimate it will be in 8-10 years (at minimum, two more federal elections). Boomers will eventually stop caring, lol.

On the bright side, anecdotally, one millennial from my high school running for city councillor, and one millennial from university that is running for MP. And a friend of a friend (also millennial) is running for city councillor in another Vancouver burb. So change is slowly happening.

#57 Anson on 10.19.14 at 6:07 pm

This is the new way of thinking.
People feel very proud to be in posession of things even though they do not own them.
There is going to be a lot of reminiscing about, the nice house they used to live in, or the nice car they used to drive.
Many live a payment lifestyle and are not actually building wealth.

#58 JSS on 10.19.14 at 6:10 pm

As a shareholder of the Big six Canadian banks, Casey please go and buy that house along with the 25 year mortgage that comes with it.

as they say, “You’re richer than you think”

#59 Kenchie on 10.19.14 at 6:12 pm

#19 Villagemoron on 10.19.14 at 2:00 pm
By now the bankers and realtors must all be saying

“thank god for idiots”.
————————-

Your list should include most retailers!

I grew up in a small retail business family. I thank god for those people who love to spend their dollars with very little prompting.

#60 Anson on 10.19.14 at 6:13 pm

Many working poor have been allowed to live a lower middle class lifestyle do to credit.
I could not believe my ears when I heard the young girl working at KFC talking about how happy she was to be a home owner.

#61 -=jwk=- on 10.19.14 at 6:22 pm

Buy it. Will be worth 600k easily on closing, you can flip for a tax free 150k (no one will tell CRA) or move in and have instant equity of 25%!

There is no point fighting the tide, buy in now and watch it go up from here.

#62 tom coates on 10.19.14 at 6:28 pm

your writing is so close to what i think is happening to the point that i’m relaxed by some of the scariest stuff you write about…i’m positioned more or less where you recommend…i can’t let go of my tfsa accounts…i treat it as a big uncertainty fund…i saw a woman on a big network a few weeks ago and she said if you don’t need the money why take the risk…also i’m still trying to understand how deflation{not inflation as i presumed) will affect me as i age…thanks a lot

#63 raisemyrent on 10.19.14 at 6:33 pm

Casey, my man. Well, my boy, let go of the dream. You have been lied to. You already have the better half, and you already live in a box. A mortgage will not bring the X factor. It’s OK. You’re young and will see the light. Being an IT nerd, would a spreadsheet work?
A while ago, we traded spreadsheets that clear up the buy vs. rent ordeal. I even think Garth posted one from a fellow engineer from la belle province. I have one of my own too. Would any other blog dog care to share a link? If I could, I would add mine to some sort of file sharing site, as I am somewhat reluctant to post my email address here (a sign of age). I also don’t know how to set up the above. It’s a modified version of a file that was given to us by the prof in a university class, after all (imagine that, Smokey Man).
I know you are reluctant to tinker with some cells, Casey. But, shouldn’t a spreadsheet and countless other analysis tools be more than in order for a decision on half a million dollars (plus as much or more in interest)? People these days do more research on whether to buy the new iPhone.
Don’t take anyone personally; we say it so because we care.

#64 Emma Zaun - GreaterFool Unpaid Intern #007 on 10.19.14 at 6:33 pm

Mr. Turner,

Most of the temporary foreign worker interns at the Greater Fool feel a lot like the cat in that pathetic picture almost every day that we work for you, for free.

Telling us every week of the “tens of thousands” you have saved us by persuading us not to jump into the condo market like poor Casey is hardly the same thing as a decent paycheque, sir!

Oh, and don’t kid yourself that you are even remotely in Mark Zuckerberg’s league, Mr. Turner. Your recent offer to allow us to freeze our eggs in your basement beer fridge is hardly the kind of benefit we seek.

Besides, if we need our eggs frozen, all we need to do is stand near you –

– and your cold, cold heart :(

Our drive for unionization is continuing. Be forewarned.

#65 Ben on 10.19.14 at 6:44 pm

Kenchie – yes it’s coming, but not because they grew a conscience, just because enough will be dead by then.

#66 Kenchie on 10.19.14 at 6:47 pm

Casey, some late night reading…

Enjoy!

http://www.vice.com/read/noel-biderman-interview-932

http://www.chicagotribune.com/lifestyles/sc-fam-0513-young-married-20100513-story.html

Only piece of advice I have is: 1) homes aren’t investments, so don’t expect a profit. 2) Invest in your relationship, particularly time and energy, more than anything else. It will produce a better long-term return than in any financial or real asset.

#67 Ben on 10.19.14 at 6:49 pm

#54 James – this is the disconnect. Why can’t two people earning in the top percentile – two wages not one! – buy a small condo?

The answer is the rug has been pulled up and housing is now the primary wealth transfer (hell, let’s call it what it is – looting) between young and old.

The question we should be asking ourselves: these guys are earning good money – why can’t they have a decent life? Why are they having to worry about interest rates, fake stimulus will they/won’t they etc. Why is buying a small home such a big gamble?

The whole thing disgusts me. Of course if you bought low in 1970 and rode the wave plus have no care for humanity then you are cheering it along.

How does owning, instead of renting, a two-bedrooom condo give you “a decent life?” Explain that. — Garth

#68 AK on 10.19.14 at 6:58 pm

Here’s why renters in America feel trapped

#69 Exurban on 10.19.14 at 7:02 pm

Yikes, $450,000 for an unbuilt condo in Victoria! Where’s the Victoria Real Estate Update poster? He is needed now to explain that $450k is almost enough to buy a decent SFH over there, and that these prices are falling. (BTW in the Victoria area 20 minutes is a long commute.)

#70 Hawk on 10.19.14 at 7:03 pm

THE WAGER:

A friend of mine and I have made a wager.

I am a smart business professional earning a decent income working in downtown for one of the Big 5.

He’s a smarter business professional earning somewhat more than DOUBLE of what I earn and both of us have a finance and economics background.

Generally his track record in past predictions is better than mine.

The wager for the amount of $100 is that in exactly 24 months from now an average house in Oakville will cost more than it does today (his bet) or that it will cost as much or less than it does today (my bet).

His arguments are the immigrants will be pouring in and interest rates low.

Mine are of-course per this blog, that people will eventually curtail their debt and reduce spending, thus decreasing demand.

Who do blog mates think will win the wager? :-)

#71 Entrepreneur on 10.19.14 at 7:04 pm

At least Casey listened to his friend, came to the Garth Turner blog. It is “dog eat dog” out there and it is nice to have a blog to come to for advice.

I would not buy a condo, apartment, duplex, townhouse too many rules and fees. Freedom lost.

Casey, read this blog and pass it on to your friends.

#72 Lillooet, BC on 10.19.14 at 7:04 pm

Garth is right. Buying an unbuilt condo for $450k and $340/month strata fee is foolish. You’re committing to something that may or may not get built 2 to 3 years down the road, tying up your assets and locking you in. Not to mention $450k is way too much for a roof over your head. You should be able to get at least a house for that in Victoria, or move to a smaller town and get a house for $200k.

When you buy a condo, you are buying into a corporation. The condo is a corporation and each unit owner is a shareholder. You elect a president and committee and will need to oversee expenses otherwise the management can throw away hundreds of thousands of condo fees for nothing. Strata fees never go down. They always increase, usually higher than inflation. And look out for the “special assessment”. That’s the day that every condo owner dreads: when the management hires an engineering firm and they discover that your building has leaky condo syndrome and will cost $10 million to fix ($20k for each unit owner). Payable in full in 60 days, otherwise there will be a lien put on your property and you’ll have to refinance your mortgage and if you can’t afford it could even lead to forclosure. Nothing you can do about it. You’re screwed. Has happened to many thousands of condo owners across Canada. Condos are a very, very bad home-owning option and definitely not an investment. Better off renting until you can afford a real house.

#73 I'm stupid on 10.19.14 at 7:05 pm

The problem is that the boomer parents think it’s normal to have debt. They teach their kids not to fear it. So when you don’t know how liberating it is to be debt free, not to owe anyone anything, you act like these stupid kids.

This is keeping up with the Jones’ on a national level. Just like their boomer parents before them, they’re going to buy the condo so they can be the centre of attention for a while among their peers. They’ll Instagram, Facebook and Twitter that they bought a shoebox in the sky; All the while they’ll be crying and their relationship will suffer because nothing kills a new marriage faster than money problems.
Good luck you too, you’ll need it!

#74 Linda on 10.19.14 at 7:11 pm

#46 Bottoms Up – you are correct, $340 per month is well within reasonable monthly maintenance costs for a home. Homeowners can of course defer repairs, but if you do that for too long the eventual cost can be extremely high – if you can do the maintenance now don’t delay but get it done. Read an article in a magazine that gave an annual cost of $4,500 (low end) to $10,000 (high end) for annual house maintenance/repairs. Basically cost related to whether big ticket items were done any given year or not – big ticket items are things like replacing the roof, replacing all the windows/doors, replacing the siding, bringing electrical/plumbing up to current code etc.
Regardless of whether you rent or buy, most people are going to spend a substantial fraction of their income on accommodation during their lifetime. Basically it boils down to what you want & whether you are willing to pay for what you want. Note that your cost may be more than money alone – if you are strapped for cash, a lot of the ‘other’ stuff you may want to have/do must either be deferred or your debt load must increase to pay for the goodie of choice.

#75 waiting on 10.19.14 at 7:28 pm

Casey, wait 2 1/2 years, start saving and see how you feel about the place once it’s built. Don’t worry, there will be units for sale – either ones that haven’t sold, or ones that people like you bought 2 1/2 years earlier and their circumstances have changed. The prices may also be lower. A lot can change in a couple of years. Why lock in now?

#76 Still learning on 10.19.14 at 7:32 pm

My grandparents lived through the great depression. Always careful with money, no debt. Grandpa built every single house they lived in. My Grandma, in retirement was able to live off her pension and still save thousands of dollars to give to her kids. Obviously different times. I think that’s why kids today don’t think twice about a lifetime of debt. They cannot conceive of what can go wrong and there’s no consequences for anything! I do agree that bankers and lenders should be more responsible but whatever happened to critical thinking and caveat emptor?

Also why should they worry – they see large companies getting bailed out all the time – nobody ever seems to have to pay the price lately…

and to be fair I have lived a life of perpetual consumer debt that I don’t seem to want to extricate myself from. I don’t know what it’s like to go without food, but my grandparents did. whole different world…

I’m grateful for this blog – and now grateful for what I don’t have – which is a great big honking mortgage on a piece of junk (I live in Van..)

#77 devore on 10.19.14 at 7:32 pm

#46 Bottoms_Up

because homeowners usually have the ability to postpone a house repair/upgrade…but $340/mo is a reasonable amount to spend on maintenance and repair, regardless of whether it’s a monthly budget for maintaining a house or a condo strata fee.

No it’s not. In TO this condo would have fees in the $400-500 range, and that’s still TOO LOW; the owners are guaranteed to be liable for special assessments.

Condo repairs can be postponed, and are all the time. How much does the average condo spend on repairs before they go the leaky condo route and wrap the building in scaffolding? However, when other people are inseparably involved, a different standard applies. Just like I drive differently when I have passengers in my car, even if just for their comfort.

#78 Daisy Mae on 10.19.14 at 7:33 pm

“economic torpor” — ‘extreme sluggishness’. What would I do without my handy Merriam-Websters’ Pocket Dictionary by my computer?

So…we receive financial guidance and improve our vocabulary, all it one. Doesn’t get much better than that!

This young couple needs to stand pat and forgo these plans. If not, disaster awaits.

#79 Retired Boomer - WI on 10.19.14 at 7:46 pm

#70 HAWK

I think you will win the $100 Wager

The future is always unknowable, but the factors are trending in your favor. Keep us posted.

#80 Daisy Mae on 10.19.14 at 7:51 pm

#32 I have a headache: “A car with a five hundred dollar a month payment is what passes for assets now a days huh? Wow!”

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

That car is a DEPRECIATING asset. Remember that.

#81 Sponge Hater on 10.19.14 at 7:56 pm

This is what easy debt does. For that we must blame gutless policy-makers, omnivorous bankers and misguided helo parents.

YUP, AND NOW THEY’RE GUTLESS MORE THAN EVER IN HISTORY,ESPECIALLY WITH THE BIG-OWE.
GIVE ME A BREAK, HE LOOKS LIKE A BIG SPINELESS BIRD ON A CASTRATING STOOL!!!!
YUP, THE BIG-OWE ALRIGHT…. LOL

#82 Capital One on 10.19.14 at 8:11 pm

#12 Renter’s Revenge

Excellent comment – your points were bang on and the post was well-written. One of the best I’ve seen here. I rarely get past the 5th line on the long-winded rants, even if I agree with the gist of the message.

GARTH – he/she could ghost write for you if you ever go on vacation.

CASEY – what Renter’s Revenge said.

CO

Vacation? — Garth

#83 Kenchie on 10.19.14 at 8:12 pm

Why Schools in England Are Teaching 5-Year-Olds How to Code:

http://www.bloomberg.com/news/2014-10-15/why-schools-in-england-are-teaching-5-year-olds-how-to-code.html

#84 Popeye the sailor man on 10.19.14 at 8:13 pm

My first wife and I bought a condo near the peak in Victoria Spring 1993 with 5% down and CMHC fees. Preconstruction no price reductions or special gifts like blinds or appliances given. Realtor double ended the deal, and filled our heads with 10% a year gains just like the 10 years before. Last buyers just before it was open for occupancy got a blind package, washer dryer and second parking spot for half we paid for one.
It ended in tears, prices softened the whole time we lived there over 7 years. Mortgage was always just a bit more than the assessments as the value dropped each year. Put off having kids. Had job opportunities outside of Victoria but could not take advantage of them during a period of changing careers. She wanted to get in a house, have a kid, get a new car, and go on a trip. What we had was an insecure job (mine), her making 55% of our income so no kids (yet!), me delivering pizza to help pay the 9.5% mortgage and car loan, ticking biological clock, and negative equity.

This ended in Divorce. Please don’t buy yet!

#85 crowdedelevatorfartz on 10.19.14 at 8:23 pm

@#81 Spounge Hater
Why are you shouting?
And
Your medication isnt working.

#86 VICTORIA TEA PARTY on 10.19.14 at 8:23 pm

HELLO OUT THERE CASEY AND CO.

Casey and wife of Victoria need a lesson in how the financial game is being played these days and who will NOT be coming up for air because they are suffocating from too much debt; a self-inflicted injury based on the premise that if banks are too big to fail, so is Canada’s and America’s middle classes!

Of course they’re not Casey and squeeze. No government loot for them!

Follow the advice of St. Garth of Sack Cloth and Ashes.

Here is blogger Phoenix Capital to explain in simple terms just WHAT THE HELL IS GOING ON (you SIMPLY MUST be smart enough to know of the zillions of unintended consequences, of borrowing beyond your means, right? Otherwise you wouldn’t be labouring as an IT specialist, a computer serfer, of sorts is my eventual guess).

Now Mr. Phoenix Capital, a worthwhile blog…

“…It’s pathetic, but when 70-80% of market volume comes from non-thinking computer trading programs, the words “Fed” and “President” matter more than common sense.

Deep down, just about everyone knows this whole “bull” market is based on the Fed. Various pundits will prattle on about earnings and the like, but the reality is that earnings are heavily massaged. Heck even 30% of CFOs admitted in a study to knowingly overstating earnings.

Moreover, all that record cash produced by these record profits is dwarfed by the record debt that corporations took on to goose EPS through stock buybacks.

And this reveals the true state of affairs for both the economy and the stock market.

…(Many) C-level executives have steered their companies since the 2008 Crisis. Most of the increase in profit margins came from lay offs. The extra profits produced by this combine with debt issued to buy back stock…not cap ex or hiring.

The buyback then helps facilitate higher share prices, which said executives then use to cash out their options and dump their personal stakes in their companies at a pace not seen since 2000.

…those individuals responsible for running the largest companies in the US, who know more about their companies’ growth prospects and the economy have used the Fed’s policies to cash out.

How telling is it that they’d rather have cash than stock? They would rather have this money sitting in a bank account earning next to nothing…than in stocks
… the captains of industry don’t want to be in their own stocks.

And remember, these are also the folks at the front-lines of the economy. They know the data from their own firms before anyone else in the public does… including the Fed or BLS.

And they’re dumping stocks.

The whole mess will come crashing down…”

We have been hearing this line since 2008 but the market has been going up!

What gives?

It’s Mob Rule and infinite massaging of markets by our betters…and its left a void of growing misery for a Middle Class that thinks low interest rates are a good thing! Wrong!

So while the Mob out there continues losing their heads, with unmanageable debt, our current situation is actually getting simpler for many who now eschew debt and serfdom: DEVOLUTION all the way down to the concept of another attitude: Individual Responsibility.

Casey, please walk past the Graveyard of Debt and Eventual Broken Dreams.

Remember there are two sides to a market, the buy (with debt) side and the sell (the stay out of debt side) where with upcoming deflation, those with their fiscal houses in order will be the Kings of the Hills!

Good luck, young ‘uns.

#87 Battler519 on 10.19.14 at 8:27 pm

You’re bang on Garth about real estate.
This couple should stay where they are and have at least 1/3 of their portfolio in quality junior mining companies, 50% in quality mid tier mining companies and the balance in cash.
That’s the way it’s done in this household. I’m single and make about 15% more than your new fan.
Regards.

It’s called the Suicide Portfolio. Remember to wear your hard hat and codpiece. — Garth

#88 Blobby on 10.19.14 at 8:29 pm

I wouldnt pay more than $100k for a condo personally.

#89 lee on 10.19.14 at 8:32 pm

#6

I don’t think you need bonds in your portfolio if you do not panic in a downturn in equities. Some pref shares and a touch if high yield bonds should be enough. I think letting money sit at 2-3 % with no growth bus a waste. I would keep some short term corporate bond exposure but replace the rest of the fixed with pref etfs and some high yield bond etfs like JNK. It’s a little more aggressive but over 15-20 years it adds up.

#90 No debt on 10.19.14 at 8:34 pm

Casey, you should buy 2! U will make a shitload guy for sure, it’s gonna be a great building !

#91 OttawaMike on 10.19.14 at 8:35 pm

Subprime Auto Loans.

Others have posted comments and links about his before. When auto manufacturers are resorting to any means necessary to goose sales at the expense of future demand.

Even foreign banks smell an opportunity:
http://business.financialpost.com/2014/09/16/banco-santander-sa-breaks-into-canadas-car-loan-market-with-298-million-purchase-of-carfinco-financial-group/

Equifax says that auto lenders are just conservative as to what qualifies as subprime:
http://www.marketwatch.com/story/equifax-details-benefits-of-database-supported-verifications-within-subprime-auto-lending-in-latest-white-paper-2014-10-16

Huge sales now are expected to drive down used prices as all these cars hit the used market:
http://www.businessinsider.com/morgan-stanley-prepare-for-the-used-car-apocalypse-2014-10

#92 Battler519 on 10.19.14 at 8:38 pm

We will see bearded wonder. I sleep fantastic at night for having an apparent suicide porfolio. I will assume you haven’t explored the books of some of the miners like img for example.
When Yellin names her next round of stimulus the 2011 highs will be passed.
We are Canadian, hard hats and mining are good business.
Regards.

#93 wowzerz on 10.19.14 at 8:43 pm

their total income is 130k per year. at 23 years old…

I don’t even believe it. If they save 90k per year they could almost pay off the entire condo by the time it is built! (or retain a good lawyer to get their money back from the folded developers more like it…)

I just don’t understand how two young single people can blow 80k more than me per year and I have 2 kids!!!! I mean the 500/per mo car loan is a tip off, but still! 2 people no kids, can easily live on one income of 50k. or even hey a lot less!!!

These people deserve to buy this condo.

#94 Sponge Hater on 10.19.14 at 8:47 pm

#85 crowdedelevatorfartz on 10.19.14 at 8:23 pm
@#81 Spounge Hater
Why are you shouting?
And
Your medication isnt working.

THAT’S SPONGE HATER U DUMB BELL.
U DID LIKE MY AN EDUCATED REDNECK COMMENT THOUGH……PEACE BIG BOY NOW

#95 Kenchie on 10.19.14 at 8:48 pm

#70 Hawk on 10.19.14 at 7:03 pm
“The wager for the amount of $100 is that in exactly 24 months from now an average house in Oakville will cost more than it does today (his bet) or that it will cost as much or less than it does today (my bet).”
—————–

What source of information will you guys be using to decide what the “average house in Oakville”?

What’s the beginning price?

#96 dave c on 10.19.14 at 8:53 pm

The ONE thing all you gloomers forget that Casey, his wife and all other 20 – 30 somethings have going for them is:

!!!!!! INHERITANCES !!!!!!!

Paying mortgage interest is akin to the VCR and rotary phone. It doesn’t exist anymore and won’t.

Having so interest free home debt is no big deal when inheritances will pay it all off in years to come.

Times have changed from the 70’s and 80’s you guys. Get with it.

Inherit from where? Have you had a look at Boomer finances lately? — Garth

#97 Praireieboy43 on 10.19.14 at 8:56 pm

Oak bay and Fairfield are the only places worth buying.
If this past week is any Indicator of the future. All I see is volatility. Watch out!
I agree with many on this blog, save your $$$.
Remember no money, no honey.

#98 devore on 10.19.14 at 8:56 pm

#83 Kenchie

Why Schools in England Are Teaching 5-Year-Olds How to Code:

That went out the window when Logo became passe, with nothing to replace it. Personally, I think understanding the fundamental workings of important technology in our lives is critical to not falling to scams, misinformation and conspiracies.

How many people don’t understand the risks involved in various Internet technologies and what is, and more importantly, what ISN’T possible? How many people don’t understand the difference between ebola and flu? The difference between a tanker ship and container ship? The difference between normal walrus behaviour and climate change paranoia? If you don’t, you’re a defenseless victim, ripe for pickings.

#99 Battler519 on 10.19.14 at 8:56 pm

#90 wowzerz I agree with your last sentence totally.
I’m biased, I think they should be buying some 100oz silver bars.
It was never mentioned how long they’ve been making those 4’s or how much they’ve saved. But they should have a nice bankroll so far if they’re adept…

#100 dave c on 10.19.14 at 8:59 pm

all the boomers nowadays live in a house that has doubled in price – that’s where the money will come from Garth.

INHERITANCES are a form of “paying it forward” to the kids.

No one wants to talk about this subject because it is taboo to think about spending dead peoples money but its the truth.

Most Boomers will spend the money pre-dead. — Garth

#101 Bernard on 10.19.14 at 9:04 pm

My kid bought a house out in Calgary (1/3 down with oil patch money) about a year and half ago. He is in another industry now but by renting part of the place out and living in the other, he has a very good cash flow situation.
He has a TFSA and is bracing for a down turn(resource based economy what do you expect).
Nothing in life moves in a straight line up,stocks,bonds,your career,your marriage, your health…

#102 Freedom First on 10.19.14 at 9:20 pm

#42 Derek R

Now that, was perfect:) …..thanks Derek! Made me smile. Great answer to the Troll.

#103 Battler519 on 10.19.14 at 9:20 pm

dave c the boomers are blowing their cash and their home equity at HD, their kid’s tuition (if they haven’t already moved back in), their nearest imported automobile dealership and in the Caribbean. What’s remaining is about to plucked from their pockets by Mr Market if they don’t pay attention. The bubble has burst pal. The smooth talkers on television have done their job while the 1% and those others in the know have been bailing…

#104 Capital One on 10.19.14 at 9:34 pm

#96 dave c

I’m in my early 50’s and my kids are in their early 20’s. My parents and in-laws are all in their 80’s and alive-and-kicking.. Hopefully, Casey-and-wife’s inheritances are a long, long way away. Around the time the Leafs win their next cup …

CASEY – just rent. If you’re unfortunate and get an inheritance in the next few years, invest it.

GARTH – “vacation” – it’s a noun. Look it up.

CO

#105 dave c on 10.19.14 at 9:40 pm

I don’t believe the hype. The boomers are retiring after working 40 years at great jobs and pocketing full CPP benefits.

They bought their homes in the 70’s and 80’s and have made a killing on them.

This talk of everyone being broke is all propaganda, there’s trillions of dollars with the grey haired folks and they will be passing it down to the kids.

Will there be the same $$ to pass on to the generation AFTER (the ones born 2008 and later) – who knows but this generation has nothing to worry about.

Even the 80 year olds and older who are soon to be passing on will have lots of assets to pass on. Every generation is getting richer and richer.

Can you deny that every generation of kids has a easier and easier life? No you can’t – this will extrapolate right up through every decade. The proof is in the phones, cars, houses, clothes, computers that they all have compared to the previous generation.

‘Full CPP benefits’? Wow. You blew that one. — Garth

#106 Hawk on 10.19.14 at 9:41 pm

#79 Retired Boomer

Agreed, the future is always unknowable and the one fact that can likely work in my friends favor is the government.

As I think Cato the Elder is at pains to point out, the Government can always intervene to prop up the market, to please voting lobbys’, although ofcourse it may not do so.

It will be interesting to see what unfolds in the next year or two.

#107 sideline sitter on 10.19.14 at 9:41 pm

The story this young lad wrote you seems so made up…

A new build, in Victoria, seriously?

#108 Hawk on 10.19.14 at 9:44 pm

#95 Kenchie,

Good point, actually we first thought about average prices and then just decided on average prices in his neighborhood next to the QEW, which currently run around $845K for a large house with a double garage about 2500 sq feet etc.

#109 joblo on 10.19.14 at 9:55 pm

Sheane Wallace on 10.19.14 at 5:19 pm
half a million dollars is a great town house or apartment on a golf course in southern Spain (100 k) + 400 k at 5 yearly % dividend = 20 k income, sufficient to live and never work again in Spain.

Really? not sure where your info is from,
Most research I’ve done is at entry level APT. at $200K
$20K would last 6 months

#110 Not an economist on 10.19.14 at 10:10 pm

Casey’s last name wouldn’t happen to be Serin, would it?

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

http://housingpanic.blogspot.ca/2006/09/ok-this-would-be-funny-if-it-wasnt-so.html

#111 Nacho Cheese on 10.19.14 at 10:16 pm

#100 dave c on 10.19.14 at 8:59 pm
all the boomers nowadays live in a house that has doubled in price – that’s where the money will come from Garth.

INHERITANCES are a form of “paying it forward” to the kids.

No one wants to talk about this subject because it is taboo to think about spending dead peoples money but its the truth.

Most Boomers will spend the money pre-dead. — Garth

I actually laughed out loud with the “pre-dead” comment. Especially after watching an episode of walking dead with the wife.

Garth, I love your blog, but I wonder how you can stay so motivated to post daily after all these years? I can’t stay motivated enough to workout two consecutive days! Share your secrets!

#112 Smartalox on 10.19.14 at 10:18 pm

Casey, you’ll do best to buy a place that’s already built. After all, it’s called Real Estate, not POTENTIAL Estate.

Also, you shouldn’t buy the place you need now, but instead buy the place you will need 5 years from now.

#113 Smudgekin on 10.19.14 at 10:26 pm

Garth you shoulda talked TFSA & RRSP. They’re the right age to start. Don’t laugh at these two. They didn’t buy and there’s still time for them to switch onto the right track. Mid 60’s (each) for young twenties is a good haul.

#114 hoo boy on 10.19.14 at 10:28 pm

$130K a year and they can’t afford to pay cash for a car??

No kids, don’t buy. Learn to be good with money first. And as others have said, families aren’t always ‘planned’.

#115 Smudgekin on 10.19.14 at 10:31 pm

Let mutual fund managers blow hidden fees on fancy wheels. If they really are the smart set they’d reinvest instead of tossing depreciation in the road.

#116 Derek R on 10.19.14 at 10:32 pm

#110 Not an economist on 10.19.14 at 10:10 pm asked
Casey’s last name wouldn’t happen to be Serin, would it?

Nice find. But that Casey is 32, not 23.

#117 Not an economist on 10.19.14 at 10:35 pm

#11 Ben

“Renting is a no-brainer right now. I’d also add that anyone who buys a condo must be nuts. $340/month in fees! That’s $4,080 a year, over a 25 year mortgage term that’s $100K. And that’s without factoring in the inevitable increases which will doubtless be above inflation (and therefore well above wage inflation).”

No kidding! I have no idea why everyone acts like once you “own” your home, the rent money is 100% freed up. What is a condo fee if not another form of rent? And what about property taxes, which all by themselves add up to be nearly as much as rent (at least in Toronto). And you still have to pay for utilities, when in the majority of cases that’s included in rent. So much for getting rid of the hated rent payment, instead now you have a mortgage payment to add on TOP of that.

Rent by any other name…

That’s to say nothing of special assessments, which might not apply to houses but for condos they can be one hell of a “gotcha”. And they can happen repeatedly. In downtown Toronto we have perma-scaffolding at street level around a few condos. Condos that were built only a couple of years ago. Why? Because some dude got hit by falling panes of glass. Don’t believe me? Look at this article, see the blood on the sidewalk in the second pic:

http://business.financialpost.com/2014/10/13/toronto-housing-condo-market/

The condo in that article has about 9 pieces of glass missing (that are visible in the pic), you know the floor-to-ceiling kind. Guess who pays for fixing those. The builder? Haha, no. Guess again. “Safe as houses”. Indeed, when all your shit flies out the window because your wall fell into the street 15 stories below. It’s a good thing so many builders don’t use unionized Canadian workers (grrr, unions), I’m sure they passed along the savings from unqualified TFWs right along to the customer. Maybe the get-rich-quick mentality will go away once someone’s kid gets sucked out with the window, which sadly is bound to happen eventually. You know they used to say that anything can be had fast, quality, or cheap, but you had to pick two. Now it seems you can’t even pick one. It’s slower than what you thought (if you bought blueprints), it’s poor quality, and it’s very very expensive.

And one last thing, why do people act like buildings never expire? As if they’re a fine wine, only getting better with age? Rational people should understand that buildings eventually need teardown and replacement, even with ongoing maintenance. Thus they need to write down the value of the structure over its useful life.

Why are people so unwilling to buy even a 1 year old used car for 30% off because “ewww used” but they’re perfectly okay buying a house more than 100 years old, with rotting wood and riddled with asbestos. Push the consequences for actions years, or even decades into the future and there is no more feedback mechanism. Asbestos causes cancer in 20-50 years. Who cares, what’s the “monthly”? Can I brag about it TODAY? Is it downtown?

#118 Ben on 10.19.14 at 10:48 pm

> How does owning, instead of renting, a two-bedrooom condo give you “a decent life?” Explain that. — Garth

Garth – good question. By “decent life” I mean the opportunity to obtain financial independence. Why must the young today work for 25 years man *and* wife for the same pile of bricks one man obtained in 10 or 15 years no long back?

Since this time we’ve had improvements in manufacturing of housing, improvements in all raw materials *and* a reduction in cost.

This has nothing to do with validation through owning a home. I couldn’t care less for that. I want my time Garth – you only live once.

Why must we work longer for the same land?

#119 Cato the Elder on 10.19.14 at 10:50 pm

Kenchie, there’s nothing wrong with making a profit. Profits simply serve as an indicator from the marketplace that you are doing the right things: you are providing a good or service that customers want.

Because you are earning profits, you can reinvest them in the business and CONTINUE to provide what the marketplace wants. That is, until you start to lose money. When you lose money, that is the marketplace telling you to change your business model. Your customers are no longer satisfied.

That is the beauty of capitalism. Most businesses lose money – they lose money because it is not easy to provide a good or service to the marketplace because it is DYNAMIC. People’s tastes and demands are constantly changing. Incrementally, goods and services IMPROVE over time due to this competition.

Big business, however, does not like competition. They want to entrench themselves. The way they do that is they ‘hire’ big government to pass rules/regulations that make it too expensive to compete. Only they can afford the cadre of lawyers to comply, and even when they don’t, they can afford the fines (which, while seemingly large, are a pittance compared to the money they make from this scheme).

Fraud would be enforced by the courts and by police forces, just like they are in every other instance. You don’t need a massive bureaucracy that stifles competition, costs massive amounts of money, and hurts consumers.

This is how it existed for over a hundred years in this country and in the US. At the turn of the 20th century, that’s when things started to change. Funnily enough, over that time period it has become increasingly difficult for the middle class. There is a reason for it. The reason is we adopted the ‘cartel’ system of governance that our European neighbors have been infected with for millenia. We need to destroy it if we are to regain our foothold in the world.

Just because Canada is doing relatively well compared to the rest of the worlds crapholes doesn’t mean we shouldn’t strive to improve. Just because they are making MORE mistakes than the many we are making doesn’t mean we shouldn’t stop.

Our system of protecting massive incumbents is weakening technological progress, hurting the middle class, and stifling our economy.

Of course, the largest cartel in our country and EVERY OTHER COUNTRY in the world is the banking cartel. Ever since they managed to convince us to accept their paper dollars in lieu of gold and silver the middle class hasn’t had an increase in real wages for 40 YEARS. The only way they can make up the difference has been an increasingly large amount of debt accrued every year. It’s like a treadmill and we have to run faster and faster to stay on, all so the banks can acquire every single asset on planet earth while we pay the interest on it.

If there is to be any government, it ought to be at the local level. The largest and most intrusive should be in your neighborhood because they are more accountable to you than a federal government thousands of miles away.

Governance is difficult and complicated. A ruling declared by the elites at the federal level can smother areas of the country that don’t need it – that’s why it is so bad.

We ought to adopt the Swiss model. The average Swiss citizen is 4 times richer than any Canadian. WHY? They live in a TINY country with NO natural resources. This is RIDICULOUS. We have massive troves of resources – there is no reason we can’t be just as prosperous. And to tie into the whole currency thing that I mentioned above, they were the last country to go off the gold standard in the 90s. And they’re going to have a referendum about getting back on it in November because the people have started to realize how much their central bank is screwing them with inflation

What we need are politicians that start looking around the world at REAL EXAMPLES of places that are doing things better. They need to start asking WHY instead of coming up with childish fantasies and delusions about how they think the world ought to be run. Maybe then we can get on the right track.

#120 Ben on 10.19.14 at 11:05 pm

#117 Not an economist
And one last thing, why do people act like buildings never expire?

Because they don’t understand that the value is the land. And yes the land won’t expire. It might fluctuate in price but that’s another story.

Regarding condo expenses and taxes – agreed. I rent – my landlord picks up the property taxes *and* my heating bill. In Montreal that’s no small sum – it’s cold!

I could buy on our street and pay as nearly much in interest on the loan as I do in rent but then I’m paying to rent the money.

Bottom line is people don’t think about it because everyone older than them says “just do it” – they didn’t think about how debt works either. When you are winning you don’t delve into the how.

I don’t want retribution I just want my kids’ labour to mean something. Right now it doesn’t thanks to the banks and the state printing “wealth” that cannot be cashed in. Wake up people.

#121 Financial Freedom at 40 on 10.19.14 at 11:07 pm

Just had to respond to the word “inheritance”
Beware of the reverse mortgage (and you may not find out until a life event forces a sale or you’re acting as executor)
It is an “ideal strategy if you hate your children” [Garth Turner] or can’t fathom downsizing and didn’t think to then invest in an annuity that will provide much needed cash flow
It is not just the 20 year-olds we need to shake our collective heads at

#122 Financial Freedom at 40 on 10.19.14 at 11:16 pm

Even found an old Garth post on it, for those counting on inheritances to save the day:
http://www.greaterfool.ca/2011/11/25/the-leveler/

#123 Nuke on 10.19.14 at 11:19 pm

Go out and buy a nice lamp instead. Works for me.

#124 Tony on 10.20.14 at 12:10 am

Re: #109 joblo on 10.19.14 at 9:55 pm

1.00 ESP (Spanish Peseta) = 0.00766678 USD

#125 chapter 9 on 10.20.14 at 12:13 am

Casey, I bought my first house when I was 26 the economy in Alberta was hot just like now. I was financially slaughtered by two factors National Energy Program and 18.5% interest rates. Marriage toast!!! If I could turn back time I wouldn’t have bought that show home and stayed renting. Too bad this blog didn’t exist back then!!

#126 Bottoms_Up on 10.20.14 at 12:29 am

#63 raisemyrent on 10.19.14 at 6:33 pm
==============================
You make a good point….Casey will end up spending close to a million bucks to pay back that mortgage (once interest is factored in).

(unbuilt) Box in the sky = million bucks? Something’s wrong with this world.

A million bucks for real estate should at least come with land ownership….

#127 angela on 10.20.14 at 1:22 am

New developments tend to sell people on a lifestyle. Happy people jogging, sitting at a bistro table sipping coffee, white couch, white carpet, fresh flowers, table set for six, complete with napkins. Take who you are now and just move it to the new place. I got an older dog, 6 years old, when I was 23. I got an older one because I couldn’t commit to a dog’s lifetime bit I figured I could do around four or five years. Three years later I had got married and moved across the country without the dog (my mum kept him). Forget where you might be in 5 years; you might completely change your minds and circumstances before the place is even built!

#128 Fortune500 on 10.20.14 at 1:33 am

This Millennial couple will have two sets of parents to partially support as they age. All of their savings are in their houses, which are cheaper country and small town homes. Nothing to cash out that won’t be needed for a smaller condo or eventually a nursing home. What is this inheritance you speak of?

#129 Bobby on 10.20.14 at 2:04 am

Lots of new condos for sale here in Victoria, that have been on the market since they were newly built in 2012. Still sitting unsold.
If the strata fee today is $340, my guess is it will be $500 on closure.
You can buy a house on a full sized lot for the same price now here in Victoria. And many of those are sitting for sale.
The decision is a no brainer.

#130 nubbers on 10.20.14 at 2:19 am

Waterloo Resident @1, don’t confuse the Daily Mail with a newspaper.

#131 TRT Post 70 Hawk on 10.20.14 at 2:34 am

Your friend will win.

Guaranteed.

Simple math. An its not about local incomes anymore.

#132 Nemesis on 10.20.14 at 2:46 am

#MondayMorningMadness… #TheShearedBeaverVs.Cash Dilemma… #ParablesForCaseyInspiredByHawk…

http://youtu.be/J155bLFAg1k

[NoteToGT: Hey… Gimme a break, eh… If Monty’s Announcer can say “ShearedBeaver” on DayTime American network television then… How could the CRTC possibly complain about that #leader here&now. Right? Right!]

#133 Bug-eye Bill on 10.20.14 at 3:26 am

The explosion in consumer debt….especially with high ticket auto loan/leasing is a global phenomena. Recently I was in Mexico and noticed that the number of young people driving new cars has exploded compared to five years ago.

The numbers have at least tripled by the look of it. I am looking at the same thing here in Bangkok where I winter. And car prices have gone through the roof…and every one pays by the month…no one owns. Same as Canada.

I’ve never seen so many average paid Joe and Janes with brand new cars. The TV ads are the same in every language….”Just sign on the dotted line…and drive away without paying”. Same as Canada …right…crazy greed….emergency rates…..and people who can’t see past the shiny chrome bumpers.

Consumer debt is a world wide problem…..and which government is going to reign these people in? A big difference is that the economies of Mexico and Thailand are exploding. Millions of people every year are moving up into a middle class.

That is not happening in Canada. People aren’t borrowing in Canada because brighter days are ahead…..they are borrowing because they are sinking into consumer debt poverty and need to tap their available credit.

I am a buyer of the macro economy and have been for the past five years. Canada is a small country with few people but big resources that ships raw materials to parts of the world that are improving like gangbusters. This will not help the Canadian worker…but has proven a great strategy for a Canadian resource investor.

The reasons were made obvious this past week when tragedy struck the retail investor and they sold into the flames and panicked…. except the professional investor who put on their party hat and went shopping. The Canadian economy is sick…but that is not true for the rest of the world. Over here….business is booming and there is an economic miracle taking place that’s lifting millions into the consumer class.

http://www.calgaryherald.com/business/What+drove+stock+markets+wild+swings+this+week+whats+next/10304128/story.html

#134 jane24 on 10.20.14 at 3:54 am

I have brought and sold condos over the years and the strata fee promised by the developer will double in the first few years of ownership. They always pitch it low as a sales technique. Add in tax and utilities and you have a VERY expensive place to live.

At 23 you should be traveling the world and totally mobile for that next great job opportunity.

#135 The real Kip on 10.20.14 at 7:02 am

“Household credit – loan and mortgages – are on the rise again, swelling at twice the pace of income growth.”

Strange. I weas listening to your buddy Benjamin Tal on the radio this weekend and he was saying Canadians are paying down mortgage debt at a record pace. He sees this as a good development.

(a) Debt continues to grow, up 4% in the past year. (b) Tal works for a mortgage-lender. (c) Is the air getting thin at the top of your crane? — Garth

#136 Matt on 10.20.14 at 7:08 am

How is cute :)

#137 earthboundmisfit on 10.20.14 at 7:27 am

A car is not an asset. It is a depreciating commodity. Will people ever learn?

#138 bigrider on 10.20.14 at 7:30 am

Absolutely hysterical .

BNN this morning is talking about the anniversary of the 1987 stock market crash (today by the way) .

They are showing clips from back then with traders in tears/fear and lots of bells ringing.

Trying to stir the pot me thinks and create PTSD..LOL

Any wonder Garth that the average Canadian wants to rub his groin against garages ?

The crash anniversary was yesterday (Oct.19). It turned out to be a giant buying opportunity. Most do. — Garth

#139 bigrider on 10.20.14 at 7:57 am

#138 bigrider on 10.20.14 at 7:30 am
Absolutely hysterical .

BNN this morning is talking about the anniversary of the 1987 stock market crash (today by the way) .

They are showing clips from back then with traders in tears/fear and lots of bells ringing.

Trying to stir the pot me thinks and create PTSD..LOL

Any wonder Garth that the average Canadian wants to rub his groin against garages ?

The crash anniversary was yesterday (Oct.19). It turned out to be a giant buying opportunity. Most do. — Garth

Garth, if most bought as you say , then the buying pressure from the majority would quickly turn red arrows to green ones. By the way, it took wall street two years to recover back then. Easy and fast to lose money long and hard to make it.

More red arrows this morning…

How often do I have to repeat the same information? (a) Don’t buy individual stocks. (b) Maintain a balanced and diversified portfolio. (c) Rebalance routinely to harvest gains and reduce volatility. (d) If you’re too busy or obtuse to do this, hire someone. — Garth

#140 james on 10.20.14 at 8:03 am

This reminds me of an episode of The Debaters on radio this last month. Here’s a clip, debating condos vs. houses.

http://www.cbc.ca/thedebaters/popupaudio.html?clipIds=2532396451

The best part in the full episode:

“A condo owner who thinks he owns real property is like a homeless guy who finds a steering wheel and thinks he has a car”

#141 bigrider on 10.20.14 at 8:28 am

More from BNN this morning. Sorry I just can’t resist.

Dale Jackson giving advice on what to do with capital gains tax liability on a cottage and issues surrounding estate trasference. Sites a hypothetical example where a cottage has grown in value from 200k to 500k.

Last week or week before sometime he was giving tax advice on what to do with capital losses in non registered investment accounts…LOL

The not so subliminal message is clear..LMAO

Hope I am not being to ‘obtuse’ Garth.

#142 The real Kip on 10.20.14 at 8:37 am

“(c) Is the air getting thin at the top of your crane? — Garth”

Hahaha Garth, the joke is on you! I quit running tower crane in August due to the high asshole factor. I’m back working ICI sector, currently at the Pickering Nuclear Generating Station and Darlington Refurbishment. Once Darlington starts it will be a 10-billion dollar project. Pass the uranium please.

#143 crowdedelevatorfartz on 10.20.14 at 8:41 am

@#125 chapter 9
Blogs?
Geez, the early 80’s?
Personal computors didnt exist back then unless it was a Commodore 64 and the internet was a wet dream. Bill Gates was still eating pizza and drinking pepsi 24/7 at MIT.

#144 Kenchie on 10.20.14 at 8:46 am

Someone should be fired:

http://www.theglobeandmail.com/life/health-and-fitness/health/ottawa-auctioned-masks-gowns-as-ebola-outbreak-raged-in-west-africa/article21160649/#dashboard/follows/

#145 Kenchie on 10.20.14 at 9:29 am

Supposedly, the Spanish nurse is tested negative for Ebola. People can calm down now, right?

http://www.theguardian.com/world/2014/oct/19/ebola-spanish-nurse-cleared-disease-madrid

#146 Daisy Mae on 10.20.14 at 9:41 am

#72 Lillooet: “…Has happened to many thousands of condo owners across Canada. Condos are a very, very bad home-owning option and definitely not an investment….”

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

The ‘leaky condos’ in the lower mainland of BC forced an acquaintance to take out a $100,000 Reverse Mortgage to pay the special assessment. And now she tells me the Contingency Fund is depleted….

#147 Daisy Mae on 10.20.14 at 10:04 am

#96 Dave: “Having so interest free home debt is no big deal when inheritances will pay it all off in years to come….”

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

Don’t be too sure of that. Parents do not owe their kids an inheritance. The only sure thing is death and taxes.

#148 Daisy Mae on 10.20.14 at 10:16 am

#111 Nacho: “…I wonder how you can stay so motivated to post daily after all these years?”

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

It’s called ‘enthusiasm’…

#149 weedeater on 10.20.14 at 10:17 am

Casey, adding to others advice: do not buy the condo. Especially one that’s on paper; if you haven’t been reading the newspaper or Garth, realize the housing market is lining up for a correction and that condo may never get built or you may be committing to overpaying from the outset. If it ever gets built in a collapsed market.

Casey, random thoughts:
A car is not an asset. Despite what car companies want you to believe. It’s like a toaster or an iphone. You buy it and after a while it’s worth less or nothing. Learn what an ‘asset’ really is. A car is especially not an asset when it’s a monthly payment.

Have you & spouse talked about what happens when kids arrive? What are your respective child raising values? One of you stay at home? Or daycare? Realize if more than one kiddo planned that daycare may make staying home better alternative. If you have any plans whatsoever, start saving now. Kids bring all kinds of expenses along with the joy of their cute smiles.

You two need to have a talk about what’s important to each of you. Do some financial & life planning and start automatic saving next paycheque. Build your TFSAs first, educate yourself about investing (a different animal than saving), pay cash for cars, travel & have fun (read: bond with each other as a couple).

A house is not an investment. It’s a place to live that costs a lot of money–of which apparently you have little. Aside from servicing the debt (for years most of your mortgage payment pays mostly interest), there’s taxes, property insurance, maintenance, repairs (in Victoria that may be earthquake or tsunami damage–don’t laugh), fees associated with buying/selling, and decorating & renovation. If it goes up in value that’s bonus, but don’t “invest” in a house.

#150 mf on 10.20.14 at 10:26 am

Balanced my modest portforlio today, now I don`t have to worry about it until January!

#151 dave c on 10.20.14 at 10:27 am

Daisy Mae:

The contingency fund SHOULD be depleted. Why should the strata use the unitholders for a bank (ie building up a cash reserve)?

Whenever there needs to be money spent OVER and ABOVE the strata fees, there should be a special assessment. Period.

I wouldn’t want my hard earned money stored by the strata so that when I move I can’t get it back. That’s ludicrous.

Keep the contingency low and fund projects through assessments.

If the strata is run properly, the regular maintenance will be planned properly so that there are minimal big hits. Plus people can save themselves instead of having the strata forcing them to save.

#152 maxx on 10.20.14 at 10:32 am

Sad, that so many have been irretrievably brainwashed into believing that without re, they have no substance. None.

Renters are the lowest common denominator, but, owners have position! “Buy now or buy never”, screams, of course, that if you don’t jump into re, YESTERDAY, you’re condemned to being a nobody forever.

Realturds and their official supporters no less, have, through the cheap toggle-device of fear and near-zero rates, damaged the lives of near everyone in one way or several. They have capitalized mightily on desire and desperation. Talk about reaching into people’s emotional pants…..

…and we pay these fools. Remains to be seen whether a path of adult behavior will be taken, or the usual childish refusal to admit the error that damaged at least a generation.

No quick fix.

#153 gut check on 10.20.14 at 10:42 am

It is glaringly obvious that they should not buy.
It isn’t even a real thing yet, ffs.

#154 maxx on 10.20.14 at 10:44 am

#8 David McDonald on 10.19.14 at 1:09 pm

“Today young people have many more options carrying lots of risk so they need to be better informed. True there is lots of information on the web but which opinion is to be trusted? By luck this young couple heard about Garth; I hope they listen to his advice.”

True, but the principles of becoming wealthy never change:

Live below your means and you never need to waste precious time juggling pots of debt.

Segregate and save the excess.

Learn to buy everything, and I mean everything, LOW- this doesn’t just apply to investments. If retailers are screaming today and tomorrow, they can go tell it on the hill, ‘çause it ain’t the consumer’s fault.

Listen to the opinions of Garth and others at odds with realturds and tptb.

Rinse and repeat.

#155 45north on 10.20.14 at 10:48 am

I could remind Casey and his new wife they’re gambling and speculating in buying a housing unit which is unbuilt, unknown and with a contract which typically gives the builder all the cards

the builder has all the cards, plus can spend more on lawyers than you can

the following had great comments:
JO
Renter’s Revenge
Yb
not 1st
blueb
You are too young
Panhead
Retired Boomer – I have more to say
Rexx Rock
Ex-Cowtown
SWL1976
devore
Cici
JSS
raise my rent
Kenchie
Hawk – I have more to say
Still Learning

but Popeye was the best – Popeye we haven’t seen you for awhile!:

It ended in tears, prices softened the whole time we lived there over 7 years. Mortgage was always just a bit more than the assessments as the value dropped each year. Put off having kids. Had job opportunities outside of Victoria but could not take advantage of them during a period of changing careers. She wanted to get in a house, have a kid, get a new car, and go on a trip. What we had was an insecure job (mine), her making 55% of our income so no kids (yet!), me delivering pizza to help pay the 9.5% mortgage and car loan, ticking biological clock, and negative equity.

This ended in Divorce. Please don’t buy yet!

#156 NEVER GIVE UP on 10.20.14 at 11:02 am

Does anyone have any idea how much it really costs to build a one bedroom condo in a high rise.
In Vancouver downtown they were selling them for $150,000. in 2000. Now 14 years later they command $450,000.
I suspect they keep building them because there is so much profit.
I wonder if we would be paying these prices if we knew how much it really cost to build.
Notice how they spare no expense with the sales and Marketing

#157 Calgary Insanity on 10.20.14 at 11:07 am

A person cannot really mention that renting is correct when there are zero rent controls. Mayor is trying to get rent controls started, as they should be.

But many people buy houses simply because they dont want to deal with the hassle of renting and most landlords, not all, rip you off.

http://www.calgarysun.com/2014/10/19/taking-ownership–attainable-housing-group-says-high-rents-driving-people-to-buy-homes

#158 45north on 10.20.14 at 11:10 am

retired boomer: Will you elaborate HOW debt “could bring us all down, especially if deflation has legs.”

here’s what I think – when a lot of people see the value of their house is less than their mortgage they’re going to be angry.

In the US politicians were quick to impose rules on banks that stopped them from foreclosing. Banks response was more rules, policies and lawyers. The result was fear and confusion.

I’m afraid that’s where we’re headed.

#159 Honey Dripper on 10.20.14 at 11:22 am

The average person making middle class wages can’t afford the average house in Victoria. We moved out of Gordon Head in 2004 and downsized to a townhouse in Simcoe County (Ontario). Invested the difference. Buy low, sell high – most are immune to processing simple advice!

#160 45north on 10.20.14 at 11:23 am

Hawk : The wager for the amount of $100 is that in exactly 24 months from now an average house in Oakville will cost more than it does today (his bet) or that it will cost as much or less than it does today (my bet).

I’m with you in spirit but I won’t take your bet.

Mark says this all the time: a change in the sales mix will increase the average selling price even though the value of the average house goes down in value.

Markets are really divided into high, middle and low brackets. In declining markets, in the middle and low brackets sales decline because buyers and sellers get in a stand-off position. On the high end, sales stay the same because a seller can take a loss and a buyer can still buy. After all they’re rich.

So the average price of houses rises!

#161 Doug in London on 10.20.14 at 11:31 am

I still don’t get it, this idea of no fear of debt. I’m a 53 year old Boomer, who saw what happened to people with too much debt during the 1981-82 recession, and in my mid twenties had fear of too much debt. Debt was, is, and always will be a 4 letter word. The rationale behind fear of too much debt was further reinforced by the recession of the early 1990s. In a fit of temporary insanity, or a good dose of a strong hallucinogenic drug like LSD, I can somewhat understand the kids having no fear of debt as they haven’t seen a real downturn, even though they are the most electronically connected generation of all time and thus should be aware of what happened in the United States, Ireland, and other countries in recent history. What I DON’T understand is why Boomer parents, who have seen what I’ve seen, aren’t advising caution to their kids. It further reinforces the idea we’ve heard over and over on this blog, that the when the adjustment back to reality comes it will hit a lot of these younger indebted people hard.

#162 45north on 10.20.14 at 11:45 am

one more thing:

An incapacitated Russian cargo ship is now in port in Prince Rupert on British Columbia’s north coast, ending fears that the vessel, which lost power Thursday night, would drift ashore, hit rocks and spill hundreds of tonnes of fuel.

The Simushir was towed to port by a U.S.-based ocean-going tug, the Barbara Foss.

http://www.cbc.ca/news/canada/british-columbia/incapacitated-russian-cargo-ship-simushir-towed-to-prince-rupert-1.2805498

yes ships have been wrecked for as long as there has been ships. The Simushir did not set out from a Canadian port so was not subject to Canadian inspection.

#163 Son of Ponzi on 10.20.14 at 11:48 am

Before boarding the Midnight Express to the Wetcoast, check out this:
http://weather.gc.ca/city/pages/bc-74_metric_e.html

#164 Valkyrie on 10.20.14 at 11:49 am

Wow, $1200 a month rent and $130,000 gross equals easy street. Make your life easy, eliminate the stress. 23 and married, good luck to both of you, and I sincerely mean it.
On another note, while some may consider Victoria boring, it is breathtakingly beautiful and clean environment, great cycling and hiking, wildlife, camping and a high speed catamaran straight to downtown Seattle for a big city rush. Lots worse places to be. Really, only the boring would be bored…..

#165 Victor V on 10.20.14 at 11:51 am

Moody’s warns on housing, but Canada retains top rating

http://www.theglobeandmail.com/report-on-business/economy/moodys-warns-on-housing-consumer-debt-but-canada-retains-top-rating/article21162487/

Canada remains at the top of the world’s credit-rating heap thanks to its fast-approaching balanced budget and a stable banking system, but the country’s high household debts and climbing house prices pose “a potential risk” to those strengths, Moody’s Investors Service said.

Moody’s, one of the world’s leading credit-rating agencies, said in its annual report on Canada that the federal government’s AAA rating and “stable” outlook are supported by its improving finances, Canada’s “relatively solid economic performance,” and its strong institutional and regulatory framework.

However, it warned, the housing market and consumer debt could threaten these healthy conditions.

“This combination presents a potential risk to the banks and to the federal government directly, as it guarantees a considerable portion of mortgages,” said Moody’s senior vice-president Steven Hess, the report’s author.

“We believe that this increased vulnerability presents the largest downside risk to our medium-term forecast,” he wrote in the report.

The report said Canada’s housing market “appears to be particularly inflated, especially in the largest metropolitan areas.” It said that while a slowdown in home construction has already begun, a further downturn is possible, “leading us to conclude that Canada’s real estate market continues to pose downside risks to our [economic] growth forecast.”

Mr. Hess argued that there are “no signs of a soft landing for the housing market in sight” – a view that is at odds with that of the Bank of Canada.

#166 Bottoms_Up on 10.20.14 at 12:24 pm

#139 bigrider on 10.20.14 at 7:57 am
—————————————
Garth said “most do” in reference to buying opportunities (that is, most market crashes are opportunities). It was not a reference to the number of people buying in at that time.

#167 Not an economist on 10.20.14 at 12:31 pm

#116 Derek R
” Casey’s last name wouldn’t happen to be Serin, would it?

Nice find. But that Casey is 32, not 23.”

32 not 23, hehe. Dyslexia got?

I’m just kidding, I know it’s not the same Casey. That Casey learned his lesson during his country’s bubble. This one hasn’t learned yet.

It’s too bad most of the info on that dude is now offline, the wiki entry and the few sources remaining have overly-sanitized the situation. Hearing it from his mouth even as he was in denial was an unreal experience. It was a train wreck of spectacular proportions back in the day (2007-2010), and it all started with him buying one condo for personal use and going nuts after discovering he could sell it for a small gain. He also bought in the late stages of the bubble (2006-2007). The issue with the moment the music stops is that even if you see it coming, you can’t time it. The ultimate result is inevitable due to cold hard math, but the timing can be very variable depending on how long the game of musical chairs (flipping) can keep going, which is based on irrationality.

The lesson is during the late stages of a housing bubble, even regular people lose their minds and stop critically thinking. Money is looked at very differently. Debt doesn’t matter, whether it’s a million or 10 million. The only thing that matters is the “monthly”, and keeping the property “floating”. Oh my, just typing those words takes me back.

#168 Bottoms_Up on 10.20.14 at 12:32 pm

#118 Ben on 10.19.14 at 10:48 pm
————————————
You ask ‘why’? I believe the answer is a mix of increasing labour supply (women entering the workforce) thus tamping wages, and wages not keeping pace with inflation. Coupled with supply and demand for land with a rising population.

#169 Not an economist on 10.20.14 at 12:38 pm

#146 Daisy Mae

” The ‘leaky condos’ in the lower mainland of BC forced an acquaintance to take out a $100,000 Reverse Mortgage to pay the special assessment. And now she tells me the Contingency Fund is depleted…. ”

Oh my LORD, 100k for a special assessment and it still wasn’t enough to fix the problem? What are Toronto condo owners looking at then, these things are already starting to fall apart and it’s only been a few years. What will happen in another 5 or 10? What about 20?

ANYTHING, these people will do ANYTHING just so they can say they technically don’t pay rent. No matter how much more it costs, only to have less freedom and more liability. There’s a time and place in everyone’s life to own some property and settle down, but it should only be done once your life and career are settled, and if the money situation makes sense.

These people who will do anything to technically no longer have a budget item explicitly called “rent” remind me of those people on that show “Extreme Cheapskates”. You ever see that show? It’s UNREAL how hard some people work to save money so that… wait for it… they don’t have to work for a living. I just don’t get it….

#170 Kenchie on 10.20.14 at 1:00 pm

Bwhahaha, this commentary by Barry Ritholtz hits the nail square into Cato’s coffin.

http://www.bloombergview.com/articles/2014-10-20/zombie-ideas-that-keep-on-losing

#171 devore on 10.20.14 at 1:32 pm

It’s flu season, expect lots of ebola cases to be reported in the next 2 months.

#172 xdisciple on 10.20.14 at 1:32 pm

#170 Kenchie on 10.20.14 at 1:00 pm
“Bwhahaha, this commentary by Barry Ritholtz hits the nail square into Cato’s coffin.”

No, it doesn’t. Not even a little bit. All Ritholtz asserts is his opinion that the ideas he’s listed are “failed”. The article makes sweeping generalizations and presents a few logical fallacies, one of which is guilt by association. I don’t believe in many of CTE’s childish ideas, but his post today at 119 was really good… Kenchie, you’re tripping but I expect better quality posts from you moving forward… thx – a fellow Millennial.

#173 jess on 10.20.14 at 1:57 pm

91 OttawaMike

from the renegade economist

helocs
http://www.golemxiv.co.uk/2014/10/trouble-bankland-video-blog/

“Lobbying in the US by the financial/Insurance and Real Estate sector in 2014 stands at $249,342,399. Its been above $450 million every year since 2008.”
https://www.opensecrets.org/lobby/indus.php?id=F

#174 Doug in London on 10.20.14 at 2:01 pm

Sometimes the simplest answer to a question is the best one, it’s called Ockham’s Razor if my memory serves me right. So why are these younger people enslaving themselves deeply in debt buying overpriced condos that aren’t even built yet when they are already saddled with debt from a car loan? They must be a bunch of masochists.

#175 Long Time Lurker on Here on 10.20.14 at 2:45 pm

I am not against buying your own place, but man, half a million for a condo is just way too much. I am sure there are cheaper options out there that are more affordable.

#176 Cato the Elder on 10.20.14 at 2:59 pm

Re: #170 Kenchie

See, I’m not going to waste my time reading that. Bloomberg is a socialist/fascist – why would anything his news organization has to say be impartial, objective, or promote LIBERTY in any way?

He enriched himself through GRAFT bestowed upon the government subsidized banking cartel. Once his megalomaniacal wealth accumulation objectives were satisfied, he had to spend hundreds of millions of his own money to become an authoritarian mayor (strange that you would spend such a fortune on getting a job that pays only 6 figures – that’s when you know you have a power hungry madman running for office). Then he went about trying to force conformity through the passage of thousands of laws including a SOFT DRINK BAN on people. He also massively increased the power of the police force there whereby you can’t even get on a subway without getting ‘frisked’ – all for your own safety of course!

If that’s the type of person you’re comparing capitalism to, no wonder you have a distorted view of it. He isn’t a free market capitalist at all. He’s a crony capitalist. Just like many of the big families here, he supports big government because it PROTECTS HIM and his wealth from competitors.

And you know what? You can hardly blame someone for pursuing their own self interest. You can’t expect someone is going to pass laws or support a system of government that allows competitors that could usurp their power at any moment.

That’s why YOU as a voter has to endorse the view that government should be limited. That’s why you shouldn’t fall for the ‘this time it’s different’ line of nonsense from government officials. It’s NEVER different – it’s always the same – more power. Don’t ask you officials to regulate anything. Ask them to enforce contract laws. Ask them to PROTECT PRIVATE PROPERTY RIGHTS. Ask them to police fraud and INVOLUNTARY uses of force of one person against another, and not consensual ones (like drinking or smoking).

Big government has been tried for thousands of years. It’s been tried for the past few decades. It hasn’t worked – time to demand that we go back to the only time we ACTUALLY made significant progress in living standards. A time when government was small. A time when we weren’t spending 6 months of the year working for them.

Maybe then a single head of household can work and provide for a whole family, a house, and several kids WITHOUT debt – all while having ample leisure time. Imagine what that would be like again. What a difference compared to today, where both parents must work, struggle with kids, have massive debt loads and no retirement peace of mind.

#177 Setting the Record Straight on 10.20.14 at 3:03 pm

@170

here are some of the failed ideas your friend lists

Homo economicus (profit maximizing economic actors)

Austerity as a virtuous policy during recessions

The efficient-market hypothesis

Tax cuts pay for themselves (supply-side economics)

Self-regulating markets

Shareholder value

Rational Investors

You are blaming all these on think tanks? or on libertarians? or Austrian economists?

The other two he deigns to discuss are opposition to the theory that there is significant man made climate change and something to do with criticism of US housing policies and Fannie Mae / Freddie Mac.

Very little if any has to do with CTE.

#178 TurnerNation on 10.20.14 at 3:04 pm

Dollarama’s stock has gone into hockeystick mode. I’m thinking 105 target.

#179 Mister Obvious on 10.20.14 at 3:19 pm

#174 Doug

“Sometimes the simplest answer to a question is the best one, it’s called Ockham’s Razor if my memory serves me right. “
—————————

Not exactly. But its good to see a great philosophical tool such as Ockham’s Razor (more commonly known as ‘Occam’s Razor’) invoked on this blog.

Occam’s Razor says that in the absence of evidence you should pare down a hypothesis to the simplest explanation that fits the facts at hand.

In other words, don’t postulate more entities than necessary until further evidence sheds improved light.

Ockham was a 12th Century Theologian. If he had lived in the present times, where much more evidence abounds than the old friar could have imagined, he would have been obliged to take his razor and slice away the concept of an intelligent creator.

#180 Bottoms_Up on 10.20.14 at 3:30 pm

#70 Hawk on 10.19.14 at 7:03 pm
————————————-
I do think you will lose the bet. Look up historical data and let us know the last time Oakville prices were down over a 2-yr stretch.

And a big unknown is sales volumes…if volumes go down over the next two years, the higher-priced homes tend to pull up the average.

What is the mix of homes being built in the area (ie, condos or large overpriced homes), and what’s the trend of sales volumes?

#181 Not an economist on 10.20.14 at 4:38 pm

#180 Bottoms_Up

“I do think you will lose the bet. Look up historical data and let us know the last time Oakville prices were down over a 2-yr stretch.”

You are right but times are changing. I’m very familiar with Oakville and I can tell you it’s 80% yuppies that work in downtown Toronto at various professional office jobs (they all commute), while the rest are quasi-rich retirees and a handful of “fake it till you make it” type people.

The fact is that if we are going into another recession/depression, there isn’t room to reignite the housing bubble or lower interest rates much further, and thus we are likely to end up like in 2008/2009 minus the quick “recovery”. If you will remember, lots of “professionals” working in Toronto were on the chopping block, and only marginally avoided getting canned. The more you make the juicier a target you are when it’s time for more fiscal restraint, and let me tell you people in Oakville make a fair bit. They’re not “Bridal Path” financially independent, that is to say they don’t have a multi-million trust fund ready to go, and they’re very vulnerable to job loss if they can’t replace it at the same salary quickly. Plenty of people stretch the budget to get to Oakville, which is why it has such a solid history of price increases.

What I find most troubling is that so many people making 100k or more per year, especially those asking Garth for help who are featured on this blog, hold the naive assumption that the job is solid and the income is not interrupted and cannot be reduced. Ask the former IT workers at Royal Bank how much they’re making now, after being replaced by TFWs who learned their job then went back to India to work remotely. They all used to make over 100k and thought they had it made, special skills, blah blah, you know the story.

Once the jobs go, the real estate value goes too. Look at Detroit. You can’t find a buyer for a decent detached house downtown for 20k because there are no new jobs. I’m not saying any city in Canada will end up like Detroit (well except for maybe Calgary, but that’s another couple of decades off), but it illustrates a point. No jobs = no real estate increases. Not in the long term.

Like I said before, it’s hard to time it even when you know with certainty what is going to happen.

#182 bob on 10.20.14 at 4:47 pm

A couple people already told you this, but if you’re reading:

Do NOT buy anything until you know the difference between an asset and a liability. (You can read ‘Rich Dad, Poor Dad’ as a good example).

Asset = things that bring in money and make you richer.

Liability = things that take away your cash and make you poorer. like car payments, gasoline, repairs, insurance, mortgages, strata fees, property tax.

Further, not all debts are liability… but that can be a story for another day.

Once you know the difference, then you can start your assessment.

#183 Snowboid on 10.20.14 at 5:02 pm

#146 Daisy Mae on 10.20.14 at 9:41 am…

We have friends in Victoria that also paid huge special assessments, including one couple that paid $ 25,000 in 2004 to repair their leaky condo, and now have another $ 40,000 owing this year to fix the 2004 work.

Even in the newer luxury complex we rent in, there are issues with repairs that shouldn’t be showing up in a six year old concrete and steel building!

Condos have to be one of the riskiest home purchases of all.

In the example today, it’s even more risky buying a pre-build.

Our plan (as potential vultures) is to wait until we see a bargain condo in Kelowna, and if this doesn’t happen we are happy to stay as renters.

Maybe when we return next April from the Valley of the Sun it will be the year we swoop in for some RE carrion!

#184 Millenial on 10.20.14 at 5:19 pm

Hey Garth,

You should put Casey in touch with Erin Bury.

#185 jess on 10.20.14 at 5:58 pm

the overconfidence effect?

from the conversation
20 February 2012, 1.31pm GMT
Economics and the brain: how people really make decisions in turbulent times

October 20, 2014, 9:35am EDT
VC Nick Hanauer: If income inequality continues to rise, it will be ‘mayhem in the streets, Ferguson everywhere’
https://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming

#186 Doug in London on 10.20.14 at 6:51 pm

@Mister Obvious, post #179:
That’s a good explanation of Occam’s Razor. In summary, unless you have any evidence of otherwise, pick the most obvious answer. As you say, I don’t recall ever seeing mention of this philosophical tool on this blog.

#187 Vangrrl on 10.20.14 at 8:08 pm

23 years old, low rent, decent income, and all they can think to do is buy an overpriced condo that isn’t even built yet?
I simply can not fathom it…. Wow.

#188 Daisy Mae on 10.20.14 at 8:42 pm

#151 Dave: “I wouldn’t want my hard earned money stored by the strata so that when I move I can’t get it back. That’s ludicrous. Keep the contingency low and fund projects through assessments.”

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

That’s what WE’VE done in the Okanagan. Rather than raise strata rates, we’ve opted to foot our own bill for roof replacements — we’ll be assessed when the time comes. These are individual townhouses. These are not condos.

My acquaintance spent years with tarps draped over the building until massive repairs were done. Cloverdale, BC. Whata mess….this reverse mortgage is eating up all her equity.

#189 maxx on 10.20.14 at 8:59 pm

“Most Boomers will spend the money pre-dead. — Garth”

Hyper-drôle and correct!

#190 Vicpaul on 10.21.14 at 2:27 am

Well,….23, $65k x 2 – and Beauty is lookin’ “to pull in” a little more. IT in Victoria, eh?
Many have shared sage advice so, I’ll offer just a few words to consider: job security, unplanned pregnancies,
accidents, health concerns, divorce……living life, yes – but none within (y)our sole control. Conversely, a Garth-like plan might suggest you two kids workin’ like Power Rangers for the next seven years living a comfy lifestyle ($65k p/a) and socking away a ton o’ dough (500kish), well invested; go to wing nights at the Tree, play mixed slow-pitch….and use protection. At thirty, if you lovebirds still have a unified life view – you’ll also have investments spinning off $30-45k a year stuffed his-and- hers TFSA’s, and may be ready for kidlets….and be able to afford dance lessons, clothes…and hockey. )

#191 elrowe on 10.21.14 at 7:17 pm

#152 DM in C
“#147 Bottoms Up
Kenchie is trolling along those lines….but elrowe is exaggerating by saying all the comments are either bashing boomers or women in the workforce. Selective reading, I think.”

Sorry, I reread and see where my comment could have been misunderstood. When I said “All the comments today bashing …”, I meant “There are so many comments today bashing …” and not “Every comment today is bashing …”. hth!

As to the what I was reacting to, please see #50 Kenchie, #75 Blacksheep, #84 Kenchie, and the discussion regarding women’s participation in the workforce being the cause of inflated RE prices in Canada. While there may be a correlation between the two, it isn’t necessarily causal; it could even be argued that many women would never have entered the workforce if housing were not so expensive thereby reversing the causality completely. I happen to not believe it’s as simple as all that.

Canadian society, like much of the world, has a long history of male dominance that many men would be happy to go back to. They think it would solve a lot of their problems. I know that genie won’t be going back in the bottle so it’s just wishful thinking on their parts, but that doesn’t make the sexism benign.

There are also plenty of comments bashing Boomers, but particularly odious comments IMO are: #24 Ben & #27 Taking Responsibility. It’s a free country and they are entitled to an opinion, however suggesting that the elderly will soon be too numerous and costly to keep alive, well, what would you call it?

Deciding who is “entitled” to a paycheque, or maybe even to continue living beyond their economic usefulness based on gender or age or race is against everything that I hold dear as a Canadian, and I shudder to think that this is the direction we’re headed as a society.