The urge

FALL modified

“We’re pregnant,” Jim said. I tried to imagine that, and failed.

Just one of those annoying verbal bridges, of course. Margie’s got the bump. Jim’s got the panic. First came the minivan. Then the life insurance. Now the house. Poor Jimmy’s so flummoxed he’s making every mistake in the book. He thinks these are responsible actions when, in effect, he’s creating a more complex, complicated and costly life for his family.

Alas, hormones. They beat the crap out of logic ten times out of ten.

They made an offer on a geriatric bung listed just south of eight hundred. It’s as attractive as a 1978 Oldsmobile, but Jim’s in a panic to buy (the baby’s coming next summer), and convinced this is far cheaper than forking over three grand to rent a similar place.

I did the math. With 20% down (to escape the CMHC premium), including the lost gains from taking almost $200,000 out of their investment account, the monthly cost of ownership is almost $4,900. The premium over renting is north of 60%, plus they’ll have almost $650,000 in debt.

To own rather than rent, that’s $22,800 a year in additional cash flow, or $114,000 over five years – none of it deductible. After sixty months (at 3% variable) they’d add $90,000 to their equity through monthly payments – and still be $24,000 worse off, even with cheap financing. Meanwhile they’re assuming rate risk (variable-rate mortgages will not be 3% in five years), property risk (a 40-year-old house needs serious help) and market risk (real estate is ripe for correction). In other words, this is a losing proposition. Jim’s family will be less wealthy and more indebted – unless house prices continue to climb.

But that’s just one issue. The property he’s after was listed days ago by an unethical agent desperate for an auction. So he priced it low, and bids are being withheld until a week from now. In Jim’s advanced hormonal state he slapped in an offer below the listing price after the agent told him that would likely deter others from following suit. However the opposite’s true. Knowing there’s already paper on the table, other suitors will assume they have to match or exceed the listing price. And Jimmy loses. Which will be the best outcome. But he might rupture.

Well, Jim and Margie’s nesting urge comes at a tough time. Housing in Toronto and Vancouver has reached a point of post-hormonal absurdity. We’ll look back on these days the way we now do the dot-com era, when numby investors paid massive premiums to buy stock in companies without profits – because everyone else was. We know how that turned out.

The latest example is a former beater house in Toronto’s west end that was featured on this pathetic blog a year ago. When 145 Galley Ave was listed it was the hovel of a poor, elderly woman who lived in squalor and disintegration on a street where hipsters now cycle by. No furnace. Missing windows. Leaky roof. Toxic walls from kerosene soot.

GALLEY

Toronto Star photo

The $650,000 asking price turned into a bidding war, and it sold to a flipper for $803,000. He invested $400,000, and it’s now on the market again, 10 months later, for $1.5 million. Most people would call this an excessive, perhaps obscene, gentrification of shelter. But not James McKellar, professor of real estate at York University (I’ll bet you didn’t know they had one). Said he to the Toronto Star: “What we’re going through now is a regeneration of the city, which may be affecting affordability, but where the benefits far outstrip the negatives.”

The benefit is emptying the burbs and intensifying the city core, part of the hipster anti-commute, pro-urban meme now being pushed by media and academia. The negative is housing most people cannot afford, the death of mixed neighbourhoods, and the relentless debtification of our entire society. In addition, plumped, flipped houses bring higher valuations for the entire street, and a relentless climb in property taxes.

Add to that, human nature. The expectation that values will continue to rise, regardless of a stumpy economy or the certainty of higher mortgage rates in years ahead, makes people like Jim and Margie able to justify a bad financial decision. Time, they’re sure, will wipe away any mistake and justify an immediate emotional want.

After all, if prices have gone up for the past five years, will they not go up forever?

Youth is so cute.

175 comments ↓

#1 Nemesis on 11.16.14 at 7:14 pm

#”HavingABaby”… #FromTheYoungHusband’sPerspective…

http://youtu.be/ViPVPgUJUgM

#2 Van Isle Renter on 11.16.14 at 7:16 pm

Three necessities of life: Food, Clothing, Shelter.

We all know that expensive Food and Clothing are bad.

But we need an Ph.D. academic to tell us that expensive Shelter is good.

It’s hell being stoopid. My head hurt.

#3 Retired Boomer - WI on 11.16.14 at 7:20 pm

145 Galley Ave.

Renovated antique hovel. Skinny lot, no parking, polluted air, and nosey neighbors.

everything city living brings! Sure buy it, you who know no better.

As for me, give me the small towns where costs are but a third, and incomes still 90%. See who gets to freedom faster.

#4 LH on 11.16.14 at 7:22 pm

Galley, what a wonderful street name to put a mortgage on.

#5 Mark on 11.16.14 at 7:25 pm

The travesty is that the youth who are chasing the (now-deflating) housing bubble, are missing out on equity prices that are within earshot of their 2009 lows when adjusted for retained earnings and earnings growth.

As risk premia (but probably not BoC rates) rise, affordable mortgage payments and a comfortable standard of living will likely give way to a situation where disposable income is completely sucked up by a mortgage on a house with declining equity. Negative equity, as the US experience has proven, is a trap that few families can really extricate themselves from without bankruptcy.

Some exciting times ahead, that’s for sure, but mainly for the youth who used their equity for productive investment, rather than chasing houses at price levels only slightly below the apex reached last year.

#6 Michael Motorcycle on 11.16.14 at 7:27 pm

When will you return to Kelowna? Would like to hear another awakening speech.

Cheers.

#7 ptbobman on 11.16.14 at 7:27 pm

deflation isn’t bad not historically unusual – also with US Canada home comparisons
http://www.equedia.com/forget-ebola-worry-about-the-coconut-virus/

#8 MOTY on 11.16.14 at 7:29 pm

The only way we can stop this insanity is to post the picture of the buyer beside those houses…at the end of the year we would choose the moron of the year!

#9 VanDammeCouver on 11.16.14 at 7:34 pm

Buying life insurance is not a mistake…

The wrong kind sure is. — Garth

#10 Van Isle Renter on 11.16.14 at 7:34 pm

“Grubering” – The deliberate spreading of misinformation as fact in order to press towards a desired outcome. Relies on the assumption that the public is too stupid to handle the “truth” and that if they knew the “truth” they would not make a decision that the academics want. Named for MIT Professor Johnathon Gruber who admits that he lied constantly about Obamacare to sell it to Americans.

http://wattsupwiththat.com/2014/11/16/new-term-grubering-and-how-it-applies-to-climate-alarmism/

A bit off topic as the link applies to Global Warming, but the principle applies to everything from CREA statistics, fracking, GMO’s, polar bears, walruses, Putin claiming he is not in Ukraine, and why high shelter prices are good for you.

#11 Sheane Wallace on 11.16.14 at 7:41 pm

Harpo all over the news today.

Is there penalty for defaming Canada? Can I sue him?

#12 RealistvsExtremist on 11.16.14 at 7:42 pm

Such smart people but no one can answer (or wont answer) why awesome oil in the ground Canada charges 50 cents more per liter than south of the border. Gotta pay those public sector wages and benefits in a collapsing economy somehow I guess.

#13 prairie person on 11.16.14 at 7:43 pm

Since I’m at the other end of the spectrum, my concern is not young people taking on crazy amounts of debt in an asset that will decline either as it ages or as the housing market falls, or both. My concern for my age group is the inexplicable, to me, craziness of people selling their city homes for serious profits but then using the money to build incredibly expensive houses on large properties in the country where not one but two cars are needed. This age group, over the last ten years has gone from 65 to 75. They are, as a doctor acquaintance of mine said, just a mess of health problems waiting to happen. Many of them built on the assumption that houses were liquid assets. If one of them had a heart attack, failed kidney, cancer, dementia, they could sell flip the mansion, take the cash and move to a desirable area in the city that is close to medical care, grocery stores, drug stores, where a car wouldn’t be necessary. Someone young might want to sell and a long wait might not be serious but when you are over sixty-five and something goes wrong finding out that no one is interested in buying your house at the moment is serious. That moment can turn, as it has for a friend of mine, into months. Half a year. Meanwhile it means driving back and forth to the city, renting a motel room, restaurant meals, parking–none of it is cheap. A lot of these people did not pay cash. In spite of their age, they took out a mortgage. One bank manager said you’ll never pay it off but don’t worry about it. When you die, the place will get sold and the mortgage will get paid. Getting old doesn’t mean getting smart.

#14 TEMPORARY® Foreign Prime Minister on 11.16.14 at 7:46 pm

“….What we’re going through now is a regeneration of the city, which may be affecting affordability, but where the benefits far outstrip the negatives….”
=========================

“unaffordability” is a benefit? Who knew?

(“strong housing market” is sooo yesterday.)

#15 earthbound misfit on 11.16.14 at 7:49 pm

cute = STUPID. And you can’t fix that.

#16 Smoking Man on 11.16.14 at 7:51 pm

I’m considering greif counseling. Sorry for lack of posts fans but I’m a bit fk up at the moment.

Not for mom, she was old.. Took great care of her. She wanted for nothing.

My nephew Mark…. That’s a different story.

I encouraged him to clime mountains, take risk. Live large.

I loved the little bugger. His parents text book do what’s right. He was perfect, and his mom and dad.

The kid looked up to me. Loved my crazy.. I feel like some one has reached inside my ass and ripped my intestines out.

Not sure if I can get over this.. The kid started out with a speech and hearing problem..we all though he was retarted. Hospital for Sick Kids, fixed him..

It’s rare when a successful young man can conquers the world without having any negative feelings toward him from rivals…

He was perfect…

This realy hurts..

#17 Kapital on 11.16.14 at 7:55 pm

Ugh I live in Vancouver and it gives me nightmares about potentially buying a home, even something more modest like a townhouse. I’d so much rather keep the investment portfolio and large cash cushion and just rent. I’d rather build up the equity portfolio and use the dividends to subsidize rent.

#18 Bill Gable on 11.16.14 at 7:57 pm

Sixteen floors above the Beach – view to die for, all the mod cons – sold to an “Investor”, from, where else….? Beijing.

$5.05 million. All cash deal.

I ask again – if Chinese Citizens are allowed a MAX of 50,000 RMB in Foreign exchange – per annum – how does this fly?

I found out.

The owner is an Officer in the Red Army.
Gee, they must pay well.

How do I compete with this kind of ‘investor’, skewing Vancouver prices like this?

How do tax authorities deal with this guy? (*Bet he has bought an “Investors” *COUGH* Visa).

I mean, I feel like Canadians are getting it in the ear, while the rich are just thumbing their noses, or worse, paying the right official. (*God Help us).

After living in “The Third World” for three years, I am wondering if we are just as crooked as my once beloved Mexico, but with worse weather.

Worrying.

#19 Realties.ca » The urge on 11.16.14 at 7:57 pm

[…] Source: http://www.greaterfool.ca/2014/11/16/the-urge/ […]

#20 Terrier on 11.16.14 at 7:58 pm

When s**t hits the fan, go and buy Eli Lilly stock … Prozac sales will go through the roof!!!

#21 Detalumis on 11.16.14 at 7:58 pm

#3 Whatever, plenty of people like the city. You know walkability, excellent transit, variety of neighbourhoods, stimulation, head office jobs. Roncesvalles has a movie theatre you can walk to by the way. The house has laneway access to a garage, you know what laneways are, I guess not.

Plenty of people dislike small towns, there are nosier neighbours in small towns than in any large city, you have insular people, lousy health care, Tim Hortons as the social centre, strip malls and having to drive everywhere. Seniors are prisoners without their car so they drive with dementia, macular degeneration, strokes, the list goes on and one. I couldn’t care less if a house was 200K in the back of beyond small town anywhere, I would never live there.

One generation ago many places in Canada looked a lot closer to Roncesvalles, it’s called a streetcar suburb, designed before the planners got “education” and learned to build houses for cars and not people.

This part of Toronto ain’t going down in value and lots of people, particularly the kids who grew up in the small towns and suburbs, really value one of the few places left that has everything, right there. It’s why Manhattan is so expensive and Houston is not.

#22 Keystone will be Vetoed and Alberta will Implode on 11.16.14 at 8:03 pm

Delusional types (including Harper) are thinking that the Republicans will be able to overturn the certain Obama veto of Keystone.

Wrong. Here’s why.

http://insideclimatenews.org/carbon-copy/20141107/house-can-gop-override-obama-keystone

Add to this the other economic messes we are stepping into and it does not look good.

Fire sale prices for Alberta real estate are coming soon.

#23 Linda on 11.16.14 at 8:03 pm

So is this a before & after shot of the Galley Ave flip? Of course, the shots are at different times of year but got to say, the renovated house (if it IS the same one) looks less charming after renos. As I recall, you had some interior shots of this place when it was up for sale first time around & lordy, it was more than a little scary & sad to see that someone was living under those circumstances at an advanced age…..

#24 Cato the Elder on 11.16.14 at 8:06 pm

Re: #186 last post Chapter 9

The US is in no position to lecture the world on almost any issue.

They are the only country in the history of the world to use nuclear weapons against a civilian, or military, population. And yet they go around the world talking about the ‘dangers’ of other nations acquiring them.

The only danger is, of course, that they couldn’t bully that newly nuclear powered nation any longer.

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

At one point, earlier in their history, the US was the envy of the world. People respected them and longed for a better life – travelling for weeks at sea in horrid conditions just for the chance of freedom.

People and nations around the world wanted to EMULATE them because they saw something good there. There was no animosity either because they weren’t interfering in others’ business – just setting a good example of what FREEDOM can really do in advancing humanity.

That is no more. After world war 2, and the assassination of Kennedy, they became a de facto empire. The military industrial complex that the US founders’ so warned against took complete control of the congress and presidency.

It will exhaust itself as so many other empires have in history – hubris into overextension and bankruptcy. It is too big a ship to turn around now. Only time will end this, and it may not be pretty. The first empire to collapse with nuclear weapons, save the Soviets. But the Soviets didn’t have nearly the breadth or worldwide involvement as the US, so who knows.

#25 Mark on 11.16.14 at 8:09 pm

“When s**t hits the fan, go and buy Eli Lilly stock … Prozac sales will go through the roof!!!”

Prozac has been generic for well over a decade now. Along with its chemical cousins. So buying Eli Lilly stock to profit from a hypothetical increase in depression would probably be a poor choice (but you might not do bad in the stock for other reasons!).

Sixteen floors above the Beach – view to die for, all the mod cons – sold to an “Investor”, from, where else….? Beijing.

$5.05 million. All cash deal.

How do you know this was an ‘all-cash deal’? Are you an attorney handling the transaction? You do know that lots of people like to lie, and/or embellish the truth, right?

#26 Jeff on 11.16.14 at 8:10 pm

We’re near housing correction now. Economy is near delfation, like comodity price is suggesting. The canadian housing market won’t bear a rise in interrest rate and we loses jobs at the benefit of others countries where salary is lower than us.

Big corporations who bring good wages no longer come in canada. Demographic is terrible (low birth, high retirement), which means we will have to support more boomers as they take their pension.

#27 Mark on 11.16.14 at 8:12 pm

“Such smart people but no one can answer (or wont answer) why awesome oil in the ground Canada charges 50 cents more per liter than south of the border. Gotta pay those public sector wages and benefits in a collapsing economy somehow I guess.”

Let’s see, Canada has what, $600-$700B of federal government debt and a mostly fully funded CPP scheme. While the US has $17T of “on-balance sheet” of debt (so at least twice that of Canada per capita), plus is short another hundred trillion or two in “off-balance sheet” debt.

Obviously the Canadian system, with higher petrol taxes, is far more sustainable, than the US system where substantial tax hikes or currency devaluation is pretty much a given at this point, the latest deflationary round aside.

#28 Cato the Elder on 11.16.14 at 8:29 pm

Re: last post #184 devore

Leisure time IS a result of productivity. You think weekends are a result of government regulations or unions? Hardly.

If I went to a poor nation and issued a proclamation that: from this day forward, all people shall have leisure time. No more working weekends. No more child labor.

Do you think suddenly they would be wealthier? Nope. What would happen is they wouldn’t be able to afford almost anything. Prices would spike, people would go hungry.

Our nation is PRODUCTIVE enough that we don’t have to send kids to work. When our nation was first founded, we had kids in factories because they HAD TO work there in order to help the family. If politicians had legislated kids out of the work force, it would have actually been CRUEL – they wouldn’t of been able to eat!

The middle class DID NOT EXIST for most of human history. It has been around for about 200 years. It has only been around as long as free market principles have been adopted. Impartial judiciary. Property rights. Individual liberty. Contract law. That’s about it.

The reason we no longer have as much leisure time as was available in the 50s and 60s is because of our money. The banks issue fake paper money, and each and every year it’s purchasing power decreases. When we had gold and silver money, this was not possible. People’s savings were not under attack. Pensions were easily fundable because their value was not being eroded every passing minute. What this means is we are on a ‘treadmill’ in which we have to keep on running. We have to keep fighting to keep up with inflation. That means work more for less.

If you disagree with that assessment – ask someone that was alive in 1967 if they have any old coins left. 1 silver dollar from that period is worth 25$ today. 1 silver quarter from that period could buy a gallon of gas, and it can STILL buy a gallon of gas today.

Sooner or later all paper currencies return to their intrinsic value: nothing. We are in the middle of this process right now.

Re: last post #185 JimH

You’re right – China does engage in much of the same stupid behaviour as the west. The key differences are:

1. Overall, they are headed in the right direction. They have been pairing down government involvement for decades, while we have been increasing ours
2. They have the savings and trade surplus to do it. The US and Canada go into massive debts to do so
3. The size of the bailout is miniscule compared to what the US did. They spent over 1 trillion dollars, and more than that, on subsequent QE rounds

Overall, the trends indicate that China is going in the right direction. This century, and perhaps the next if humanity survives, will belong to China.

#29 Retired Boomer - WI on 11.16.14 at 8:29 pm

#20 Detalumis

A “Laneway” is another word for an alley? A small usually one way traffic lane where garbage cans and garage doors front the “Laneway”? If my guess is correct then I know, if not, then you are right I don’t know.

As a stroke survivor (had one at 43) I find the old structures in a city a real bitch to maneuver. Give me the newer builds of a small town, not a strip mall please, but a real town with free standing buildings and no BIG BOX stores. I can drive the half hour to see that crap, the Docs, and broader shopping.

I can see the deer, listen to the wind, see the stars unencumbered by ‘night sky’ brightness in my little town of 500. Yes, a car is quite helpful, but we also have a very good senior transit system available here. The neighbors are quite decent, and yes, you are an outsider for 20 years but you get used to it.

I have lived in Milwaukee, Chicago, Detroit, and Buffalo for cities as well as several small towns. For me, the smaller towns have the quality of life, and variety I need. Should I make advanced geezer age, I might need to reassess.

If you have lived in both settings you can fairly make up your mind, if you have not, you are unqualified to speak an opinion. By the way, do the street cars still run?

#30 nonplused on 11.16.14 at 8:29 pm

And don’t forget all the maintenance. That’s what I did most of this weekend. Yay! Maintenance!

It all started with bees this summer. We all love bees, bees are our friends, but not when you’ve het 3 to 10 new ones trying to escape your basement every morning! So the hunt was on to try and figure out how the little buggers were getting in there.

I never did figure it out for sure, but guess what I found in the process? Mice! Yay mice! Somehow the little buggers manage to get under the concrete stairs, make a hole in the header wall that covers the joists, and built a cozy little nest in the insulation between the joist. Lovely. You know how hard it is to fix a hole in the wall between the joists that’s under the concrete stairs? Well I don’t either because I haven’t figured out how to do it yet. For now I just pumped a can of Great Stuff insulating foam into the hole and I’m hoping it filled up the void under the stairs. But there’s no way to know for sure, for all I know it’s just sitting in a big pile on the ground. Oh well the hole is plugged for now.

Why they didn’t put some sort of a better protection on this little bit of wall under the stairs I don’t know. Maybe they thought because it was under concrete it was safe. But as far as I can tell there is nothing but chip board and paper for about 4 – 6 inches between the bottom of the stairs and the foundation. Easy peasy for a mouse to get through. And this is a fairly new house. The rest of the header wall has stucco on it which is a significantly better rodent deterrent.

Thank goodness on the inside was the furnace room, or I’d have had to bust drywall to get at this mess, assuming I could find it.

#31 Jimmy on 11.16.14 at 8:31 pm

Buying life insurance is not a mistake…

The wrong kind sure is. — Garth

I’m thinking it’s been about seven months since you said you would write about insurance. Looking forward to reading what you have to say about it. Term all the time?

#32 Steve French on 11.16.14 at 8:34 pm

Smokey:

Earth is just a speck of dust revolving around a minor star in the backwoods of our galaxy.

It’s really mind blowing if you stop and think about it.

Dust in the wind dude,

#33 VanDammeCouver on 11.16.14 at 8:38 pm

Buying life insurance is not a mistake…

The wrong kind sure is. — Garth

I assume you’re talking about permanent life insurance Garth. Definitely there are clowns out there who will do anything they can to sell you a crappy universal life policy and generate a commission cheque for themselves.

However I think you should be cautious when discussing life insurance. A lot of people read your blog and take your advice, and you don’t want to give people the impression that life insurance is not a good product.

It’s all about finding the right type of insurance professional, just like it’s all about finding the right type of investment professional.

Just what I said. — Garth

#34 Deckard on 11.16.14 at 8:42 pm

Re #15 Smoking Man

I think we’ve all lost a loved one at some point. We share the pain. It’s a sad and cruel existence.

#35 TEMPORARY® Foreign Prime Minister on 11.16.14 at 8:42 pm

#10 Sheane Wallace on 11.16.14 at 7:41 pm
Harpo all over the news today….Is there penalty for defaming Canada? Can I sue him
=========================

No, but you can vote him out of office next year, assuming he doesn’t use an omnibus bill to secretly move the ‘fixed election date’.

Might have trouble finding him, though. Best to check all the broom closets first…

#36 VanDammeCouver on 11.16.14 at 8:47 pm

It’s all about finding the right type of insurance professional, just like it’s all about finding the right type of investment professional.

Just what I said. — Garth
____________________________________

What can I say, great minds think alike!

#37 Cow Man on 11.16.14 at 8:58 pm

Sir Garth:
I thought that you were going to tell Jim to “stay away from the Life Insurance guy”. Do you not think that you should have?

#38 4 AM Sunrise on 11.16.14 at 9:00 pm

Well, I know this much: Cato the Elder is a Millennial. Or at the very least, spells like one.

#39 crossbordershopper on 11.16.14 at 9:02 pm

it will be much easier in your elderly years to simply live in a mid sized city where you can own your little place. just make sure your not far from the hospital and have the doctors phone number on speed dial, everything else is irrelevant. we simply get older, till the end, if you live in a castle or a shoe box condo, we end up in an urn or a six foot box. we all downsize in our old age.
what is this constant talk about kids. who cares about them, they will find their way, we did.
big debt little debt. listen kids like stupid people are taken advantage of because their young and stupid and believe stuff you tell them.
does an old military commander go into battle, no he pumps up the troops- young eager beavers to go into battle for country and fame, and probably die, but thats not going to happen to you, its your buddy that will die. you will be the victor.
nothing changes in life, old take advantage to youth.

#40 Freedom First on 11.16.14 at 9:02 pm

Garth, thanks for the story of Jimmy and Margie. Flummoxed is a good word for young Jimmy.

Hopefully he won’t get the house he bid on and listens to you instead. However, being flummoxed, and likely surrounded by people who think his thinking is sane, including Margie, he could be in for a real screwing like he’s never had before. I consider Jimmy and Margie the average Canadian young couple today. There is most certainly proof this is true.

#41 Julia on 11.16.14 at 9:03 pm

Here’s another perfect example of what you are talking about. This house is in termiteville, backs onto Gerrard in Chinatown East and has no laneway so no garage, just ugly front pad parking, but a decent yard. They spared no expense in renos and I know the contractor so I know the workmanship is stellar, but really, 1.8 million?? At least the jail is gone now I suppose.

http://www.realtor.ca/PropertyDetails.aspx?PropertyID=15023000&cul=1

#42 God here on 11.16.14 at 9:09 pm

#15 Smoking Man on 11.16.14 at 7:51 pm
I’m considering greif counseling. Sorry for lack of posts fans but I’m a bit fk up at the moment.

God God God God God God God God God God God God

Well Smoking Man you challenge me and I give grace. Now is the time to come to me, I’m always here.

#43 MoneyMyHoney on 11.16.14 at 9:10 pm

This is a different look at Business, through the eyes of a mystic: Business of Business: http://www.youtube.com/watch?v=RUeQVyuX4hM

#44 Mr. Reality on 11.16.14 at 9:13 pm

32 VanDammeCouver on 11.16.14 at 8:38

Life insurance is simply a fixed income scheme designed to gauge ever more money from the consumer in order to allow insurance company to invest their money in leveraged products.

Take the money and invest it yourself in a portfolio like Garth has talked about on this site countless times.

The game is designed to extract as much money from us as possible, insurance, interest, taxes etc. Once you realize this you will reach enlightenment.

Do you best to pay them nothing :)

Mr. R.

#45 nonplused on 11.16.14 at 9:16 pm

Oh and the other point to make about maintenance especially of newer houses is that chip board is absolute crap, you must make sure your house is absolutely sealed from water and I would inspect it every year or 2. Chip board simple blows apart if it gets wet for any length of time. My little not even exposed wall I talked about before, maybe 4 inches by say 4 feet, is already black on the inside and the mice got it. The only moisture that could be getting in there is coming from a tiny crack where the concrete stairs have moved a bit away from the house due to settlement (which I sealed today as part of my great weekend adventure).

Seriously folks, if I were building a new house today, I would specify and insist on using real wood headers with the joists placed before the concrete and the concrete coming up through the joists like the did it when I was young. Also no chip board. Insist the whole house be clad in plywood sheeting even the roof. This chip board stuff is simply just junk. It will cost a bit more, but at least the house might outlive the mortgage.

And anything out of sight should be pressure treated plywood. Just in case it’s getting a bit of water there and you can’t tell, like under concrete stairs.

I would even say make sure and use plywood for the floors. Sure they are supposed to be dry but this chip board stuff is crap. It can’t take any water. Plywood isn’t as great as real wood either but at least if the water doesn’t get through the first ply it dries out and it’s ok. Chip board is instantly damaged, and it only gets worse. A crack in the grout that goes unnoticed, and well you are cutting up the floor to replace it a few years later.

So if you have a chip board house, as I do, always always always make sure that chip stays dry.

And in Canada you are fighting a double burned. If your vapor seal isn’t working 100%, frost and ice will build up behind the insulation and guess what? More rot you can’t see! Stuff plywood and pine planks could take for years but chip board can’t. So you have to make sure the chip board is well protected from water on the outside and also from air on the inside. The stuff is crap, I am amazed we are allowed or choose to build houses out of it. It’s crap.

I have another chip board story. I bought a house with a new fence, recently installed, before I knew how crappy chip board is. The fence was basically painted chip board with lattice at the top. 5 years later it was totally ruined, I replaced it with pressure treated pine. Chip board is totally crap and nobody should use it on anything expected to last more than 5 years. It absolutely cannot get wet.

And so what they do with new houses is wrap the chip board in plastic to keep it dry. It’s not enough but it’s better that when they were still wrapping it in tar paper, which works for plywood and pine planks, but nothing is good enough for chip board. Chip board sucks. It must be sealed with Tremclad to have even a decent chance (which is another story).

#46 Diane on 11.16.14 at 9:17 pm

If the baby is not due til summer, why the hell buy a house now? Wait a couple of years. Its not like infants require a lot of space.

#47 VanDammeCouver on 11.16.14 at 9:18 pm

@ JIMMY #30

“I’m thinking it’s been about seven months since you said you would write about insurance. Looking forward to reading what you have to say about it. Term all the time?”

Not all the time, there’s definitely a good time for permanent insurance. Keep in mind that insurance policies pay out their death benefits tax free, meaning permanent insurance policies offer an important tax planning feature for business owners as well as people wanting to leave an estate for their family.

There are numerous reasons to use permanent insurance, even as an investment (Garth will be mad at me for saying that, but it all depends on a multitude of factors like age, timeline, current assets, etc).

Good advice is key.

#48 My House is my Friend on 11.16.14 at 9:23 pm

This is disturbing. It seems that all mortgages in the USA are now being registered electronically and are being securitized by the banks. Some people who have their houses paid off are being foreclosed on and are unable to prove ownership.

Starts around 14:00
https://www.youtube.com/watch?v=6pwrHYYrBOs

Which brings me to a question I have? I recently paid off my mortgage with RBC. All I have received from them was a letter telling me that my mortgage has been discharged. Shouldn’t I have received a document of some kind proving my ownership. Any comments would be appreciated.

#49 Herb on 11.16.14 at 9:23 pm

#11 RealistvsDunce,

sorry, but I must have missed where you established the connection between high gas prices and public servants.

Or do Neandercon tubthumpers not need causal connections?

#50 TnT on 11.16.14 at 9:24 pm

#27 Cato the Elder

You’re right – China does engage in much of the same stupid behaviour as the west. The key differences are:

1. Overall, they are headed in the right direction. They have been pairing down government involvement for decades, while we have been increasing ours

** Ask Hong Kong if China has been pairing down government

2. They have the savings and trade surplus to do it. The US and Canada go into massive debts to do so

** Ask their citizens how China’s environmental protection agency is doing… All that savings and surplus and none of it spent on keeping their water and air clean?

3. The size of the bailout is miniscule compared to what the US did. They spent over 1 trillion dollars, and more than that, on subsequent QE rounds

** Any yet more of them are willing to leave China and relocate to USA or Canada than the other way around except for you maybe?

Overall, the trends indicate that China is going in the right direction. This century, and perhaps the next if humanity survives, will belong to China.

** Not in your lifetime even though you live the benefits of the West and slag it for the East

Let us know if you can even read this site from China… you are moving there right?

#51 VanDammeCouver on 11.16.14 at 9:27 pm

@ Mr. Reality #43

32 VanDammeCouver on 11.16.14 at 8:38

“Life insurance is simply a fixed income scheme designed to gauge ever more money from the consumer in order to allow insurance company to invest their money in leveraged products.

Take the money and invest it yourself in a portfolio like Garth has talked about on this site countless times.

The game is designed to extract as much money from us as possible, insurance, interest, taxes etc. Once you realize this you will reach enlightenment.

Do you best to pay them nothing :)

Mr. R.”

Sorry Mr. Reality, but your comment is nonsense. Just because a company makes a profit doesn’t mean the service it provides is bogus (though sometimes it is).

There are plenty of publicly traded companies that are profitable, but whose services are still important. Insurance companies are one of them and completely legitimate, though I can’t always say the same about insurance agents.

With insurance companies, their service is actuarial science, which is the law of big numbers. Nobody knows if you or I will die in 10 or 20 years, but sample a population of people similar to you and me, and patterns start to emerge. That type of pattern-finding is actuarial science, and it is a valuable service.

Society as it is today could not exist without insurance.

That’s fairly black and white style thinking Mr. Reality, you should aim for a more balanced style of thinking, there’s a lot of grey out there.

#52 ronh on 11.16.14 at 9:29 pm

DELETED

#53 Randman on 11.16.14 at 9:31 pm

Tanned and Sassy ( from Yesterday)

Greetings neighbour to the North…I’m in Penang Malaysia
Agreed…it’s so nice not to have to hear the constant Canadian BS over here…just sit by the pool …..and eat fantastic food … live like a king here for $1000 month!

But what the hell happened to the Lions????

#54 CalgaryRocks on 11.16.14 at 9:38 pm

Which brings me to a question I have? I recently paid off my mortgage with RBC. All I have received from them was a letter telling me that my mortgage has been discharged. Shouldn’t I have received a document of some kind proving my ownership. Any comments would be appreciated.
======================

Your ownership is the title registered at the court house. The mortgage is also registered there. Once it’s discharged your title is clear.

You’ve always owned the property. The bank was just first in line to get their money back in case you defaulted or sold.

Don’t worry you won’t get foreclosed.

#55 Gary on 11.16.14 at 9:41 pm

Mayor Moonbeam “Paver” Robertson got re-elected. His developer buddies who got him in again must be licking their lips. 4 more years of lack of consultation on development projects, backroom deals, and ugly hi rises popping up like weeds further obliterating the mountain views and causing more traffic congestion, and more bike lanes.

#56 Kenchie on 11.16.14 at 9:42 pm

#27 Cato the Elder on 11.16.14 at 8:29 pm

Stop talking about China. You do not know anything about China.

There is a reason why 47% of Chinese with $1.5m in investible assets are planning to leave the country.

#57 Gary on 11.16.14 at 9:47 pm

It’s Chinese investment driving the market in Toronto, many paying cash for those crappy little condos, which will all need to have their windows replaced in 15 years.

#58 ptbobman on 11.16.14 at 10:00 pm

Cold November – could it be the sun slowing down?
BBC article:
http://www.bbc.com/news/science-environment-25771510

#59 ptbobman on 11.16.14 at 10:02 pm

Deflation occurred in the U.S. during most of the 19th century (the most important exception was during the Civil War).

http://www.equedia.com/forget-ebola-worry-about-the-coconut-virus/

#60 SWL1976 on 11.16.14 at 10:08 pm

#11 RealistvsExtremist

Such smart people but no one can answer (or wont answer) why awesome oil in the ground Canada charges 50 cents more per liter than south of the border

—————————————————————-

Canada refines very little gasoline. We as a nation are not big on value added business here. Maybe its our economic action plan, maybe its better for our real owners, who knows? Since Diefenbaker sold out our Avro Arrow its been business as usual

What does Canada produce these days besides massive real estate debt?

Also our oil in the ground is not that awesome its mixed with sand

#61 Cyclist on 11.16.14 at 10:12 pm

The 1978 Oldsmobile was stylish and a great car.

http://www.hemmings.com/classifieds/dealer/oldsmobile/cutlass_supreme/1690407.html

#62 Chickenlittle on 11.16.14 at 10:16 pm

Smokey you SHOULD talk to someone…that’s a serious loss you’ve experienced.
I lost my father when I was still very young. It hurts more now as an adult than it did as a child. I’ve accepted it, but, you know…
You’ve buried someone that was like a son to you. That’s very sad! In an ideal world that wouldn’t happen.
I hope you find peace soon…

#63 gladiator on 11.16.14 at 10:16 pm

Garth, sorry for my angry rant at this stupidity and “problems” of this country.

Sh|it, really? My best man’s kids were born when he and his wife lived in a room where, when you unfolded the bed, there was no room for walking. One of those kids is now studying medicine in France, and the other one is a star in her school, soon to graduate with huge merits. Both girls, well educated, well raised and with their heads in the right place.
My kids were both born when we rented (we still do) and we surround them with much love, care, hugs and attention. The result? My older one (in grade 3) brought home the report card with only Es (for excellent) and only 3 “Progressing well”s: for dance, phys ed and music; the rest are all “progressing very well”s – parents will know what I mean. She is getting tested for the gifted program soon. Reads so fast that she will get us broke for spending on books (we love to buy them because it’s a b|itch to get them through the library since the books of interest are oversubscribed) and wins most of the times when we have an argument/negotiation (whenever she has a valid point, we let her win, because this develops her negotiation/selling skills that we consider crucially important in life).
Anyway, my point is that it IS possible to raise normally developed, balanced, loving, smart children in rented digs. I mean, if you can afford to buy a house AND buy the many developing things for the kids – books, puzzles, toys, experiences, travels, etc. (we spend ~300$ on this per month [travels are in a different budget]) – by all means, buy it. But if you’re stretched to the limit and have to choose between paying the mortgage and investing in your kids – the hell with the mortgage! The mortgage will not take care of you when you will be pissing your pants while being delirious of your whereabouts – your kids will. The kids who you hugged millions of times, who you spent your time with reading books, discussing, asking them about their ideas, fears, wishes, dreams, etc. The more time you give to your kids when they’re small, the more time they’ll spend with you when you’re old. That’s just how life goes.
It makes me sick to my stomach to read about all these cases when new parents think that they MUST buy a house when little ones are in the oven. It’s like a rogue program overrides their minds that they have to behave in a certain way and do certain things – buy a house – buy a house – buy a house! How can it be explained to them that the kids don’t give a rat’s azz about how big their home is – all they care about is loving and caring parents who give them lots of attention, who hug and kiss them all the time, who provide a nurturing environment for their good development; not parents who buy a big-azz house and then work crazy hours in order to pay that mortgage and have day cares or nannies raise their kids, because they just don’t find the time for this. That ball chained to their necks called “mortgage” screws up their and their children’s lives and create this huge divide in the family between parents and kids, so that the young generation learns its values not from the people who truly wish them well (the parents), but someone or something else – the “educational system”, the TV, the street.
I just find it so totally damn wrong. Or maybe I am wrong in my concepts – I don’t know. I do what I think is right for my progeny and will instill these values in them. Time will tell if I have it right. Now, I will go and kiss my kids good night.
end of rant.

#64 Stillrentingstillsaving on 11.16.14 at 10:20 pm

5 million in cash for a vancouver condo

Well, if true, its a criminal hiding ill gotten gains in Canada. Its certainly not novel

What i find comical is that Vancouverites have been reaping the benefits of foreign money for almost 60 years – ever since the Canadian gov’t began trading passports for cash. Where do you think a large percentage of the money and infrastructure in this city come from? It isnt from the local economy. It isnt free – and i find many people here feel entitled to all this wealth. News flash – reap what you sow

#65 Danforth on 11.16.14 at 10:27 pm

Not sure how the reno passed inspection. Stairs that high require a railing! anything else not to code?

#66 SWL1976 on 11.16.14 at 10:32 pm

#15 Smoking Man

—————————————-

Sorry to hear. Easy on the booze though it will only cloud your mind. Time heals

I’m sure he would want you to be the same old smokey

#67 Pete on 11.16.14 at 10:41 pm

Hey Garth, what do you have against a 1978 Olds. I just reluctantly had to get rid of my 1978 Olds Toronado XS (560,000Km). In my opinion, it was the best car ever made. Now I drive a 1981 Chevy Citation. 1985 was the last year in which any good cars were made. By the way, I’m 43 years old and not some 90 year old fondly recollecting the good-ole-days.

#68 45north on 11.16.14 at 10:42 pm

The $650,000 asking price turned into a bidding war, and it sold to a flipper for $803,000. He invested $400,000, and it’s now on the market again, 10 months later, for $1.5 million.

key phrase “it’s on the market again”, if it’s so great why doesn’t he live there?

prairie person : My concern for my age group is the inexplicable, to me, craziness of people selling their city homes for serious profits but then using the money to build incredibly expensive houses on large properties in the country where not one but two cars are needed.

Many of them built on the assumption that houses were liquid assets.

so there’s not much difference between a $400,000 house and a $800,000 house

no one is promising that you can sell your house at all, no one!

Detalumis : (simulated backwards) This part of Toronto ain’t going down in value It’s why Manhattan is so expensive and Houston is not.

I know the area. I’d say if prices in Roncesvalles declined by 10% then prices in Brampton would be down 50%. I don’t know the future but I’m worried about the long term effects of the Toronto condo market. I’ve heard predictions that the glass condo’s will become very expensive to maintain 20 years out – resulting in a net loss.

Retired Boomer – WI : talking about Roncesvalles: By the way, do the street cars still run?

they sure do

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

#69 waiting on the westcoast on 11.16.14 at 10:48 pm

#18 Bill Gable re: competing with Chinese Army Officer

Anecdotes are not markets…

If you really believe that the market is utterly owned by HAM, stay on the sidelines. No one is forcing you to buy. As for me, I think it is more likely that the locals have bought into velvet rope and are willing to sell their future to get into the club…. I am still… Waiting…

#70 Hawk on 11.16.14 at 11:05 pm

#48 My House is my Friend on 11.16.14 at 9:23 pm

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

You need to go to the Land Registrar and ensure that there is n mortgage showing on your title. Take the document with you. As long as there is no mortgage on your title you are fine.

#71 Paul on 11.16.14 at 11:10 pm

A flipper Relator,Talk about not being diversified if things slow the house price drops and so does income ouch.

#72 Kay on 11.16.14 at 11:16 pm

I think one reason people are in such a rush to buy is they are tired of hearing that “renting is for losers”.

Even though I only pay $1100 rent for large, comfortable and well-managed apartment on Vancouver’s west side, I am growing so weary of the vicious comments I read everywhere about only those who are un-ambitious losers and addicts rent.

It’s true I save lots per month and have a debt-free life, I do feel kind of hopeless sometimes. I tried to do things right and stay out of debt etc but I think I am the greater fool actually.

#73 Obvious Truth on 11.16.14 at 11:17 pm

Somebody please explain the rule of 72 to them. It has nothing to do with canada, russia.

On another note maybe espo needs to be at the g20 to rally the troops.

#74 45north on 11.16.14 at 11:20 pm

ptbobman : could it be the sun slowing down?

my feeling is that the total radiation from the sun is declining but that this decline is offset by increased green house gases. Even if true, the pattern of heating and cooling of the earth is significantly altered.

#75 Leo Tolstoy on 11.16.14 at 11:28 pm

“After all, if prices have gone up for the past five years, will they not go up forever?”

More like gone up for 2 decades.

And they don’t need to go up forever to make homeowners wealthier than renters. That’s already the reality.

Sigh. It’s not about renting vs owning, but about having a diversified net worth. — Garth

#76 My House is my Friend on 11.16.14 at 11:49 pm

Hawk on 11.16.14 at 11:05 pm
CalgaryRocks on 11.16.14 at 9:38 pm

Thanks for your input!

#77 ozy - I DO NOT SEE ANYTHING WRONG. on 11.16.14 at 11:51 pm

at 11:50 pm
to recap – a free market bid ends in a cheap purchase price of $ 800000. A to be applauded (we need more) risk taker aka true capitalist turns this neglected house into a gem. In return for his wit and time, and market risk, he asks for a profit in line with market forces at play.

I DO NOT SEE ANYTHING WRONG.

Anyone suggesting otherwise – seems a communist to me, jealous on new owner’s hard-hard work

he will surely get what he deserves, maybe $200000 in profit. what is wrong?

#78 Stickler on 11.16.14 at 11:56 pm

@ #46 Diane on 11.16.14 at 9:17 pm

If the baby is not due til summer, why the hell buy a house now? Wait a couple of years. Its not like infants require a lot of space.

—————————

They need time to renovate. Don’t you know newborns need a freshly painted bedroom, stainless steel appliances, and granite counter tops?

#79 My House is my Friend on 11.17.14 at 12:00 am

Why my house is my friend

I purchased my house 35 years ago for $30,000. Over the years I remortgaged a few times for renos, children education and purchases of spousal RRSPs. I have over the last 10 years or so cashed out RRSPs to pay off house and fund TFSAs. Where would I be if I rented all those years? Admittantly I was lucky to hit the sweet spot. Where house prices will be in 35 years is anyone’s guess!

#80 Derek R on 11.17.14 at 12:05 am

#74 45north on 11.16.14 at 11:20 pm wrote:
my feeling is that the total radiation from the sun is declining but that this decline is offset by increased green house gases. Even if true, the pattern of heating and cooling of the earth is significantly altered.

That’s about the size of it. The sun goes through something called the solar cycle which lasts just short of 11 years. During that time the sun’s radiation output goes up and down. As it happens, it’s low just now. So as you say, it’s counterbalancing the greenhouse gases for the moment.

#81 For those about to flop... on 11.17.14 at 12:24 am

Hi Garth ,so if a balanced portfolio is running at about 6 to 7 % does this mean the only way to lose is if there was one financial meltdown after another?
It took my retirement fund 6 years to get back to par after the GFC.

There won’t be. The 60/40 portfolio recovered from the GFC in one year. — Garth

#82 A Yank in BC on 11.17.14 at 12:27 am

Why did the Toronto Star not hold the good professor’s feet to the fire, and ask him to recite just what those benefits might be?

#83 nonplused on 11.17.14 at 12:33 am

#70 Hawk…

No you aren’t fine because: title fraud. Title fraudsters play on people who don’t have leans or mortgages on their property. They pretend to be legit lawyers and the title office just transfers them the property an blam! Your house is being foreclosed in a situation where you don’t own it, didn’t sign the mortgage, and never even knew.

The ways to prevent this are to take out title fraud insurance (which can’t stop title fraud but will cover many of your legal bills trying to get your house back), or even easier make sure their is always a lean of some sort against your property, be it a mortgage, a secured line of credit, or have your brother the drywaller just register a lien.

#84 dienekes on 11.17.14 at 1:02 am

@nonplused 45
“Seriously folks, if I were building a new house today, I would specify and insist on using real wood headers with the joists placed before the concrete and the concrete coming up through the joists like the did it when I was young. ”

Stupidist thing you can do. Unless you never finish the basement and vapour barrier it. Concrete is a water wick, those joists will rot out in a few years from the moisture accumulating behind the vapour barrier. And it does, just open one up in winter and see how much frost accumulates. Seen it a million times in Saskatoon in the 70’s AHOP houses, Riverheights etc. finish basement, joist ends rot out fast.
Thats why it is never done anymore. Cheap crappy construction method ranked with ballon framing.

#85 Tony on 11.17.14 at 1:18 am

Re: #22 Keystone will be Vetoed and Alberta will Implode on 11.16.14 at 8:03 pm

I guess when you’re Warren Buffett you have a lot of friends. That’s why the veto will go through. This is what happens when you own the railroads and have friends in “high” places.

#86 Tony on 11.17.14 at 1:41 am

Re: #31 Jimmy on 11.16.14 at 8:31 pm

He already said don’t buy “whole life” insurance.

#87 Steevee on 11.17.14 at 1:48 am

Gladiator,

Thanks for posting. You definitely have it right, mate. We are doing the same thing with our children, and have a great life.

Cheers.

#88 kommykim on 11.17.14 at 1:49 am

RE: #9 VanDammeCouver on 11.16.14 at 7:34 pm
Buying life insurance is not a mistake…

It is for the majority of the people who buy life insurance. Otherwise, the life insurance companies would be out of business.

#89 BigM on 11.17.14 at 1:52 am

#48 MHMF

You go to the Land Registrar, on the title of the property, the mortgage company is listed.

Bring the letter, you make an application to have the mortgage company removed from the title.

Takes an hour.
When my mother passed, she didn’t get this done.
Thank God I found the letter from the bank, it was 15 years old.

For those blogdogs that have a mortgage, mortgage insurance is the best insurance you can buy.
It should not be considered optional.

#90 omg the original on 11.17.14 at 2:10 am

“REAL ESTATE PRICES GO UP FOREVER”

That is basically all the 20 or 30 somethings buying houses have known.

So its not illogical for them to assume that to continue.

They simply do not have the experience to understand that real estate, which in Canada is still just a place to live, always has reverted to the mean.

Plus nobody is going to tell them otherwise, it is just not in anyones interest.

And “Greater Fool” is not on their radar screen for as much as we obsess over it.

Too bad, the young buyers that will be left holding the bag at the end of the day are the ones that understand real estate least.

#91 james on 11.17.14 at 2:17 am

#75
“And they don’t need to go up forever to make homeowners wealthier than renters. That’s already the reality.”

Not if they purchased recently. Not at all. I think you have missed all the various calculations of the financial aspects of renting vs buying.

Sure, if you purchased in 2000 you did quite well. You would also have done well in precious metals (despite the pullback), stocks, etc. The reason people flock to housing is that it is the only asset class where you can leverage 95% or higher.

#92 1% Doomer on 11.17.14 at 2:37 am

math for the ‘investor’… $800k purchase, $400k invested. with a min 20% down means a minimum of $560k cash tied up for a year of renos and listing time. We all know houses over 1 mil are harder to sell. plus every month is another month’s carrying costs

If it sells for 1.5mil with 5% commission (+ HST) he will net $215k. minus other costs of closing. not bad for 560k invested. If it sells for 1.4 million, it is no longer such a great return, around 20%. Many of us are doing better than 20% these days with our portfolios. If it sells for $1.3mil, zero profit. Time will tell but I take less of a gamble with my portfolio which produced 20% annually over the past 5 years and doesn’t count on a greater fool with $1.5 million wanting to live near a crack neighbourhood

#93 Winterpeg on 11.17.14 at 2:37 am

#46 Diane :……”If the baby is not due til summer, why the hell buy a house now? Wait a couple of years. Its not like infants require a lot of space.”
I was thinking the same thing as Diane, and then #63 Gladiator summed it up well:..”buy a house – buy a house! How can it be explained to them that the kids don’t give a rat’s azz about how big their home is.”

I had this same conversation with a workmate whose wife is pregnant. A dim light of acknowledgement of the fact that one didn’t need that much space for a kid briefly crossed his face, but who knows if it sank in.

The home ownership meme has been imbedded in our psyches at least since the post WW2 boom. Hard one to extricate.
That is why # 72 Kay, in spite of all that has been said in this blog, still expresses the sentiment “It’s true I save lots per month (renting) and have a debt-free life, I do feel kind of hopeless sometimes. I tried to do things right and stay out of debt etc but I think I am the greater fool actually.”
And that is why it is so important for people to read this blog, & keep reading it until the message sinks in and they learn to think for themselves, and think past the cultural meme of ownership, at least until the housing market corrects to true affordability.

#94 Lillooet, BC on 11.17.14 at 3:29 am

With 100,000 immigrants flooding into Toronto each and every year, year after year, decade after decade, and a rental vacancy rate of .0000001 %, the housing market in Toronto will continue to be insanely expensive.

Sure, it’s easy to say just rent a place for $3000 a month until sanity returns to the market, well, renting doesn’t come without it’s issues. Maybe the rental is for sale and you’ll have real estate agents parading prospects through your house every week, maybe the landlord wants to do major renos while you’re living there, maybe the landlord refuses to do any renos and wants to save money on maintenance, and the place is falling apart. Renting is not always the best option either.

Garth, you talk about the “anti-commute, pro-urban meme now being pushed by media and academia”, how about the anti-small-town meme pushed by everybody? With 3 bedroom houses in small towns available in many parts of the country going for $150,000, why is the solution “pay $3000 rent in the city” as opposed to “move to a small town and buy a house and start a small business”? Why are small towns not even considered an option? With online movies, music, internet, culture, fast communication, e-commerce available right across the country, small towns are the wastelands they used to be.

#95 I forget on 11.17.14 at 3:38 am

“#28 Cato the Elder on 11.16.14 at 8:29 pm ”

I don’t know if you’re misguided, mentally ill or just an idiot but enough we all have your point of view. You have repeated often enough. Do you ever have anything to say about the ACTUAL TOPIC of the blog posted by the host?

What exactly do you think you are achieving by this? I read the post where first you buttered Garth up and then asked him to fix all of this essentially. Do you not see that he can’t?

As I’ve said before I have a relative that carries on like this when they are off their medications. I have know idea how to deal with them or help them at that point but eventually it always costs me a couple of grand to bail them out of whatever predicament they have got themselves into with these thoughts.

I don’t know where you are but here’s a good starting point regardless, they will direct you where to go if they can’t help http://www.camh.ca/en/hospital/Pages/home.aspx

Is that better Garth?

#96 Happy Renting on 11.17.14 at 6:21 am

House-hunting, moving, and renovating while pregnant? I’m sure Jimmy’s wife will enjoy those low-effort, low-stress, and low-cost experiences while she is fatigued and going through bodily (and hormonal) changes.

#97 Retired Boomer - WI on 11.17.14 at 7:06 am

#68 45 NORTH

I am impressed that Toronto has a real -viable- street car system yet. I notice the major winning cities (NY, Chicago add Toronto) have solid public non-auto transport.

While a pain in the ass to expand, they DO serve areas well, and neighborhoods to change (up and down) overtime. They make a great non-car livable core area very attractive, and tend to keep values more stable.

The ‘smarter cities’ will build and expand these services over time. Note the expansions of those mentioned above. Will the suburbs pay to hook up with the city cores? History is not always kind on this answer. High fuel prices help, as does congestion, pollution, and smart politicians.

Whoops! We are fresh out of the latter!

#98 randman on 11.17.14 at 7:11 am

Haha …Nicole has it right on the money with her latest

Not only did the pedantic Anglo-Saxon power hungry freak show of Harper, Cameron and Abbott (nobody even noticed Obama) give Vladimir V. Putin a good laugh with their empty chest thumping, entirely spin doctor scripted and entirely aimed at their domestic media and audiences, these so-called leaders also came up with no less than 800(!) measures they claim will boost global economic growth by 2.1%, or $2 trillion. Over 5 years, or some useless and opaque number like that (2018?).”

How embarrassing to have an idiot like Harper in charge…doing the bidding of his controller Oblama!

This is what we’ve been reduced to in Canada, once a respected international peacekeeper to lap dog of the US
corporate interests…what an utter shame on us!

http://www.theautomaticearth.com/the-world-is-run-by-fools-and-we-let-them/

#99 I'm stupid on 11.17.14 at 7:54 am

#31 Jimmy

I’m of the opinion that life insurance should be bought under certain circumstances. If you have dependants, and don’t have adequate assets to take care of them in the event you pass. A term policy only, never a whole life policy is what you need.

The difference in price is astronomical the ladder is more an investment and a terrible one. Never buy insurance attached to a mortgage because the payout reduces over time, buy the equivalent term value.

How to decide how much coverage you need and the length of time you need it for. Look at the needs of your dependants and how much support they’ll need before they can become independent. Don’t make the mistake of trying to make your family financially independent in the event of your death its a losing strategy.

If you don’t have dependants you shouldn’t have life insurance. It’s a waste of money.

#100 live within your means on 11.17.14 at 8:07 am

#30 nonplused on 11.16.14 at 8:29 pm
And don’t forget all the maintenance. That’s what I did most of this weekend. Yay! Maintenance!

It all started with bees this summer. We all love bees, bees are our friends, but not when you’ve het 3 to 10 new ones trying to escape your basement every morning! So the hunt was on to try and figure out how the little buggers were getting in there.

I never did figure it out for sure, but guess what I found in the process? Mice! Yay mice!
…………………….
LOL – I know it’s not a laughing matter. We had a similar situation in the basement family room (which is rarely used now). When DH ripped up the old carpeting & moved furniture from the walls, he found that mice had managed to find a way through & chewed through the gyproc. It has a cement knee wall in the basement & years later we found out how they managed to get in. Turned out that the wood sill plate (?) was rotten. Contractor buddy discovered it when he was replacing windows, new siding, etc. He had to raise 3/4 of the house to install new ones. If we hadn’t hired him to do this work our house would have collapsed. The soil level, for lack of the proper terminology, around most of the house was too high.

Our house was built in 84 & we bought in 91. Found out later it was built by a fireman who built 3 or 4 houses on in his spare time on our street. All of them have had some problems over the years. Municipal building codes & inspections were sadly lacking then.

#101 Josh on 11.17.14 at 8:21 am

Small towns have very few jobs and people don’t want to waste their precious time in traffic. Maybe if real estate prices significantly dropped in small towns they could start attracting more people, but just like in the big urban areas things are just way too overpriced.

#102 Brad on 11.17.14 at 8:32 am

While I will agree that 20-something clueless hipsters are ripe for blog-bashing, your use of the word is similarly misguided. It’s not American apparel toting tots who buy these 800k homes – hell millennialist can barely afford their monthly phone plan. So, I encourage you to find another word for pigeon holing the demographic you’re talking about. People younger than you.

#103 Londoner on 11.17.14 at 8:35 am

“To own rather than rent, that’s $22,800 a year in additional cash flow, or $114,000 over five years – none of it deductible.”

Of course I agree with the arguments of renting over buying in this case, but what’s the big deal if he’s happy with paying the premium? There are worse things he could do (like spend his savings on a Porsche). No one says you have to spend your money wisely. After all it’s not like they’re over leveraging here. I can’t help but feel that this example is fostering a common “grumpy old man” perspective.

I stated the case clearly: if financial security is the goal, this is not the path. Sounds like a hormonal young man perspective. It’s only a building, after all. — Garth

#104 Mousy on 11.17.14 at 9:02 am

Smoking Man,
Go for the grief counseling. It probably won’t hurt you, and some of your tazmanian devil stardust will spin off and lessen the load.

#105 james on 11.17.14 at 9:09 am

This looks very bad for the global economy and will spread fast.

http://www.reuters.com/article/2014/11/17/us-markets-global-idUSKCN0J101320141117

Neither is true. Abe’s tax last spring is having the expected effect. That’s why the BoJ did a preemptive strike. I’m glad you’re not a trader. — Garth

#106 Londoner on 11.17.14 at 9:22 am

“I stated the case clearly: if financial security is the goal, this is not the path. Sounds like a hormonal young man perspective. It’s only a building, after all. — Garth”

There are plenty of paths that hormones can take young people. Buying a house because wifey feels secure may be one of the least destructive (relatively speaking – spare me the examples). If this couple were being gifted money so that they could scrape together 5% down then I would say they deserve your full criticism. However, this just sounds like a personal decision to me. Maybe a poor one from a financial security perspective but, unfortunately, not enough information is provided.

There was enough for you to pompously pass judgment. — Garth

#107 Jeff in Moose Jaw on 11.17.14 at 9:41 am

I remember this house, cleans up nice.

1.5 mill and still no railing for the front steps.

#108 weedeater on 11.17.14 at 9:44 am

#48
In the old days you’d get a document from the mortgagor and still can but they will charge a fee north of $250. You can get this done yourself by taking the letter from the bank to the land registry office.

#63
Exactly. Couldn’t have said it better.

#109 Jeff in Moose Jaw on 11.17.14 at 9:55 am

#16 – sorry about the grief Smoking Man

#110 José on 11.17.14 at 10:19 am

Many analysts now saying that stocks are expensive and the market is on borrowed time. Bonds, preferreds and REITS could go down as interest rates rise. Is this the right time to start a new portfolio, even a safe one. Is targeting 7-8% realistic?

There is always a reason to be afraid and sit in cash. Many people have done so since 2009. Before markets rose 160%. — Garth

#111 Daisy Mae on 11.17.14 at 10:20 am

“….slapped in an offer below the listing price after the agent told him that would likely deter others from following suit. However the opposite’s true. Knowing there’s already paper on the table, other suitors will assume they have to match or exceed the listing price.”

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

“…likely deter others”? What stupid advice from an agent. Of course, the opposite is true!

#112 Daisy Mae on 11.17.14 at 10:44 am

#16 Smoking Man: “I’m considering greif counseling. Sorry for lack of posts fans but I’m a bit fk up at the moment.”

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

It helps to talk, SM — to family, friends — anyone who will listen. For as long as it takes. Until you feel better. And eventually you will.

#113 saskatoon on 11.17.14 at 10:47 am

garth,

you’ll appreciate question #2 (buyer) of this new RECO online quiz:

http://recofactfiction.ca/

#114 saskatoon on 11.17.14 at 10:55 am

p.s. apparently, i am a “real estate super genius”.

i am sure you are too :)

#115 saskatoon on 11.17.14 at 11:15 am

kim kardashian’s bottom is our last hope!

http://www.youtube.com/watch?list=UUC3L8QaxqEGUiBC252GHy3w&v=3Z_q11gnmX8

#116 Daisy Mae on 11.17.14 at 11:18 am

#54 CalgaryRocks: “Your ownership is the title registered at the court house. The mortgage is also registered there. Once it’s discharged your title is clear.”

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

Maybe the court house can issue a photostat copy of the ‘discharge’? Something is better than nothing….

#117 Daisy Mae on 11.17.14 at 11:28 am

#86 Tony: “He already said don’t buy “whole life” insurance.”

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

Hmmmm….how about ‘decreasing term’? As the value of the policy decreases, net worth increases. Hopefully! ;-)

#118 Daisy Mae on 11.17.14 at 11:44 am

CBC: “Japanese economy slips back into recession…”

#119 Editrix on 11.17.14 at 11:48 am

Garth, please check back in on the Galley pile in three months to see whether it’s still on the market.

#120 crowdedelevatorfartz on 11.17.14 at 11:53 am

@#82 A Yank in BC
“Why did the Toronto Star not hold the good professor’s feet to the fire, and ask him to recite just what those benefits might be?”
+++++++++++++++++++++++++++++++++++
Because, right after that biased, real estate pumping “news” article.
There was a Real Estate “Pull Out” section thicker than the actual “news”paper.
Just like the 6pm Global Van news that constantly pumps real estate about once a week and then the commercials warn about the perils of not using a realtor. Back to the weather brought to you by another real estate cartel. No conflict there.
What would you call these “news” media outlets that accept payment for compliant “services rendered”?
One clue.
The word rhymes with “bores”

#121 Rational Optimist on 11.17.14 at 12:25 pm

My wife and I had a kid back in the summer (we did it the old-fashioned way- she was the only one who got pregnant). Why would you want to be a home-owner with a young kid? Maintaining an old home is obviously a tonne of fun, but it’s time-consuming. Child-rearing is, too, so what has to give? It’s going to be a lot more fun playing with your son or daughter and seeing his or her many milestones, than spending time on of the stupid little pieces of work that a new homeowner inevitably feels like doing to make a place “theirs,” and, later, the many pieces of routine work needed to keep a house dry and standing. That work stinks even worse when you’re generally tired from raising an infant, and probably worse yet when you consider what irreplaceable moments with your kid have passed by while you were working on the house.

I would venture as far to say that having young children tips the scales towards renting, even when ownership might not have much cost premium.

#122 Rational Optimist on 11.17.14 at 12:33 pm

I almost forgot: I just learned that a relatively new colleague of mine had an offer accepted on a house over the weekend. No sign-back needed, the first offer was accepted, which apparently is a good sign. The house is on the same street as a few friends of mine, who say that it would have been a new high for the street. It is vacant; the sellers recently reduced the price by a paltry 3%; and they insisted on a quick close (given that property taxes must be three or four hundred a month, and heating season is upon us).

It’s November to boot, so I suggested last week to him that blood was in the water, and it was time to go in for the kill, but he for some reason offered 98% of their asking price. Bone headed move to buy here in the first place, but that place had been listed for a while, and was about to languish. He’ll never get those few tens of thousands (plus interest) back.

I bet the sellers are thrilled.

#123 Ronaldo on 11.17.14 at 12:36 pm

#85 Tony –

”I guess when you’re Warren Buffett you have a lot of friends. That’s why the veto will go through. This is what happens when you own the railroads and have friends in “high” places.”

I was surprised to hear Obama speak about the XL Pipeline recently stating that all it would be doing is transporting oil down to Mexico to be sent everywhere else. Actually, it will be going to refineries for processing and not to export terminals according to the below link.

http://keystone-xl.com/responding-to-inaccurate-claims-in-the-berkshire-eagle-editorial/

Cost to ship oil by rail is up to 3 times more expensive and far more dangerous. Many railways travel alongside rivers and you can imagine what would happen if one of these 100 car trains derailed and spilled their contents into the river. I’m not convinced that railways would have the capacity to handle the tonnages proposed without affecting the other traffic being transported like coal, grain, etc. without huge expenditures in building up their infrastructure. The longer the delays in getting this project going, the more problems that will develop as more and more oil is transported by rail. To expect that railways would lower their speed hauling the oil on their main lines would further exacerbate the problem. Vetoing XL would be a drastic mistake for the U.S. It seems that the environmentalists are creating a far worse problem here.

#124 TnT on 11.17.14 at 12:45 pm

#92 1% Doomer

Sometimes these General Contractors are taking on new projects just to keep their crew employed.

If it does not sell for a profit then one of the builders / family member or employee will just move in to secure the primary address as a resident and sell later with no capital gains.

It is more likely that this house will sell in a multiple bids scenario before the it sells for a lost.

#125 calgaryPhantom on 11.17.14 at 12:54 pm

Garth,

I read you suggestion to some blog dog about going with laddered bonds to counter rising interest rate environment.

What are you thoughts on laddered preffered share ETF, is that a better option for next 5 years than CPD?

Thanks

#126 Mike S on 11.17.14 at 1:05 pm

To Twriter

“The ETFs I referenced are 100% equity and cost approximately 50bps – not sure you are familiar with the ETFs”

Let’s take the FDV etf. it is actively managed fund which costs management fee of 0.55%

compare it to say to XIC, XUS & XEF which cost 0.05% – 0.2% and are more diversified

Why do you want to pay more to hold less diversified fund? Are there any benefits for FDV being “actively managed”?
Why do you prefer dividend paying equities?
Why do you want to mix Canadian and US dividend payers in one fund and loose control of their allocation and location (considering the different tax policies of these asset classes)?

I don’t wish to present my opinion here, just questions

#127 Mark on 11.17.14 at 1:09 pm

“Many analysts now saying that stocks are expensive and the market is on borrowed time. Bonds, preferreds and REITS could go down as interest rates rise. Is this the right time to start a new portfolio, even a safe one. Is targeting 7-8% realistic?”

Agree that REITs, bonds, preferreds, and houses are quite overpriced. So the strategy would be to underweight (but not zero-weight) those assets in your overall portfolio.

As for stocks, many of them perform very well in the rising rate environment, particularly stocks with a lot of long-term debt and very costly infrastructure. Railways, infrastructure-heavy telecoms, utilities, oil and gas producers, miners, etc. with great long-term assets, are great examples of such. Why? Because prices should rise in response to higher inflation, *and* additional investment in their respective industries will come at a higher hurdle rate in a higher rate environment.

Of course, balance is important, as is diversification. But there’s no particular reason to want to avoid equities these days, as P/E ratios, P/B’s, etc., are on the lower bound of historic averages. Particularly for Canada which has lagged behind the world in the stock market recovery for the past few years (the speculative enthusiasm clearly being with housing instead!).

#128 DON on 11.17.14 at 1:09 pm

Garth: What is the wrong kind of life insurance? – I ask as I am about to buy.

The kind you don’t need, and the kind that masquerades as an investment. — Garth

#129 Debt Mountain on 11.17.14 at 1:11 pm

While Professor McKellar has impressive academic credentials, the last major publication that he cites was in 2006. The list of real estate interests that his company has worked for is staggering.

“Other clients in Canada include the Canadian Real Estate Association (CREA), Waterfront Toronto, Tridel Corporation, Mattamy Homes, and Hullmark. “

York”>Professor McKellar CV

#130 Debt Mountain on 11.17.14 at 1:13 pm

Sorry, a mistake on the last link.
Professor McKellar CV

#131 cynically on 11.17.14 at 1:17 pm

In answer to #82 A Yank in BC as to why the Toronto Star didn’t do its due diligence in reporting, you will soon see and understand that this is sheeple country where everything is relaxed and unquestioned. This is the big reason Canada will never be on top and also why so many of us criticize your country which gets things done one way or the other and rose to its leadership position today.
Canadians are a quiet and thoughtful society as you will see if one steps on your foot. The Canadian will do the apologizing. I think this is a British thing – a throwback to when the US opened its immigration to everyone and we restricted ours to Brits and northern Europeans. The former grew to its present size and position and we stagnated . There are still many here who believe we did the right thing then as they complain about our present day opening of the gates just as they will about my view of our country’s most recent history. It’s all one person’s very wide answer to your question.

#132 Mike S on 11.17.14 at 1:35 pm

“I invested real time into studying the subject of saving and investing, I looked for opinions from people I know to be successful. Sounds like you are looking for a financial advisor Mike S. I have had an advisor in the past – and he unfortunately provided bad advice. Finding a good advisor can be challenging. Even if I do find a great advisor – that doesn’t mean I shouldn’t be asking the opinion of others and growing my investment knowledge. Which is what I’m trying to do here on this blog. I welcome your opinion on geographic allocation, asset allocation and products such as ETFs – thank you!”

I agree that finding a good avisor can be challenging. I am not looking for an advisor, but mainly because I enjoy spending the extra time to do that myself.

Not sure what was the bad advise the advisor gave you, but why would you want a random opinion from a reader in Garth’s blog, if even a pay for adviser (who knows your financial situation and goals) did some mistakes? I mean lot’s of people here diversify between gold and bitcoin …

Garth himself talks a lot about asset allocation. There is the “Canadian couch potato” guy who discuss that as well

There are also good books on this subject and more. It all depends on how much time you have and wish to invest into it …

#133 Powering ahead on 11.17.14 at 1:36 pm

Canada house prices at a record high!! Led by Toronto, Vancouver, Calgary.

Is it only coincidence that those cities have the highest rates of immigration?

I certainly think not.

#134 Mark on 11.17.14 at 2:00 pm

“Canada house prices at a record high!! Led by Toronto, Vancouver, Calgary.”

Only because the high end is still moving, but the low end has seen a dramatic diminishment in volume. Basically changes to the sales mix. Doesn’t mean that house prices have actually risen, and may actually mean quite the opposite.

A more proper paraphrasing of the data is, “prices on houses that Realtors actually happen to be selling at the moment are at record highs”. Not “house prices” generally, since there’s lots of houses which are going down in price.

#135 Mike in Toronto on 11.17.14 at 2:02 pm

#97 Retired Boomer

“…High fuel prices help, as does congestion, pollution, and smart politicians.

Whoops! We are fresh out of the latter!”

Harper’s damned smart. His motives and ethics are aligned for short-term gains. He’s done a wonderful job of that.

Justin OTOH is the opposite.

#136 Cato the Elder on 11.17.14 at 2:08 pm

Re: #128 Don

Life insurance is for one thing: to replace a primary earner’s income in the event they can no longer earn income.

This is common sense. As Garth points out, many companies try to sell life insurance as some kind of investment. It isn’t. It’s a failsafe, and shouldn’t be viewed as a retirement plan.

Your kids don’t need life insurance – they aren’t earning income to support the household. Likewise, if your spouse is not earning income, they do not need it either.

Of course, if you feel that their lose would be catastrophic to YOUR ability to earn an income, because your work life would be affected, you can still insure them. In most instances, this is not the case.

However, that is how life insurance should be regarded: replacing lost income. Whoever is providing the income should be insured in the event that it is lost.

Very simple.

#137 live within your means on 11.17.14 at 2:30 pm

#112 Daisy Mae on 11.17.14 at 10:44 am
#16 Smoking Man: “I’m considering greif counseling. Sorry for lack of posts fans but I’m a bit fk up at the moment.”

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

It helps to talk, SM — to family, friends — anyone who will listen. For as long as it takes. Until you feel better. And eventually you will.
……………………………

My hubby’s Mom & Dad died within 3 months of each other. They lived in France. At least he got to spend 3 or 4 weeks with his Dad at Xmas. Couldn’t attend his funeral as he had already paid for a charter flight. At least he got to spend 3 weeks w/his Mom before she died & was able to attend her funeral, & help his bros. clear out the house. We were just watching videos he took of all the family over the years. Brought back fabulous memories as well as sad ones. They were in their early 80’s & lived a good life. When we go next year it will seem very strange & sad, but we’ll be doing a lot of travelling & visiting lots of old friends & family.

A friend of ours recently lost her Mom & her Dad hasn’t much longer to live.

It is harder to bare when it happens to someone who is so young. So true what others have said Smoking Man. I wish you all the best.

#138 Steve on 11.17.14 at 2:37 pm

#133 Powering ahead on 11.17.14 at 1:36 pm

Canada house prices at a record high!! Led by Toronto, Vancouver, Calgary.

Is it only coincidence that those cities have the highest rates of immigration?

I certainly think not.
______________________________________________

Agreed – you think not. I will not be joining your xenophobic clan.

Having the highest house prices and attracting the most immigrants are both characteristics of cities like Toronto, Vancouver, and Calgary. There is no evidence that those characteristics are related in the causal fashion that you imply.

Please provide evidence of causality if you are able. In the interim, you might want to read up on the Sneetches.

#139 TheManwhoStaresatSheeple on 11.17.14 at 2:46 pm

Re #105 james – “This looks very bad for the global economy and will spread fast” and the Garth own reply as footnote:
“Neither is true. Abe’s tax last spring is having the expected effect. That’s why the BoJ did a preemptive strike. I’m glad you’re not a trader. — Garth”
=====================================

Then how come all of the economists and AUMers polled got it wrong as they expected a growth of 2.1% for the third quarter?

OK – lets drop that but please can you tell us more about your own predictions about Japan and the effect they have on the world economies.
That famous 60/40 portfolio of yours surely has international exposure (and part of that is Japanese exposure), always gets rebalanced at the right time – so what are you doing now – after that quadruple-dip recession.

#140 45north on 11.17.14 at 2:46 pm

dienekes : Cheap crappy construction method ranked with balloon framing.

http://en.wikipedia.org/wiki/Framing_(construction)#Balloon_framing

I owned an old house with balloon framing. The standard in Ottawa has 1″ boards on both sides of the studs. They are horizontal and form a continuous surface so there is no need for braces. I’m pretty sure 145 Galley Avenue is balloon construction.

Kenchie : There is a reason why half of Chinese with $1.5m in investible assets are planning to leave the country.

that got my attention, I worked for 10 years with a man from China – he would go back for a visit but had no plans to move back.

#141 Retired Boomer - WI on 11.17.14 at 2:48 pm

Time for MY opinion on X/L Pipeline.

Build it. We already have over 200 pipelines crossing Nebraska and the Ogallala aquifer. Nebraska also has many wells punched through that aquifer.

Pipelines are vastly safer than rail or truck transport. A new line is vastly superior (if only in principle) to one laid down 50 years ago. Think of it this way, would you prefer your car head-on crash in a 1958 Impala, or the 2014 Impala?
Rant over!

#142 Mark on 11.17.14 at 2:55 pm

“Maybe the court house can issue a photostat copy of the ‘discharge’? Something is better than nothing….”

Of course, Land Titles, or whatever it happens to be called in your province (in Alberta, its an Alberta Registry, in Sask, its Information Services Corporation, etc.), in Ontario, Teranet, can issue a certified extract of the title. The actual title, per the Torrens system, is held by the government in the registry, but anyone can go pull an extract if that would satisfy them that the mortgage charge has been removed.

#143 I'm stupid on 11.17.14 at 2:55 pm

#128 Don

Read my comment at 100

#144 None on 11.17.14 at 2:57 pm

Hey Cato the Elder, what do you do for a living? I’m curious given your views on capitalism, etc.

Thanks.

#145 @Mark on 11.17.14 at 3:01 pm

You are wrong Mark.

Detached houses in all segments going up, up, up.

#146 Nemesis on 11.17.14 at 3:20 pm

#SciuridaeUrges,Or… #”AllRight,MrDemilleI’mReadyForMyCloseUp”…

http://bcove.me/54g82w0t

[NoteToGT: Sadly, that particular project was yet another victim of sequestration… On the BrighterSide, though – only the excruciatingly patient can train one of those things… besides which, any lapse in vigilance and you can kiss your peanuts goodbye. So it’s just as well.]

#147 devore on 11.17.14 at 3:31 pm

#77 ozy – I DO NOT SEE ANYTHING WRONG.

he will surely get what he deserves, maybe $200000 in profit. what is wrong?

What does “deserve” have anything to do with it? He “deserves” nothing. He will get what the market thinks the product is worth, regardless of how much work or risk he put into it, or how much anyone thinks he “deserves”. If the market tanks, he might lose $200000 on it. Does he “deserve” to lose $200000?

“Deserve” implies entitlement; a certainty; a just reward; do this work, receive this bacon. No one deserves anything, unless it’s spelled out in a contract.

#148 None on 11.17.14 at 3:33 pm

Cato – a comment from the other day you made:

“I endorse free markets because when someone makes a mistake, only they suffer for it.”

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

Not exactly. In your world of gov’t that does not burden capitalism with regulation, what happens when the company produces a good like a food product that ends up killing people due to some production issue? The business is not the only one punished.

#149 None on 11.17.14 at 3:35 pm

One more comment to Cato the Elder. You said the other day that in the 1930s (or was it the 1910’s?), families could have one parent stay at home and they all had so much more leisure time. Do you have any idea how much manual work you had to do in a regular household back then? Hand wash things, sometimes get water from a well, etc.

#150 Victor V on 11.17.14 at 3:38 pm

http://www.theglobeandmail.com/news/politics/ontario-government-revenue-down-508-million-fall-update-reveals/article21613153/

Ontario government revenue is down more than half a billion dollars – forcing Finance Minister Charles Sousa to dip into a reserve fund to keep the province’s finances on track.

What’s more, Ontario’s economy is now projected to grow more slowly over the next three years than previously thought, making the governing Liberals’ job even harder as they struggle to erase a $12.5-billion deficit.

#151 Moller on 11.17.14 at 3:55 pm

Buy on rumour, sell on fact – ancient wisdom.

#152 Maggie the Tech Writer on 11.17.14 at 4:00 pm

Managing Risk
#120 Cato

What on earth gives you the idea that there’s any connection between leisure and rearing a brood of children, especially before reliable birth control and medical care existed?

This and other posts suggest that you lead the romantic life of an intellectual, polishing the walls of your ivory tower, high above the bloody, muddy battlefield of reality where most of spend our time.

#153 Mark on 11.17.14 at 4:09 pm

“Your kids don’t need life insurance – they aren’t earning income to support the household. Likewise, if your spouse is not earning income, they do not need it either.”

I have to disagree here. If the spouse isn’t earning income, but they are working in the house, then their work will, at some level, have to be replaced somehow if they were to experience a disability or pass away. Go price out, for instance, the cost of extra restaurant meals, child care, or other forms of home care/maintenance (among other tasks that a non-working spouse would engage in), and the costs can be significant. Life insurance can also cover disability or long-term functional impairment, which can often be a more significant burden than merely outright death.

You are wrong Mark.
Detached houses in all segments going up, up, up.

Nope. Going down actually. But the shift has been towards more transactions at the higher end segment of the market. Not the dumper houses (or overpriced mid-level stuff) that are now sitting on the market for increasingly lengthy periods as the CMHC subprime standards have been tightened, and, frankly, the buyer pool exhausted.

#154 None on 11.17.14 at 4:11 pm

Smoking Man: I think grief counselling is a great idea. Perhaps some volunteering at the hospital for Sick Kids would help you work through things and also be connected for a time to kids that faced challenges as your nephew once did.

#155 Prairieboy43 on 11.17.14 at 4:15 pm

How will this affect California Real Estate Values?http://media.nbcbayarea.com/images/608*342/FRACKING+IMAGE.png

#156 Mark on 11.17.14 at 4:45 pm

“How will this affect California Real Estate Values?”

Oil and gas production has been a feature of the California landscape for a long time. Los Angeles sits ontop of, at one time, one of the world’s most prolific oilfields. Oil, and gold are the two commodities that literally provided for much of California’s early growth.

#157 Flaneur on 11.17.14 at 5:05 pm

#140 45 North

145 Galley is most certainly not baloon framing. It is solid brick. Post reno it is still solid brick with Styrofoam insulation on the outside covered with stucco. The stucco may need to be redone in a couple of decades, but the house is solid, a lot more solid than anything new you can buy today from a developer.
The prices are high, but when you compare to other western-world financial-centre cities, its not really outrageous.
Could we see a 20% correction? Sure, but just as likely we can see a 20% correction in equities. Leverage is your friend in good times and your enemy in bad times, and leverage is where the world of Canada’s RE has gone mad.

#158 bdy sktrn on 11.17.14 at 5:09 pm

#155 Prairieboy43 on 11.17.14 at 4:15 pm
How will this affect California Real Estate Values?
—————————
they have tens of thousands of ‘those bad things’ pumping away right now.
Any new production will add more jobs, govt revenue, growth so it should support prices.

#159 Mike S on 11.17.14 at 5:12 pm

“A more proper paraphrasing of the data is, “prices on houses that Realtors actually happen to be selling at the moment are at record highs”. Not “house prices” generally, since there’s lots of houses which are going down in price.”

Who buys the high end houses (I assume above 1M)?
I thought that CMHC financing is no longer available for 1M and more?

If this is because up movers, how do they really sell their low end house if things are not moving?

#160 Mike S on 11.17.14 at 5:20 pm

“You are wrong Mark.

Detached houses in all segments going up, up, up.”

some detached sell below asking (by about 3-4%). Than again, maybe the asking price was too high.

That said I am not familiar with the entire statistics, just a few detached houses here and there.

#161 Mike S on 11.17.14 at 5:26 pm

“What’s more, Ontario’s economy is now projected to grow more slowly over the next three years than previously thought, making the governing Liberals’ job even harder as they struggle to erase a $12.5-billion deficit.”

Also their debt schedule seems very interesting. Can’t wait for my tax rate hike

#162 La la land on 11.17.14 at 5:28 pm

@Mark
“Only because the high end is still moving, but the low end has seen a dramatic diminishment in volume. Basically changes to the sales mix. Doesn’t mean that house prices have actually risen, and may actually mean quite the opposite.”

Do you really believe prices are falling in Toronto where aggregate months of inventory is less than 2?????? Not happening, bud. At least not yet.

#163 DON on 11.17.14 at 5:37 pm

128 DON on 11.17.14 at 1:09 pm
Garth: What is the wrong kind of life insurance? – I ask as I am about to buy.

The kind you don’t need, and the kind that masquerades as an investment. — Garth
.

Thank you for the reply Garth – I understand.

Thank you also Cato and I’m stupid – your comments helped fill in the blank.

The goal is to replace my income (if something was to happen to me) to allow support for my wife and children) that is until my wife goes back to work. I am thinking a ten year term.

#164 seeing it from both sides on 11.17.14 at 5:48 pm

@#72 Kay

“Even though I only pay $1100 rent for large, comfortable and well-managed apartment on Vancouver’s west side”

I’d like to know what your definition of large is. Even the crappiest building that smells 100 years old in the West End goes for at least 1300 bucks for 500 sq.ft.
I have been contemplating cashing out of my condo and renting, but I can’t stomach having to shell out 1800 -1900 bucks for 700 sq ft of space with no insuite laundry, and parking usually extra.
I don’t agree with the general consensus that landlords are ‘subsidising’ renters. Yes, we have rent control, but ‘renovictions’ is a common ploy to skirt around that. With a new tenant, the landlord just jacks up the rent to cover his costs, or whatever the market will bear.
Case in point, I was looking at Pacific Sands (West End) summer of 2013….was told the 500 sq ft 1 bdrm unit was $1250. This year, it’s at $1400!
Here’s the availability list I got from them:
June 1, 2014
#1803 – 500 Sqft $1400 View S/W/N
#1906 – 650 Sqft $1675 View N/E

June 16th, 2014
#2002 – 700 Sqft $1900 S/W

All our suites include heat and hot water, storage and secure bike storage. You also have the use of the indoor pool and sauna.

Secure underground parking is available for $60 a month. Please visit our web site for the virtual tours

#165 Mike S on 11.17.14 at 5:51 pm

“Do you really believe prices are falling in Toronto where aggregate months of inventory is less than 2?????? Not happening, bud. At least not yet.”

Some houses re-listed with a lower price and then sell in a month or 2 for 96%-97% of the new asking (again not familiar with everything just a couple of examples)

#166 Cato the Elder on 11.17.14 at 5:53 pm

Re: #148 None

You’re right – sometimes people get hurt. That happens regardless of regulations though.

Look at all the laws we have today. How did all those financial regulations help in preventing the financial crisis?

They didn’t.

Regulations get ‘captured’ by private industry. The hire ex-employees into the private sector as consultants and pay them huge sums of money – this is an indirect form of bribery.

All regulations are is a barrier to entry for small upstart businesses. Big business LOVE REGULATIONS because it keeps their competitors out! Don’t you get it yet? It’s a big scam!

And the wonderful job they’ve done convincing you that it’s in your best interest is the most ironic part – because it actually hurts you.

In your example above, what would happen? The people at the company would be liable. Now, bear in mind, those sorts of things happen VERY infrequently, even in a completely laissez-faire free market. Why? Companies WANT TO KEEP THEIR CUSTOMERS ALIVE. They want them to come back and buy more! This produces a great incentive to keep a good reputation with good quality product.

Now the tragic thing is, in today’s environment, regulations often provide a ‘legal shield’ for companies – when they get sued, they go to court and say ‘we were inspected by a government agency, they said everything was fine’. Don’t think this happens? You’re wrong. It does. They do it all the time, especially with environmental permits – yes, permits that PERMIT them to pollute! And you thought your government was so generous in protecting the environment? What a laugh.

Re: #149 None

Again, I’ve mentioned this before, I don’t want the technology of earlier years. I want the freedom. Look at all the inventions and HUGE progress that was made over those decades. We are completely stagnant today. What improvements have come in air travel since the jet engine? If anything, we’ve REGRESSED (no more Concord).

Free markets are the most MORAL and equitable means of distributing resources IN THE HISTORY OF MANKIND. You can only acquire wealth by providing a good or service that your fellow man wishes to voluntarily purchase. You can’t steal. You can’t commit fraud.

Much of what OTHER economic systems do is THEFT. Government engages in it all the time, they call it ‘taxes’. But taxes are an involuntary taking of your money – it’s not a voluntary purchase you are making. The free market force of constantly competing to improve quality and lower price DO NOT EXIST. They only minimally sneak through when populations get angry enough to force their politicians – but that takes A LONG TIME and sometimes it NEVER happens.

***********

Re: #152 Maggie

You mentioned my post in #120, but I didn’t write that one so I’m not sure which one you’re referring to.

I don’t live in an ivory tower – I’m competing in the marketplace just like you.

What I recognize, however, is the destruction of the middle class. And I know why.

It isn’t a lack of government. We have had steadily increasing government for DECADES and that has correlated with our declining living standards.

When I say living standards, I don’t mean conveniences. Computers, dishwashers, air condition and other technological advances have made our lives easier. What I mean is things like the cost of living – home prices, car prices, fuel prices, food prices, ability to save for retirement, and disposable income. ALL these things are being impacted negatively.

Homes now cost decades of work instead of only a few like they did in the 50s. Food now makes up a larger portion of peoples incomes than ever before. Gas prices are forcing people to buy ‘fuel efficient’ vehicles instead of nice big comfortable ones that they really want.

And leisure time is HUGELY important. Most people would prefer to work less if they could keep the same amount of purchasing power. But our purchasing power is decreasing everyday. There is a fundamental reason for it: too much government.

We pushed all our industry away with over taxation and regulation. There was no incentive for them to invest in plant and equipment upgrades, or train new workers, because each and every year they got to keep less of their profits. Profits are a reflection of all the hard work that goes into running a business – and they are not guaranteed. Often, these businesses LOSE money. When the government lays a claim to more and more of that elusive outcome, business owners would rather go elsewhere.

Leisure time is a novel concept in human history. It only exists today because we are productive enough in the time we spend at work that we don’t need to work all the time. Machinery plays a big role in this, allowing one worker to do the work of 100 that it may have taken in the past.

If you fail to understand that, I am sorry. But economic reality does not care about sensibilities, loyalties, or political correctness. It only cares about environments that are conducive to capital growth (savings) and environments that destroy capital (debt). We are the latter, and our day of reckoning is coming.

We need to decouple from the US as quickly as we can. When the Chinese decide to take their place on centre stage, the US will undergo a catastrophic collapse. Over 100 trillion dollars in liabilities and no way to fund them. If they took 100% of their economic output in taxes, which is impossible, it would take over a decade to work their way out.

We need to position ourselves correctly before it’s too late. But I don’t think it will happen.

#167 Prairieboy43 on 11.17.14 at 5:53 pm

Try this again. How will this affect California Real Estate?

#168 Mark on 11.17.14 at 5:55 pm

“Do you really believe prices are falling in Toronto where aggregate months of inventory is less than 2?????? Not happening, bud. At least not yet.”

Yes it is happening, and prices are falling in the GTA. “Inventory” numbers don’t represent the whole picture, particularly shadow inventory, FSBO’s, etc.

#169 Mark on 11.17.14 at 5:58 pm

“Who buys the high end houses (I assume above 1M)?
I thought that CMHC financing is no longer available for 1M and more?”

CMHC financing is most definitely available for $1M houses and higher. More downpayment needs to be brought to the table though, so that the total loan does not exceed $1M (the actual CMHC limit is on the value of the loan, not on the value of the house!).

So if someone, for instance, sells a paid-off $700k house, they could, by way of a CMHC-insured subprime loan, buy a $1.7M property.

Of course, it never was the first-time buyer with the 5% downpayment in the >$1M houses, even prior to the limit being enacted.

#170 chapter 9 on 11.17.14 at 6:07 pm

#16 Smoking Man
Don’t hesitate to reach out and talk to someone. Often we look at ourselves especially men like we are invincible.And that is not the case. Hang in there!

#171 Mr. Reality on 11.17.14 at 6:12 pm

#51 VanDammeCouver on 11.16.14 at 9:27 pm
@ Mr. Reality #43

32 VanDammeCouver on 11.16.14 at 8:38

“Life insurance is simply a fixed income scheme designed to gauge ever more money from the consumer in order to allow insurance company to invest their money in leveraged products.

Take the money and invest it yourself in a portfolio like Garth has talked about on this site countless times.

The game is designed to extract as much money from us as possible, insurance, interest, taxes etc. Once you realize this you will reach enlightenment.

Do you best to pay them nothing :)

Mr. R.”

Sorry Mr. Reality, but your comment is nonsense. Just because a company makes a profit doesn’t mean the service it provides is bogus (though sometimes it is).

There are plenty of publicly traded companies that are profitable, but whose services are still important. Insurance companies are one of them and completely legitimate, though I can’t always say the same about insurance agents.

With insurance companies, their service is actuarial science, which is the law of big numbers. Nobody knows if you or I will die in 10 or 20 years, but sample a population of people similar to you and me, and patterns start to emerge. That type of pattern-finding is actuarial science, and it is a valuable service.

Society as it is today could not exist without insurance.

That’s fairly black and white style thinking Mr. Reality, you should aim for a more balanced style of thinking, there’s a lot of grey out there.

Actually insurance preys on fear. Its that simple. The reason the industry makes money if based on fear they get you to “insure” yourself against that are statistically improbable of happening.

So instead, take the money and make money yourself instead of handing it over to an industry skimming profits off the top.

I suggest you learn about money and how the system, especially insurance is set up to take it from you with ZERO RETURN. And yes it is black and white.

If you work in insurance stop drinking the cool aid.

Mr R

#172 saskatoon on 11.17.14 at 6:54 pm

#148 None

someone made a mistake buying the food.

one can try to sell people plastic rice; and, this would not necessarily be a “mistake”.

#173 For those about to flop... on 11.17.14 at 10:44 pm

Hey Garth ,thanks for answering my question yesterday. So is the 60/40 mix 60fixed 40 equity or is it the other way around.

60% growth assets. — Garth

#174 Setting the Record Straight on 11.17.14 at 11:56 pm

My understanding is that the owners of nuclear plants in Ontario have a limited liability for damages under the law. Can someone confirm this or is this incorrect?

I also understand that vaccine manufacturers cannot be sued in the US. There is a special legal procedure whereby some people do receive some compensation.

Ca n someone clarify the Canadian situation?

#175 nonplused on 11.18.14 at 1:13 am

#84 dienekes

If this is so why are all the houses that were built this way still standing 30 – 40 years later with no mice coming in through the header?

I can agree that concrete can wick water, but it’s not supposed to be wet either unless you have another problem. Drainage isn’t good or it’s not properly sealed. But even in the new way of building houses, the joists (which are now also plywood and chip, not lumber), still sit on the concrete and get wet if the concrete is “wicking” moisture.

The strongest ways to build a structure in order are steel, concrete, brick, real lumber, plywood, plastic, and last and least chip. It’s crap.