It works.

HOMES modified

The tale of two nations. Part deux. This is certainly getting interesting.

The average moist virginal homebuyer in Canada is 29 years old, just emerged pasty and blinking from his parents’ basement, and plans to spend $510,000 in Vancouver and over $400,000 in Toronto to buy real estate. Almost all of these buyers take high-ratio loans, since they lack a 20% downpayment, and end up paying CMHC insurance – which can add $15,000 to that Van price.

But despite the fact this amounts to an awesome debt loan, the home ownership rate among the twentysomething set (according to BeeMo) is 50%. That’s down from the past level of 55%, mostly because houses are so stupid expensive.

In Canada the average place costs more than $400,000, says CREA. In the States, the average is $176,500.

So, you’d imagine US kids would be swarming to real estate, since mortgage costs are roughly equal (thirty-year loans are 4% in the US, but tax-deductible), as are big-city incomes. But you’d be wrong. Home ownership among this group hit 40.6% as the housing boom was ending in 2007, then fell to 34% last year and is now just 29%. Of new-home purchasers, just 16% are first-timers.

What could possibly account for this huge gap between the Yanks and the Maples?

Well, many US kids saw their parents get their butts roasted in the housing correction that bottomed about four years ago. The US middle class was vacuumed for about $6 trillion, and millions of families found that having a one-asset investment strategy, leveraged over a mountain of debt, was a toxic idea. A whole nation of house-hornies discovered real estate does not always go up.

But that’s background. More salient reasons American millennials are renting are (a) student debt, (b) higher youth unemployment and (c) a lack of affordable properties. Sound familiar? So, we still don’t have an answer. Until we look at lending practices.

To get a mortgage in the States, you typically need a credit score of 750. Yikes. Not only that, but most lenders usually won’t dole out any funds unless a buyer can cough up a downpayment of 20%. Compare that with Canada, of course, where 5% is all you need, and the bank will give you at least half of that for showing up.

Of course we also have teaser-rate and adjustable-rate mortgages, which are now banned in the States. That’s how banks here sucker in people with 1.99% or 2.2% two-year terms. It’s also worth remembering the Canada Interest Act dictates all mortgage terms have to expire after five years, so you cannot lock into a 4% rate for the next three decades, as so many Americans are doing currently. (Refinancings have jumped 23% as bond yields fell.)

The result is obvious.

Half of our kids buy houses and the average price is $408,795. South of us, in a similar country, less than a third can buy – and homes cost $176,500.

This is no coincidence. Real estate doesn’t cost more here because it’s better-built, or since we have a larger population and a better climate, or because people in Seattle make half what Vancouverites earn. Prices are higher because houses are easy to buy, and debt flows.

It’s been deliberate. Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas. By pushing citizens into borrowing and spending massively, politicians don’t need to pare spending, enact stimulus programs or reform taxation, especially when the economy turns south. They just get the fool voters to do it. Simple. It works.

So we got forty-year amortizations and zero down payments, along with first-time homebuyer tax credits. This was layered over the Home Buyer’s Plan allowing RRSPs to be raided, and provincial grants to encourage newbies. Land transfer taxes are slashed or eliminated for the virgins and, of course, CMHC wipes away all lender risk for mortgages up to 95% of a property’s value. We now have an entire banking sector that’s grown fat on giving home loans to people who have been too challenged, lazy, undisciplined or juvenile to actually save any money.

The result?

Unaffordable houses and record debt.

Genius country, eh?

178 comments ↓

#1 Sean on 10.23.14 at 7:58 pm

Nicely said! Government does have a big role in this… and it’s not b/c they are trying to help us. Citizens also have a big role in this… stupidity and greed do not equal innocence. Ironically, the banks may be least to blame.. by design they have been incentivized to behave in this way.

#2 Happy Renting on 10.23.14 at 8:01 pm

What a gross advertisement. Of course, it jibes with Waterloo Resident’s experience with women… Yuck.

#3 visorman30 on 10.23.14 at 8:04 pm

Very good points on the lending practices. I work with many good “middle class” accountants who make about 80k-100k that aren’t even aware of the $1M limit. They bought at 800-900k thinking there is only 1 way to go but even at their income level the down payment was nowhere near 20%.

#4 VandammeCouver on 10.23.14 at 8:05 pm

Thanks for the post Garth.

You said earlier this week that interest rates may not rise in Canada in 2015, due to the state of the economy. Understandable, so do you perceive the debt glut and house horniness to keep on going?

I wonder if a decent earthquake would rattle Vancouver prices…..

#5 JO on 10.23.14 at 8:07 pm

Great post today Garth
I see it as you do on the front lines. One of the many things I do is lend money. A significant number of these recent buyers are broke and will not be able to hang on when the inevitable rate rises or life shock comes.

And yes, it is not by accident. It is massive intervention by government policies and Bank of Canada. It is very likely to end badly. Only question is time. It has lasted a lot longer than most expected but that simply means the hangover will be worse than expected too.

We have a fundamentally weak economy and it will roll over faster than most expect. The ingredients are there: Extreme leverage +Extreme Optimism= crash

JO

#6 Joseph R. on 10.23.14 at 8:12 pm

It was the best of times, it was the worst of time…. to buy RE.

In one country, any 29 year old with 2 years on the job can get financed at 95% the value of a house while in another country, the ex-CEO of the Central Bank can’t refinance his own house:

http://www.bloomberg.com/news/2014-10-02/you-know-it-s-a-tough-market-when-ben-bernanke-can-t-refinance.html

Wisdom and Foolishness, Light and Dark,…

#7 David W on 10.23.14 at 8:13 pm

If home prices in Canada were like the ones in the US I could actually afford a place, paying cash, and comfortably raise a family.

#8 sideline sitter on 10.23.14 at 8:13 pm

genius!

I get it… owning means ‘you made it’, but if its more expensive, and by a longshot, why bother? as the wealthy barber said, you HAVE to live somewhere, rent is not a waste of $$$

#9 West Coast on 10.23.14 at 8:15 pm

Just spoke to a r.e. broker’s assist – recently laid off. She used to work for a large company….apparently their recent sales numbers were higher in Victoria than Vancouver (unusual for the co.)
She talked about the ‘peak’ (5 years ago) …said properties were still moving but “only because loans are available with 5% down – no one can afford to buy. Those who can afford to buy in Vancouver often just have the property as an investment as Vancouver is such a safe haven. That’s why so many condos are empty” (her words).
My advice is don’t play with fire by buying a condo in Vancouver. The construction standards are inadequate, the condo fees are artificially low, the 5% down is criminal (tax payers will pay for this – yeah you pay taxes too!) and as Garth likes to say – we are not special. What’s happened in other places can just as easily happen here.

#10 RayofLight on 10.23.14 at 8:18 pm

What do you think the chances are PM S Harper will follow through with the $10,000 TFSA contribution limits?

2015 – Zero. — Garth

#11 james on 10.23.14 at 8:27 pm

Indeed, mortgages are pretty hard to get here in the USA at the moment. Hence, stories such as this one:

http://dealbook.nytimes.com/2014/10/22/u-s-loosens-reins-but-mortgage-lenders-want-more-slack/

I was surprised at how rigorous the process was in the USA, compared to Canada. Tons of documentation, verification of income, inspection of income tax returns, etc etc. I wouldn’t say that a person who is below 750 is locked out at all, but it is not a cakewalk. Even for Americans with good credit and good jobs, it can be 2 months to close.

In comparison, anyone who can fog a mirror seems to be able to land a mortgage in Canada.

#12 omg the original on 10.23.14 at 8:32 pm

I started this decade convinced that we would have seen the start of a correction by now. It just isn’t happening in the major markets (sorry Halifax, Regina and Brandon don’t count).

For Canadian housing interest rates are the factor that swamps everything else. (As opposed to the US where sentiment swamps everything)

But let’s say people can hang onto their houses as interest rates increase and prices stay high.

I think it will mean a lot to other sectors of the economy – they will hurt. There will be a lot of people that are just very “house poor” – just scrapping by to make payments on their massive mortgage.

Since the mortgage will be a drain on disposable income the “house poor” won’t be eating out as much, won’t be buying new consumer good as often (cars, furniture, appliance), and will not be having as many kids.

All that will be a drag on the economy and reduce growth in other sectors. But so long as they can pay their mortgages its great for Canadian banks.

#13 takla on 10.23.14 at 8:33 pm

genius country Garth…or genius predatory banks?These white collar crooks are never brought before justice as they continue to reek havic on the middle class,uninformed masses.
So we harvest what we allow Gov policy/banks to sow,a cash depleted middle class that have reduced consumer spending ,possible deflation and stalling all hope of recovery after the GFC of 08’…sad,very sad!

#14 Victoria Real Estate Update on 10.23.14 at 8:33 pm

. . . . . . .Price Increase/Decrease. . . . . . .
. . . . . . . . . Since June 2008 . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+46%. . . . . . . . . . . . . . . . . . . . . . x. . .
+44%. . . . . . . . . . . . . . . . . . . . . . . . . .
+42%. . . . . . . . . . . . . . . . . . . . . . . . . .
+40%. . . . . . . . . . . . . . . . . . . . . . . . . .
+38%. . . . . . . . . . . . . . . . . . . . . . . . . .
+36%. . . . . . . . . . . . . . . . . . . . . . . . . .
+34%. . . . . . . . . . . . . . . . . . . . . . . . . .
+32%. . . . . . . . . . . . . . . . . . . . . . . . . .
+30%. . . . . . . . . . . . . . . . . . . . . . . . . .
+28%. . . . . . . . . . . . . . . . . . . . . . . . . .
+26%. . . . . . . . . . . . . . . . . . . . . . . . . .
+24%. . . . . . . . . . . . . . . . . . . . . . . . . .
+22%. . . . . . . . . . . . . . . . . . . . . . . . . .
+20%. . . . . . . . . . . . . . . . . . . . . . . . . .
+18%. . . . . . . . . . . . . . . . . . . . . . . . . .
+16%. . . . . . . . . . . . . . . . . . . . . . . . . .
+14%. . . . . . . . . . x. . . . . . . . . . . . . . .
+12%. . . . . . . . . . . . . . . . . . . . . . . . . .
+10%. . . . . . . . . . . . . . . . . . . . . . . . . .
+8%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+6%. . . . . . . . . . . *. . . . . . . . . . . . . . .
+4%. . . . . . . . . . . . . . . . . . . . . . . . . . .
+2%. . . . . . . . . . . . . . . . . . . . . . . . . . .
..0%. . . .x *. . . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . .*. . .
———————————————————————–
. . . . . . .June . . . .June. . . . . . . . . .Sept
. . . . . . .2008. . . .2010 . . . . . . . . . 2014

x = Toronto
* = Victoria
(source: Brookfield’s index)
(link)
(For future reference, the following (Brookfield) monthly index levels for Victoria will be noted: June 2008 = 151.6, June 2010 = 160.2, September 2014 = 143)

From June 2008 to September 2014, house prices in Toronto increased by 46% while prices in Victoria fell 6%. What should be even more alarming for many Victoria mortgage holders is that this price decline happened while 5-year mortgage rates fell from near-normal levels (in 2008) to today’s historically-low (emergency) levels. If historically-low mortgage rates can’t stop Victoria’s price decline, what will?

Victoria’s (debt-induced) housing boom party ended in 2010. Since then:

* Victoria’s economy hasn’t been able to support house prices, despite historically-low mortgage rates.
* Single family home sales have been well below Victoria’s long-term average.
* Many people have lost their jobs in Victoria and have left to find employment in other parts of Canada.
* In 2012, the BC government brought in a hiring and pay freeze (2,000 positions lost over 3 years).
* Several businesses in Victoria have had to close down. For example, Ashley Furniture in Langford closed in early 2014 and Six Mile Furniture is currently in the process of closing down.

All of this adds up to future lower prices. The party is definitely over in Victoria.

We would have to go back to 2007 to see September prices this low in Victoria. However, the simple fact of the matter is that prices in Victoria are still extremely bubbly. Stagnating incomes in Victoria over the last number of years have not added any buying power for home buyers (14th chart).

The least expensive house for sale in Oak Bay is 2343 Hamiota Street.
* Asking price: $579.9 K
* Built in 1911 and updated.
* This tiny house has 2 bedrooms and 1 bathroom in the approx. 850 sq. ft. of above ground living space.
* Located on a tiny 3,375 sq. ft. lot.

For a fraction of the cost of this $579.9 K Oak Bay house, it is possible to buy a much bigger and newer house in several US cities with summer-like winter weather. For example:

Florida:

$213 K, Jacksonville, FL (5 beds, 3 baths, 3,068 sq. ft., built in 2006, 0.32 acre lot, attached double garage, backyard pool)

$263 K, Spring Hill, FL (5 beds, 3 baths, 3,079 sq. ft., built in 2005, 0.3 acre lot, attached 3 car garage, backyard pool)

Arizona:

$177 K, Maricopa, FL (5 beds, 2.5 baths, 3,216 sq. ft., built in 2005, attached double garage, backyard pool)

$149 K, San Tan Valley, AZ (5 beds, 3 baths, 3,164 sq. ft., built in 2005, attached double garage, backyard pool)

Texas:

$145 K, Fort Worth, TX (5 beds, 3.5 baths, 3,208 sq. ft., built in 2006, attached double garage)

$220 K, Glenn Heights, TX (5 beds, 5 baths, 3,191 sq. ft., built in 2007, attached double garage)

Girls and guys, it’s obvious that Victoria’s housing market is in a major bubble and that prices will fall much deeper before reaching bottom. Do not buy a house in Victoria at this time. Buying now would create all sorts of major financial difficulties for you and your family in the future. Renting for now is a no-brainer as you wait for lower prices.

Until next time – Cheers!

#15 Cato the Elder on 10.23.14 at 8:39 pm

Garth,

Would you mind restoring some calm following the attacks in Ottawa? I believe you to be a well thought out individual that doesn’t jump to irrational conclusions and want your opinion. I will respect it even if it differs from mine.

I am worried given statements recently issued by Harper and others that they are going to pass legislation destroying vital civil liberties in our country. A right to privacy in our phone conversations and emails that shouldn’t be violated without a warrant specific to a particular situation is one of the first ones I believe will be rescinded.

Would you please discuss the ramifications of such a sweeping change and whether or not you think it’s necessary to combat such infrequent occurrences?

Thank you.

#16 David McDonald on 10.23.14 at 8:41 pm

If this was a morality play those sinners would have to atone for their excesses. However if interest rates stay low judgement day will never come.

My wife pressured me into buying a year ago. I fulminated against ridiculous prices and made bold predictions about an imminent housing correction. Nothing happened! My wife can’t resist saying I told you so.

#17 Retired Boomer - WI on 10.23.14 at 8:46 pm

I don’t get the comparing of the U.S. and Canadian markets, or values. In the U.S. there really is no stigma among ones peers for renting. Renting gives one freedom of movement, freedom to ensure an adequate 20% downpayment so you aren’t shelling out the extra fees for the “mortgage insurance” that only protects the lender -not you.
In the U.S. we know we have to make our own way for health insurance, as well as any secure retirement beyond social security.
Yes, usually your employer chips in a chunk for that health insurance, but it rarely covers dental, or eyeglasses which are generally born by you. Plan on paying about 30% of the typical health insurance premium as well, usually $400-$500 monthly on a family plan. Yes, you can generally pay this pre-tax.
Now about that house, or rent. You gotta shelter your buns somewhere, the smart rent the least costly ‘do-able’ place until they are ready to buy. They shop carefully, after finding that job that might last a while, and pay decently. These days, that’s not so easy with short term contracts, and unreliable employers, but there still are some decent ones out there.
Saving for retirement as well as short term saving for the car replacement, the emergency fund etc. is never easy. Get used to it. You are NOT going to win the Lotto.
With care, you might make it to retirement with enough to last you until you hit room temperature, which you WILL do at some point.
Remember that old fable of the hare and the turtle? It is quite true. Of course, you could get run over by a bus, or shot by a terrorist, or kidnapped by aliens.

The ugly part comes when you hit retirement with no savings, debt, and no prospects! Then you’re wondering why those aliens are late. I’ve seen this happen to too many early Boomers who never planned on getting old!

#18 Mark on 10.23.14 at 8:47 pm

Smart millenials who don’t acquire housing and stay away from bonds and REITs (extremely overvalued asset classes) have the ability to take advantage of a once-in-a-generation opportunity to acquire Canadian stocks at contemporary prices.

After all, the market forces that has pushed the average Canadian house to $400k, had to suck those speculative resources from somewhere. And out of the (Canadian) stock market is where the money came from.

Well more than half the contemporary TSX is trading at below the replacement cost of the underlying assets. Whether it be the railways, where the assets simply are irreplaceable and would cost hundreds of billions to replicate at contemporary land and labour prices. To the gold mining sector that is trading at roughly half of long-term “book” value. Even the telecoms are cheap relative to the assets they have in the ground. I don’t know about everyone else, but I’d rather have $400k of XIU, than an average pile of sheetrock and half-rotted plywood that suffices as a Canadian “house”, that’s for sure.

#19 HJD on 10.23.14 at 8:53 pm

Garth, Interesting assessment and description of our current situation. If you had the political power (Prime Minister Turner?), what legislation or changes would you want to introduce in order to set things straight? Because of vested interests, do you think the political/economic system would ever agree with your beliefs about what’s right for the country? I have my doubts.

#20 Cow Man on 10.23.14 at 9:06 pm

Sir Garth:
This may be the best analysis you have ever written. Thank you for your clear concise comparison. This government agenda is carried on with the financing of agricultural land through the Farm Credit Corporation. Same lending process as CMHC. Farm land in Perth County Ontario, is selling at over $20,000 an acre while producing 10% less gross income than land selling in Iowa at $6,000 an acre. How can this end well?

#21 Aaron - Melbourne on 10.23.14 at 9:09 pm

QUOTED FOR TRUTH!~
“It’s been deliberate. Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas. By pushing citizens into borrowing and spending massively, politicians don’t need to pare spending, enact stimulus programs or reform taxation, especially when the economy turns south. They just get the fool voters to do it. Simple. It works.”

And here in Oz…. they will do anything to keep the bubble going and the money flowing. That’s why the RBA has capitulated on Macroprudential rules which were until recently “a fad” according to Reserve Bank Governor Glenn Stevens. Furthermore, they want to target the investor segment and the HAM without impacting on first timers and owner occupiers. Probably would be a good thing if they could get the house in order with tax reform (ending negative gearing as a start), banning foreign purchases and setting higher Loan-To-Valuations for everyone. A return to 20% deposit would be a good start provided they made invesstors plonk down 50%, thus favouring owner occupiers over investors.

Here’s a nice little vid from Lateline
http://www.youtube.com/watch?v=aQefvOioxXQ&feature=player_embedded

http://www.youtube.com/watch?v=aQefvOioxXQ&feature=player_embedded

#22 Cato the Elder on 10.23.14 at 9:16 pm

Re: #18 Mark

You’re thinking of this wrong. Those resources weren’t redistributed from the markets into housing, it’s the result of a massive issuance of debt.

That debt is on the balance sheet of every Canadian that owns a house now. If the housing market begins to deflate, you can’t just transfer money into the stock market – those debts still need to be paid off.

#23 WhiteKat on 10.23.14 at 9:16 pm

Garth has a talent for focusing attention back to HIS blog, and chastising anti-racial comments, yet he fails to acknowledge that a subset of Canadians (1 million and their families) cannot invest in RESPs, RDSPs, Canadian Mutual Funds, and are exposed to double tax on their pension funds, RESPS, TFSAs and RRIFS. He completely ignores us as though we do not exist, and NEVER comments on our plight. WE ARE CANADIANS! What the HELL Garth? You have a following here. We are INNOCENT. Why do you ignore us?

Who can blame him? We all want to feel special.

Your US tax problems are yours to solve. Renounce. — Garth

#24 Mark on 10.23.14 at 9:27 pm

“My wife pressured me into buying a year ago. I fulminated against ridiculous prices and made bold predictions about an imminent housing correction. Nothing happened!”

Not sure where you live, but in most of Canada, housing has been going down in price for the past year and a half.

#25 WhiteKat on 10.23.14 at 9:28 pm

I forgot to mention TFSA’s. Seriously Garth, you disappoint big time. And I have to wonder if you hang back and watch people like me whose parents and grandparents were BORN IN CANADA, yet I am treated like an American low-life. YOU make SO MANY, anti-racial comments which I respect. But, WHY AM I EXCLUDED FROM THAT “immigrants lets treat them like Canadians” group? I am not an immigrant even, though I do not discriminate against against them which is what is sick about this whole witch hunt. My parents and grandparents were born here. I am totally Canadian except for the fact that I was born in the USA. How can you harass people who are against HAM and yet pay no attention to my plight? WTF?????

#26 Mark on 10.23.14 at 9:30 pm

“But let’s say people can hang onto their houses as interest rates increase and prices stay high.”

As rates increase (most likely risk premiums against specific collateral such as residential RE, not benchmark risk-free bond rates), the extra cost of debt service is going to send up in somebody’s hands. I predict it will accrue to bank shareholders’ equity, as the BoC will likely run low-interest rate policy (similar to the US Fed) in an attempt to ‘stimulate’ the economy.

Obviously segments of the economy that overwhelmingly cater to homeowners will suffer. But the owners of the debt are likely to do quite well and will have additional spending power.

#27 wallflower on 10.23.14 at 9:33 pm

#9 West Coast on 10.23.14 at 8:15 pm
What I see affirms your words. Been living at stupid-expensive Kerrisdale/Shaugnessy ‘hood junction since October 1. Go walking all over the ‘hoods almost every day, and drive about 40km per day in Vancouver area (main city). Lots of unlived in homes around here. A falling down piece of crap lists for around $3M. Lots of For Sale signs were here when I arrived. About 20% had SOLD on them. The remainder not sold. Thing is, all these signs are the same; no change. These realtors are not removing the SOLDs and the not solds have not acquired SOLD stickers. That is now just over 3 weeks. However, I have seen a few additional new For Sale signs.

#15 Cato the Elder on 10.23.14 at 8:39 pm
Go To Another Blog

#23 WhiteKat on 10.23.14 at 9:16 pm
Agree with Garth. Enough.

#28 Mark on 10.23.14 at 9:33 pm

“You’re thinking of this wrong. Those resources weren’t redistributed from the markets into housing, it’s the result of a massive issuance of debt.”

The TSX has spent the past 14 years compressing its P/E multiple, going from 35X earnings, down to today’s 14X earnings. Housing did the opposite, going from 10-14X earnings in 2000, to today’s 35X earnings. Housing and the stock market in Canada historically are inversely cyclical. There’s exceedingly very little debt in Canadian public companies, or in the hands of Canadian public equity investors who mostly don’t buy their investments on margin or credit. While Garth points out on a daily basis that there’s enormous amounts of debt in RE.

#29 gladiator on 10.23.14 at 9:37 pm

I was thinking about this: since a home buyer needs CMHC insurance if the downpayment is below 20% of the dwelling purchase price, what if this coverage seizes to exist as soon as the buyer paid off 20% of the initial price of the house: 5% in downpayment and 15% in principal.
Or, this raises a question: if I bought a house and after a number of years I paid off say 25% of its price and I need to refinance my mortgage: will I still need this insurance? If I don’t, then the situation is not that bad: banks bear allthe risks in say 10 years after the dwelling purchase.
Any ideas?

#30 Mark on 10.23.14 at 9:39 pm

“How can you harass people who are against HAM and yet pay no attention to my plight?”

I think the argument that Garth (and I) make is that HAM really doesn’t exist to any statistically relevant level of significance. High housing prices are found in neighbourhoods where there isn’t an “Asian” to be seen. The real culprit is the near trillion dollars worth of subprime credit underwritten by the CMHC’s lax subprime mortgage insurance standards.

Not sure what your specific plight is. Perhaps you could elaborate further?

#31 Mark on 10.23.14 at 9:43 pm

“I was thinking about this: since a home buyer needs CMHC insurance if the downpayment is below 20% of the dwelling purchase price, what if this coverage seizes to exist as soon as the buyer paid off 20% of the initial price of the house: 5% in downpayment and 15% in principal.”

CMHC insurance turns your relatively risky mortgage into the equivalent of a GoC bond. This requires less capital resources of a lending institution to backstop versus a mortgage with no insurance. Hence, if the CMHC insurance is ‘cancelled’, you will likely have to pay a higher interest rate on account of the greater ‘charge’ your mortgage will incur against Tier1 regulatory capital.

After all, as Garth says in this blog post, Canadian housing is more than 200% of US valuations, when normally valuations aren’t significantly disconnected merely because of a political boundary. So a 50% drop isn’t out of the question in a mean reversion scenario.

#32 TEMPORARY® Foreign Prime Minister on 10.23.14 at 9:47 pm

“…..Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas…..”

“……In Canada the average place costs more than $400,000, says CREA. In the States, the average is $176,500…..”
=========================

It doesn’t take a genius (unless you’re spending all your self-inflicted time dodging YouTube wannabes) to figure out why corporations are moving Canadian jobs south to the U.S. where labour is far more affordable.

That’s some (in-)Action Plan we have going here.

#33 WhiteKat on 10.23.14 at 9:53 pm

#23,

Wow man, You suck. Garth, I am crying now as I write this. I do not deserve this. I would so LOVE to renounce this curse I was born with. It does not come free to unenslave myself from the land of the free. I have to prove 5 years tax compliance, which involves some serious legal and accounting costs and penalties, along with a $2,350 renunciation fee, and exit tax. My middle income family cannot afford this.

MY CRIME: BORN IN THE USA TO CANADIAN PARENTS.

#34 Mark on 10.23.14 at 9:57 pm

“It doesn’t take a genius (unless you’re spending all your self-inflicted time dodging YouTube wannabes) to figure out why corporations are moving Canadian jobs south to the U.S. where labour is far more affordable.”

Not only labour, but the cost of capital. As I’ve argued above, a huge quantity of resources in the economy have been diverted, by CMHC fiat, towards subprime mortgage financing to inflate a housing bubble. Rather than where the market would ordinarily allocate such resources — most likely, at least partially into other asset classes.

In the short term, its great that Canadians have better quality housing than ever before, but it has come at the cost of a competitive economy. Absolutely huge opportunity for those who are able to trade against this trend, that’s for sure.

#35 Financial Freedom at 40 on 10.23.14 at 9:57 pm

There is no easy help for WhiteKat
http://tinyurl.com/o3xloyh
We can only say we’re sorry you are facing this, but I don’t think this audience has your answer

#36 young & foolish on 10.23.14 at 9:57 pm

Great post …. thanks Garth! Will the government really let the average joe homeowner suffer?

Cato the Elder talked about wealth and free markets yesterday. Sure, in a Textbook Example it’s supposed to play out as he describes it … individual freedom and open markets do bring promote ingenuity and prosperity. But many would argue that today we only have an illusion of this. Once you lift your nose above the textbook and look out the window, you may notice the imperial nature of our ways.

#37 WhiteKat on 10.23.14 at 9:58 pm

Garth, we cannot do it. The game is rigged. We never knew. We never earned there. We were born there. That is is it. They make us go through hoops to pay for our freedom. How can you say what you are saying?

#38 Capital One on 10.23.14 at 9:59 pm

#23/#25 WhiteKat

Garth has it right – renounce. Is there a reason can’t do so? The primary focus of this blog is real estate and his advise and observations should apply to you as well.

But you do have my sympathies. I know others who were caught up in that and it’s not right.

Maybe move back. You have what about a billion people on the planet would like. And the weather is better …

CO

#39 crowdedelevatorfartz on 10.23.14 at 10:04 pm

and on tonights 6pm Global ‘News” another story on why Real Estate is a good deal.
“Buy next to the Skytrain Rapid Transit line station. People want to be able to walk to transit ….”

Every night, another pro real estate “news” story.
Its blatant propaganda . Sickening if it wasnt so pathetic.
And then they cut to the weather. Brought to you by Remax…….
No conflict there………..

#40 young & foolish on 10.23.14 at 10:10 pm

So, the government is messing with the markets. Are we surprised? No. But wait, I am sure they are doing it for our own good, and for the betterment or the greater society, right?

Thanks anyway.

#41 WhiteKat on 10.23.14 at 10:11 pm

@CapitalOne #38.

Renounce what? Where I was born? I cannot help where I was born. I had no choice in the matter. Why am I being punished for that?

#42 WhiteKat on 10.23.14 at 10:14 pm

@Captial One #38

Move Back? I do not remember living in the land of the free, as I was one year old when I moved BACK HOME TO CANADA WITH MY CANADIAN BORN MOM. Where should I move back to?

#43 crowdedelevatorfartz on 10.23.14 at 10:20 pm

Sooooo Whitecat
You’re a US citizen. Living in Canada? Working in Canada? And cant afford to renounce your U.S. citizenship?
Time to relocate to the US and take advantage of your citizenship. Less taxes, economy is ramping up, Hawaii bekons……
There’s millions of people that would sell their firstborn to have the same “dilema”.

#44 WhiteKat on 10.23.14 at 10:20 pm

Someone tell me what I did wrong please.

#45 Roy on 10.23.14 at 10:20 pm

Sears braces for closing 100 stores, 5,500 layoffs
http://wivb.com/2014/10/23/sears-braces-for-closing-100-stores-5500-layoffs/

More signs of a US economic recovery

#46 WhiteKat on 10.23.14 at 10:22 pm

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#47 WhiteKat on 10.23.14 at 10:32 pm

Just renounce they say? Yes like this is a walk in the park.

How do Canadians like me who were born in the USA, ‘just renounce’?

Well, first of all, USA is onto us all, and has just raised their renunciation fee from $450 to $2,350 (BTW Canada charges 200 bucks). And a USA slave cannot buy their freedom simply by paying the renunciation fee. OH NO. We have to also prove five years of US tax compliance which involves a WHOLE MESS of accounting an legal issues that 100% true blue (born anywhere else other than the USA) Canadians have any clue about, and an exit tax on our already highly taxed, made in Canada, net worth. THIS IS EXTORTION pure and simple.
Garth can say, ‘just renounce’,well please IRS, can you make it so that I can, ‘just renounce’ without going bankrupt?’ I am just an average Joe. I cannot afford this price for me freedom, I really cannot.

#48 Harbour on 10.23.14 at 10:32 pm

New York officials: Doctor has Ebola, 1st in city
this just out….

No subway rides there

#49 WhiteKat on 10.23.14 at 10:37 pm

@cato

They will not listen. As long as it is not THEIR FREEDOMS that are being threatened, they do not care. I am just a pawn. Yet I am perfectly capable (especially here in the relatively pure land of Canada) of keeping myself safe….yet we are all at risk.

WAKE UP PEOPLE.

#50 Joe Anderson on 10.23.14 at 10:38 pm

Garth, I should probably know the answer, but if the Canada Interest Act mandates 5 year mortgage terms maximum, how do some people obtain 10 year mortgage terms in Canada? Or am I mistaken thinking a 10 year term is possible here? Thanks, Blog Dog Joe.

It becomes open after five. — Garth

#51 WhiteKat on 10.23.14 at 10:42 pm

Wow, I have never been deleted here before. Thanks.

#52 Capital One on 10.23.14 at 10:47 pm

#41 Whitekat

Your US citizenship: http://travel.state.gov/content/travel/english/legal-considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html

Your place of birth does not matter.

You are being “punished” by the US gov’t who is looking for the relatively-few US citizens who are hiding their wealth (and income derived from it). I agree – it sucks.

But, again, this primarily is a real estate blog. Agree/disagree with Garth as much as you want on the topic. He also advocates a certain equity/fixed income ratio, an age-based real estate ownership model and that a “fiat-based economy is fine” Have at it one any of these.

But find a FATCA blog if you’re looking for advice. This one took me 2 seconds to find:
http://travel.state.gov/content/travel/english/legal-considerations/us-citizenship-laws-policies/renunciation-of-citizenship.html

CO

#53 Renter's Revenge! on 10.23.14 at 10:51 pm

“More signs of a US economic recovery.” #45 Roy

Agreed. Sears sucks. Out with the old, and all that.

#54 Charles Ponzi on 10.23.14 at 10:51 pm

Genius country and gangster banksters in bed with corrupt politicians.

#55 pastbeyond60 on 10.23.14 at 10:52 pm

@capitalOne#38, Garth
WhiteKat is suffering immensely as are 1 million other Canadians that cannot afford renouncement and will be bankrupted by the US government. Canada is aiding the US in this amoral endeavour. The cost of FATCA will be handed down to all Canadians in service fee increases from the banks to cover the millions spent in compliance costs. Under the draconian FBAR penalties millions in Canadian assets will be stolen by the US.

The amoral bottom of the barrel; Disabled Canadian children will have their deferred disability accounts taxed and rendered useless by the IRS. These accounts along with RESPs are matched with funds from the Canadian government. These monies are from ALL Canadians, ALL CANADIANS are being robbed by the IRS. (Not to mention all Canadians will suffer when the US renders these innocent folks bankrupt and they are on Canadian welfare).

These tainted people will be taxed on the sale of their homes and can not invest in the Canadian economy under the punitive PFIC rules. This also effects ALL Canadians.

You say move back? Well most never lived there. Border babies born to Canadian parents, children born in Canada with one US parent…they are as Canadian as you are Garth.

Garth, you have a platform to help. This situation will directly effect the Canadian economy. The FBAR penalties are 10,000$/account/yr x 6 yrs. At minimum each person has 3 reportable accounts. That is $180,000 x 1 million people taken out of the economy. The Canadian banks have to date spent 750 million dollars in compliance fees. All of this is for NOTHING in return. Do you not see this as immensely hurtful to the Canadian economy at large?

#56 Inglorious Investor on 10.23.14 at 10:53 pm

Good post.

In order for the economy to create sustained growth in real wealth we need real innovation.

Canada’s current reliance on the resources sector (which goes boom and bust), the FIRE sector (which relies too heavily on debt), and government (which is too big and draining resources) is not a plan for long-term prosperity.

Currently, too much capital is being funneled into the above mentioned sectors at the expense of businesses that can create real, valuable innovations, and jobs.

I fear we may be missing some huge opportunities and becoming less competitive in the process as we feed a bloated government, and sacrifice brains for bricks and mortar.

#57 WhiteKat on 10.23.14 at 10:56 pm

DELETED

#58 NEVER GIVE UP on 10.23.14 at 10:56 pm

#15 Cato the Elder on 10.23.14 at 8:39 pm
Regarding loss of civil liberties.
—————————————–
I already have changed my phone conversation habits to reflect the fact that ours and the USA’s government are recording all phone conversations and email for future possible retrieval.
We should not have to live in fear of a possible misinterpretation of our words by a bureaucrat in some office thousands of miles away.
I will be waiting patiently for unbreakable encryption phones and computers. Until then a chill has been sent down my spine.

#59 ozy - FINNALY AN ADMISSION on 10.23.14 at 10:58 pm

AND AGAIN, who are the MASTERs of PUPPETS in the Government? hahahahaha!!!!

finally – the truth is getting slowly exposed :)

RE:
Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas. By pushing citizens into borrowing and spending massively, politicians don’t need to pare spending, enact stimulus programs or reform taxation, especially when the economy turns south. They just get the fool voters to do it. Simple. It works.

#60 Renter's Revenge! on 10.23.14 at 11:00 pm

Yay, Mark’s back to make me feel good about buying canadian equities! Hope you picked up some good deals last week! If I’m not mistaken, you’re an engineer based in Alberta? ERTW, amiright?

#61 wallflower on 10.23.14 at 11:02 pm

OMG
#33 WhiteKat on 10.23.14 at 9:53 pm
If you were not doing so much blubbering, you could have achieved this renunciation FOR A LOT CHEAPER BFORE THEY RAISED THE FEE RECENTLY…. but no, you are blubbering all over this blog and goodness knows where else…………………………… you could have been born a Christian in Syria, you could have been an American journalist in Iran, you could have been born a bipolar, pscyhotic, conspiracy-adopting gun toter, you could have been born without hands, you could have been born by the Ebola River…….. holy crap. You were born in the USA to Canadian parents. How about contacting reality show producers about this — in the USA? Like Garth says, DO something about it. And for the rest of us, GET OFF THIS BLOG.
However, here is another perspective on this. Seek psychiatric assistance. I think you may need it.

#62 Bottoms_Up on 10.23.14 at 11:06 pm

#197 Daisy Mae on 10.23.14 at 7:21 pm
———————————————
Letting our home-grown terrorism access other parts of the world wouldn’t be all that responsible now, would it?

#63 WhiteKat on 10.23.14 at 11:06 pm

DELETED

#64 Bottoms_Up on 10.23.14 at 11:11 pm

#164 RealistvsExtremist on 10.23.14 at 3:22 pm
————————————————-
Interesting, you are arguing one side of the story, whereas I am trying to deal with the current reality.

I agree with you, no matter what side you’re on, a family member killed could very well inspire hatred and violence against the other side. How would you feel if your family member was in the 9/11 towers, or if that was your son or brother or father killed at the war memorial yesterday? I’m sure your sympathies wouldn’t be with the terrorists.

The point being that there is a horrible part of this world that is breeding uneducated, misinformed, inequal, uncaring, unsympathetic people that have no qualms committing barbaric acts against humanity.

Regardless of how we got here, how do you deal with that?

#65 Bottoms_Up on 10.23.14 at 11:13 pm

#42 WhiteKat on 10.23.14 at 10:14 pm
————————————–
You are more than welcome to stay my Canadian friend. Don’t allow the ignorant locals get to you.

#66 Bottoms_Up on 10.23.14 at 11:16 pm

#25 WhiteKat on 10.23.14 at 9:28 pm
—————————————-
I think Garth is simply just directing you to the easiest route between point A and B. Renouncing will get the monkey off your back. While you may have to give in to your values, you have to ask yourself is this a fight you want keep fighting? It could go on the rest of your life and cost you financially, emotionally, physically etc. You are right and the government is wrong….but do you want to let your values get in the way of living a lower-stress life? The choice is yours.

#67 ozy - your WIFE is smarter on 10.23.14 at 11:19 pm

SURE, YOUR WIFE IS SMARTER, what was your alternative, live with mice, cockroaches and bed bugs??!! add pretty often so crappy service from really old apartment building’s personnel. YEAH, it took you long to decide. Well, if you bought VALUE aka QUALITY, you have mitigated the RISK Garth is talking about from his OWNED CITY CORE Mansion :)

CONGRATULATIONS – A RENTER SAVED!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

RE:
#16 David McDonald on 10.23.14 at 8:41 pm
If this was a morality play those sinners would have to atone for their excesses. However if interest rates stay low judgement day will never come.

My wife pressured me into buying a year ago. I fulminated against ridiculous prices and made bold predictions about an imminent housing correction. Nothing happened! My wife can’t resist saying I told you so.

#68 Cato the Elder on 10.23.14 at 11:19 pm

Re: #36 Young and Foolish

I find this to be a common argument by people about many things.

Things can’t be perfect, so why bother trying?

That’s a terrible argument to make. All those who strove for a better life and lobbied for the political freedoms we have today didn’t think that way.

We should always be striving for a better society.

I can’t stand that Canadian way of thinking that ‘oh well gee golly that’s the way it is!’

If there’s a way we can improve, even by a little bit, we should demand it. Quit accepting that this is the best we can do. Pursuing more freedom, and more equitable application of law, is always a noble pursuit.

Obviously, people are flawed, and there will always be problems. However, we have a LONG way to go before we can attribute what is ailing us to that. What is hurting us today is a failed ideology, and that ideology is that government’s should run our lives.

#69 WhiteKat on 10.23.14 at 11:20 pm

DELETED

#70 Terrier on 10.23.14 at 11:23 pm

Crash course of Canadian banking and how debt flows around …
http://www.amazon.ca/Thieves-Bay-Street-Brokerages-Canadians/dp/0307359646/ref=sr_1_1?ie=UTF8&qid=1414120839&sr=8-1&keywords=thieves+of+bay+street

#71 pastbeyond60 on 10.23.14 at 11:25 pm

@Bottoms_Up
The easiest route will cause WhiteKat to be bankrupted! Bankrupted by an illegal, extraterritorial overreach by the US government. This situation effects all of our values as Canadians. Our cowardly government has allowed the US to override our laws and breach our sovereignty as a nation. Those are values we should all defend.

#72 Bottoms_Up on 10.23.14 at 11:26 pm

#17 Retired Boomer – WI on 10.23.14 at 8:46 pm
————————————————-
Some interesting facts there. In Canada we may pay $100/mo for family health coverage from household income (add in yearly family deductible and you’re closer to $120/mo), plus in Ontario there’s a hefty provincial tax ($1200 between spouses?) so that brings you to $220 per month for family health coverage.

Then you start layering in waiting times and lack of access to doctors, and the subsequent realization that not visiting the doctor, while your health may suffer, may just be the best option,iand our universal system isn’t looking so hot compared to the US system of $400/mo with quick access and great care.

#73 WhiteKat on 10.23.14 at 11:29 pm

If I was GT, riding Harleys… people like WhiteKat would bug me too. But the GT, who loves dogs, and gets us all emotionally inspired about the things that are ‘really important in life’, who is not so young anymore (neither am I) has to sleep at night too.

You are so gone. — Garth

#74 Bottoms_Up on 10.23.14 at 11:29 pm

#33 WhiteKat on 10.23.14 at 9:53 pm
—————————————–
While I know you’re feeling violated, it sounds like you could be free and clear of all this BS for under a few thousand bucks. Let’s say $5000. Give up your internet, tv and cell phone for a couple years and you’re good to go. Or take out a line of credit and you should be able to pay it off over the next 2-3 yrs.

#75 WhiteKat on 10.23.14 at 11:32 pm

DELETED

#76 DV01 on 10.23.14 at 11:35 pm

Winter Spring Summer Fall ~repeat~

#GoodPost

#77 Joe on 10.23.14 at 11:36 pm

Whoever bought a house and took a big mortgage is awinner…~~

Hiperinflation will eat all this debts…

End of story….savers are loosers

#78 WhiteKat on 10.23.14 at 11:39 pm

DELETED

#79 Capital One on 10.23.14 at 11:40 pm

#54 pastbeyond60

Sorry – I missed your explanation on why you cannot afford renouncement. My brother in law did it. And he grew up in the States and fought for them in Vietnam. Up until FATCO, these people had it pretty sweet. Most Canadians couldn’t just move to the States if a better job came up.

#42 Whitekat

Move “back” to wherever makes sense for you. Vermont is nice. Florida is great in the winter, hot in the summer. But not California – they have no water. Not trying to be a jerk – but, again, you have what about a billion people on the planet want. If you don’t want it anymore, give it back.

Also – what #43 crowdedelevatorfartz and #65 Bottoms_Up said.

CO

#80 pastbeyond60 on 10.23.14 at 11:46 pm

@Bottoms_UP
Our entire country is being violated. Our banking system has spent 750 MILLION dollars to comply with the US governments extortion of our country! Canadian citizens could owe BILLIONS in FBAR penalties. It would cost WhiteKat at least $180,000 in FBAR penalties, $2,000 x 5 yrs in filing costs and $2,500 in consular renouncing fees. I don’t think the banks would be lining up to give the Kat a LOC.

#81 WhiteKat on 10.24.14 at 12:00 am

DELETED

#82 dienekes on 10.24.14 at 12:01 am

33 Whitecat
I wish i had your problem.
At least you can bail out. I cant get in

#83 Mark on 10.24.14 at 12:02 am

“Whoever bought a house and took a big mortgage is awinner…~~

Hiperinflation will eat all this debts…

End of story….savers are loosers

Not with the adjustable rate debt that nearly all of Canada’s housing (with a mortgage) is financed with.

There’s somewhat of an argument for hyperinflation wiping out debt if you have a 30-year fixed mortgage like they have in the USA. But on the first whiff of inflation in Canada, interest rates on mortgages and credit generally will skyrocket as lenders demand additional return to compensate for loss in monetary value.

#84 Christopher Lackey on 10.24.14 at 12:02 am

TRUE STORY from a millenial (31 yrs old, and I really prefer the term gen y). I’ve been working, saving, and investing for 10 years. I’ve got the down payment – the real one, 20%, not the virgin rip-off one that adds thousands to your unsuspecting mortgage. I didn’t have it in 2010 when everyone was flipping condos pre-construction. Now I look around and everything in my city is massively overpriced. The condo across the street from my house would cost 3-4x per month what it costs me to rent my apartment with the same square footage and that’s at rock bottom interest rates. Sure I think about “diversifying” into real estate, the rule of 90 and all that, but I’ve oscillated between buying and talking myself out of it for two years and I’ve finally realized it comes down to this:

The reasons for as owning are emotionally and culturally based more than anything, misperceptions that have become gospel like “paying someone else’s mortgage” etc. You crunch the numbers on just about any property in Canada and compare them to what you can make investing your down payment from your living room and it is just more trouble than its worth to own. People only look the mortgage payments and forget the five figure entry and exit costs and semi-annual maintenance surprises. There is no excuse in the age of proliferating information we live in for this many members of my generating to be deluding themselves with this home ownership at bubble prices kool-aid.

#85 Quebec is Great on 10.24.14 at 12:03 am

WhiteKat,
Get a grip dude. As far as troubles go, yours is smaller than many (dare I say most). Insulting Garth for not catering to your particular tax pimple is rude.
I like reading this blog; comments such as yours make me worry Garth’s next post is going to something like “screw all you ungrateful assholes… I’m out!”

#86 Mark on 10.24.14 at 12:04 am

“Our entire country is being violated. Our banking system has spent 750 MILLION dollars to comply with the US governments extortion of our country! “

Canadian banks, now some of the largest in the world in terms of market capitalization, operate heavily in the United States. Complying with US law is part of the cost of doing business there, and are costs that are imposed on all US banks. So this isn’t something that’s Canadian banking specific.

If the US wants to damage their banking system by imposing a regulatory burden upon it, then that’s their decision. It doesn’t bode well for the country in the long term, but its not something that is specifically going to damage Canadians.

#87 Millennial_Falcon on 10.24.14 at 12:06 am

-From last night-

#196 WhiteKat

“Your logic is flawed. You wouldn’t have to give up your civil liberties if those bombs had not been dropped in the first place.”

You are living in a dream world if you think your civil liberties just appeared out of nowhere and that they remain largely intact without “any bombs being dropped”.

Ever heard of the first and second world war?

–> Sometimes bad people need to be stopped with force. As many on this blog pointed out, remember the pacifists in the western powers pre WW2? How did that go?

#193 Cato the Elder

“You’re a fool. Plain and simple.”

I usually ignore your drivel. But I read this comment because it was directed at me.

How old are you? Have you not learned in your 60? 70? 80? years how take off your tin foil hat and understand that sometimes thing are as they seem, without a conspiracy. Do you also believe 911 was an inside job or that one group controls everything? I bet you do.

I don’t doubt that there are multiple points of view, and multiple competing interests. What I do doubt though, is what you are saying: that our government (or any other) will allow an incident like this to happen to further their own “Agenda”.

If anything, this incident looks bad on our government because it shows a lack of preparedness in dealing with internal threats. Someone is being held accountable, and I wonder how they are feeling now?

–>About being Gullible. Sorry but your constant ranting about the “alternate story” with little or no concrete proof wreaks to the high heavens of gullibility.

MF

–> No one with any grasp of reality believes Canada will become a third world dictatorship any time soon. Nice try though.

#88 LandLord / Investor on 10.24.14 at 12:07 am

Ok, I’ve a dilemma… As a real estate investor, thus a landlord of 2 fairly nice old, but well kept NV condos, should I sell them? The tenants in each are great – pay their rent on time. They keep the condo rules so no hassles. BUT what if the tenants lose their jobs? The values of the condos are tanking (according to similar ones on MLS) Three years ago they were each worth $350,000, now maybe $250,000. OUCH. Do we sell or keep them? If we sell we’ve Realtor fees, capital gains to pay etc. Is it too late to sell? How low can they go?

#89 Son of Ponzi on 10.24.14 at 12:09 am

#39 crowdedelevatorfartz on 10.23.14 at 10:04 pm
and on tonights 6pm Global ‘News” another story on why Real Estate is a good deal.
“Buy next to the Skytrain Rapid Transit line station. People want to be able to walk to transit ….”
Every night, another pro real estate “news” story.
Its blatant propaganda . Sickening if it wasnt so pathetic.
And then they cut to the weather. Brought to you by Remax…….
No conflict there………..
————-
Be patient, Canada Line is already at capacity.
With another 100,000 condos coming online within the next few years, it will be:
Transportation break down.

#90 TEMPORARY® Foreign Prime Minister on 10.24.14 at 12:10 am

#46 WhiteKat on 10.23.14 at 10:22 pm
DELETED

#50 WhiteKat on 10.23.14 at 10:42 pm
Wow, I have never been deleted here before. Thanks.

#56 WhiteKat on 10.23.14 at 10:56 pm
DELETED

#62 WhiteKat on 10.23.14 at 11:06 pm
DELETED

#68 WhiteKat on 10.23.14 at 11:20 pm
DELETED

72 WhiteKat on 10.23.14 at 11:29 pm
You are so gone. — Garth

#74 WhiteKat on 10.23.14 at 11:32 pm
DELETED
=========================

How does that definition of insanity go again?

Something to do with repeating the same thing over and over, expecting a different outcome?

#91 crowdedelevatorfartz on 10.24.14 at 12:10 am

@#68,72,74,77 Whitekat

Apparently “stubborn” , “unwilling to listen” and “in denial” are character traits of which you have an abundance.
Unlike your bank account………

Buh-Bye.

#92 Son of Ponzi on 10.24.14 at 12:11 am

How quickly yesterday’s heroes have been forgotten.
TSX was up.
So life is good.

#93 TEMPORARY® Foreign Prime Minister on 10.24.14 at 12:18 am

#72 WhiteKat on 10.23.14 at 11:29 pm
If I was GT, riding Harleys… people like WhiteKat would bug me too….
=========================

(cue Scottish accent)…..”Evary maan dyes….note every maan rilly lives….

#94 WhiteKat on 10.24.14 at 12:20 am

DELETED

#95 Steve French on 10.24.14 at 12:23 am

Good god… where is Smokey?

I’m getting worried.

Does anyone know the number of his sister ?

#96 Kris on 10.24.14 at 12:24 am

#76 Joe on 10.23.14 at 11:36 pm
Whoever bought a house and took a big mortgage is awinner…~~

Hiperinflation will eat all this debts…

End of story….savers are loosers

ARE YOU ITALIAN ???

#97 pastbeyond60 on 10.24.14 at 12:28 am

@Capital One

The US is “deeming” people American that never wanted to be American. If you had Canadian parents on holiday in the US and unfortunately decided to be born early and came back to Canada and NEVER left or lived in a border town and the US hospital was the closest and again you came back to Canada and never left why are you deemed an eternal US tax slave?

There are also those unfortunate Green Card holders whose cards had expired, they came back to Canada never having been told about the requisite paper work. They assumed expired meant “done”, over. They too are considered eternal US tax slaves.

Yes, I understand all but the Green Card folks could have gone to the US for work but they chose not to. They had something imposed upon them they didn’t want, often did not know they had. They never understood the need to renounce and are now caught in an untenable situation.

Your brother-in-law was VERY lucky he got out before FATCA. Most now are entrapped. As for moving “back”, there is no “there” to move back to. These affected people are as Canadian as you and I. What move back to the town they were born in and left when they were hours old? That isn’t their home, Canada is.

We have a moral obligation to protect all Canadians no matter where they were unfortunately born. We also have an obligation to protect our country from having its laws decided by another nation and not allowing our precious few assets to be stolen.

Canada is a nation of immigrants. If all countries around the world adopted the US form of citizen based taxation we would very quickly be a bankrupt country. The Eritrean consular was kicked out of Canada for trying the same nonsense as the US is imposing.

#98 WhiteKat on 10.24.14 at 12:30 am

DELETED

#99 Roman on 10.24.14 at 12:32 am

Can’t wait till this pyramid falls apart, Canada really needs a full blown financial crisis to shake up things a little.

#100 Ex Appraiser on 10.24.14 at 12:47 am

Canadian house construction quality is the worst I have seen. The west coast is absolute crap. These are garbage houses are falling apart before they’re built. The plastic and plaster used is a horror show waiting to happen. Compare to houses around the world built to last generations…Canada is building the equivalent of 3rd world ‘grass huts’. None of the houses built have an economic life exceeding 40 years. By then you would have had to have rebuilt the exterior two to three times. Figure that into the cost of ownership.

#101 Cato the Elder on 10.24.14 at 12:48 am

Re: #71 Bottoms_Up

Our healthcare system is terrible. The US healthcare system is terrible too.

It’s unfortunate that people often think the US has a ‘free-market’ healthcare system, when they don’t.

They have a CORPORATE/crony-capitalist system. Controlled by several large health insurers that pass massively restrictive/burdensome/expensive legislation like Obamacare.

The thousands of pages in Obamacare were not meant to equalize and liberalize healthcare – it was written by lobbyists to restrict competition.

This net effect can be seen by the massive spike in premiums paid as well as huge policy cancellations that have happened down there since it’s passage.

Very unfortunate.

Our healthcare system could be fixed overnight, and without ANY kind of central planning.

Watch me fix it: LEGALIZE COMPETITION.

Wow, that was easy!

That’s right folks, all we have to do is make it LEGAL for private companies to compete with our public system! We keep funding the public option, allow anyone into it that needs treatment. Just allow people to GET OUT OF THE LINEUP and into private treatment if they want it!

This serves 3 wonderful benefits:
1. Less strain on public sector resources. Money can be spent on upgrading equipment etc.
2. Less wait times for those that really need help, especially the poor. Having a wait time reduced by even 10% because people are opting out would be beneficial.
3. Keep money in Canada. People no longer will fly to the US or elsewhere to spend money on private care – they can spend it here! Taxes generated can be put into our ailing healthcare system!

Win-Win all around! Free-markets are good for all!

Just as long as the government doesn’t determine they need to ‘regulate’ it. That would quickly cause this wonderful solution to become yet another problem.

Just one simple line on one simple page of legislation:

We hereby legalize competing private entities in the healthcare sector

#102 Cato the Elder on 10.24.14 at 12:57 am

Re: #55 Inglorious Investor

Capital isn’t being driven into the FIRE sectors – debt is.

Canada doesn’t really have any capital anymore. Capital is derived from SAVINGS.

The only way to get business owners and people to allocate capital in a rational way is to incentive it. Interest rates have to come up. Savings rates will rise if there is a monetary incentive to do so (a % return).

Also, when interest rates are high, banks, and businesses, are much more reluctant to deploy their capital on risky ventures. They will instead invest in WHAT THEY KNOW and make LONG TERM decisions. The types of investments they will make include infrastructure and plant and equipment.

That’s why our manufacturing sector is destroyed, because our low interest rate policies provide a perverse incentive. Higher interest rates also strengthen the value of the dollar, and would LOWER the prices of raw commodities used in manufacturing.

See, everyone has it wrong. A weak dollar is only good for exporters TEMPORARILY when it cheapens the value of their current inventory.

However, the moment they go to re-stock up on raw materials for the next manufacturing cycle, the prices of those raw materials have gone up! This leads to a deadly cycle that never ends.

PAY ATTENTION TO THIS: Better for manufacturers to have a strong dollar. They can constantly buy cheaper raw materials. They can use their profits to increase productivity by purchasing better equipment and hiring better workers. This is what led to the rise of the middle class. We have been doing the opposite for decades, which is why the middle class is shrinking (constantly devaluing the dollar).

#103 45north on 10.24.14 at 1:04 am

Mark : as Garth says in this blog post, Canadian housing is more than 200% of US valuations, when normally valuations aren’t significantly disconnected merely because of a political boundary. So a 50% drop isn’t out of the question in a mean reversion scenario.

50% , that’s what I see. Of course, it’s all tied up with interest rates and the economy. Maybe the slide has already started.

#104 Mark on 10.24.14 at 1:10 am

“For Canadian housing interest rates are the factor that swamps everything else. “

Not true. Interest rates have continued to go down, but housing has been going down for the past year and a half because actual credit has been tightening (mostly because of the changes to CMHC subprime mortgage insurance that were introduced starting with Budget 2013!).

So no, Canada really isn’t different than the US. Sentiment towards RE is now declining in Canada, particularly as expressed in terms of lending standards. With home ownership rates of 70%+, realistically, the pool of “pent up demand” is nonexistent.

#105 RealistvsExtremist on 10.24.14 at 1:25 am

I agree with you, no matter what side you’re on, a family member killed could very well inspire hatred and violence against the other side. How would you feel if your family member was in the 9/11 towers, or if that was your son or brother or father killed at the war memorial yesterday? I’m sure your sympathies wouldn’t be with the terrorists.

The point being that there is a horrible part of this world that is breeding uneducated, misinformed, inequal, uncaring, unsympathetic people that have no qualms committing barbaric acts against humanity.

Regardless of how we got here, how do you deal with that?

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

Look who keeps arguing one side.

Now what would I do? Easy. Get the EFF OUT of the middle east. Offer food, medicine, advisors etc etc but get the military out and let them figure it out. Offer peace and trade. Incentives that will make the people want to stop fighting.

Then in a year or two or ten the fighting will stop. But this continual war war war war all the time? Is only going to keep messing things up.

#106 raisemyrent on 10.24.14 at 1:26 am

Wow I think WhiteKat is going for a record number of DELETED comments tonight. Neone keep track of this stuff? Maybe the lot that put together the Garth terms glossary (very handy).
Kat, I feel for you, to an extent. My grandmother was also born in the US and never lived there. Some thoughts:
– If there are a million duals (all of which you say cannot afford to renounce, which I doubt), why not unite and have the act repealed? Write to your MP. Go Public on CBC, crowdsource your fees, but do something on this side… just some thoughts.
– I understand why Garth wouldn’t cater to you; this is a Canadian blog, and you are here complaining about taxes in a very specific, foreign-related situation. You hold citizenship from one of the 2 countries that taxes citizens living abroad (other is Ethiopia according to google). Unfortunately, you’re just not going to get a lot of sympathy in another country for that. It was Canada who agreed to cooperate with the US, so maybe start there. But demanding attention and answers on a blog will likely not get you anywhere.
– To all who say just move back, *I* feel offended, there ARE MANY differences between Canada and the USA, not just what you call weather (it’s climate). And taxes. Kat has decided to live here and I am sure she has her reasons (as do we all).
– I’m going to assume that you are at least about 20 years old, so this at best a 20 year old problem, but has been brought to light due to tax changes. It’s hard to get sympathy in that situation. Again, if there’s a million of other people like you, then ask some of THEM?

In other news, great post today. Disgusting photo. Am I the only one who feels that the Canada we idealised is going down the drain within the next few years Remember that come election time (can’t we just no confidence soon?).

What are the main benefits of membership in the doomer club???

#107 EarlySpring on 10.24.14 at 1:35 am

So why does a house in Saskatoon cost as much as in Toronto? I don’t get it. Maybe because the Saskatoon Blades(pffff) Our future NHL team(pffff)? Potash(pffff)? Our sweet snow removal(pfffffffff)? Our low crime rate(pffff)? Anyone???
It’s cause people are delusional here and have never had attention and now we get a bit and next ya know shell canada is moving headquarters here, the population will be double in 10 years, potash will fuel us forever( potash is strong to our economy and a hugely great asset but not even close to justifying our bubble) I don’t know just frustrated with the people and mentality here. Comments?

#108 devore on 10.24.14 at 1:48 am

#41 WhiteKat

Renounce what? Where I was born? I cannot help where I was born. I had no choice in the matter. Why am I being punished for that?

Many people find themselves in bad situation through no fault of their own, with no support coming from their government. There is a path for you to follow at least, which is more than most of these people can say. What do you want Garth to do? What do you want us to do? You already know what you can do, and what your options are.

If there are 1 million of you, as you claim, it should be a no brainer to organize and work together. This is not the place.

#109 Freedom First on 10.24.14 at 2:08 am

Yes, the average house price in the U.S. versus Canada says a lot. The Americans, Europeans, Japanese, etc, have already had their financial screwing by high priced over leveraged RE fed to them with the same tactics by the same usual suspects. It works is right. Sheep.

#110 SWL1976 on 10.24.14 at 2:09 am

Great post Garth, thanks for telling it like it is…

It’s been deliberate. Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas

WhiteKat, why don’t you focus on what you have instead of playing poor me blah blah blah

Cato for PM, you’d get my vote

Thanks again Garth for this wonderful blog and to everyone’s collective thoughts and ideas

Cheers to all

#111 NEVER GIVE UP on 10.24.14 at 2:10 am

What is happening to Whitekat is unconscionable abuse from a bully’s pulpit.

Many years ago I considered moving my business to the USA. After a long hard think I wisely stayed put.
It is a great country in so many ways but as time goes by they are more and more oppressed by their government and police state.

I worried that some day my children or their children would be drafted in some useless war. That would be the biggest tragedy I could ever initiate.

Is the USA a police state? A US attorney speaks to the subject…
https://www.youtube.com/watch?v=PpJpSFKC8gw

#112 cynically on 10.24.14 at 2:10 am

I don’t think anyone has ever accused Canada or Canadians of being smart or sophisticated in financial matters and today’s column tends to prove that. Once they get thumped in this present day real estate morass, will either one of them have learned its or their lesson. I doubt it.

#113 Cato the Elder on 10.24.14 at 2:11 am

Re: Whitekat

Look, the costs to renounce US citizenship are going to continue to increase. Why? As the government gets more and more confiscatory, people are going to try to escape. One of the people I listen to frequently about economics predicted several years ago that the costs associated with renouncing citizenship would continue to increase, and he was right. I suggest you listen now to Garth and renounce and be done with it.

The US is one of only 2 countries in the world that requires it’s citizens to file taxes even when they aren’t in US jurisdiction! It’s insane that authoritarian regimes don’t even require that. The reason is because they’ve mismanaged their finances to such a degree that now anyone that’s been responsible with money is viewed as a source of income – rightly or wrongly.

Regarding all your deletes, this is Garth’s blog and he can delete you if he wants to. Just based on reading what you wrote, I would recommend some tact. It goes a long way.

And while it’s good to be concerned about what’s happening in government, try not to be too alarmist. As a voracious reader of history, I’m VERY skeptical of government power. But you’re not presenting your message in a factual way and you’re jumping from subject to subject spouting off things.

#114 devore on 10.24.14 at 2:19 am

#65 Bottoms_Up

You are right and the government is wrong….but do you want to let your values get in the way of living a lower-stress life? The choice is yours.

Well, you can choose to be right, or you can choose to be happy. Apparently the current and perceived future benefits and advantages access to US citizenship confers are no longer beneficial and advantageous to Whitekat, so of course world-income taxation, which US has always practiced and pursued aggressively, is suddenly a big and expensive problem. The path relinquish US citizenship benefits, settle obligations, and forgo future responsibilities is well documented. Thousands manage to do so every year, a number dwarfed by those trying to go in the other direction.

#115 NEVER GIVE UP on 10.24.14 at 2:19 am

#70 pastbeyond60 on 10.23.14 at 11:25 pm
Our cowardly government has allowed the US to override our laws and breach our sovereignty as a nation.
———————————————————-
I wholly agree with your take on the subject.
I will be active in removing our cowards from Capitol Hill.
They even handed over Marc Emery for an offense not punishable in our Country. Here was a politically active man with nothing to hide. Even a storefront in Vancouver advertising his business and he was handed over like the 1,000,000 US born Canadians.
Lambs to the Slaughter.

If we resist it will cost us Billions in Financial penalties but we will lose much more, becoming like them in the long term future.

#116 Angela on 10.24.14 at 2:21 am

Just a thought. Canadian millennials are entering the housing market on the advice of their Boomer parents who have made out well. Could it be just as true that US 20-somethings are not buying houses on the advice of their parents who got their butts roasted? They’re not smarter, they’re doing the exact same thing, taking advice from their parents. It’s just the advice is different on each side of the border based on our respective recent experiences.

#117 Londoner on 10.24.14 at 6:15 am

“It’s been deliberate. Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas. By pushing citizens into borrowing and spending massively, politicians don’t need to pare spending, enact stimulus programs or reform taxation, especially when the economy turns south. They just get the fool voters to do it. Simple. It works.”

I’m liking this post as we’re finally getting into understanding the model. But it’s not necessarily a bad thing. Canada’s fiscal and economic model can’t change overnight. The problem is that there isn’t anyone initiating a change.

#118 Steve French on 10.24.14 at 7:46 am

Looks like sad news for Smokey folks.

I knew something was amiss– his posts here are usually like clockwork.

http://dyslexicsmokingman.blogspot.com

It seems his nephew has gone to the bosom of the Pacific.
Good night, sweet prince.

Sincere condolences to Smokey & Family from your Greater Fool blog dog friends. We’ll raise a white russian in his honour.

#119 $10,000 TFSA on 10.24.14 at 8:14 am

#10
What do you think the chances are PM S Harper will follow through with the $10,000 TFSA contribution limits?

2015 – Zero. — Garth

Garth, you just broke my heart. I know this would only benefit the “richer” but he promised. Why Garth? Whyyyyyyyy?!

#120 crowdedelevatorfartz on 10.24.14 at 8:56 am

@#113 ngu
Marc Emery? Really?
You’re using THAT self important little twerp as an example?
He mailed pot seeds into the US in direct violation of their laws. Violating US Postal laws is a federal crime. So YES, he knowing broke their laws and challenged the US govt to arrest him. He also expected the same “kid glove” treatment he was recieving from the canadian govt. The didnt want to make a martyr out of him. The US govt took a dim view of his blatant stupidity and didnt want any precedents set.
He lost.
Ironically enough Pot became legal in several US States while he was playing, “pick up the soap” in a prison show.
I suppose you’re “outraged” every time the US Secret Service arrests a Canadian from countefeiting US currency? Another “borderless crime” that the US pursues vigorously.
Basically , if your stupid enough to “kick the grizzly” over and over and over, dont complain when you get bitten.
How’s Mark Emery’s ‘political campaign” these days?
Will any of the major opposition parties even touch him with a 10ft pole? A political pariah in every way.

Pick another “hero” for an example.

#121 Daisy Mae on 10.24.14 at 9:17 am

“It’s been deliberate….”

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

Deliberate…but not smart. Real stupid, and lazy. And we call this ‘leadership’?

#122 Smocking Man on 10.24.14 at 9:27 am

#95 Steve French on 10.24.14 at 12:23 am
Need another week fellow dude.

#123 Daisy Mae on 10.24.14 at 9:45 am

#12 OMG: Since the mortgage will be a drain on disposable income the “house poor” won’t be eating out as much, won’t be buying new consumer goods….”

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

And so while the dumb feds thought they had it all figured out….they really didn’t.

#124 creepy calgary on 10.24.14 at 9:55 am

Buying a mortgage isnt all about debt. It is about for many not dealing with renting. There are no rent controls in Alberta. So you get to deal with creepy landlords who can raise the rents as they please. That is the major incentive for most to buy a place. It doesnt hurt that lending is easier than in the USA. If the mortgage is the same or less than rent, you can requalify if the property value goes down because good credit and earn enough, then many people would acquire a mortgage. Perhaps in other provinces this information here is valid. It is not that valid in places like Calgary.

#125 Daisy Mae on 10.24.14 at 10:02 am

#25 WhiteKat: “How can you harass people who are against HAM and yet pay no attention to my plight? WTF?????”

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

What do you expect Garth to do for you?

#126 -=jwk=- on 10.24.14 at 10:08 am

@ #12 OMG
For Canadian housing interest rates are the factor that swamps everything else. (As opposed to the US where sentiment swamps everything)

No, that is wrong. Interest rates are not really relevant. they are the same in the US as they are in Canada. As long as the government keeps giving away free money, prices will stay high. Interest rates can go up 1,2 even 3% with no effect. Money is free in Canada – everyone one qualifies, money is hard to get in the USA. Thats the difference!

#127 Rational Optimist on 10.24.14 at 10:22 am

88 LandLord / Investor on 10.24.14 at 12:07 am

“As a real estate investor, thus a landlord of 2 fairly nice old, but well kept NV condos, should I sell them?”

Firstly, congratulations on being the 88th poster. Very auspicious- I always wonder about these posters who want to be first.

Secondly, I thought real estate in Nevada was on the upswing?

#128 pbrasseur on 10.24.14 at 10:22 am

“It’s been deliberate. Pushing real estate’s been a key policy initiative of governments which are financially strapped, strangled by election cycles and bereft of other ideas. “ – Garth

You never said anything truer.

Americans paid dearly for that, no doubt we will too.

Great writting BTW.

#129 Daisy Mae on 10.24.14 at 10:23 am

#29 Gladiator: “…will I still need this insurance? If I don’t, then the situation is not that bad…”

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

You’ve already paid the premium. It’s factored into your mortgage.

#130 Daisy Mae on 10.24.14 at 10:29 am

#33 WHITEKAT: “MY CRIME: BORN IN THE USA TO CANADIAN PARENTS.”

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

You must appeal to the USA government. We can understand your frustration but there’s nothing Garth or any Canadian can do about it.

#131 Daisy Mae on 10.24.14 at 10:35 am

#36 Young & Foolish: “Will the government really let the average joe homeowner suffer?”

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

Yes…because ‘Joe’ makes decisions of his own free will.

#132 MrGrumbles on 10.24.14 at 10:47 am

Garth, I’m a total site disciple, but you’ve got a lot of things wrong on this post today. I’m a yank. I just got a mortgage this June with 5% down, and had plenty of lenders competing for my business. So your statement about needing 20% is a bit off (it was somewhat true in 2009-10 days, I’ll give you that). Also the statement about lenders not wanting to touch buyers with 750 or lower FICO scores is bunk too. My score was 738, and I could have gone as low as 680 with many. Just look up the lending sheets online and you’ll see the criteria for any one of thousands of lenders. If anything Garth, the numbers down here point to even more reasons why yanks SHOULD be taking on more debt to buy real estate but aren’t – so I guess in a weird way you’re point is even stronger. Thanks and hope the oncoming cold weather doesn’t make those pins feel creaky. I know from experience.

#133 MrGrumbles on 10.24.14 at 10:49 am

Oh, and ARM loans are everywhere. Teasers may be gone but ARMs are still going strong.

#134 Dupcheck on 10.24.14 at 10:51 am

Have you ever thought that US has a lot of trailer/movable type homes that are dirt cheap. These type of homes bring down the average a lot. In Canada we do not have as many dirt cheap homes. We cannot live in these type of homes up here, because you can freeze in winter. Basing conclusions on just averages sometimes is not that fair.

#135 Cato the Elder on 10.24.14 at 11:27 am

Re: #99 Roman

Be careful what you wish for. The government is going to make all the wrong decisions in a crisis. The solution to government induced mismanagement of resources will be MORE government induced mismanagement. That includes bailouts and confiscations, all for your own good, of course.

You can’t expect an entity that caused the problem to advocate for it’s own abolition.

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

Re: #87 Millenial_Falcon

You are a fool.

I never once talked about there being a government orchestrated false flag in Ottawa – although it wouldn’t be farfetched given the number of events in world history of governments doing so to justify power grabs.

No, you’re a fool because you were advocating for a reduction in your civil liberties. A point you purposely avoided addressing in your reply.

If you think there aren’t evil people in government, you’re a fool.

I can assure you there has been legislation pending this sort of attack just WAITING for the right crisis to be passed.

Want to know how I know that? It happened to our southern neighbor. The Patriot Act wasn’t drafted in response to 9/11. It was ALREADY WRITTEN and sitting on a shelf somewhere for years. This is WELL DOCUMENTED.

You need to wake up. There are people on this earth that don’t want you to be free to express yourself. See, freedom of expression is a DANGER to what they want to do. The Patriot Act destroyed habeas corpus and hundreds of years of well established english law.

If that doesn’t concern you, it probably should. See, that little ‘civil liberty’, one of which you would gleefully relinquish, means that you can seek relief from unlawful imprisonment. Of course, this will only be used sporadically at first, and against minorities. But give the government enough power, and they will slowly incorporate it against everyone. We are witnessing right now in images from our southern neighbour, who is rapidly devolving into a police state.

I DON’T want that happening here. I DON’T want people like you justifying it. I care too damn much about my family and friends to let that happen. And neither should you.

#136 NEVER GIVE UP on 10.24.14 at 11:34 am

Whitecat:
The world is not fair.
Much of our situation in life is based on luck.
To ease your pain think of it this way.
You could have been born in Liberia and lived next door to an Ebola carrier.
Even worse, you could have married my ex wife.
After the luck has been dispensed we are like new born puppies hitting the ground running aimlessly. Our challenge is to meet the adversity head on and subdue it in the most efficient way so we can go on living and growing.
I feel your pain.
Be strong and meet your problem head on.
Renounce sounds like the easiest solution.

#137 Ronaldo on 10.24.14 at 11:39 am

This is what we have to look forward to in Canada.

http://finance.yahoo.com/news/us-home-sales-close-flat-september-140340138–finance.html

#138 Ronaldo on 10.24.14 at 11:42 am

#134 Dupcheck on 10.24.14 at 10:51 am

”you ever thought that US has a lot of trailer/movable type homes that are dirt cheap. These type of homes bring down the average a lot. In Canada we do not have as many dirt cheap homes. We cannot live in these type of homes up here, because you can freeze in winter. Basing conclusions on just averages sometimes is not that fair.”

Nothing wrong with an ATCO Trailer.

#139 Jay Dee on 10.24.14 at 11:51 am

Left the dank Surrey basement I inhabited in my motherland and got my green card 2 years ago. I live 3 hours south of the line and just locked in for 30 years at 4.375 on a 2 bed post-war bung for $169k, or 1.96 times my wife and I’s annual earnings. It’s absolutely true they put you through the wringers before you get a loan, but we finagled a state sponsored zero down first timer program. Best part about owning is how little of my take home pay it actually consumes here….I have money to do and buy things still! Ironically my medical costs $20 a month less than BC too…

#140 chapter 9 on 10.24.14 at 11:58 am

#87 Millennial_Falcon
Cardinal Richelieu understood the value or surveillance when he famously said,”If one would give me six lines written by the hand of the most honest man I would find something in them to have him hanged.”
Watch someone long enough and you’ll find something to be arrested on or blackmailed.

#141 SWL1976 on 10.24.14 at 12:05 pm

#117 Londoner

Canada’s fiscal and economic model can’t change overnight. The problem is that there isn’t anyone initiating a change.

Yeah and the one who was got the boot, see how things work?

#142 Ronaldo on 10.24.14 at 12:08 pm

#25 Whitekat

”How can you harass people who are against HAM and yet pay no attention to my plight? WTF?????”

What do you expect Garth to do for you?

#143 Mark on 10.24.14 at 12:10 pm

“Have you ever thought that US has a lot of trailer/movable type homes that are dirt cheap. These type of homes bring down the average a lot. In Canada we do not have as many dirt cheap homes. We cannot live in these type of homes up here, because you can freeze in winter. Basing conclusions on just averages sometimes is not that fair.”

Sure, but that’s always been the case. Yet for all of recorded history, US and Canadian housing prices were relatively similar, give or take depending on the short-term performance of the respective economy.

The average home in the United States tends to be larger square-footage wise. The “McMansion” trend in Canada is mostly confined to a few major cities, while it was pretty much everywhere in the US. Visit Houston sometime — just like Calgary, there are no meaningful “land” constraints, and its quite a sharp contrast at how tightly things are packed in Calgary compared to the sprawl in Houston which literally extends so far that you’re still at 35k feet and “top of descent” when you fly in and start to see the outskirts.

#144 Mark on 10.24.14 at 12:28 pm

“Ironically enough Pot became legal in several US States while he was playing, “pick up the soap” in a prison show.”

That’s because there isn’t a single US state in which “pot” (ie: marihuana) is legal. Marihuana is a C-I drug under US Controlled Substances Act in all states.

A few states have passed legislation which basically makes it legal for state and city police officials to ‘ignore’ breaking of the law, but such individuals are still liable to the full force of the law if they cross state lines, deal with any constituent of the national banking system, post office, etc. So hardly ‘legalization’ in any sense of the word.

#145 Mark on 10.24.14 at 12:35 pm

“As long as the government keeps giving away free money, prices will stay high. Interest rates can go up 1,2 even 3% with no effect.”

Prices are going down, even with the low rates. And have been in most of Canada for the past year and a half. Its simply a case of demand exhaustion and the marginal buyer, the first time buyer, being priced out and, at this point, only minimally existent. The housing industry now has so much infrastructure to create new supply that there’s no risk of anything in terms of meaningful shortages for years to come. Rising interest rates, due to decreased credit-worthiness of housing borrowers, will be devastating financially to those who financed on subprime CMHC credit and are already strapped on payments to all lenders (remember, when people buy a new house, they usually take on a lot of credit to buy furniture, cars, etc., to use in conjunction with such new house!).

#146 SWL1976 on 10.24.14 at 12:39 pm

#87 Millenial_Falcon

You’re very naïve my friend. There are plenty of questionable things about the tragedies that happened on Sept 11, I am not going to argue either way I just thought I would share my personal story about some questionable behavior

I worked at a place in Victoria slicing sapphire for LED lighting in 1999 till about 2002 interesting job. Anyways another thing we did at this little place was scope out missile domes from sapphire, you see laser guided missiles have a sapphire dome that the laser can see through and take the heat of going Mach whatever. Missile domes used to be a small part of the business until about the year 2000 than all of the sudden we could not scope enough out to keep up with the orders. Hmmm coincident or did someone making these missiles know some thing was up? Never thought about it at all at the time, but years later and all the other holes in the 9/11 story make me wonder

If it can happen, it will happen, and there are lots of evil power hungry people in big government, and the honest ones mostly get weeded out.

Sad but true

#147 Mark on 10.24.14 at 12:41 pm

“If anything Garth, the numbers down here point to even more reasons why yanks SHOULD be taking on more debt to buy real estate”

Taking on debt to buy assets at greater than depreciated replacement cost (which is what US RE prices are) is just silly. Unless the expectation is for a sort of future hyperinflation.

Doing it with adjustable rate debt in Canada, at far greater extremities of ratios, and multiples of depreciated replacement cost is the definition of insanity.

Garth is right on the money, the divergence between Canada and US “prices” is insane, and will not end well for Canadians who have a vested interest in high housing prices. Hyperstimulation of any asset class is usually the death knell for that asset in the medium-long term. Whether it be gold in the early 1980s, Japanese stock in the early 90s, tech stocks in the early 2000s, or houses and bonds more recently.

#148 Mike S on 10.24.14 at 12:41 pm

“2015 – Zero. — Garth”

It is an election year. H doesn’t have anythings else going for him.

#149 Mike S on 10.24.14 at 12:46 pm

“There’s somewhat of an argument for hyperinflation wiping out debt if you have a 30-year fixed mortgage like they have in the USA. But on the first whiff of inflation in Canada, interest rates on mortgages and credit generally will skyrocket as lenders demand additional return to compensate for loss in monetary value.”

It is more than that. hyperinflation may be a good enough reason to hold forex/gold or whatever. it is a bad reason to hold houses. maybe fixed loans will be wiped, but so will housing prices in real terms

#150 Mike S on 10.24.14 at 1:00 pm

“Sure I think about “diversifying” into real estate, the rule of 90 and all that, but I’ve oscillated between buying and talking myself out of it for two years and I’ve finally realized it comes down to this”

Same for me. I can buy my rental (or similar – many of these out there) meet the 90 rule, and I don’t even need to pay a visit to a bank to do that

However, numbers just don’t add up. it basically means loosing money each month, and have a a significant downside risk for the principal

But many seemingly smart people (All ages) all seem to be hyper-bullish on RE from various reasons (which mostly not thought through)

I’m just avoiding talking about that outside this blog. Feel to weird otherwise

#151 Dr. Mike Hunt & Nurse Pat Magroin on 10.24.14 at 1:06 pm

I MIGHT leave smoking dummy alone now. After all a new king of stupidity has entered the fray. Congratulations Cato the elder you have taken smoking fools crown. You are most certainly the biggest idiot to ever comment here. How many blogs have you been disinvited from already? You are truly an insufferable idiot. Go hide under your bed with your tinfoil hat and pajamas. Take the phone book with you and look up psychiatrists, oh and take Whitekat with you once you get an appointment. You’ll both feel better after a few years treatment.

#152 jess on 10.24.14 at 1:20 pm

Replacing the double irish / dutch sandwiches
see : Corporation tax could be the never-ending war for Ireland
‘Corporate Inversion’
Irish Times ‎- 3 days ago

knowledge box
http://www.finfacts.ie/irishfinancenews/article_1028319.shtml

#153 None on 10.24.14 at 1:22 pm

#73 WhiteKat on 10.21.14 at 10:40 pm
@vadamcouver #11

@Cato the Elder, this grassroots fights is a great example of the power and determination of the people to fight bad government. We do not all have our eyes closed. This battle is the financial version of the war of 1812-1815, happening 200 years later. We will beat back the Americans this time too (and take the CONS down with them).

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I don’t get this WhiteKat. You were born there, and thus a citizen of the US at birth. It’s not like the US is saying hey people who were never born here you are now US citizens. They are saying, hey you were born here, you are a US citizen, your parents should have known. You can renounce your citizenship, here’s how, yes it costs money.

I don’t get why you think Canada has done anything wrong to you. You are an American by birth. This is your parent’s fault. Not Canada’s. I hope your court case is thrown out.

#154 Mark on 10.24.14 at 2:07 pm

“But many seemingly smart people (All ages) all seem to be hyper-bullish on RE from various reasons (which mostly not thought through)”

Many incredibly smart people were hyper-bullish on Nortel and the tech stocks in general. Which is why they were rendered, in many cases, broke. After being multi-millionaires. I personally know a few ex-Nortel millionaires, who, in the wake of the collapse, not only lost most of the value of their stock, but also lost their wives, and their jobs.

As a rule of thumb, Realtors tend to “eat their own cooking” and most that I know own multiple rentals and are heavily reliant on credit. The Nortel tales of woe are likely to be replicated over the next decade upon these people.

#155 Mark on 10.24.14 at 2:10 pm

“Yay, Mark’s back to make me feel good about buying canadian equities! Hope you picked up some good deals last week! If I’m not mistaken, you’re an engineer based in Alberta? ERTW, amiright?”

Basically correct. And the irony of it all is that my cousin is the President of the Homebuilders’ Association in one of the bubbly major Canadian cities. Makes for some very, very interesting dinner conversations when I get to see him, lol.

#156 None on 10.24.14 at 2:27 pm

#48 Cato the Elder on 10.22.14 at 9:29 pm
Quit interfering abroad – even for ‘humanitarian’ reasons – which are always a PLOY just to get us bogged down overseas.
Busybodies really need to learn better. You’d think they would have learned to mind their own business starting in pre-school, but they’re obviously mentally incapable of seeing the damage they cause.

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You are a fool. So just sit back see no evil, hear no evil? Since some people had the misfortune of being born in the wrong country too bad, so sad if they are being brutalized? The neutrality of the Swiss isn’t exactly neutrality, they just like to play both sides, look at WWII. Nothing to be proud of. You do have to take a stand sometimes man. If you let the world go to hell around you, at some point your National Defense concept won’t be strong enough to fight that beast back when it comes knocking at your door since you let it grow and grow until it was unbeatable.

I’m curious how old are you and what do you do for a living? You are quite foolish.

#157 None on 10.24.14 at 2:35 pm

Hey Cato, keep this point from another blog dog in mind:

“FLQ idiots did not represent Quebec any more than Muslim extremists represent those who follow Mohamed.”

You asshat. Are you really Michael Coren?

#158 Vince on 10.24.14 at 2:36 pm

How do ‘echo boom’ demographics play into the current real estate run-up?

I watched an interesting archive from 1996 (David K. Foot) mentioning that the boomers gorged on real estate, and more generally, consuming things in the 1980s, and eventually that led to the 1989 bear market in housing that lasted until 1997 (with negative or near-zero growth).

http://www.cbc.ca/archives/categories/society/youth/generation-x-lives-on-hold/boom-bust-and-echo.html

If the echo-boomers span from 1980 for say at least 10 years until 1990, don’t we have a way to go before we ‘pass through the hump’ of that cohort? 1980’s kids are now 34, but 1985’s kids are only 29, and 1990’s kids are only 25. What is the average age that a person buy’s their first house? 25? 28? 30?

I guess I am asking: don’t we still have quite a few fools left to buy before we run out of house-consumers? When I say this, I am suggesting that there could be years left before a market correction. The only thing that would change this would be a severe unforeseeable shock to the Canadian Economy.

This could take many forms… oil price shocks (up or down), interest rate hikes, loss of status as a ‘safe’ nation for foreign investment, etc.

I’m a bit rushed, and I suppose my thoughts are a little garbled, but it’s incredibly tough to figure out when the wheels are going to fall-off, and you can go blue in the face waiting for it to happen.

#159 None on 10.24.14 at 2:39 pm

Garth – sorry for the strong words to xdisciple in that other post.

#160 None on 10.24.14 at 2:51 pm

#140 xdisciple on 10.23.14 at 9:27 am

====

You have kids? God help them.

#161 Mark on 10.24.14 at 2:56 pm

“I guess I am asking: don’t we still have quite a few fools left to buy before we run out of house-consumers? When I say this, I am suggesting that there could be years left before a market correction. The only thing that would change this would be a severe unforeseeable shock to the Canadian Economy”

The decline began last year and we’re already a year and a half into it. There is no ‘pent up demand’ — 70% of Canadian households already own, and that’s at the upper bounds of what’s realistic. Demand has been ‘pulled’ from extremities — many non-traditional groups, including un-attached young people, students, and even the extreme elderly, are more into home ownership than they ever have been. No “shock” was required to the Canadian economy for the housing industry to fully meet and exceed demand — the industry only needed to fulfill the demand out there, and by all means they have. Between excess supply, and a reduction in the real amount of CMHC subprime mortgage credit available, we are now seeing housing prices declining across Canada.

#162 bigtown on 10.24.14 at 3:05 pm

Canada has had the highest immigration rate in the world for the past decade…still we have very low growth and our young people are overeducated and underpaid or underemployed.

Our biggest untapped resource available to us remains on the ground and ignored…we have a couple of million talented aboriginal people left out of our economy and that fact is acceptable to Canada but if some newbie immigrant gets bent out of shape and offended for not getting a nice government position the media is all over it.

When we embrace the unloved ignored Aboriginals into the economy we will get the growth we know we are capable of without all the “social engineering”.

#163 None on 10.24.14 at 3:08 pm

#25 WhiteKat on 10.23.14 at 9:28 pm
My parents and grandparents were born here. I am totally Canadian except for the fact that I was born in the USA.

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This is exactly why your cause has no merit. You were born an American. Your tax issues are not Canada’s fault. Renounce your US citizenship, pay the price. Why would you want to sue the Canadian Government for this? It’s not their problem your parents had you in the US.

#164 jess on 10.24.14 at 3:08 pm

The Seattle Times quotes two unnamed “law enforcement sources” as saying “a gunman believed to have opened fire at Marysville-Pilchuck High School Friday morning is dead from a self-inflicted gunshot wound.”

#165 None on 10.24.14 at 3:11 pm

#33 WhiteKat on 10.23.14 at 9:53 pm
. I have to prove 5 years tax compliance, which involves some serious legal and accounting costs and penalties, along with a $2,350 renunciation fee, and exit tax. My middle income family cannot afford this.
MY CRIME: BORN IN THE USA TO CANADIAN PARENTS.

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So then, you are implying that if you could afford it you would you just do it. But as you say you can’t, so then hey sue Canada cause it’s their fault my parents had me in the US and the price of renouncing is high? I don’t disagree that the way the US does income tax is terrible, but I had a problem with you implying that Canada is oppressing you and taking away your Charter rights because they won’t shield you from US tax-law. You are an American dual citizen, thus you are subject to their laws.

#166 None on 10.24.14 at 3:13 pm

#41 WhiteKat on 10.23.14 at 10:11 pm
@CapitalOne #38.
Renounce what? Where I was born?

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Yes and the citizenship that came with it.

#167 gladiator on 10.24.14 at 3:28 pm

Russell Brand’s take on what our authorities’ use of recent events in their agenda.
Quite well done!
http://www.youtube.com/watch?v=ALEaAAU3KAE

#168 Mister Obvious on 10.24.14 at 3:28 pm

#158 Vince

“…it’s incredibly tough to figure out when the wheels are going to fall-off…”
————————–

Garth’s opinion (reiterated often on this blog) is that the wheels are not going to fall off. Rather, the wheels will lose pressure as the vehicle slows down over time and in many cases slips into reverse.

Leaving behind the car analogies, we can see that a slow melt in house prices will be just as devastating as a rapid correction for those home owners who are most at risk.

Young buyers with huge debt loads and only a sliver of equity will be the first to suffer. They will be in a nasty bind without mobility or options. If they want to sell they will need to bring a check on closing day. A check they certainly will not have.

People with more equity and who need to get their hands on it will (with encouragement from realtors) continually overestimate the market and wait forever to “get their price” in an ever-deflating market. Eventually they will discover what their single asset nest egg is really worth.

These are the depressing scenarios that will occur in the years ahead even without a rapid crash.

While people are quick to dismiss Garth as doomsday prophet he has never predicted a specific doomsday.

Instead, he has consistently predicted a seriously troubled future for Canadian residential real estate based upon observations and data available to anyone, but which is almost universally ignored.

#169 RealistvsExtremist on 10.24.14 at 3:32 pm

You are a fool. So just sit back see no evil, hear no evil? Since some people had the misfortune of being born in the wrong country too bad, so sad if they are being brutalized? The neutrality of the Swiss isn’t exactly neutrality, they just like to play both sides, look at WWII. Nothing to be proud of. You do have to take a stand sometimes man. If you let the world go to hell around you, at some point your National Defense concept won’t be strong enough to fight that beast back when it comes knocking at your door since you let it grow and grow until it was unbeatable.

I’m curious how old are you and what do you do for a living? You are quite foolish.

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

Funny how no one ever seems to “follow the money”. They need to get supplied with weapons somehow. Where is our 21st century techno know how in following and stopping the guns and ammo from getting into the hands of these wack jobs. Cut off the supply and the killing will stop.

#170 Entrepreneur on 10.24.14 at 3:34 pm

WhiteKat…renounce then email to Road to Justice and Accountability. Just maybe they can help out with the finances, to a point or direct you to a helpful site. We all have a limit with debt and it seems to me that you are over your head in it. Also, talk to a lawyer or different ones to get their perceptive. First-time are using free or $20. Write it down, first the emotionial one then take out the facts and write only the facts. Hope this helps.

Cato the Elder, I do agree on the manaufacturing. We should be concentrating on jobs in communties.

Housing has been pushed too long that it has created a mess.

#171 Son of Ponzi on 10.24.14 at 3:35 pm

#106
What are the main benefits of membership in the doomer club???
—————
You get to be among the first to get off the Titanic.

#172 gladiator on 10.24.14 at 3:44 pm

@None: are you implying that the American, Canadian and other armies are in Iraq, Afghanistan, etc. in order to stop those people from being brutalized by some bad guys? Or to “defend our nations from evil”?
You might want to revise all this with a more unbiased view.

#173 Renter's Revenge! on 10.24.14 at 3:49 pm

“Basically correct. And the irony of it all is that my cousin is the President of the Homebuilders’ Association in one of the bubbly major Canadian cities. Makes for some very, very interesting dinner conversations when I get to see him, lol.”

Well, you can’t really blame homebuilders for cashing in on the absurd levels of demand for housing and churning out product as fast as they can. He must be feeling pretty smug these days. Hopefully he doesn’t eat too much of “his own cooking”.

#174 notagreaterfool on 10.24.14 at 4:13 pm

http://m.huffpost.com/ca/entry/6036072

Check this out. TD’s evaluation of the unemployment numbers.

#175 jess on 10.24.14 at 4:41 pm

At KeyArena, they’re coming by the hundreds for free health care

At a free medical clinic at KeyArena, people begin lining up early to see more than 500 volunteer doctors, dentists, optometrists, nurses and other health professionals.

By Erik Lacitis

Seattle Times staff reporter

FREE medical, dental vision

http://seattlecenter.org/PATIENTS/
http://seattletimes.com/html/localnews/2024856496_freeclinicxml.html

-holds 67 dental stations. More than 500 medical professionals and others wanting to help out have volunteered.

On loan is a $200,000 “CAD/CAM” machine, which stands for “computer-aided design and computer-aided manufacturing,” which can design and mill a dental crown on the spot.

#176 Cato the Elder on 10.24.14 at 4:54 pm

Re: None

I have no idea where you’re coming from with this nonsense.

Evil exists in the world. It exists in Canada. Now what?

If we get involved in mediating every situation around the world, it’s going to do nothing but hurt us.

It costs money. It costs lives. It breeds hostility abroad at our interference.

Would we be angry if Russia interfered the last time Quebec had a referendum? Yes, we would.

So what the hell are we doing over in the Ukraine protesting what happened in Crimea?

Mind our own business.

And your mind is incredibly distorted by a demented collectivist ideology. People have to be judged on an INDIVIDUAL basis. You can’t lump a group of people into the ‘evil’ category like you’re trying to do with muslims. There’s 1.4 billion of them. If they were some unitary force hellbent on destroying the west, there’d be utter mayhem happening on a daily basis.

I’m amused that you call into question my intelligence, yet you have proven you are incapable of distinguishing between the acts of certain individuals and an entire population – something that many are mentally capable of by elementary school.

Staying neutral is also beneficial because WE HAVE OUR OWN PROBLEMS HERE. As long as a single problem exists here, we have no moral authority to dictate to the world how they ought to resolve theirs.

#177 Bill Gable on 10.24.14 at 6:05 pm

Is it a full moon?

Garth, how you manage to wade through this stuff, is beyond me.

“Free tin foil – on aisle three…..”

#178 millenialcowboy on 10.24.14 at 8:19 pm

@whitekat
Gartho in my opinion is great but also BELIEVES the state IS civilization… it is rare he is critical of the system in general. the rareness is the source of this blog.

My recommendation, send the US notice to take a hike, and keep the money you earned…. of course I hope you don’t have anything there they could seize..
when people fear the government there is tyranny