It’s Realtor McNuggets® time here on GreaterFool – an occasional sampling of the empty calories and salt-encrusted carbs Canadians are fed daily by those friendly people in Audis with vanity license plates.
Hey, here comes one now. Look, kids, it’s Paul Etherington, el presidente of the Toronto Real Estate Board. You know, the guy who gave a presser to diss the city’s land transfer tax as adding to the cost of housing, then refused to admit 5% commissions had anything to do with it. What a card.
Anyway, Paul’s just announced the latest monthly housing stats for the GTA, which the board says are sizzling. “Strong growth in sales was evident across all major home types during the first full month of fall. This suggests that there are a lot of households across the Greater Toronto Area who remain upbeat about the benefits of home ownership over the long term, whether we’re talking about first-time buyers or existing home owners looking to change their housing situation,” adds Paul.
But, as usual, TREB has fudged the numbers. The reported sales increase was 7.7%, but based on TREB’s published numbers from last year, the increase is just 6.9%. Insignificant? Not exactly – it’s a few hundred sales. And deducting those from last year’s stats (presumably because they didn’t close) should also alter the average price. But, weirdly, Bob used the old reported price number from 2013 on which to calculate the current annual increase, of 8.9%.
Confused? Of course you are. It’s probably intentional. Both the sales number and the average price should be approached with the same skepticism as, say, a Prince concert in Toronto, or a date with a CBC host.
In fact, TREB’s telling folks that premier properties – singled-family detached houses in the Holy Land (416) – have escalated in value in the past 12 months by an impressive 8.7%. But is this actually so?
In reality, that average property – today valued at $951,746 – is ‘worth’ less than it was way back in February, when it was trading for $955,314. In fact that house has made nothing for the entire year, and is actually worth $14,000 less than in April. Once you factor in Toronto’s double land transfer tax and the cost of selling, every buyer in the past year is a loser.
Well, if the real estate industry was regulated the way the financial business is, people might get numbers they could actually trust, upon which many decide to make the biggest investment of their lives, taking on a mother of a debt to do so. Of course, that will come. After the deluge.
Now, let’s go to Vancouver where we have a different problem. She’s called Atrina Kouroshnia. This young woman is one impressive hustler – a mortgage broker who’s marketed her way into article-writing gigs with several publications, and turned a Human Relations degree from Concordia into something coated with dollar signs.
I like that. But she should have taken a course in ethics along the way. I fear she may be drawing too many virgins into her web in the country’s single most dangerous real estate market. Of course, the vacuous Huffington Post must shoulder some blame, for actually publishing her one-sided advertorials and pushing them off on Millennials as news.
The latest carries this headline: “Seriously, Why Are You Still Renting In Vancouver?”
Read the opening lines and you can understand why Atrina is as credible as the realtors she services:
A few of my friends and neighbours are currently looking at renting a home, and the rates are outrageous. You can easily pay $1,800 for a one-bedroom apartment downtown, and at the end of your lease you’ve padded your landlord’s pockets but haven’t built up any equity of your own. If you’re planning to stay in the area long term, why not consider buying?
Okay, let me count the reasons. First, anyone with five minutes and Kijiji knows there’s a mess of downtown one-bedders available for $1,500 or $1,600. Second, it actually costs less to rent than to own, even with 2.99% five-year home loans and nubile, alluring mortgage agents to deliver them. The monthly costs on a $315,000 box with 5% down ends up being about $2,000 once you add in bank interest, CHMC insurance, strata fees, property taxes and a little heat. Third, why would any clear-thinking Millennial want to spend more money every month and take on a $300,000 debt when she could live in the same unit for $400 less, with no debt?
Fourth, a condo buy in Vancouver when big pieces of the world (including Canada) are closer to deflation than inflation, and yet prices are at historic highs, is insane. Why not let a landlord subsidize you, instead of subsidizing Atrina and the bank? Let some schmuck who thinks he’s a 25-year-old version of Donald Trump take all the risk, while you get to live in his house.
Fifth, hello, does anybody remember BC’s leaky condos? Or was Atrina still in Huggies then? Well, that decimating experience will be nothing compared to the financial tsunami which could hit owners when the great Window Wall crisis materializes. Condo corps simply have not made adequate provision for the fact the entire skin of most new buildings has a lifespan of only 15 years or so. Unlucky owners could be nailed with big assessments and see their equity plunge at the same time.
So, mortgage girl, if you’re going to sell your lending services (which is cool), tell both sides of the story. A young person walking into a mountain of leverage might make money if Van stays delusional, or she might not. But she’ll absolutely be paying more every month, suffer huge closing costs and be taking on market risk, rate risk, building risk and the potential of illiquidity.
The kids today crave help and good advice. They need peers who are leaders. Not another Judas goat.
149 comments ↓
A bit late today Garth….injured fingers from typing so much mayhaps? Does blogging count as being an intern since it is also unpaid?
Well “Up side”…..at least Vancouver real estate pumpers are HOT!
What amazes me is that business ownership, and even investing in fractional business ownership by way of stocks, doesn’t even enter the minds of our youth. Nobody is expecting that the youth of today have a million dollar portfolio by the time they’re 30 (like I did), but certainly the “education” system should be teaching them what business ownership really is. I bet if you asked 100 30-year-olds out there randomly on the street what a share of, say, Canadian National Railways was, they couldn’t correctly articulate that it actually represents a small fractional ownership of the railway.
Oh democracy… how perverse you can be…
Swiss referendum on increasing their central bank’s gold reserve to 20%.
http://www.bloomberg.com/news/2014-11-05/prepare-for-gold-rally-if-swiss-bullion-referendum-passes.html
The age old rent vs buy argument. Garth do these realtor peeps ever not use the words “strong growth in ___” either volume, sales, starts, prices. Such optimists.
Realtors should just run property management firms on the side that way they can offer both perspectives to clients.
If they don’t BUY and line your pockets, get them to RENT and line your pockets. How hard is that?
Otherwise you’ll end up in labour like this dude says.
http://www.thingsyouwontlearninschool.ca/the-desk/what-do-i-need-to-know-before-investing-in-real-estate
Buying RE = sexual experience
Selling RE (or gold lol) = PAIN!!
Wow!
Atrina is hot.
I’d buy a house if she told me to buy one.
Um, so what was today’s blog about? I just forgot.
Sir Garth:
Regulations only matter if they are enforced. Seems like some regulators such as FSCO don’t bother enforcing the Regulations in place. Why worry about lack of regulations for realtors, if they are not enforced once in place.
#5 Bon Vivant
Your link doesn’t work
Oh, let’s buy the box in the sky, and pay for it with the money we will not be earning on our new un-paid jobs.
Mc Jobs he says.
Strange the way people eat up the media garbage they WANT to believe in, and reject the ones that don’t ‘fit’ their preconceptions. sigh, to each their own.
Everything is wrong with TO…
Plugged in Paul (see picture above).
Fords are still in city council.
Vanishing Prince.
Former CBC host.
…except GT!
Here is Ms. Kouroshnia’s facebook fan page for those wishing to communicate with her more directly.
https://www.facebook.com/MortgagebyAtrina
“The kids today crave help and good advice.”
I just gave em sum yesterday,
#8 Arfmooocat on 11.05.14 at 10:03 pm
“#5 Bon Vivant
Your link doesn’t work”
Got to copy and paste it all into the browser. Worked eventually.
Oh THIS should be an interesting one.
Wrong. 1-beds in the “cool” area millennials like her and her clients desire are $1750. Plus. Plus. Plus. Parking. Storage. Bike parking. You’re up near 2K too fast. Kids today won’t accept anything other than the best. And of course their parents are willing to do anything to keep them this way. Work that up against your scenario of chaos and collapse.
#4 Kenchie on 11.05.14 at 9:59 pm Swiss referendum on increasing their central bank’s gold reserve to 20%.
——————————————————–
Another example of the Swiss people getting to decide on what goes on in their country with direct democracy….
While we get a 4 year dictator.
#15 mac
For these kids barrista at Starbucks would be the dream job,
We will see what they will accept then.
Whoops, wrong link… here it is:
http://www.thingsyouwontlearninschool.ca/the-desk/what-do-i-need-to-know-before-investing-in-real-estate
As long as she does guarantee outsized returns, it appears she is just doing her job and selling the product. It isn’t banned in the financial game to show charts of past market growth inferring future growth, as long as you dont promise it.
When snowflakes like me were raised, was there too much emphasis on trust and being nice, and not enough on critical thinking and the idea that people sell you things to benefit themselves, not you?
Yeah, I think there was.
#162 gladiator on 11.05.14 at 10:19 am
“I did voluntary work for 6 months at a company that many Ivy League graduates would dream to work for.
This has catapulted my career to such heights that I consider this the best investment I have ever made.
I know several people who worked for free as well. They are all doing quite nicely financially and career-wise.”
That’s very impressive. Most people are too myopic to understand these types of investments (which is of time and energy). Some might say they have an entitlement problem…
Paul: Lay off the Rob Ford diet. It’s a hoax.
Well said Garth. Hear that Atrina? How does it feel to be publicly outed for what you are? Congrats! You should feel honored. You’ve been put on display for the world to see the real you by the best.
Garth, your Titanium leg is kick a$$. And the $$$$hit list grows longer. Wonderful.
“It isn’t banned in the financial game to show charts of past market growth inferring future growth, as long as you dont promise it.”
True professionals financial advisors, the sort of club that Garth belongs to, have to ensure that investments are “suitable”. If they fail to do so, there are huge consequences for their dealership and even to their licenses.
I can assure you that if a professional financial planner ever marketed a 20X leveraged private investment, with theoretically unlimited downside, to a 20-something-year-old with relatively limited market knowledge and financial resources — regulatory action would be swift. Yet Realtors do this in the ordinary course of business, actually sponsored and underwritten by our own federal government’s CMHC subprime mortgage insurance.
So when the invetitable real estate correction comes and the condo owner gets a special assessment, where will the money come from? The mortgage holder is not going to be in a hurry to lend more on a place that is already worth less than what is owing on it. This seems to have been where it has come from frequently in the past.
Now these people will have nowhere to get the money and the condo corporation will get a lien on the unit as I understand it. This will be counterproductive though because the condo corporation, made up of all of the individual owners, will be no more able to affect the repairs as the contingency fund isn’t adequate or there wouldn’t be a need for a special assessment.
Maybe I have this all wrong but seems to me that the future holds many condo buildings half empty in horrendous disrepair. If I’m even half right, what then? RIETs manage to buy them up for next to nothing and rent them back to the people who went broke trying to own them?
These kids don’t just need financial advice, believe me. RE smarts is the least of our problems. The emotional and moral deficit most kids are experiencing because of bad parenting is beyond belief.
I worry about the future….these kids are going to throw their elders into homes or just euthanize us faster than you can say “soylent green.”
So surprised that the real estate market remains hot in October, if interest rates stay continue to stay low, Atrina will be laughing all the way to the bank!
Just to clarify Garth. (And no, i dont own a glass box – i rent in a concrete building).
I thought the 15 year glass building number came from Toronto where the lifetime of these buildings is significantly reduced due to extreme weather conditions (very cold in winter, very hot in summer).
And that in Vancouver where it’s neither very hot nor very cold, these buildings would last significantly longer?
Or that was at least my understanding.
If not, then – wow.. I know a LOT of potentially screwed people.
#15 mac
Kids today won’t accept anything other than the best. And of course their parents are willing to do anything to keep them this way.
—————————————–
You’d be amazed at what one will accept once the proverbial SHTF scenarios play out.
Spoiled brats and their idiot parents may and likely will not be able to escape a multitude of financial, economic and social land mines in life, if they only see their world as top of the heap, best of the best things.
These kids as you say will likely feel the smack right between their eyes when maybe the job they thought they deserved does not come or maybe falls away from their grasp. If they see that person they viewed with eternal love at the nuptials one day come to say “ADIOS! I’m outta here and BTW divorce will be a bitch.” If they find having to care for maybe sickly parents who may have squandered their savings. If they find that the job they took in the end does not go above the first floor in career mode. If they see house/condo prices drop and they are under water mortgage wise. If they feel the drowning effect of too much debt for too much entitlements in life catch up to them.
So, no these blind, entitled wannabes and their idiot parents and other kinfolks may BELIEVE that they deserve the best of the best all the time, maybe and probably will see for many the hard way that NOTHING AS SUCH IS GUARANTEED IN LIFE! The they will see that in life at times REALITY JUST BLOODY WELL BITES!
#163 neo on 11.05.14 at 10:32 am
“Here is a good read for you Garth…”
The author doesn’t mention the steady accumulation of treasury bills by the Japanese and Chinese governments, among many others, for over the past 30 years. Certainly, this demand for US government debt has had downward pressure on bond yields, which has allowed the US government to spend beyond its means for decades.
“Maybe I have this all wrong but seems to me that the future holds many condo buildings half empty in horrendous disrepair. If I’m even half right, what then? RIETs manage to buy them up for next to nothing and rent them back to the people who went broke trying to own them?”
Make no mistake, after a RE crash in Canada, the REIT sector will likely be distressed as well, at least in the short term. But longer term, you pretty much have nailed it, although the REITs will be able to rent very cheap with their very low cost base. The general trend will be that of larger institutional landlords coming into condo developments, buying up a number of units, change the condo board, change the rules (ie: strip out the swimming pools, saunas, exercise rooms, and other amenities), and eventually pressure the non-sellers to sell out. Eventually they will control the entire building lock, stock, and barrel, and it will be not unlike any other rental-only building you see today.
You probably will even see minor amounts of litigation relating to abusive practices of the large REITs that end up doing all this stuff to existing condo unit-owners and the boards that they control.
I know a retired couple who were going to sell their long ago paid for house and buy a condo. They could not find one, they looked at a great many, that didn’t have a major deficit with their contingency fund.
They still have the house. They figure the work they were trying to avoid is better than the nightmare they foresee with a condo.
Thanks for the leadership Garth!
I’m 28, debt free, diversified and liquid with six figures invested. TFSA contribution maxed, up 43%.
Freedom 50 seems doable.
“The author doesn’t mention the steady accumulation of treasury bills by the Japanese and Chinese governments, among many others, for over the past 30 years. Certainly, this demand for US government debt has had downward pressure on bond yields, which has allowed the US government to spend beyond its means for decades.”
Interesting you mention that, because with oil having dropped so much, there’s going to be a lot less $$$ available for the petroleum exporting, USD$ hoarding countries to buy T-Bonds. In fact, many will be sellers as they need to support their domestic economies. So while the lower oil prices and higher USD$ might be helpful in the short term, it appears that such strength is only transitory and could be a last gasp before another powerful downleg as we saw in the 2000-2006 era, or even throughout the 1970s.
#174 Retired Boomer – WI on 11.05.14 at 11:46 am
“You have been “commoditized.”
Yes, you young people, with or without your university sheepskin. With, or without your trade school education.
YOU are a commodity, to be selected, used, and priced just like any other commodity.”
I don’t disagree. But I would expand it to everyone in society, not just the young. And I don’t think this is a new phenomenon. A blue-collar worker in the 60’s doing menial shift work at a factory was also a commodity. The difference then was they usually had a labour union to negotiate for them and minimize the competition for that piece of menial work.
Not sure why you guys are picking on realtors and brokers, they’re trying to make a living, it’s the banks you need to call out.
#JustForHammer_Down…
http://youtu.be/-NzZ1mCNbNA
#BonusRetroZenForConventionalOrCabOver:
http://youtu.be/0bIFLSpipWs
#BonusBonusZenForLessSavouryProfessionals:
http://youtu.be/4NCtpXG6Az4
I’m still waiting for some smartypants to tell us why I’m not paying 0.99 for gas yet……
#24 Mark
Great points. Unfortunately, can you imagine the aggregated costs of having an Offering Memorandum for a housing transaction.
What is even more funny is how the regs for crowdfunding equity are coming along. The investor can only put in $1500 every six months because the government doesn’t want them to get suckered…. I know many friends who don’t qualify under accredited investor regs that would love to invest in startups but our government is protecting them…. Housing – not so much!
“Not sure why you guys are picking on realtors and brokers, they’re trying to make a living, it’s the banks you need to call out.”
And what exactly are the banks doing that’s kind of shady? They’re merely lending money which is impossible for them to lose because they make sure the loans are CMHC subprime insured. Its the Realtors who are pushing the buyers into the financial suicide arrangements.
Blaming the banks for bad investment in housing, is like blaming a stockbroker because you decided to act on a “hot tip” that someone spammed to you on the Internet and lost money. They’re just an intermediary, not a source of ‘advice’.
Excellent post Garth…love it when you come out swinging
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I’m thinking since politicians won’t start the ball on legislating proper data collection and distribution, why don’t we use chang.org to start a petition to get the conversation going? Might even lure more millenials to this blog then to Atrina’s blog as well.
Finally, it would also be a good jab at your former colleagues Garth!
What say you?
@ Mark # 24
“I can assure you that if a professional financial planner ever marketed a 20X leveraged private investment, with theoretically unlimited downside, to a 20-something-year-old with relatively “market knowledge and financial resources — regulatory action would be swift. Yet Realtors do this in the ordinary course of business, actually sponsored and underwritten by our own federal government’s CMHC subprime mortgage insurance.”
I couldn’t agree more with you Mark, well put!
Oh yeah and another real estate lawyer has disapeared with all the money she had in trust. Article says 3.5 million.
http://www.bramptonguardian.com/news-story/4961007-lawyer-missing-along-with-3-5-million-in-clients-money/
Shawiiiiing!!! I know of some “real-estate” down south that just had a massive increase of 300% in no time!!!
She shall now be reffered to as “Smokin’ Lady”!!!
#177 Mark on 11.05.14 at 12:03 pm
Mark, my comments are not directed at you, per se, but I am using your comments to ask the general blog dog public.
“I go by what I see on the Sunshine lists in the various provinces. And they’re definitely starting in the $80k range right out of school. Pharmacists even more with the hourly rate (although pharmacy wages do not generally rise much).”
Why are people hung up on $80k being unreasonably high for nurses? They have some of the worst daily tasks out of any job in the world. IMO, they deserve at least $80k starting out, otherwise fewer people would be willing to join the profession at lower remuneration, and we likely have a structural shortage of nurses. Also, it is a moderately specialized vocation that isn’t easily comparable to work in other industries.
Pharmacists, a highly specialized vocation, go to school for quite long relative to other careers. And they require continuous education every few years to remain qualified with their provincial colleges. Given the investment in education and time, a remuneration of $80k starting isn’t very high either.
***********************
“Of course, most employers don’t meet expectations, which is why the youth have been mostly screwed.”
Although this is a generalization, IMO, it’s the fault of young people for being naive about the expectations about the jobs on offer. Earlier this year, from the hiring side, I saw naivety by what appeared to be a very smart and confident young man (only 30 minutes or so to judge him). In the interview, he asked if he could collaborate with this or that department, and some other unrelated tasks. I tried to explicitly lower his expectations for the job, but he just nodded his head and asked more irrelevant questions. In other words, he didn’t “get it”, literally and figuratively.
#28 blobby on 11.05.14 at 10:40 pm…
“…Vancouver where it’s neither very hot nor very cold…”
You forgot wet – this is the biggest problem in Vancouver and Victoria.
Mould silently grows in these improperly clad buildings, until it’s too late and each owner is assessed $ 40-60K for the envelope repairs.
Not to mention your view for at least a year is through fuzzy green or blue netting!
Although we like the condo lifestyle, it is one of the most risky RE investments period – so one should tread carefully when purchasing.
Renting is so much easier, and even if approaches the cost of ownership in the future, at least the risk is mitigated by renting.
In the Okanagan rents have to go up substantially before it’s even worth looking at buying, but vultures we still are.
Sorry for being so hard on Stevie yesterday, but let’s face it those remarks he made were very insensitive. Even Zero Hedge picked it up and ridiculed him.
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“Great points. Unfortunately, can you imagine the aggregated costs of having an Offering Memorandum for a housing transaction. “
My point was that Realtors advise people on RE transactions. Financial planners like Garth advise people on financial investments.
Garth* has to deal with a litany of compliance issues. He has to test everyone he deals with very carefully for their risk tolerance and investment objectives. He can only sell securities which have been licensed by the state to his clients. Advising any leveraged strategies must be done with an abundance of caution. A significant portion of an investment dealerships’ cost of operation goes directly into compliance with all of such.
A Realtor, OTOH, has almost none of the same obligations.
In addition to shutting down the CMHC’s subprime mortgage operations, I’d like to see a levelling of the playing field between the RE advisory industry, and the financial/securities industry. Either hold them all to a certain standard by fiat, or take a completely hands-off approach and let reputation alone govern things. Small investment dealers, and even smaller issuers are being suffocated by the burden of regulatory compliance. A significant but growing apparatus of government exists to discourage domestic investment in business, rather than in RE.
* Please Garth, if I am in any way wrong about anything here, chime in. As I am not in that industry, but that’s my understanding of it.
That’s about right. — Garth
“40 Mark on 11.05.14 at 11:08 pm ”
How about people just take blame for their own stupidity? No bank held a gun to their heads and told them their first house had to be 4,000 square feet and luxirous. Or that they needed that BMW just because the lease is only 329 a month. It is the sense of entitlement people have developed that is the biggest problem with all of this. Why would they enter a bidding war on an old house? There are lots more of them and as soon as people balk and walk when an agent starts that crap the sooner it will stop.
Jeeze for a while there you even came back to reality and quit with the 900 billion nonsense and admitted it’s capped by law at 600. Problems with CHMC definetly but over half of the 551 they have insured is portfolio insurance on mortgages that WERE 20% down or more.
CHMC should be restricted to first time buyers with a reasonable limit. Then it would be the aid it was intended to be not wouldn’t enable people to continually leverage up into places they really have no business buying.
All of you people would get more action by writing to your MPs as much as you comment on these blogs that can’t change anything accept an individual readers view. Then again reading these comments most days it’s quite clear that most will take whatever tidbit of Garth’s post that suits their point of view and than run off from there to god knows what imaginary conspiratorial rant. Lots of them just go right there without even a nod to anything of the days topic. Incredible!
Years back before the explosion of mortgage brokers my lawyer suggested I talk to one he knew and get a house. That broker told me straight up he could get me a mortgage but I’d be far smarter to save at least 15% down and come back then. Guess what I did?
Garth:
Love your blog. But some people ( a simple count of posts should identify them) seem to treat this blog as a “dialogue” versus a singular commentary on the topic at hand. One, two, maybe three posts is understandable, but there are some participants (again, a simple count of their posts will identify them) who just go on endlessly. Every day. We are all too familiar with their views. I don’t name them to spare them. But seriously….maybe if they need to get up each day and deliver a sermon they might start their own blog versus trying to take over this one. They don’t seem to understand the idea that ‘less is more’, ‘quality over quantity’, and perhaps need to look up the meaning of pontification. Sometimes it gets a little queasy when they go after one another like it’s a video game and they want to “take one another down”. Game of Thrones or some such lame exercise.
Mercy.
#213 Mark on 11.05.14 at 3:37 pm
“‘40% of arable land is polluted… Tough to feed such a large population with less and less domestic farmland.'”
“That won’t and hasn’t stopped the Chinese from simply feeding their population polluted food. Or exporting it abroad (walk into a contemporary “Dollar” store, its amazing how much manufactured food we import from China!).
But on a more serious note, developed nations should be enacting tariffs on Chinese made goods until they clean up their act. As being allowed to pollute without consequences is a de facto subsidy of their domestic industry. Not to mention a human tragedy of epic proportions.”
———————————-
Yup, the money-hungry Mainlanders are unscrupulous sometimes. Even prison guards are making money in unscrupulous ways: http://www.theguardian.com/world/2011/may/25/china-prisoners-internet-gaming-scam
And I definitely agree that countries shouldn’t be shy about re-enacting tariffs against irresponsible countries, such as China.
#45 Kenchie
I don’t disagree one bit. Back in those 60’s-70’s yes, there probably was a labour union there for you. You KNEW you were a commodity, and you also KNEW that your job was going to disappear when the factory building was past its “Best Used By” date. (Well, some did the reality coming).
Today, the university grad is akin to an electronic part that is expected to be a “plug ‘N play” item into their regime. I have seen this very often in recent years. Sure, some fit this mold in the form of temp professionals, who can command a relatively high dollar. Key word though, is “temp.”
I see a general case of “unrealistic expectations” today, whether it is the trade school apprentice tool maker who thinks 50 grand is coming his way immediately..Ha, Ha. I will show you several 35 year experienced journeymen guys who would jump at that that salary.
Not sure where the unrealistic expectation came from, but I suspect the educational system might share some of the blame. After all, they are “selling seats” to an “education” in the final analysis.
Global competition will make things tougher for the US and Canada who have been the suppliers to the world for much of the past 70 years. Now, we have some really good, hungry, competition! Can we adjust to compete?
#224 Spectacle on 11.05.14 at 5:00 pm
“Thanks for reading & comment regarding my post.
I just got off from a phone call with the young gent , that I took for that “coffee” mentoring.
He is now married,
moving into a newer rented house,
huge career learning curve and doing very well.
I think I ended his misery in a decent, positive and compassionate way……….ultimately he did the heavy lifting!”
You sir, are gentleman of the highest order. I hope one day I can offer the same support to some young person.
I have been reading this blog for over 6 months now, and although I may not agree with everything that Garth publishes, I certainly come with an open mind and follow through some of his entries with my own research. It is been a process that I enjoy, and if I must admit, I look forward to it nearly everyday. So, I’ll get to the point…
I am a millennial, 30 years of age, and I rent. I have an income of 50k plus bonus incentives, I have no debt, 30k in savings, and I drive a 3 year old Kia Soul that I purchased new (paid off in two years). I live with my partner and together we have an household income of over 90k with rent coming in at $1125 (everything included) for a newly renovated basement suite that is by far the nicest place I have ever lived in (heated floors, granite counter tops, in-suite laundry, dishwasher, etc…) . I am a ticketed tradesman that got right into the workforce after graduating high school, and am currently working as a house designer. More than anything, I would love to own a house that I either built, designed, or renovated. The reality is that it’s just not affordable for me, and I feel like I am in a good financial position with a great career. This leads me to believe that everyone else my age is either making substantially more than I am, or have massive piles of debt. Nearly all my friends have already bought into a house, even my younger sister is thinking of going from the parents basement into a 300k condo. Rent, from what I am told is “just throwing away money, you’re not building any equity!” And frankly, I am fine with that. Why would I not want to save 2k a month and buy into a housing market that is unstable. Until house prices correct and get to a point where I can buy a lot outright, whether that be 4-5 years down the road, then renting is what I have to do. I’ll get into the market when it’s right for me. More than anything though, I value my ability to be able to give a months notice and just leave, whether its to pursue another career, or travel, I have the flexibility to go wherever, whenever I want. People never put a value to that. As a Canadian, I would say that I am very patriotic, and I love Canada. I drink my beer and watch my hockey like a good boy. I have traveled or worked in 5 other provinces and have seen a lot of what she has to offer, and hope to see more. But when it comes to housing affordability in the cities that I want to live in, man, it just makes me shake my head. There is no way I am spending 500k on a starter home on the west coast. I would head south in a heartbeat if the opportunity was there for me. Portland, a beautiful city of roughly 2 million (greater Portland that is) has fantastic housing value. For 250k you can get a wonderful starter home in a great neighborhood. My point is, for or those first time buyers out there, just hold on. The timing for your single most expensive purchase in life is just not right. You may have to wait 5 years, but just think of the market at that point and the money you could save. In the meantime, save your money, invest in a diversified portfolio as Garth nearly mentions everyday (super easy to do) and take the odd vacation to clear your head, knowing that full well patience is the key.
In my mind, this whole real estate thing is puzzling, but to sum it up I would say this. The three directions in which the Canadian economy could go, whether it be deflation (there goes your raise), stagnation (not that stripper party nation you are thinking about) , or growth (there goes interest rates), I just can’t see housing keeping pace in terms of value. The middle class can only throw away so much of their hard earned cash on housing before it starts to kill off their spending habits. God forbid they have to sell…
Archie Bunker:
“Dere is a special providence what protects meatheads”
That’s why stupid people are prospering in a game designed to be won by stupid people.
We have become aphids feeding on a tree of debt. Tended to by ants with large glassy eyes and degrees in finance. Grow wings and flee my gelatinous friends! Flee through the flaw in the flue! Careen away from impending destruction and take flight with your tiny inefficient wings! That’s what we should be telling one another if we were aphids and had any sense. However most will simply slam into a radiator grill and be caramelized by the intense heat of a brutal real estate correction. Not me! My aphid alter ego is soaring high and free. I can proudly stand on all six legs and face the mirror with a smile on my proboscis.
Re last post: #26 Spectacle
I don’t know the details of Agenda 21. All I know is, our own government is barely accountable to us, and the U.N. is a MONSTER of a bureaucracy in which we elect NO ONE.
The U.N. has no democratic legitimacy. It should be a forum for discussions only, and not involve any kind of binding treaties. If treaties are proposed, they should be put to a vote in a national referendum.
I’ll explain to you what is happening with Mr.Poloz. This is the NATURAL, PREDICTABLE consequence of central banking. If a small group of people are given monopoly power over issuing a nation’s currency, they will eventually own everything. There is nothing we own that is not owed to the banks.
The consequence of this is a lessening of productivity as it is not a rational investment for businesses to make. Why spend money on expensive equipment upgrades to increase productivity when you can just borrow money at low rates and hollow out what you already have? Not only that, but there are prohibitive taxes and regulations on investments, so why bother.
Folks, we are in a worse situation than MEDIEVAL SERFS. Medieval serfs only paid their masters 10-25% where the average Canadian pays a total tax burden of 50% (consumption taxes, regulations, property taxes, everything)!
This is absolute insanity, and it will continue to get worse. We are nearing the ‘end game’. The end game, of course, is a total authoritarian state encompassing the entire globe, whereby only a small group of people have any say in what happens.
Look at the amount of propaganda we are inundated with on a daily basis. They are trying to control every aspect of our lives both socially and economically. Don’t smoke, don’t pollute, don’t start a business, don’t offend people with speech, don’t rock the boat, don’t make a scene in public, don’t spend money how you want.
It’s all a lie. It’s a lie because they want to hide the fact that you are slowly being enslaved by the debt masters. They don’t want you to notice. They want to publish phoney statistics to confuse you. They want you to think it’s normal that you’re working 60 hours a week and are still in debt. They want you to think rising prices are GOOD FOR YOU!
https://www.youtube.com/watch?v=Bx5Sc3vWefE
“Pharmacists, a highly specialized vocation, go to school for quite long relative to other careers.”
Pharmacy is a 4-year degree. Just like engineering. And nursing. And even accounting. There’s a few brief unpaid internships interspersed into the program. Pharmacy salaries tend to be extraordinarily flat with additional experience, unlike most fields. The point I made in that post, and others, was that as a percentage of average house prices, $80k is not an unreasonable demand of a new grad historically speaking. Unfortunately, for most, it is not reality.
“Jeeze for a while there you even came back to reality and quit with the 900 billion nonsense and admitted it’s capped by law at 600. Problems with CHMC definetly but over half of the 551 they have insured is portfolio insurance on mortgages that WERE 20% down or more.”
$900B is not nonsense. It is a combination of the $600B capped direct subprime mortgage insurance at the CMHC. And 90% reinsurance of private sector mortgage participants such as Genworth Canada MI.
Whether a loan is subprime and the threshold between prime and subprime is in the eyes of the lenders. After all, subprime literally means “less than prime”, and “prime” is defined as a loan of sufficient quality that it can be held directly as a bank balance sheet asset. They’ve obviously decided that the threshold is higher than 20%, hence, have deemed those loans subprime by buying CMHC subprime insurance against them.
Thanks for your post, but you really haven’t shown anything I’ve written previously to be, in pith and substance, erroneous. We can quibble over whether the figure of CMHC’s total potential subprime insurance issuance is $900B, or $551B + $330B. That’s all da minimus compared to the overall point being made, and that is, CMHC’s influence in Canada’s burgeoning subprime mortgage marketplace is massive.
I want to thank all canadians who borrow and pay my debt-free family with stock returns. I will use your money to travel to Japan next year. We live in a small place but afford large life experiences. Enjoy your walls:
“Genworth MI Canada Inc. (TSX:MIC) says it is increasing its regular quarterly dividend and will pay a special dividend to shareholders after reporting a slight increase in net earnings in the third quarter.”
#51 Mark on 11.05.14 at 11:47 pm
Everyone is out to make a buck. Financial planners/investment advisors, realtards, used car salesmen, snake oil salesmen. Financial planning is a sales job just like the other jobs listed above. You’re kidding yourself if you don’t think otherwise. A friend of mine worked for a large investment/financial planning firm. All it was was sales. He quit because he didn’t feel comfortable with this.
So find an advisor who sells nothing. Simple. — Garth
#26
‘I worry about the future….these kids are going to throw their elders into homes or just euthanize us faster than you can say “soylent green.”’
Write the kids out of your will or don’t leave them any inheritance, and don’t invite them to your funeral.
#34 Mark on 11.05.14 at 10:49 pm
“Interesting you mention that, because with oil having dropped so much, there’s going to be a lot less $$$ available for the petroleum exporting, USD$ hoarding countries to buy T-Bonds. In fact, many will be sellers as they need to support their domestic economies. So while the lower oil prices and higher USD$ might be helpful in the short term, it appears that such strength is only transitory and could be a last gasp before another powerful downleg as we saw in the 2000-2006 era, or even throughout the 1970s.”
I agree with them having to sell USD to support their domestic economies. It’s probably healthier for the long-term that these USD hoarding nations part ways with some of their stash. But I doubt that the USD will weaken thereafter, particularly if the cost of energy remains significantly higher in East Asia vis-a-vis North America over the coming decades.
#57 Cam on 11.06.14 at 12:10 am
The reality is that it’s just not affordable for me, and I feel like I am in a good financial position with a great career. This leads me to believe that everyone else my age is either making substantially more than I am, or have massive piles of debt.
Or, behind door #3, is a cash infusion from the parental units!
http://www.torontolife.com/informer/features/2014/11/04/the-bank-of-mom-and-dad/
Central banker friends of Poloz have just handed out trillions of dollars over the last six years in free money, corporate welfare to float zombie banks, institutions, and a failed debt-based economic system. Many of those trillions of free dollars have landed almost exclusively in the hands of the rich.
In total ignorance of this feat, Poloz suggests the young and unemployed adapt, and begin working in this now feudal, zombie economy for free. Poloz obviously has no idea how to run an economy, other than to run it into the ground. On that I give him and all his buddies an A+
#57 Cam. “….the dream of the nineties is alive in Portland……”
Re: #3 Mark on 11.05.14 at 9:57 pm
All the good companies are listed privately or not listed at all. All the crud is listed public. Add to that the stock market today is more overvalued than any time in history because back in time false accounting wasn’t used. Believe you me people buying homes in Canada will lose big but people buying stocks will lose everything.
Great article. I am a happy renter in Greater Vancouver.
My landlord pays the strata fees as well as all the special assessment fees including windows & elevators.
At $1.1K a month my rent doesn’t feel cheap, but it allows me to save.
> The kids today crave help and good advice. They need peers who are leaders. Not a Judas goat.
So true:
http://forums.redflagdeals.com/investing-real-estate-edmonton-calgary-alberta-buy-condo-builder-1591983/
http://forums.redflagdeals.com/thoughts-condo-good-bad-investment-1589361/
http://www.condoinvestments.ca/images/11832/Minto-Westside/MWS_1DEN_ROI.pdf
I save all of Garth’s great quotes. This will become another priceless one.
Well, if the real estate industry was regulated the way the financial business is, people might get numbers they could actually trust, upon which many decide to make the biggest investment of their lives, taking on a mother of a debt to do so.
Re: #57 Cam on 11.06.14 at 12:10 am
The problem is when housing falls in price you won’t wait long enough. You might end up a casualty like the other people buying far too early into a falling market. With so many greater fools still around (totally clueless at that) this housing market will take longer than you think to hit bottom.
My kids (young adults) want me to buy the old “homestead” in Brighton, ON where they had fond memories of visiting grandma and grandpa as kids. Use it as a cottage for the growing family. My parents unloaded it for $175k 15 years ago. It was listed in May for over $300k. There have been a few price drops and now 6 months later it is around 280k and listed now as a motivated seller. I offered 240k…they thought I was crazy. Fair enough..mine has been the only offer.
It is vacant so the owner will now have to pay heat for the winter, hire someone to remove snow , etc etc.
I told my kids be patient. Your father is going to pick it up for close to what your grandparents sold it for 15 years ago, plus over $100k in renos.
Price slides are certainly happening outside the big cities
This is exciting….
#53the jaguar
– amen –
#52 the Jaguar
Hear, hear! Thank you for that… I’m sure many of us here aiming to “read and learn” would agree.
the last paragraph says it all.. what a cliffhanger
May I suggest that young people consider a career as a pharmacist;
http://www.youtube.com/watch?v=dDz4FDR4bso
Condo tower windows in Vancouver need replacement after less than 15 years. Cost 7 million.
http://www.cbc.ca/news/canada/british-columbia/vancouver-wall-centre-in-7m-window-fix-1.1317415
MEANWHILE IN VICTORIA THE FABRICATED GOOD NEWS JUST KEEPS ROLLING
You would never know it by the headlines in our media but Victoria RE continues its several year slide.
Each month the local board finds some good statistic to report. Either year over year (or YTD, or sales are up or month over month prices. There is always something you can cobble a good news story from.
And if there are not possible ways to make good news out of the statistics then just forecast price increases for next year.
And of course our local rag prints it all unquestioned.
Most people in Victoria have no idea prices have dropped so far from their peak until they try to sell that investment condo that has been bleeding red for the last 5 year.
It’s not only the ‘window walls’ that are improperly used and installed in high rise condo’s that are falling into the street…it’s failing balcony cladding causing water intrusion, leaking internal plumbing, improper ‘LEEDS’ ducting and ventilation causing weeping condensation, mold growing behind drywall on plastic, rust creeping along re-bar, flaking disintegrating underground parking ( hey…what’s that smell?)….oh yeah….stagnant water. And where is my water pressure going going going?
Never mind the creepy carpets that have already worn through, urine soaked elevators and stairwells, tenants peeing off their balconies and the blow back onto lower suites.
Oh Yeah…..condo living….paradise. ….for idiots. Special assesments for owners will be into the many millions on individual buildings. The high rise crisis will make the leaky condo crisis look like a summers day in the park….get out while you can.
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#58 Steve on 11.06.14 at 12:13 am
Steve, put down the glue, step away from the glue.
I don’t want to be mean but since when is a ticketed house designer a tradesman? Do you mean architect or structural engineer. If you just pick stuff for a finished building then I can do that myself or find some guy who is desperate to supply his input without a “ticket”. Better still I can find a hot young woman who will do it for a price and not turn her nose up at me until she has been paid.
This is the problem with our modern world, we have to hire someone to go to the furniture store with us and point at stuff that we then pay for and have to live with long after said pointer leaves with their cheque, nuts. HGTV says that’s what you should do though because how could you possibly be expected to know what you like you pessant.
If you actually do some kind of engineering I appologize, if the above description is accurrate and someone wants to pay you for it that’s between you two. I find it unnecessary and rediculous.
“So, mortgage girl, if you’re going to sell your lending services (which is cool), tell both sides of the story.”
She probably wouldn’t be very successful at her job if she were to do that. Since there’s no regulation in the industry, someone else would simply come along and take her place. I think it’s fair to make these comments about the industry but not so fair to pick on just one person.
Besides, haven’t we seen statements like “rates have only one way to go” and “house prices are 100% likely to be lower next year” on here without similar disclosures? Unless I’m mistaken, we’ve even seen some charts. I know you’re not selling anything on this blog but I would be surprised if the opinions you espouse here don’t carry into your profession. No doubt some people reading this blog believe that your professional activity lends some credibility to your views.
I don’t disagree with your message to young people about over leveraging themselves and I agree that in many cases renting is far superior to buying. Like you, I also believe in diversification and liquidity. However, at times, I feel you’re over critical of individuals who happen to present alternative views.
Of course all of the above is just my opinion. Cheers!
Meh. Even though Vancouver has been on a tear the last few years, condos are anemic. That’s looking at the HPI and average, which are levitated by the monstrous amount of new inventory constantly streaming to market. The condo you bought 7 years ago is old and busted, almost certainly worth less than you paid for it.
If you’re looking for a new condo in Vancouver, or indeed anywhere in Lower Mainland, there is no shortage of choices.
And you can take that to the bank.
#16
The referendums you refer to are nothin’ but ‘dog and pony shows’. Regretfully, despite the idyllic scenery, anything even remotely important related to money affairs gets decided behing the curtain by secretive members of faceless committees.
“by those friendly people in Audis with vanity license plates.”
Thank you for this Garth.
All these douche Audi drivers with vanity plates is something I have also observed since moving back to Canada. It is an incredible phenomenon: Audi drivers in T.O. are so much more likely than any other vehicle type to have a vanity plate, BY FAR WITH STATISTICAL SIGNIFICANCE. I always mention it to my friends (especially if they’re looking at cars & Audi comes up), and they look at me with a blank stare like I’m crazy, “oh, I’ve never noticed that.”
Your critical observation skills have been confirmed tonight for me.
#57 you work as a home designer and wish for the housing prices to fall by 50%. You were only 6 years old in the last collapse, that’s when I bought my house right at the peak. Unemployment among tradesmen went to close to 20% in my area, construction dropped like a stone. It stayed that way for 7 years.
So now flash forward, you are 35 and the housing market collapses, you lose your job and have to scramble for whatever you can get up until 42. You live on your “partner’s” income and your savings during that time. I don’t know if your partner is a guy but say it’s a 30 year old woman. She now gets to kiss her hopes of ever having any kids bye-bye. At 35 when the market supposedly may fall by 50% she still hasn’t had any. She is now a “geriatric” pregnancy and nobody has kids in a recession, can’t afford to. She either dumps you then or resents you the rest of her life.
You do wax on about the granite and heated floors though and you make your living designing pretty houses for people you envy and I guess secretly dislike. You need to give your head a shake, your wish may come true and you will certainly rue the day.
If I were you I would do what my friend’s son just did, he went to be an elevator mechanic, that job is recession proof, they need to inspect them on a timely basis and stick the safety seal on them every few years.
why would any clear-thinking Millennial want to spend more money every month and take on a $300,000 debt when she could live in the same unit for $400 less, with no debt?
Because $670 of that $1,800 stays as equity, whereas 100% of their $1,800 rent goes out the door permanently.
Say they have $2,000/month available for rent and investing. If they rent for $1,600/month, then you’re right, that leaves them with $400/month to invest and add to their net worth. If they buy the place for $2,000/month, then they have nothing left to save, but $670/month of that payment adds to their net worth.
So in the “buy” scenario, their monthly net worth grows by $270 more than in the “rent” scenario.
There are, of course, many other factors (realtor commissions, land transfer tax, lawyer fees, whether the return on investment beats growth in property value, etc.), but this is how the realtors so easily make their case to “buy.” If you’re going to fight them with math, you need to have the numbers to support it.
Read my words again. Risk. The ‘equity’ you build is only a tiny portion of debt repayment, and 20X leverage can work against you in an instant in the event of a market change. I would think over-educated Millennials, or even you, would grasp that. — Garth
#51 Mark
I should have used a wink emoticon as I agree with what you said… My point was that while realtors are far too lightly regulated, the financial community is far too strongly related.
#53 Jaguar – so very true…. But you would have to setup your own site, build a more robust base of articles, hire Amazons to edit your stuff, vet posts by people hijacking your blog, etc…. ;-)
A $400 savings every month, for instance, allows for RSP contributions, and a resulting tax refund. One could put that tax refund into a TFSA. Over 30 years, for example, at today’s damaging interest rates, the TFSA alone could be worth at least 200K. Invested Garth-style, it would very likely be worth far more. The RSP, ditto. Additional savings, wow!
In the mean time, as re prices continue to melt, buy only when costs equate renting or are preferably lower- and buy quality. There is so much crap out there.
Retirement? No worries, mate.
I get the daily sales feeds from the Tdot, more houses than not selling for less than list now especially in the detached realm. Even under 1 million, they are going for less. Bidding wars are all but gone if the daily feeds are correct. I see the correction already happening even without adjusted numbers.
For #80 omg, you’re quite right. The real estate market in Victoria is nothing like what is portrayed in the media. There have been lots of price drops with the listings finally just taken off the market. Lots of new condos for sale, built in 2012, that just sit empty. At one open house the realtor described selling a home on the Peninsula akin to pulling teeth.
Get out and look around and see for yourself. The last person I would believe is a realtor.
I sympathize with Atrina.
Look at the options according to Mr. Polzo – hustle or be hustled.
Work for free – or work for subsistence – or work to hustle and make a killing – the rules of our game.
Oh Canada
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Any day now it’s all going to start trickling down.
http://www.salon.com/2014/11/06/5_disturbing_facts_that_show_the_system_is_rigged_against_americas_middle_class_partner/
#90 Kevin
Your not even touching any equity for 5 years, especially all the newbs with their minimum down payments.
Meanwhile, back on a planet where we determine strength of the economy on employment and real wealth creation (i.e., not on paper on a bubbly single asset), SNC pulls the plug on 9% of its workforce.
What a coincidence that this number is more or less the same as the bullshit “gain” in Toronto area home prices as trumpeted by the TREB.
No regrets about calling my favourite headhunter this week and giving him orders to look south of the border for me.
#31 Mark
“The general trend will be that of larger institutional landlords coming into condo developments, buying up a number of units, change the condo board, change the rules (ie: strip out the swimming pools, saunas, exercise rooms, and other amenities), and eventually pressure the non-sellers to sell out. Eventually they will control the entire building lock, stock, and barrel, and it will be not unlike any other rental-only building you see today.”
This is optimistic. I guess anyone will do anything, at the right price, but it’s important to remember that buildings built to be condo buildings are not apartment buildings. When a REIT or a property manager contracts the construction of a new apartment building that it intends to hold for decades, it takes many decisions very differently than when a developer builds a condo building to be marketed to owner-occupiers or small-time landlords who have only a year to pursue the builder, and who will in any case mostly only own for a handful of years themselves.
These condominium buildings going up are not rental apartments; they are of inferior quality, built to be obsolete before the long-term. REITs will in a lot of cases not touch them. I suppose for a certain price, some of them will, and then it could in some cases play out like your describe. But I would say the more general trend will be increasing numbers of accidental landlords renting these places out at bottom-dollar because there are no buyers. I bet the residents (renters and owners alike) would keep their fingers crossed that a professional property management company were interested in their building.
And the world most powerful person (according to Forbes) is:
http://www.forbes.com/sites/carolinehoward/2014/11/05/putin-vs-obama-the-worlds-most-powerful-people-2014/
Latest News Release
October sales set a near record as market heads into buyer’s territory
Ottawa, Novemver 5, 2014 – Members of the Ottawa Real Estate Board sold 1,121 residential properties in October through the Board’s Multiple Listing Service® system, compared with 1,089 in October 2013, an increase of 2.9 per cent. The five-year average for October sales is 1,076.
The average sale price of residential properties, including condominiums, sold in October in the Ottawa area was $355,813, a decrease of 1.2 per cent over October 2013.
The average sale price of a residential-class property was $369,540, a decrease of 3.2 per cent over October 2013.
#28 Blobby: “And that in Vancouver where it’s neither very hot nor very cold, these buildings would last significantly longer?”
****************
Nope. Because it rains constantly — always damp, everything is soggy. Mildew everywhere. Outside the city center, the sidewalks actually have a green tinge. The trees, shrubs and grass, however, thrive!
we have a nice 1 bedroom for rent here in Kits for 1100 or so and the apt across the street is similar in price and pleasantness…
these apts for rent are between yew and vine on 8th ave.
ten minutes mac by car to down town and a very pleasant 45 minute walk to say Georgia and Burrard.
so dont pay that 1800 folks !
much better deals over this side of false creek and way, way quieter.
But how long is the Vespa ride to Bar None? — Garth
#97 Rosie “moving forward”
Interesting Article, but me thinks mostly full of ‘class envy’ sure, the 1% did fantastic. I’ll submit to you the top 205 did really well, too!!
The bottom half never seem,s top do well, never really has, and maybe never will.
We have a “less fair” tax system here. Earned wages can be taxed as high as roughly 40% including the new health care tax. Passive income could be as low as ZERO, 105 but most likely 15%. Only an idiot would try to earn more, when he could restructure things to earn through capital gains etc.
The RICH didn’t get that way thinking inside the box.
Great post Garth, always good with the subtle yet witty humor.
I watched ‘American Beauty’ again last night and these hustlers are not far off the character ‘Buddy’ the ‘Real Estate King’
#59 Cato the Elder, also great post.
For those who care to see the shell game that is our modern monetary system
Even my own daughter signed a BRA (Buyer Representation Agreement (EBA Exclusive Buyer Agreement in B.C.). Why?
Because it levels the playing field between listings. Within the BRA the agent remuneration the Buyer agrees to pay is outlined and the agent is able to negotiate for a top-up of the Buyer’s Agent’s remuneration in such cases where the Seller’s Agent might be offering something less than that agreed between the Buyer and their appointed agent. If the property is a FSBO (For Sale By Owner) then too is the Buyer’s agent able to negotiate their fee, which the Buyer has agreed to pay, to come from the proceeds of the sale. If in such cases as arise from time to time where the Seller’s Agent is offering more remuneration to the Buyer’s Agent than that agreed between the Buyer and their agent then the excess is the property of the Buyer and is refunded to the Buyer upon completion.
In the case of my daughter, of course, refunded the full commission back to her as a gift to help with the down payment. She is my daughter after all. BUT she still signed a BRA/EBA as I treat ALL clients equally and expect they do the same of me.
Kids today really do crave help and good advice. Where will they find it? What kind of advice can you give a kid? Hey pal, sorry the bell curve turned into a pyramid, let me teach you how to climb over your peers so you can be a rare success story. Dontcha know capitalism is about taking chances and getting lucky, what, you thought it was about steady work over decades bringing steady and predictable prosperity? Don’t even think about buying a home. Keep your d*** in your pants and your young wife working, rent and save your money. Good advice, but a hard sell. People want kids and granite. Shit all you want on the Millenials, but the boomers wanted the same thing. Difference was, they could have it. A grade 10 education, walk into a factory and your wife didn’t even have to work. A house a car and two kids, no real financial stress unless you took to the casino.
Didn’t our dear Governor get hired straight out of school at the Bank of Canada back in the early 80s? I wonder how many days of unpaid work he did.
Who’s going to tell the kids the truth, who even wants to admit it to themselves? At least the Governor is giving it to us straight: it’s not getting any better any time soon. Embrace the basement.
In 1981, major corporations (globally, not just Canadian) were spending less than 3 percent of their combined net income on buybacks, but in recent years they’ve been spending up to 95 percent of their profits on buybacks and dividends. “Corporate profits”. With such a low level of reinvestment how can anyone expect the economy to truly recover and post some sustainable gains?
Canada actually lost GDP in August (before oil prices suddenly fell), and I’ll bet you my left testicle that September will turn out to be even worse. I guess we’ll know more tomorrow.
Canadian corporations by and large continue towards downsizing, outsourcing, six sigma, a “flex” workforce, all to stockpile money in their checking accounts. I think Canadian corporations should be reaching 700 billion right about now, earning less than inflation. In a country of ~35 million souls (not counting TFWs). Good thing the dear Governor understands the corporate world’s need for interns that work for free, haha.
What advice can you give a kid for the medium to long term? Go vote, that’s about it. For who? That’s a good question. All I know is this federal government isn’t interested in investing in anything, least of all the youth. Harper has this whole theory about bootstrapping that he’s sticking to, and it’s a compelling emotional argument, even if it has no basis in today’s reality. I bet even you still believe in it, Garth.
In Ontario whenever Premier Wynne creates jobs, with or without spending money, there are morons that just have to put their worthless 2 cents in and complain. Honda just announced a major investment in a plant within commuting distance of Toronto, leave it to the right wing to have a problem with that.
http://www.oecd-ilibrary.org/economics/how-was-life/global-well-being-since-1820_9789264214262-5-en
OECD inequality is at roughly the same levels as the 1820s, despite the fact that places like China and India have seen domestic inequality actually improve. Guess where things are getting worse, and fast. We might not have declined that much in absolute, or even inflation-adjusted terms, but when you look at how much the average Canadian is making as compared to his share of the GDP, it’s a real wake up call. We used to have more or less a bell curve, where extremes of wealth and poverty were rare. Now we have the CN tower, a big fat bulge at the top, a skinny middle, and a large parking lot at ground level where everyone can huddle. At least in the CN tower the elevator still works.
What advice do you give a kid? Go to Alberta if you can’t find a job? Because over there is a “labour shortage”. Yet labour force participation dropped by nearly 3% in the last 12 months in Alberta, and almost 6% of Albertans tried to find work last month and failed. But tell the kid to sell everything and hop on a train. He’ll figure it out when he gets there. Worst case scenario, he can work at McD**** for 15 an hour now that they have to slow down on the TFWs. 15 bucks doesn’t really pay the rent in Fort McMoney, but who says you have to live in a private apartment. Maybe they can hook you up with some nice communal housing for 40% of your check.
You’re right about one thing, Garth. We really do need leaders, but where do we find those without a selfish agenda, or ideological axes to grind?
Should we continue to recite the litany of right wing Reagonomics, and place all our bets on the holy free market fixing itself? Looks to me that people like Paul and Atrina are teaching us that self-regulating industries are taking our economy back to the early 19th century. I for one am not counting on anyone voluntarily changing the way they do business any time soon. The heavy regulation that Garth has to deal with may be onerous, especially for smaller businesses, but what’s the alternative?
Hey Cato,
This is written by Michael Bloomberg (the person you call a socialist facist). You may agree with his opinion piece… or you may not, but at least give it a read before denouncing it.
http://www.bloombergview.com/articles/2014-11-06/gridlock-leads-voters-out-of-washington
But how long is the Vespa ride to Bar None? — Garth
Hahaha. That made me laugh out loud. Is that night club still around?
BTW, smart hipsters of Van don’t ride Vespas anymore….they have a Car2Go membership instead ;)
Best,
HD
It appears I have lost my bet, when I suggested that they would never make ground on this building:
http://www.econdosshowroom.com/
They are now tearing down the TD bank at the corner to make room for it. The thing that I failed to realize is that the renovation going on in the Yonge Eglinton Centre (mall) and the new higher rent tenants that will live here, will need a good market of consumers, e.g. another giant condo across the street.
I guess RioCAN figures they might as well provide their own consumers (since they appear to be part of the builder group for the condo).
But who knows, maybe I’ll still win the bet and we’ll end up with a shell of a building like the Adelaide Centre in the late 1980s:
http://www.blogto.com/city/2014/04/the_story_of_the_bay-adelaide_centre_stump/
Still waiting for the music to stop. But in the meantime, still happy to pay about 50-60% of the cost of owning to put a roof over my head, and put the unspent excess to work for me in performing assets.
#90 Kevin
“Because $670 of that $1,800 stays as equity”
You may want to check that mortgage schedule again, especially the first 60 payments or so. Bankers get their profits first, before the inflation they create eats away at it.
“I agree with them having to sell USD to support their domestic economies. It’s probably healthier for the long-term that these USD hoarding nations part ways with some of their stash. But I doubt that the USD will weaken thereafter, particularly if the cost of energy remains significantly higher in East Asia vis-a-vis North America over the coming decades.”
This selling by the distressed countries will just cause the rest to hoard more USD as a reserve currency for the possible future distress, as it has been happening so far.
Like it or not there is just no better alternative right now than the US government bonds
“All the good companies are listed privately or not listed at all. All the crud is listed public. Add to that the stock market today is more overvalued than any time in history because back in time false accounting wasn’t used. Believe you me people buying homes in Canada will lose big but people buying stocks will lose everything.”
Long-term holders of, for instance, the top 10 names on the TSX, have done very well. Stories are fairly abundant of people buying, for instance, the banks, 20-30 years ago, and today receiving annual dividends equal to their original purchase price. I would hardly call this a complete destruction of value. Over the long term, business ownership almost always outperforms home ownership in total return. The stock market is priced in-line with, or even beneath its historic averages by almost every metric possible including dividend yield relative to the risk-free rate, P/E ratio, P/B ratio. Enthusiasm for the stock market, at least in Canada, seems to be at almost all-time lows, hence, it is primed for above-average returns as people realize they need to get serious about saving for retirement (a house is not a retirement plan!) and flock back in. I don’t know what else to tell you, other than you are so wrong to claim that investing in a balanced portfolio in “the stock market” will leave you with nothing.
2009: Bubble is about to burst.
2010: Bubble is about to burst.
2011: Bubble is about to burst.
2012: Bubble is about to burst.
2013: Bubble is about to burst.
2014: Bubble is about to burst.
Don’t worry, Mark and others, SOME DAY you will be right. Good God. Stop with the doomsday scenarios.
In several cities, it has. Doomsday only comes in a real estate correction to those with light equity and heavy debt. The message of caution cannot be repeated too often for them. — Garth
“In the case of my daughter, of course, refunded the full commission back to her as a gift to help with the down payment. She is my daughter after all. BUT she still signed a BRA/EBA as I treat ALL clients equally and expect they do the same of me.”
Dumb, dumb, dumb. I assume by your post that you are a Realtor. Because you actually collected the commission from your daughter, you had to declare and pay income tax on it. So you were actually out of pocket to the CRA. But had you not charged her a commission, or had you agreed to reduce your commission, then you could have avoided the tax hit.
Same deal for the folks who charge their kids rent to live in the basement. This gives rise to a tax liability, which is money forever sucked out of the family and lost to the CRA forever. Much better to simply require that the kids pay all the utilities and buy food when they’re at home, rather than collect formal “rent” from them.
#53 the Jaguar
Your take on the comment section of this blog is accurate. There are usually a handful of relevant, thoughtful posts but you’ll need to dig deep for them daily. This state of affairs exists largely due to Garth’s lenience. It’s an endless source of wonder to me.
If you’re inclined to make the effort you will soon learn who’s comments are worth reading (few), and who’s should be skipped (many).
I read this blog because of Garth. I read the comments (and post occasionally) because I have time on my hands. If you enjoy a more fulfilling life you should just stick to the Garth part.
“In the case of my daughter, of course, refunded the full commission back to her as a gift to help with the down payment. She is my daughter after all. BUT she still signed a BRA/EBA as I treat ALL clients equally and expect they do the same of me.”
What I find amazing is the fact that many who work in the RE professions are often very leveraged in the real estate themselves (often holding one or more investment properties) and convincing their family members.
Think of this. I work in a big company, say I put all my net worth in the stock of this company moreover I take a LOC and invest it in yet more stocks. Because the stock mostly went up for the previous 10-20 years (including 2008) I convince my extended family members to invest (with leverage of course) in the same stock. So now both my future income and the net worth of everybody I know is invested in the same place. Not risky at all
#38 RealistvsExtremist on 11.05.14 at 11:01 pm
I’m still waiting for some smartypants to tell us why I’m not paying 0.99 for gas yet……
_______________________________________________
I live right on the border and the nearest gas station to me is in the US. Went down 2 weeks ago and gas was .83 CDN / liter. Probably even lower now. Up here still 1.26. And then they call us “bad Canadians” for cross border shopping … I tell my wife “we couldn’t afford to move from here.”
http://youngandthrifty.ca/understanding-home-equity-actually-works/
If I have to listen to one more Canadian tell me that their home is, “The best investment I ever made,” I may lose my mi… well, let’s not be hyperbolic – I’ll probably just continue to internally shake my head at this statement.
“Don’t worry, Mark and others, SOME DAY you will be right. Good God. Stop with the doomsday scenarios.”
The bubble burst last year with the 2013 Federal Budget where the CMHC subprime rules were substantially tightened up to keep the $600B limit to CMHC’s subprime guarantee authority intact. Its been down pretty much ever since.
Yes, a few cities still are claiming increases. But for the most part, such ‘increases’ are due to a substantially different sales mix as was seen in years prior. Or inconsistent/faulty methodology.
#100 Rational Optimist
I completely agree with you. The condos being built in Vancouver are absolute junk. They are not designed for endurance and lack altogether the robustness sought by professional property managers.
At about 28 years, my purpose-built rental building is getting older but still in fantastic shape considering. I’d much rather be here than in a brand new condo unit that has been forced onto the rental market by desperate ‘investors’.
What’s up with realtors and audits and promoting their good life???
Oops… audis
Is this as good as things get in the economy?
$85 million taxpayer investment
0 new jobs
4000 jobs “saved”
For now.
Plus….
The next set of Hondas made there will be more energy efficient, using less gas.
Sorry, Alberta.
Good thing real estate is so much of our economy. It always goes up.
http://www.thestar.com/business/2014/11/06/honda_to_make_major_announcement_in_alliston.html
Ever notice that pictures of realtors (especially of the female kind) were taken about 20 years ago?
107 };-) aka Devil’s Advocate on 11.06.14 at 11:59 am
“Even my own daughter signed a BRA (Buyer Representation Agreement (EBA Exclusive Buyer Agreement in B.C.).”
You’re somebody’s father?
(I almost didn’t read the rest of your post. Your daughter signed a BRA with you? And you collected a commission from her, only to pay tax on it and then gift it back to her?)
#It’sADogs’Life,OrIsIt?… #HallOfInfamy:BC’sUnsavoury&Unpunished…
[CBC] – Victoria investment adviser David Michael Michaels fined $23M
…”Despite the massive fine, it’s unlikely Michaels’ victims will ever recoup their lost money. The clients Michaels defrauded invested $65 million with him in bogus securities he advised them to buy.
No criminal charges have ever been laid against Michaels, a former mutual fund salesperson, over the alleged fraud.”….
http://www.cbc.ca/news/canada/british-columbia/victoria-investment-adviser-david-michael-michaels-fined-23m-1.2825560
#WhippedIntoTheologicalFrenzy… #AyatollahsChooseDogmaOverDogs… #InvestmentAdvisorsRemainUnaffected…
[AlArabiya] – Iran’s dog owners could receive 74 lashes: Report
…”A group of Iranian lawmakers have introduced a bill to parliament calling for tougher punishments to those who sell, buy or walk pet dogs in public, including paying fines and flogging, the National Council of Resistance of Iran reported on its website….
Parts of the draft legislation read: “Anyone who takes a pet like a monkey or a dog in public and damages the Islamic culture or the health and tranquility of the people – particularly children and women, or attempts to buy or sell them, or keep them at their house, and not to act on the warnings issued by State Security Forces (police), would be fined between 10 to 100 million rials or would receive 74 lashes, plus the pet would be confiscated.”…
http://english.alarabiya.net/en/News/middle-east/2014/11/06/-74-lashes-lie-in-wait-for-dog-owners-in-Iran.html
#117 Mike S
“Think of this. I work in a big company, say I put all my net worth in the stock of this company moreover I take a LOC and invest it in yet more stocks. Because the stock mostly went up for the previous 10-20 years (including 2008) I convince my extended family members to invest (with leverage of course) in the same stock. So now both my future income and the net worth of everybody I know is invested in the same place. Not risky at all”
This is my brother-in-law’s game plan. So far, he hasn’t succeeded in convincing anyone else, but he not only keeps the company stock he’s given, he puts what little he saves into yet more of it. He cannot wrap his head around my argument that having his nest egg invested with the same outfit that cuts his pay cheque might increase risk.
When I tell him he may be on to something, as news of his lay-off may be bullish for company stock, he doesn’t get that, either.
#162 gladiator on 11.05.14 at 10:19 am
I did voluntary work for 6 months at a company that many Ivy League graduates would dream to work for.
This has catapulted my career to such heights that I consider this the best investment I have ever made.
I know several people who worked for free as well. They are all doing quite nicely financially and career-wise.
—————
Does not surprise me that Gladiators are making a comeback.
Panem et circenses for the sheeples.
TheLaughingCon # 101,
“And the world most powerful person (according to Forbes) is:”
———————————————————–
This list is designed for public consumption with the intent to distract.
I very much doubt those listed would make the top ten globally, when it comes to choosing the next sovereign government to be overthrown and IMF-ed or if resistant, just plain invaded, under some lame excuse like, ICEASS.
The obvious exception to the above, being Mr. Putin.
The real money is in resource accumulation and taxation of a beleaguered citizenry, whom eventually begs for a bailout.
http://en.wikipedia.org/wiki/Confessions_of_an_Economic_Hit_Man
#115 Mark –
”Much better to simply require that the kids pay all the utilities and buy food when they’re at home, rather than collect formal “rent” from them.”
Since you would be benefiting from this, could CRA look upon this as a taxable benefit?
#109 Kenchie on 11.06.14 at 12:13 pm
Hey Cato,
This is written by Michael Bloomberg (the person you call a socialist facist). You may agree with his opinion piece… or you may not, but at least give it a read before denouncing it.
http://www.bloombergview.com/articles/2014-11-06/gridlock-leads-voters-out-of-washington
+++++++++++++++++++++++++++++++
So you choose “one thing” bloomberg does politically and call him a hero?
http://www.infiniteunknown.net/2013/08/18/fascist-mayor-michael-bloomberg-seeks-mandatory-fingerprinting-for-nyc-public-housing-residents/
Less than half of NY approve of him and that group are part of his “elitist totalitarian” way of thinking. I’ve been to NY and have seen first hand how he keeps getting elected.
-better bars on this side of the creek Garth [ in my opinion….].
and thanks for letting me plug for our apt and the competition across the street!
#124 james on 11.06.14 at 1:48 pm
Is this as good as things get in the economy?
$85 million taxpayer investment
0 new jobs
4000 jobs “saved”
For now.
Plus….
The next set of Hondas made there will be more energy efficient, using less gas.
Sorry, Alberta.
Good thing real estate is so much of our economy. It always goes up.
http://www.thestar.com/business/2014/11/06/honda_to_make_major_announcement_in_alliston.html
+++++++++++++++++++++++++++
This is yet another example of how govt pisses away money and does not create jobs. They should not stand in the way of job creation. Not only do they get in the way, they pretend to create jobs. And that is why Canada is failing.
MISSISSAUGA — One day she was working as a lawyer in an office plaza in Mississauga, handling millions of dollars of her clients’ mortgage funds in a trust account.
The next day she was gone — and so was $3.5 million.
Real estate lawyer Rita Grewal abandoned her office, her home and her clients in July, allegedly fleeing to India as a millionaire, according to the Law Society of Upper Canada.
http://www.bramptonguardian.com/news-story/4961007-lawyer-missing-along-with-3-5-million-in-clients-money/
MISSISSAUGA — One day she was working as a lawyer in an office plaza in Mississauga, handling millions of dollars of her clients’ mortgage funds in a trust account.
The next day she was gone — and so was $3.5 million.
Real estate lawyer Rita Grewal abandoned her office, her home and her clients in July, allegedly fleeing to India as a millionaire, according to the Law Society of Upper Canada.
http://www.bramptonguardian.com/news-story/4961007-lawyer-missing-along-with-3-5-million-in-clients-money/
“Real estate lawyer Rita Grewal abandoned her office, her home and her clients in July, allegedly fleeing to India as a millionaire, according to the Law Society of Upper Canada.”
Sad but down the road, even regular people likely to choose to flee back to a home country rather than face consequences of 95% mortgage debt and more LOC/credit card debt
Luckily CMHC will cover the loses
The Big Unwind: After Messing up the Housing Market, the “Smart Money” Bails Out. Sales To Institutional Investors Plunge To Lowest Level Since 2010.
http://investmentwatchblog.com/the-big-unwind-after-messing-up-the-housing-market-the-smart-money-bails-out-sales-to-institutional-investors-plunge-to-lowest-level-since-2010/
#55 Retired Boomer – WI on 11.05.14 at 11:57 pm
#45 Kenchie
===============================
You sound very smart so you know if wealth is spread equally throughout the world we would all be poor.
So who created this [email protected]#$% of competition when all corporations and/or government monopolize what they can. Competition is only worth it when everyone is on equal footing but it’s never been nor will it ever be.
THOSE WHO HAVE THE POWER MAKE THE RULES
Ever heard of co-ops? Live in Vancouver, close to downtown, paying $1000 for 2 spacious bedrooms. The apartment complex is mortgaged as a whole, not as individual units. Deposit to move in equals to a month’s rent. No extra payments above that. 25 year mortgage on the whole structure that will be paid off in a few short years.
Imagine moving into a house someone almost paid off, paying less than the market rent with prospect of it being reduced even lower after the mortgage is paid off. No special commitments. Stay as long as you want. Move out any time.
Only additional thing required to compensate of the ridiculously low rent is that you do the work a landlord typically does – put in a few hours per month to do cleaning, take out garbage, or do something else you good at for the benefit of the co-op. Contribute physically and you’ll be rewarded with significant savings.
There are co-ops all across Canada. I paid standard rent for many years and didn’t even know they existed.
Research co-ops. They’re the best of both worlds.
The only disadvantage to a speculator is that co-ops cannot be resold for profit once the mortgage is collectively paid off.
In several cities, it has. Doomsday only comes in a real estate correction to those with light equity and heavy debt. The message of caution cannot be repeated too often for them. — Garth
Good advice. Unfortunately too few heed it. I would agree that too many have taken on too much debt at the current gift mortgage rates. I remember the mortgage on our first home being something close to 20%. It can and, someday, could very well go there again. If rates doubled payments would effectively go up by 35%. As alarming as that might be, fact is most would likely be able to hold on although it would inflict a good deal of stress upon them. I’ve seen far too many teetering on the edge still holding together to think everyone would be screwed. Oh but they will pay dearly for that all too late an education they should have garnered much earlier. On the bright side, what doesn’t kill ya makes ya stronger.
It is as it is and what it should be. Bulls and Bears make money, Pigs get slaughtered.
SHIFT happens. Learn to ride the tide.
Two things;
I am happy to pay those taxes I am obligated to pay.
I’m not stupid. There is accounting finesse that I employ which rightfully & legally mitigates the tax burden for both my daughter and I while facilitating a gift that helps her in the purchase of her home.
BTW, with respect to the CRA; I tend to leave money on the table so that if they do choose to do an audit I am happy to welcome it as I tell them “I was hoping you might call because I did not do (fill in blank) and I was wanting to claim it as I am eligible to do”. Not huge money but enough to make it worthwhile insurance toward ensuring the audit procedure is a more enjoyable experience for me should one be called.
};-)
#138 Mike: “Luckily CMHC will cover the loses”
*****************
Yes! We’re all so very thankful for that….
I WAS being sarcastic, ya know. ;-)
You guys should lighten up. If nothing else those occurrences are teaching us where our weak spots are. What doesn’t kill ya makes ya stronger.
It is what it is. If it’s wrong it’ll be taken care of, eventually. If it’s right… somebody will push it’s limits, testing it and if it’s stong enough they will finally give up.
What is… is..
SHIFT happens. Learn to ride the tide.
};-)
Gawd, now Devil’s Advocate has TWO slogans and a logo….
“Why not let a landlord subsidize you, instead of subsidizing Atrina and the bank?”
’cause at some point the landlord will wake up and raise your rent to make this deal profitable for him or her.
That’s why.
@SrV (#112)
You may want to check that mortgage schedule again, especially the first 60 payments or so. Bankers get their profits first, before the inflation they create eats away at it.
The math is bang-on.
$300,000 mortgage @ 2.99% for 25 years, the monthly is $1,415. $670 of that is principal, and $745 is interest. That is, as you pointed out, most of the payment is interest. There is no error – only in your reading comprehension.
Great unemployment numbers!
Poloz says don’t get a job and move out of your parents basement – instead stay home and work for free in an “internship”.
Which is it? Super employment numbers or numbers so bad the head of the Bank of Canada says work for free?