The goal of life

TRUCK modified

“I just stumbled upon your blog today,” writes Amanda, on the most important day of her moist millennial life, “as I’m in the process of deciding whether or not my partner and I should take the leap into buying a house in Toronto. The reviews are so mixed.  Lots of people saying it’s never a bad investment, it will keep rising, etc.  And if we are in it for the long term, as a home, we need one anyways….”

Well, I know where this is headed, when a twenty-something tells me she “needs’ to own real estate. Anyway, little A sets it out this way:

“Then there’s your camp, who say this is a terrible idea.  But to be honest, after reading your blog haven’t you and others been “predicting” this for many, many years?  Sure, it’s bound to crash, or softly land, or whatever sometime… But am I not missing out now?  Will I maybe just have to pay even more later on?

“My partner and I are both professionals.  We have a combined income of almost $200k/year.  And we have a huge chunk of savings that we could put into a down payment (over 100k).  Yet it still seems impossible to fight with people who seem to have even more than us (or do they?)… lest we buy in a crummy area.

“I know your advice will be to hang tight.  But for how long?  Is it not possible that it can keep going up, up, up because of the amount of people that want to live here?  How can you be so certain it will come down (when it hasn’t yet) – and by how much? I’m feeling overwhelmed and scrambled by the whole experience and am looking for guidance and evidence for same.”

If Amanda and her professional other buy a slanty semi for $800,000, they’ll have no money and a mortgage of about $750,000 (with tax and CMHC premium). They’ll also have a 2.79% five-year mortgage that will carry for $3,300 a month. With property taxes and insurance (no maintenance), the total will be about $4,000. Renos are extra, plus the usual utilities, garbage tax, street parking permit and annual racoon removal. After five years they’ll have paid $99,000 in interest and still owe $640,000.

Is this wise? After all, that’s more than I pay in rent to live in my two million dollar property, where the landlord kindly subsidizes me. And it’s not a semi. With four-car parking, a garage, three levels, landscaped backyard, motorized awning, and festive patio lanterns. So, the price of ownership – even with the cheapest mortgage rates ever – ain’t cheap. Besides, if my high-efficiency furnace quits or the designer apron sink leaks on the travertine flooring, I speed dial the LL, and have another scotch.

But, some people just have to nest. So should Amanda, with a hundred grand burning a hot hole in her bank account, take the plunge into Toronto’s steamy realty waters?

There’s no correct answer to the question, of course. If the kids do it, they’ll be gambling every shred of net worth they have – and most of their cash flow – while taking on a massive amount of debt, to buy an asset whose value has never been higher because rates have never been lower. This seems like the perfect definition of ‘risk.’ If Amanda wants a house of her own that badly (and it sounds so), she’ll ignore this risk and start seeing it as security. That’s the way the brain works. It’s why a lot of people fail.

House prices don’t need to crash, or even soft-land to make this happen. In some markets they could just reach a plateau (about where we are now) and stay there. In that case these virgins would end up spending double the amount they need to for accommodation, which will materially zap their ability to save and invest, while exposing them to market risk, rate risk plus employment and mobility risk.

However, nobody listens to me, which is oddly liberating. We’ve bred a generation of offspring with one goal in life. It’s not world peace, career success, good deeds, entrepreneurship, animal welfare or even self-fulfilment. Nah, it’s a house. Nothing else really matters. How sad is that?

Well, here’s the latest forecast: the domestic economy is doing badly and will get worse. GDP numbers suck. Employment stats suck. Government budgets suck. The oil thing is just starting to whack corporate and public finances. Family debt’s increasing and wages aren’t. Same old story.

So I wouldn’t be surprised if the Bank of Canada panics again and lowers rates another quarter point, which will kill the dollar, make commodities fade and import more inflation. 2015 could go down as the year family finances degenerate as never before. But because house values in a few cities rise as mortgages deflate, the wealth effect will mask it. Kids like Amanda will puff out their chests, invite their little friends over to drink white wine out of plastic cups and brag about their equity and their acumen.

I sure hope that’s a big moment, given the sacrifice. Not just in money.

276 comments ↓

#1 Yogi Bear on 03.19.15 at 6:41 pm

Good luck, Amanda.

(you’re going to need it)

#2 Bob the dude on 03.19.15 at 6:41 pm

First from Seattle. Great blog.

#3 First on 03.19.15 at 6:44 pm

FIRST!!!!

#4 pathcontrolmonk on 03.19.15 at 6:46 pm

In what alternate reality does someone think that the OECD slashing Canada’s economic outlook is a good thing?

#5 saskatoon on 03.19.15 at 6:47 pm

better call marco koslowski:

https://www.youtube.com/watch?v=Qp2YVmCdy9I

this one is THE BEST!!!:::::::::::::

https://www.youtube.com/watch?v=YK9WKj86FX8

“i didn’t know where oklahoma was…so i looked it up on a map…i still don’t know where it is…and my duplex property there ended up being a quadplex”

claim you toronto-area seat today(!):

http://realestateprosperity.ca/

“Using Marco’s system I was not only able to find one deal but several in a very short amount of time…the best part was not just finding the 6 deals, it was Marco giving me all the funding I needed to close those deals. I would never have been able to close them on my own.”

#6 gulnar on 03.19.15 at 6:48 pm

Repeated message. hopefully it will sink..
Also GT. Just be open about rate cut. If you know and I know it will happen then we should be forceful.

#7 gulnar on 03.19.15 at 6:49 pm

Amanda dont do the Financial Suicide.
Let your money Earn Money and you enjoy your life and paying taxes only.

#8 md on 03.19.15 at 6:50 pm

Amanda….I think what Garth is trying to tell you is…..just buy the house…. your richer then you think!

#9 bob on 03.19.15 at 6:50 pm

So I wouldn’t be surprised if the Bank of Canada panics again and lowers rates another quarter point,

WHAT? Just a couple of days ago you said it was a sure thing rates were going to rise and follow the US. Now you wouldn’t be surprised if the opposite happened?

Therefore, would you be surprised if housing prices keep on going up?

Try to keep up. The BoC will inevitably (not immediately) follow the Fed higher. But in the meantime, the goofiness will continue. Over time the outcome stays the same. Rates up. — Garth

#10 The Young Generation - tralalalala on 03.19.15 at 6:50 pm

They are digging their own hole and proud about it

Why are you wasting your breath, Garth? Really

#11 james on 03.19.15 at 6:51 pm

#2 Bob, greetings from Seattle as well.

I don’t get the urge for young people to lock themselves into a huge mortgage.

Mobility is key these days. The transaction costs on selling an 800k home are significant.

I enjoy my modest 1800 sqft detached house in Seattle. It costs me a very small fraction of my net take home pay each month. After property tax and mortgage interest deductions it is cheaper than renting the same place.

However, I am vaguely disquieted at the prospect of having to either sell the damn thing or rent it out if I relocate. I keep getting pinged by quantitative trading firms in NJ, NY and Houston, and I’m thinking that the home is in fact a bit of a drag.

I think people underestimate the importance of mobility and low transaction costs in certain occupational sectors.

#12 Kilby on 03.19.15 at 6:53 pm

I hope Poloz isn’t so far under Harpo’s mesmerizing influence that is would lower the rate again. Weighing our trade ventures against the debt and real estate issues we have, a rise of a quarter point would be a good signal…..Maybe he will have to wait until after the election.

#13 Victoria Real Estate Update on 03.19.15 at 6:56 pm

HOUSE PRICES CONTINUED TO TUMBLE IN FEBRUARY, making it 6 consecutive months of lower prices in Victoria.

. . . . . . . . . . . . . House Prices. . . . . . . . . . . . . . .
. . . (Percent Above/Below June 2010 Price Level). . .
. . . . . . . . . . Victoria and Winnipeg. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+13.0% . . . . . . . . . . . . . . . . . . . . . . . . x . . . . .
+12.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+11.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+10.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 9.0%. . . . . . . . . . . . . . . . . . . x. . . . . . . . . . .
+ 8.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 7.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 6.0%. . . . . . . . . . . . . . . .x. . . . . . . . . . . . . . .
+ 5.0%. . . . . . . . . . . x. . . . . . . . . . . . . . . . . . .
+ 4.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 3.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 2.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
+ 1.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . 0%. . .x*. . . x . . . . . . . . . . . . . . . . . . . . . . .
– 1.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 2.0%. . . . . . .*. . . . . . . . . . . . . . . . . . . . . . . .
– 3.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 4.0%. . . . . . . . . . . *. . . . . . . . . . . . . . . . . . .
– 5.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 6.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 7.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 8.0%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– 9.0% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10.0%. . . . . . . . . . . . . . . . . . . . .*. . . . . . . . . .
-11.0%. . . . . . . . . . . . . . . . *. . . . . . . . . . . . . .
-12.0% . . . . . . . . . . . . . . . . . . . . . . . . .* . . . . .
———————————————————————————–
. . . . . . .June. . Feb. . Feb. . Feb. . Feb. . Feb. . . . .
. . . . . . 2010. . .11. . . 12. . .13. . . 14. . . 15. . . . .

x = Winnipeg
* = Victoria
(Source: Brookfield’s index)

In Victoria, February prices were:
* 1.7% lower than a year earlier
* 0.4% lower than in January
* 11.8% lower than the peak (June 2010)

Prices in Victoria would have to climb 13.4% to get back to the peak.

(continued below)

#14 PM on 03.19.15 at 6:56 pm

Have you ever owned a home Garth? What did the conditions look like that made you buy then?

Many of them. — Garth

#15 Canada's Real Estate Market on 03.19.15 at 7:03 pm

RECENT EXAMPLES OF MAJOR PRICE CORRECTIONS IN CANADA THAT DIDN’T REQUIRE RISING INTEREST RATES

In 2008-09, PRICES IN VANCOUVER FELL AT A RATE OF 14.2% PER YEAR (for 10 months) until interest rates were slashed from near-normal levels to emergency levels.

. . . . . Vancouver House Prices. . . . . .
. Percent Below July 2008 Price Level . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. .0%. . .*. . . . . . . . . . . . . . . . . . . .
– 1%. . . . . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . .
– 3%. . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . . . . . . . . . . . . . .
– 5%. . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . *. . . . . . . . . . . .
– 7%. . . . . . . . . . . . . . . . . . . . . . . .
– 8%. . . . . . . . . . . . . . . . . . . . . . . .
– 9%. . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . . . . . . . . . . . . . . .
-11%. . . . . . . . . . . . . . . . . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . * . . .
—————————————————————-
. . . . . .July. . . . December. . . . May. . .
. . . . . 2008. . . . . 2008 . . . . . 2009. . .
(source: Teranet’s index)

HAM didn’t stop prices from falling at a rate of 14.2% per year in 2008-09 and HAM will not prevent or stop Vancouver’s next major price decline.

From 2007 to early 2009, SFH PRICES IN CALGARY FELL AT A RATE OF 12.2% PER YEAR (for 18 months) until emergency interest rates were brought in.

. . Calgary Single Family Home Prices. . .
. .Percent Below July 2007 Price Level. . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. .0%. . .*. . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . .
– 8%. . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . .* . . . . . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . . . . .
-14%. . . . . . . . . . . . . . . . . . . . . . . .
-16%. . . . . . . . . . . . . . . . . . . . . . . .
-18%. . . . . . . . . . . . . . . . . . . . *. . .
—————————————————————-
. . . . . .July. . . . .January. . . . January.
. . . . . 2007. . . . . 2008 . . . . . .2009. .
(source: Bob the realtor’s site)

The price of oil was above $100 for a big chunk of Calgary’s price decline. Oil will not insulate Calgary from major price declines in the future. Ditto for Edmonton.

From 2007 to early 2009, SFH PRICES IN EDMONTON FELL AT A RATE OF 12.4% PER YEAR (for 21 months) until interest rates were slashed from near-normal levels to emergency levels.

. Edmonton Single Family Home Prices. .
. Percent Below May 2007 Price Level . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. .0%. . .*. . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . .
– 8%. . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . . . . . . . . . . . . . . .
-12%. . . . . . . . . . *. . . . . . . . . . . . .
-14%. . . . . . . . . . . . . . . . . . . . . . . .
-16%. . . . . . . . . . . . . . . . . . . . . . . .
-18%. . . . . . . . . . . . . . . . . . . . . . . .
-20%. . . . . . . . . . . . . . . . . . . . . . . .
-22%. . . . . . . . . . . . . . . . . . . . .*. . .
—————————————————————-
. . . . . May. . . . February. . . . February.
. . . . .2007. . . . . 2008 . . . . . . .2009. .
(source: Bob the realtor’s site)

In 2008-09, PRICES IN VICTORIA FELL AT A RATE OF 11.7% PER YEAR (for 10 months) until emergency interest rates were brought in.

. . . . . . Victoria House Prices. . . . . . .
. Percent Below June 2008 Price Level .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. .0%. . .*. . . . . . . . . . . . . . . . . . . .
– 1%. . . . . . . . . . . . . . . . . . . . . . . .
– 2%. . . . . . . . . . . . . . . . . . . . . . . .
– 3%. . . . . . . . . . . . . . . . . . . . . . . .
– 4%. . . . . . . . . . . .*. . . . . . . . . . .
– 5%. . . . . . . . . . . . . . . . . . . . . . . .
– 6%. . . . . . . . . . . . . . . . . . . . . . . .
– 7%. . . . . . . . . . . . . . . . . . . . . . . .
– 8%. . . . . . . . . . . . . . . . . . . . . . . .
– 9%. . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . . . . . . . . . . . *. . .
—————————————————————-
. . . . . .June. . . .December. . . .April. . .
. . . . . .2008. . . . .2008 . . . . . 2009. .
(source: Teranet’s index)

Victoria’s current major price decline could speed up dramatically at any time.

(continued below)

#16 Randy Randerson on 03.19.15 at 7:03 pm

Oh GT, why bother with advising millennial virgins about RE purchases when they’ve already set their young minds to it. Most young kids nowadays have nothing in their sights except RE in an ironic neighborhood that they can brag to their little friends. They’re all looking forward to rotator cuff surgeries after giving out jillions of high fives to their little buddies.

They ask you for advice not out of curiosity, but to confirm their believes that stocks are risky and houses are security. Such confirmation bias is everywhere.

#17 Canada's Real Estate Market on 03.19.15 at 7:04 pm

By 2007-08, house prices in Vancouver, Calgary, Edmonton and Victoria were deep in bubble territory. These markets were the bubbliest in Canada at that time. Indeed, these 4 Canadian markets were as bubbly as some of the bubbliest American markets of the 2006 US housing bubble.

ALL 4 OF THESE MARKETS EXPERIENCED PRICE DECLINES AT ASTONISHINGLY FAST RATES (11.7% to 14.2% per year). An unbiased, outside observer would most likely categorize such speedy price declines as crashes.

It’s important to note that INTEREST RATES WERE FALLING AS HOUSE PRICES FELL IN THESE 4 CANADIAN MARKETS.

It’s also important to note that the effects of the Great Financial Crisis weren’t felt in Canada until late 2008, after price declines in all 4 markets were well underway. It is, therefore, impossible to argue that the GFC caused these markets to correct.

In 2008 Garth correctly predicted that Canada’s housing market would undergo a significant price correction. It had started and he was right about that, however, emergency interest rates were brought in to stop the price correction – a move that nobody could have predicted.

This time, Canada’s major market correction will not be stopped by the market boosting effect of lowering interest rates from near-normal levels to emergency levels, since rates are already there..

Until next time – Cheers!
(Victoria Real Estate Update)

#18 CJ on 03.19.15 at 7:08 pm

Really looking forward to Lillooet telling us we should all live in backwater towns. Now THAT’S a future!

#19 Nodebt on 03.19.15 at 7:10 pm

Hey lilooet women! What’s your net worth?

#20 Lady in Red on 03.19.15 at 7:11 pm

Decided a couple of weeks ago to use my freedom of speech and write a letter to the government expressing my concerns with the current housing crisis as I see it. While I was at it, decided to throw in some comments related to cheap lending and lack of return for responsible savers. Ended the letter asking what the government plans on doing about it…

Received a response telling me to contact the Finance Minister with my concerns. So, copy, pasted and sent the letter – still waiting to hear back. Didn’t write expecting to actually be addressed, but figured it’s really the only way (aside from Garth’s wonderful blog) to get our voices heard. Why are we Canadians so nice about getting screwed?

http://www.canada.ca/en/contact/questions.html

#21 Jimmy on 03.19.15 at 7:12 pm

What does the partner have to say?
Amanda should buy it on her own.

#22 Bottom Feeder on 03.19.15 at 7:12 pm

#248 from yesterday Oil is Sticky
$1.20 gas. Sorry Bub. That’s your AH Liberal provincial government bending you over. What you are paying is high excise tax and the carbon tax. Now go back to protesting the Enbridge line.

#23 S. Walton on 03.19.15 at 7:13 pm

Hey Picasso, Mr Noodles 4/$1.00 at Walmart

#24 Nicolas on 03.19.15 at 7:13 pm

Maybe I’m impermeable to all this but I feel like renting and maintaining a robust balanced portfolio is such a no brainer. If I get hit by a bus tomorrow, I leave my wife and kid a growing pile of money instead of a debt hole.

#25 waiting on the westcoast on 03.19.15 at 7:13 pm

Garth – love the ongoing angst over the lunacy! ;-)

I was recently visiting a company I used to work with. There was a young woman who just recently had a child and just bought a townhouse in Van for over 900k. They had a pretty sizeable downpayment (about 300k). I pointed out how overvalued the market was, how she could invest the 300k and make ~20k a year. She could rent a nice townhouse for around 30k a year and continue building up her savings while waiting for a correction. After listening and acknowledging my points, she said she just wanted to have her own place.

I don’t bother giving advice anymore. I am definitely in the minority on housing, especially in Vancouver. I am so happy that my wife also loves your blog and “gets it”.

#26 pinstripe on 03.19.15 at 7:13 pm

my advice to A ,and any other millenien, is to BUY.

The current system is designed to reward borrowers and punish savers.

since 2008 real estate is the best investment . there is a lot of fear mongering but that is to be expected,

The interest rate will stay low for a long time. It would be political suicide for any politician to move the rate upward even though the right answer is to move rate upward to cut down the rate of debt piled on. A politician will de anything to stay in pwer and get reelected.

All the realestate that I purchased over the past years (since the 1950s) has always trended upward in value. NEVER did I sell anything at a loss.

#27 Mr.Hulot on 03.19.15 at 7:15 pm

Garth, keep bragging and your landlord is going to raise your rent.

#28 Victor V on 03.19.15 at 7:16 pm

I have known quite a few couples like Amanda and many of them have one dirty little secret that they mostly keep to themselves.

That ‘down payment’ that they reference is often not cash saved in the bank, but rather cash on its way from the Bank of Mom and Dad.

Makes the virginal plunge more enticing when the dollar bills are being dangled, no?

#29 Godth on 03.19.15 at 7:17 pm

Too bad it’s not just Canadian real estate.
The Financial Folly Lurking Beneath Yellen’s Patient Lack Of Impatience
http://davidstockmanscontracorner.com/the-financial-folly-lurking-beneath-yellens-patient-lack-of-impatience/

#30 Mike T. on 03.19.15 at 7:19 pm

#5 Saskatoon

smart people (me) realize that if Marco and his kind truly had investment property dream deals, they sure as hell wouldn’t tell anyone

they’d buy it themselves – DUH

#31 Nemesis on 03.19.15 at 7:21 pm

#OhGT!,YouSoHadMeAt… #”Festive patio lanterns”,Or… #JustAskDetectiveInspector… #”I’m a renter”… #AlexTardio,19thPrecinct…

https://youtu.be/CQeKPGMYyBg

(NoteToGT: You’ve got to stop wearing those scandalous Argyle Socks. Seriously.)

#32 Andrew Woburn on 03.19.15 at 7:22 pm

Meet co-bot, your new coworker.

http://www.ft.com/intl/cms/s/0/ed7be188-cd50-11e4-a15a-00144feab7de.html#axzz3UqXd0rC1

#33 chapter 9 on 03.19.15 at 7:25 pm

Amanda you live in Ontario and make good money, who do you think the provincial government is going to be taxing to death as you guys near the $325 Billion mark in provincial debt. You! As a young professional the last thing you want to do is take on nearly a million in debt for a second rate pile of bricks. You don’t need this crap at your age. Stay liquid, cause you never know when it might be time to “get outta dodge”.

#34 Van Isle Renter on 03.19.15 at 7:25 pm

There’s two kinds of money in the world; real and imaginary. Real money does what you want. Imaginary money makes you do what someone with real money wants.

Which one you want to have?

#35 HD on 03.19.15 at 7:26 pm

Age: 30
Balanced portfolio: $205K
Real Estate: 0
And my employer offers a DB pension plan

Why on earth would I want a house? Like an infamous/famous regular poster would say, freedom first.

Some of us are listening. See you guys at the finish line.

Best,

HD

#36 Smoking Man on 03.19.15 at 7:26 pm

Dogs, Rabbits, and Turtles.

I resite the great Elvis. “You anit nothing but a hound dog, you never caught a rabbit and you ain’t no friend of mine.”

Most off you, the basterds got you young, in primary school.

You now beilive the Turtle won the race.. Bahahaha.. It was a lie, a social engineer put that in your head to make you weak, frightened, he’s a dog working for the 1% wagging his tail in hopes for a milk bone with melted chezz on top.

The rabbit kicked ass, he went into town, hit the bar, the brothel, the strip joint, not in that order.

The Turtle gasping for air, rushing, trying to cross the road before an 18 wheeler squishes it into a splat…

Dogs, you want to catch a rabbit. South Side Johnnys at 7pm tomorrow night.

#37 Mark on 03.19.15 at 7:27 pm

House prices are no longer going up and haven’t been for most of the past 2 years. The real economy in Canada sucks and appears to be in a deflationary funk which is set to deepen as the severance cheques run out. Retail has almost no pricing power, so none of the currency weakness is actually showing up for consumers. YoY debt expansion was one of the slowest on records, according to Transunion, at only a hair over 2%.

This all points to an economy that is in need of additional stimulus, especially as the RE decline deepens. If the BoC raises rates, they would effectively be committing economic genocide against the Canadian economy and the Canadians who want to participate in it, but can’t for lack of sustainable employment opportunities. All for what, to guarantee an already quite wealthy elderly population additional return on their hoards of “risk-free” GICs?

#38 Smoking Man on 03.19.15 at 7:28 pm

Ops, rabbit catching on Saturday night, so hammered I thought it was Friday today.

#39 Leroy Washington on 03.19.15 at 7:29 pm

Wow…you Canadians don’t have a clue. Have you not learned from us Americans’ experience of 10 years ago, with respect to housing? You are in for a rude, painful surprise. Get ready to be Terry Tated, financial-style:

https://www.youtube.com/watch?v=RzToNo7A-94

#40 Old Fogey on 03.19.15 at 7:29 pm

Dear Amanda,
Had lunch with a friend who has lived in her Cabbagetown town house for 27 years. When she and her husband bought it, they did a “to the studs” Reno. Their $200K mortgage sounded horrendous way back then, particularly with the kind of mortgage rates that were the norm back then and which you young things couldn’t imagine in their wildest nightmares. With both of them working, they’ve done the normal maintenance that “century” homes need and raised their family, steadily paying off most of their mortgage along the way. However a sizeable chunk was left when hubby died, which was fortunately paid off with insurance. In the past year alone, the house has required a new roof, two reno’ed bathrooms (necessitated by damage caused by an invasion of squirrels) and kitchen and a new furnace.
Do not believe the nonsense that real estate is an investment. It isn’t. It is a liability. And, it is a life style choice. It is costly to buy , costly to sell and in between you are liable for taxes and maintenance costs.
Listen to Garth’s advice.

#41 aL Pacino on 03.19.15 at 7:30 pm

Dear Garth.
The true goal of life is not to be left behind……
Your thesis would be great in a country like germany or france, but here in canada, where virtually all immigration is from 3rd world countries, where homeownership is the holly grail this thesis if simple erroneous.
I’m not good at words unlike yourself so im just gonna leave it at that.

#42 Daisy Mae on 03.19.15 at 7:34 pm

“However, nobody listens to me, which is oddly liberating…”

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

Ah, well. No one listens to me, either. Garth, it appears you only have parking for four. What are you going to do when the tsunami of guests arrive? You DID invite everyone, after all…

#43 We Are So Toast on 03.19.15 at 7:35 pm

What will happen is that another couple of rounds of interest decreases, then a canadian version of QE, and then negative interest rates. In two years time, the CAD will be 50 cents to the USD. Then, foreign vultures eehm investors will cobble up buy up many of our businesses. We will be told the economy is going up again. Hurray! Neo-liberalism with a good dosis of communist-style financial economic management, it’s the future of our planet!

#44 raisemyrent on 03.19.15 at 7:35 pm

All of these professionals in their 20s making 6 figures that this blog attracts. I suspect wishful thinking on their incomes if they can’t figure out a 6-7 figure deal is a bad idea. Cue Smokey’s obedience rant.

#45 zedgt87 on 03.19.15 at 7:36 pm

You think millionals have bad housing list? Look at the boomer generation. They started it, most of us youngens just want somewhere to live that isn’t a shithole. Its an unfortunate situation, oh well guess I’ll keep renting the shoebox until buying makes sense. Modern day feudalism

#46 Victoria Real Estate Update on 03.19.15 at 7:38 pm

Winnipeg’s housing market has dramatically outperformed Victoria’s over the last 5 years. Victoria’s weather hasn’t insulated it from a significant price decline.

The warmest markets in the US ended up being the biggest prices losers, by far, as the 2006 US housing bubble deflated. Victoria is following suit.

Extreme overvaluation is a problem for all of Canada’s major housing markets. By 2011, Canada’s housing market was already more overvalued than the US at its peak (The Economist). The degree of overvaluation of Victoria’s market is still extreme. A quick comparison to house prices in several US cities makes this clear.

$125 K, San Tan Valley, AZ (Phoenix) (3 beds, 2 baths, 2,150 sq. ft., built in 2007, attached double garage)

$115 K, Palm Bay, FL (3 beds, 2 baths, 2,061 sq. ft., built in 2009, attached double
garage)

Girls and guys, the biggest part of Victoria’s price decline is in the future. Continue to rent (risk-free and worry-free) for less money each month than paying the monthly on a dangerous mortgage until prices are much lower.

Stay out of Victoria’s housing market for now and avoid the serious financial problems associated with buying near the peak of a deflating housing bubble.

Until next time – Cheers!

#47 Un Kwestion on 03.19.15 at 7:40 pm

Garth, faced with the choice between (1) decreasing the interest rate further, thereby importing inflation, and (2) increasing rates, thereby bringing down the housing market which indirectly is responsible for about 25% of our GDP, why do you think that option 2 will be looked at as the lesser evil?

#48 Daisy Mae on 03.19.15 at 7:40 pm

“Kids like Amanda will puff out their chests, invite their little friends over to drink white wine out of plastic cups and brag about their equity and their acumen…”

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

And, learn one of the many life lessons the hard way, as usual…..

#49 Andrew Woburn on 03.19.15 at 7:41 pm

There has been a lot of concern about the high proportion of working age people in the US who don’t have a job. The reason according to this well respected economics writer is that young people are staying in school longer not that middle aged people are out of work. If you exclude people past retirement age the participation of 25-55 year old’s is stable. She has the numbers.

https://www.creditwritedowns.com/2014/02/explaining-the-us-labour-force-participation-problem.html

#50 Smoking Man on 03.19.15 at 7:43 pm

Dearest Amanda, Let me introduce myself. My name is Dr Dyslexic Smoking Man, if get visuals of a Bald 50 something dude with many extream addictions and rotting teath..Your Spot on..

I know the temptation to shove a Granet counter top up the ars of a rival is tempting. Don’t do it.

Unless you come to my Long Branch. This hood rocks. As the un official, un elected, un accredited spokes men and spiritual leader of the greater Fool home owners association.
I welcone you to the hood.

#51 omg the original on 03.19.15 at 7:44 pm

CALGARY HOUSE PRICE DEATH WATCH

Seriously with what is happening with layoffs in Cowtown we should see a huge price response in real estate.

BUT……..my left nut and $50 bucks says the price response will be muted – maybe a 10-15% reduction from the irrationally high current levels. A more reasonable expectation would be for a decrease of 20- 30% – which would be back to 2005/06

I am guessing, and its a guess based on watching real estate for the past 3 decades, that Cowtown listings will be up wildly, sales will be down hugely, but prices will not crater.

WHY………….

1) Canadians in bubble cities expect high house prices – its why we pay double, triple or even quadruple for a house in Calgary versus a better located, more economically vibrant city in the US. The expectation of high prices in the bubble cities has become entrenched in peoples’ minds over the past decade and it will take a good decade or more to change.

2) people HATE, absolutely HATE, to lose money on a house – they will hang on no matter what and pawn their kids $2000 mountain bike if need be. But they will NOT sell for less than what the house was worth 6 months ago. That is UNTIL THEY HAVE NO CHOICE which will be a 1 or 2 down the road.

3) There is a fair bit of fat in households that can be cut to met housing expenses in the hopes the oil prices (and Cowtown jobs) will turn around. One less Lexus in the driveway, less eating out, no nanny or private school, a $50 cell phone plan instead of a $150 plan, etc, etc.

4) People will be bombarded by the MSM with what a great buying opportunity this is. A chance to buy in Canada’s “Dallas” for 15% off!! Load me up, I take two!

Irrational yes, but its Canadian housing after all. Watch for it.

#52 Linda on 03.19.15 at 7:45 pm

Ah, the nesting instinct. For all the good advice (& it IS good advice) to wait for prices to fall, market to correct etc. – in the end, the need (heart/emotional) outweighs the rational brain going ‘Wait! Wait! this is not a good time to buy!’ despite how loudly it shrieks. Discipline is hard, getting that goodie now feels good. Guess which of the two choices – save or splurge – tends to win. Kind of like trying to ignore your favorite dessert in the whole world sitting there out in the open every time you walk by. Yeah its a zillion calories you don’t need, but you want it.

#53 MSM-free Zone on 03.19.15 at 7:47 pm

“……2015 could go down as the year family finances degenerate as never before…….”
_________________________

Does this mean there won’t be a ‘fixed election’ date?

#54 everythingisterrible on 03.19.15 at 7:49 pm

#10 The Young Generation
As a Millennial, all you smug boomers can get f’ed. Your chastising an entire generation for wanting the same thing that you wanted, the only difference was that it was easily attainable for you and you experienced a huge surge in the value of your homes making some of you think you’re investment geniuses but it was actually just dumb luck. But we’re the idiots? BTW not all of us are house obsessed and are patiently waiting for an end to this real estate madness. I hope you all get put in homes when your inevitable senility kicks in.

An ugly, ageist comment. Perhaps some experienced people are trying to warn the inexperienced. You can listen, or not. But don’t be a douche. — Garth

#55 Piccaso on 03.19.15 at 7:50 pm

S. Walton

Left over pizza tonight, but thanks!

#56 Mark on 03.19.15 at 7:51 pm

“What will happen is that another couple of rounds of interest decreases, then a canadian version of QE, and then negative interest rates. In two years time, the CAD will be 50 cents to the USD. “

Very doubtful. As the Canadian economy goes into more significant deflation, the CAD$ is likely to rise as people race to repay debt. Remember that borrowing is effectively ‘shorting’ a currency, and we know what happens when a ‘short squeeze’ occurs.

The US economy and the USD$ appears to be on the verge of rolling over as well.

If you exclude people past retirement age the participation of 25-55 year old’s is stable. She has the numbers.

Due to the easy availability of student debt, much of that age group is remaining “students” simply as a survival tactic. As jobs simply are not available in any significant numbers that are suitable for university graduates, and the ones that are usually are given to foreigners on H-1B and other work visas.

i know some might try to manipulate the numbers, but in the real world, most real jobs are getting hundreds of applicants and firms are so overwhelmed with talented individuals that they aren’t even giving them the basic courtesy of a response.

#57 The 'Merican! on 03.19.15 at 7:52 pm

At #40: Leroy, amen. Amen.

#58 Moi on 03.19.15 at 7:53 pm

Amanda, live with $50k and save $150.
It will be $750k in 5 years, then buy a house.

#59 Fuzzy Camel on 03.19.15 at 7:55 pm

Go spend $800k on a house that has less than $100k in materials and labour in it. Sounds like a steal of a deal.

Then go finance a $45k Mercedes made in Mexico that loses 50% of it’s value in 5 years. You’ll fit right in then.

Toronto is full of a special breed of suckers. Pay a premium to live next to a major highway so you get to breath in brake dust and products of combustion all day.

#60 nonplused on 03.19.15 at 7:57 pm

Look everyone, it’s really simple. Oil & gas prices have crashed, and when oil & gas prices crash, every other price in Canada soon follows suit. Even in TO. Without oil and gas, we don’t have exports.

It’s a hard connection for most people to make but even if our banks are insulated from real-estate due to CMHC, they are exposed to oil and gas in a big way.

Watch the WTI ticker. The price of your house, wherever you live except Montreal, will follow with a lag.

#61 Sheane Wallace on 03.19.15 at 7:58 pm

castle in Tuscany for sale

http://www.dailymail.co.uk/news/article-2993981/Medieval-Tuscan-castle-100-bedrooms-home-two-Popes-goes-sale-Italy-20million-making-largest-private-home-market.html

#62 prairie person on 03.19.15 at 8:07 pm

In spite of all the warnings not to buy in Victoria, there are a lot of people buying. Spring isn’t here yet but the spring sales are. Today, when I drove through the neighbourhood toward downtown, there were four sold signs in a short distance. One, a for sale by owner, was only for sale for a few days. I was shocked. Reading this blog and particularly the posts of the real estate person condescendingly referring to us as boy and girls and providing irrelevant house prices from the US where conditions for buying and owning are so different that the one does not reveal anything about the other, I would have expected for real estate signs to be so old that they are covered in moss. Like Garth, I, too, believe that buying at these lofty prices is filled with risk but everywhere I look houses are being bought, condos are being built, houses are being built. I don’t know where the buyers are coming from. Retirement buying is supposed to have slowed. Although, the drop in the Canadian dollar has made buying in the US less desirable. A 22% premium is a barrier. Perhaps Americans are coming back. If that is the case, they are not showing up downtown where a lot of store fronts are shuttered. My view is very narrow, of course. I don’t drive around the city making notes on how many houses are for sale and how many have sold. This is a desirable middle class neighbourhood with houses generally in the 600k to 1.2m range. No house stays on the market for long.

#63 Oil Is Sticky on 03.19.15 at 8:12 pm

Speaking of “goofiness and try to keep up”……

“U.S. stocks rallied on Wednesday after the Federal Reserve suggested a LESS AGRESSIVE timeline for raising interest rates even as it opened the door for the first hike in almost a decade. The Fed has come under lobbying from other countries not to raise rates. The Fed will comply for now, but when the Dow breaks out over the 20,000 level, the Fed will start to abandon international policy objectives shifting to domestic. The Fed NEEDS to raise rates for unless they do, they realize they have no room to lower rates for a stimulus in the future. The stocks rallied on the traditional view of interest rates and that will dominate the trend until after the ECM turns.

The Fed dropped its pledge to be “patient” in deciding when to begin raising rates, but it cut its interest-rate projections over the next few years and DOWNGRADED its outlook for the U.S ECONOMY. The dollar plunged Wednesday, falling 3 percent against the euro, after the Federal Reserve signalled it could begin raising interest rates as early as June but slashed rate projections and downgraded its outlook for the economy.”

So not only will we not be seeing interest rates at 2 or 3 percent for YEARS to come….but the fed is saying the RECOVERY…..is…..well…….downgraded. Or at least that is what they are admitting too…….

Rates will start to rise in 2015 and we have seen a watershed moment in US monetary policy. As predicted. — Garth

#64 Mister Obvious on 03.19.15 at 8:17 pm

There’s hope for you Amanda. I know this because today you took the time to seek Garth’s council even though he concedes it’s likely you will ignore his sage advice.

Here’s another important thing you can do. Go to this web page at statistics Canada:

http://tinyurl.com/ojfyphf

It’s an interactive ‘historical age pyramid’ for Canada. It spans the years from 1921 to 2011. Move the slider at the bottom to various years and watch the ‘tree-like’ graph turn into an elephant. Keep your mind open and think hard about what this data means. It could change your life.

I like to move the slider first to 1961. I was 10 years old that year. Other than the ‘indents’ you see around the 22 year-old age group, (a result of World War II) it still pretty much looks like a pyramid.

Move the slider to 1979 and observe another indent. Note the big lump that is located between the two indents. That’s me and my cohorts moving into a long prosperous era of inflationary times. It was a time when a large, young population was working very hard and needing lots of things. It was a time when the inflation wolf was always at the door and interest rates were generally high.

Now drag the slider all the way to 2011. Look! We’re still there, but so much older now. We don’t need to borrow much because we’ve either already amassed significant wealth or else we messed up our finances so badly we are now extremely poor credit risks. Either way, we will be a huge burden.

Notice the narrow base upon which this top heavy mushroom sits. That’s you and your contemporaries. Sorry Amanda, but it’s not my fault I was born right after a horrifying, planet-changing war when our parents (the western victors) were itching to put the world back together properly for the sake of all the soon-to-arrive little Jimmys and Janes.

Locate your birthday on this graph and consider how the data speaks to your future. We are entering a long period of deflationary times. Yes, interest rates will rise from the insane lows of today (that will be painful enough) but in my lifetime I don’t expect to see a day when you can pull 6% return out of a GIC.

You are in a much different world than the one in play when I was your age. This is a terrible time to use extensive leverage to buy a house in Vancouver or Toronto. You need to learn how to invest and you need to make peace with risk. Not ‘excessive’ risk mind you, (like a house in TO) but ‘managed’ risk in diversified investments. Keep reading this blog. Move forward cautiously and with purpose. Garth is correct. Your friends and family are wrong.

#65 Victor Y on 03.19.15 at 8:17 pm

“However, nobody listens to me, which is oddly liberating. We’ve bred a generation of offspring with one goal in life. It’s not world peace, career success, good deeds, entrepreneurship, animal welfare or even self-fulfilment. Nah, it’s a house. Nothing else really matters. How sad is that?”

Indeed sad and boring. House is a necessity in life. I heard the Germany is the only country that doesn’t have house bubble due to tight regulations.

Shelter is a necessity. A house is not. — Garth

#66 Babblemaster on 03.19.15 at 8:27 pm

#17 Canada’s Real Estate Market

This time, Canada’s major market correction will not be stopped by the market boosting effect of lowering interest rates from near-normal levels to emergency levels, since rates are already there.

——————————————————–

No, that’s true, but there are many other creative things they could do to kick the can further down the road.

#67 Smoking Man on 03.19.15 at 8:29 pm

DELETED (Vulgarity)

#68 takla on 03.19.15 at 8:31 pm

anyone pulling out their checkbook for a massively over valued asset{house}at this point in our economic deflation needs their heads examined.
waiting for the deleveraging to complete from the economic expansion of debt juring the run up to the GFC in 2008 would be prudent and advised.

TASBEM{theres a sucker born every minite}

#69 Oil Is Sticky on 03.19.15 at 8:31 pm

So not only will we not be seeing interest rates at 2 or 3 percent for YEARS to come….but the fed is saying the RECOVERY…..is…..well…….downgraded. Or at least that is what they are admitting too…….

Rates will start to rise in 2015 and we have seen a watershed moment in US monetary policy. As predicted. — Garth

—–

0.5% increase in Fed Rates in 8 years…..a raindrop moment perhaps. And look forward to more news on the recovery….that wasn’t.

It’s always interesting how so many Canadians cheer for a US stumble. Guess that balances off our hate for the Chinese. Luckily, we’re perfect and have nothing to worry about. — Garth

#70 TnT on 03.19.15 at 8:32 pm

If it’s 416 proper then you have plenty options.

Young professionals in Toronto rule.
Your income will climb faster than the balance of your mortgage.
Plan for maternity.

Pick a detach on the edge of crazy price areas I.e. Birchcliff has detaches with all the same amenities as The Beach. Same schools, stores and beach at a fraction of the cost. Wexford has tons of affordable detaches and great transit, schools and the best authentic cultural foods in Toronto. Scarborough is so under valued and there’s plenty of pockets of great neighbourhoods that are completely affordable for 2 young professionals.

Once you buy your home it just becomes your new reality and you adjust (for better or worse).

Good luck, be smart, feel excited for you.

#71 Joseph R. on 03.19.15 at 8:35 pm

Goal of life: Waiting for Godot

#72 nonplused on 03.19.15 at 8:48 pm

Sorry Garth, I didn’t mean to hit such a bone yesterday, my point was just that you are living large. But I guess if you can live large within a budget I guess that’s winning so points to you. I wouldn’t pay $3800 a month for rent but then I don’t need to live close to downtown TO.

#73 Godth on 03.19.15 at 8:48 pm

#54 everythingisterrible on 03.19.15 at 7:49 pm

You have been sold down the river, it’s a global phenomenon. Garth is getting more delusional all the time, but then no generation wants to look in the mirror and admit they’re leaving a massive mess for the next. I’m generation X so I’m stuck in the middle again. The future is broken as it’s been mined out by debt and corruption. The good news is your generation may have the opportunity to re-imagine the future, in fact you’re going to have to as this iteration of ‘reality’ is winding down. We can only hope that the lunatics in charge don’t start a nuclear war but it’s looking more likely by the day unfortunately.

“To conquer the known world” is a very old game, sorry kid, it’s the whole globe now or nothing. Sad.

#74 Sheane Wallace on 03.19.15 at 8:49 pm

there will be 0.25 % rate increase in 2015 (probability of 40 %)
and another one of 0.25 % in 2016 (probability of 60 %) than they will reverse it to zero and then it would go to 6 % in few months. get ready to rumble

#75 Smoking Man on 03.19.15 at 8:57 pm

It’s getting hard to type, my last one, drained the battery listining to Cash, and punching the shit out of my liver.

The Goal of life.!!!!!!

Make as many copies of yourself with as many DNA combinations as posable. That’s what we are ment to do judging by the Action at the bar.

Damn those teachers and social engineers… The prests, Rabbi’s, the meca organizers, the boodists, the southern Con men.

And mostly my wife, when I suggested we should think about moving, you know let’s go down south…

In pure highlander sord swathing, that was the day I lost em.

Now, because of the fear of Dog Lipstick, I got to take Wyatt my six mount old, crazy eyed shit in the house perfect dog, to the surgeon.

After its done, we can both share a cigar and lie to each other, it’s not that bad, life is great.

Sorry Wyatt..

#76 I'm stupid on 03.19.15 at 8:58 pm

Optics

That’s why the vast majority fail. If you rent you’re a loser, if you own you’re a winner. It’s total B.S to enslave and keep you where you are. The 99% hate the 1% because deep down inside they don’t have what it takes to succeed.

I was born a loser who became a winner. It’s not because I’m smarter or better than anyone else. It’s because I wasn’t afraid to take risks and didn’t care about what anyone else thought. I did what was best for me and my situation. Everyone has it in them to know what the best is for themselves, but few will do what needs to be done in the face of ridicule.

#77 Brian Richards on 03.19.15 at 8:59 pm

Hi Garth,
As a Sacramento, California resident, I am astounded at the price of real estate in Canada. A close friend has a smallish condo in Vancouver and he told me it was worth over a million USD. Look, I live in a nice little 1200sq ft home on a wooded acre 10 minutes to the Capitol building, right across from a multi-thousand acre natural wilderness. Recent appraisal:$190K USD. Amanda could buy something similar for $20 or $30K down and payments of $1200/month for a fixed 15 year period. Where is the good value in Canadian real estate?
Thanks, and the best to you and Amanda.

#78 Ralph Cramdown on 03.19.15 at 9:00 pm

Smoking Man, how can you deny the fable of the Tortoise and the Hare. You follow Ontario politics… The current PC leadership race is a classic example.
Christine Elliott = hare
whatshisname = tortoise
He has a good ground game, apparently.

#79 Van Island Girl on 03.19.15 at 9:01 pm

Anyone who thinks that buying a $750000 slanty semi is a good investment for housing has really seen too much HGTV. I know even though we recently bought our home, it was never an investment and when people tell us, how much of a smart investment it was we just smile and nod. It was a choice in a place to call home, not somewhere we plan on parking any of our extra money. Yup, we borrowed against our credit line to buy it and we’ll have that paid off in a couple of years max and then everything extra will be properly invested in something that will make us money. Our mortgage and taxes is no more that we were going to be paying in rent (actually a little less) and so that’s good enough for us. Sure we’ll have to do maintenance but considering little to none is done here for us, it will be an improvement.
I don’t think of myself as old, but I have to admit, almost everyone I talk to thinks that houses are a sound investment. I feel like a fish out of water when I present my opposing point of view.

#80 len on 03.19.15 at 9:01 pm

I think that when people like Amanda come to you to ask, they have doubts – and that is progress.

Waiting for the Feds to raise interest rates is like Samuel Beckett’s play Waiting for Godot. Looks like they surgically removed “patient” and at the same time managed to communicate that the US economy is a bit sucky so they wait. No wonder in a financialized economy where demand has been pulled forward and debt is higher than ever, chepo rates are a given. They will raise a bit, the stock market has a hissy fit and QE4+ is in the cards. Student loans? I hope so, at least the working stiffs see some benefits.

The Dow swinging 2000 points last week alone is not a sign of stability. It is a sign of financial system under extreme stress. Just my opinion of course.

#81 Marco on 03.19.15 at 9:02 pm

@TnT

“Once you buy your home it just becomes your new reality and you adjust (for better or worse).”

The problem with realtors in this country is they play with people’s dreams and prey on their vulnerabilities. As if they are qualified trusting financial planners. For these reasons alone there should be more stringent regulations imposed on this lot. Add in the fact that they quite possibly may be making the worst mistake of their lives buying in such a volatile economy. That’s reality, realtor talk…

Cheers.

#82 waiting on the westcoast on 03.19.15 at 9:04 pm

#54 everythingisterrible on 03.19.15 at 7:49 pm
“#10 The Young Generation
As a Millennial, all you smug boomers can get f’ed. Your chastising an entire generation for wanting the same thing that you wanted, the only difference was that it was easily attainable for you and you experienced a huge surge in the value of your homes making some of you think you’re investment geniuses but it was actually just dumb luck. But we’re the idiots? BTW not all of us are house obsessed and are patiently waiting for an end to this real estate madness. I hope you all get put in homes when your inevitable senility kicks in.”

Hey – I am a gen x’r so basically told in high school that my life would suck as the boomers would keep all the best jobs, etc. Don’t be a hater, there is/will be tons of opportunity for those that are awake. There is no better time to start and build your own job/career/business than now. Just a crappy time to buy a house.

I will point out that the houses my family owned were not as large or filled with over the top amenities. The higher expectations for your “starter home” is part of the price surge. Ultimately, if the price of houses are too high, don’t buy them. I am not blaming millenials for the inflated housing market (I am sure there are some stupid boomers in there too). Be a smart millennial and put your investment dollars/time/energy in assets that are going to make you the most money!

And if you just have to have that granite counter, well, be a dumb millennial… ;-)

#83 CJ on 03.19.15 at 9:09 pm

#77
Brian, you can’t compare US prices to Canadian prices. Completely different. I’m curious what your property taxes are.
My bet is they’re 5-10 times more than a similar property in Canada.

#84 Smoking Man on 03.19.15 at 9:13 pm

#78 Ralph Cramdown on 03.19.15 at 9:00 pm
Smoking Man, how can you deny the fable of the Tortoise and the Hare. You follow Ontario politics… The current PC leadership race is a classic example.
Christine Elliott = hare
whatshisname = tortoise
He has a good ground game, apparently.
……

They need a Smoking Man, who can fake being a happy Starbucks worker who talks like a teacher in high octaves.

Then when in… Raspy voice comes out of the closet..

#85 Oil Is Sticky on 03.19.15 at 9:15 pm

0.5% increase in Fed Rates in 8 years…..a raindrop moment perhaps. And look forward to more news on the recovery….that wasn’t.

It’s always interesting how so many Canadians cheer for a US stumble. Guess that balances off our hate for the Chinese. Luckily, we’re perfect and have nothing to worry about. — Garth
——

Who said anything about cheering? Truth once in a while would be nice. But cheering for doom and gloom absolutely not.

#86 DisgustMadeMePost on 03.19.15 at 9:18 pm

So how much really, do you expect that the average family is able to save per month while renting?

I know from my own renting scenario that savings are negligible. Lucky me, I have some money from my previous life so my stress is low. . But if I didnt, there would be NO WAY I could save any appreciable amount.

I am not living above my means. After the rent, hydro, gas, tel, car insurance, food, clothing (my kids choose to shop at thrift stores now cuz that’s IN.. But God bless them lol) and assisting kids with education expenses, what’s left over?

Not much if anything.

Not every family makes 200k a year.

Amanda’s ‘plight’ ? Oh brother.

#87 The real Kip on 03.19.15 at 9:27 pm

Sorry for the short post but I realized yesterday that I don’t have a resume to even compare to Janet Yellen so I’m working on it tonight. I’m just at the part where I invented truck nutz. How does Janet compare to that?

#88 Cici on 03.19.15 at 9:29 pm

#16 Randy Randerson,

Because he’s trying to knock some sense into their overinflated virgin heads in the hope that they will wake up and realize that they are probably being overpaid for what they do at the present time, and will be lucky if able to hold onto such high wages in the near future in light of the devastation that is encroaching on our economy. As such, the average millenial who is taking on massive mortgage leverage with little down is not only risking their own financial future but also further burdening the already lackluster Canadian economy with that excess risk.

#89 tkid on 03.19.15 at 9:36 pm

Amanda’s marriage is doomed when she says “I’m in the process of deciding whether or not my partner and I should take the leap into buying a house in Toronto.”

What, the hubby doesn’t want a say, or need a say? Nope. Amanda has the decision making covered.

And forget the 200k. That vanishes when the jobs do. And at 3300 monthly, the mortgage payment’ll sink ’em fast when the jobs & market vanish.

But Toronto’s market has gone up for years! Yeah, ok sweetie. You’ll be in for 2 years 3 months and boom … under a bridge living in a cardboard box hating the guy who made the decision to buy the place.

And no, I’m not some woman-hater, I just believe when two people are marrying, two people make the decisions TOGETHER.

#90 Nemesis on 03.19.15 at 9:36 pm

#IndustrialGuy… #WeAdoreYou… #RenoDogzBeware…

(Independent) – Gas explosion in New Jersey leaves 15 people injured

…”A gas explosion at a house in New Jersey has left 15 people injured and damaged several other buildings in the area.

Among the injured were six fire fighters and seven gas workers, one of whom was left in a critical condition.

Footage of the blast in Ocean County was captured by a police car dashboard camera that was near the scene at the time.

In the video, the huge explosion completely destroys the house and sends debris soaring into the air. Only the foundations of the house are reported to have survived.”…

http://www.independent.co.uk/news/world/americas/gas-explosion-in-new-jersey-leaves-15-people-injured-10068904.html

http://www.independent.co.uk/news/world/americas/gas-explosion-in-new-jersey-leaves-15-people-injured-10068904.html

#91 Victoria Real Estate Update on 03.19.15 at 9:37 pm

# 62 Prairie Person

“Reading this blog and particularly the posts of the real estate person condescendingly referring to us as boy and girls and providing irrelevant house prices from the US where conditions for buying and owning are so different that the one does not reveal anything about the other…”

Providing examples from US cities shows how overvalued house prices in all Canadian cities are, not just Victoria.

It’s true that conditions for buying and owning in the US are different than in Canada as Canadian lending standards are lax in comparison to standards in the US. This is a big part of the basis for Canada’s housing bubble.

Until 2006, house prices in Canada and the US were approximately the same, overall. Examples from the US that show the disparity between prices now is valuable for Canadians who are thinking about buying for the first time as it may help them to understand the risks and dangers of buying near the peak of a major housing bubble. The more they can learn about the US housing bubble and crash, the better.

The information I provide in my posts is relevant and valuable to potential first-time buyers (boys and girls).

“This is a desirable middle class neighbourhood with houses generally in the 600k to 1.2m range. No house stays on the market for long.”

The information you provide is your interpretation of the houses you can see through your windshield as you drive in a particular neighborhood and anecdotal at best. Try using facts. Much more convincing that way.

I’ve shown that 2007 was an average year for SFH sales in Victoria. February 2015 SFH sales were approximately 20% less than in February 2007 and that’s with 2015’s record-low rates pulling sales forward. That there were more SFH sales this February than last doesn’t mean that “there are a lot of people buying”. You fail to put sales into perspective. Your view seems to be limited to what you can see out of your windshield, quite literally.

#92 TnT on 03.19.15 at 9:39 pm

#81 Marco on 03.19.15 at 9:02 pm

For what it worth I am not a realtor and I have been reading / posting here for years (not the first time being called a realtor either).

My turn to guess now…. Marco is a sad basement dwellers who thinks everyone should be renters.

****

The problem with *basement dwellers* in this country is they play *video games* and prey on *pizza*. As if they are qualified trusting financial planners. For these reasons alone there should be more stringent regulations imposed on this lot. Add in the fact that they quite possibly may be making the worst mistake of their lives *wasting away in a basement*. That’s *a different* reality…

So much hate for realtors on this blog is comical.

Cheers!

#93 Smoking Man on 03.19.15 at 9:41 pm

#67 Smoking Man on 03.19.15 at 8:29 pm
DELETED (Vulgarity)

Insects upset you, your the wiredest dude I’ve ever had a man crush on.. No, dude in mirror is impressive too.

Can you email it to me, for some strange reason, I’m drawing a black.. Just remember bugs..and fat chics.

#94 Paul on 03.19.15 at 9:42 pm

The Opposite side of the spectrum.
But no question house sale will and are slowing regardless.

http://finance.yahoo.com/news/schiff–fed-has-been–bluffing—no-rate-hike-in-2015-161117074.html

#95 Nemesis on 03.19.15 at 9:42 pm

“Many of them.” — HonGarth

“Ahem… Cough. Cough…”… – Nemesis

http://tinyurl.com/m7g6nj

#96 Karma on 03.19.15 at 9:49 pm

Yikes… This is perhaps the most grim article about China I have read in a long time, or ever…

“Worries, meanwhile, are growing about the economy. Citibank estimated that $100-billion (U.S.) per month in capital fled China near the end of last year, while Chinese researchers have said as much as $1-trillion could flow out in 2015.”

http://www.theglobeandmail.com/news/world/as-china-moves-away-from-communist-regime-cracks-appear/article23548297/

#97 Andrew Woburn on 03.19.15 at 9:50 pm

#63 Oil Is Sticky on 03.19.15 at 8:12 pm
The Fed will comply for now, but when the Dow breaks out over the 20,000 level, the Fed will start to abandon international policy objectives shifting to domestic.
=================

To the best of my knowledge, the Fed has no international policy objectives in its mandate. It is and will always be concerned if the high dollar drastically cuts exports and makes it difficult for domestic producers to compete with imports. However the US internal economy dwarfs the flow of imports and exports so domestic needs will always come first.

#98 trailerdude on 03.19.15 at 9:54 pm

Garth,

“festive patio lanterns” ????????

You are definitely living large bro’…… stop bragging and making the rest of us feel so bad! With the oil downturn, my trailer is only decorated with beer can lanterns….they do the trick and are festive (or post-festive mayhaps), but it just don’t bring the same living large vibe as you got going…

#99 Mark on 03.19.15 at 9:54 pm

“Amanda’s marriage is doomed when she says “I’m in the process of deciding whether or not my partner and I should take the leap into buying a house in Toronto.”

What, the hubby doesn’t want a say, or need a say? Nope. Amanda has the decision making covered.

https://www.youtube.com/watch?v=20n-cD8ERgs

#100 Andrew Woburn on 03.19.15 at 9:56 pm

#65 Victor Y on 03.19.15 at 8:17 pm
Indeed sad and boring. House is a necessity in life. I heard the Germany is the only country that doesn’t have house bubble due to tight regulations.
====================

Germans hate debt and they also have plenty of decent quality rental housing. Obviously they are total losers by Canadian standards.

#101 Nemesis on 03.19.15 at 9:57 pm

#JustForHommeDuTabagisme… #”ForHeIsNotAlone”…

https://youtu.be/omOZyLmNMJs

(NoteToSM: Never confuse CultClassics with BOFFO. It’s a VARIETY thang… http://www.theguardian.com/film/filmblog/2010/oct/29/variety-speak-trade-magazine-language )

#102 Don Derc on 03.19.15 at 9:57 pm

“I hope you all get put in homes when your inevitable senility kicks in”

So do I. Better than living alone unattended…or in the street. Just buried the grandmother – her last care home was charging $2500 a month with lots of a la carte services. Maybe I will take the street.

Poor Amanda – a 2 bdrm on Jane street for $100k, with a $800 monthly maintenance fee just doesn’t cut it. She has the same problem Vancouverites have – abby/Chilliwack nyet nyet – downtown nightlife preferred – it’s “sexier”. Plus maybe a better commute?

I’m 50 and well remember the shock of WW2 on my grandparents (still hoarded tinfoil and sugar). With money, I then grew up with the philosophy of “find it cold? Put on a sweater”.

I learned financial lessons by watching other people getting kicked in the wallet. Amanda we may have to watch you to learn another one as well.

Amanda – when it comes to money, real estate, etc I am a measured gambler. The house does not beat me – neither does the TSX, or the economy. I play to win, and when I look at your numbers I don’t see win. The loss looks hidden and long term with a poor exit strategy. Stop asking for advice from salespeople (realtors/bankers) and hang out with a few people who have lost, have a story to tell, and perhaps bless you with some intellectual capital.

I operate on positive cash flows, balanced budgets, and fiscal responsibility. Kind of rare these days…. unless of course you are a boomer.

Inevitable senility indeed.

#103 Smoking Man on 03.19.15 at 9:57 pm

Pink Floyed wrote about you amimals on the animals album about blog dogs.
…….

Enjoy

Dogs (Waters, Gilmour) 17:06

You gotta be crazy, you gotta have a real need.
You gotta sleep on your toes, and when you’re on the street,
You gotta be able to pick out the easy meat with your eyes closed.
And then moving in silently, down wind and out of sight,
You gotta strike when the moment is right without thinking.

And after a while, you can work on points for style.
Like the club tie, and the firm handshake,
A certain look in the eye and an easy smile.
You have to be trusted by the people that you lie to,
So that when they turn their backs on you,
You’ll get the chance to put the knife in.

You gotta keep one eye looking over your shoulder.
You know it’s going to get harder, and harder, and harder as you
get older.
And in the end you’ll pack up and fly down south,
Hide your head in the sand,
Just another sad old man,
All alone and dying of cancer.

And when you loose control, you’ll reap the harvest you have sown.
And as the fear grows, the bad blood slows and turns to stone.
And it’s too late to lose the weight you used to need to throw
around.
So have a good drown, as you go down, all alone,
Dragged down by the stone.

I gotta admit that I’m a little bit confused.
Sometimes it seems to me as if I’m just being used.
Gotta stay awake, gotta try and shake off this creeping malaise.
If I don’t stand my own ground, how can I find my way out of this
maze?

Deaf, dumb, and blind, you just keep on pretending
That everyone’s expendable and no-one has a real friend.
And it seems to you the thing to do would be to isolate the winner
And everything’s done under the sun,
And you believe at heart, everyone’s a killer.

Who was born in a house full of pain.
Who was trained not to spit in the fan.
Who was told what to do by the man.
Who was broken by trained personnel.
Who was fitted with collar and chain.
Who was given a pat on the back.
Who was breaking away from the pack.
Who was only a stranger at home.
Who was ground down in the end.
Who was found dead on the phone.
Who was dragged down by the stone.

#104 Jean-Claude VanDammeCouver on 03.19.15 at 9:58 pm

Hi Garth, ive been reading your blog almost daily for the last 2 years, and love it. I actually read a lot of comments from posters too, but especially any comment you make back to a poster.

What ive noticed is most of your responses are to people who you disagree with, which is fine. Im just windering how come you never reply to someone whom you agree with, or whose comment you appreciate.

We are pathetic and need a little love sometimes too!

#105 Mark on 03.19.15 at 10:02 pm

“Yikes… This is perhaps the most grim article about China I have read in a long time, or ever…”

I have extremely serious questions about the accuracy of any article which makes such a claim such as this:

“People are still buying Bentleys, not joining bread lines.”

What a few elites do with their money has nothing to do with the condition of rank-and-file Chinese. Nothing.

Pretty sad how far journalism has fallen in Canada. The whole piece reads as though its trying to support the easily disproven narrative that Chinese are supporting Canadian RE prices.

#106 Mukadi on 03.19.15 at 10:04 pm

Garth,

To be serious, I admire your dedication and courage. I gave up on such things long ago. I know the type of person you are because I’ve gone through that.

1. You first believe that you’re dealing with sovereign beings and later realize that you’re dealing with media (subliminally) brainwashed zombies.

2. You assume that your sovereign beings understand the concepts that you’re preaching – like microeconomics key performance indicators that control their lives or eating GMO foods and then complaint later about cancer!

3. You believe that your sovereign beings understand the concept of opportunity costs and the total cost of ownership of a car or house that they buy….

etc…

Unfortunately, you’re dealing with the sheeple and you can continue preaching in the wilderness for decades and you won’t be able to turn on their “power of reason” that has been subdued by social conditioning and media brainwashing.

Good luck and thanks you for this pathetic blog.

#107 Marco on 03.19.15 at 10:06 pm

@TnT

Hahaha, creative I will give you that. If you are not a realtor then you are tied directly to the real estate industry. “Plan for maternity” another classic real estate industry spin, because little Jimmy won’t like to be renting. A bit too personal that comment don’t you think? Why are you knocking basement suites? You guys use them as an incentive for people to buy over priced mortgages, to help with mortgage payments. Anyway I’m a few stories above ground.

Cheers.

#108 Will on 03.19.15 at 10:07 pm

Mark:
This all points to an economy that is in need of additional stimulus, especially as the RE decline deepens. If the BoC raises rates, they would effectively be committing economic genocide against the Canadian economy and the Canadians who want to participate in it, but can’t for lack of sustainable employment opportunities. All for what, to guarantee an already quite wealthy elderly population additional return on their hoards of “risk-free” GICs?

Stimulus doesn’t work. If you literally give people or other governments money they will spend it, but the boom is soon gone and you need more stimulus again. If it did work, than why is Japan stuck in deflation? Low interest rates and stimulus cause asset bubbles, sort of like the ones we have now. Raising rates would be painful but necessary to start clearing the debt in the economy – either by giving people an incentive to repay it or by having them default.

#109 Bottoms_Up on 03.19.15 at 10:09 pm

What I see from Amanda is she thinks she’s losing out. She has over $100,000 in savings. That is liquid cash, not some pie-in-the-sky-squishy-equity-that-can-disappear-over-night.

She should be happy she is further ahead than most. And realize that prices for certain places (condos) actually have come down in price…..they are definitely NOT missing the boat.

If I were them, I would give it a couple of years before pulling the trigger…wait for a major life change before buying (new job, baby etc.). Why rush into something right now with all the economic uncertainty in Canada?

#110 natrx on 03.19.15 at 10:11 pm

My plan… sell my bigger home in Scarborough. Take the equity and downsize big time in Scarborough. Aim to pay off the mortgage in 5-7 years. Save Save save.. invest invest invest.

Hopefully be free from corporate enslavement. Or at least quit, then take on contract jobs that I want.

#111 Julia on 03.19.15 at 10:11 pm

“With property taxes and insurance (no maintenance), the total will be about $4,000. Renos are extra, plus the usual utilities, garbage tax, street parking permit and annual racoon removal. ”

Young professionals, then comes the child, no or very little income during maternity leave, followed by $2,000/month for infant child care when going back to work and all other expenses related to kids.

Good luck.

#112 Cici on 03.19.15 at 10:14 pm

Not sure that Garth would appreciate me citing the jar lady on his blog, but I think Amanda should read this letter:

F Wrote: I am recently separated, and I need your guidance now as I embark on my own financially. I work full time as a Montessori Assistant and earn approximately $30,000.00 a year. My husband is in High Tech and earns approximately $109,000.00 a year. We have been married for 36 years. We have a home that is worth approximately $600,000.00 with a $200,000.00 mortgage that we just renewed in June 2013. I have approximately $40,000.00 in savings and my husband has $119,000.00. He has a problem with credit card debt but is in denial. Our financial adviser advised us to consolidate our debt load into the mortgage last June which we did and advised us to liquidate a family boat that was financially draining. My husband refused to let go of the boat, and does not feel that he has a credit card problem. We are now in the process of legally separating; with no chance of reuniting. My husband is renting a room because he cannot afford an apartment, the boat and for me to live in the house. He wants me to rent out rooms in our home to help cover expenses or sell the house. If we sell the house I feel I have no financial security for the future as I have invested all my inheritance into the house over the years, as well as I have cashed in my RRSP’s over the years to maintain the upkeep of the house. We will also have to pay a penalty to get out of the mortgage early, real estate fees and legal fees to sell the property, which will mean that there is not a lot left over for investing for the future. My lawyer has sent me a Net Family Property Statement stating that my husband owes me approximately $54,000.00. Plus the division of the matrimonial home valued at approx. $300,000.00 (my share). I want to move on with my life in a positive and healthy way, physically, emotionally, spiritually and financially. What do you recommend that I do moving forward in my financial future, and are you available to guide me going forward.

To which Gail responds, “sell and buy a cheaper place, but…keep in mind that the carrying costs on a home will be with you forever. My home, which I own outright, still costs me about $1,100 a month to carry.”

#113 Ralph Cramdown on 03.19.15 at 10:23 pm

#83 CJ — “#77 Brian, you can’t compare US prices to Canadian prices. Completely different. I’m curious what your property taxes are. My bet is they’re 5-10 times more than a similar property in Canada.”

Instead of just being curious, why not seek knowledge. You can find out in about 1 minute on Zillow. Take this place:
http://www.zillow.com/homedetails/1146-Azusa-St-Sacramento-CA-95833/26087857_zpid/

Taxes $1.5-$2k. I don’t know exactly, but this seems comparable or a bit below what #77 described.

You sure can compare Canadian and US house prices. We have similar after tax incomes (netting health insurance costs), lifespans, taste in homes, construction methods, etc etc. Sacramento, a government town of a large state, would compare favourably to Ottawa or Victoria, but with a much higher metro population.

#114 Smoking Man on 03.19.15 at 10:25 pm

When you as a human, not talking Nectonite here.

If one day, you can walk down young street, completely naked, all hair shaved off, pure you..

And you can hold your head up high, and say.

I’m loving human, I care, I have no fear. I’m judging you ass holes. If your judging me. You’re owned loser.
…..
Above just popped into my head after some Jamaica and who lost count of Tennessee burbin.

God damn I’m getting this writing shit, looking for a mirror to French kiss my self, if only I can get pasted my teeth.

#115 JSS on 03.19.15 at 10:26 pm

#54

Don’t get too angry. And don’t waste time fighting other generations. Most people from every generation are feeling pressure between their ears these days. The good thing is that anyone from any generation can become rich, if they do the right things. $100 per paycheque per week towards ETF’s (or dividend paying stocks like RBC, CN Rail, Fortis, Walmart!). Do this for 20 years straight. You should be okay. Questrade is a good trading platform. And don’t marry an expensive spouse, and drive a car that’s not too shitty – doesn’t have to be BMW.

#116 Sherri on 03.19.15 at 10:27 pm

Garth,

I am a moist Millenial. Your gloom and doom talk is drying me up.

Next week do a week of positivity post with all positivieness.

#117 crash callaway on 03.19.15 at 10:30 pm

Amanda,

Advance to Go!… collect $200
Life is a bowl of cherries
When you are in over your head and drowning you can always put the monopoly game away.

#118 Hot Albertan Money on 03.19.15 at 10:31 pm

What’s with referring to your significant other as your ‘partner’? Is ‘husband’ or ‘wife’ taboo these days?

#119 Vicpaul on 03.19.15 at 10:31 pm

#13, 15, 17 – Victoria Real Estate Update

You’ve taken some heat for consistently (some would say relentlessly..) messaging that our little burg has, after the dramatic and delusional doubling of RE price value between ’02-’10, been slowly, inexorably melting into the moribund market we have today. It’s a nice city – nicer 28 years ago with fewer cars, big box stores – but home now.
I went back to Ontario in the summer of ’11 to visit family and help my brother paint his family house before sale. It was bid up to 50-60 k more than he thought it would go for. He was pleased, but shocked. I remember thinking at the time, I’ve seen this movie before.
Since, markets in select locales have been smokin’ hot or roasting – and while houses still sell and people still pay too much – it has been a depreciating asset here in Victoria for some time…as our diligent VreU states each Thursday.
Thanks for the update….good work…like the new name.)

Ps. Garth, thanks for guiding Big Pete. )

#120 TS on 03.19.15 at 10:31 pm

I don’t understand people.

I grew up in the old City of York in Mount Dennis / Weston area.

You can still get houses up in there for like half of what they cost 10 minutes over in Corsa Italia.

What the eff? Do you have to be that close the action that you’re willing to pay double for a 10 minute drive?

You’re willing to pay double that for a house in leslieville right across from the Shit Plant?

the logic escapes me…. so glad I got out of Toronto.

#121 everythingisterrible on 03.19.15 at 10:32 pm

#54
You make sweeping generalizations of an entire generation but categorize my joking comment as ageist? You’re logic is a little flawed. A real douche is someone who gloat’s and then claims they are conveying advice.

Don’t they teach punctuation any more? — Garth

#122 Carl on 03.19.15 at 10:33 pm

Garth, why do you need such a big house?

I do much that make little sense. Like writing a pathetic blog and putting up with you. — Garth

#123 John in Mtl on 03.19.15 at 10:34 pm

@103 – Smoking Man:

Pink Floyed wrote about you amimals on the animals album about blog dogs.

Enjoy

Dogs (Waters, Gilmour) 17:06

Love that song, and the words are as true today as they were in 1977 when Waters & Gilmour wrote that song. So Millenials, listen up and memorize those words!

From Traffic, “The Low Spark Of High Heel Boys” – those words sound a familiar reality too, the system hasn’t changed and probably never will unless some catastrophic event wakes half the human race. The “smart” ones profit from the masses and their programming/schooling/beliefs…

“The percentage you’re paying is too high priced
While you’re living beyond all your means
And the man in the suit has just bought a new car
From the profit he’s made on your dreams”

#124 Godth on 03.19.15 at 10:42 pm

Don’t they teach punctuation any more? — Garth

You really have lost the plot.

You mean the one about the young schooling the old? — Garth

#125 Tri-Guy on 03.19.15 at 10:48 pm

I noticed Lou Schizas bad mouthed Garth on his facebook wall the other day. As the old saying goes – those who cant teach.

#126 Karma on 03.19.15 at 10:48 pm

#26 pinstripe on 03.19.15 at 7:13 pm
“my advice to A ,and any other millenien, is to BUY.

The current system is designed to reward borrowers and punish savers.

since 2008 real estate is the best investment . there is a lot of fear mongering but that is to be expected,

The interest rate will stay low for a long time. It would be political suicide for any politician to move the rate upward even though the right answer is to move rate upward to cut down the rate of debt piled on. A politician will de anything to stay in pwer and get reelected.

All the realestate that I purchased over the past years (since the 1950s) has always trended upward in value. NEVER did I sell anything at a loss.”
—————————————————————
Guaranteed that you don’t do proper accounting to deduct capital expenditures, operating costs and other expenses in your calculations in determining “the best investment”. Unless you own property on Old Bond Street in London, your properties probably haven’t done as well as you think, and most certainly aren’t “the best investment”…

You are correct on the “current system is designed to reward borrowers and punish savers” though…

#127 Haroldd on 03.19.15 at 10:50 pm

“because of the amount of people that want to live here? ”

Last place in Canada I’d want to live is Toronto. I get there once or twice a year and am happy to see it in my rear view mirror.

#128 Dee on 03.19.15 at 10:50 pm

I think #40 Old Fogey’s point is a good one that often goes forgotten when people talk about lusting over real estate, especially in Toronto: Toronto’s housing stock is old. ooooold. and mostly in need of huge repairs. Garth refers to this a lot with comments about ‘slanty semis’ and such things.

I always thought those old houses in Cabbagetown or Little Italy or other places looked so lovely. I’ve spent the last few years renting a 110-year-old house in Leslieville, paying below market rent while my landlord subsidizes my living. Over those years, at least once a year something goes horribly wrong. And this house is relatively well-maintained; it’s just old, and old houses are constantly in trouble.

So even if you can make the mortgage numbers work on paper, you’re probably mortgaging yourself to the hilt and then forgetting the part where, at some point during the year, you’re gonna need an extra five figures in “emergency” repair money.

Me? I’ll keep renting. My rent’s 15% of my gross income, so I’ll keep shovelling money into my investments while my landlord replaces the basement or roof or something again…

#129 The goal of life | Realties.ca on 03.19.15 at 10:51 pm

[…] Source: http://www.greaterfool.ca/2015/03/19/the-goal-of-life-3/ […]

#130 waiting on the westcoast on 03.19.15 at 10:52 pm

#91 Victoria Real Estate Update on 03.19.15 at 9:37 pm

+1 – love your posts… Don’t ever stop!

#131 Mixed Bag on 03.19.15 at 11:00 pm

Couple we used to know, in the late 80’s buy a house, when prices were near peak. Prices tanked and so did the marriage. Divorced, the house is sold as part of the divorce, for much lower than paid. This woman and her child live in her parents’ basement, while she pays off her share (or all?) of the mortgage.

Let me write that again in case you missed it, Amanda: the house and marriage were gone, but she was living in her parents’ basement, for years, with her child, paying off a mortgage to house she no longer owned.

Life throws curve balls. Buy or not buy, up to you, be prepared for whichever scenario you choose.

#132 Terrier on 03.19.15 at 11:00 pm

And bottom feeders prey on weak in the murky lending waters … http://www.canadalend.com/blog/is-a-private-mortgage-right-for-you/

#133 SWL1976 on 03.19.15 at 11:04 pm

Invite their friends over to drink white wine from plastic cups – lol, nice touch Garth.

I’ve been doing the Southern Ontario tour with my better half for almost a week now and honestly we don’t get it. Yeah I understand that everyone has to live somewhere but 800k for a bung in TO???

You’d have to pay me 800k just to consider that rat race. My jeans don’t fit tight enough to live downtown. Really, I’d rather live in Lillooet. At least we wouldn’t be subject to endless tim horton’s and 12 lanes of traffic

Big cheers to #64 Mister Obvious for telling it like it is

#134 Godth on 03.19.15 at 11:07 pm

#103 Smoking Man on 03.19.15 at 9:57 pm

hahaha, I don’t think they meant this as a literal philosophy for the good life, more of cautionary warning. This explains so much about you. You’re a Pink Floyd fan that’s been interpreting their words in a dyslexic way. You have it all backwards. If I ever meet you I’ll pull a Diogenes on you.

If Dr. Robert Sapolsky met you he would advise TB infected meat.
https://www.youtube.com/watch?v=A4UMyTnlaMY

#135 Balmuto on 03.19.15 at 11:08 pm

Take a look at the chart of Genworth, the private Canadian mortgage insurer (select the 1y chart). Keeps plumbing new 52 week lows on high volume. This is smart money telling you that Canadian RE is in big trouble:

http://www.google.ca/finance?cid=9736781

#136 Rebecca on 03.19.15 at 11:10 pm

Ugh, another rate drop? The “Canada Tax” may drive me out of the country. Already we get paid less than our American counterparts for the same work, we’re taxed more, our cost of living is higher, and now our purchasing power may take yet another hit.

I love Vancouver, but it looks increasingly like financial suicide to stay. If we’re below 70 cents on the US dollar come January, off to Seattle I go.

#137 Nemesis on 03.19.15 at 11:10 pm

#RhymesWithFido… #VevoMomentsLovinglyCraftedFor… #”MoistMillenials”…

http://youtu.be/1TO48Cnl66w

#138 Buy Low Sell High on 03.19.15 at 11:14 pm

Attention grasshoppers, here is your assignment for this evening:

A young professional couple, both age 35, based in Toronto with a combined income of $240k per annum decide to buy a fully detached home in Toronto for $1.5 million. Their down payment is $300k and they take a mortgage for the balance with a 25 year amortization. The house gets paid off on their 300th monthly payment when they are both 60 years old in the year 2040. They decide to sell the house and move to a condo. The house sells for $2.7 million. Did they make or lose money? Discuss?

#139 Mountain Man on 03.19.15 at 11:21 pm

Amanda: Garth is right. Don’t buy a house now in Toronto. They are extremely overpriced.

In my opinion, overpriced by at least 50%. I’ve seen Toronto house prices crash a couple of times. Buying now is the most foolish thing you could do. Keep renting and saving.

#140 Snowboid on 03.19.15 at 11:32 pm

#62 prairie person on 03.19.15 at 8:07 pm…

Which REB are you a member of?

There is nothing irrelevant about comparing prices from the US, as it is a clear indication of what is going to happen in Canada.

The fundamentals are the same as the months leading up to the US crash, you buy at inflated prices in Canada at your peril.

Americans may vacation in Canada to take advantage of the exchange rate, but they are not stupid enough to buy Canadian property.

The rest of your comments are worthy of the best shovelers of horse manure.

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

#83 CJ on 03.19.15 at 9:09 pm…

Currently in our area of Phoenix property taxes are 1/2 that of comparable properties in Kelowna BC.

When you add in health care costs, living in Phoenix is still less expensive that anywhere in Canada, even Lillooet.

BTW, in a slightly drunken stupour because our Albertan relatives went ape-sh*t in our local Total Wine yesterday where $ 100 buys a years supply of booze! A bottle of Italian wine, their favourite in Alberta on sale for $ 15 CAD is $ 8.16 CAD at the TW store!

Word got out of our ‘winter cabin’ in the sun, it’s such great fun to take them places where you can buy almost everything for 1/3 to 1/2 the Canadian prices – hence the ‘bookings’ right into 2016-17!

These converts are returning to Canada to spread the word about how the rip-offs north of the border, so soon you will all know!

#141 Nemesis on 03.19.15 at 11:33 pm

#It’sAllAboutTheVig,BuyLow… #TheVig… #”LookAtMe…”…

http://youtu.be/LRXUzxKhlMo

#142 $10K TFSA contrib per year on 03.19.15 at 11:33 pm

I want that.

#143 Godth on 03.19.15 at 11:37 pm

You mean the one about the young schooling the old? — Garth

No I meant the one about the old eating the young. Your post yesterday was classic delusional.

#144 kommykim on 03.19.15 at 11:38 pm

RE: #60 nonplused on 03.19.15 at 7:57 pm
It’s a hard connection for most people to make but even if our banks are insulated from real-estate due to CMHC, they are exposed to oil and gas in a big way.

No, they’re not that exposed to O&G. At least not the two I have preferred shares in. Read their annual reports.

#145 Oil Is Sticky on 03.19.15 at 11:40 pm

#122 Carl on 03.19.15 at 10:33 pm
Garth, why do you need such a big house?

I do much that make little sense. Like writing a pathetic blog and putting up with you. — Garth

—–

Why Garth writes this blog……….

https://www.youtube.com/watch?v=49J6eh7kJMA

in jest of course…..right?

#146 Mark on 03.19.15 at 11:42 pm

“A young professional couple, both age 35, based in Toronto with a combined income of $240k per annum decide to buy a fully detached home in Toronto for $1.5 million. Their down payment is $300k and they take a mortgage for the balance with a 25 year amortization. The house gets paid off on their 300th monthly payment when they are both 60 years old in the year 2040. They decide to sell the house and move to a condo. The house sells for $2.7 million. Did they make or lose money? Discuss?”

First of all, you need to attack the assumptions. Real estate appreciates over the long term at roughly the rate of inflation, which is nominally 2%/year. We need to also consider that RE prices are so elevate at the moment that a reversion to the long-term mean, which is around 50-60% less than today’s prices is possible.

Hence, in 25 years, starting from 50% off of today’s prices and applying the 2%/annum return for inflation, a price closer to $2M is far more realistic.

Another area you have to look at is the mortgage. Long-term mortgage rates are on the order of 7%-8%/annum, with obviously some periods below average, and some periods above, much above average. If you don’t over-pay for an asset, then paying a mortgage at the long-term average rate of interest isn’t a big deal — eventually appreciation will mostly make up for the agony of a long payment series. However, if you overpay for an asset, those losses basically will follow the borrower around “forever” and significantly impair their retirement savings.

Yet another area of concern is the stability of their alleged “$240k income”. Such incomes are significantly above average in Toronto/Canada, and unless they’re involved in occupations that have very high barriers to entry, such as having professional degrees (Engineering, Medicine, Law, Dentistry, etc.), its likely they’re going to see reductions in their incomes at some point in the cycle. Hence, they might further run into problems there, especially if their incomes are tied to the public sector which is a lot riskier employment-wise than most people believe.

Last but not least, an example I like to often give is that of someone taking their 25% down-payment funds in 1990 (the peak of the last major bubble in the Toronto RE market), investing it in a simple TSE/TSX equity index fund such as the TIPS, and coming back a decade later with an investment account worth enough for 100% of a house. The combination of superior investment returns (the TSX tripled 1990-2000) and housing market depreciation/stagnation allowed the down-payment funds to grow. There’s no reason to believe the same couldn’t repeat itself this time around either, as the stock market appears to be majorly under-valued and the housing market, obviously in a giant bubble now in the process of popping. Does this family want to be making mortgage payments for 25 years, or could they rent until both stock market and housing valuations invert (as they typically do, in a cyclical fashion), and then make their move to buy a house outright without credit/leverage?

As for whether they “made money” or “lost money”, that’s a hard question to answer as one needs to consider a lot of variables, opportunity costs, etc. However, I think it is clear that buying at multiples of income, rent, etc., that are elevated dramatically far beyond the historic norms is not a good recipe for long-term value creation.

#147 Ponzif on 03.19.15 at 11:46 pm

Now SM is debunking fables.
What’s next?
Fighting Windmills.
Buddy, all great ideas have been thought.
All we do is regurgitate.

#148 Mixed Bag on 03.19.15 at 11:47 pm

Home ownership can feel good, but the work involved can be overwhelming when stuff breaks, let alone the maintenance.

Cleaning the eavestroughs, if not, then you get
Water damage, replace the roof, or pipes, drywall, floor
Rodents, good luck getting rid of them, then clean the whole place, and wash all the clothes if they got into your dressers
Insects, such as termites or carpenter ants, damaging your wooden beams and joists
Raccoons knocking over your green bins and cleaning the mess every freaking day
Plumbing problems
Appliance problems
Problematic neighbours
Landscaping maintenance, how about removing a dead tree
Or tree roots that have gotten into your clay pipes, which need to be dug up from your lawn or basement floor and replaced
Weeping tiles need replacing, involves digging down to the foundation
Chimney needs to be rebuilt as it’s old and the mortar/brick is destabilizing
Windows and doors need replacing as they’re old and inefficent, or just plain broken
The neighbourhood is going down the toilet
Or some other crap out of your control, bringing property values down

One day, in the future, we will rent, and it will be glorious.

#149 4 AM Sunrise on 03.19.15 at 11:47 pm

From yesterday:

#230 Entrepreneur on 03.19.15 at 3:16 pm
When complaints come in continually (racist or not) the government should look into the matter with facts and figures (weather you believe in it or not). Who is buying and with what money? This is not only for the Canadians but to protect money laundering from other countries.

The “with what money” part is under the surveillance of FINTRAC, http://www.fintrac.ca . As an ex-bank employee, I’m proud to say that we do our best, too, within the bounds of privacy laws.

I’ve seen, with my own eyes, blacklists of names with their countries of origin, too. All governments know that money laundering is a problem. But it sure feels like a game of whack-a-mole sometimes.

#150 Second Hand Smoke on 03.19.15 at 11:57 pm

Amanda,

Wait 6 – 8 months and see how interest rates are doing. Don’t hurry to bury yourself in debt. A rise in interest rates typically spells the decline in RE values. If the rise occurs, pay attention to RE values. I’d hate to see you buy at the precipice. Be patient and in the meantime try to increase your financial knowledge…see a “real” financial adviser rather than [email protected] Look before you jump!

Good Luck!

#151 Terrier on 03.20.15 at 12:04 am

#138 Buy Low Sell High

The house gets paid off on their 300th monthly payment when they are both 60 years old in the year 2040. They decide to sell the house and move to a condo. The house sells for $2.7 million.

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

Year 2023. The house foundation is completely irreparable due to decades of heavy water damage and structural issues that went “unnoticed” by home inspector. The couple (now with three kids) is forced to sell the property to a lowballer who “knows” what to do with the house. They moved to a close by rental house and for some reason it feels like home ….

#152 Karma on 03.20.15 at 12:06 am

#65 Victor Y on 03.19.15 at 8:17 pm

“Indeed sad and boring. House is a necessity in life. I heard the Germany is the only country that doesn’t have house bubble due to tight regulations.”

Couple points that make Germany unique in the 2000s:

1) Germany spent billions of Deutschmarks invested in the 1990s in the former East Germany in order to bring it up to a satisfactory standard of living. It was a huge burden for their economy, and therefore didn’t have a great start to the new millennium, while other Eurozone countries did very well. FYI, Germany was known as “the Sick Man of Europe” in the early 2000s. It depressed wage growth for most of the decade, which made it more competitive than the rest of Europe today. Read: http://www.economist.com/node/209559

2) As someone mentioned above, Germans don’t like credit. They don’t use credit cards for daily purchases. They don’t take out large mortgages on their property. So a lower interest rate doesn’t spur borrowing binges like they do elsewhere. Furthermore, the ECB, until Draghi, was never one for loose monetary policy.

3) Germany’s home ownership rate is 53.3%, according to Eurostat (via Wiki). http://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
In other words, it’s one of the lowest in the developed world. (See Canada much higher on the list – English Canada is above 70% while Quebec at 60% or so brings down the average).

This is a good read on the subject: http://qz.com/167887/germany-has-one-of-the-worlds-lowest-homeownership-rates/

Perhaps Germany avoided a housing bubble because of “tight regulation”, but it looks like there is more to it than just government regulation…

#153 Lobster Man on 03.20.15 at 12:09 am

#65 – Victor Y

Garth is right. Shelter is a necessity. And I would also add that in truth, shelter should be counted at as an expense, just like food, clothing and transport. All of them should not be looked at as investments.

German house ownership rate has always been below 45% during the last couple of decades. Recently it has climbed to about 46% because of the Berlin market. Hopefully, this is still way below bubble territory (Spain for example, has ownership rates higher than 80%). There are several reasons why the majority of Germans choose to rent, rather than own their dwellings. The major reason, IMHO, is because of government policies. These policies are not so much based on heavy regulations, as you suggested.
What they do not have are policies that favour homeownership. And they certainly do not have strong lobbying groups that represent their housing industry. Thus, Germany as a nation, allocate a relatively small percentage of capital/resources to that single industry called housing. Instead, the resources are distributed more evenly amongst a number of other industries (think German cars). And of course you can see the results – very strong on exports. Obviously, they have long realized that housing, as an industry, is not exportable.

#154 Blogbitch on 03.20.15 at 12:16 am

Dear Amanda,
You seem like a smart young lady who has had the good sense to save some serious cash at a young age. Now you have a grown up decision to make: Bathe in liquidity or drown in debt. One will help you transform into a financially empowered woman of substance and the other will lead you into a chrysalis from which you will emerge a fully grown Sheeple.

#155 chris on 03.20.15 at 12:18 am

…again well said Garth!

#156 Vanecdotal on 03.20.15 at 12:22 am

#64 Mister Obvious

+1

Great post, agree with all points… and I’m a late Gen Xer.

Amanda, you’re looking at 2 scenarios: rent and invest the difference in cost between renting and owning in a diversified portfolio, or going all-in one a single asset, that you will pay punitive fees and taxes to purchase, that will require constant cash infusions just to maintain, (never mind to improve and “make it yours”), and assume an epic debt load for the priviledge.

At this blow-off-top insane pricing we’re seeing right now in TO & Van, you need to understand that the expectation of continuing significant future price increases is highly unlikely at this point in the market cycle.

If you purchase in this frothy market completely detached from fundamentals expect the following:

Gone is your financial wiggle room. Want to update something – damn the furnace just broke. Want to take a vacation – nope – there goes the water heater. Want a new car? Uh uh, the refrigerator/washing machine just died, roof leaked, sewer backed up/yard flooded, etc. etc. Your property taxes will be going up steadily every year whether your incomes are or not. Get used to shopping at Costco and staying in, ‘casue there won’t be enough $ left over to dine out much anymore. You are likely used to this lifestyle with your fabulously high incomes for someone in their 20’s, sure you can fake it for a while on the credit cards as you dig yourselves an even bigger hole, but essentially kiss your free-wheelin’ lifestyle goodbye.

Or you can keep renting, keep squirreling your ample incomes away and invest wisely in a diversified portfolio, get that nut up to a point where it’s throwing off enough cash to pay a portion of your rent without touching the capital in a few years. No debt, $$$ in the bank, enough income left over every month to travel, drive a nice vehicle, dine out, etc. You are able to ENJOY your youth, and plan for the future in the scenario. Or you can join your heavily indebted friends for a Costco shrimp ring and a nice box ‘o wine on their slanty sun deck (that they can’t afford to fix) ’cause that is often the reality, especially if grossly overpaying for the home in this type of irrational market.

Only you can decide what’s in your best interests, but having both rented, and owned, I can tell you that even with 2 people making decent incomes, the (sometimes unanticipated) total costs of ownership, in both TIME and $ can be financially crippling. You do not get the $$$ or these years of your life back.

I strongly suggest *not* drinking the koolaid. You are already light years ahead of many of your peers, why blow your lead now?

#157 HAM No More on 03.20.15 at 12:23 am

DELETED (Anti-Chinese)

#158 Mike on 03.20.15 at 12:25 am

The complete lack of common knowledge in people looking to buy their first house absolutely blows my mind. I work in Edmonton, for a manufacturing company (we supply the oil sands of course) that has recently laid off a good chunk of our employees, and Q2 is fast approaching and looking MUCH worse than Q1 (And Q1 was pretty terrible for us).

Yet, I have 2 co-workers that are looking to buy houses. The first has absolutely no idea about anything at all (he didn’t realize what condo fees were), and is being completely screwed and taken advantage of by his RE agent, and the 2nd co-worker figures if he can find something for 5-6x his salary that he really likes he might just put in an offer. I told him if he MUST buy, to at least offer about $100k less and warned both of them to hold off till oil at least starts to permanently rebound.

I personally don’t think Canadian interest rates are rising in 2015, or above 1.5% in all of 2016. I remember a few years ago everyone (this blog included) saying that in early 2014 rates would start to rise. I see a massive change in the MSM reporting about how bad Canadian RE could drop (a big change from 6 months ago when hearing about a 5% soft landing was rare), but I think it’s still going to take sustained low oil prices for several more months or years, resulting in much more layoffs to be the true catalyst for a substantial drop in RE prices. Whether that happens or not, only time will tell.

We’re on our way though. Things continue to stay ugly here in Alberta. I heard yesterday that a trailer manufacturer in Edmonton has laid off 30 ppl already and have just canned another 30, plus the rumor is that NOV is supposed to be laying off a bunch of ppl soon too. I was personally looking for a different job since August, but ever since Nov/Dec that chance has pretty much dried up. I used to be able to apply for about 10 jobs a week and now there might be 1 a month. Met with a placement company and they said that the jobs are few and far between and the competition for them is now HUGE because of all the layoffs in the area.

If you live in Alberta, things don’t seem that bad… Unless you really open up your eyes. It’s starting to get bad here.

#159 kommykim on 03.20.15 at 12:26 am

RE: #138 Buy Low Sell High on 03.19.15 at 11:14 pm
Did they make or lose money? Discuss?

Depends on the mortgage interest rate.

#160 everythingisterrible on 03.20.15 at 12:27 am

#121
a rebuttal highlighting a typo? so clever. When did this comments section become a bastion of grammatical accuracy. I must have missed that blog post.

#161 Shawn on 03.20.15 at 12:33 am

Douche?

From number 121, everything is terrible,

#54
You make sweeping generalizations of an entire generation but categorize my joking comment as ageist? You’re logic is a little flawed. A real douche is someone who gloat’s and then claims they are conveying advice.

response:

Don’t they teach punctuation any more? — Garth

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

The case is rested… Douche indeed.

#162 Vanecdotal on 03.20.15 at 12:33 am

#128 Dee

+1

Great points. Frankly here in Van, a lot of the housing stock is much “younger”, but even a home that is “only” 20-30 years old requires constant cash infusions and maintenance just to keep it safe & dry.

To say to budget an extra 5 figures annually, (on top cost of taxes, utilities, insurance, mortgage interest, etc.) JUST for maintenance would be accurate in my experience.

#163 BS on 03.20.15 at 12:33 am

56

Very doubtful. As the Canadian economy goes into more significant deflation, the CAD$ is likely to rise as people race to repay debt. Remember that borrowing is effectively ‘shorting’ a currency, and we know what happens when a ‘short squeeze’ occurs.

It would make sense people would want to repay debt in deflation, but the problem is the people in debt have no extra cash flow to pay more than the minimum payment on that debt. In most cases shorting stocks is done by investors who have the money ready to cover the short.

The people who are borrowing money today are maxed out on payments, have no savings, and unless wages increase significantly (not going to happen with deflation) will have no ability to repay debt other than maybe the minimum they are currently paying.

#164 Hot Albertan Money on 03.20.15 at 12:42 am

<[email protected] 128 Dee on 03.19.15 at 10:50 pm

"paying below market rent while my landlord subsidizes my living."

Not so fast. You’re subsidizing him too. Whether the house was paid off years ago or his just bought it with 5% down.

You’re paying some/all of his mortgage and he’s getting 100% of the equity.

Face it, Landlords and Renters need each other. Neither party is as stupid as the other thinks they are.

#165 Vanecdotal on 03.20.15 at 12:44 am

@ TnT

..is a RealTroll™ Amanda, and coincidentally the most enthusiastic pro-ownership post of the day – Buy-Now-Take the Plunge! It’s always a good time to buy!” Once I have my commission cheque see ya later suckers!

Beware the wolves trying to fleece the last of the sheeple before the wheels fall off.

#166 I Agree on 03.20.15 at 12:45 am

I agree with fuzzy camel go buy it’s a steal of a deal. Don’t let that money burn a hole in your pocket. seriously what hole did this person crawl out of how can someone who is so simple make so much money? no wonder they are bringing in TFWs and say Canadians aren’t smart enough!

#167 Entrepreneur on 03.20.15 at 12:46 am

Victoria Real Estate Update…Thanks for the facts and figures, cannot argue with that. Always look forward to Thursdays.

Amanda…take a hint from Victoria Real Estate Update and get the facts. On one sheet of paper write your story out with all the emotions but on another sheet just write the facts, start with columns, dates, prices, make a graph. Find reliable resources for information, not the real estate board or the news (both are controlled). Read Garth’s articles and the comments (some are realtors who want to keep the game going).
A house should be a home to relax, not a headache.

#168 Obvious Truth on 03.20.15 at 12:53 am

For what it’s worth.

Amanda. put a million in the bank and take a load off. You only live once.

Let some loser with a great big grin on their face buy the slanty semi.

Work for fun. Not a house.

Build a life. Not a new kitchen.

#169 multi-generation mindset on 03.20.15 at 1:02 am

I bought a house, it was all good, I can’t complain – it was 15 years ago.

I picked a small house on a big lot, thinking of the future, which has arrived now.

My son is ready to leave the house. He just hit mid-twenty, makes good money with his own business and saved up over $200K, fully maxed out TFSA, some RRSP, invested in well over 7% a year return in self-directed accounts, no debt. Part of his business revenue stream is USD, he owns all the equipments he needs, he can self-finance any additional required CAPEX, he never worked for anyone else and so far never paid a penny interest.

He understands that buying a house in Toronto is insane with the current prices. He was attracted to downtown condos, with walking distance to most of his clients, but he knows that it does not make financial sense.

He would not mind to build a 1200-1500 sq feet addition on our big lot, though. We would not mind it either, actually I brought up the idea, I picked the house with this future option in my mind.

We are a close-knit family, we get along very well. Living right beside each other – still separately is an appealing option emotionally. We are immigrants, with only with our two kids and my sibling here. Our goal is to leave the house for the kids, we never planned it in any other way. I know it’s an unusual arrangement here, the new 5000-6000 sq ft houses in the street are occupied mostly by two-three people. Having two or later possibly three generations side-by-side is not common here, but I have seen it working well.

What do you think about it strictly from financial aspect?

His income could support the cost of building on an existing (“free”) lot and he can continue at least to fully max out his TFSA and maintain an investment portfolio, as a minimum. He could also write off some of the home-related cost as business expense.

#170 this has to have an affect on 03.20.15 at 1:03 am

http://www.businessinsider.com/the-ex-wife-of-a-fugitive-chinese-official-is-being-held-in-the-us-on-immigration-fraud-and-money-laundering-claims-2015-3

#171 Spectacle on 03.20.15 at 1:03 am

Um, Actually it’s more like this::

Thank You Garth, and for all the great contributors

: )

Outside the Wall (Waters) 1:42

“All alone, or in two’s,
The ones who really love you
Walk up and down outside the wall.
Some hand in hand
And some gathered together in bands.
The bleeding hearts and artists
Make their stand.

And when they’ve given you their all
Some stagger and fall, after all it’s not easy
Banging your heart against some mad bugger’s wall.”

#172 Joe2.0 on 03.20.15 at 1:06 am

Sitting around the pool today with a fellow that owns 2100 properties.
I asked him if Chinese and other foriegn buyers effect our market.
His response being that there is huge amounts of cash being parked in RE.
And lots more coming with the weak dollar.
That’s a REality check people.

#173 devore on 03.20.15 at 1:09 am

#86 DisgustMadeMePost

So how much really, do you expect that the average family is able to save per month while renting?

If you’re not able to save anything while renting, you definitely will not save anything as an owner, a much more expensive proposition. Some households do not earn enough money to ever be able to buy a house, period. And that’s fine, as it should not be anyone’s life goal, nor is it some kind of right or entitlement. Adequate shelter is a necessity. It is an expense; minimise it, save whatever is left over.

#174 Everything is bad :c on 03.20.15 at 1:14 am

Let’s talk about watches…
https://www.youtube.com/watch?v=O068t_YTd3w

#175 devore on 03.20.15 at 1:19 am

#126 Karma

You are correct on the “current system is designed to reward borrowers and punish savers” though…

That is a poor comparison.

Borrowers (for purposes of real estate purchase) are taking on substantial risk, whether they realize it or not, and after considering financing, transaction and maintenance costs, are not being rewarded nearly as well as they think they are. Borrowers in general are not being rewarded at all, as interest charged is an expense, not a reward.

Savers take zero risk, therefore they are rewarded accordingly, and always have been.

Investors, in comparison, have done quite well in med-long term, commensurate with the risk they are taking.

I do not believe anyone is being punished.

#176 devore on 03.20.15 at 1:26 am

#108 Will

Stimulus doesn’t work. If you literally give people or other governments money they will spend it, but the boom is soon gone and you need more stimulus again.

You don’t understand how establishment Keynesians think: if stimulus (support for aggregate demand) did not work, the only and sole reason that is so is because it was too small. Solution: more and bigger stimulus.

#177 Nagraj on 03.20.15 at 1:32 am

GT: “2015 could go down as the year family finances degenerate as never before.”

In which case this humanoid incarnation of pomposity itself, our PM. will not be re-elected. Another BoC rate cut notwithstanding.

I think Canada is already in Recession. The Petro-Loonie is dead and buried. Canadians DON’T LIKE their currency to palpably drop. I don’t see where another BoC cut helps the Cons politically.

I also think every monthly Statscan jobs report will be horrid going forward.

How high can the household debt/income ratio go?
How high the moon?

#178 Oceanside on 03.20.15 at 2:12 am

So much hate for realtors on this blog is comical.

Cheers!

It is interesting how people borrow too much money, go house hunting with it then after the purchase blame the realtor for the high prices not taking any personal responsibility for the transaction…Just don’t borrow what you can’t comfortably afford to pay back…Easy!

#179 213 fool on 03.20.15 at 2:13 am

mortgage = prison…

#180 TNT? on 03.20.15 at 2:53 am

TNT I see no common sense in your comment to Mark! just because someone rents doesn’t make them a basement dweller eating pizza! thats just a stupid comment, you come here to just try to blind people to how rediculous it is to get into real estate now, but you are preaching to the wrong crowd we aren’t going to get sucked in by the likes of you. You are probably the basement dwelling realtard eating pizza angry because you are running out of suckers!

#181 BT on 03.20.15 at 3:13 am

Imagine if government backed the loans banks gave to productive small businesses instead of mortgages to people that can’t afford it…..we would have the opposite problem of overemployment, higher wages and reasonable house prices. But that won’t win any votes……

#182 Nemesis on 03.20.15 at 3:21 am

#Only1.21GW… #BackInAJiffy…

http://youtu.be/f-77xulkB_U

#183 observer01 on 03.20.15 at 3:33 am

http://www.mortgagebrokernews.ca/news/analyst-cmhc-to-blame-for-pending-4050-per-cent-price-correction-189384.aspx

The party punch will continue to be spiked by cmhc and the government until everyone will be drunk dead and ready to be buried.

Then the banks and their paid analyst will all say , never seen it coming

#184 Interstellar Old Yeller on 03.20.15 at 3:40 am

#118 Hot Albertan Money on 03.19.15 at 10:31 pm
What’s with referring to your significant other as your ‘partner’? Is ‘husband’ or ‘wife’ taboo these days?

When I hear “partner” what comes to mind is “same-sex partner”. Amanda’s letter doesn’t specify, so it could be a girlfriend or wife that’s letting Amanda make the buy/no buy decision.

Amanda, use the Rule of 90.

#185 Freedom First on 03.20.15 at 4:19 am

Well, I’m not the brightest guy in the world, but I get a kick out of renting a place that costs a lot more to buy than I would ever consider paying for it.

#186 nubbers on 03.20.15 at 4:19 am

Mixed Bag @131
“Couple we used to know, in the late 80’s buy a house, when prices were near peak. Prices tanked and so did the marriage. Divorced, the house is sold as part of the divorce, for much lower than paid. This woman and her child live in her parents’ basement, while she pays off her share (or all?) of the mortgage.”

As she no longer had a house to secure the mortgage, would she have had to pay a higher interest rate on what she owed?

#187 Julia on 03.20.15 at 7:53 am

#181 BT
“Imagine if government backed the loans banks gave to productive small businesses instead of mortgages to people that can’t afford it…..we would have the opposite problem of overemployment, higher wages and reasonable house prices. But that won’t win any votes……”

It’s been done an not with great success. Money doesn’t necessarily go to employment or higher wages, more to bottom line and/or owners. With the Government paying when it fails.

#188 CJ on 03.20.15 at 9:10 am

Real estate costs less in the United States?

So does rent, people. Do your homework.

http://rentbits.com/rb/t/rental-rates/sacramento-california

#189 Yanniel on 03.20.15 at 9:13 am

Garth, thank you. You made my day with the “and annual racoon removal”.

#190 Cherry Bloosom on 03.20.15 at 9:24 am

You make my day every day. I can’t begin my day without reading your blog with my morning coffee and listening to BNN. Yes your blog is equally important as Business News Network. Your writing has great humour.
sunday is terrible cause no blog. Carry on Garth. Great Job!!!\

Now why can’t you all be that sweet? — Garth

#191 Holy Crap Wheres The Tylenol on 03.20.15 at 9:31 am

#244 Smoking Man on 03.19.15 at 4:41 pm
#66 Holy Crap Wheres The Tylenol on 03.18.15 at 9:07 pm
Rates will raise this year, guarantee it! Perhaps third quarter but Garth is correct! Sorry kiddies the free ride is over. Oh it’s going to be hell out there with all of the minions of house horny overstuffed people saying WTF happened? Karma baby!
………

Well now that you’ve sold your oakville mcmansion, I know you would be going to the dark side.
Attention Basement Dwellers.. You have a new member for your team, he’s a pilot. Old all the same, perhaps he can be trained to fly drones. Drop bombs on real estate hawks.
On behafe of all the proud Home owners of Greater Fool.
We bid you farewell and good luck, with you new friends.
____________________________________________
Sorry to say gone from the home in Oakville to a town-home beside the Marina. I can walk to my sail boat in the summer. Walk to the Hoyt-toyty bistros, bars and coffee shops on Lakeshore and enjoy what life I have left. So still own a property. Just saw the writing on the wall regarding large homes regarding RE so it was time to punch out. When the Apocalypse comes the big ones over $750K and up are going to take the biggest hit. The affordable homes will not loose as much. Took my $1.5M and invested most of it. Going to rent a winter home in Bahamas for four months of the year. Not purchasing anything yet. As for the dark-side I was there already from 1971 to 1974. Once you’ve gone to the dark-side your never the same sorry to say. You are actually lucky you can retreat back into your booze infused dreamworld. Not saying its bad at all, if it works for you great man. So still a home owner!

#192 Retired Boomer - WI on 03.20.15 at 9:32 am

Amanda,

Do whatever YOU and your smarter half decide upon.

You can’t really let logic, trends, demographics assist you in making the most ‘practical decision.’ Humans just are not made that way.

Do whatever empowers the two of you. Doing otherwise would be treasonous to your human history.

Uh, remember, there ARE two of you in this decision. TWO who if they sign a mortgage together will be more tightly bound (with the possible exception of wrists, and ankles), than in marriage. Good luck with these choices.

#193 David Hawke on 03.20.15 at 9:32 am

Oh please say that Herr Harper’s minion isn’t STUPID enough to cut the rate. If the loonie drops into the 60 something cent range, I’ll be forced to let the gardener go. :-(

#194 tkid on 03.20.15 at 9:39 am

Another thing to consider – if the real estate market craters or slows and the jobs disappear, Amanda, you and yours can look for work elsewhere. It’s a lot ea$ier to move when it’s just a rental agreement to deal with versus having to sell the house.

And if you move to the US, you won’t want to keep the house in Canada. Houses in the US are plentiful and are a lot cheaper.

#195 TnT on 03.20.15 at 9:42 am

#165 Vanecdotal

Fear not… I am not affiliated with the RE industry in any way but I am a believer that Toronto 416 can not be compared to any other place or historical chart as we have entered uncharted waters. We are NewYork city circa 1980’s. 15 to 20 years from now only millionaires will own SD homes in 416.

#180 TNT?

Whoooosh…..

That’s the sound of my post going over your head.

#196 Buy Low Sell High on 03.20.15 at 9:52 am

Mark and kommykim:

I simply provided the two goal posts: Acquistion price: $1.5 million and Disposition price: $2.7 million.
Duration: 25 years
Interest rates: ok, I did not provide interest rates but let’s say for the purpose of this example that this couple takes out 5 five year mortgage terms at the following rates: 2.8%, 3.5%, 5%, 7%, and 8%.
Assming all the normal costs of ownwership i.e. taxes, maintenance (including those pesky “coons) my question still remians: did this couple make money or lose money? Did they beat inflation?
Maybe the house market corrects and then comes back, but who cares; the purchased for $1.5 and sold for $2.7.
Also, would a similar couple with fare better if they rented for the 25 year period and put their $300k downpayment cash in a balanced portfolio assuming an average annual return of 7%?

#197 Daisy Mae on 03.20.15 at 9:52 am

#104: “Im just windering how come you never reply to someone whom you agree with, or whose comment you appreciate….”

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

Probably because he doesn’t have the time? “No (comment) is good news”.

#198 same as #190 on 03.20.15 at 9:54 am

Same but more!

#199 Holy Crap Wheres The Tylenol on 03.20.15 at 9:58 am

If Amanda and her professional other buy a slanty semi for $800,000, they’ll have no money and a mortgage of about $750,000 (with tax and CMHC premium). They’ll also have a 2.79% five-year mortgage that will carry for $3,300 a month. With property taxes and insurance (no maintenance), the total will be about $4,000.
____________________________________________
What if rates go up even 1% that adds a few lead weights on the lifeboat. If the rates go up we may see a US style bailout on property where the banks soon become the owners. This will adversely affect the value of property’s. So now you are the proud owner of something way beyond your means, paying more than you can afford on something that is now worth less than what you paid for it! The old and wrinklies with good solid investment equity can afford it but not the young ones. Ugly!

#200 cramar on 03.20.15 at 10:21 am

I’m just reading the wisdom of the late Thomas J. Stanley. His most famous work, “The Millionaire Next Door” was written almost two decades ago and I was totally amazed at how he describes people and conditions today. A later book, “Stop Acting Rich,” adds further insights into conditions today. According to the latter book, Amanda & partner are IA and not BA.

IA – Income Affluent – People (usually professonals) who have large income, but no real wealth because they spend large amounts to maintain a status lifestyle.

BA – Balance Sheet Affluent – People who regardless of income, have the goal of building wealth and are willing to live accordingly to do so.

So Amanda, do you want to have the option of retiring in your 50s with real wealth in the seven figures, or do you want to buy that house and live your life with the facade of wealth?

#201 Daisy Mae on 03.20.15 at 10:26 am

#143 Godth: You mean the one about the young schooling the old? — Garth

“No I meant the one about the old eating the young. Your post yesterday was classic delusional.”

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

Garth also can ignore rude posts such as the above.

#202 Squirrel meat on 03.20.15 at 10:27 am

Underwater in wet van…………. well at least they’re young. Ditch the condo .. start saving!

http://business.financialpost.com/2015/03/20/debt-ridden-young-couple-in-vancouver-wants-it-all-bigger-house-kids-early-retirement/

#203 Broke Dick on 03.20.15 at 10:55 am

Amanda just remember these words “never bet against the house”

#204 Mike Power on 03.20.15 at 10:57 am

Met GT one year ago. Did some investing and talked about me and wife’s future…had two houses. Just sold the second “retirement” home – closes April 30. We have money – lots of it – no debt. Sleep at night now – really well. Life is way better “with” money that without. GT is old (sorry man)…so am I…read and do what he says everyone. he’s right, period.

#205 imagine on 03.20.15 at 10:58 am

#181 BT on 03.20.15 at 3:13 am
Imagine if government backed the loans banks gave to productive small businesses instead of mortgages…

————–

I don’t really want to imagine that… there are entire industries relying on government tax credits to produce anything at all. Just look at any made in Canada tv show, for example. If it does not qualify for some sort of government subsidy, it won’t happen.
Besides, I have seen businesses to strategically default and start up “fresh”.

#206 Everything is bad :c on 03.20.15 at 11:00 am

http://www.wsj.com/articles/the-coming-chinese-crack-up-1425659198

quote

Consider five telling indications of the regime’s vulnerability and the party’s systemic weaknesses.

First, China’s economic elites have one foot out the door, and they are ready to flee en masse if the system really begins to crumble. In 2014, Shanghai’s Hurun Research Institute, which studies China’s wealthy, found that 64% of the “high net worth individuals” whom it polled—393 millionaires and billionaires—were either emigrating or planning to do so. Rich Chinese are sending their children to study abroad in record numbers (in itself, an indictment of the quality of the Chinese higher-education system).

Just this week, the Journal reported, federal agents searched several Southern California locations that U.S. authorities allege are linked to “multimillion-dollar birth-tourism businesses that enabled thousands of Chinese women to travel here and return home with infants born as U.S. citizens.” Wealthy Chinese are also buying property abroad at record levels and prices, and they are parking their financial assets overseas, often in well-shielded tax havens and shell companies.

Meanwhile, Beijing is trying to extradite back to China a large number of alleged financial fugitives living abroad. When a country’s elites—many of them party members—flee in such large numbers, it is a telling sign of lack of confidence in the regime and the country’s future.

/quote

Is it really as sketchy in China as the author portrays or is it some sort of psy-ops piece?

#207 Kris on 03.20.15 at 11:06 am

So I wouldn’t be surprised if the Bank of Canada panics again and lowers rates another quarter point..
————————————————–

Exactly, Garth. Rate increases are hardly a foregone conclusion, even in the US, never mind Canada. A single bad quarter is all it takes: The Fed or BoC will seek safety in the down-arrow of their keyboards.

The only only only way BoC will increase rates here is – If they think that NOT increasing rates will have a worse consequence than the mass turmoil of rate increases on indebted Cdns.

So.. That’s an interesting case study:
Can someone enlighten us, what does it mean to the common Cdn if our rates don’t follow the US? Florida jaunts get more expensive, sure, but what else..

#208 Victor V on 03.20.15 at 11:09 am

#160 everythingisterrible on 03.20.15 at 12:27 am

#121
a rebuttal highlighting a typo? so clever. When did this comments section become a bastion of grammatical accuracy. I must have missed that blog post.

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

A clever person would know there was more than one.

#209 Bottoms_Up on 03.20.15 at 11:11 am

#184 Interstellar Old Yeller on 03.20.15 at 3:40 am
————————————————————
Well, ‘partner’ is the diplomatic way of saying ‘gender doesn’t matter, what matters is that I’ve chosen a partner’. It is sensitive to same sex relationships, and also doesn’t indicate marriage status (you can be married or unmarried with a ‘partner’).

But using the term definitely is not assured that it means someone is in a same-sex relationship!!

#210 4 AM Sunrise on 03.20.15 at 11:14 am

Garth, the sheeple will not listen, much less learn, and here’s why (note: ‘they’ is a general ‘they’ and not specific to Amanda):

If real estate prices sputter after they buy, they’ll rationalize it themselves by saying that they were going to spend money on rent anyway, so it’s better to build “equity” even if the underlying asset is declining. They’ll tell themselves that this is their Forever House. The Boomer parents will also reassure them with similar rationalizations #SunkCostFallacy

If real estate outright craters, they’ll blame “the economy”. They’ll blame the banks. They’ll blame the government for allowing this to happen. Maybe they’ll blame immigrants for…something.

If real estate keeps marching up, they’ll blame immigrants. They’ll blame the government. Their Boomer parents will demand that the governments make it easier for their special snowflake children to get on the property ladder or be priced out forever.

If they change their mind and try to sell their Forever House in a slumping market, they’ll blame “the economy”. They’ll blame the government. They’ll blame tightwad vulture buyers. They’ll blame bad staging. They’ll blame the realtor. They’ll blame other sellers for front-running them. If they get a bad price, they’ll say, “oh, we were going to spend it on rent anyway.” They will be willfully blind to all the other costs of ownership.

If they lose their jobs in such a way that their ability to make their mortgage payments is in jeopardy, they’ll blame “the economy”. They’ll blame the government. They’ll blame evil outsourcing corporations. Yes, corporations are to blame, but in the context of having been over-leveraged on a house….

The notion of buying a house is so noble and well-intentioned that they won’t acknowledge any potential downside, much less protect themselves against it.

#211 Victor V on 03.20.15 at 11:14 am

184 Interstellar Old Yeller on 03.20.15 at 3:40 am

#118 Hot Albertan Money on 03.19.15 at 10:31 pm
What’s with referring to your significant other as your ‘partner’? Is ‘husband’ or ‘wife’ taboo these days?

When I hear “partner” what comes to mind is “same-sex partner”. Amanda’s letter doesn’t specify, so it could be a girlfriend or wife that’s letting Amanda make the buy/no buy decision.

Amanda, use the Rule of 90.

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

Common law “partnerships” are common these days, especially among the millennial cohort.

#212 4 AM Sunrise on 03.20.15 at 11:20 am

Let’s talk about these “festive patio lanterns”. If we come over to visit, will Kim Mitchell be performing?

He rents the basement suite. — Garth

#213 Alex N Calgary on 03.20.15 at 11:24 am

We got to serve our old landlord with a notice to appear and evidence for our dispute to retrieve our damage deposit, that was pleasant. (no move in damage inspection report, no walkout, shes very lazy but decided to steal 1000$ from us with no evidence or reciept of company that did cleaning…) Its so landlord oriented in this province, now we have to wait for her to counter serve us with evidence and then see her in dispute resolution court, all to get back our legally-defined damage deposit. I guess this is how it goes with any bad transaction though, I bet lots of people suffer like this with Reno guys etc.

Oil and Gas co making monitoring tools here in Cowtown, we’ve been dead quiet for 3 weeks, a few little sales here and there, but nobody knows the future of what Aussie parent company will do. I still project low prices for a long time now. The boss made a speech yesterday pretty much hoping for a “small” war to bring oil back up. Our massivly overpaid Sales and field services guys, who’ve been gourging for years in Alberta act like they are entitled to their jobs, what a joke.

I figure about June\July people will be running out of money and things will really start to burn, so far, just lower traffic that I see. 77,000 oil and gas layoffs so far they report, I bet more then that, construction and real-estate come next (stats AB said in like 2013 Finance\real estate and construction were 25% of AB economy)

Detroit? Miami? what is our situation? I think the general hope here is that a hail-mary pass will happen, they’re holding onto the last minute before we all get laid off, I can’t see it being too far into the future.

but maybe, WAR!!!!!!!! thats the hope, that innocents will die so some rigpigs overpaid jobs and double 6 figure sales guys with no education can keep paying for their Audi Q7’s, I guess I sound bitter, but thats what its like when you work in the belly of the beast. (wait wait that would be at Lamb’s office right? ) you know after wrote what he Said in the Washroom last time, it changed my perspective on this whole game, if people are arrogant and silly enough to pump their cash into Granite and stainless, why should we hold them back?

Next upswing, I’ll rip out the Granite and Stainless for whatever is hot at the time (our new rental area is all dark oak wood from early 80’s) and market it direct to the young ones, and properly retire based on all the knowledge and research we did in this bubble to realize when the next one is forming and when to buy and sell.

Keep the good stuff coming Garth!

#214 4 AM Sunrise on 03.20.15 at 11:29 am

One more for the rant about the sheeple:

If mortgage rates go up, they’ll blame the banks. They’ll blame the government for not protecting them. Their Boomer parents will blame the government. They’ll blame the US. They’ll blame the “economy”. Because the act of buying property is so well-intentioned that there can’t possibly be any negative consequences.

#215 Mike on 03.20.15 at 11:34 am

I overheard a girl a work say that her “…auntie once won a $100,000 on a scratch ticket when that was a lot of money.” I told her a $100,000 is still a lot of money but she told me “you can’t buy nothing today for a 100 grand.”

#216 Victor V on 03.20.15 at 11:42 am

https://ca.finance.yahoo.com/news/alberta-faces-structural-deficit-even-141406816.html

The government of Alberta could be facing a long-term deficit situation for reasons beyond the temporary plunge in oil prices, TD Bank said in a report Thursday.

Economists Jonathan Bendiner and Derek Burleton say the province’s current estimate of a $7-billion budget shortfall might not be realistic and the government could be facing much more serious fiscal challenges — namely, a structural deficit.

Unlike what’s known as a cyclical deficit, which is when governments temporarily dip into the red because of a temporary slowdown in the business cycle, a structural deficit is a situation where a government spends more than it earns even after the real economy rebounds, because of the compounding impact of debt payments.

Alberta is set to unveil its latest provincial budget next Thursday. Policymakers have already signalled to expect spending cutbacks, but the bank’s report says it doubts those alone will be enough to fix Alberta’s long-term financial problems.

#217 Whazzdown on 03.20.15 at 11:54 am

Hi Mr. Turner. Thank you for your service to your fans. One question I don’t recall ever seeing discussed is in regard to down payment options. Sure, you can put down 20% to avoid the CMHC, but why? If you’re going to buy a house at todays (future-rising) rates, wouldn’t it make sense to only put down 5%, pay the CMHC, and keep the other cash invested earning 7%? If rates do increase substantially, just sell and pay the difference at the end of the term. I have a hunch I’m wrong, but I’m not sure why I’m wrong.

#218 Armando on 03.20.15 at 11:56 am

Garth is 100% correct here. Buying is so pricey vs. renting that it simply makes no sense! And it doesn’t matter whether real estate goes down or stays flat (’cause don’t count on it going up like it has over the past 10 years). Even if Garth’s Balanced Portfolio temporarily turns into an Out-of-Balanced Portfolio in a Bear Market (which should be of little concern for long-term investors anyhow), at current prices you’re much better off renting and putting as much money away as possible!

#219 kommykim on 03.20.15 at 11:56 am

RE:#196 Buy Low Sell High on 03.20.15 at 9:52 am
Duration: 25 years…………..
Assming all the normal costs of ownwership i.e. taxes, maintenance (including those pesky “coons) my question still remians: did this couple make money or lose money? Did they beat inflation?

Like Mike said, there is no way to accurately calculate this in advance. I have no idea what inflation will be over the next 25 years and neither does anyone else.
I have created a spreadsheet for my own house listing purchace costs, maintenance costs, etc, and yes over the last 7 years I have lost money. A semi I owned from 1992 until 2008 I made money on. No doubt about it. But over the next 25? Who knows?

#220 AfterTheHouseSold on 03.20.15 at 12:00 pm

#156 Vanecdotal
“…the (sometimes unanticipated) total costs of ownership, in both TIME and $ can be financially crippling. You do not get the $$$ or these years of your life back.”

You hit it out of the park! Best post of the day. Anyone out there thinking of buying in Van or TO today, please reread this post. Print it out, hang on your rented fridge. Step away from the kool-aid.

#221 Bottoms_Up on 03.20.15 at 12:08 pm

#20 Lady in Red on 03.19.15 at 7:11 pm
————————————————-
Yes, more Canadians need to write to government officials. Also, you can write to your local M.P. to voice your concerns.

#222 Drill Baby Drill on 03.20.15 at 12:08 pm

#54 everythingisterrible

“that it was easily attainable for you (Boomers)”

You are a whiny butt vent. In 1982 I was making $20K per year, bought a house $50K, interest rates 21% and needed $12.5K as downpayment because CMHC would not insure an older house at the time. It was tough making ends meet. The old house needed renovations as well.

#223 BT on 03.20.15 at 12:13 pm

#187 Julia
“It’s been done an not with great success. Money doesn’t necessarily go to employment or higher wages, more to bottom line and/or owners. With the Government paying when it fails.”
When money goes to the bottom line, there is an incentive to make that bottom line bigger by re-investing. That generates more employment and higher wages through labour competition. Government involvement is needed sometimes to stimulate certain areas of the economy (e.g. such as original role of CMHC to provide affordable housing to veterans) but over time, it creates moral hazards and unnecessary risk (i.e. role of CMHC today).

#224 Lorne on 03.20.15 at 12:28 pm

#206

http://www.wsj.com/articles/the-coming-chinese-crack-up-1425659198

quote

Consider five telling indications of the regime’s vulnerability and the party’s systemic weaknesses.

First, China’s economic elites have one foot out the door, and they are ready to flee en masse if the system really begins to crumble. In 2014, Shanghai’s Hurun Research Institute, which studies China’s wealthy, found that 64% of the “high net worth individuals” whom it polled—393 millionaires and billionaires—were either emigrating or planning to do so. Rich Chinese are sending their children to study abroad in record numbers (in itself, an indictment of the quality of the Chinese higher-education system).

Just this week, the Journal reported, federal agents searched several Southern California locations that U.S. authorities allege are linked to “multimillion-dollar birth-tourism businesses that enabled thousands of Chinese women to travel here and return home with infants born as U.S. citizens.” Wealthy Chinese are also buying property abroad at record levels and prices, and they are parking their financial assets overseas, often in well-shielded tax havens and shell companies.

Meanwhile, Beijing is trying to extradite back to China a large number of alleged financial fugitives living abroad. When a country’s elites—many of them party members—flee in such large numbers, it is a telling sign of lack of confidence in the regime and the country’s future.

/quote
……..
Is it really as sketchy in China as the author portrays or is it some sort of psy-ops piece?
…….
Having lived in China for 2 years my impression is that it really is VERY “sketchy”!

#225 TnT on 03.20.15 at 12:41 pm

#222 Drill Baby Drill

So a house cost you 2.5 x your salary (single person)

Now a house cost 7 x the family income (2 people)

See the difference?

#226 JacqueShellacque on 03.20.15 at 12:45 pm

Renting’s cheaper than buying they say? Not at these prices. Townhouse (Hamilton, market on fire for some reason) right next to mine (attached) sold for $330,000 yesterday. At 3.24% interest with 10% cash down, the mortgage (not including property taxes and maintenance, natch) is….8 bucks per month less than I pay in rent for the unit right next door. With 20% cash down, mortgage is all of 40 bucks cheaper per month. And I’ve had the LL fix the garage door, fix some bathroom plumbing issues, fix a broken back fence, and get me a new stove, all for free.

You neglected to add in closing costs, condo fees, property taxes, maintenance charges, insurance, selling commission and mortgage renewals at elevated rates, plus the lost opportunity costs on the downpayment. Renting is still cheaper. — Garth

#227 everythingisterrible on 03.20.15 at 12:46 pm

#222 Drill Baby Drill
Lol, Look at your the ratio of your salary to your total house price. Nice try. You bought a house for 50k!

#228 DisgustMadeMePost on 03.20.15 at 12:56 pm

#222 Drill Baby Drill on 03.20.15 at 12:08 pm
#54 everythingisterrible

“that it was easily attainable for you (Boomers)”

You are a whiny butt vent. In 1982 I was making $20K per year, bought a house $50K, interest rates 21% and needed $12.5K as downpayment because CMHC would not insure an older house at the time. It was tough making ends meet. The old house needed renovations as well.

And your point is?

You paid 2.5 x your earnings. Try that now.

#229 gut check on 03.20.15 at 1:01 pm

Amanda –

THIS from #156 Vanecdotal:

[i] Gone is your financial wiggle room. Want to update something – damn the furnace just broke. Want to take a vacation – nope – there goes the water heater. Want a new car? Uh uh, the refrigerator/washing machine just died, roof leaked, sewer backed up/yard flooded, etc. etc. Your property taxes will be going up steadily every year whether your incomes are or not. Get used to shopping at Costco and staying in, ‘casue there won’t be enough $ left over to dine out much anymore. You are likely used to this lifestyle with your fabulously high incomes for someone in their 20’s, sure you can fake it for a while on the credit cards as you dig yourselves an even bigger hole, but essentially kiss your free-wheelin’ lifestyle goodbye. [/i]

Is worth reading and re-reading. I was writing to give you the same warning but lost my post (BSOD… and with the cost of housing it’s not as easy to just get a new machine! :) )

anyway, add to all of the above the TIME that it takes to research any house issues, call up the gas company, the City, the tax department, the roofers, the plumbers, etc and wait around for them OR try and do some of these things yourself which ends up meaning lots of tool purchases, incorrect sized fittings purchases & returns, etc etc…

Yard work, pest control (and don’t kid yourself, you’ll likely have one or another pest to deal with every single year, from wasps to skunks if you’re lucky.. termites or mice if you’re not) driveway repairs (you will not BELIEVE how much those cost or how long they take to do yourself)

oh yeah, it’s basically a prison sentence, except you get to pick the wallpaper.

I know there are lots of problems with renting. BELIEVE ME, I know. I rent. BUT.. I’ve just signed another lease instead of buying. I have plans and none of them involve counter tops. :)

good luck, whatever you decide

#230 Julia on 03.20.15 at 1:05 pm

#214 4 AM Sunrise

Adding to your train of thought:
Banks are damned if they turn people down for loans and they are damned if people get into financial difficulty because the Bank should not have lent them that much money in the first place.

#231 Blacksheep on 03.20.15 at 1:13 pm

Bottoms # 221,

#20 Lady in Red on 03.19.15 at 7:11 pm
————————————————-
“Yes, more Canadians need to write to government officials. Also, you can write to your local M.P. to voice your concerns.”
—————————————————————-
Don’t waste your time.

I still have a personally signed response from big “F” the elfin dude, from back in 2009. All you’ll get is lip service, as I did: “thank you for your concern”

I was actually surprised someone responded

#232 Mark on 03.20.15 at 1:25 pm

“You are a whiny butt vent. In 1982 I was making $20K per year, bought a house $50K, interest rates 21% and needed $12.5K as downpayment because CMHC would not insure an older house at the time. It was tough making ends meet. The old house needed renovations as well.”

That’s a dream compared to the situation today. You bought at 2.5X income. If you made pre-payments, even minor pre-payments, they cut your future balance owing dramatically. And over the next 33 years, you were able to refinance into successively lower interest rate mortgages (with a relatively brief exception of the 1990s) while mostly enjoying rising prices.

Today’s youth if they’re stupid enough to buy, have mostly lower prices to look forward to, and higher financing costs. Modest pre-payments barely even move the needle in terms of paying the mortgage off. The only thing that might be said of today’s youth is that the employment market may very well work out for them better in the long term — much better, on account of the high dependency ratios implied by demographics. But that doesn’t help young people right now because such a trend has yet to meaningfully kick in and jobs have been few and far between since the 2000-2001 crash, especially for university graduates in the private sector.

#233 Underhoused on 03.20.15 at 1:25 pm

At least Amanda is asking. She’s at least got a shot, then, at letting Garth’s Rule of 90 guide her. That’s better than most.

In contrast, two colleagues of mine, both recent immigrants to Canada from the EU, can’t wait to buy a place as soon as their probationary periods end this summer. No clue about rates, oil, general state of the Canadian or world economies.

Not only are they not asking, they do not want to hear even the gentlest suggestion that buying real estate now might be a bad idea. One is so sure that investing equals losing money that she refused to invest her nest egg safely over the years while saving for a down payment. (*sigh*)

#234 Retired Boomer - WI on 03.20.15 at 1:28 pm

#222 Drill Baby Drill

Regarding #54 everything is terrible

That poster should have been around in the late 70’s – early 80’s when interest rates were between 15-21%.

Come to think of it, even “normal” rates (think 2% over inflation) would make that whiner think the world was coming apart.

I just give up. You can NOT instruct, warn, or direct these ignorant fools. Sometimes I am amazed that Garth has the tenacity to try 6 days a week.

“Things” are different today, but they are not so very much different today.

#235 CJ on 03.20.15 at 1:35 pm

One more question for those who like to compare American and Canadian lifestyles:

How much do you value the fact that, in Canada, we are actually given time to spend with our children when they’re born?

I know many people in the US (mothers, fathers) who had to be back at work 6 weeks after their babies were born.

But, hey, at least their houses are cheaper!

The federal Family and Medical Leave Act (FMLA) provides for four months of time off for bonding with a new child. Several states have added more time to that basic right. — Garth

#236 Mark on 03.20.15 at 1:39 pm

“If you’re going to buy a house at todays (future-rising) rates, wouldn’t it make sense to only put down 5%, pay the CMHC, and keep the other cash invested earning 7%? If rates do increase substantially, just sell and pay the difference at the end of the term. I have a hunch I’m wrong, but I’m not sure why I’m wrong.”

Basically the ‘problem’ with the scenario you describe is that of too much leverage. 5X leverage is already a lot for an individual on their balance sheet, which is what buying a house for a 20% down-payment implies. Theory tells us that as one increases leverage (ie: does what you’re asking), the implied financing cost associated with such leverage increases, to the point where leverage becomes completely uneconomic and realistically, unable to exceed any sort of return that can be expected on an investment. If the cost of capital exceeds the expected return on investment, then making such investment will destroy wealth, which isn’t what you want.

How could/would this show up for someone who only puts 5% down? Well, 5% down means that as housing prices continue to fall, you’ll be in negative equity. Mortgages in negative equity likely are going to be subject to penalty by lenders. You’ll be sacrificing mobility and your ability to earn income if you’re stuck in an underwater house. One way or another, it will come back to bite you.

So to keep yourself in a balanced portfolio, it is apparent that you probably should revisit the whole premise of buying a house at all until you have a far stronger balance sheet. Diversification is great, as are balanced portfolios, but with the cost of a house exceeding your financial resources by factor of 5X, and with houses at such elevated P/E ratios (~35X earnings across Canada, and dramatically worse in Toronto/Vancouver) — the simple act of avoiding a housing purchase can have a dramatic effect on your long-term finances.

#237 Mixed Bag on 03.20.15 at 1:50 pm

#186 nubbers

Good question. It only occurred to me today after I re-read my comment. I would imagine that without the house as collateral, a higher rate would have been charged. (Sucks to be in dire financial straits, twice as hard to get ahead). I don’t know the details, it wasn’t a comfortable situation to be asking them the details about, we heard mostly from other people, and in person were supportive, you know how it is. But my curiosity is now piqued, I’ll try to find out more.

#238 CJ on 03.20.15 at 1:51 pm

Garth,

I appreciate the response. Here is an overview of FMLA (for your readers). I will take coverage in Canada over that in the United States (four months of unpaid leave) any day:

Overview

The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave.

My point was that you made up the “six weeks” comment. The period is four months, federally-mandated. Makes us question everything you state. — Garth

#239 Millenial-falcon on 03.20.15 at 1:51 pm

#222 Drill Baby Drill on 03.20.15 at 12:08 pm

Haha 20k per and a house was 50k so 2x income? Old economy Steve…. Your a whiny buttvent. Cry me a river

#240 everythingisterrible on 03.20.15 at 2:04 pm

#234 Retired Boomer – WI
Not whining- the real estate market is what it is and it’s up to me how I want to play the game.
My original post stated being tired of smug boomers like you thinking you know it all and your generations condescending tones. Congratualtions- you’re a perfect example.

#241 Millenial-falcon on 03.20.15 at 2:04 pm

Conference board of canada suggests vancouver to outpace growth of 27 other metro areas. Unemployment to fall to 4.8 by 2019. Solid growth in wide range of areas including ship building. 40000 a year moving into vancouver proper.

Where’s the crash coming from Garth?

#242 gut check on 03.20.15 at 2:26 pm

I’m trying so hard not to fall for the generational warfare stuff as I used to but Retired Boomer – WI really does make it difficult.

#243 Capt. Obvious on 03.20.15 at 2:28 pm

What I never understand about the “buy now — prices always go up” crowd is how the assertion “rates will stay low” supports prices continuing to go up? Prices have gone up (arguably) for the past 30 years on the back of interest rates trending to zero. That is a one time phenomenon that will not be repeated in our lifetimes (probably). Any price growth from here happens as a result of a) population growth, b) income growth. I suppose we could have Poloz helicoptering in dropping money on people’s porches, but if it comes to that you might want to find another country to live in.

People are strange.

#244 Mark on 03.20.15 at 2:28 pm

“Conference board of canada suggests vancouver to outpace growth of 27 other metro areas.

With a disproportionate amount of the Vancouver economy vested in RE speculation? Not a chance! Someone at the Conference Board must be hanging with the former Mayor of Toronto and imbibing in the same substances that got him into so much trouble.


Unemployment to fall to 4.8 by 2019. Solid growth in wide range of areas including ship building. “

Ship building? Hahaha, now that’s a good one. What a joke.

#245 Godth on 03.20.15 at 2:29 pm

#201 Daisy Mae on 03.20.15 at 10:26 am

Enjoy your gated community.

#246 jess on 03.20.15 at 2:32 pm

” TJN’s (Taxjusticenetwork) financial secrecy index, Gibraltar scored a wholly unpleasant 79 out of 100 in 2013, placing it among the most secretive and least cooperative jurisdictions on the planet. The government of Gibraltar has never disputed these findings, so its claim against ABC strikes us as being akin to the Pope suing a newspaper for describing him as a Catholic. (from tax justice network)

Tax haven Gibraltar sues newspaper for calling it a tax haven
http://www.taxjustice.net/2015/03/19/tax-haven-gibraltar-sues-newspaper-for-calling-it-a-tax-haven/

THE Gibraltar government is suing a Spanish daily national over a front page story which pictured the Rock as an iceberg of dirty money.
http://www.theolivepress.es/spain-news/2015/03/16/gibraltar-government-slam-defamatory-abc-front-cover/

Banco de Madrid files for bankruptcy after money laundering …news 4days ago
http://www.theolivepress.es/spain-news/2015/03/16/banco-de-madrid-files-for-bankruptcy-after-money-laundering-allegations-surround-parent-company/

#247 TRT on 03.20.15 at 2:44 pm

The day we have to worry about is when the S&P and The US$ index go down together for a week. That is when you we will have real problems. Until that day…

Regarding Vancouver and Toronto RE. Not going down. You don’t have to believe me, be a new ‘Real Jimbo.’ Interest rates not going up (monthly carrying cost) and continued urbanization and population growth of our cities continues along with extreme land use controls put in place by municipal councils controlled by developers.

#248 Drill Baby Drill on 03.20.15 at 2:45 pm

#227 everythingisterrible

That is because of ultra high interest rates !!!! The house was 2.5 times my gross salary with no CMHC backing me up. Instead of whining about the boomers how about pulling up your socks and figure out that life is work and adjusting to the new realities. Just like the boomers had to do.

#249 TRT on 03.20.15 at 2:45 pm

Mark:

Are you filthy rich by now?…you seem to have it all figured out.

#250 Ponzif on 03.20.15 at 2:48 pm

#241 Millenial-falcon on 03.20.15 at 2:04 pm
Conference board of canada suggests vancouver to outpace growth of 27 other metro areas. Unemployment to fall to 4.8 by 2019. Solid growth in wide range of areas including ship building. 40000 a year moving into vancouver proper.
Where’s the crash coming from Garth?
————-
The crash will come in the form of car accidents as the TRANSLINK referendum will surely be defeated.
No new roads, buses and bridges and extra 40k new people per year will mean traffic hell.
The only growth will come from auto repair shops.
And btw, who still listens the Conference Board?

#251 Drill Baby Drill on 03.20.15 at 2:51 pm

This house I bought for 50K was 45 km south of Calgary and was the only one I could get financing for because of the 21% interest rates.

And for those who state that I should try and buy a house today for 2.5 times my gross means I could now buy a home at that ratio for 700K

#252 Mark on 03.20.15 at 2:53 pm

“What I never understand about the “buy now — prices always go up” crowd is how the assertion “rates will stay low” supports prices continuing to go up? “

Prices have been going down in Canada over the past 2 years, largely on account not of interest rates going up, but merely because demand has been nearly fully satiated with the onslaught of supply. Housing is like any other consumer good, subject to the laws of supply and demand, and all the cheap financing in the world won’t manage to push more housing onto the public than they want to consume.

As it stands already, housing vendors have pushed housing ownership into many non-traditional groups. For instance, many students are into ownership of condos. Young unmarried people traditionally would be renters, but huge numbers are now owners. Even assisted living complexes are now being sold to seniors under the condominium model across Canada, something which wasn’t the case until quite recently. In short, there’s very little “pent up demand” in the housing market even available, as nearly everyone who is capable of buying, has bought.

So in short, the model of “lower interest rates = higher housing prices” no longer works. Interest rates will likely go lower with lower housing prices as central banks find the need to stimulate the economy out of the (housing-led) downturn. Demand and price support will only return to the housing market once deeply counter-cyclical industries start dramatically outperforming and providing owner returns. Since ownership of such industries in Canada is so highly concentrated, the extremity of such returns will have to be extreme in order for enough to trickle into the housing market.

#253 devore on 03.20.15 at 3:00 pm

#241 Millenial-falcon

Conference board of canada suggests vancouver to outpace growth of 27 other metro areas. Unemployment to fall to 4.8 by 2019. Solid growth in wide range of areas including ship building. 40000 a year moving into vancouver proper.

There is a glut of shipping capacity of all kinds right now, and has been for some time. Companies are using container and tanker ships for STORAGE. What does the Conference Board see that would cause such a sudden surge of demand in the next year that wound drive ship building, in Vancouver no less, not exactly a tier 1 ship building hub.

#254 TnT on 03.20.15 at 3:11 pm

#156 Vanecdotal on 03.20.15 at 12:22 am

OK after this post I accept that fact that I look like a RealTurd but just trying to apply some balance… it’s Friday peeps…

Amanda, you’re looking at 2 scenarios: rent and invest the difference in cost between renting and owning in a diversified portfolio, or going all-in one a single asset, that you will pay punitive fees and taxes to purchase, that will require constant cash infusions just to maintain, (never mind to improve and “make it yours”), and assume an epic debt load for the priviledge.

This is false scare mongering It’s not 2 scenarios here. Why not own and invest?

Why does it have to be a single asset process here? Use the rule of 90 and practice all the other advice Garth gives on home ownership i.e. investing in TFSA instead of paying down cheap debt.

You and your partner are young and already make $200k and this is just the start of your career.

A single detach home in Toronto is the best piece of real estate that will be the least affected by the ever looming, RE downturn.

There’s plenty of single detach homes in Toronto 416 that a couple earning as starter pay $200k can afford.

At this blow-off-top insane pricing we’re seeing right now in TO & Van, you need to understand that the expectation of continuing significant future price increases is highly unlikely at this point in the market cycle.

Not all of Toronto is crazy pricing. Scarborough is the next “up and coming” neighborhoods. Plenty of single detach homes at very affordable prices for a couple making $200k

If you purchase in this frothy market completely detached from fundamentals expect the following:

Gone is your financial wiggle room. How? With the rule of 90 there’s plenty of spare disposable income each month.

Want to update something – damn the furnace just broke. Want to take a vacation – nope – there goes the water heater. Want a new car? Uh uh, the refrigerator/washing machine just died, roof leaked, sewer backed up/yard flooded, etc. etc. Your property taxes will be going up steadily every year whether your incomes are or not. Get used to shopping at Costco and staying in, ‘casue there won’t be enough $ left over to dine out much anymore. You are likely used to this lifestyle with your fabulously high incomes for someone in their 20’s, sure you can fake it for a while on the credit cards as you dig yourselves an even bigger hole, but essentially kiss your free-wheelin’ lifestyle goodbye.

Talk about scare tactics… “Rent Now or forever be broke repairing your house…..”

Or you can keep renting, (paying the landlords mortgage) keep squirreling your ample incomes away and invest wisely in a diversified portfolio, (check your own past history on how well this is working for you) get that nut up to a point where it’s throwing off enough cash to pay a portion of your rent without touching the capital in a few years. (few years?) No debt, $$$ in the bank, enough income left over every month to travel, drive a nice vehicle, dine out, etc. You are able to ENJOY your youth, and plan for the future in the scenario. (again all or nothing basement dwelling scare tactics)….

Or you can join your heavily indebted friends for a Costco shrimp ring and a nice box ‘o wine on their slanty sun deck (that they can’t afford to fix) ’cause that is often the reality, especially if grossly overpaying for the home in this type of irrational market. *** I love this line…. It really speaks volumes of what’s really going on, jealous much?***

Only you can decide what’s in your best interests, but having both rented, and owned, I can tell you that even with 2 people making decent incomes, the (sometimes unanticipated) total costs of ownership, in both TIME and $ can be financially crippling.

“Can” be but doesn’t “have” to be…

You do not get the $$$ or these years of your life back.

This is a valid comment if you are renting because you don’t get that money back and years wasted that could have paid off your largest purchase that you are going to make anyways.

I strongly suggest *not* drinking the koolaid. You are already light years ahead of many of your peers, why blow your lead now?

Like this is a race to where? Digital numbers in a bank account? Home ownership does not mean broke and crying… sheesh…

#255 Mike on 03.20.15 at 3:14 pm

Do you know one thing i’ve noticed on the comments section lately?… Not as many RE agents harping on about how house prices always go up and anyone not begging to buy a house is an idiot. Maybe they’re all too busy trying to get rid of their leased Audi’s b/c they can’t afford the paymets anymore?

#256 Holy Crap Wheres The Tylenol on 03.20.15 at 3:16 pm

#103 Smoking Man on 03.19.15 at 9:57 pm
Pink Floyd wrote about you animals on the animals album about blog dogs.
…….
Enjoy
Dogs (Waters, Gilmour) 17:06
___________________________________________
You are correct dogs is a good song. This whole album was built on the George Orwellian thesis of Animal Farm.
One of my personal favs from Floyd.
Was at this one back in 71, try it you may like it!
https://www.youtube.com/watch?v=OjcK2Yosbu8

#257 20TH CENTURY LIMITED on 03.20.15 at 3:31 pm

Garth – About two years ago you blogged on ‘living small’ and how it was the next coming thing. Perhaps you should send a copy to Amanda.

BTW – It was an EXCELLENT blog. I’m living small now and I’ve never been happier. Thanks for the advice!

#258 Mark on 03.20.15 at 3:33 pm

“Not all of Toronto is crazy pricing. Scarborough is the next “up and coming” neighborhoods. Plenty of single detach homes at very affordable prices for a couple making $200k”

Advocating that top income people can afford a house merely because it happens to be in a dumper area of town, rather than in an area more closely fitting their socioeconomic standing? A really unfortunate position I would suggest.

Sure, a surgeon can live amongst the much lower income population and perhaps be the king of the neighbourhood. But if a surgeon pays top dollar for such, relative to prevailing local incomes, they’ve still made a bad investment and will suffer poor, if not negative returns for years to come.

As Warren Buffet once said, “The chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.” A quote quite apt here.

#259 TnT on 03.20.15 at 3:33 pm

#248 Drill Baby Drill on 03.20.15 at 2:45 pm

That is because of ultra high interest rates !!!! The house was 2.5 times my gross salary with no CMHC backing me up. Instead of whining about the boomers how about pulling up your socks and figure out that life is work and adjusting to the new realities. Just like the boomers had to do.

Boomers squandered the largest opportunity ever bestowed on mankind.

They single handedly spent every penny saved by the greatest generation, exploited every sacred piece of nature, polluted all 4 corners of earth, farmed out the best jobs over sea, created the largest social welfare program known to man ensuring guaranteed bankruptcy for future generations and they now cry the loudest when their delusional perspective on what it takes to make it in this new world they created is challenged.

/rant off

#260 Homeowners get approved ..Alpine credit on 03.20.15 at 3:34 pm

Alpine credit…….
Do you own your own home ?…..APPROVED!!!!!!
Brought to you by RE/MAX……….LOL…LOL
Do you need…30,000….60,000 or 600,000…?
This is non stop on global, and I mean non stop.
This kind of MSM brainwashing show no signs of slowing down.
Mass programming of masses I guess.

#261 everythingisterrible on 03.20.15 at 3:45 pm

#253 devore
I think he’s referring to Military contracts recently awarded to Seaspan in van to build numerous naval/coast guard vessels – I could be wrong though.

#262 Iconoclast on 03.20.15 at 3:52 pm

China seems to be ramping up their efforts to chase after their corrupt officials overseas. Emigrees are going to be looking over their shoulders now.

If as much money has been running out of the country as these articles say, we will really notice the effect when it starts to get clawed back.

No we won’t. That corrupt money has increased Vancouver house prices is an urban myth. — Garth

#263 JacqueShellacque on 03.20.15 at 3:54 pm

Garth, thanks for pointing out my mis-type (#226). I meant to show that renting is cheaper than buying since my soon-to-be next door neighbor will pay almost exactly my rent in mortgage payments, plus will have to pay property taxes, maintenance, closing costs (which I’d neglected and you’d pointed out), etc, and has acquired hundreds of thousands in debt and/or opportunity costs. While I’ve had assorted free goodies from the LL that otherwise I would’ve had to pay for, and earned 12% on my index funds for the last 4 years.

#264 Millenial-falcon on 03.20.15 at 3:58 pm

Have you all heard of seaspan which just did a 200 million facility upgrade to accommodate the 10billion dollar government shipbuilding contract,
You can deny all you want van haters, the numbers don’t. And they continue to prove all of you wrong.

#265 Julia on 03.20.15 at 3:59 pm

“Not all of Toronto is crazy pricing. Scarborough is the next “up and coming” neighborhoods. Plenty of single detach homes at very affordable prices for a couple making $200k”

“Drive until you can afford it” is what I hear people say now. There is a cost to living closer to downtown (house price or rent) and there is a different cost to living further (time commuting, multiple cars etc…). I have a colleague who bought 45 minutes Go Train further than where they are now because that where they could afford the larger house they wanted.

I personally would rather not spend my money on a 2nd car or my time commuting.

#266 everythingisterrible on 03.20.15 at 4:01 pm

#251 Drill Baby Drill
“And for those who state that I should try and buy a house today for 2.5 times my gross means I could now buy a home at that ratio for 700K”

Congratulations on having an exceedingly high annual salary compared to most canadians, you sir, are a real winner. Did you see my previous posts about gloating?

#267 Millenial-falcon on 03.20.15 at 4:03 pm

#259 TnT on 03.20.15 at 3:33 pm

Dead on right

#268 Bill Gable on 03.20.15 at 4:34 pm

This is what’s happening, as the “recovery” continues in the United States.
Mr. Turner talks about the booming Markets etc. – but what is filtering down to the “average American”.
My loaded question is: Does this bode well?

“Every night around nine, Janis Adkins falls asleep in the back of her Toyota Sienna van in a church parking lot at the edge of Santa Barbara, California. On the van’s roof is a black Yakima SpaceBooster, full of previous-life belongings like a snorkel and fins and camping gear. Adkins, who is 56 years old, parks the van at the lot’s remotest corner, aligning its side with a row of dense, shading avocado trees.

The trees provide privacy, but they are also useful because she can pick their fallen fruit, and she doesn’t always­ have enough to eat. Despite a continuous, two-year job search, she remains without dependable work. She says she doesn’t need to eat much – if she gets a decent hot meal in the morning, she can get by for the rest of the day on a piece of fruit or bulk-purchased almonds – but food stamps supply only a fraction of her nutritional needs, so foraging opportunities are welcome.

Prior to the Great Recession, Adkins owned and ran a successful plant nursery in Moab, Utah. At its peak, it was grossing $300,000 a year. She had never before been unemployed – she’d worked for 40 years, through three major recessions.”

LINK: http://tinyurl.com/83vps2w

#269 cramar on 03.20.15 at 5:06 pm

#225 TnT on 03.20.15 at 12:41 pm
#222 Drill Baby Drill

So a house cost you 2.5 x your salary (single person)

Now a house cost 7 x the family income (2 people)

See the difference?

————————

In his 1996 book, “The Millionaire Next Door”, Thomas J. Stanley said not to spend more than 2X your annual income on a house. Thirteen years later (2009), in “Stop Acting Rich” he revised that to 3X. I don’t know what a realistic number is for today, maybe still 3X, maybe more. But the point is, when it is 7X—YOU DON’T BUY A HOUSE—IF you want to build wealth! It is still possible to buy a house at 3X your annual income in parts of Canada today. You just cannot do so in TO or Van. So what is the solution? Simple. Get the H of those cities if it is important for you to own a house.

#270 Drill Baby Drill on 03.20.15 at 5:22 pm

#265 everythingisterrible
You missed the point. Get up off of your complaining ass and get on with it.

#271 Housenut on 03.20.15 at 5:40 pm

When she uses the word PARTNER, it sounds like a business partner – why does she choose that word rather than husband, boyfriend, etc. I agree with Garth – do not buy real estate with someone you are not sleeping with!!!

#272 CalgaryRocks on 03.20.15 at 5:50 pm

Is it really as sketchy in China as the author portrays or is it some sort of psy-ops piece?

No dude, in China a duck farmer can become a millionaire, scratch that, a billionaire just because he is such a smart business person. wink, wink. Accidentally, the duck farmer happens to sit on a planning committee, but I am sure that has nothing to do with his amazing business skills.

He doesn’t. The 2,000-member body is an advisory one with no legislative authority. The man in question owns a construction conglomerate, several hotels and pharma companies. The reason the media has chosen to label him a ‘duck farmer,’ which was an early agricultural enterprise, is because it fits the meme that only a crook could succeed where you have not. — Garth

#273 Vanecdotal on 03.20.15 at 6:03 pm

#254 TnT

You completely (conveniently) overlook that this couple likely can NOT afford to purchase a home in TO at current pricing based on Garth’s Rule of 90.

Your entire argument hinges on the purchase price being affordable RELATIVE to their current incomes, (which may go up, down or sideways in the future).

My points are not “scare tactics”, they are reality when housing prices become completely detached from local incomes, ESPECIALLY if one is stretching financially and assuming a large mortgage just to get there foot on the property ladder.

… and I am no “basement dweller”, (not that there’s anything wrong with that), although I have been in the past, and I had a helluva a lot more $ to play with, enjoy life, and invest for my future when I was.

In the past, when home prices correlated much more closely, even in large urban markets, to average / median local incomes, your argument *may have* once made sense.

This is not the current market / economic climate this next generation is facing. Apples and oranges.

#274 everythingisterrible on 03.20.15 at 6:06 pm

#269 Drill Baby Drill
You take offense to my statement that generally houses are less affordable than in the past and respond with stop complaining and work harder. I’m pointing out a systemic problem with the real estate market and your response is “stop whining and work harder”

You missed the point of my posts… and the short bus that would have taken you to mathematics class it seems.

#275 Vanecdotal on 03.20.15 at 6:12 pm

Further to #254 TnT

“Or you can keep renting,
(paying the landlords mortgage)”

Or the landlord subsidizes your rent every month while paying for all the additional costs of home ownership if the bought their “investment” property in the last 5-10 years (depending on location).

“keep squirreling your ample incomes away and invest wisely in a diversified portfolio, (check your own past history on how well this is working for you)”

Thanks for asking. My investments (diversified portfolio) have consistently outperformed my RE holding over the last 15 years actually, by a wide margin. The home was bought on a low-ball bid to live in, NOT as a speculative investment, which is a good thing as it’s a cash hoovering black hole… yes, in YVR. Fortunately I have other non-RE investments that offset this.

We will have to disagree on this as while no one can predict the future, your “adice” is downright reckless in this economic climate as it relates to a young couple just starting out in life.

#276 Rebs on 03.23.15 at 12:41 pm

I love reading your blog and agree with so many of your points.
On the other hand, people who rent out homes (ie: your landlord) aren’t doing it for charity. They are making some profit, right? Which seems to incur that at a certain point (or in certain conditions), owning a home can be profitable, whether or not one is living there. Oui/non?

I think home ownership is similar to deciding to have children; it’s a very personal decision and for the most part not exactly profitable. Regardless of this, many people take the leap for both things (sometimes at the same time!). What’s more, taxpayers support both home-owners (CMHC) and parents (especially in Quebec, with extremely generous parental leave and cheap daycare) which can kinda stink for someone who has a conventional mortgage and no kids. lol