When parents go bad

BERNARD modified

Update: US, Canadian jobs soar. Fed hike assured. Link.

Jeremy has this problem. His parents. They’re nuts.

“Hi Garth: I’ve been following your blog for a few years and I appreciate what you do. I’ve stayed out of the market because of your advice and even though it’s been hard not to buy in, I think it’s been the right decision. It’s very hard to talk down the wife and mother in law from buying, but I think I can resist them for another year or two. I’m 34 with three young kids and a Bernese Mountain Dog.

“I’ve saved reasonably well over the last ten years. Making around 90,000 a year on average I’ve managed to save 150,000. My investment decisions have been based (loosely) on your advice. I have a question I’m hoping you can answer for me.

“Today my parents asked me for a $100,000 loan to buy a house on Vancouver Island as an investment. They offered to pay me 5% for a one year loan. Should I take the 5% seeing as it’s a sure gain or should I stick with my current portfolio? They have four other houses nearly paid off and they are financially secure so getting my money back is not a concern.”

Well, Jer, let’s start with this question: if your parents are ‘financially secure’ why do they need to borrow from their son? Won’t the bank loan them a hundred grand? Do they not have equity in all of those houses they can borrow against (with tax-deductible interest)? Isn’t there cash flow from four rentals to draw on? Or are your folks just addicted to real estate, have no liquid investments, and are now drawing you into their sticky web? Huh? Why would they pay you 5% for a loan when they can get a mortgage for 2.5%? Or maybe they can’t?

Hang up the phone, Jeremy. They’re toxic. And keep the dog away, too. He could be ransomed.

While we all love real estate (I own some), the meme today that property’s riskless and the only asset anybody needs, is taking us to extreme places. Like guilting your kid into financing your obsession. Or the 18% jump year/year in detached houses in Toronto, plus the 16% pop in YVR taking a SFH to $1.4 million.

Face it, nobody’s income is climbing by double digits. But mortgage debt has jumped 7.85% annually for the past 14 years, while wages increased just over three per cent. In 2001 we owed $448 billion. Now it’s $1.3 trillion. And here we are months away from the start of an interest rate normalization. Sadly, if the Bank of Canada drops rates again before the tightening starts, it will simply add more to long-term debt while giving a temporary pop to prices. What a miserable combo.

Anyway, poor, elder-abused Jeremy, here’s what really worries me.

When things turn, it sounds like your real estate-heavy, cash-starved parentals could be in serious trouble along with millions of other Boomers. In fact just days ago my econo buddy, Benny Tal of CIBC, came out with a new report saying 5,800,000 people are going to be nailed with at least a 20% drop in their standard of living once they stop working. The reason? That’s easy. They don’t have enough money, usually because they’ve too much real estate.

With a savings rate of about 3% (it was about 20% when the Boomers were hitting their 30s), millions of people are massively ill-prepared for decades after work. (And with all of the layoffs lately, those decades are getting longer.) As I have told you with flesh-eating, fingernails-on-blackboard repetition, RRSP contributions have fallen off a cliff lately, only a small fraction of people max their TFSAs, and 80% of the money in tax-free accounts is in cash or brain-dead GICs. Increasingly, net worth is concentrated in one asset, with 70% of us owning houses. So just imagine the impact when this bubble deflates. Fast or slow, no difference. It means losses.

So Benny is joining the chorus asking for better public pensions. As you know, the feds have suggested that maybe in the future people could pay more into the CPP on an individual basis in order to collect more. But that would involve the government tracking millions of individual accounts all with varying pay-outs. The logistics, cost and prep time are daunting.

Ontario now has an extra pension plan, taking another 2% of everybody’s income. But no meaningful pay-out will be available for decades, and in 30 years it will amount to just $10,000 (maximum) a year. Meanwhile, although rates will increase over the years ahead, the hikes will be gradual and incremental. Nobody will be making enough interest to provide retirement financing, and yet the moves will be enough to materially impact on inflated real estate and a steaming mountain of personal debt.

But, Jeremy, wait. It gets worse! (Don’t you love this blog?)

Mr. Tal says, “While many Canadians, particularly those now close to 65, are on a path to the retirement of their dreams, the data show that millions of others are headed for a steep decline in living standards in the decades ahead, particularly those who are currently younger and who are in middle income brackets.”

Yep, J, that means you. The bank says it’s the children of the Boomers who should really be worrying for several reasons. Their savings rate is virtually non-existent (thanks to starting work later in life, then buying houses); corporate pension plans have become weensy, skinny little runts with non-guaranteed benefits; and grossly stupid real estate prices have sucked off household cash flow while creating epic levels of debt that parents never faced.

The bottom line for retirement: “For those born in the 1980s, this implies a 30% drop in their standard of living.”

Don’t talk to them, Jeremy. Move. Change your email addy. Secure an unlisted phone number. Get a bouncer.

And do something about your MIL. This is war.

172 comments ↓

#1 S.Bby on 06.04.15 at 6:59 pm

Poor decisions:
http://www.cbc.ca/news/canada/british-columbia/rbc-threatens-fast-foreclosure-to-seize-port-coquitlam-home-1.3099202

Take the money and run:
http://www.cbc.ca/news/canada/calgary/2-men-charged-in-multi-million-dollar-mortgage-fraud-1.3100539

#2 Brian Ripley on 06.04.15 at 7:02 pm

“Nobody will be making enough interest to provide retirement financing…” Garth

Low rates are weighing down on earnings as well. The latest StatsCan numbers for Ontarians took a big drop and since the March 2009 Pit of Gloom, average earnings are:
Up 28% or 4.6%/yr in Alberta
Up 20% or 3.3%/yr Nationally
Up 17% or 2.8%/yr in Quebec
Up 15% or 2.4%/yr in BC

BUT only Up 12% or 2.0%/yr in Ontario

Updated chart here: http://www.chpc.biz/earnings-employment.html

#3 raisemyrent on 06.04.15 at 7:05 pm

I always chuckle when I see house/RE and investment on the same sentence. sounds like the in-laws have been drinking the milkshake. watch them hold the properties through a crash. if they bought at the right time, correction, if they leveraged the crap out of their investments at the right time, they should sell them all and walk away and be happy they got lucky. what is always pitiful is leveraged people waiting for things to work out ‘in the long run’.
sounds like they need an intervention, and their cable cut-off (HGTV).

p.s. kudos on the bernese, our dog is half bernie half poodle.

#4 Greg on 06.04.15 at 7:05 pm

CD Howe says we’re saving enough for retirement, thank you very much.

http://www.cbc.ca/news/business/canadians-are-saving-enough-for-retirement-says-c-d-howe-study-1.3100653

So go live with them. Maybe there’s a spare bedroom. — Garth

#5 zedgt87 on 06.04.15 at 7:08 pm

Born in the late 80s, economically my generations had taken it up the rear and will continue to do so. Luckily I have a good job and hate debt so I think I’ll be ok.

#6 PM on 06.04.15 at 7:09 pm

With a savings rate of about 3% (it was about 20% when the Boomers were hitting their 30s)

This is misleading. Savings are counted as cash/guaranteed investments. When boomers turned 30 interest rates were double digit, who wouldn’t take that?

Of course no one saves now with 1% interest, even the hallowed ‘balanced portfolio’ contains almost no cash.

Count equity-based investments as savings and I bet the story doesn’t have the same scare factor.

Yes it does. The ‘savings rate’ refers to money put aside for future consumption or growth after current expenses are paid. — Garth

#7 North Burnaby on 06.04.15 at 7:16 pm

“John Maclean

So I took Garth’s advice. My house sold in May, and since then I’ve decided to rent.

I’ve been looking for a place to rent and so far, nothing decent has come up. I’m living in a motel room out of several suitcases, all possessions in storage, every morning scan the “house for rent” ads in the local paper and Craigslist. I’ve called about 25 places. About 10 are already rented, another 10 are not until July 1st. I’ve been to see the other 5. One I saw today was a hovel, dark, dingy basement in a rooming house with ceilings so low I had to stoop. Another place has no phone and no internet service. Another place I got rejected because I am a freelancer. Another place I got rejected because I have a pet.

Getting a little desperate I have given up trying to rent a house and am now trying to rent a one bedroom apartment. We’ll see if they allow pets and allow freelancers. Even though I have $200k cash in the bank, when you tell them you don’t have a full time job but freelance, they look at you sideways. Then they want references. I tell them I just sold a house. They want a complete history of my life.

So, moral of the story, renting is a f****cking pain in the ass. No wonder people would rather pay sky-high prices to buy a condo or house.

True story. To be continued.”

You are so screwed, buddy. Go buy a condo with your pity $200k.

#8 Victoria Real Estate Update on 06.04.15 at 7:17 pm

How far have Greater Victoria single family home prices fallen since the 2010 peak?

Up until December 2013 the local board published median price stats for individual areas of Greater Victoria.

The following charts were put together using SFH median price data from Victoria’s board. They are 3-month median price charts using 3 months of median price data averaged

. . . . . . . . .Single Family Home Prices. . . . . . . .
. . . . . . . . . . . . . .Langford. . . . . . . . . . . . . . .
. . . . . . . . (Percent Below 2010 Peak). . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0%. . . .* . . . . . . . . . . . . . . . . . . . . . . . . . . .
-1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-3%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-4%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-7%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-8%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . *. . . . . . . . . . . . . . . . . . . . . .
-11%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-13%. . . . . . . . . . . . . . .* . . . . . . . . . . . . . . .
-14%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-15%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-16%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-17%. . . . . . . . . . . . . . . . . . . . . .*. . . . . . . .
-18%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-20%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-21%. . . . . . . . . . . . . . . . . . . . . . . . . . . *. . .
———————————————————————————
. . . . .06/10. . .06/11. . .06/12. . .06/13. .12/13. . .

. . . . . . . . .Single Family Home Prices. . . . . . . . . .
. . . . . . . . . . . . . . Oak Bay. . . . . . . . . . . . . . . .
. . . . . . . . (Percent Below 2010 Peak). . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0%. . . * . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-3%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-4%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-7%. . . . . . . . . .*. . . . . . . . . . . . . . . . . . . . . .
-8%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11%. . . . . . . . . . . . . . . *. . . . . . * . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-13%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-14%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-15%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .*. . .
-16%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
———————————————————————————-
. . .March 10. . Dec.10. . Dec.11. . Dec.12. . Dec.13

. . . . . . . . Single Family Home Prices. . . . . . .
. . . . . . . . . . . . . . Victoria. . . . . . . . . . . . . . .
. . . . . . . . .(Percent Below 2010 Peak). . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0%. . . .* . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-1%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-3%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-4%. . . . . . . . . . . . . . . .*. . . . . . . . . . . . . . . .
-5%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-6%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-7%. . . . . . . . . *. . . . . . . . . . . . . . . . . . . . . .
-8%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-9%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-10%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-11%. . . . . . . . . . . . . . . . . . . . . .*. . . . . . . . .
-12%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-13%. . . . . . . . . . . . . . . . . . . . . . . . . . .*. . . .
———————————————————————-
. . . . .03/10. . .03/11. . .03/12. . .03/13. 12/13

(Source: Victoria’s board)

All areas of Greater Victoria had experienced significant price declines up to the end of 2013.

It is safe to say that at the beginning of 2014 SFH prices across Victoria had fallen 12 – 15% below peak (2010).

What has happened with SFH prices since the beginning of 2014?

Using SFH average price numbers from Victoria’s board, I’ve put together this 6-month average price chart (6 months of average price data averaged together). Victoria’s board published the 6-month average price data in the past.

. Average Single Family Home Price. .
. . . . . . Greater Victoria. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
+ 1%. . . . . . . . . . . . . . . . . . . . . .
…0%. . . .*. . . . . . . . . . .*. . . . . .
– 1%. . . . . . . . . . . . . . . . . . . . . .
———————————————————-
. . . . . . .May. . . . . . . . .May. . . . .
. . . . . . .2014. . . . . . . . 2015. . . .

(source: Victoria’s board)
(6-month average)

Conclusion:

•. At the beginning of 2014 SFH prices across Greater Victoria had fallen 12 – 15% below peak.

• SFH prices across Greater Victoria have been flat since the spring of 2014.

•. Therefore, SFH prices across Greater Victoria are 12 – 15% below peak (2010).

#9 Dr.Dr. on 06.04.15 at 7:18 pm

This won’t end well.

#10 Interstellar Old Yeller on 06.04.15 at 7:18 pm

Wife, three kids, and a dog, but still resisting the pressure to buy? That’s impressive.

#11 rampant inflation on 06.04.15 at 7:23 pm

Yes it does. The ‘savings rate’ refers to money put aside for future consumption or growth after current expenses are paid. — Garth
_________________________________________

the collapse in the savings rate is a direct result of central bank policies…

ie, money for nothing.

why save anything when there is perpetual inflation and zero interest rates?

#12 bigtown on 06.04.15 at 7:23 pm

As an experienced owner of Vancouver Island real estate all I can say is WATCH YOUR BACK.

#13 Victoria Real Estate Update on 06.04.15 at 7:24 pm

My charts didn’t display properly.

Oak Bay: – 15%
Langdord: – 21%
Victoria: – 13%

#14 S.Bby on 06.04.15 at 7:26 pm

That John Maclean post is fake. It’s gotta be because with everybody “invested” in rental properties there is lots of good stuff to rent. Just look at Craigslist. When I read that I thought: this has realtor written all over it.

#15 amazon girl on 06.04.15 at 7:31 pm

Love the picture Garth, that was my first and only dog
I was only 4 and he carried me around …
Thanks

#16 Made in BC on 06.04.15 at 7:33 pm

Tax Rebellion in Denmark

http://armstrongeconomics.com/archives/31307

“As the economy turns down and governments become far more aggressive to grab money from everyone, we should see a sharp rise in these types of incidents. This is part of the rising trend in civil unrest. This is all insane since money is no longer tangible; taxes are also no longer necessary. We should seriously address the fact that money is not what it used to be. We have moved forward in technology, science, medicine, and every field except economics. France is high on the list for a major tax revolution as nearly 50% of GDP is consumed by annual tax collections. That is totally insane. And they wonder why the rich flee and unemployment rises? This is the 21st century, not the 17th. Money has changed and taxes are no longer necessary, yet they create it anyway. That is like me giving you a $100 bonus and then charging you $50 to receive it.

What’s the point? They spend more than they collect anyway.”

#17 Mark on 06.04.15 at 7:38 pm

“Count equity-based investments as savings and I bet the story doesn’t have the same scare factor.”

Except that Canadians aren’t really buying much equity-wise. Canada’s largest and highest long-term performing mutual fund, XIU, has not grown its unit issuance in well over a decade.

source: http://sedar.com/DisplayMFDocuments.do?lang=EN&issuerNo=00014927 2003 audited Annual financial statements — 116M pre-4:1 split units outstanding (page 11).

http://www.blackrock.com/ca/institutional/en/products/239832/ishares-sptsx-60-index-etf?locale=en_CA&siteEntryPassthrough=true&fundSearch=true&qt=XIU — 473M post-4:1 split units outstanding.

If the highest quality, most liquid and least expensive equity investment product in the Canadian equity mutual fund marketplace isn’t growing in outstanding units, then are Canadians really buying Canadian equities? I’d submit that the answer is “no”. So the purchase of equities is probably not a meaningful addition to the savings rate.

I’m sure you can probably replicate the same results by adjusting Statistics Canada-derived data accordingly. Houses and debt have been severely in favour. Bonds and GICs in favour. But equities, pretty much left for dead by Canadian investors. Even pension funds like the CPP, etc., have directed a lot of their enthusiasm towards RE investment and other “alternatives”, rather than buying new ownership positions in Canadian business.

#18 Balmuto on 06.04.15 at 7:39 pm

#6. PM

“Count equity-based investments as savings and I bet the story doesn’t have the same scare factor.”

You sure they don’t count any equity/based investments as savings? Not even mutual funds? That’s pretty dumb if they don’t.

#19 crowdedelevatorfartz on 06.04.15 at 7:46 pm

@#7 North Burnaby

Tell John Maclean to do THIS

http://www.google.ca/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=11&cad=rja&uact=8&ved=0CEcQFjAK&url=http%3A%2F%2Fwww.allposters.com%2F-sp%2FNational-Lampoon-January-1973-If-you-don-t-Buy-this-Magazine-We-ll-Kill-This-Dog-Posters_i8677945_.htm&ei=FeNwVbXOHMyzoQTGnoPgAQ&usg=AFQjCNExKNMtYbDcdRgqvIQI7W1yAh5aAw

to resolve the pet “issue”.

After that.
Renting is no problem.

#20 crowdedelevatorfartz on 06.04.15 at 7:52 pm

@#7 North Burnaby
PS. What the “H” “E” Doublehockeysticks is a “freelancer”?

Does that mean self employed?

Or a person that sells articles to news agencies.

Either way. It shouldnt matter one whit.

I rented an apartment without a job and no references after I sold my house of 20 years.
Had $800k invested.
No issues getting “approved”

Its the smelly, fea infested, drooling, pooping pet.

#21 Italian love real estate on 06.04.15 at 8:01 pm

DELETED

#22 Mark on 06.04.15 at 8:02 pm

“why save anything when there is perpetual inflation and zero interest rates?”

Low interest rates just mean that people who save, have to invest their savings in other things if they want an explicit return.

Historically cash or T-Bills have never offered anything except for preservation of purchasing power. At times, on an after-tax basis, in high interest rate environments typically associated with inflation, cash hasn’t been able to even provide that. Just because a nominal return isn’t guaranteed by government on ‘savings’ doesn’t mean that returns aren’t available with appropriate allocation of savings to a balanced portfolio. Garth routinely quotes 7% as the number achieved by a typical balanced portfolio — not a guarantee of individual past or future returns, but rather, proof that the low interest rate environment can generate historically typical real rates of return without taking outsized risks.

All too often we see, in the media and elsewhere, some sort of equation of “savings” with investment in cash, and the sort of returns available on such. Its a bunch of nonsense used by those more interested in pushing a certain point of view (ie: hatred of central banking, for example), or covering up for mathematical or logical flaws in an investment scheme (ie: pension funds claiming they’re insolvent because of low rates, when in fact contributory levels were far too low given a reliance on overly high assumed rates of return).

#23 Greg on 06.04.15 at 8:05 pm

So go live with them. Maybe there’s a spare bedroom. — Garth

Thanks for the advice Garth but not required. I’m one of those defined benefit Dino’s, doing just fine on about 70% of preretirement income.

#24 A Tale of Two Chitties on 06.04.15 at 8:09 pm

On the one hand we are being told that we are the greatest savers in the world, as clearly excessive mortgage payments are savings (lol):
http://www.thestar.com/business/personal_finance/2015/06/04/dont-worry-youre-probably-saving-enough-for-retirement-mayers.html

On the other, we see what the one asset strategy does to those who invest all in real estate with dreams of riches. This poor guy can’t get his deposit cash back and has NO liquidity to protect his family. Words fail me that he has no other assets, and this is in the good times…
http://www.thestar.com/business/2015/06/03/family-fears-homelessness-when-builder-doesnt-return-deposit.html

Actually, this is all part of the same boat – dreams and confidence that could melt away into nothing the second people start to fear real estate.

#25 PM on 06.04.15 at 8:13 pm

You sure they don’t count any equity/based investments as savings? Not even mutual funds? That’s pretty dumb if they don’t.

That’s what I heard from a friend (I know) so after Garths response I looked and have found a few definitions.

From a US Fed Reserve bank

http://www.frbsf.org/economic-research/publications/economic-letter/2002/march/what-is-behind-the-low-us-personal-saving-rate/

This persistence could be attributed to an increase in trend productivity that induces higher permanent income for households or to a relaxation of financing constraints due to financial innovation. To the extent that these factors are important, the current low personal saving rate would not represent a problem that is overhanging the U.S. economy, but is instead a manifestation of a more efficient deployment of the economy’s resources.

I think it was the financial innovation bit that was confusing. I’m guessing that refers to fancy debt products instead of fancy financial product.

I’ll read a bit more. It’s certainly a more complicated measure that it seems to be on the surface.

#26 rk usa on 06.04.15 at 8:17 pm

#1 24 hour RBC foreclosure

it takes about 2 years for a bank to foreclose in Maryland

no wonder Canadian banks are so solid

the game is entirely rigged for their benefit

#27 Conrad on 06.04.15 at 8:18 pm

Victoria Real Estate Update

your posts sound like wishful thinking. Show a nice house in Oak Bay that is 15 percent less than 2010. The last examples you showed of the “declining” market was a few very marginal condos (old, age restricted, etc). I follow the market, and this year has been very hot, with lot of bidding wars for single family homes. Condos haven’t seen as good but certainly are not going down in price.

#28 omg the original on 06.04.15 at 8:21 pm

Jeremy should just be the adult and tell his parents that if they need financing from him when they “have” four investment properties, they maybe have overextended themselves.

They should just let their debt paydown for a bit before they get stars in their eyes.

After all maybe it all works out in the end and Jeremy ends up inheriting the 4 properties 25 years from now.

#29 mathman on 06.04.15 at 8:21 pm

Garth – Yesterday you mentioned folks would need $920k mortgage, with a 270k DP to by the average home. The insane part of the comment is the fact that anyone making $185k before tax could sleep with that amount of debt. The even crazier thing is the banks roll out the red carpet for folks at that income level.

to carry that size of a mortgage you are probably out fishing for three eyed salmon on lake ontario, cause your not going to be able to buy anything. Sadly these same folks are normally dinkwad2LC’s, (Double Income no kids with a dog and two leased cars)

the major problem I see in the GTA is the 700k-850k homes. Open houses are filled with young couples all juiced up on their parents money and ready to bid. these people are drastically overpaying and bidding to the CMHC cap, which is exactly what economics 101 tells you when the gov’t plays with the market and sets a “cap”. what you have are people who make a combined $150k, paying 900k and carrying massive mortgages. the real value of these homes is probably less than 500k, so when we do get mean reversion, it will be a serious wake up call.

I don’t even bother at this level, because their is no rational behavior. What is interesting is homes over$1.5 don’t look like they are moving.

CMHC is like giving an olympic swimmer flippers in a race of equally fast swimmers who don’t have flippers, it will allow that person to do things they would never be able to do on their own, and completly distorts the playing field. The mommy and daddy down payment has the same impact. combine these two factors and you have a market devoid of all rational behavior.

#30 crowdedelevatorfartz on 06.04.15 at 8:27 pm

@#13 Victoria Real estate

“My charts didn’t display properly”
+++++++++++++++++++++++++++++++++++

Juuuust a suggestion but perhaps you should forgot the charts from the 1970’s and merely do what you just did.

Oak Bay -15%
Langford -21%
Victoria -13%

Its waaaaaaaaay waaaaaaaay easier to read than the eye watering, dementia inducing “x’s” and lines that use up massive amounts of screen.
(Think of all the baby seals on the melting iceflows you’ll save from global warming because you’re using less heat producing screen time.)

Love your info….hate the presentation.

#31 Westsider on 06.04.15 at 8:29 pm

Thats’ a St. Bernard, not a Bernese Mountain Dog.

Some days I marvel at this blog. In a bad way. — Garth

#32 crowdedelevatorfartz on 06.04.15 at 8:29 pm

Oh, @ #7 North Burn-a-bee

Does your “friend” John Maclean look like this?

https://www.google.ca/search?q=bruce+willis+as+officer+john+mcclane&biw=1440&bih=766&tbm=isch&tbo=u&source=univ&sa=X&ei=Xe1wVfmgL5e5ogTPioPwAQ&ved=0CFEQsAQ

#33 Ret on 06.04.15 at 8:31 pm

Not sure about the CPP plan to increase pensions will work. Currently you pay 50% and your employer pays 50% of your CPP premiums unless you are self employed and then you pay the whole 100%.

So if an individual bought more CPP credits, they would have to pay both sides of the premium increase-100%

Some might want to do that but what happens if they don’t see their 65th birthday, or they only see a short time after it.

My CPP credits purchased while working basically all but evaporate if I don’t live to 65 or die while partying on my 65th birthday.

What would happen to CPP credits purchased as ‘extra” CPP credits? If my estate doesn’t get my contributions refunded back, why would they get additional CPP credits refunded back to their estate?

I can’t wait to see how this unfolds.

#34 Nemesis on 06.04.15 at 8:32 pm

#Hmmmm… #CrossGenerational… #ParentHoodDiscussions?…

https://youtu.be/0t6IIdmOIOQ

[BonusNoteToTCcOnTrarian: “Only questions is: do I bring my wife? :-)”… Well, since you asked – I’d be inclined to say, “Yes, you might well want to consider that as the better/best option.” CautionaryTalesForTheIllPrepared: https://youtu.be/nhomGXOMYmc?list=PLZbXA4lyCtqrvW7kgmHpduKkq3lmNdE-s ]

#35 Kreditanstalt on 06.04.15 at 8:34 pm

You’re starting to sound like The Globe and Mail’s financial makeover column…

$90,000/year!

Can’t you profile someone on $40,000/year? Or someone underemployed…or part-time…or hiding in school…or unemployed and NOT on government payouts…or with no credit history…or no credit score…or someone with real life marital, financial, health or family problems…

These people, not “banksters”, are The Rich.

You’re kidding, right? — Garth

#36 Two views on 06.04.15 at 8:41 pm

On the one hand we are being told that we are the greatest savers in the world, as clearly excessive mortgage payments are savings (lol):
http://www.thestar.com/business/personal_finance/2015/06/04/dont-worry-youre-probably-saving-enough-for-retirement-mayers.html

On the other, we see what the one asset strategy does to those who invest all in real estate with dreams of riches. This poor guy can’t get his deposit cash back and has NO liquidity to protect his family. Words fail me that he has no other assets, and this is in the good times…
http://www.thestar.com/business/2015/06/03/family-fears-homelessness-when-builder-doesnt-return-deposit.html

Actually, this is all part of the same boat – dreams and confidence that could melt away into nothing the second people start to fear real estate.

#37 Don Derc on 06.04.15 at 8:48 pm

The parents ask Jeremy because he won’t “fast foreclose” on them when the parents a) run out of cash, and b) see their asset depreciate by 25% over the next 5 years. Save your cash Jeremy, make the loan and buy back the property off your parents for pennies on the dollar and rent it back to them. God I hope my parents aren’t reading this today.

Funny how my behavior in the real estate game has changed dramatically in the last 3 years, thanks to this blog, and the National Post/ Globe and Mail. It’s refreshing to have a smart conversation once in a while.

I leveraged everything ’til the cows came home but that was then (90’s) this is now (13th year in Afghanada). Leverage your home (or in this case…leverage your Jeremy) today, or in the last 5 years when real estate prices were high and … well you know the story.

The canaries in the coal mine are continuously being silenced by doubling and tripling of insurance for homes, job losses, market depreciation, and one asset strategies.

My Wpg rental will now get a $1500 annual fee slapped on it because it’s a rental. Thank you NDP. I can’t pass that onto Garth’s renters because of the rental increase limit (2% annually?)

The game changes and so do the rules but I never saw that one coming. I think it boils down to the borrowing and spending habits (and accumulative debts being carried) of not only consumers, strata corporations, voters and taxpayers, but of businesses, corporations and governments. Good debt was carried by my tenant. My unit is mortgage free and I just lost 15% on my gross income because like my strata, this country will have major infrastructure and maintenance / repair problems – hey this country is old – you should see what the yanks are facing with water/sewer and roads. Hugh shit storm coming down the pipe Ricky!!

And guess who foots the bill?

But I’m the little guy. Property Management companies don’t give a you know what about me. I understand that – we all want to serve people who own 20 story apartment bldngs etc. The little guy gets screwed on home insurance, travel insurance, health insurance etc.

It’s a classic financial squeeze play. I limited my exposure to real estate in the last 3 years, zero debt, high cash, and every time I turn around I’m forced…FORCED…to see some company up my rates, or decline services. I have an exit strategy of course, but really, what is becoming of this country? We are the Rolls Royce of everything a country should be but I feel we are on a downward slide.

The bills are in but the gov’t/taxpayer can’t pay it. Where will we all be in 3 years?

This won’t end well.

Quite a rant – thanks for listening.

#38 Ret on 06.04.15 at 8:54 pm

Jeremy’s parents have hit their credit limit and have probably even been refused by secondary lenders at this point.

They could probably sell a few or all of their properties now at a profit (after expenses) and walk away from future potential financial ruin, but they think that they are RE geniuses. They could be looking good if they cashed out now, but they won’t. RE always goes up, right?

Intersection of Greed and Stupidity perhaps?

With all due respect Jeremy, – dig deeper, there is more to this story IMHO. Casino trips? Addiction? Wacko Ponzi investments? Something doesn’t ring true here.

#39 rwm on 06.04.15 at 8:55 pm

#10 Interstellar Old Yeller on 06.04.15 at 7:18 pm
Wife, three kids, and a dog, but still resisting the pressure to buy? That’s impressive.

Not to mention the in-law rent shaming. Impressive indeed!

#40 David Lee on 06.04.15 at 8:57 pm

Garth and Cameron Muir are now two peas in a pod:

http://www.vancouversun.com/opinion/op-ed/Facts+fail+support+foreign+buyer+fears/11109581/story.html

Actually, he is correct on this issue. — Garth

#41 Raging Ranter on 06.04.15 at 9:06 pm

@#14 S Bby, you are correct, it is totally fake. There is no shortage of rentals in any Canadian city right now. And someone allegedly sitting on an enormous pile of equity from his home sale would not have nearly so bitter a tone, and would be way too busy with his money to be posting crybaby missives here. I doubt it was a realtor though. More likely a financially stressed homeowner or maybe a doubly stressed condo “investor”.

#42 Vicpaul on 06.04.15 at 9:11 pm

Are you kidding me?!
“Their arrest was the culmination of a months-long RCMP sting operation involving hundreds of officers and countless hours of surveillance”.
Found guilty yesterday of terrorist activity…..two drug-addled half-wits who, left to their own devices, struggled to find the keys to the moped.

Geez! Hundreds of officers…countless hours of surveillance. That’s money well spent!? The only way it could be worse is if they were teachers, eh Smokester.

#43 Vicpaul on 06.04.15 at 9:12 pm

By the way Smoke, who’s teaching your kid Os code?

#44 Smoking Man on 06.04.15 at 9:13 pm

Hang up the phone, Jeremy. They’re toxic. And keep the dog away, too. He could be ransomed-Garth

What a complete waste of writing talent. Writing a financial blog that is.

Fiction Dude , you would kill it. GOD in my next life please give me just 1% of Garths skill..

That’s all I would need for a million copy seller.

#45 Mark on 06.04.15 at 9:14 pm

“http://www.vancouversun.com/opinion/op-ed/Facts+fail+support+foreign+buyer+fears/11109581/story.html”

Well now we’re getting somewhere. A Realtor-employed economist coming out and saying quite clearly that the sales mix, and not average houses appreciating has been responsible for most of the alleged “gains” in Vancouver RE.

#46 Mark on 06.04.15 at 9:22 pm

“What would happen to CPP credits purchased as ‘extra” CPP credits? If my estate doesn’t get my contributions refunded back, why would they get additional CPP credits refunded back to their estate?”

CPP, like all other defined benefit schemes, are basically annuities, where longevity insurance is embedded into the product. CPP can be a horrifically bad program if one is a member of a group with statistically lower longevity. Unlike traditional life insurance which is underwritten in an attempt to at least take into account individual risk factors, CPP is a one-size fits all approach.

I can’t imagine why anyone would make a voluntary contribution to CPP. Involuntary contributions, sure, but there are much better places in the long term for voluntary contributions.

#47 Freedom First on 06.04.15 at 9:22 pm

Sound advice about the parents and the MIL, that will be all, over, and out.

#48 Vanecdotal on 06.04.15 at 9:23 pm

#14 S.Bby

+ 1

My thoughts as well, definitely reeks of RealTroll™ N. Bby, North Burnaby & John Maclean = split personality?

#49 Irish Stew on 06.04.15 at 9:28 pm

No parent should ever ask their child for money.
It is toxic.

#50 TurnerNation on 06.04.15 at 9:29 pm

Worst case Smoking man can write Frat Lit.

As in: The remains of last night’s pizza party threatened to evacuate and expropiate whatever free air and will is between us.

#51 Sheane Wallace on 06.04.15 at 9:31 pm

Lie after lie after lie

https://ca.finance.yahoo.com/news/canadians-reasonably-well-prepared-retirement-c-d-howe-080804779.html

#52 Mark on 06.04.15 at 9:42 pm

“Lie after lie after lie”

Care to address what the ‘lies’ are?

The Canadian economy as a whole is easily capable of producing more than it consumes. And there’s an ample labour force available for the future, whether in the drastically under-utilized domestic talent pool, or through immigration. So retirement preparedness is largely a matter of a cyclical shift from excess valuation in the economy being vested with residential real estate, towards such valuation being vested in business and financial assets which people rely upon for retirement income.

The net worth of Canadians is not going to disappear in the housing crash. It will just show up elsewhere. Long-reserve life projects in the oilsands have guaranteed energy security for Canadians for the next few generations. The economy isn’t larded up with a disproportionate level of unproductive activity in either finance or precious metals hoarding. And theres very little in terms of foreign claims on Canada’s economy that have priority over domestic consumption.

So I just don’t see where the retirement crisis really would be. Sure, there will be some, if not many individual stories of woe. But those will mostly be on account of poor asset allocation, rather than the economy’s long-term inability to generate returns. Returns have been generated — they’ve just been vested in housing and fixed income, rather than in business ownership.

#53 Andrew Woburn on 06.04.15 at 9:50 pm

#142 Josh in Calgary on 06.04.15 at 10:44 am
#77 Andrew Woburn on 06.03.15 at 10:43 pm

Well if a British Engineer says so then it must be true :)

His original assumption is that you want to get the entire state of California off the grid. That’s a false dichotomy. It’s not an all or nothing solution. The problem with “the grid” is that it currently has to be built to handle peak load. So let’s say your average requirement is 100. The system has to be built to handle 150 because that’s the peak (units left off because it’s just an example and I don’t have time to look up the numbers). So even without adding solar into the picture you can reduce the size of the grid simply by adding enough batteries to the system.
=======================

I don’t think Mearns was seriously proposing that anyone in California goes totally off the grid. I believe he was trying to counter the exaggerated impressions created by the MSM about rooftop solar especially in view of the seasonal variability in power potential at different latitudes.

He says it makes no financial sense, even in California, to install a residential PV/battery system to shave peak loads because, today, and in the mid term, the investment in panels, batteries, inverters and installation will not pay back because the peak rate differential is not enough to create a positive rate of return on typical residential annual consumption. Obviously the case for residential solar improves if the householder also gets a good rate for feeding excess power back into the grid, but governments seem less generous with feed-in tariffs than they used to be.

He agrees that the batteries make sense for commercial installations and Walmart is already using them.

He also makes the interesting point that at some latitudes, it is cheaper to overbuild your PV system rather than invest in storage. The system would be geared to cover your needs in the depths of winter and shed the extra power you can’t use in the summer. The closer you are to the equator, the less seasonal variability so the less this overcapacity would cost.

The implication to me is that, as the industrial use of solar grows in importance, countries closer to the equator will have a significant manufacturing power cost advantage.

#54 Julie K. on 06.04.15 at 9:51 pm

REPORTING LIVE FROM NORTH VANCOUVER

Sold the comfortable North Van family home (1991-2015) containing a 1bdrm suite that adult daughter & her BF lived in.

Place sold instantly, over asking, early April. That is the good news.

Plan was to rent x 2 (place for us, place for the kids and our respective dogs) on the North Shore. Hubby gave notice to retire and we were going to invest our new found capital in a balanced, diversified portfolio.

Easy peasy, lemon squeezy, right?

Wrong.

After weeks of a relentless search (CL, Kijiji, Twitter, WOM, etc), the only decent (ie liveable) North Van rentals to be had this April & May were at or OVER $2k month (usually plus utilities). Typically only one parking spot included which quickly became another issue we had not thought of (yeah, dumb us).

With closing date fast approaching, we all needed a roof over our heads — panic started to set in.

In the end, kids ended up buying (gulp) a 2bd/2ba 8yr old condo in City of NV for less than they could have rented — even with maintenance, utilities, taxes. Their black lab very welcome. They closed & took possession this week (timing was perfect in that regard).

As for us, wait for it, we plan to couch surf at the daughter’s new place and our son’s (he also has a condo purchased a few years back on The Drive in East Van).

In the end, we simply could not justify the North Van rental prices for places that were marginal at best.

How much the dog(s) hurt our rental hunt is unknown but, yeah, we are now house-less and couch surfing.

At our age….should be a real blast.

#cognitivedissonance

#55 Andrew Woburn on 06.04.15 at 9:54 pm

San Francisco Too Expensive For McDonald’s?

http://sanfrancisco.cbslocal.com/2015/06/03/san-francisco-too-expensive-for-mcdonalds/

#56 Nemesis on 06.04.15 at 9:54 pm

“Actually, he is correct on this issue.” — HonGarth

#AWishComeTrue,Or… #PantsOnFire!… #WasItGoodForYou,Too?…

https://youtu.be/IsBB4i4k2PM

#57 Retired Boomer - WI on 06.04.15 at 10:05 pm

Jeremy 34 married 3 kiddo’s and a pooch. Renting, $150K in investments, and a 90K income…. that’s what I got out.

Great Job Jeremy, now the problem.

Parental units want to ‘borrow’ 2/3 of your liquidity @ 5% for a year on a speculative RE investment. At a time when RE is at nose-bleed heights, and the borrowers would buy it next maybe can’t get the new financing when the sale date -a year off- comes round.

Sometimes, Jeremy, the wiser only smile, fold their wad of money in their pocket, doubling their money. Walk on this ‘sure bet’ young man.

Your parents should secure their own less costly financing it seems, why have all the family assets on one RE horse?

Something smells a bit off on this one – Walk, Don’t Run.

#58 Retired Boomer - WI on 06.04.15 at 10:09 pm

OK, Why did the US Dow take that big -170 dump today?

Yellin pass gas, or the world get it’s eviction notice, or what?

Been melting in strange places of late, that always my nose itch. MSM asleep at the junction once again?

#59 Yuus bin Haad on 06.04.15 at 10:11 pm

Garth, you do know that the jury’s still out on whether you make up these reader inquiries or not.

You should see the letters I don’t publish. — Garth

#60 [email protected] on 06.04.15 at 10:17 pm

How much would cost to rent a ad banner by the skytrain in Vancouver that reads: “buying real estate is a bad financial investment right now. Save, diversify and be free!” ? For a month all comuters will see it and maybe will have a bigger effect than evelyn xia’ little gathering…
Townhouses and condos in the YVR burbs are not selling fast, in the area that i am watching it sells 5pct under asking and the prices are 1-2% lower than last year for the same type of units. Truth is that SFH in the core 20-30 mins by train to downtown is moving fast so you have 2 types of markets here.
If you ignore the foreign investors which come with a boatload if cash you cannot ignore the liw inventory which has a simple explanation: over 60 generation is debt free, over 40 generation has paid out a chunk of their house and the over25 are trying to catch up with low interest rates and dislocated the 2 other generations by making offers they cannot refuse. People will always want to live close to downtown, but it is simple demand and supply for SFH here. Cut the cmhc and increase interest rates will normalize the market, but in 10 years people will forget.

#61 Squirrel meat on 06.04.15 at 10:21 pm

#54 Julie K. on 06.04.15 at 9:51 pm

REPORTING LIVE FROM NORTH VANCOUVER

Sold the comfortable North Van family home (1991-2015) containing a 1bdrm suite that adult daughter & her BF lived in.

Place sold instantly, over asking, early April. That is the good news.

Plan was to rent x 2 (place for us, place for the kids and our respective dogs) on the North Shore. Hubby gave notice to retire and we were going to invest our new found capital in a balanced, diversified portfolio.

Easy peasy, lemon squeezy, right?

Wrong.

After weeks of a relentless search (CL, Kijiji, Twitter, WOM, etc), the only decent (ie liveable) North Van rentals to be had this April & May were at or OVER $2k month (usually plus utilities). Typically only one parking spot included which quickly became another issue we had not thought of (yeah, dumb us).

With closing date fast approaching, we all needed a roof over our heads — panic started to set in.

In the end, kids ended up buying (gulp) a 2bd/2ba 8yr old condo in City of NV for less than they could have rented — even with maintenance, utilities, taxes. Their black lab very welcome. They closed & took possession this week (timing was perfect in that regard).

As for us, wait for it, we plan to couch surf at the daughter’s new place and our son’s (he also has a condo purchased a few years back on The Drive in East Van).

In the end, we simply could not justify the North Van rental prices for places that were marginal at best.

How much the dog(s) hurt our rental hunt is unknown but, yeah, we are now house-less and couch surfing.

At our age….should be a real blast.

#cognitivedissonance
——————————————

Since it’s Garth’s fault he should let you couch surf at his place for free.

#62 Muttley O'Toole on 06.04.15 at 10:23 pm

Never, ever, lend money to a relative of any sort, especially family.
Invariably there are recriminations, family feuds,ill feelings and “we’re not gonna let you near the grandchildren” threats.
Finally, never,ever lend to family and relatives.
Did I say never, ever etc. etc.?
(Advice based on experience).

#63 Lead Paint on 06.04.15 at 10:26 pm

#44 GOD in my next life please give me just 1% of Garths skill.

Looking forward to your posts in the next life when you have 1% of Garth’s skill. Until then, take a break.

#64 BS on 06.04.15 at 10:42 pm

“Today my parents asked me for a $100,000 loan to buy a house on Vancouver Island as an investment. They offered to pay me 5% for a one year loan. Should I take the 5% seeing as it’s a sure gain or should I stick with my current portfolio? They have four other houses nearly paid off and they are financially secure so getting my money back is not a concern.”

Yes sure. The houses are almost paid off. That’s why they need your $100K. For just a year (hopefully the price rises so we can borrow more from the bank to pay you back).

This is probably the biggest factor fuelling this bubble right now. All the paper gains people have made on RE is getting borrowed and put right back in. They are even asking the son for money when the bank says sorry no more for you (after 4 mortgages).

#65 BS on 06.04.15 at 10:48 pm

PM 6

This is misleading. Savings are counted as cash/guaranteed investments.

LOL, if that was the case pretty much every millionaire and billionaire out there doesn’t save much.

#66 Kreditanstalt on 06.04.15 at 10:51 pm

Apart from blog braggarts (in their minds), how many Canadians really “clear” $90,000/YEAR and have parents with four houses?? Based on the dismal productivity of Canada it’s difficult to imagine an employer voluntarily paying anyone that much outside of resource industries, government or unions…

Who needs “banksters”? The rich are your neighbours, if Garth is correct…

Most everyone out there, if not in debt, spends their entire paycheck, has a mortgage, budgets carefully and has next-to-no savings.

If that WEREN’T the case, we’d be in a recovery ~ a REAL one.

#67 BS on 06.04.15 at 10:53 pm

25 PM

I’ll read a bit more. It’s certainly a more complicated measure that it seems to be on the surface.

Pretty simple actually.

Disposable income – Expenses = Savings

#68 Suede on 06.04.15 at 10:56 pm

“if the Bank of Canada drops rates again before the tightening starts, it will simply add more to long-term debt while giving a temporary pop to prices. What a miserable combo.”

A pop in prices… I don’t see that as a bad thing.

But those boomers better start selling those 1.4M avg price homes to cash in. Just, where will they live after doing that. They’re programmed to their houses.

#69 Paul = so what if Toronto has 3 more years at Or the 18% jump year/year in detached houses on 06.04.15 at 10:57 pm

what if Toronto has 3 more years at Or the 18% jump year/year in detached houses – like you say this year did

why not buy now, especially if you have a 50% down payment

#70 Randy Randerson on 06.04.15 at 10:57 pm

Too many realturds pretending that the market is hot, or “buy now or buy never.” I bet those fakes are just realturds in disguise, or underwater home-owers who are bitter that their financial lives suck.

#71 fisheman on 06.04.15 at 11:01 pm

Can’t figure out my home province B.C., let alone the world. Big layoffs & shut downs in the sawmills. Lumber way down & the reverse tariff is kicking in. That’s the agreement the fed signed for the softwood lumber treaty whereby the lower the price of lumber the higher the tariff. LNG terminals ain’t happening. Mining in the pits.
Fishing is schitzo, some species at record highs; other lower than 30 years ago. Same with agro.
West side Van. R/E in a frenzy. My coffee buddy just listed & accepted offer north of 4 mil after a bidding war. 50ft. lot, nice, not a teardown, craftsman style. All 26 groups that went through were Mandarin speakers. Agent says his listings coming from divorces,estate sales, & old boomers like us “cashing out”. We’ve all given up trying to predict when or if this will end or what the hell is going on. Rennie came by again; same question, What do you think? Same answer, “It’s a good gamble.”

#72 Longterm on 06.04.15 at 11:02 pm

#35 Kreditanstalt on 06.04.15 at 8:34 pm

OK, here’s a ‘real’ one for you. Take it as you will.

I currently make $31,000, my wife $22,000. One child, 4 years old, both of us mid-40s. I didn’t have a full time job until I was 31 and at the time had $15K of debt. We have $270,000 saved and invested during ten years living in the UK facilitated by sharing a flat with other people for seven years. At our peak in London – 2007 top wages and exchange rate – we made $150,000. Every other year was a lot less [and London is brutually expensive] and in 2009-2010 we had no income and spent about $35,000 travelling the world for 14 months. We earned about $50k combined in 2011 and 2012 and nothing from emplyment in 2013 when we moved back to Canada but about $12,000 in investment income.

We are now hand building a house on some inexpensive but high quality Gulf Island land. By the time we are done our mortage will be $160,000 for five and a half acres with a house and 1/2 acres garden and still $230,000 invested. Child benefit goes straight into the daughter’s RESP so that will be maxed by the time she is 17.

On a combined income of $50k this is fairly easy. Mortgage payments of about $780 a month. Tax $100, electricity for our super efficient house will be about $50 and internet/phone $100, insurance and other costs maybe $300 per month. We can still save and invest at least $15,000 perhaps more all in TFSAs as costs are low, life is rich in experiences over stuff and we have well-honed discipline.

By age 55 we should have a portfolio of about $750,000 chucking off income of $50K a year and about $110,000 left on the mortgage. We could boost this portfolio a bit by getting a HELOC and extracting and investing some of the house equity with the interest tax deductable.

It’s all pretty doable on a middle of the road income but not if you wedded to living in To, Van, Cowtown or indeed London, England.

#73 couch surfing on 06.04.15 at 11:04 pm

# 54 Julie K.

===========

Sorry to hear your pain.

I just can’t understand that before deciding to sell, you did not check the rental market for price and availability. It does not make any sense that you are finding out only now that the type of property you want, costs way beyond what you budgeted for.

I hope you did not count on the landlord subsidizing your rent. It may occur as an anomaly, but it’s hardly a sound, long term financial consideration.

I wish you to find a decent place and your peace soon.

#74 Lead Paint on 06.04.15 at 11:05 pm

#54 REPORTING LIVE FROM NORTH VANCOUVER
North Van home with a 1 bedroom suite must have sold for $ 2 mil or more and you’re cribbing about rent that is ‘over $2k’ per month? That’s a great deal.

And you didn’t do a lick of research before selling to see what you could rent in your neighbourhood? I think you and #7 North Burnaby should share a motel room, misery loves company – but spare the rest of us.

#75 Karma on 06.04.15 at 11:10 pm

#128 crowdedelevatorfartz on 06.04.15 at 8:51 am
@#75 Karma
“My Gawd.
Not another. “Its ALL the Boomers fault”

Please
A “war” between generation Boomers and “Generation Why bother”?
That’ll be the day. Most people today are too busy playing Candy Crush or some other eye destroying game on their Ipads. Or texting or talking on the phone.
Blame everyone but yourselves for your bad university education choices, your bad financial decisions, and a planet thats gone global for work options.
Thay’ll fix everything.
Dont forget to say “Good job!” everytime your 10 year old child puts one step in front of the other. Nothing like continous, endless positive reinforcement to create another generation of kids totally unprepared for anything but whining about how unfair everything in the real world is.

Good job.”
——————————————–

@crowdedelevatorfartz

1) I don’t blame either the boomers or the millennials for anything in particular. I’m simply pointing out that the two very large groups have diverging interests and it will play out in politics more so than people realize today.
2) Yes, many millennials are apathetic when it comes to voting and politics. But as they get more mature and have kids, they won’t be as you characterize them.
3) I’m not concerned in the least about my financial future. For my age (31), I’m easily in the top 1% of my cohort. Therefore, I have no need to blame my “bad university education choices, [my] bad financial decisions”.
4) I don’t have kids, but I know I’m the disciplinarian in the extended family. So please keep your parental advice to yourself.
5) I call myself Karma because I believe people’s choices lead to the lives they live. I used to work as a CSR at two banks over the course of two years in two countries. I saw copious amounts of irresponsible spenders on a daily basis. I have zero sympathy for these people. It’s not about “fair”, it’s about choices. You’re correct that the world isn’t fair. But you’re dead wrong to think that I whine about how unfair it is.

#76 DisgustMadeMePost on 06.04.15 at 11:11 pm

Hmmm, that’s the Reverse Bank of Mom and Dad.

Gotta wonder how much they put down on each of those 4 houses that they ‘own’.

A story like that makes me appreciate my parents just that much more.

#77 BS on 06.04.15 at 11:12 pm

Sold the comfortable North Van family home (1991-2015) containing a 1bdrm suite that adult daughter & her BF lived in.

Thats great. You probably cleared at least $1 million.

After weeks of a relentless search (CL, Kijiji, Twitter, WOM, etc), the only decent (ie liveable) North Van rentals to be had this April & May were at or OVER $2k month (usually plus utilities).

You just cleared $1 million plus to invest, have no property taxes to pay, no maintenance expenses to worry about and you won’t pay $2K per month rent? The dividends from your investments will cover your rent.

What is wrong with people?

#78 Mike T. on 06.04.15 at 11:17 pm

#54 Julie K.

FAKE

no one talks like that
easy peasy lemon squeaky makes my pukey

no one says hubby when referencing their husband either

there are more important things for you to do than make up fake stories online

its been pointed out that zillions of rentals exist

also, do you think you are original? fake stories ben showing up for years, its obvious, people don’t talk like that

#79 Julie K. on 06.04.15 at 11:18 pm

#61 Squirrel meat

Great idea, thank you, but where did I say it was Garth’s fault?

Anyway, no worries. The kids won’t be charging us any couch rent either. Mind you, they are all my old couches……

On a brighter note, our new couches…er..homes will still be in Vancouver, BC. #bestplaceonearth

:)

#80 Victoria Real Estate Update on 06.04.15 at 11:23 pm

#27 Conrad

I presented factual information. None of that is wishful thinking.

Can you prove your claims? The last time someone talked about a bidding war in Victoria it turned out to be one of those situations where the realtor listed the property well below market value to draw attention to it and to possibly being more than one bid.

As I proved, overall SFH prices have been flat since the spring of 2014. I could have brought in the fact that there has been substantial upward skewing of the SFH average, but I left that out. It would prove that individual properties have lost value over the last year. More on that in another post.

A few select areas may be taking a short break from the well established downtrend that had been in effect since 2010 (record low rates and the summers market can do that) but the long term outlook for all properties in all areas of Greater Victoria is down.

We’ve had emergency rates since 2009 and Victoria’s market has seriously under performed compared to all other Canadian markets over the last 6 years or more. Some markets have gained close to 50% since 2008 and prices in Victoria are lower than in 2008.

You obviously don’t look at the big picture. If you did you would understand how poorly Victoria’s market has performed since 2008 and why house prices should be hitting new record highs each and every month with 2015’s record low rates. Instead you only look at the things that a realtor who is trying to sell you a house would want you to look at.

Drink more of that industry kool aid and keep the blinders on.

Perhaps some day you’ll have something factual to share with us.

#81 kommykim on 06.04.15 at 11:39 pm

#17 Mark on 06.04.15 at 7:38 pm
“Count equity-based investments as savings and I bet the story doesn’t have the same scare factor.”
Except that Canadians aren’t really buying much equity-wise. Canada’s largest and highest long-term performing mutual fund, XIU, has not grown its unit issuance in well over a decade.

What? XIU is an ETF. Canadians have about 1 TRILLION in mutual funds vs about 70 billion in ETFs so XIU is a splash in the bucket.

#82 The Glitterman on 06.04.15 at 11:40 pm

DELETED

#83 4 AM Sunrise on 06.04.15 at 11:43 pm

Today’s picture could totally be real. Anybody who’s done the tourist trek to the Matterhorn can back me up on this. The St. Bernards who pose with tourists for a living are the sweetest creatures. What you don’t see is the scene the dog is gazing at: tour buses, cacophonous tour groups, back-up St. Bernards and their hawkers, an Indian restaurant (way back when I was there 15 years ago)…

#84 Mark on 06.04.15 at 11:49 pm

“what if Toronto has 3 more years at Or the 18% jump year/year in detached houses – like you say this year did”

First the premise that Toronto houses went up 18% is quite problematic in and of itself. When Realtors quote “price increases”, they speak of the stuff that they’re actually moving. Not prices on individual houses compared to years previous. Since an individual, or even an investor, at best, only owns a small number of houses, average numbers that are highly distorted by changes to the “sales mix” aren’t terribly useful. Most GTA homeowners are finding their real equity in their homes to be stable, if not slightly declining and are in the process of adjusting their expectations accordingly.

“why not buy now, especially if you have a 50% down payment

Because its a horrifically poor use of a down-payment, given that GTA housing is priced at more than 3X the price of competing investments.

You obviously don’t look at the big picture. If you did you would understand how poorly Victoria’s market has performed since 2008 and why house prices should be hitting new record highs each and every month with 2015’s record low rates. Instead you only look at the things that a realtor who is trying to sell you a house would want you to look at.

We see it in the blog comments all the time — people believe that housing prices are a function of only interest rates, physical supply and demand be damned. Well, eventually the supply side, on account of high prices, overwhelms the demand side, and wham, prices come down. Lower interest rates not being able to stop the slide in house prices.

Its practically a certainty at this point that some form of central bank intervention will be required in the Canadian economy as housing deflation picks up stem. The only real question in my mind is how much? Will ZIRP for 5 years be enough? Or will they have to do full-blown NIRP and QE? How bad will CAD$ appreciation become in all of it?

#85 Smoking Man on 06.04.15 at 11:53 pm

#43 Vicpaul on 06.04.15 at 9:12 pm
By the way Smoke, who’s teaching your kid Os code?

……

Bitmaker labs.. 12k 3 months …its worth it. I’m to old to absorb fast. Keysme coming to IPhone and android . 12k investment. Billion dollar potentially . I’m a gambler. Vegas wants me to pull this off.

My bet, the herd us pissed , don’t like the machine snoping their love letters.

#86 Brandon on 06.05.15 at 12:00 am

Tons of great places for $2,500 – $3,500.

http://vancouver.craigslist.ca/nvn/apa/5016504332.html

I am currently looking too.

The mortgage for $1 mil @ 3% is $4,800 (need to add on property tax and all that good stuff too)

#54 REPORTING LIVE FROM NORTH VANCOUVER
North Van home with a 1 bedroom suite must have sold for $ 2 mil or more and you’re cribbing about rent that is ‘over $2k’ per month? That’s a great deal.

And you didn’t do a lick of research before selling to see what you could rent in your neighbourhood? I think you and #7 North Burnaby should share a motel room, misery loves company – but spare the rest of us.

#87 Sheane Wallace on 06.05.15 at 12:02 am

#52 Mark

who is talking to you, boy?

#88 Sheane Wallace on 06.05.15 at 12:03 am

#52 Mark

If shit is capital you are Canada’s biggest asset.

#89 TRTh on 06.05.15 at 12:06 am

The Quebec immigrant investor program will accept 5000 multi millionaire families this year. Past stats show 91% end up in Vancouver. Expect about hundred $5million dollar homes to be bought every week with this cohort. And these aren’t even counted as BC immigrants.

Prices aren’t going down in Vancouver

#90 Chris on 06.05.15 at 12:12 am

Jeremy, are you sure this is not a secret scheme to get you to buy a house without knowing it.

#91 Hap on 06.05.15 at 12:14 am

The Imf calls on the fed to delay the rate hike…

So calling for interest rate hikes and failing year after year is one thing, but, when will this blog finally admit the USA economic renaissance never was?

We need moar popcorn because the show is just starting!

#92 Made in BC on 06.05.15 at 12:45 am

#40 David Lee on 06.04.15 at 8:57 pm
Garth and Cameron Muir are now two peas in a pod:

http://www.vancouversun.com/opinion/op-ed/Facts+fail+support+foreign+buyer+fears/11109581/story.html

Actually, he is correct on this issue. — Garth
+++++++++++++++++++++++++++++++++++++

Except that the facts he is providing are very poor and provide no proof or data. It’s all speculative and does not include “relatives who act as proxies” for all the millions and millions of dollars wired into Vancouver banks Monday to Friday 52 weeks a year.

#93 David Lee on 06.05.15 at 1:02 am

“With Finance Ministry data suggesting there is little evidence wealthy or foreign investors are driving housing unaffordability, there is little reason to institute a tax on luxury housing”,

http://www.vancouversun.com/news/metro/Christy+Clark+says+housing+investors/11110081/story.html

Oh, so NOW there’s data! OK then Christy, let’s see it.

#94 Turtle on 06.05.15 at 1:13 am

Jeremy, you are 34 y.o., so your parents are close or in their 60’s. At this age they should stop talking about money and debt, and start enjoying things… like their three grandkids.

It is not normal when money flow upstream from kids to parents… it is unnatural. Parents pass on wealth to their kids, not the opposite way. The only reason your parents asked you for a loan, not a bank, is that you are not going to send a repo-man when everything goes south.

Keep in mind that you have three kids to take care and one dog, they don’t know how safe and secure are those 5% on one year loan. Don’t do it.

Tell you Mother-In-Law that your parents are so financially sound that they gonna give you one of their four houses for Christmas… and it would be stupid to buy a house when you are gonna get it for free.

Have fun with it.

#95 Ebeneezer S. on 06.05.15 at 1:16 am

Interesting article from the UK about home repossessions…Garth it may be time for you to start providing counseling services for Canadians who could end up in this situation

“http://www.mirror.co.uk/money/i-hadnt-realised-how-ferocious-5823677

‘I hadn’t realised how ferocious they could be’: How one man fought off his mortgage lender and kept his home

Here are five tips from Shelter helpline adviser Nadeem Khan on fighting repossession:

1. Get expert advice early

If you are struggling to pay your housing costs, talk to an expert adviser as soon as possible who can take you through your options and advise the next best steps for you. Visit Shelter’s website or call Shelter’s free helpline on 0808 800 4444.

2. Prioritise your mortgage or rent

Paying your mortgage or rent should always be your number one priority. If you have other debts such as credit cards and phone bills you can take action to deal with these separately. Learn more about dealing with debt here.

3. Respond to letters and phone calls

It’s natural to want to keep your head down and hope it’ll sort itself out but it’s important to read everything your mortgage lender, landlord or letting agent sends to you. Keep records of every letter and phone call.

4. Have a rainy day plan

It can take just one thing, like losing your job or falling ill, to put your home at risk. Avoid payday loans, as sky-high interest rates could make things much worse very quickly. There are usually much safer and cheaper alternatives.

5. Turn up for court hearings

If the worst comes to the worst, make sure you attend the possession hearing so that you can put your case to the judge. If you don’t have legal representation you can be assigned a court duty solicitor on the day – Shelter is one organisation that provides that service across the country. Get advice from an organisation like Shelter as soon as you get the hearing date to give yourself the best possible chance.

#96 Employment Numbers on 06.05.15 at 1:51 am

125.000 looming job losses in the O&G sector

http://calgaryherald.com/business/energy/ewart-oilpatch-communicates-125000-looming-job-loses-in-alberta-to-notley

Wonder when they show up in the stats?

***

FP has this story on “phantom real estate” bids in Toronto.

Those “bidding wars” are potentially fake.

Buyer or Bidder beware

http://business.financialpost.com/personal-finance/mortgages-real-estate/phantom-real-estate-bids-are-enough-of-a-problem-that-ontario-is-cracking-down

***

If there’s a weak US employment report and USD drops, consider it a buying opportunity. I doubt it will happen and even if it did, the USD is a solid bid. Just check the JPY going down further. No reversal. The trend is your friend.

Mark, there’s lots of upside left in the USDCAD pair.

#97 NoOneOfConsequence on 06.05.15 at 2:38 am

Hmmm…maybe the people who sold should look for a change?
I rent a house in a great part of Surrey (suburb of Vancover). It was for sale for $940,000 for 8 months before the owner decided to make it a rental.
For $2500 per month, all in, I get 5 bedrooms up, a 2 bedroom basement suite for my 2 boys going to university, all new appliances, dead center for schools, shopping and golf. Rec center, huge park, running track only 4 blocks away.
Lol! It’s like I died and went to heaven!
A 10 year old, almost million dollar home for $2500 per month. No utilities, Internet, TV and phone free!
Sigh…time for a quick hot tub….:)

Let’s see…what could I buy for $2500 all in, in Surrey….oh yeah…nothing!!

Renting rocks!!

#98 Nagraj on 06.05.15 at 3:21 am

Some CD Howe inmate put out a blurb telling Canadians their golden years will be golden.
Was that to inform Harper that he needn’t go down the socialist path to hell by worrying about the old folks?

The CBC duly reported that CD Howe blurb (along with a silly picture of a jubilantly happy golden years couple) but then properly followed that up on the same page with two pieces effectively trashing the CD Howe bullshit.

Well, you know, who cares? There are already too many nails in the Harper coffin to count. And if anyone’s farsighted enough to see twenty years ahead they need new glasses badly.

Barring an unforeseen event – in time both Mulcair and Trudeau should present an AFFORDABLE HOUSING PROGRAM, a YOUTH JOBS INITIATIVE. and God only knows what in the way of MORTGAGE MODIFICATION MEASURES (we saw plenty of those in the US) before they get around to foodstamping starving old people. Of course acc to Harper&Co there is no housing bubble; only some, a few people are in over their heads; and the younguns kin work for free for a year. Wossa problem? And now we get THE GOLDEN YEARS is comin’.

Good for the CBC in taking on the Howe Institoot (sic) blurb BUT the discussion is presently academic. All the talking heads are out to lunch – I suppose it’ll take a poll showing the NDP leading to wake the confident people up. Popular anger is already the order of the day. (Conservatives may substitute terror for anger in that sentence, the democratic guillotine is ready.) The Conservative golden Harper years are facing a bloody finish a la 1993.

#99 Jake Gerard on 06.05.15 at 3:40 am

Is it just me or has there been a sudden rush of listings on Vancouvers West Side? It seems to me I have never seen so many for sale signs go up all of a sudden. It seems like every sob and his dot wants to get his ‘2 million’ for the run down Kits barn before the gate closes on the HAM-Specuvestors-Rich etc etc whatever name has been decided as politically correct to call the ‘problem buyers’.

Maybe the scare and public finally raising the issue that the media has hidden for so long is attracting some stank. Could the protests and ‘news’ finally be the beginning of a groundswell and the ‘straw that breaks the camels back’?

Personally I thought the legal beagles suggestions about routing out the ‘laundry money’ by sticking the buyers with tax documentaion was the best idea…no problem for Canadians but difficult for foreigners to stay hidden..was a good suggestion. I also like the suggestion that Canada sign an extradition treaty wih China…that would clean out the baddies almost overnight. But…having Black Mariahs scooping up tens of thousands of ‘foreign nationals’ from pricy house in Vancouver may present bad optics before the next federal election. Still…action is needed.

But…will so many new listings cause cracks to appear and price reductions?

#100 Ken Lovegrove on 06.05.15 at 6:02 am

I feel for Jeremy. I mean when your Parents ask it is difficult to say no. But Garth is so right. Why don’t they go to a bank?

Real Estate hot here in Edinburgh, Scotland. My neighbour sold his one bedroom within two days. Received cash offer, full asking. Our building is old Victorian. Solidly built but can be cold in The Winter. You just have to eat your porridge.

#101 Typhoon Terry on 06.05.15 at 6:02 am

Storm clouds are brewing…..and it might just be a hurricane! The wooosh heard around the world!

https://homes.yahoo.com/news/mortgage-rates-definitely-panic-mode-172500518.html

“Mortgage rates: ‘Definitely in panic mode’CNBC.com

#102 LowRent of Arabia on 06.05.15 at 6:36 am

Hey Guys…you won’t believe this.

I was in a grungy expat underground bar deep in the Arabian Peninsula last night and one of my poker buddies, an American, leaned over to me. He said, “Hey I hear Vancouver is the Real Estate market to buy in right now. Whattya think?”

I chuckled and told him about this blog but I had to laugh at the power of the YVR real estate hype that it has permeated all the way to a poker table deep in the heart of the desert where a misfit band of brothers toil away miles from civilization and lattes.

Real Estate humpf…All in.

#103 ANON on 06.05.15 at 6:52 am

Jeremy would be wise not to lend his money, if he wants to have it. If he does not necessarily care whether he still has the money or not , he would be even wiser to blow it on more entertaining activities, at least he could get some wild fun out of it. Oh, wait, wife and three kids, big hunk o’dog, maybe that’s not an option either. Keep it, Jeremy, it’s a no brainer at this point.

#104 maxx on 06.05.15 at 7:14 am

Simple, annoying truths:

Timing is everything. Buy now and pay forever.

Most parentals, PIL and the Bank of Mom CEO are idiots and in this case, selfish as hell- they really believe that a) they’re richer than they think b) they have a patent on how to handle money and c) re is the only hedge against any downturn in the economy.

It’s as though Canadians feel that if they don’t own re, they don’t exist. Pathetic.

Money talks, and debt, well……………prevents you from wintering in say, the South Pacific or wherever else your heart will undoubtedly, inevitably desire.

#105 uxyro on 06.05.15 at 7:54 am

Yiddish proverb: when the father gives money to his son, both laugh, when the son gives money to his father, both cry.

Don’t lend money to your parents Jeremy.

#106 Trading Naked on 06.05.15 at 8:07 am

$100,000 at 5% “guaranteed”? Sounds like the human version of a third-world country pitching its junk bond to investors.

#107 Bottoms_Up on 06.05.15 at 8:20 am

Regarding the RBC foreclosure, buddy should allow the bank to take it, then take his 11K and use as a 5% down payment on a condo worth twice as much. Voila, positive equity, a nicer place to live and no more bank vultures after him.

#108 Smoking Man on 06.05.15 at 8:32 am

Country Girl looks like I need to give back a feather in my hat.

Huge positive job numbers in Canada and USA

Yellen is going to spike.

#109 crowdedelevatorfartz on 06.05.15 at 8:41 am

@#54 Julie K

Why the insistance on renting in N. Van?
Hubbys retiring and you have close to 1.5 mil in the bank….. Rent in Burnaby, Coquitlam, Langely etc. or buy a used RV and travel.
The dog will love it, a new place to lift his leg every day!

#110 ShawnG in TO on 06.05.15 at 8:44 am

nearly 59k net new jobs. higher rates, here it comes

#111 Hot Albertan Money on 06.05.15 at 8:51 am

The bottom line for retirement: “For those born in the 1980s, this implies a 30% drop in their standard of living.”

How do you measure standard of living and how do you measure it dropping?

Since most DB pensions or investment plans aim for about 70% of your working salary, wouldn’t a 30% drop be in line here?

Again, I have no idea how to measure ‘standard of living’ so I’m most likely way off here.

#112 Van Isle Renter on 06.05.15 at 8:53 am

Up Island in the Comox Valley prices are dropping steadily, not quickly, but the slow melt has been on for a long time. Lots of people laid off from their oil patch jobs. The market here is kind of bi-polar. Under $400K seems to sell reasonably quickly, likely due to the turn-over at the Comox Forces Base. Above $400K, much less action and above $500K prices are cut 10-12% from original asking, sitting on the market for months and going unloved.

No reason to rush to but out here. Just smile, nod and keep on sailing time.

#113 Karma on 06.05.15 at 8:53 am

Go Amurika!!

“The 280,000 advance in payrolls exceeded the median forecast in a Bloomberg survey and followed a revised 221,000 April increase, figures from the Labor Department showed Friday in Washington. The median forecast called for a 226,000 May gain.”

“Payrolls estimates in the Bloomberg survey of 96 economists ranged from increases of 140,000 to 305,000 after a previously reported April advance of 223,000. Revisions to prior reports added a total of 32,000 jobs to overall payrolls in April and March.”

http://www.bloomberg.com/news/articles/2015-06-05/payrolls-rose-more-than-forecast-in-may-boosting-earnings

#114 LL on 06.05.15 at 8:58 am

The International Monetary Fund waded into the debate over when the Federal Reserve should raise interest rates, calling on the central bank to wait until the first half of 2016 and cutting its U.S. growth forecast for the second time this year.

http://www.bloomberg.com/news/articles/2015-06-04/fed-urged-by-imf-to-postpone-rate-liftoff-to-first-half-of-2016

And the show must go on……….

See? I was sure for any reason they will not rise interest rate!
They will rise interest rate after the housing crash.

#115 gladiator on 06.05.15 at 8:59 am

It all depends.
My parents have a very seasonal business when they make all their money in the 3 summer months.
In the last 4 years, I have been sending them about 20-30k per year around January for their business expansion projects and they would return it all by August of the same year. This way, they were able to increase their business in size by about 30% every year.
No need to send them money anymore, as they now have enough for any improvements/expansion.
Now, they finance 50% of our travel costs to visit them every year :)

#116 Statistics Canada on 06.05.15 at 9:06 am

We here at Stats Can , as we like to call it, are happy to report that on a per capita basis, Canada created TWICE as many jobs as our Southern friends in the month of May. Well done everyone.

#117 T1 Trust on 06.05.15 at 9:08 am

‘Mr. Tal says, “While many Canadians, particularly those now close to 65, are on a path to the retirement of their dreams,…’

What planet is this guy on? Civil servants for sure, corporate executives, professional athletes – they all have a nice retirement coming. For civil servants it is even indexed! The rest of us schlubs who didn’t inherit or work for the government – it’s Freedom 85, if ever.

‘…corporate pension plans have become weensy, skinny little runts with non-guaranteed benefits -‘

If all that verbiage means non-existent, then I agree.

#118 LL on 06.05.15 at 9:08 am

Yes, but the Fed doesn’t care. — Garth

You want to bet Garth the Fed will not rise IR?

It’s already planned for long time to not rise the IR.
The IMF play their game…and the fed too.

#119 LL on 06.05.15 at 9:20 am

26 rk usa

it takes about 2 years for a bank to foreclose in Maryland

no wonder Canadian banks are so solid

the game is entirely rigged for their benefit

Canadian banks “looks” solid but they are not.

By these days, with the – housing hard crash/landing – coming I will never buy any banks share.

#120 Renter's Revenge! on 06.05.15 at 9:35 am

Hey, #37 Don Derc,

I was curious about the new rental unit fee you had to pay so I looked it up. Is this what you’re talking about?

http://www.gov.mb.ca/condo/rentingunit/index.html

“Can a condominium corporation charge a unit owner a levy if the owner rents out the unit?

Yes. If its declaration allows it, a condominium corporation can collect a levy from unit owners who rent or lease their units. The amount of the levy must be set in the condominium corporation’s by-laws. The maximum levy allowed by the Condominium Regulation is $1,500.”

http://www.cmhc-schl.gc.ca/en/co/buho/cobugu/cobugu_007c.cfm

“Other Important Things About Buying a Condominium in Manitoba

Do provincial legislation/regulations govern renting or leasing a condominium unit?

Yes. The Condominium Act allows for a condominium corporation to collect a leasing levy (security deposit) from unit owners who rent their units. Beginning 1 February 2015, this levy is limited to $1,500. The levy (or unused portion of it) must be refunded to the unit owner when the lease ends. The corporation’s bylaws or declaration may specify that interest be paid.”

It’s not so bad. It looks like it’s more of a damage deposit than anything else. Hopefully you picked good tenants :)

#121 J on 06.05.15 at 9:46 am

Smoking Man:

Every time you talk about writing, you remind me of a character from the novel Happiness, by Will Ferguson. Please read it! Not only is it hilarious, but you may see a little bit of yourself in it.

#122 saskatoon on 06.05.15 at 9:49 am

re: update

garth,

i’ve said this before:

but how many full-time jobs HAVE BEEN LOST?

comparing this number to the “jobs created” data is essential for clear understanding.

#123 The American on 06.05.15 at 10:19 am

Just sayin’…..
http://www.theglobeandmail.com/life/home-and-garden/real-estate/for-vancouver-housing-and-income-dont-add-up/article12436288/

#124 JimH on 06.05.15 at 10:45 am

#122 Saskatoon
If you’re referring to the US non-farm payroll report, then I think you’re confused if you interpret the report simply as “jobs created”.
The US non-farm payrolls report is the month/month change in the TOTAL number of paid US workers. It says nothing directly related to new jobs created vs old jobs lost, as it is a sum total of all payrolled workers.
The report does not include most government employees, employees of assistance-based non-profit organizations, workers employed in private households, and of course, farm workers.

#125 Vamanos Pest on 06.05.15 at 11:01 am

I’ll never understand why people argue that the solution to avoiding paying 2k a month to rent a place is to buy the same place and pay 4k a month on mortgage and taxes.

Sure, equity. But the ~2300 that is interest and taxes is still more money spent than the rent, and the ~1700 that builds equity could be invested with higher returns and less risk.

#126 Richard B on 06.05.15 at 11:02 am

Economic growth: Adding some water to the milk

http://www.thecitizen.in/NewsDetail.aspx?Id=3890&Economic/growth:/Adding/some/w

#127 PM on 06.05.15 at 11:19 am

I’ll never understand why people argue that the solution to avoiding paying 2k a month to rent a place is to buy the same place and pay 4k a month on mortgage and taxes.

In the burbs maybe. Where I live in Van renting a 2b/2br townhouse is $2800. Buying it is $650K. Aside from loss of flexibility the difference is small and a few years of rent increases would wipe it out. Of course price gains in that segment have been moderate too so buying isn’t a clear win.

#128 lee on 06.05.15 at 11:21 am

#123,

There are 50,000 FDSFHs in Vancouver. Maybe 500-600 a year come up for sale. I don’t think incomes have much to do with it as Vancouver can muster up 500 families a year to bid properties up, whether locally or from overseas. even 50 foreign buyers a year makes a difference. Very limited inventory.

My understanding is in the burbs of Vancouver prices are pretty normal and one can buy for 600-700 thousand. I say buy in the burbs and visit the city on the weekends. There is apparently nothing to do there anyway. I assume you can see the Rockies from the burbs.

#129 PM on 06.05.15 at 11:37 am

Is it just me or has there been a sudden rush of listings on Vancouvers West Side?

Naw. Inventory has held solid for ~ 2 months. There’s no change coming for at least a year.

#130 maxx on 06.05.15 at 11:43 am

#4 Greg on 06.04.15 at 7:05 pm

“CD Howe says we’re saving enough for retirement, thank you very much.”

“……most of them will be just fine with 50 or 55,”

Absolutely. If their bag is spending endless winters enjoying sub-zero, colourless landscapes, watching cable, playing bridge and taking vacations at trailer parks or camping.

C.D. Howe’s pronunciation on acceptable retirement comfort may dovetail nicely with some opinions, but not necessarily with those which involve escaping the big freeze in some style.

Savings are the keys to life options.

If you want to actually live during those decades of free time, bank stats are far more reliable and reflect how 100% of people actually wish to retire.

#131 TurnerNation on 06.05.15 at 12:16 pm

Another 2% of our megere tax farm wages stolen away?

Would anyone suggest there’s a clear agenda of social, cultural and educational programming to isolate , scare us and destroy the concept of whole and productive family?
To take our energy away – personal energy via scareful, carefully crafted ‘news’ items – and charging us a fortune for old technologies – electricity, gas prices – our basic living, and ensnaring us into a new technocracy where everything even our Dna is online in their servers?

No not yet?

#132 Randy Randerson on 06.05.15 at 12:37 pm

#93 David Lee on 06.05.15 at 1:02 am

Haha, so now even the BC government is saying the idiot RE price in Vancouver isn’t caused by wealthy foreigners and HAM. I guess the only people responsible for the crazy price are nothing by idiotic Vancouverites.

Way to kibosh the entire “ban wealthy foreigners from buying OUR houses” argument.

#133 Made in BC on 06.05.15 at 12:39 pm

Where your taxes REALLY go…..this is happening in Canada too its just not reported in the news or of course by Govt.

“Chicago may become the next Detroit. We can see this Big Bang unfolding everywhere around us at a very rapid pace. Moody’s Investor Services just cut Chicago’s bond rating from Baa2 to Ba1, while Standard & Poor’s lowered the city’s rating from A+ to A-. Fitch Ratings also cut Chicago’s ratings from A- to BBB+.

The cuts are clearly in response to the Illinois Supreme Court decision, which ruled a 2013 pension reform law unconstitutional as it threatened the pensions of state and public workers. The state’s constitution says that pension benefits for current workers, “shall not be diminished or impaired.”

Chicago is really screwed now, and government workers will now consume the bulk of taxes in pension payments. Detroit collapsed when more than 50% of the current budget went to pay for pensions. The city has six pension plans, which in 2013 were only 40% funded and had a combined unfunded liability of $30 billion.”

(a) There is absolutely no comparison. (b) If you are going to rip off other blogs (like the one above, from Armstrong Economics) then link them. Better yet, get lost. — Garth

#134 Made in BC on 06.05.15 at 12:41 pm

DELETED

#135 Julia on 06.05.15 at 12:51 pm

#84 Mark
“First the premise that Toronto houses went up 18% is quite problematic in and of itself. When Realtors quote “price increases”, they speak of the stuff that they’re actually moving. Not prices on individual houses compared to years previous. ”

—————————————-

Isn’t that what Teranet provides?
http://www.housepriceindex.ca/Default.aspx

#136 Reality Check on 06.05.15 at 12:53 pm

“Decrease in living standards”.

What a joke. 99% of the population are a bunch of whiny morons. Fact: Life today compared to 100 years ago is like living like a King.

1)Does Canada have contaminated water when you turn on the tap? Most of the time, no.
2)Does Canada have food that when you eat it, you will die? Most of the time, no.
3)Will you get shot at when you exit your residence? Most of the time, no.

Thing is up until recently, most people didnt live past 40, they either died to illness or died in war. All these problems and whining are pathetic.

Get a grip. Unless you are threatened with AIDs or Ebola or being executed, is life really that hard? What do you have to do to get food, have a job, earn some money and then go buy it? That is just SO DIFFICULT.

Bunch of whining saps. It’s like my coworkers in their 40’s and 50’s who complain about the chairs they are sitting in at work or they may be late to golf. Really?

I will worry when there are people with guns, fresh water and food are nonexistent and there is imminent threat of death.

#137 Mike T. on 06.05.15 at 12:54 pm

just cruising the internet today…what a turnoff

war on bank fees
war on poverty
war on…..war?

stupid

it is in rapport that we thrive

time to change the context of our thoughts

#138 saskatoon on 06.05.15 at 1:00 pm

#124 JimH

confused?

who said anything about new vs. old jobs?

#139 Kreditanstalt on 06.05.15 at 1:04 pm

#72 Longterm,

You’re still pretty wealthy in comparison to the kids of most people around here (Vancouver Island)…but you do have the right idea. Stick with it. (Just watch those taxes.)

I got my heritage house on 3/4 acre several years ago in cash for much less than the price of a Burnaby hi-rise condo. Now I watch my neighbour flippers and floggers trying desperately to pass small-lot $150,000 properties off to the next fool for double that…slap on new paint, tidy garden, add furniture to real estate ad and MARKET…

#140 Not a Retard on 06.05.15 at 1:07 pm

At #127:

” In the burbs maybe. Where I live in Van renting a 2b/2br townhouse is $2800. Buying it is $650K.”

Why do you lie? Do you think people don’t have access to Craigslist?

$2300 for a newish townhouse near UBC, one of the most desirable areas in the city: http://vancouver.craigslist.ca/van/apa/5049132503.html

Many more like it.

#141 45north on 06.05.15 at 1:09 pm

Won’t the bank loan them a hundred grand? Do they not have equity in all of those houses they can borrow against (with tax-deductible interest)? Isn’t there cash flow from four rentals to draw on? Or are your folks just addicted to real estate, have no liquid investments, and are now drawing you into their sticky web? Huh? Why would they pay you 5% for a loan when they can get a mortgage for 2.5%? Or maybe they can’t?

I liked that part so much I posted it again.

Ret pretty much sums it up:

Jeremy’s parents have hit their credit limit and have probably even been refused by secondary lenders at this point.

#142 Ponzius Pilatus on 06.05.15 at 1:31 pm

#129 PM on 06.05.15 at 11:37 am
Is it just me or has there been a sudden rush of listings on Vancouvers West Side?

Naw. Inventory has held solid for ~ 2 months. There’s no change coming for at least a year.
———————-
Lot’s of new listings in Steveston, Richmond.
People sense the top.
2 families from our hockey team just sold.

#143 Ponzius Pilatus on 06.05.15 at 1:33 pm

No wonder Canuck’s attendance in down:

http://www.theprovince.com/sports/Gallagher+Rogers+Arena+feng+shui+location/11110019/story.html

#144 cramar on 06.05.15 at 2:06 pm

#136 Reality Check on 06.05.15 at 12:53 pm

———–

+1

#145 fancy_pants on 06.05.15 at 2:10 pm

#142 Ponzius Pilatus on 06.05.15 at 1:31 pm
2 families from our hockey team just sold.

did they can the Sedin brothers?

Whether a market is bullish or bearish, there is a buyer for every seller. so I don’t follow your logic (even though I may agree with your sentiment)

#146 cramar on 06.05.15 at 2:12 pm

“Benny Tal of CIBC, came out with a new report saying 5,800,000 people are going to be nailed with at least a 20% drop in their standard of living once they stop working.”

———-

A 20% drop in the average standard of living might be a good thing. If most middle-aged couples had to live with 20% less (and had time to prepare) it would be helpful to them.

My wife and I were biking around some local subdivisions yesterday. It doesn’t matter whether it was modern townhouse or large SFH, what struck me was whether single or double car garages, most places had vehicles parked in the drive. I said to the wife, “You know why? Because the garages are used as storage for all their ‘STUFF!'”

It was evident when the garage doors were open. Fridges, pool tables, etc., etc. Or full of plastic kids toys! One place had a boat with trailer plus a Harley in the double garage (3 places had Harleys within one block). It’s no wonder families are in so much debt. When you have a house, you must also have all the trappings of the “Good Life.” STUFF! Fill the garages with stuff, and the expensive STUFF bought with cheap credit.

If people were forced to stop buying STUFF, they could easily live on 20% less and it would prepare them for retirement. Sadly, no one wants to give up the “Good Life” and keeping up with the Jones!

#147 Bottoms_Up on 06.05.15 at 2:22 pm

#116 Statistics Canada on 06.05.15 at 9:06 am
——————————————————–
Is this the breakdown:

25,000 in food service industry
10,000 dickie dees
8,000 life guards
5,000 cash day loan officers
3,000 Repo men

#148 Bottoms_Up on 06.05.15 at 2:26 pm

#111 Hot Albertan Money on 06.05.15 at 8:51 am
———————————————————–
He was basically talking about people retiring today are at 100% (or more) of pre-retirement wages.

vs.

70% for people in the future.

So on a cash flow basis alone, it’s a 30% drop.

However, the generations following the boomers have already been living with less so at the end of the day does it matter?

#149 Video Production Services Salt lake City on 06.05.15 at 2:38 pm

As an accomplished proprietor of Vancouver Island land whatever I can say is WATCH YOUR BACK.

#150 Julia on 06.05.15 at 2:42 pm

#146 cramar

Same with all these storage facilities popping up even though houses are getting bigger. Stuff.

#151 Mark on 06.05.15 at 2:49 pm

“What? XIU is an ETF. Canadians have about 1 TRILLION in mutual funds vs about 70 billion in ETFs so XIU is a splash in the bucket.”

ETFs are mutual funds. Just a different method of distribution. They’re all “Mutual Fund Trusts” per the Income Tax Act.

The point was, if the single largest and highest performing fund in Canada hasn’t grown its units outstanding (although its certainly grown its AUM due to market appreciation), then there’s a pretty good chance that there’s been only minimal net investment inflows to the Canadian equity sector itself. It speaks to very low enthusiasm by Canadian investors for Canadian equities.

“Isn’t that what Teranet provides?”

The Teranet methodology in its attempts to correct for the shifting sales mix, effectively becomes a low pass filter (ie: integrating/averaging filter). As price changes are averaged over a significant number of years. Thus, there is a lag/delay inherent in Teranet data. A step input or impulse input to the Teranet algorithm could very well take years to show up in their final numbers.

#152 AfterTheHouseSold on 06.05.15 at 2:56 pm

#54 Julie K.
“cognitive dissonance”

I think you’ve hit on something there Julie. You’ve been busy packing, looking for a place to live, hubby retiring. Maybe you just haven’t had time to sit back and fully absorb your new reality: You are a wealthy woman now.

You might be looking at the cost of rent through your old filter of how many hours of labour you would need to work to pay for that.

Once you have your million plus invested with the 7% dumping into your account each month, your new filter will see things much differently!

Now go make yourself a nice cup of tea and find yourself a place to rent. All the best to you and hubby. Enjoy your new life!

#153 Blobby on 06.05.15 at 3:18 pm

@92 : Quote “it’s all speculative and does not include “relatives who act as proxies” for all the millions and millions of dollars wired into Vancouver banks Monday to Friday 52 weeks a year”

—–

Well if relatives are sending money to people who live here (Have any proof of this btw?), then by definition, the people who are buying – live here.. And are, as such.. LOCAL, not foreign buyers.

Honestly, how hard is this to understand?

#154 Investorz on 06.05.15 at 3:31 pm

10-year US interest rates up 4% at 2.40%.

Watch those US banks and those canadian insurers juuuuuust beautiful. Sunlife, Manulife, ZUB ETF from BMO.

La Fin du Monde, how fitting.

#155 Edward on 06.05.15 at 3:33 pm

WHAT THE MORTGAGE RATE SPIKE MEANS NOW.

“Each 1 percent drop in interest rates in the last 15 years has allowed home sellers to raise price 12 percent. Now take that theory to the flip side. Higher rates mean home prices could fall just as easily.”

http://www.cnbc.com/id/102737358

#156 Snowboid on 06.05.15 at 3:43 pm

#146 cramar on 06.05.15 at 2:12 pm…

Having a close relative who is a hoarder (two car garage with no room for vehicles and a basement relegated mainly to storage) I can relate to what you saw.

We learned 15 years ago the value of getting rid of ‘stuff’ and every time we move we get rid of more.

As we prepare to move into our new ‘vultched’ home near the lake in Kelowna, we ditched another ten boxes of unused ‘stuff’ – we figure if we had it in the previous condo storage area for almost three years we likely don’t need it!

With our investments only slightly smaller after paying cash for our new place, our retirement income of about 82% of our previous employment income is easy to live on.

In fact, it allows a better lifestyle than when we were working!

#157 TRT on 06.05.15 at 3:47 pm

Think a local is going to buy this?

http://www.news1130.com/2015/06/05/vancouver-house-listed-at-12-million-described-as-tear-down/

#158 Vamanos Pest on 06.05.15 at 4:20 pm

Jeremy, the banks will lend to an insolvent arsonist right now, and your parents are coming to you for money, offering almost DOUBLE the rate they’d get at a bank?

Do you even have to ask?

Besides, you don’t get into real estate with people you don’t get into bed with.

Run.

#159 Leo Trollstoy on 06.05.15 at 4:25 pm

New York Fed president Bill Dudley still expects the Federal Reserve will raise rates this year.

http://www.businessinsider.com/feds-dudley-on-rate-hikes-2015-6

Whether it’s this year or 2016 doesn’t matter. Rates going up. Expose all the pretenders.

#160 Black sheep on 06.05.15 at 4:34 pm

My sibling just bought a home in Airdrie against my better advice. I now know the face of house horniness and it’s close and personal.

“It’s only down 3% and won’t get much worse” he insists.

I don’t know what to say. It was easy to call people idiots when they’re nameless but this is someone I care about. Well a home is where the heart is, not just a financial matter.

#161 Bobby on 06.05.15 at 4:35 pm

#27 Conrad, sorry but I beg to differ with you. I’m looking at SFH here in Victoria and there are many for sale for less than they sold for in 2012. Yes, homes are selling if they are priced right and in good condition. But many have been languishing on the market forever under a number of listings.
Look at bcassessment.ca and you can click on any home and see what it sold for in the last 3 years. But as a realtor you should know that, or wouldn’t you.
I’m constantly amazed what a realtor will say to make a sale, much of it not quite true.

#162 Mark on 06.05.15 at 4:36 pm

“Watch those US banks and those canadian insurers juuuuuust beautiful. “

If lower rates clearly represented a tailwind to the financial industry (ie: the financial industry solidly outperformed the TSX and the S&P500 over the past 30 years of progressively lower rates), why would the industry outperform in a higher rate environment?

Sounds like people claiming higher rates will improve the performance of the financial sector are basically making the claim that the financial and insurance sector will perpetually outperform. Which is logically asymmetrical and defies the business cycle.

In a rising rate environment, I would expect industries which have been the chronic long-term underperformers to start being the outperformers. And there’s no better examples of such than manufacturing, mining, railways, terrestrial telecoms, and other firms that employ very expensive/irreplaceable fixed assets either not financed, or financed with long-term debt.

In a nutshell, the days of outperformance of long-term bond portfolios is over, and such portfolios are likely to underperform for at least the next 30 years. The FIRE sector, which benefitted enormously through excess returns in fixed income assets due to falling long-term interest rates and duration mismatch, will shrink dramatically in prominence, in profitability, and in employee compensation as the result of such.

#163 Julie K. on 06.05.15 at 4:37 pm

#152 – AfterTheHouseSold

Thank you!

:)

#164 Mark on 06.05.15 at 4:40 pm

“Think a local is going to buy this?”

Maybe not at that price, but there are plenty of locals or groups of locals who buy properties, plunk a new unit on such, and then attempt to flip it. A high risk proposition, but there are many in Vancouver who have made an awful lot of money in RE with the resources to do such.

The problem arises when the relatively minor drops in prices experienced over the past few years turn into major drop, and the flippers start to hit the panic button. Then all mayhem could break loose.

#165 Retired Boomer - WI on 06.05.15 at 5:04 pm

10 yr Treasury settled at 2.40% today. The rest of the market was kind of…meh.

At least a few new jobs.

I’m gassing up the unicorn now, maybe rates will actually be going up. While I would LOVE to see a “To the moon Alice” type of rise, say 2% now, and then we’ll talk…

…any type of sudden market jolting increase is what I have in mind. I like chaos best, it’s where you can, and do make money!

Screw the indebted, they had been warned!

#166 jess on 06.05.15 at 6:07 pm

FOR IMMEDIATE RELEASE
2015-111
Washington D.C., June 5, 2015 —

The Securities and Exchange Commission today charged Computer Sciences Corporation and former executives with manipulating financial results and concealing significant problems about the company’s largest and most high-profile contract. The SEC additionally charged former finance executives involved with CSC’s international businesses for ignoring basic accounting standards to increase reported profits.
http://www.sec.gov/news/pressrelease/2015-111.html

—–
cookie jar /kickbacks etc etc
“The wide-ranging misconduct in this case spanned several countries and occurred over multiple years, reflecting significant management lapses and internal controls failures,” SEC associate director of enforcement, Stephen Cohen, said.
http://www.afr.com/technology/enterprise-it/computer-sciences-corporation-charged-with-accounting-fraud-and-fined-us190m-20150605-ghi2i2

#167 Karma on 06.05.15 at 6:25 pm

#107 Bottoms_Up on 06.05.15 at 8:20 am
“Regarding the RBC foreclosure, buddy should allow the bank to take it, then take his 11K and use as a 5% down payment on a condo worth twice as much. Voila, positive equity, a nicer place to live and no more bank vultures after him.”
——————————————–

Do you really think another bank is going to automatically give him a mortgage? Not a chance…

#168 Gursk on 06.05.15 at 6:35 pm

# Julie K REPORTING LIVE FROM NORTH VANCOUVER

Too bad you didn’t do a bit of research before taking the plunge. Plenty out there for rent in North Van, however that pool becomes a puddle when you have pets.

Fewer than half of those currently on the market (Craigslist) in your area accept dogs.

Pets are the enemy of landlords all over the GVRD and make it significantly more difficult to find a quality rental place.

Just one of the many aspects that don’t show up on the balance sheet when doing the math on rent vs. buy.

#169 Karma on 06.05.15 at 6:48 pm

#141 45north on 06.05.15 at 1:09 pm
“Won’t the bank loan them a hundred grand? Do they not have equity in all of those houses they can borrow against (with tax-deductible interest)? Isn’t there cash flow from four rentals to draw on? Or are your folks just addicted to real estate, have no liquid investments, and are now drawing you into their sticky web? Huh? Why would they pay you 5% for a loan when they can get a mortgage for 2.5%? Or maybe they can’t?

I liked that part so much I posted it again.

Ret pretty much sums it up:

Jeremy’s parents have hit their credit limit and have probably even been refused by secondary lenders at this point.”

——————————————————

Or it’s a form of estate planning and tax minimization. Their net income from the rental would go down at a higher interest rate, meaning their income taxes payable would be down, while passing the interest income to their son without it having to be a gift (i.e. early inheritance). It’s likely that Jeremy wouldn’t declare it either.

Obviously, we don’t know their debt situation regarding their RE investments. But it’s also possible that they are tired of given money to the various governments and banks and would rather give extra income to their son.

#170 Karma on 06.05.15 at 6:55 pm

#143 Ponzius Pilatus on 06.05.15 at 1:33 pm
“No wonder Canuck’s attendance in down:

http://www.theprovince.com/sports/Gallagher+Rogers+Arena+feng+shui+location/11110019/story.html

LOL that’s hilarious. Gallagher’s a joke.

Attendance is down because Vancouverites are skint. They don’t go on dates often also because they’re skint. Hence, Vancouver’s known as a tough place to find love…

#171 Ret on 06.07.15 at 10:13 am

Bad feng shui. Too bad. Don’t go there.

My neighbour is always spewing this feng shui. It didn’t stop him from buying his student property near McMaster with a big willow tree in the backyard. (Bad f.s.- willow wood used to make coffins!)

His Asian tenants seem unconcerned even though their basement rooms are firetraps. So much for feng shui.

#172 Marco on 06.07.15 at 11:32 am

@155 Edward

From that article:
“It can create an unforeseen issue with qualifying for the loan in the first place,” Graham said. “Many borrowers are just squeaking in under the debt-to-income ratio guidelines. So a modest increase in the monthly payment can cause the ratio to rise just enough to kill the deal.”

This an American article but our debt to income ratio is higher regardless. When bank of Mom sees her boomer house start losing value do you think she will fork over a downpayment at a higher rate?

Interesting n’est pas?

Cheers.