Emotions

FAT CAT modified

Another tale of two cities. Actually, make that four.

“Here’s an update for ya,” says Paul. “I took your advice and put my Halifax house up for sale. It has been on the market since August and is currently listed for $15K less than I paid for it 5 years ago and I haven’t had a call on it since Christmas. Brutal.”

By the way, Paul’s house in Atlantic Canada’s largest city sits empty, since he has to relocate for work to Calgary (of all places). He reports that his Cowtown landlord just lowered his rent by $200 a month, which tells you something else.

Meanwhile in the GTA, meet Pam, who I think is pissed at me.

“My husband and I have been married for about 6 months and moved in with my parents to save money.  He‘s an engineer and makes $150,000 a year and I am a teacher at about 46,000.  We make good money and yet my husband is still not interested in moving out of my parents’ house – until the market “corrects itself”.

“This is where I am confused, my dad and my husband have been discussing this correction for years (while also quoting your blogs) and still nothing has surfaced, in fact I think it is increasing quickly.  Everyone around me is buying homes and condos all over the GTA (buying, selling and flipping condos apparently making lots of money in the process. Most people advise me to never rent because all that does is pay someone else’s mortgage and I tend to agree with that.  As well, they all encourage me to get into the market soon to gain trading power for the future.   So my question to you is, how do I know you, my husband and my dad are the right ones and everyone else around me are the wrong ones? I have heard all about the low interest rates and low down payments and such but, nothing has changed! This correction has been predicted for years and housing prices are still on the rise, are they really ever going to go down? Especially, with talk of interest rates going into the negatives. If I did buy a house now and the correction did occur would it completely devastate our financial situation? BTW, I hate you.”

And now, in Vancouver, here’s Jason, 27, also with a fresh bride:

“We rent in downtown Vancouver, within a 10 minute walk of both of our work locations and manage to put a good chunk of money into our investments every month with the money we save by not having any debt. If we manage to stick to this plan we will have a substantial nest egg in later life. Sounds great hey? Then, this weekend happened. My father in law is a very nurturing father to my wife and will do everything he can to help her. He came to us with a proposal.

“He tells us he is investing into an apartment. He already owns a SFH (no mortgage) in Richmond and wants to put more money in the booming Vancouver real estate. He cannot fathom why we pay $1,800 to rent a one bedroom apartment, telling us we are throwing away our money. He proposes 3 options with his investment plan: 1) He buys an apartment and rents it to whomever. 2) He buys an apartment and rents it to us (with the intention of us paying a lower rent). 3) We buy an apartment together at whatever % of ownership we prefer and pay him a portion of the rent based on the % of ownership.

“The only option I consider is option 2, who wouldn’t want cheaper rent? However, my wife sees this as a great opportunity to get our foot in the door of the crazy RE market in YVR. She accepts we can’t afford a place on our own, but with her parents she thinks it’s a smart idea.

“Calmly, I proceed to explain why it’s a bad idea but it all goes over her head. She says let’s run the numbers, which I’m glad to do as it will prove my point and she will now get it. I tell her to buy (even if we split it with her parents) we would have to suck out all of our investments for a deposit, and our mortgage would add over $1,000 to our monthly expenses. This would mean we have nothing in investments, and nothing going into investments for the foreseeable future. All of our eggs go into real estate in a market that by all economic standards should be imploding any time soon, we have nothing in investments and are tied down for years.

“Suffice it to say the fiscal argument didn’t go down well and there were many a tear shed that night. ‘But I want to feel like I own something’, she says. You warned me of this Garth, and it’s happening.”

The common thread here is emotion. Paul’s depressed he can’t sell his house. Pam’s angry she can’t buy one. Jason fears he’ll be crushed by a father-daughter tag team. Paul discovered real estate equals risk and loss. Pam’s scared of not getting into the market. Jason is vexed and must choose family or logic. At the heart is the most emotional of all assets, which more than ever is messing with people’s heads.

This weekend down payments went up, so anyone buying between $500,000 and a million has to cough up 10% over the threshold amount. In the lead-up to the change, the inevitable happened. One beater house on the wrong side of Toronto had over a hundred showings, 13 offers and sold for $149,000 over ask. The listing agent attributed it all to a beat-the-changes mentality. Perversely, trying to save some money on a down payment cost the buyer more than a hundred grand in a bidding war. The young have so much to teach us…

More consequential are new capital requirements now in place for lenders to pace the growing risk in residential real estate, plus higher CMHC fees on the issuers of mortgage-backed securities. These changes have already led to creeping mortgage rates, even as the economy sinks along with oil. That economic decline, by the way, is why houses in Halifax are going unsold, and rents in Calgary are falling. Job creation has fizzled, and in five weeks we’ll see a federal budget bathed in red ink.

There’s nothing inherently wrong with owning, or wanting, a house. But it should never be your life’s goal. Nor should it replace all liquid wealth, plunge you into unrepayable debt, inflate your living costs or turn into a speculative financial play. If you can’t afford it without cleaning you out, don’t buy. If it makes you inflexible, immobile or unable to adapt in an economy in flux, then wait. If houses in your hood are crippling, move. If you rent, be smug.

If you doubt, think of the people torn up, in tears, terrorized or terrified by real estate. And the big event hasn’t even started.

Emotions? Highly overrated.

212 comments ↓

#1 ILoveCharts on 02.15.16 at 4:32 pm

“This weekend down payments went up, so anyone buying between $500,000 and a million has to cough up 10% over the threshold amount. ”

And tomorrow Christy will be introducing a provincial budget in BC that will basically negate that impact by raising the limit for the property transfer tax exemption. With the money people save on the taxes, they can afford the increased down payment requirements. On the plus side, more money will be going into down payments instead into taxes which will make it a little harder to go underwater on the mortgages in the future. However, the net effect is that there will be no moderation to increasing housing prices. The extreme lust in Vancouver (and anything within an hour or two of driving distance!) will continue.

#2 Jimmy on 02.15.16 at 4:32 pm

First on Family Day!!

#3 Doug t on 02.15.16 at 4:35 pm

Second

#4 bdy sktrn on 02.15.16 at 4:36 pm

emotion is for weaklings.

#5 Winterpeg on 02.15.16 at 4:38 pm

This is why I love my girlfriend (aka. ‘tax wife’). We moved to the Peg for work just over a year ago. We make OK dough (just over $100k a year) and have enough saved that we could buy a small house while still obeying the rule of 90. However, every time I peruse the MLS for giggles, my GF asks “why the hell would we want to buy a house in Winnipeg, of all @&*$% places?”. She gets the mobility thing. Another bonus is that her parents think we’re geniuses for renting and investing… so no pressure from the in-laws. If all goes well and I get tenure in three years from the Uni where I work, we may buy a place. Perhaps. But that’s only if things correct a bit so that we don’t have to buy in the more stabby parts of the city.

#6 GottaLoveIdiots on 02.15.16 at 4:39 pm

They own cash and investments and have a positive net worth. You will always get who you marry, always. Choose wisely.

#7 Godth on 02.15.16 at 4:40 pm

I think you should try to distinguish between “stuff” and monkey status that we attach emotion to and art and the humanities that can truly inspire us, along with friends and family when they’re not obsessing about “stuff” and status.

We’re all emotional creatures but we seem to have shifted this emotional need from real human interaction with all it’s highs and lows to LOOK AT ME. Ego, arrogance, entitlement, ignorance, etc. have become positive attributes and it’s just sad. It’s also built on a mountain of debt. Oh well, it’s all temporary; “apres le deluge.”

It’s all so superficial now. Anybody want to play some crib and really talk? Nah.

#8 Hugh Jass on 02.15.16 at 4:44 pm

Not looking forward to the downturn. Fear it will be worse than most expect.

#9 Prairieboy43 on 02.15.16 at 4:44 pm

Just ask for cash via Twitter. Kayne West wants 1 billion from Zuckerberg.
http://www.marketwatch.com/story/kanye-west-wants-a-1-billion-from-facebooks-mark-zuckerberg-2016-02-15

PB43

#10 Siva on 02.15.16 at 4:45 pm

Kevin O’Leary says there are 3000 applicants for every entry level jobs that pays $8/hr. Kudos to those brave souls for buying million dollar homes, paying 150k over asking in this economy.

#11 Doug on 02.15.16 at 4:46 pm

First time poster….long time reader….First post of the day???!!!

#12 Doug t on 02.15.16 at 4:47 pm

This home ownership cult has completely gone full retard – hey I own my house but with all the costs involved with home ownership I gotta say I will not ever buy again. People in this country have drank the koolaid from the advertising by real estate boards, mortgage groups, realtors and HGTV for far too long. The language used by many sounds like the stuff of pyramid schemes – “you have to get in now” or “the sooner your in the better”. Wake up people – nothing ever keeps going up, there are always corrections. So as my younger hipster friends say to me “chill dude”

#13 Bram on 02.15.16 at 4:48 pm

I wondered if someone here can someone solve this assessment puzzle on Yukon st Vancouver?

http://ps3computing.blogspot.ca/2016/02/does-bc-assessment-use-random-number.html

#14 mark on 02.15.16 at 4:51 pm

Jason needs to hire a few HAs to rough the old boy up and warn him off this plan. It would be less trouble dealing with them than the emotional wife.

#15 JSS on 02.15.16 at 4:56 pm

I thank God every day that I’m married to a someone who understands the importance of saving, and investing, yet does not hold me at gunpoint to buy a bigger house and spend like drunkees like her buddies on Facebook.

There are two things that really screwed up couples – (1) Facebook ; (2) low interest rates.

Facebook problem – “Hey everybody, look at us! Look at our $800,000 house we bought! We’re so rich now! Also, look at our pics we posted five minutes ago! Look, we’re eating sushi! And, I just bought a $900 LV purse, on sale! Did you guys check out our pics on the beaches in Trinindad and tobago? You guys sure wish you were us”

Low interest rate problem – “Bank: Sure, you can use your HELOC for aaannny thing you want.” Couple:” Oh wow, I want granite countertops. Guy says, hey I need another ski-doo”

Canadians are so f^&*$d up. Logic be damned. This country needs a good ‘ol recession like them ones from back in 1982, and 1992, to bring the fear of God into them.

#16 Frank on 02.15.16 at 4:56 pm

What are the reasonable numbers to spend on buying a house?

What % of income? How much of your saving?

Rule of 90. Oft covered here. — Garth

#17 Herf on 02.15.16 at 4:59 pm

“There’s nothing inherently wrong with owning, or wanting, a house. But it should never be your life’s goal.”

I recall reading your comment in your book (the one that started this blog site), Greater Fool, you said something to the effect that part of life’s goal should be to have a “balanced life”, rather than sacrificing everything for the sake of a house. Holds for other material things too, I think. What a “balanced life” means to each person obviously will vary from person to person. I believe in the biblical view that says we should learn to be content with what we have. My late mother told me on more than one occasion that if we have our health, we have everything we need. Her comment became more poignant as her health declined in her later years. The whole worldly system, expressed through the sales, marketing and advertising industries is aimed at trying to get people to feel dissatisfied with their lives or something about themselves and to get them to believe that if they buy whatever the world is selling, some personal “need” will be satisfied. The real estate industry seems to have mastered this principle.

#18 Bobs ur uncle on 02.15.16 at 5:01 pm

Jason is a fine example of why you should not have all your finances in the same pot. Let the wife invest *her money* wherever she wants. If that absolutely has to be a condo with dad, then fine – pay her rent for your half of the accom, and invest *your money* however you please.

In 30 years (prob less) you can see who has done better. And who gets to retire first.

#19 Nemesis on 02.15.16 at 5:03 pm

“The young have so much to teach us…”… HonGT

#BeholdTheKamikazeFuerdai…

“Do you want to see my pic with Justin Trudeau?… He wasn’t the Prime Minister then, and I just asked him for a photo. I like Justin. I like most Canadian politicians, actually.” – Weymi Cho

[NewYorker] – The Golden Generation: Why China’s super-rich send their children abroad

…”On a crisp Sunday morning in November, Weymi Cho picked me up at my hotel, in downtown Vancouver, in her new car, a white Maserati GranTurismo with a red leather interior. She had slept only two hours the night before. A new karaoke machine had been installed in her apartment, a four-million-dollar condo with a view of the city’s harbor, and she and some friends had spent the night singing and drinking Veuve Clicquot.”…

http://www.newyorker.com/magazine/2016/02/22/chinas-rich-kids-head-west

#20 CandianOne on 02.15.16 at 5:08 pm

To the theme of “REGRETS”, this one is floating around on huffpost today… Thought you blog dogs and the confused/emotionally trapped folks would have a bit of a different angle on the long term situation.

http://www.huffingtonpost.com/dr-travis-bradberry/5-choices-youll-regret-fo_b_9102098.html?utm_hp_ref=canada&ir=Canada

Happy Family Day to ya’ll.

#21 understood by few on 02.15.16 at 5:11 pm

“we make good money”

Good enough to rent and sock away some investments. Not good enough to buy a house in GTA or MetroVan.

I assume the husband is early in on his career. 50K is a pittance for an engineer (assuming he has a B.Eng and not some 2 year tech cert or something). Luckily both of your jobs are portable! Really want to buy a house? Move somewhere smaller and cheaper.

Or just over-extend yourself like everyone else and lose sleep whenever you get a surprise bill. To each their own.

#22 turn of the tide on 02.15.16 at 5:15 pm

I come here to learn and for that daily mental-sanity check :)

Garth, could write a post about the best way to keep the portfolio balanced?

Since becoming a reader of your blog, I created an uber-cool spreadsheet to track my portfolio balances (it uses real-time data, so I always know my allocation!):

http://postimg.org/image/5a49gjcwj/

Every 2 weeks or so I throw some more money into my ETFs, when it’s time to buy, instead of always buying the same chunk of stuff, I look at my sheet where I am below my desired range and buy that.

As such I never really sell any ETFs but instead just buy more of the ones that are below range. This means it’s always as balanced as possible.

I read about the once-a-year selling and buying to re-balance. I guess that would make sense if one you buy once at the beginning of the year and let stuff sit. But for those of us that buy a little bit all throughout the year, what’s the best way to keep the portfolios balanced? When should we ever sell? Any other tips?

A post on the art of keeping balanced would be awesome!

Thanks again, as always!

#23 Helman Rickards on 02.15.16 at 5:19 pm

Greater Fools: with Saudi Arabia, Venezuela and Russia meeting to cut OEPC production, do you think now is a good time to invest in Oil Centric Alberta Real Estate and Canadian Oil stocks? (Lows being in place once the oil recovery takes off probably tomorrow?) Buy the Rumor baby!

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/update-9-oil-stages-late-gains-as-saudi-russia-venezuela-to-meet/article28760734/

#24 Shawn on 02.15.16 at 5:21 pm

Perfectly Logical Predictions Don’t Always Come True

Perfectly logical predictions over the past eight years or more that interest rates would rise and house prices would fall have refused to come true (well, except in Mark’s mind). Instead interest rates go lower and house prices are about flat in some Cities and continued to rise in Vancouver and Toronto,

Perfectly dumb (even insane) decisions by many young people to mortgage themselves to the hilt in the past five to ten years (even with 35 and 40 year amortizations in some cases) have worked out perfectly wonderfully especially in Toronto and Vancouver.

Sometimes a poor decision gives a good outcome and the opposite is true as well.

Now we are hitting a few speed bumps in some Cities especially Alberta.

Will logic finally prevail? Stay tuned. But be careful about betting the farm on the direction of future interest rates.

Be more careful of excessive leverage. Thought you would know that. — Garth

#25 Godth on 02.15.16 at 5:24 pm

Nobody knows nobody now: nobody knew nobody then. How’s the weather? The gaphas only gotten wider in real terms but in terms of fiction? Superficial and beautiful – golden. What size drink was that? Are you on facebook?

Need money? Get rich or die tryin’. Winner takes all baby.

People aren’t people, they’re statistics in your quest for glory.

#26 Smartalox on 02.15.16 at 5:25 pm

Jason:

Don’t make the mistake that so many make – buying the home you need now, instead of the one you’ll need in 5 years.

A one bedroom apartment may be all that you and the Mrs. need now, but in a year or two when the two of you start expanding your family, you’ll quickly outgrow your one-bedroom place. At least if you’re renting (even if from your father in law), you won’t have the added pressure of waiting for your current place to sell, before ‘moving up’ the property ladder.

Focus your attention on where you want to get to, not on where you are right now, because the present quickly becomes the past.

#27 Abolitionist on 02.15.16 at 5:30 pm

Great article, thanks Garth.

#28 pinstripe on 02.15.16 at 5:31 pm

Several towns away from where I live a landlord was set to deliver a rent-increase to a tenant. the landlord made a request to the RCMP to provide a member to be present when the delivery was made. The RCMP declined the request. No details available as to the outcome. (Coffee shop closed due to family day in AB).

#29 the Jaguar on 02.15.16 at 5:34 pm

Can’t believe I would ever line up at the scrimmage line with Mark, but he is right on this issue. The ‘father’ of the bride needs to butt out. Stay out of their marriage.

#30 Shawn on 02.15.16 at 5:37 pm

Required Capital Increases for Banks

“More consequential are new capital requirements now in place for lenders to pace the growing risk in residential real estate…”

*****************************************
Speaking of capital, apparently, Bankers who have a reputation for being conservative are actually mostly big gamblers. Without the regulators imposing capital rules they will apparently sometimes leverage themselves to the absolute hilt. When they are leveraged “only” ten times they believe they have “excess capital”.

Bank regulators also helpfully use arcane rules whereby a billion in assets can be claimed to be only say $400k on a risk-weighted basis. In fact some assets like Canadian government bonds and CMHC mortgages may be considered zero risk and so bankers can joyfully use infinite leverage on those loans / investments if they wish. (And they do tend to wish.)

Royal Bank of Canada reports it has a 10.6% common equity Teir 1 capital ratio. But that’s based on the mumbo-jumbo notion of “risk-adjusted”.

For example who is to say that Royal Bank’s residential montages ( a mix of CMHC and uninsured) should have a risk weighting factor of precisely 6%? That’s the number they use. But at the end of the day that is only a guess. A regulated guess, but a guess nonetheless.

Its actual balance sheet reveals that Royal Bank had at the end of October a common equity to assets ratio of 5.5% . And, deducting goodwill their actual tangible common equity ratio was (and is, since that is the latest report) 4.6%. Can you say “leveraged to the hilt?”.

I am not suggesting Royal Bank is risky. I’d suggest I have no idea how risky it is but that 20 times leverage is a red flag. 20 times leverage does not leave much room for errors.

#31 Silent the people on 02.15.16 at 5:37 pm

Great post Garth! Emotions run high and banks don’t help when they say things like Scotiabank commercial ” I moved some stuff around and saved you $1500.00 a year”
If banks can “move stuff” and create money why don’t they do that all along! Who do you trust! No wonder the public is confused!
“Buy now or buy never!” “A Home is everyone’s goal!” What a bunch of baloney!

#32 Another Vancity Renter on 02.15.16 at 5:38 pm

“There’s nothing inherently wrong with owning, or wanting, a house. But it should never be your life’s goal. Nor should it replace all liquid wealth, plunge you into unrepayable debt, inflate your living costs or turn into a speculative financial play. If you can’t afford it without cleaning you out, don’t buy. If it makes you inflexible, immobile or unable to adapt in an economy in flux, then wait. If houses in your hood are crippling, move. If you rent, be smug.”

Garth, the above paragraph very nicely summarizes your whole message about real estate. If people would listen up and take it to heart, you could stop blogging now. Yet the emotional ones are not listening, and they’re not going to listen. But as for every asset bubble, the day of reckoning for Vancouver (and Toronto) real estate will someday come. It’s different here? Maybe only in how far people will carry on that myth and all the stupidity and greed that goes with it.

I am over 40 and still value my freedom and mobility a great deal. How can someone much younger be so eager to trade that in for a lifetime of crushing debt and staying at home because it’s “too expensive” to go out in your own neighbourhood?

#33 hope & ruin on 02.15.16 at 5:42 pm

I can relate to aspects of all three stories.

The market isn’t providing affordable options right now, nor does it need too. My only options are pay rent or cough up the dough to buy a place. So I pay extortion rent because I can’t deal with living at home. Ya it sucks but it is what it is.

The more logical parts of my brain realize that over the next 5 years the opportunities will be south of the border. Need to maintain that mobility.

Best thing a moister can do is consistently visit this blog to keep your head screwed on straight. Even if we take some abuse from time to time. It’s a small price.

#34 Blacksheep on 02.15.16 at 5:43 pm

“And the big event hasn’t even started.”
———————————————
What “big event”, It’s been a 100K Job-ageddon in Alberta and RE prices have barley moved. If Pam or Jason, had purchased RE in TO or Van in the past 12, 24, 36, 48 (should I go on?) months, they would be way ahead $ wise.

I was Pam’s husband or Jason in 2009.

I believed 70K incomes could not support million $ homes in Van. It was a literal house of cards. I didn’t believe that ‘other sources’ of income were driving the market.

So I put my $’s were my mouth was and sold my primary residence in 2009 and bought gold (fortunately, did well).

Unfortunately, I was also, dead….f-ing…wrong about a RE correction.

Five years later, I accepted the reality of the situation and stole a house that was languishing on the market for 8 months at Xmas time, from a divorcing couple.

This March will be two years in the new house and it’s value is up an easy 100K.

Getting a call wrong is one thing, but clinging to that bad call, after years and years of evidence showing you, you got it wrong, is quite another.

Just stating the facts as I see them.

Try reading the post again, slowly. Move your lips if it helps. — Garth

#35 Nemesis on 02.15.16 at 5:49 pm

#QuelleSurprise….

[G&M] – Questionable tactics encourage B.C. homebuyers to avoid taxes

…”Some real estate listings in British Columbia are marketing newly built, potentially vacant properties as personal residences, a deceptive tactic that can encourage buyers to avoid paying the GST and enable sellers to avoid declaring capital gains on multimillion-dollar transactions.

The phenomenon, observed in Vancouver’s high-end housing market, raises the prospect of significant lost revenues through federal tax evasion in a sector already identified by the Canada Revenue Agency as high risk.

As part of an ongoing investigation into the forces that drive Vancouver’s expensive housing market, The Globe and Mail examined hundreds of property listings and marketing materials in the Lower Mainland for evidence of questionable claims by agents.

While there is no way to quantify the scope of the phenomenon, the data suggest various forms and degrees of deception are common.”…

http://www.theglobeandmail.com/news/investigations/questionable-tactics-encourage-bc-homebuyers-to-avoid-taxes/article28758483/

#36 Mark on 02.15.16 at 5:55 pm

Just watching my old VHS tapes this weekend before heaping them into the garbage. I liked documentaries and the news as a kid, so lots of old recordings of the early 1990s. Haven’t found anything with Garth in it yet, but it was a far more optimistic time indeed than today. Some of the ads of the era are just downright funny, such as a Home Hardware advertisement that guarantees “happy endings” when shopping there.

What’s kind of shocking about this post today is that an engineer is actually working in Canada for $50k/year. That’s the sort of compensation that was more typical at or near the entry level, even outside of the “hot” discipline du jour, of 15+ years ago, ie: the 1990s. We all know there’s a bubble in house prices, but there’s definitely an inverse bubble in engineering compensation.

Sure, the employers stopped hiring “top of the class” a long time ago, and are now hiring merely to maintain a minimum headcount at the lowest cost. But that still doesn’t explain fully why compensation hasn’t meaningfully moved forward in all those years. I’m kind of shocked, quite frankly, that an engineer who only makes $50k is describing it as ‘good money’. Being paid only around 1/8th of a SFH per year for valuable work is not ‘good money’. And in the GTA, that number is closer to 1/16th.

Typo. $150K/year. — Garth

#37 S.Bby on 02.15.16 at 5:58 pm

In my area it is a hot sellers market. A new build next street over was up for sale at $2.5 million and sold in a week. I doubt the quick sale had anything to do with the new mortgage rules.

#38 E Richard on 02.15.16 at 5:58 pm

Suburban Lower Sackville of Halifax. In local neighbourhood of rental I share two recent sales:
A two story semi sellers only got $15,000 more than they paid for a decade before after taking almost a year to sell, less carry costs for the year empty and commission on sale.

A three story semi, sold for $180,000 in June 2014, foreclosed 15 months later just sold for $149,500.

Seeing homes for sale that have the forclosure notices in the front windows not making MLS, can find only under listing agent here.

#39 Ontario's Left Coast on 02.15.16 at 6:00 pm

I am so thankful that I don’t have to worry about any of this crap. Not bragging, but I paid off my modest SFH the year I turned 30 and we have no plans to leave any time soon. My home is my 4th most valuable asset and I couldn’t care less if it dropped in value.

These people living and dying around the decision to get into the market have to give their heads a shake. Save, invest and rent if you have to. Enjoy your time and each other and forget the hysteria!

#40 Mark on 02.15.16 at 6:02 pm

“In fact some assets like Canadian government bonds and CMHC mortgages may be considered zero risk and so bankers can joyfully use infinite leverage on those loans / investments if they wish. (And they do tend to wish.)”

I’ve argued, here and elsewhere, that the Canadian banks are in giant trouble if ever the CMHC guarantee is called into question, or even if there’s political rumblings to such an extent.

All that needs to happen is Trudeau, or someone in his cabinet opening their mouths and suggesting that the CMHC guarantees won’t be paid in full, and the reaction from investors in Canadian MBS, and Canadian bank equities is likely to be swift and unrelenting. As you correctly point out, the situation is so dangerous that even a slight ‘accident’ or misinterpretation by the market on the government’s intentions, could be enough to trigger a systemic event. And certainly with the CMHC being short $100-$200B of capital relative to reasonable long-term requirements, there is likely to be a lot of political controversy regarding bailing it out.

Perhaps the way to play Canadian banks is to be long, but to take a bit of that dividend money and buy deep-out-of-the-money long-dated puts? Anyone else have any ideas?

#41 Rick on 02.15.16 at 6:06 pm

Great article Garth! When I was 35, my wife and I bought our first house. We both had good paying jobs; and the banks offered us more than double, what we were prepared to borrow. We bought with 20% down; to avoid the extra fees/insurance; and made sure we could afford the mortgage with just one salary. In case one of us lost our job. 10 years later we were mortgage free; and have been ever since. Guess these are old fashioned ideas these days:)

#42 Shawn on 02.15.16 at 6:06 pm

Being Dependent on Colluders

#23 Helman Rickards on 02.15.16 at 5:19 pm asked:

Greater Fools: with Saudi Arabia, Venezuela and Russia meeting to cut OEPC production, do you think now is a good time to invest in Oil Centric Alberta Real Estate and Canadian Oil stocks?

*****************************************
Sure, as long as you don’t mind investing in high-cost oil producers and then hoping that some unsavory nations (that mostly hate each other) will decide to once again collude and curtail production so that your high-cost oil producers can make a profit.

Meanwhile Saudi Arabia is still waiting for a Thank You card from Alberta for allowing Alberta to make so much money by virtue of OPEC artificially keeping oil prices high for all those years. I am not sure that Saudi Arabia is in any hurry to play that unappreciated role again.

#43 waiting on the westcoast on 02.15.16 at 6:11 pm

Well – another awesome month for my service business (80% of locations are US with balance in Canada and a few in AUS). My four locations (3 in the NE and one on the westcoast of US) grew by 17%, 22%, 26% and 40% in January. The system average was 24% growth YoY in January.

Again – troubles in AB/SK/MB with negative double digit growth… low single digits on Van Island/Okanagan.

I will know when people start feeling it in the US… we will quickly have flat sales (my business is highly sensitive to disposable income fluctuations or FEAR).

#44 DannyBoy on 02.15.16 at 6:19 pm

Well people are asking when this housing market will top out, my best guess is that after years speculating that we might actually be there soon. The Canadian Yield Curve is inverted, which forecasts recessions. We should see the prices starting to drop even in the hottest of markets within 18 months

#45 Indie Chick on 02.15.16 at 6:20 pm

My bf and I rent a sweet little house in Toronto’s west end. We pay about 15% of our income on housing costs which leaves us plenty of room to save, invest and most importantly enjoy life. The real estate market in T.O. is nothing more than a freak show. We prefer to watch it from the sidelines. I truly hope hope that younger people reading this blog think twice before they jump into huge debt obligations.
Thanks again Garth for another great post :)

#46 acdel on 02.15.16 at 6:22 pm

The comments I have read from those living in the greater Van and Toronto areas are interesting. For those who succeed in the real estate markets by flipping; good for you, but I cannot help to think that it is just “Russian Roulette”, eventually luck runs out. All the best!

A paradigm shift is happening in the world, from bots to a fundamental change in the economy, this one is going to be a real challenge to the world community.

#47 JacqueShellacque on 02.15.16 at 6:24 pm

If only it were just emotion, Garth. The house horny of today feel entitled and care nothing about debt. Which means they give no thought to the future. Neither do our governments, which spend with reckless abandon for pretty much the same reasons. This breaks the social compact of just about any society that has lasted. In other words, it is an existential threat to our civilization.

#48 tundra pete on 02.15.16 at 6:28 pm

“You have to buy now or you will get priced out of the market. They aren’t making anymore land. You will just be throwing away your money on rent. Why pay someone elses mortgage. I’m tired of paying my landlords maintenance bill. It’s always cheaper to pay a mortgage than rent.”

I heard them all from my friend who came over this weekend to show off his new truck. A loaded f 250 with all the bells and whistles. Nice truck for sure.

He is not the only one I know with a new set of wheels. They all pay monthly payments. None I have asked have any money in a savings account even.

Isn’t it funny how no one can save a nickel yet they all have a new vehicle they pay hundreds, at least, a month for.

#49 The Great Gazoo on 02.15.16 at 6:32 pm

This past week, the International Energy Agency said that non-OPEC supply fell by 1/2 million barrels per day “from a month earlier”, see excerpt below. After including OPEC growth, the net was a reduction 200k barrels per day.

Bet you didn’t see or hear anything about this 1/2milion barrel reduction in any of the headlines and articles along side all the ones that claim Iran is increasing production by the same amount or more. The supply demand imbalance will correct this year, it’s just a matter of time.

https://www.iea.org/oilmarketreport/omrpublic/

“Global oil supply dropped 0.2 mb/d to 96.5 mb/d in January, as higher OPEC output only partly offset lower non-OPEC production. Non-OPEC supplies slipped 0.5 mb/d from a month earlier to stand close to levels of a year ago. For 2016 as a whole, non-OPEC output is expected to decline by 0.6 mb/d, to 57.1 mb/d.”

#50 math is fun on 02.15.16 at 6:35 pm

#10,

By Mr. O’leary’s numbers 126,000,000 people applied foir those 42,000 jobs thatwere created last month. I think he knows how to count in the negatives though given the returns on his funds recently.

#51 OttawaGuyRenting on 02.15.16 at 6:44 pm

The insanity in the streets “housing” “flipping” “build” “renovations” has been top of mind anecdotally for way too long.

I’m just not sure when the party will end here in Ottawa. Seems like this city is immune.

I just know that in my line of work, there are a ton of scared people. (Consultant for Large Multinational Restaurant)

Average cheques are down. Traffic across the board – also down.

“Nothing left at the end of the month” is the factor.

Can Ottawa skate through a major housing correction as a big government town?

#52 beggar's dozen on 02.15.16 at 6:45 pm

#36 Mark on 02.15.16 at 5:55 pm Just watching my old VHS tapes this weekend before heaping them into the garbage. I liked documentaries and the news as a kid, so lots of old recordings of the early 1990s. Haven’t found anything with Garth in it yet, but it was a far more optimistic time indeed than today. Some of the ads of the era are just downright funny, such as a Home Hardware advertisement that guarantees “happy endings” when shopping there.

What’s kind of shocking about this post today is that an engineer is actually working in Canada for $50k/year. That’s the sort of compensation that was more typical at or near the entry level, even outside of the “hot” discipline du jour, of 15+ years ago, ie: the 1990s. We all know there’s a bubble in house prices, but there’s definitely an inverse bubble in engineering compensation. ”

I am calculating the 90s as approx. 25 years ago…..but then again I called for the loonie’s fall….

#53 Suede on 02.15.16 at 6:46 pm

Things are different in Vancouver.

Family day was last week.

#54 Andres on 02.15.16 at 6:46 pm

I think people are forgetting that there’s a big difference between SFH and condos in this city. I almost bought in 2008. Instead I have $150,000 in investments. I looked at the condos I was eyeing back when I wanted to buy and they’ve scarcely moved. A few seem at most to be worth an extra $50,000, and its likely I would have had no investments in order to reach that increase. Now, if I had the coin for a house, that would have been something else.

#55 rawdiswar on 02.15.16 at 6:55 pm

I used to read the comments just for Smoking Man and to glean a few tidbits of real knowledge, but Godth, I know Control +F for you too, buddy.

So if you’re young, (<35 yrs), not in any debt, and have a little over 100K to play with, what's the smart/ballsy move here?

Whether empires are crumbling or rising, someone always seems to making money and things keep moving. Is the direction forward? Well I guess that depends.

I was too young and dumb in '08, and I don't intend to let the forthcoming crisis go to waste.

#56 ILoveCharts on 02.15.16 at 6:55 pm

For the deniers:

http://www.newyorker.com/magazine/2016/02/22/chinas-rich-kids-head-west

#57 ron b on 02.15.16 at 6:57 pm

I miss my Okanagan house however… rule of 90 was not my way though it makes sense.

I sold my paid off house last year for many reasons. I’d read Garth’s blog for several years and realized I was house poor.

I’d paid off my mortgage as fast as I could but had no money to fix anything in my old house, no money for any fancy vacations… no liquid money except after several months of saving. Silly.

So I sold my house, invested and feel much better about things. I do miss my house and yard some days and maybe will buy again one day when I actually have the money to live in a house and not be enslaved by a house.

#58 IKnow on 02.15.16 at 6:59 pm

Garth, do you at least feel some sympathy for today’s Canadian youths in Vancouver or Toronto?
Back 30 years ago owning a detached house in an average neighborhood could be taken for granted, almost like the ability to breathe unless one is really very sick.
Now they gave to compete with international wealthy land barons and the diseases they spread to locals.

Kind of like 30 years ago you just need a B- to get in a decent university program, now it would be 89%+.

Some of us older folks had it too easy, well at least about owning a detached house in those two cities.

#59 Blacksheep on 02.15.16 at 7:03 pm

May I politely suggest, you read my comment again.

On this blog, there is always a RE boogy man lurking at every corner: Unemployment, rising rates and now (again) tightening lending practices that is going to change everything, this time, but strangely, never does.

The “big event” is always just over the horizon.

But It’s all BS, because the input data is faulty and the support for RE is 100% systemic.

I lived this shit, I sold the house, waited five years for nothing (thank god for gold) before realizing the error in my (and your) rational. If there is one thing I’ve learned, it’s not to fight the system.

#60 Godth on 02.15.16 at 7:05 pm

#47 JacqueShellacque on 02.15.16 at 6:24 pm

Yeah, we’re basically done. But what does that mean? Most people still look towards technology as that’s succeeded thus far. Now we’re in the age of limits. What does that mean? It means we’re going to have to do without again. Doesn’t necessarily mean worse or better but you should probably start closing doors as you move around the house. Meet you in the kitchen.

#61 Ronaldo on 02.15.16 at 7:06 pm

#13 Bram – re: assessments

You’re absolutely correct. I have checked many in his area and it makes no sense whatsoever. I know of one personally purchased by friends on Ontario St. (east side) which is assessed at over 1.2 Mil and the house value shown as just a bit over 92,000 (not reno’d) vs one two doors over that was completely reno’d with roughly the same assessment but with the value of the house at only 31,700. Both 33 ft lots.

You are right in saying that it appears that they are just using random numbers for the building values. I makes no sense. Maybe someone out there can answer this.

#62 Retired Boomer WI on 02.15.16 at 7:15 pm

This is all to much for the old brain box of a geezer now on the gov dole, albeit with adequate savings. A house, a lousy, always needing repairs, paint, and updating house!! Only Taxes and insurances are guaranteed to go up annually by inflation.

Your value will fluctuate with market & hood.

Is a place to wash up, take a dump, and love your better half worth eternal penury?

This geezer doesn’t believe it is. Sure, a 1/4 acre of crabgrass faux shutters, and carpeting might make the young more moist, but at what cost? For the old who satisfied the mortgage, ok until you are wheeled out to your ‘perpetual care plot’ in the cemetery, or the addled geezer’s home for the near dead.

Live your life, not for a house. I can understand the passion of a hobby overtaking the desire of owning a home, that’s all well & good. Fathers in law, not so much.

Your money (or borrowed money), your choice. HA!!!

I’d rather bet on the investment markets! Florida week!!

#63 Tony on 02.15.16 at 7:17 pm

Re: #23 Helman Rickards on 02.15.16 at 5:19 pm

1) Alberta real estate will keep on falling in price no matter if they cut production or not.

2) There will be no production cut until November or December this year.

#64 Godth on 02.15.16 at 7:18 pm

Try reading the post again, slowly. Move your lips if it helps. — Garth

You can read your post again at whatever speed you want and contort your lips however you want but the fact remains that Van. real estate is crazy up. I think it’s nuts, you think it’s nuts, we can sort of understand why it’s nuts, it is nuts and it keeps on going. Of course it ends badly and worser at some point but not yet, you’ve been dead wrong for a good long while.

Meanwhile you’ve been wrong for the same reason you bin right on stocks for quite a while. Cheap money honey. Are you crying tears of sorrow or joy?

Don’t matter ’cause the Paartae always ends. Who gonna’ clean this shit up? Not me honey. nuh-uh.

The consistent message here has been balance. Investing all in speculative markets or assets always ends the same way. — Garth

#65 not waiting on 02.15.16 at 7:26 pm

#19 Nemesis

that was an interesting article … thanks for posting

#66 Curt on 02.15.16 at 7:28 pm

Hi garth, the extension of this post is when do you actually buy in a falling market? We have been renting in Calgary since 2001. We have a growing family and have basically outgrown our rental. We have survived the cuts, are in excellent financial health and have no debt. I could extend our rent 6-12 mths but wonder when the bottom will hit or maybe I should just buy now knowing you can’t ever buy the bottom.
Thanks

Buy when it makes sense for you. But this is not the bottom. — Garth

#67 family beagle on 02.15.16 at 7:30 pm

The more I read this blog, the more I appreciate my wife. She refused to get a mortgage. She can’t stand debt. So we rent in 604 and own a sprawling estate across the street from a provincial park in the country, paid for with cash, 10% below list. She is the envy of her friends, not because of her 200′ arcing driveway, or her own mountain (named after her), but because her husband believes in her. Likewise, I’m sure.

#68 BG on 02.15.16 at 7:31 pm

“He‘s an engineer and makes $150,000 a year and I am a teacher at about 46,000. We make good money and yet my husband is still not interested in moving out of my parents’ house”

Pam, get a grip.
You found a guy who earns more than 3x times your gross income and allows you to say “WE make good money”.
Yet, you want to push YOUR own real estate lust down his throat.

Do you know how far can 46k get you in the GTA as a single lady? VERY far from any interesting neighborhood.
Don’t push you luck.

#69 Tony on 02.15.16 at 7:32 pm

Re: #37 S.Bby on 02.15.16 at 5:58 pm

Scott Bibby?

#70 wallflower on 02.15.16 at 7:33 pm

Heh, Winterpeg, is that stabby parts of the city, or shabby parts of the city.

Not a pegger.

#71 FormerSaskie on 02.15.16 at 7:44 pm

The engineer from GTA in Garth’s blog today makes $150,000.00 and his wife $46,000.00, not $50,000.00 as some commenters have written.

#72 peter on 02.15.16 at 7:47 pm

In Yvr specifically South Surrey the boom continues with houses going for over asking.I went to a new opening at high noon saturday with 50 people standing in the rain dying to pay 499.999-739000 plus for these townhouse. My wife brought me back the next day we were then allowed into the show suite then looked at the site map half the units sold!The other units not till the next release with higher prices the realtors mentioned. ….insanity people panicking to get in !

#73 Femdom Fist on 02.15.16 at 7:53 pm

My landlord in Cowtown has offered me a 30% rent cut if I stay. I’m going to see if I can get %40. Yeeehaw!

Also, netfile open, taxes done. #realadult The new auto-fill thing is awesome.

#74 Gus Treblehook on 02.15.16 at 8:01 pm

Trudeau Liberals gut the Canadian economy in order to grind out opposition. The fact that Canadians can no longer afford to travel is important, why, because having no world view will limit the discussion in Canada.

http://business.financialpost.com/personal-finance/retirement/how-canadian-snowbirds-are-feeling-the-pinch-of-a-falling-loonie-we-lost-a-lot-of-dollars

If you’re a young person you should be outraged that your government is determined to keep you ‘home’ and out o f the ‘world loop’. With the CBC constantly droning that Mr Giggles is sexy the Goebbels Propaganda Concept ( the biog lie) will have a greater and faster effect on the trapped minds of the young.

Everyone knows that negative interest rates are a tactic to devalue the currency, with zero effect on the economy, so why are governments determined to use this big stick? Is it because they have a plan for us to be good little robots?

http://www.telegraph.co.uk/finance/economics/12149894/Mapped-Why-negative-interest-rates-herald-new-danger-for-the-world.html

#75 Leo Trollstoy on 02.15.16 at 8:11 pm

Referencing the Teranet index, of course, which is notorious for lagging years behind what is happening in real life.

lol no wonder WalMark of Sadkatoon finds it hard to find a job

#76 Babbler on 02.15.16 at 8:13 pm

“If you doubt, think of the people torn up, in tears, terrorized or terrified by real estate. And the big event hasn’t even started.” – Garth

——————————————————

TO and Vancouver housing are completely divorced from the fundamentals. That should have become very apparent to everyone these last few years. There is no big event coming anytime soon that will hugely impact these two cities. Not unless we have a financial collapse. The prediction of higher interest rates is nonsense. There is no way that central bankers will allow that to happen because then we would have a financial collapse.

There will be a mess if they do not. — Garth

#77 Chris on 02.15.16 at 8:18 pm

Housing in Calgary is cold. Housing is hot in GTA and Vancouver. Maybe the people that lost jobs in Calgary can come to GTA to do some counselling on house buying with the people here. GTA is hot hot hot. I really gave up. A search for properties under 400k in Whitby gives less than 20 results. That is crazy. What is the median income again?

#78 triplenet on 02.15.16 at 8:20 pm

#13 Bram
That’s an easy one.
It’s not the specific allocation of a numerical value that one should be concerned about. (that has been attributed to the improvements)
It is the reason they do this.
Answer: qualification for the home owner grant.
YES, that’s all.

#79 nonplused on 02.15.16 at 8:25 pm

Pam and Jason will both be single soon. I mean who would stay with a woman who makes 1/3 what you do but thinks she’s the financial expert? Nope, she’s using you and see it as soon as your eyes (the ones in your mind) will allow.

I don’t get why raising the down payment requirements would cause people to bid way higher and thus incur much higher costs over all. Are we that stupid? If so kudos to the banks and the government for thinking of it.

#68 BG – Some people are just designed to push their luck. Maybe she looks really good in a dress or something. If the guy doesn’t even know about MGTOW he’s hopeless until he understands he has options that don’t include her.

#80 hope & ruin on 02.15.16 at 8:27 pm

#60 Godth on 02.15.16 at 7:05 pm

Yeah, we’re basically done. But what does that mean? Most people still look towards technology as that’s succeeded thus far. Now we’re in the age of limits. What does that mean? It means we’re going to have to do without again.
______________________________________

oh godth. You’re so edgy and cool with all your new age ideas. With your unconstrained international music scene. Our very own nostradamus has decided to spend end-times preaching to a pathetic financial blog. We are blessed.

After 60,000 years of human innovation and ingenuity. That’s it. No more ideas. No more ways forward. Might as well pack up and join the mennonites. lol. so boring.

That archdruid crap, it reads like a cult-site. If you can read the 8th and 9th paragraphs of that article without rolling your eyes at all the bullsh*t then you are a sucker for what these guys are selling.

If they tell you to drink the grape juice and a spaceship will come to get you…don’t drink it! There’s no spaceship.

#81 Emotions - Realties.ca on 02.15.16 at 8:32 pm

[…] Source: http://www.greaterfool.ca/2016/02/15/emotions-2/ […]

#82 Nagraj on 02.15.16 at 8:35 pm

I was readin’ a piece in The Aged Madam (G&M) about how this Douggg Ppporter (I stammer in the presence of greatness) says that the markets got it all wrong, that the economy is fundamentally rosy, that yas people runnin’ around with long faces is scarin’ off business and that, just think, a single hot liquid fertilizer pipeline straight up to Pluto would create more than twennythousand jobs. More than twennythousand!

SO: putting this into context: GT having said that “Bay Street is in a funk”, we expect Sophie Gregoire-Trudeau to arrive at Bay&King on a brightly decorated flatbed truck, singing “Tomorrow! Tomorrow! The sun’ll come out tomorrow! Just you wait and see.”

Adding urgency to the anti-funk movement, I now read here that “Job creation has fizzled.” Oh Garth, say it ain’t so!

All of which reminds me – imagine Garth as Baby Jane (demoralizing her crippled sister Blanche) – “But y’ARE crippled, Blanche, but y’ARE!” (Mean to the max, eh?) Of course Garth and Baby Jane ain’t the only folks willing to call a spade a spade, so there must be hope somewhere in Cripplanada. Maybe.

#83 @Jason on 02.15.16 at 8:38 pm

Jason: Buy or be priced out for a long long time. This only applies to new ‘Canadian’ areas of Vancouver and Toronto.

Cash is pouring into these markets. Locals are scared and they’re buying the low end now. Speculators are also in now.

YVR and YYZ markets are too big to fail now. They will be propped up endlessly by high immigration, land use restrictions, and lax control of foreign money.

CBSA mostly doesn’t check the empty containers that are being exported to foreign countries. The foreign buyer is happy and pays for the import. In other words, figure it out.

#84 Shawn on 02.15.16 at 8:39 pm

Inverted Yield Curve. Exploding Black Sheep Heads and Recession.

#44 DannyBoy on 02.15.16 at 6:19 pm noted and forecast as follows:

The Canadian Yield Curve is inverted, which forecasts recessions. We should see the prices starting to drop even in the hottest of markets within 18 months

************************************
Indeed yes, the Canadian yield curve is inverted out to five years!

Bank of Canada target overnight yield 0.50%, 3 month T-Bill 0.46%, Benchmark Two year is at 0.36% and Benchmark 3 year at 0.35%., Benchmark 5 year is 0.48%.

http://www.bankofcanada.ca/rates/interest-rates/

http://www.bankofcanada.ca/rates/interest-rates/canadian-bonds/?page_moved=1

That does seem disturbing.

I don’t want to see a Bank of Canada rate cut but this looks to be forecasting same.

I don’t know what kind of insane investors are buying bonds that lock in less than 0.50% interest for two, three and five years.

If I had say a million cash, I’d far rather keep it at the 3 month rate of 0.46% or even keep it at zero% as opposed to locking in for 5 years at 0.48% or two years at 0.36%.

Even if I had $100 million cash it’s hard to imagine the logic of locking in such pathetic returns for several to five years. Yes, Mark will point out there could be deflation meaning I still get a positive real return. But if so the shorter term cash at 0% or 3 month T-Bill at 0.46% will benefit from deflation so I don’t need to lock in to get that benefit and so why lock in?

Notice also that as consumers we can get at least 0.75% in high yield savings accounts. Apparently big corporations either cannot get that or they don’t trust their multi-millions to a bank.

I am not sure what this five year inverted yield curve portends, but I don’t like it.

It does appear to suggest that the supply of money to be loaned at low rates is large compared to the demand for same. In order to entice borrowing and sop up the huge glut of savings we needed these low rates

(Blacksheep, feel free to let your head explode as you will be pointing out that loans create deposits which is true, but still someone has to own that deposit after it is created and the loan is spent, the deposit ends up as cash savings to some individual or business until such time as the deposit is destroyed by the loan being paid off.)

Maybe it is a predictor of recession as ultra low rates suggest a dearth of anyone wanting to borrow and invest ibn business expansion. They can only be enticed to do so through super low rates.

And maybe that is because we already have too much of most every sort of business capacity. Too many Hotel rooms, Too much retail, Also too much housing. Too much broadband, Too many television stations and on and on.

#85 Felix on 02.15.16 at 8:39 pm

Quelle surprise – yet another anti-feline, RACIST posting by the dumb bearded human who prefers dogs who have no self-respect and eat their own feces to observant and intelligent cats…….

As if all cats have behavioural issues like your little picture suggests! What an idiotic sweeping generalization!

Hope your dog pees on your leg and humps your Harley right into the repair shop, you HATER!!!!!

#86 Kreditanstalt on 02.15.16 at 8:41 pm

The common thread here is: these people still have (overpaid?) JOBS.

When this downturn hits, it will have run out of lower-paid lower middle classers to squash.

Next up the higher-paid: middle-managerial types, technicians and engineers, government employees and resource grunts.

Canadians are an eternally, deliriously optimistic lot…ever entrepreneurial even in completely obvious the absence of solvent buyers.

I think they’d better all sit in CASH.

#87 JSS on 02.15.16 at 8:43 pm

In September 1992, as I sat in the Engineering library at the University of Manitoba, there was a sign on the wall stating average salary of Engineers in Manitoba was $48,000.

I thought if I ever made $48K, I’d be set for life. A decent 1,900 square foot custom built two storey house in Southwest was around 2.5x Engineer salary. Now average salaries are almost double, but houses are now around 4-5x Engineer salary.

Yikes!

#88 @Jason on 02.15.16 at 8:43 pm

Lumber is a huge industry for money laundering.

A executive at one such firm told me that they usually send 40 container worth of wood. On papers, it is usually listed as planed, dried, high quality lumber. In fact it is lower grade lumber.

The purchaser overseas buys at a high price. That money comes to Canada. The lumber is liquidated at cost in the foreign country. The difference between the low grade and premium lumber is the laundered portion. And yes the importer and exporter are in bed with each other.

Exporting ‘jewels’ is also big business in Canada now. ;)

#89 Leo Trollstoy on 02.15.16 at 8:44 pm

“My husband and I have been married for about 6 months and moved in with my parents to save money. He‘s an engineer and makes $150,000 a year and I am a teacher at about 46,000. We make good money and yet my husband is still not interested in moving out of my parents’ house – until the market “corrects itself”.

solid income. and Pam is correct. GTA real estate prices have been increasing for a looooong time. insanity

#90 Shawn on 02.15.16 at 8:49 pm

Why Interest Rates are so low. Currency Devaluation?

Gus Treblehook says:

Everyone knows that negative interest rates are a tactic to devalue the currency, with zero effect on the economy

****************************************
Maybe that is part of the reason. But the stated reason is usually to get commercial banks to loan out money at interest rather than keep excess amounts on deposit at the central bank earning negative rates.

And it is often said that the central banks have less control over the longer term rates.

There we have market participants, pension funds, insurance companies buying longish term bonds at near-zero rates. WHY, WHY, WHY? Blind adherence to asset allocation guidelines? Utter stupidity? If they did not buy those bonds the yields would rise. Central Bank also may be buying but why do private companies?

Getting back to currency devaluation. The U.S. dollar has appreciated greatly. Why don’t they just print mass amounts of money and buy Euros and Yen and such to push up the value of Euros and Yen?

#91 Marco Polo on 02.15.16 at 8:50 pm

Here in Grande Prairie, AB my rent was dropped $200/month a few months ago. Now it seems it should go down further still. For what I’m paying now, I can get a bigger place for the same rent. The bottom has fallen out of the rental market here. In October 2014, we had 1.4% vacancy. Many couldn’t find a place to rent immediately, and had to stay in a hotel their first few weeks in town.

Work has dried up here, very few new jobs are advertised anymore. Companies used to pay for billboards as you came into town looking for help last year.

Now the hotel parking lots are half empty. The vacancy rate here for December 2015 was 10.8%. As bad as it is, it’s worse in Fort McMurray. I believe we are far from the bottom here. This is only the beginning of the end. The spring and summer markets will be a flop here, with desperate sellers and fewer buyers by the fall.

#92 western observer on 02.15.16 at 8:52 pm

RE: #58 IKnow

Wow! Somebody who acknowledges that Boomers had it way easier.

I respect that.

Reminds me of another Boomer to be respected, who told me the following:

“When I was 1 year away from graduating from high school multiple companies and potential employers came to the school throughout the year. They offered jobs and signing bonuses. I had 3 job offers. They were competing for my services”

In Europe and North America Boomers are widely associated with privilege, as many grew up in a time of widespread government subsidies in post-war housing and education, and increasing affluence.

They were also the generation that received peak levels of income.

Source: Wikipedia

For example:

In 1972 Minimum wage in BC was $2.50 per hour.
Cost of brand new sprawling rancher in Richmond was $40,000.00

Fast forward to 2016:
Minimum wage $10.50 per hour or just over 4 times that of 1972.
Brand new 2 level sprawling house in Richmond is $2,000,000.00 or 50 times that of 1972.

Sure wish that they were more Boomers who acknowledged this .

#93 Looney Baloney on 02.15.16 at 8:53 pm

Spotted at your local Walmart in the prairies:
http://imgur.com/ooHpNIK

#94 45north on 02.15.16 at 9:00 pm

Jaguar: talking about Jason: The ‘father’ of the bride needs to butt out. Stay out of their marriage.

this is gross interference. His motivation is to influence his daughter and her husband Jason. I mean he owns a house in Richmond – presumably free-and-clear. If he wants to be so helpful he could just sell and give her some money.

Single detached houses in Vancouver are now increasing in price at 50% a year which means now is a good time to sell.

#95 Leo Trollstoy on 02.15.16 at 9:05 pm

#73 Femdom Fist on 02.15.16 at 7:53 pm

nice!

#96 cramar on 02.15.16 at 9:09 pm

Pam, Pam. So young! So foolish! So naive!

Of course your friends and all those around you are correct. Real estate has never tanked in your short life, so obviously never will. Keeping up with the Joneses is just as fashionable today as it was in your grandparents’ generation. Go for it! Learn from experience. Make your own mistakes. Pay for the rest of your life.

#97 Bottoms_Up on 02.15.16 at 9:11 pm

Garth, how about 4 anecdotal stories of people loving the fact they bought, or made tons of money off of real estate?

Over the next 23 years I owe the bank $540,000, at which point I own the home outright, rent-free, for my remaining wheel-chair-free days. In the meantime, I get to raise my kids and give them consistency of home, neighbourhood and school, while knowing no one can force me to move but the repo man.

Why would we want to celebrate Groundhod Day lives? Real estate is not the point of existence. — Garth

#98 april on 02.15.16 at 9:14 pm

Check out, Rocco Galati challenges Bank of Canada to return to the practise of lending federal and provincial governments interest-free money for infrastructure. CKNW did an interview with him aired Feb 15. “His argument is that foreign private banks, are dictating the terms of Canadian debt, usurping the role of the BOC.” It also affects ” student, car and home loans.” He says Canadian banks and citizens are being taken over by these “International loan sharks” who are ” unaccountable”. “Keep the citizens enslaved until retirement, that’s if we can afford to retire”. Similar goings on in the US according to some of the callers to CKNW. Anyone else aware of this? What ya think?

Move along. Nothing to see here but tinfoilers. — Garth

#99 BS on 02.15.16 at 9:24 pm

Blacksheep on 02.15.16 at 7:03 pm

I lived this shit, I sold the house, waited five years for nothing (thank god for gold) before realizing the error in my (and your) rational. If there is one thing I’ve learned, it’s not to fight the system.

Sounds like you screwed up big time. Sold too soon then bought back in 5 years later at a much higher price near peak. Even without considering the hassle and massive transaction costs that is a huge loss. Your error was buying back in. You should have stuck it out and waited. In the US it took 13 years for RE to crash and Japan 20 years. We are just hitting 13 years in 2016.

#100 Kreditanstalt on 02.15.16 at 9:27 pm

#96 cramar

Forgive them! Almost no one alive today under the age of 45-50 can remember 19% interest rates. Or living with stagflation. Many do not know what a genuine “jobless recovery” is. They’ve never had trouble job-searching out of school, nor have they had to really PAY for credit. In an era of continuous nominal increases in “asset prices”, few have been punished for living paycheck to paycheck. There have always been “more jobs where that came from!”

What North America needs are job losses, big time…which will teach frugality, thriftiness, perspicacity, re-using and second-hand as well as the virtues of SAVING (investing) instead of mindless speculation and spending on consumption.

And…delayed gratification!

#101 cramar on 02.15.16 at 9:28 pm

#31 Silent the people on 02.15.16 at 5:37 pm

Great post Garth! Emotions run high and banks don’t help when they say things like Scotiabank commercial ” I moved some stuff around and saved you $1500.00 a year”
If banks can “move stuff” and create money why don’t they do that all along! Who do you trust! No wonder the public is confused!
“Buy now or buy never!” “A Home is everyone’s goal!” What a bunch of baloney!

————–

When I first saw the Scotiabank commercial, I said to my wife, “I should go down to the bank and tell them to move things around and save me $1500.”

Like to see how they can do that, since the only thing I pay the bank is for safety deposit box rental.

#102 Love my Kia on 02.15.16 at 9:31 pm

Awesome blog comments tonight!

I read the China’s Rich Kids, Kanye wanting a billion from Zuckerberg, and the Facebook showoffs, all great links that show the problem with debt in today’s society.

#103 james on 02.15.16 at 9:31 pm

So, one thing that I find baffling is the frenzy to bid over asking.

Let’s take a family in Toronto. I think that was about 70k in 2011. 73k in 2013, according to StatsCan.

Let’s double that family’s income to around 150k. On that, they will be paying a fairly hefty amount of tax. Sales tax, income tax, hidden taxes for their vehicles, the upcoming ORPP, etc etc. And then food (which is rising due to the crashing dollar), consumables, retirement contributions (ha ha, right), etc etc.

I’m no accountant, but it strikes me that two people earning double the median family income in Toronto might have 20% of that total left over as disposable income. So maybe 30k.

They are willing to pay 150k over the asking price, or 5x what a fairly high earning family in Toronto can save per year. On a home that is probably already valued at 800k+, which is way beyond the 3x income heuristic that is the historical norm.

Crazy, just crazy.

PS: Payscale.com is giving me 63k average salary for mechanical engineers in Canada, and 61k for civil engineers. 150k is not bad at all for Canada. That is way more than one standard deviation.

#104 j on 02.15.16 at 9:31 pm

Well so we’ve gone nuts. It will correct by the time I am retired so no house for me
http://www.theprovince.com/news/vancouver/that+tiny+point+grey+home+land+sells+over+million+asking/11721091/story.html?utm_source=dlvr.it&utm_medium=twitter

#105 Dirty Debtor on 02.15.16 at 9:34 pm

$1800 for a one bedroom apartment…

How much money does that leave for food, the heating bill, and yoga class?

#106 salonist on 02.15.16 at 9:45 pm

Meet the Real Estate Duo Answering Vancouver Prayers

http://thetyee.ca/News/2016/02/12/Vancouver-Holy-Realtors/

#107 the Jaguar on 02.15.16 at 9:47 pm

#94 45 North…. I stand by my comments. Note this:
here’s Jason, 27, also with a fresh bride:

Fresh bride. They are newly married. Let them enjoy that phase of their lives before ‘helpfully steering them in the direction in which the father-in-law’ thinks they may benefit. He may be right. But give them some time. Helicopter parenting extends to the stage where the young have left the nest and set up their own household apparently…. Advice is usually welcome, but let the nuptials cool off a little before stepping in with it.

#108 Mark on 02.15.16 at 9:49 pm

“The U.S. dollar has appreciated greatly. Why don’t they just print mass amounts of money and buy Euros and Yen and such to push up the value of Euros and Yen?”

In a nutshell, its not the style of the US government, nor the US Fed, to confiscate value from Americans and give it to foreign nations. After all, if the US were to buy Yen or Euros, then the governments of Japan and the various EU nations would be earning seigniorage on such money.

Besides, with chronic long-term US trade deficits and a significant shortage of export capacity in the US economy, its only a matter of time before the USD$ falls again. Recent US Dollar strength is, at best, likely short term in nature.

#109 Mark on 02.15.16 at 9:56 pm

“PS: Payscale.com is giving me 63k average salary for mechanical engineers in Canada,”

The salary surveys from the various APEG* and the PEO* put the average salary of engineers in Canada in the $90-$125k range.

Surveys conducted by Statistics Canada, and by other private data gatherers tend to be less rigorous on the definition of ‘engineer’. Often including technicians and technologists in the tally, which often bring down the averages.

However, even those figures might be somewhat misleading, as, according to an OSPE report, only 1/3rd of Canadians qualified to be part of the professional engineering profession are actually able to find work in it.

So $150k is pretty good, but unfortunately, not all that common.

Concur with the previous poster, with reference to his 1990s experience at the U of M, that engineers have lost a lot of ground in the housing market. But then again, so have most other professions except those directly related to the FIRE bubble.

#110 fishman on 02.15.16 at 9:59 pm

I like the story about the lumber laundry. The Chinese just acquired a big ground fish license, quota & license out here from an independent. Price has been stable for years because two men (Jimmy & the Yank have oligopoly) Price jumped 60% in 2 weeks. Pretty hard to go through a container of frozen fish (40,000 lbs. sorted in 60lb boxes & strapped. If your still left owning fishing licences & quotas looks like another west side Van play. Is it sinking in yet for those east of the Rockies just how much money is coming across the Pacific? Don’t worry, you’ll figure it out. In the meantime, just a suggestion, get ready by acquiring & keeping the good stuff.

#111 NOTHING SURPRISES on 02.15.16 at 10:05 pm

Mr Turner, a good explanation on why the distorted real estate market should not be entered.

Emotions? Highly overrated.
Possibly: but they do come in handy when you have to tell someone you absolutely don’t know, who is submitting relevant comments to a superficial blog “I don’t like you”.

But I don’t. — Garth

#112 april on 02.15.16 at 10:09 pm

#98 – Well that’s it now Garth. If I didn’t have much respect for CKNW all along now I have none.

#113 45north on 02.15.16 at 10:11 pm

OttawaGuyRenting:

I just know that in my line of work, there are a ton of scared people. (Consultant for Large Multinational Restaurant)

Average cheques are down. Traffic across the board – also down.

“Nothing left at the end of the month” is the factor.

Can Ottawa skate through a major housing correction as a big government town?

no it’s not going to skate through a major housing correction. But what do you care about housing – you’re in the restaurant business?

#114 common sense on 02.15.16 at 10:17 pm

Just read China expanded it’s credit $520 BILLION in January alone which was 1/2 of QE3 and 1 TRILLION since October yet it’s stock market has been steadily declining.

Nothing to worry about at all in this inter connected world of finance…

Nothing at all…everything will work out in the end. It will all get paid back and no one will default.

#115 Brazil ex-pat on 02.15.16 at 10:19 pm

#98 april on 02.15.16 at 9:14 pm
Check out, Rocco Galati challenges Bank of Canada to return to the practise of lending federal and provincial governments interest-free money for infrastructure. CKNW did an interview with him aired Feb 15. “His argument is that foreign private banks, are dictating the terms of Canadian debt, usurping the role of the BOC.” It also affects ” student, car and home loans.” He says Canadian banks and citizens are being taken over by these “International loan sharks” who are ” unaccountable”. “Keep the citizens enslaved until retirement, that’s if we can afford to retire”. Similar goings on in the US according to some of the callers to CKNW. Anyone else aware of this? What ya think?

+++++++++++++++++++++++++++++++++++

That was a great show last night. It really is too bad the anti-tinfoil people always have to be proven wrong. Well in North America anyway. Here in Brazil everyone laughs at how brainwashed North Americans are.

#116 Smoking Man on 02.15.16 at 10:20 pm

And on tonight’s x-files Mulder uses mushrooms to tap the UCC to solve the crime.

#117 45north on 02.15.16 at 10:29 pm

fishman: Is it sinking in yet for those east of the Rockies just how much money is coming across the Pacific?

that got my attention. the Chinese are getting their money out of China in whatever way they can. My personal theory is that we are witnessing capital flight of biblical proportions.

#118 Ms on 02.15.16 at 10:51 pm

“Meanwhile in the GTA, meet Pam, who I think is pissed at me!”

Haha you know we all love you here!

#119 Ronaldo on 02.15.16 at 10:56 pm

”Why would we want to celebrate Groundhod Day lives? Real estate is not the point of existence. — Garth”

Decided to see how many times I’ve moved in the past 50 years since leaving home after graduation. 19 times. Once every 2.6 years. It used to be said that people moved every 3 to 4 years. Three more to go all going well. I was a restless groundhog.

#120 NOTHING SURPRISES on 02.15.16 at 10:57 pm

Watching the news while sitting in Florida it was announced the first US factory will be built in Cuba in 50 years to initially assemble 1200 small tractors for farmers.

Canadians have been going to Cuba for decades,

Where are our Canadian entrepreneurs/businessmen?

#121 Leo Trollstoy on 02.15.16 at 10:59 pm

if a person didn’t make money in the dramatic drop of the CAD against the USD in the last 3 years, what hope do they have of making money when the trend reverses? exactly. none.

#122 TurnerNation on 02.15.16 at 11:04 pm

Solution to all of this today: Get a divorce.

Never take advice from relatives on love nor money.
The ungreat have no place in the bedrooms of this country.

#123 Joe2.0 on 02.15.16 at 11:18 pm

Oil will go up once WW3 kicks off officially in the next few months, war also is cyclical.
Then houses are going to be the least of our worries.
Your all aware of what’s going on in Syria right now I hope with the hundreds of thousands of troops that are jockeying for position.
Perspective 2.0

#124 Raging Ranter on 02.15.16 at 11:28 pm

“Suffice it to say the fiscal argument didn’t go down well and there were many a tear shed that night. ‘But I want to feel like I own something’, she says. You warned me of this Garth, and it’s happening.”

The poor SOB is divorced already, he just doesn’t know it yet. He’s up against a wall. His wife is going to listen to Daddy, and that’s that. If he doesn’t go for it, she’ll likely raid their savings and say, “I don’t need a man to invest in real estate” (really ironic since her Dad will be backstopping the deal). If he succeeds in convincing her not to do it, his father-in-law will resent him for destroying his baby girl’s home ownership dreams (in reality he’ll resent him for screwing up his own investment plans).

Even if he convinces her to stay put and RE crashes in Van, proving him right and prudent beyond even his own expectations, she’ll seethe with resentment just because he was right. No woman ever has an emotional argument that brings her to tears, then comes around to the guy’s point of view. She will NEVER admit he’s right after investing tears and hysterics in an argument. That’s a woman’s point of no return; the point where he became permanently wrong. I feel for him, but whatever… marry better next time I guess.

#125 Observer on 02.16.16 at 12:03 am

B.C. to unveil new measures to improve collection of real estate data

British Columbia will introduce new measures to improve the collection of data around real estate transactions – information Finance Minister Mike de Jong says will then be shared with the Canada Revenue Agency.

http://www.theglobeandmail.com/news/british-columbia/bc-to-unveil-new-measures-to-improve-collection-of-real-estate-data/article28762976/

#126 b riding dirty on 02.16.16 at 12:23 am

A old buddy called me up at work today. To see how I was doing or to pump his own tires, either way I was happy my phone rang and it was not my wife to bitch at me about something I di5 or did not do.

Anyway he bought a home in burnaby aka. B town. In 2007, 495k built a brand new home 650k and now is getting cold calls with realtors suggesting 3million.

He said some great words over some beers. Ay back then, you can’t save or invest your money faster then its going up.

All us friends were. To concerned with trying get girls.

Respect to my buddy with a clear 2 million profit while we watch or banks and invests fall flat. I told him today sell !! And do not invest. Enjoy!

#127 NeoAnderson on 02.16.16 at 12:27 am

Don’t you find it interesting that most of the time its the man that’s logical? :)

#128 Kenchie on 02.16.16 at 1:16 am

And this is why you shouldn’t judge a person’s wealth at all, because it could be worse than you’d expect:

http://www.independent.co.uk/news/people/kanye-west-claims-to-have-53m-in-personal-debt-and-asks-mark-zuckerberg-to-invest-1bn-into-kanye-a6874521.html

#129 BS on 02.16.16 at 1:42 am

Bottoms_Up on 02.15.16 at 9:11 pm

Garth, how about 4 anecdotal stories of people loving the fact they bought, or made tons of money off of real estate?…

The only people making money from RE are those that have sold and did not buy back in. Paper gains are not making money and do nothing to improve the quality of your life. You still live in the same house.

Over the next 23 years I owe the bank $540,000, at which point I own the home outright, rent-free, for my remaining wheel-chair-free days. In the meantime, I get to raise my kids and give them consistency of home, neighbourhood and school, while knowing no one can force me to move but the repo man.

Plenty of people renting do the same thing, except without the anchor of the $540K debt. Plus they get to raise their kids in a nicer neighbourhood, send them to better schools, live closer to work and spend more time with the family at a lower cost. The savings on interest, property taxes and maintenance are then invested which provide income and freedom for those wheel chair free days.

#130 Babbler on 02.16.16 at 1:50 am

RE is NOT going to crash in Vancouver. The Chinese are offshoring their money big time. They obviously feel the best way to invest their money is in Vancouver RE.

#131 Carousel on 02.16.16 at 2:44 am

Vancouver hot market is on its way out … With the corruption and total greed of some Realtors .. The CRA will squash and track them down. Are people so blind to see that the government is kahoots with real estate. To make money .. BC is in the black financially. … No kidding.. Does it take Globe and Mail to dig up corruption …It seems to me the whole system is corrupt, might and well be living in Russia.

#132 family beagle on 02.16.16 at 3:25 am

#124 Raging Ranter on 02.15.16 at 11:28 pm
She will NEVER admit he’s right after investing tears and hysterics in an argument. That’s a woman’s point of no return; the point where he became permanently wrong.

I disagree, respectfully. It’s just social stress and a conflict of maturation rituals. Nesting has superseded mating for wifey. She’s feeling insecure due to a lack of momentum between approval ceremonies. Society, parents, peers all pressure her to nest. Now Daddy wants her to nest. Alas, husband’s investments are intangible and without accoutrement. I recommend they travel and stay in a few finer hotels, so she sees the debt culture back home is for peasants.

“My father in law is a very nurturing father to my wife and will do everything he can to help her. He came to us with a proposal.”

He sounds like a professional meddler. If Father and Daughter want to do a business arrangement, consider the angles where you come out wealthier. Now is the time to negotiate. Maybe a vacation for yourself and a buddy in Portugal. Say yes, but with the conditions x, y, and z. However, realize this strategy establishes Daddy as the knight of her castle. Does she mention the word “home”?

If so, I might take Daddy out for a coffee and tell him how the birds and bees work and to back off, he’s effing up my marriage. I’d tell wifey to choose. If she picks me, maybe I’d reward her by taking the deal. Or another deal. Maybe I’d agree to rent with an option in a year. I’m trying to imagine my wife and my mom as business partners? I shudder.

To Jason, 27, with fresh bride, don’t stress about it. It really doesn’t matter what you do, as long as you both want to do it together. Maybe Daddy has a good deal? Either way, it doesn’t involve him. It’s you and wifey in a canoe paddling, hopefully in the same direction. Go on a date together everyday. Be rebels together. Take your losses together and with no blame. I’ve been with my wife since we were 16, I’ve known her since grade five, now with two grown kids. Imagine the turmoil, and the bitter sweet… A house is nothing in the grand scheme. It’s a box that someone else stuck a value on. You can buy a shipping container for cash and live anywhere on roots and berries if you believe in each other. Love isn’t agreeing. It’s the joy of being with your dearest friend, even in dangerous times.

#133 Maxwell C. on 02.16.16 at 3:44 am

I’m still sceptical of all of this. I read your blog, and thoroughly enjoy it, but there’s that bit of me that also is itching to believe what I think is the bullshit here in Vancouver.

I mean… just go to any house viewing. My parents are so doing right now, after I convinced them to sell their massive house a year ago. Almost everyone is Chinese or Korean at these viewings.

Why does Garth think that the rumours of “It won’t pop because there is always a richer Asian to buy at the higher price” are not true? I realize that statistics may point otherwise, but I am sceptical of those too. Anecdotal evidence suggests otherwise.

#134 family beagle on 02.16.16 at 4:55 am

A word to the wife of Jason, 27…
I wanted to buy an apartment in Vancouver and get on the property ladder when we got married, but my wife didn’t want to. She hates debt. She doesn’t like being owned. As the male, I was constantly scorned because I didn’t jump in a buy real estate ‘for’ my wife. I got badgered by my parents, (thankfully her parents were cool), and I was shamed by friends, even a brother avoided me because I rent. But I didn’t marry them. It meant enough to my wife to stay debt free that I made it our decision and it’s been the two of us against the world. I won’t kid you, at times we’ve been tested. Thirty years later, it’s real, deep, and dreamy.

Moral? Now we have two successful children with great priorities. We own a ranch in the interior, a vacation cottage in the okanagan, we’re even shopping for an island getaway…and we still rent in Greater Vancouver. In that time we’ve had incredible travels, careers, several businesses, we’ve rescued people and animals, and indulged in life altering experiences and challenges, none of which would have been possible if we were stuck slaving to pay a mortgage in a nowhere job. We’ve been all over the world for business and even toured on stage together with a band…all while we were renting. Meanwhile, those friends who pestered me–Divorced, boring, suburban, old, or dead. My wife is still young, growing, learning. She dances when she gets up in the morning. She’s an incredibly interesting person, one in a million, and I feel fortunate for the journey.

#135 Mike in van on 02.16.16 at 5:02 am

@Suede: family day? No, around here we call it like it is “Christy Clark Day”

@Jason: let the father in law buy the whole thing. You have the freedom to move anytime without selling “your part” and you will eventually inherit the *huge* financial gains in the end, right? So tell pop-in-law to put that apartment in his will and leave you off the deed!!

#136 Herb on 02.16.16 at 6:27 am

“Free enterprise” in Canada –

http://www.cbc.ca/news/business/neil-macdonald-competitition-1.3444243

At least now we know why the Investigations Branch of the Competition Bureau of Canada never found evidence of price fixing (or “price maintenance”) among oil companies, for instance, except for some bit players in Quebec, even before that champion of free enterprise, Harper, removed some teeth from the law. They were not supposed to. It’s good for us.

Ask me why I’m a “leftie”.

#137 Ontario's Left Coast on 02.16.16 at 6:33 am

Kudos to the Globe for pulling the thread on this one. What a scam, perpetrated by greedy opportunists feeding off the growing addiction of runaway house culture. These guys make the stock pumpers of old look like do-gooders by comparison.

Heaven. Help. Us.

http://www.theglobeandmail.com/news/british-columbia/bc-to-unveil-new-measures-to-improve-collection-of-real-estate-data/article28762976/

#138 fancy_pants on 02.16.16 at 7:36 am

Unfortunately for Pam she married a guy with common sense. Common sense was put to rest long ago. I still kick myself for selling an investment condo back in ’08 when it looked like sheet was about to hit the fan. In non-manipulated market conditions, RE would have properly fallen to sustainable and appropriate levels. but no, some little pecker had to introduce 0/40 mortgages and a nerd with a slick haircut had to in-still ’emergency’ rates (seven years and counting now)

They reigned in the loose and lax mortgage conditions in an effort to curtail the lust for debt but it was too little too late. Recent to the table is homebuyers now have to put at least a down payment of 10 per cent on the portion of the price of a home over $500k. However, with the talk of negative interest rates now (no surprise to most of us this was coming – it has to in a fractional-reserve, debt driven economy), the primary fuel source (low rates) has embedded itself as the new norm. Couple that with our lower dollar and the non-existent HAM, healthy immigration, and casino effect on RE you can see how we got to where we are. Going forward, it certainly does not look as rosy so I would offer equal caution to Pam but ZIRP remains her #1 enemy and it along with all it’s sidekicks will continue to submit upward pressure on the RE circus in Candastan.

#139 economictsunami on 02.16.16 at 8:08 am

Freeze but no thaw.

Secret Saudi Arabia-Russia oil meeting ends: production freeze, but no cut:

http://www.businessinsider.com/the-saudi-and-russian-oil-ministers-are-meeting-and-crude-oil-is-ripping-higher-2016-2

The flies in the ointment:

“If Iran and Iraq are not a part of the agreement, it’s not worth much — and even then there is still a question of compliance.”

From the “Hey, but I thought everything from fixed” files:

DANGER SIGNS FLASHING FOR GLOBAL ECONOMY, YEARS AFTER CRISIS:

http://hosted.ap.org/dynamic/stories/G/GLOBAL_ECONOMY_THE_BIG_UH_OH?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2016-02-16-05-37-21

Where Deflation Comes From

http://www.theautomaticearth.com/2016/02/where-deflation-comes-from/

That’s the problem. Nothing is/was fixed. We just bought some time but targeted the wrong financial demographic…

#140 TurnerNation on 02.16.16 at 8:27 am

There’s the daily bottom in USD/CAD

#141 TurnerNation on 02.16.16 at 8:29 am

In the land of million dollar sht bungs:

From IE

“Canaccord also took a $4 million writedown of its investment in Canadian First Financial, which offers mortgage and other financial services to retail customers.
The biggest portion of Canaccord’s third quarter loss is a $321 million writedown of the value of its capital markets division, which provides research, advisory, trading and corporate finance services to institutional and corporate clients.”

#142 Tony on 02.16.16 at 8:34 am

Crude is falling very fast and it looks like it will eventually test the 20 dollar U.S. mark this year. No production cuts.

WTI has added 10% in a couple of weeks and sits just below $30. Go away. — Garth

#143 Herb on 02.16.16 at 8:41 am

#74 “Gus Treblehook” –

another creative name for an uncreative Conservative robowriter.

#144 Noel on 02.16.16 at 8:59 am

An economic decline means lower levels of business investment, and lower for longer interest rates, which means better mortgage rates.

Cash and real estate is going to be the best asset allocation for the next couple years.

History says otherwise. — Garth

#145 AfterTheHouseSold on 02.16.16 at 9:09 am

#127 NeoAnderson
“Don’t you find it interesting that most of the time its the man that’s logical? :)”

Yes, and yet when it comes to selecting a mate, seem to do their thinking with their little …oh never mind.

#146 Soothsayer on 02.16.16 at 9:41 am

Like I said before (straight out of Macbeth)…

“Caesar, Caesar beware the ides of March!!!”

#147 Penny Henny on 02.16.16 at 9:43 am

“This is where I am confused, my dad and my husband have been discussing this correction for years (while also quoting your blogs) and still nothing has surfaced, in fact I think it is increasing quickly. So my question to you is, how do I know you, my husband and my dad are the right ones and everyone else around me are the wrong ones?- Pam

///////////////////////////////////

Pam I think you should sit down for a moment because this may come as quite a shock. The reason your husband and your father don’t want to change the current living arrangements is because they are having an affair. I can’t imagine how much it hurts to find this out in such a public forum so know that you have all of our support. Stay strong.

#148 CBC Breaking News: Average house price in Canada up 17% on 02.16.16 at 9:45 am

Check out http://www.cbc.ca/news/business/housing-crea-january-1.3449838 :

“BREAKING: Average house price in Canada up 17% in January to $470,297. … Home sales were higher during the month, but prices truly soared, the Canadian Real Estate Association reported Tuesday. As has been the case for several years, however, two large and hot markets, in Toronto and Vancouver, skewed the national average higher. Stripped the two cities out of the numbers, the average Canadian home was worth $338,392 last month, and the year-over-year gain drops to eight per cent. If B.C. and Ontario were stripped out, the picture would look even bleaker — the average price of a Canadian home would have dropped by 0.3 per cent in January to $286,911.”

#149 Love my Kia on 02.16.16 at 9:50 am

Newsflash.

Home sales up 17% last month. Next month will be even more interesting with increased down payments required.

Big drop coming.

#150 Love my Kia on 02.16.16 at 9:58 am

Home prices up 17% I meant.

Its bubbalicious!

#151 Renter's Revenge! on 02.16.16 at 10:18 am

“Pam I think you should sit down for a moment because this may come as quite a shock. The reason your husband and your father don’t want to change the current living arrangements is because they are having an affair. I can’t imagine how much it hurts to find this out in such a public forum so know that you have all of our support.”

She doesn’t have my support. She should have seen this coming.

“Real estate is the most emotional of assets.”

#152 NTH on 02.16.16 at 10:18 am

Family Beagle, thanks for sharing some of your story. I enjoyed your word combinations on this thread.
Appreciate the Tuesday morning reminder that we are building loves & lives!

Bravo

NTH

#153 YVR Realtors Laughing at CRA on 02.16.16 at 10:36 am

I think its pretty clear the asian realtors are a huge part of the problem in YVR. They are blatantly advertising it too.

http://www.canadianrealestatemagazine.ca/market-update/vancouver-realtors-says-some-are-promoting-deceptive-practice-203166.aspx

http://www.theglobeandmail.com/news/british-columbia/bc-to-unveil-new-measures-to-improve-collection-of-real-estate-data/article28762976/

The white realtors are okay? — Garth

#154 Godth on 02.16.16 at 10:52 am

#80 hope & ruin on 02.15.16 at 8:27 pm

What a stunning argument you made. Would you prefer to hear how delusional you are from this guy:
http://www.vaclavsmil.com/
https://www.youtube.com/watch?v=nJxmlNyu4sE

#155 cramar on 02.16.16 at 10:59 am

#58 IKnow on 02.15.16 at 6:59 pm

Garth, do you at least feel some sympathy for today’s Canadian youths in Vancouver or Toronto?
Back 30 years ago owning a detached house in an average neighborhood could be taken for granted, almost like the ability to breathe unless one is really very sick.
Now they gave to compete with international wealthy land barons and the diseases they spread to locals.

Kind of like 30 years ago you just need a B- to get in a decent university program, now it would be 89%+.

Some of us older folks had it too easy, well at least about owning a detached house in those two cities.

————–

I’m not sure the average young adult 30 years ago could afford a house in TO or Van even then. I know I couldn’t. Yes it is tougher today for jobs, careers, housing etc. But where my sympathy ends is that if a young adult really wants a house—if it is that important to own, then the solution is the same as it was for me 40 years ago. GET OUT of TO or Van and move to some city where housing is affordable. That’s what I did. It still works today.

But in reality Millennials don’t what to leave the Big Smoke! They just want to whine that they cannot afford the housing.

#156 A Canadian Abroad on 02.16.16 at 11:00 am

RE: RENTS in Calgary are falling

We negotiated at the start of our lease 10 months ago for $200/month reduction; at the time, we were the cheapest 2bdr in the building by $450/month.

I just called this morning to see if we can get another $200+/month off due to market conditions in Calgary. Waiting for the response.

Rents have fallen so fast in Calgary that we went from the average to +$150/month over other units!

Now, we can rent a comparable unit for $400/month less in another building with FREE 1st mo/rent + 50% off next THREE months rents + Free internet and cable!

Crazy.

#157 Lillooet, BC on 02.16.16 at 11:06 am

#24 Shawn on 02.15.16 at 5:21 pm
Perfectly Logical Predictions Don’t Always Come True

Bingo!

Sometimes, contrarians win and win big!
If Mark ignored Garth’s logical analyses and bought a house in Vancouver or Toronto 8 years ago, he must have at least doubled or even tripled his investment. If, however, he went with a balanced portfolio, he may have achieved 50% return. In addition, if it is his primary house, there is no tax.

I still respect and read this blog!

How can I write so many posts and so many people still miss the point? It is not a competition between real estate and financial assets. It’s not an either-or scenario. Smart people have both, in balance and at the correct times. — Garth

#158 Lillooet, BC on 02.16.16 at 11:12 am

Another observation:
It seems most economists are well off but far from being wealthy.
Are they not interested in making money and being wealthy? Or they made stupid decisions based upon their own theories?

#159 BeSmartRich on 02.16.16 at 11:28 am

I wonder how the new rule of 10% minimum down payment requirement over $500K going to work out. Hopefully this will help calming the real estate frenzy happening in Toronto.

#160 Capt. Obvious on 02.16.16 at 11:35 am

Important: renters with recently acquired significant other: If you cave to your true love and buy now, and the market reverses, you can bet you will be blamed for the loss because you prevented purchasing earlier. This is honey logic. I can already see the conversations 5-10 years from now “I can’t believe we made no money on this house. It’s all your fault for making us wait to buy!”.

#161 Lillooet, BC on 02.16.16 at 11:39 am

#84 Shawn on 02.15.16 at 8:39 pm

I don’t know what kind of insane investors are buying bonds that lock in less than 0.50% interest for two, three and five years.

Buffett said in one of yearly letters “nowdays bond should have a warning label”.

#162 Smoking Man on 02.16.16 at 11:46 am

Damn I would love to buy shares in Greater Fool.

Soon all MSM online comments sections will be shut down. Looking all over the place to vent my brand of logic on the three woman would took down Ghomeshi. The more I research it the more is screams that this was a case of revenge by conspiracy.

No one likes to get dumped, but this takes it to a new level.

No Ghomeshi’s lawyers are getting hammered by femanazis world over.

#163 Capt. Obvious on 02.16.16 at 11:53 am

Fun story from talking with my parents over the week-end. Flash back to 1982. Interest rates are astronomical. They bought a 1500 sq ft detached new build house in a far flung corner of Scarborough near the Rouge Hill GO station. (I think that was their 3rd or 4th house — they were about 35 years old at this time.) Cost of house: $95,000. They never had a mortgage bigger than $30,000. Back then my father made about $40k a year and was the sole earner. People throw around $30k now like it’s chump change. (Even adjusting for inflation, that’s about $67k today. Adjusting for interest rates, that’s something like a mortgage of $160k today. How many people have $160k mortgages?)
The interesting thing to me is if you adjust for inflation and interest rates, that house wouldn’t sell for much more than you’d expect, which tells you a lot about how much falling interest rates over decades have contributed to current housing prices.

#164 Smoking Man on 02.16.16 at 12:10 pm

Socialist

Notley bans any reporter from Rebel
Alberta is doomed.

http://www.therebel.media/notleyisabully

Like I said before, Hitler was a socialist so was Stalin.

#165 IHCTD9 on 02.16.16 at 12:17 pm

#15 JSS on 02.15.16 at 4:56 pm
I thank God every day that I’m married to a someone who understands the importance of saving, and investing, yet does not hold me at gunpoint to buy a bigger house and spend like drunkees like her buddies on Facebook.

There are two things that really screwed up couples – (1) Facebook ; (2) low interest rates.

Facebook problem – “Hey everybody, look at us! Look at our $800,000 house we bought! We’re so rich now! Also, look at our pics we posted five minutes ago! Look, we’re eating sushi! And, I just bought a $900 LV purse, on sale! Did you guys check out our pics on the beaches in Trinindad and tobago? You guys sure wish you were us”

Low interest rate problem – “Bank: Sure, you can use your HELOC for aaannny thing you want.” Couple:” Oh wow, I want granite countertops. Guy says, hey I need another ski-doo”

Canadians are so f^&*$d up. Logic be damned. This country needs a good ‘ol recession like them ones from back in 1982, and 1992, to bring the fear of God into them.
____________________________________________

This is about correct, I’d go beyond just Facebook to include all online social media and MSM outlets. Most of the internet is being used for “Ballerism”, everything from houses, cars, guns, boats, bikes, vacations, travels, you name it. A quick look on youtube reveals twenty somethings who spent every dime they had, plus leverage out the back door to drive a Lambo – and then post a million vids about how great the car is, how he’s realized his “dreams” and on the virtues of working hard and saving LOL!

The WWW is rife with “look at me” syndrome…

#166 Dups on 02.16.16 at 12:30 pm

Fed’s newest member suggests breaking up Wall Street banks.

http://www.reuters.com/article/us-usa-fed-kashkari-idUSKCN0VP1Y4

If US does it and Canada follows too.
Say goodbye to the CHMC and say hello to housing bubble burst. The smart baby boomers should have sold their homes by now.
This year is their last chance to get out in dignity!!!

#167 CH on 02.16.16 at 12:36 pm

Sheesh. The market shift continues. I stopped coming to this blog a long time ago. I think a big part of that is Im over real estate. there not much I can do about a permanemt shift in the market. I thought I was being smart now Im just priced out of ever having a home. thats ok though, ive come to terms with it. Sometime markets just fundamentally change, even though 99% of the time this would just be a bubble. I made all the right moves (normally) but I bet on the wrong side. Thats all, life is risk and I made a bad bet.

#168 sam on 02.16.16 at 12:40 pm

Garth,
We encouraged to invest in bonds at a quite high percentage of our saving.
After tax the yield is so small and the risk of significant loses present ,how can one address the issue.
I would appreciate your comments on bonds.
Keep up the good discussions.

#169 Hope & Change (Canada) on 02.16.16 at 12:44 pm

#136 Herb on 02.16.16 at 6:27 am
“Free enterprise” in Canada –

http://www.cbc.ca/news/business/neil-macdonald-competitition-1.3444243

Ask me why I’m a “leftie”.

How many were prosecuted for price fixing before the change in legislation?

The idea was to decriminalize price fixing (which is harder to prove) and instead replace it with fines (much easier to prove and implement)

Anyways, sometimes you need to think beyond the CBC story.

Like for example, Canada Goose has lots of competitors as does Apple (another non discounter). So the fact that they don’t discount their own products does not constitute ‘price fixing’.

Consumers do not HAVE TO BUY Canada Goose, they can by thousands of other brands that will keep you just as warm for 1/3 of the price.

I personally use Android, not Apple products, because I don’t want to pay Apple prices for what I consider an inferior product.

But enough FREE people are happy to buy Apple products thus keeping Apple in business and doing very well. So how is that price fixing?

On the other hand consumers HAVE TO USE TAXIs because there is a monopoly supported by the state that sets and FIXES PRICES.

The state makes rules that guarantee a monopoly and then the taxis complain that possible competitors do not follow the rules. Huh? The whole idea is to kill competitors thus they have no rules to follow.

Taxi plate owners buy and sell plates on the black market at inflated prices and we, the taxpayers are responsible for their bad investments. Really? Anyone here getting their money back on CPD from the government?

Taxi owners want the government to spend tax payer resources, in the form of salaries for cops, judges, lawyers, politicians to enforce their monopoly so as to guarantee that their black market plates do not lose their value. Really?

All of a sudden, taxis, of all people, are concerned about governments getting their fare share in tax money from Uber. Ha! Please!

I live in NYC. We have Uber here now. I don’t really see the point of it in Manhattan. There’s always a taxi driving by. But taxis sometimes don’t want to go all the way to the Bronx or whatever, so then, an Uber would be handy.

I was in Dubai a few weeks ago, they also have Uber. I took it once because I couldn’t get hold of a taxi from where I was. Otherwise taxis are more affordable there.

The point is, if Uber can exist in NYC and the UAE, it can sure exist in Canada. The taxi plate owners just need to back down and forget about their monopoly.

#170 "Jason" on 02.16.16 at 12:59 pm

Some interesting advice here for me to ponder over.

Seems I need to go home and immediately withdraw all our investments so my wife can’t take it behind my back, ask for a divorce and hire a hitman for my soon to be ex-wife’s father, all because we disagree on real estate….

You guys are quite dramatic!

#171 A Canadian Abroad on 02.16.16 at 1:15 pm

*Goldman’s Currie expects gold to fall under $1,000. A 17% Decline

Goldman Sachs (NYSE:GS) today stated that it sees gold’s rally as fleeting, believing it will drop to $1000 per ounce by the end of the year.

“…sees bullion dropping to $1,100 in three months, then $1,050 in six months and finally $1,000 in 12 months.”

http://www.marketwatch.com/story/goldmans-currie-expects-gold-to-fall-under-1000-report-2015-07-22

#172 IHCTD9 on 02.16.16 at 1:20 pm

Maybe my memory is fading, but 15 years ago, I don’t remember such marital strife or drama associated with buying a house. When the wife and I started out, the plan was kill off the OSAP loans, get a good start on the RRSP’s, buy a house, start a family.

Once the school debt was gone and the RRSP’s off and running, next was buying a house – so we just went out and bought one.

No strife, arguments, family interventions etc..

#173 Retired Boomer WI on 02.16.16 at 1:31 pm

#153 Godth

Reviewed your attachments there. Frankly, I did not get much out of it. Yup, we use steel, drive inefficient cars.
They are less inefficient than before. We have driven prices for some commodities (houses) to unimaginable levels in certain areas. The wise today avoid living in those areas. Why? Simple, they will not be desirable areas tomorrow (think 30 year downstream).
Employment today can be had virtually anywhere, why would you try to do it in the highest cost places?
Because of recency, conditioning, and that strangest of commodities family.

Rethink reality.

#174 Penny Henny on 02.16.16 at 1:36 pm

Garth please help me. I just heard a commercial on the radio with Tube Top Sandra and she is trying to solicit new clients. I can’t help it but I’ve got this urge to sign a BRA with her. Pray for me.

#175 Mark on 02.16.16 at 1:41 pm

“If Mark ignored Garth’s logical analyses and bought a house in Vancouver or Toronto 8 years ago, he must have at least doubled or even tripled his investment.”

I certainly could have done that. But over the past 3 years, the house would not have appreciated (as the only reason these ‘headline’ Realtor averages are going up is on account of the shifting sales mix!). Meanwhile, I’d be sitting on an asset with a P/E well into the 50s and 60s (Canadian average ~= 35) if not higher. Ripe for even more dramatic falls than already experienced.

I’m much, much happier with my balanced portfolio of Canadian and foreign assets with a P/E hovering around 12, and plenty of growth upside. I’m much happier with a modest 15% of my portfolio allocated to a very deeply out of favour segment of the market, the precious metals mining sector. I love the fact that I can be mobile instead of worrying about the roof leaking, or where the money for a new furnace is going to come from.

The fact that stocks are so out of favour, and housing is way too much in favour, is, in my view, an opportunity of a lifetime. Especially in Canada where, on account of all the deflation that the falling RE market is creating, the Bank of Canada will be stuck in ZIRP (or near to it) for at least the next decade.

#176 Best and worst investment on 02.16.16 at 2:00 pm

@hope and change

Only an idiot would buy a taxi plate right now. There is too much risk from ridesharing. Plate value in Vancouver was $800,000. Now, maybe $200,000??

#177 understood by few on 02.16.16 at 2:00 pm

#148 Love my Kia

Next month will be even more interesting with increased down payments required.

Big drop coming.

The down payments shift is too small. And here in wet green BC, Krusty (the clown) Clark is pushing for reduced PTT for first time buyers, which should negate any changes made federally. Make it easier for people to get into the market, so current owners can trade up and the gov’t gets their cut of ever increasing property values via PTT.

A $1mil home costs $18K in PTT. Of course back when PTT was created (thanks Bill), 95% of homes were under the 200K step from 1% to 2%. That cuttoff/step should have been indexed to inflation or average housing prices. Now you can’t buy a SFH for 200K in YVR. You can maybe get a 400sqft studio in a crappy building in a crappy area. Want anything nicer (like a single bedroom so you have a door to hide your indiscretions) and you have to pay the full PTT.

Looks like my original comment beat the typo fix. ~200K income is pretty darn good. Still, I wouldn’t want to buy anything more than 700K on that (preferably 600K max). And the income split is concerning. Hard to carry a mortgage and living expenses on 46K.

And this shows you how inflated things are. A family making well over average income can’t afford an average home (without stretching themselves).

#178 Blacksheep on 02.16.16 at 2:04 pm

” How can I write so many posts and so many people still miss the point? It is not a competition between real estate and financial assets. It’s not an either-or scenario. Smart people have both, in balance and at the correct times. — Garth”
——————————————–
Ding, ding. ding……

You hit the problem, squarely on the head Garth.

With RE prices as high as they are, it actually is an, “either-or scenario” for many that do not have the choice to “have both, in balance and at the correct times”

The rule of 90 is simply unaffordable for much of the herd. The only reason it works for me is my business is 60% of my net (not planned) at age 52. Many simply can’t (won’t?) harvest that % of equity with out selling their house, so they have to decide which road to take.

Nowadays, all investments seem to carrying more risk and the return on $’s, more elusive for multiple reasons.

Your diversified, re-balancing portfolio sounds very reasonable, if that is the vehicle chosen for said investment.

Many just can’t have both in the suggested ratio.

#179 salonist on 02.16.16 at 2:05 pm

Canadians without company pension plan face uphill battle to stay out of poverty, study finds

“The value of retirement assets for those without employee pension are shockingly low. Canadians making $20,000-$50,000 have an average of $250 saved for their golden years. Half of the demographic has less than half a year’s income saved. The average single senior falls $5,600 below the poverty line, with a median income of under $20,000.

The study says Ottawa’s proposed 10 per cent GIS increase could have the minor impact of alleviating senior poverty by 12 per cent. This would still leave some 634,000 retirees impoverished.”

http://business.financialpost.com/news/economy/canadians-without-company-pension-plan-face-uphill-battle-to-stay-out-of-poverty-study-finds

2016 version… I love my truck
https://www.youtube.com/watch?v=Ozljah9glwU

#180 Burnaby Guy on 02.16.16 at 2:16 pm

Sometimes, contrarians win and win big!
If Mark ignored Garth’s logical analyses and bought a house in Vancouver or Toronto 8 years ago, he must have at least doubled or even tripled his investment. If, however, he went with a balanced portfolio, he may have achieved 50% return. In addition, if it is his primary house, there is no tax.

I still respect and read this blog!

How can I write so many posts and so many people still miss the point? It is not a competition between real estate and financial assets. It’s not an either-or scenario. Smart people have both, in balance and at the correct times. — Garth

——————————————————————-

Well Garth that was not your original intention when you started this blog. I remember reading your book ” Greater fool the troubled future of real estate” back in 2008. As a matter of fact I believe the name of this blog was taken from the book. Your original idea was real estate is bad and financial assets are good from 2008 on. Well you are proven wrong. I also remember your panel discussion with Sherry Cooper and all those people year after year and you are proven wrong.

I am usually the sane one when I discuss RE with my friends. I usually point out lower mainland RE is not sustainable but what has happened so far does not support that. I admire your unwavering attitude but what is proven is on record. Also you can’t claim that you are right if and when lower mainland RE actually corrects after 8 years.

I know I am running the risk of not getting this posted because I am stating the obvious.

First, it’s not 2008 any more. This blog is a daily response to continuously changing conditions. Heed it. Ignore it. I actually don’t care. Second, Burnaby is not the entire country and many people in many markets seriously regret having put all their eggs in the housing basket. A survey out today finds half of all pre-retirement couples in Canada without corporate pensions (50% of the cohort) have enough saved to last just one year. This is how a single-asset strategy, and your line of reasoning, blinds. — Garth

#181 cecilhenry on 02.16.16 at 2:32 pm

Hi Garth:

I’ve seen this advertisement in a number of professional journals.

Wondering what you think of this?? It would be great wouldn’t it??

He says 9% secure returns. Have to be skeptical– but there it is???? How do you dissect this?? Thanks

Learn How YOU Can Earn 9% Fixed Interest Every Year

http://www.peterlantos.com/

Sure – invest in private mortgages (that banks won’t touch) at the top of the market. What could possibly go wrong? — Garth

#182 Dups on 02.16.16 at 2:38 pm

What do you guys think of Bombardier stock?
It is at 0.89 cents right now…

#183 Blacksheep on 02.16.16 at 2:42 pm

Shawn # 84,

“(Blacksheep, feel free to let your head explode as you will be pointing out that loans create deposits which is true, but still someone has to own that deposit after it is created and the loan is spent, the deposit ends up as cash savings to some individual or business until such time as the deposit is destroyed by the loan being paid off.)”
———————————————-
We’ve been monitoring your comments brother and have documented your spreading the word of the good book (BoE pdf) and as such, see no cause for intervention, at this time.

But remember, we are always watching.

Blacksheep Consortium

#184 @BurnabyGuy on 02.16.16 at 2:49 pm

The reason for the disconnect on our forecasts here on this blog and actual Vancouver prices is we tend to ignore the effects of foreign money. Purposely?, i don’t know. But there is a reason.

However, it doesn’t serve anyone denying the truth.

#185 Jim on 02.16.16 at 2:53 pm

Bram: rezoned properties that have a higher use than their current use will see their land values increase, sometimes dramatically. As this new land represents development value the current building value is reduced to a nominal amount. However long term residents may apply for assessment relief called section 19-8 which is most likely responsible for the apparent discrepancy.

#186 hope & ruin on 02.16.16 at 2:54 pm

#153 Godth on 02.16.16 at 10:52 am
#80 hope & ruin on 02.15.16 at 8:27 pm

What a stunning argument you made. Would you prefer to hear how delusional you are from this guy:
http://www.vaclavsmil.com/
https://www.youtube.com/watch?v=nJxmlNyu4sE
_________________________________

I didn’t make an argument. I was just mocking how stupid and gullible you are.

I actually thought you were going use your vast critical thinking skills to challenge me on the archdruid credibility. I was all amped up for an intellectual debate.

Instead you just post another soothsayer video like I’m suppose to be impressed by another argument from authority.

Believe what you will. Just trying to lend a hand. If you’re not scientifically literate. You will always be a victim of other people’s bullsh*t.

Godth’s disciples: you’ve been warned. This guy is a crackpot.

#187 Bram on 02.16.16 at 3:16 pm

What do you guys think of Bombardier stock?
It is at 0.89 cents right now…

I Just took a look at its balance sheet:

https://www.google.com/finance?q=TSE%3ABBD.B&fstype=ii&ei=sH_DVuDKMMOAiwL0pbHwCw

Eh…. if I read this right: liabilities equal the assets?

Ouch, so I guess that would be a book value of roughly $0,- now? So, yeah, 89c could be overvalued.

Bram

#188 Billybob on 02.16.16 at 3:17 pm

#24 Shawn on 02.15.16 at 5:21 pm
My nephew bought a place last year in Edmonton.
Said it would pass Vancouver prices…I thought OH OHHHHH.
I’m old……der hes a kid. Didn’t have the heart to tell him that typically when everyone’s in the know its the wrong direction. The markets way ahead of you….

Meanwhile I like fire sales…bought a $100k of XEG today…it may take a bit but oil stocks have been outperforming oil and it a good sign…The bottom is in or VERY close..
a 4% DIV to wait is ok by me…Bull cycle to take hold by years end. No big boom but better then the black hole we are in..

#189 Bram on 02.16.16 at 3:31 pm

#182 Jim on 02.16.16 at 2:53 pm
As this new land represents development value the current building value is reduced to a nominal amount

Thank you for explaining Jim.
It’s the first explanation that makes some sense.

However, it does not seem to apply to both of these two homes?
I checked on http://vanmapp.vancouver.ca

And both neighbouring properties are zoned identically: RM-9. Same sized lots too.

Yet, the crappy house is assessed at 44K, the huge mansion at $10K.

Shouldn’t the old small house be reduced in a similar fashion, if its RM-9 zoning puts all value in the land?

Thanks,

Bram

#190 TurnerNation on 02.16.16 at 3:43 pm

Entitled Leftist complaining? A few decades ago my parents washed reusable cloth diapers for babies. Imagine the horror.

Get to it. Stop complaining on Facebook.
Hubby should help too.

http://www.cbc.ca/beta/news/canada/edmonton/fort-mcmurray-s-middle-class-feels-pain-of-alberta-downturn-1.3446431
Jaime Hammond was desperate for diapers. Again.

“Size 5 diapers please and thank you,” the Fort McMurray mother posted recently on a local Facebook page. “Have 2 left & need some to last till tomorrow!”

In October, Hammond’s husband was laid off from his carpentry job. As money ran out and bills piled up, she turned to the food bank for help.

#191 waiting on the westcoast on 02.16.16 at 3:53 pm

#173 Mark on 02.16.16 at 1:41 pm
““If Mark ignored Garth’s logical analyses and bought a house in Vancouver or Toronto 8 years ago, he must have at least doubled or even tripled his investment.”
I certainly could have done that. But over the past 3 years, the house would not have appreciated (as the only reason these ‘headline’ Realtor averages are going up is on account of the shifting sales mix!). Meanwhile, I’d be sitting on an asset with a P/E well into the 50s and 60s (Canadian average ~= 35) if not higher. Ripe for even more dramatic falls than already experienced.”

It never gets old… the ol’sales mix… ;-)

#192 waiting on the westcoast on 02.16.16 at 4:00 pm

First, it’s not 2008 any more. This blog is a daily response to continuously changing conditions. Heed it. Ignore it. I actually don’t care. Second, Burnaby is not the entire country and many people in many markets seriously regret having put all their eggs in the housing basket. A survey out today finds half of all pre-retirement couples in Canada without corporate pensions (50% of the cohort) have enough saved to last just one year. This is how a single-asset strategy, and your line of reasoning, blinds. — Garth

Why is everyone so rigid when it comes to a dynamic model? If everything was so predictable, we would have algorithms to make money. Variables keep changing, priorities shift, etc.

I would love to buy a house in Vancouver. I can buy a house in Vancouver. I WILL NOT buy a house in Vancouver because it is far too overvalued. Now, it was overvalued for a number of years now and I definitely misjudged and lost out on some awesome returns but that doesn’t mean that it was a good value then. If the US Fed had not kept interest rates so low for so long, the froth you see today would have never happened and I might be buying a much less expensive home here today.

When you are at a casino and on a roll, it feels really good. Doesn’t mean that you have a system that works… just means that you are lucky during that window.

#193 Smoking Man on 02.16.16 at 4:12 pm

Looks like reality is sinking in, even with those ridiculous adds the Wynne socialists are realizing they are facing a mass exodus from large corps if this goes through.

Like these vampire tax feeders would let up for any other reason.

Delay means aint going to happen.

http://www.cbc.ca/news/canada/toronto/ontario-pension-plan-1.3450336

#194 calgaryPhantom on 02.16.16 at 4:13 pm

It looks like a good opportunity to buy a house in Calgary.
Sales down, lots of inventory on market. You can probably get a house at price levels of 2013. Add to that a low mortgage rate for next five years.

#195 Market Update on 02.16.16 at 4:21 pm

Emotions play a big role in the formation of housing bubbles but they play an equal negative role in the deflation of housing bubbles.

This will help drive house prices down in Canada.

#196 jess on 02.16.16 at 4:26 pm

what is happening with Mady Canada’s 25th largest general contractor.

from 2013
http://www.edmontonjournal.com/Mady+Development+Corporation+Windsor+success+story/8369218/story.html

=
http://www.therecord.com/news-story/5470492-144-park-project-in-waterloo-runs-out-of-money/
http://windsorstar.com/business/insolvent-mady-may-be-forced-to-sell-incomplete-100-million-project-in-barrie?__lsa=9dc1-e69f

#197 Godth on 02.16.16 at 4:37 pm

#80 hope & ruin on 02.15.16 at 8:27 pm
#183 hope & ruin on 02.16.16 at 2:54 pm

So let’s deconstruct your bloviating:
“After 60,000 years of human innovation and ingenuity.”
You say that as though it’s a linear trajectory without failure (I have no idea where you get 60 thousand as opposed to 100, or 200 thousand yrs. from but who cares). How many civilizations have collapsed in the last 5-6 thousand yrs. and why?

“That archdruid crap, it reads like a cult-site. If you can read the 8th and 9th paragraphs of that article without rolling your eyes at all the bullsh*t then you are a sucker for what these guys are selling.

If they tell you to drink the grape juice and a spaceship will come to get you…don’t drink it! There’s no spaceship.”
So there’s not much there except you claiming that John Michael Greer is claiming a spaceship is going to save us. You are clearly a retard.

“Instead you just post another soothsayer video like I’m suppose to be impressed by another argument from authority.”

So Vaclav Smil is a soothsayer in your world that is making appeals to authority? He’s running numbers and thinking through the idiocy that passes for thinking and his end analysis can be summed up along these lines:
https://www.youtube.com/watch?v=rNV0xXy5oSg

Vaclav Smil is a scientist, but you don’t like his message so deem it unscientific and prefer your own vapid opinions.

You have offered exactly zero to the conversation yet you want an intellectual debate. 0+0=0 while 1+1=2

You have nothing but denial and delusion. (p.s. if I have any disciples (lol) they should kill themselves immediately).

#198 Lillooet, BC on 02.16.16 at 4:39 pm

#156 Lillooet, BC on 02.16.16 at 11:06 am

How can I write so many posts and so many people still miss the point? It is not a competition between real estate and financial assets. It’s not an either-or scenario. Smart people have both, in balance and at the correct times. — Garth

****************
Totally agree with Garth on the balanced assessment management including RE and investment portfolio

#199 Josh in Calgary on 02.16.16 at 4:41 pm

#179 cecilhenry on 02.16.16 at 2:32 pm,

Just because that add was in a number of professional journals does not mean they endorse it. It just means they paid to have the add placed in that professional journal (likely targeting people with the type of money to invest that they are interested in).

At best this is an investment that delivers returns that are proportional to the risk you are taking. In other words right along the same lines as some corporate bonds. Most likely you’ll get your interest payments every year and your principle back at the end. But there is a chance that the company goes belly up before that happens and you get nothing back.

At worst it could be a Ponzi scheme. In the first minute on that website I got and eerie feeling that they were just trying to sell people on the ideas of “trust us, we’re great guys”.

Save your money and just put together a balanced portfolio as Garth suggests. Part of that can be corporate bonds with a payout of 9%. A small part.

#200 waiting on the westcoast on 02.16.16 at 4:48 pm

One other thing… noticed that local commercial clients are rapidly disappearing for the operations in AB. Down by ~45% for both Edmonton and Calgary. Sure the homeowners are tanking (overall rev drop of ~15%) but the commercial business fell off the roof… tough times…

#201 Godth on 02.16.16 at 4:53 pm

#171 Retired Boomer WI on 02.16.16 at 1:31 pm

So you missed the overall point(s) entirely. We live in an industrial civilization that runs on burning fossil fuels and “green” energy will never be ever to run our industrial civilization.

Bah, I can’t be bothered…we don’t lack the information but never underestimate the power of denial and stupidity.

#202 Jim on 02.16.16 at 4:54 pm

#185 Bram:

A friend of mine had the same kind of question and the answer he got was the property with the non-10,000 building value was subject to an assessment relief provision of the assessment act called section 19(8) allowing to be assesssed as if they were not rezoned. The program only applies to long term residents, you can google “section 19(8)” if you like. Not sure if this is the case in these examples but sounds familiar.

#203 Shawn on 02.16.16 at 4:56 pm

Bombardier. Bombardier!

#184 Bram on 02.16.16 at 3:16 pm
What do you guys think of Bombardier stock?
It is at 0.89 cents right now…

I Just took a look at its balance sheet:

https://www.google.com/finance?q=TSE%3ABBD.B&fstype=ii&ei=sH_DVuDKMMOAiwL0pbHwCw

Eh…. if I read this right: liabilities equal the assets?

Ouch, so I guess that would be a book value of roughly $0,- now? So, yeah, 89c could be overvalued.

Bram

*************************************
Right, according to its balance sheet its liabilities exceed assets. (Some people call that “broke”.)

Its equity is shown at NEGATIVE $3.675 billion. But that includes pref shares of $0.347 billion so common equity is negative $4.02 billion.

There are 2.226 billion shares. So that is a book value of negative $1.80 per share.

As Mark has pointed out, a negative book value does not mean the shares are worthless. In fact they trade at about 90 cents.

Regarding earnings, Bombardier has none presently and probably little to none in prospect for the next few years. (They lost $2.30 per share in the first nine months of 2015.)

Mark again correctly pointed out that this was mostly non-cash losses. Well, except actually it does represent cash that was invested and later deemed worthless.

Mark judges that Bombardier is pretty well managed. Mark apparently has low standards in that regard.

Bombardier is a sad embarrassment to this country. Its third generation management is a sad embarrassment to its late founder. (And the second generation has destroyed his own earlier good works and reputation.)

I feel badly for share owners but I feel terrible for the employees and retirees. The situation for them could turn into a tragedy.

But I think the government will bail it out to some degree. About which, more tomorrow. (Earnings release coming)

Basically the shares probably have value as a sort of option on the possibility that Bombardier will someday make money again.

#204 Shawn on 02.16.16 at 5:03 pm

Waiting on The Westcoast

Thank you for your updates about solid gains in your service business stateside and the big declines in Alberta, especially commercial.

Would love to have a hint what this discretionary service is?

Janitorial / housekeeping?

Also, I would be interested to know how you apparently manage the service operations from afar (sounds like you are an owner). Have you been able to find excellent staff to manage things for you?

I am sincerely interested in stories of success.

#205 Leo Trollstoy on 02.16.16 at 5:11 pm

#198 Shawn on 02.16.16 at 4:56 pm

bumbardier is trash. walmark of sadkatoon is obviously wrong about the biz. but his investing is low bar. bottom shelf. like those bad cadusd-will-rise and barrick-gold-is-undervalued calls he made 2 yrs ago. fits his skills (or lack of?) not everybody can be a good investor. that’s why we have diversified portfolios.

#206 Leo Trollstoy on 02.16.16 at 5:18 pm

pay walmark of sadkatoon no mind. good thesaurus. bad investor. simple google search shows toronto real estate prices rising for years despite sales mix. easy to find. walmark needs to focus on getting hr to respond to his resume. that’s the level he’s operating at. has more excuses than resume rejections. giant gaps of unemployment on linkedin profile. just fyi

#207 Leo Trollstoy on 02.16.16 at 5:21 pm

How can I write so many posts and so many people still miss the point? It is not a competition between real estate and financial assets. It’s not an either-or scenario. Smart people have both, in balance and at the correct times. — Garth

gartho u fight the good fight but fact of the matter is most will be poor. most want to be poor. most do things to increase odds of poverty. just like most want to be wage slave. it’s fact of life.

#208 Leo Trollstoy on 02.16.16 at 5:23 pm

I still kick myself for selling an investment condo back in ’08 when it looked like sheet was about to hit the fan.

learning lesson. when sheet about to hit fan, let it. then go shopping. god mode.

#209 Shawn on 02.16.16 at 5:24 pm

Walmark

Hate to pile on but I am pretty sure he was really bullish on the TSX market index about two years ago. Something about it being much cheaper than the U.S. markets as I recall.

#210 acdel on 02.16.16 at 5:30 pm

Nearly Half of Canadian’s are within $200 a month of unable to pay their bills.

http://business.financialpost.com/news/economy/nearly-half-canadians-within-200-a-month-of-being-unable-to-pay-bills-poll-finds

#211 waiting on the westcoast on 02.16.16 at 6:06 pm

Bombardier… What is really interesting is comparing them to Boeing. Similar cost of revenue but Boeing takes 1/3 of its gross profit for SGA and a massive 1/3 for R&D and the rest for shareholders (profit). Bombardier takes in 1/6 the revenue but has 1/2 the SGA costs (probably lots of friends and family headcount there) with only 10% of broad profit to R&D and, of course, nothing but losses for the shareholders.

Shawn – you are close… Don’t want to open up here as I am sharing some broad numbers for our system. It’s a franchise – so highly systemized and I tend to manage by KPIs and which way the cash is flowing… If it’s growing and I am making decent margin, I give my managers a lot of rope. They start missing against goals, etc, and I become the Eye of Sauron and watch much tighter. My GMs prefer me to not be watching… ;-)

#212 Bram on 02.16.16 at 7:07 pm

#197 Jim on 02.16.16 at 4:54 pm

Ah, yes, you are spot on I think.

Thanks for explaining, it was driving me nuts not knowing what was behind this.