Entries from October 2015 ↓

Earlier this week, in another fine example of why I’m no longer an obedient politician, I dissed a poster for bragging about living on air. Worse, it was a senior. Even worse, a woman. Sherry Danson told us about having a paid-for house, several mounding piles of cash, pensions and security. But we live on just $2,500 a month, she cooed.

Momentarily insane, I replied: “Spending $2,500 a month? Wow. The high life. Is that what you worked decades for?” And so it began – the cacophony of comments pointing out the striking similarities between the current blog host and pond scum.

Well, to be clear, my meaning was this: the most precious commodity we have is time, not money. Nobody can create, borrow, loan or steal a single hour. But you can always get wealth. So how can refusing to spend money, to make time more valuable or memorable, be applauded? Why is it that we praise frugality and make cheap a virtue? I mean, is life all about Kias and Costco, fer gawd’s sake?

Strikes me the point of our existence is to embrace it all. But that’s expensive. So why not work hard and invest to get the cash that can yield a fabulous run during the final decades of your life, when you have the time? Besides, Sherry was full of it. No couple owns a nice house in a urban centre and lives well on $2,500 a month. After property tax, maintenance, utilities, house insurance, car insurance, food, clothing, life insurance, thirsty underwear, Netflix and Milk Bones, it’s gone.

Why do people underestimate what they’ll need, think they can live in the future on spores and celebrate misleading braggarts like Sherry? Because they’re afraid. They fear taking the risk necessary to build wealth, to accumulate that knowledge or make big decisions in their lives. It’s easier to swim with the fishes, open a GIC and let life happen.

This blog is not actually about getting rich so Justin can take it. Or avoiding the house lust that’s gripped so many. It’s about giving over some tools and perspective so you can make a better job of things. If that leads to more security and better days, every day, I’m happy.

Ken lives on Vancouver Island in a trailer and sent me the note below this week. After I thanked him he asked me to publish it, “as the do-gooders probably can’t stand that you are sincerely making a difference in others’ lives.”

That was all the incentive required. Apparently I’m a better person that I realized. I’m off now to tell Dorothy.

“Even though my grammar may be far from perfect I felt the need to express the difference you have made to my life and my families. Many on your site say your pathetic Blog is full of 1%ers – but nothing could be further from the truth. It is just last summer I was directed to your website by a friend of mine who has a Masters in Political Science boosting about your decisive and honest analyst regarding the housing market and money as a whole.

“At this point in my life I had very little savings under $1000 and was in an expensive rental trying to survive based on a small income of $50,000 a year. Within a month of faithfully reading your Blog. I came to the understanding on what must be done in order to save money. Owning a 5th wheel outright my family and I decided to move into our 5th wheel last Sept. We have now been in an RV park for just over a year and for the first time in our lives we have savings of just over $18,000 which to us is like a million dollars. Due to these choices our family now has left over money to do many activities with our children we couldn’t afford before and still add money to what we call a substantial amount to our savings each month

“It is because your unbelievable knowledge in economics we were able to change our lives and see a light at the end of a very long and frustrating financial tunnel. We were raised in a poor family with little understanding of money because their was never much left over due to my own parents household debt, like ourselves our parents had very little understanding about economics, money and debt, yet our eyes are wide open now and we see their is a different way.

Not to toot your horn or your pathetic Blog it is my honest opinion Garth Turner economics should be taught at ever high school and College in Canada, so our children have some understanding of money and can make the proper financial decisions in their future with this wisdom they will have the knowledge to understand financial independence. Hope comes from teachers and great leaders that guide and direct. You are one of those great teachers.

“No matter how pathetic you may think your Blog is you are a genius and making a true difference in peoples lives.

Ken.”

Ken and his family have eighteen thousand, live in an RV and are smoking. Sherry has a house, hoards a million and is vapid. Ken’s living. She’s existing. If there’s a correlation between wealth and wisdom, it’s news to me.

“Am I horny,” Nick asks, “or just confused?”

Well, let’s find out.

“I’ve been faithfully avoiding the plunge since before the U.S. housing crash, but times are changing, personally anyway,” says the 31-year-old from Regina. As it turns out, Nick has one kid, one on the way, a working (for now) wife, family income of $120,000 plus an eviction notice.

The financials? Seventy-five grand spread over four TFSAs and RRSPs, plus a weensy company pension. There’s also student debt, being paid off at a thousand a month. So far they’ve been happily renting a townhouse for $1,750, but the combination of this eviction thing (owner is moving back in) plus HGTV is proving too much to resist.

“So here’s my argument for buying,” he says, “given my income and the fact you shouldn’t spend more than three times what you make on a home, some of the houses for sale around me (south east Regina) are actually reasonably priced, $360,000 for a 1350 sq ft bungalow that’s in really good shape but dated is not bad. Plus you can get a 10-year mortgage for 3.99%. Anyway, I’ve got about six weeks to pull the trigger, so if you’d care to explain why I’m an idiot for taking this path, that’s greatly appreciated.”

Three-sixty for a bung. The inmates of YVR can only imagine. But then again, it’s Regina. They were melons on their heads to football games.

Still, should Nick go for it, buying that little bungalow with its cute turquoise toilet, harvest gold appliances and shag? Does it make financial sense for this almost family of four? Surely in a cheapo city with a funny name lost out in the grain fields, there must be redemption.

Well, after paying down the student debt, Nick and his brood look like they’re worth about $50,000. So buying a $360,000 house with 10% down and closing costs will pretty much wipe them out. They end up with a single asset, and a monthly nut more than twice the rent they currently pay (mortgage at 3% plus property tax, insurance, opportunity cost on the down payment, plus a modest reno and maintenance budget).

In practical terms (a new baby, mat leave, increased child care costs) these guys will save nothing, diverting all of their cash flow into something they could have rented for half the cost. Meanwhile they’ve got two kids and essentially no pensions. When you’re just 31 stuff like sending your spawn to university or retiring in dignity looks light years away. But it’s not. And people who choose to have children should be more responsible than to gamble their family’s future on a pile of bricks on the prairies.

Harsh? Too bad. Here’s why Nick’s sounding like an idiot.

First, Regina’s enough like Saskatoon to be sideswiped by the same commodity crisis. Oil is headed back towards the $40 mark, rendering most of our energy industry unprofitable. But it’s not just crude. Potash and grain are also suffering, with prices having fallen by dizzying amounts since the spring.

No wonder CMHC had this to say about a local real estate market where two years ago there were bidding wars and a condo-building boom: “In Regina, price acceleration, overbuilding in the condo market and overvalued home prices are responsible for the heightened housing market risk, although CMHC notes that price growth is beginning to wane.”

No kidding. The market is sputtering as a result of terrible fundamentals. Even Royal LePage is not blind to the mess, saying in its latest report it sees, “year-over-year median price decreases across most housing types surveyed in Regina. In the third quarter of 2015, the aggregate price of a home in the region declined 2.2% to $324,606. Over this period, the median price of bungalows declined 3% year-over-year to $298,839, while the price of condominiums fell 5.2% to $250,879.”

The local realtors add this, Nick: overall sales in September were down 14%. Single-family detached sales off 13% and condos falling 16%. Prices are 4% lower in the past year and now 7.3% below levels of three years ago. The dollar volume of sales has crashed 17% while the supply of active listings is “well above historical levels.”

Does that sound healthy? You really want to spend every dollar your family has, embrace a new load of debt and double your monthly living costs so you can catch a falling knife? What’s the prize? To swagger into work and brag you’re a homeowner.

Man, have we lost our way.

Yes, Nick. Horny. And confused. Get over it.