[email protected] speaks

NAP modified

Call her Linda. She works at a bank in the rich little GTA burg of Oakville where the average sale price last month was $1,027,834 and 70% of all trades are for single-family homes. The juices run strong here. These days there are 253 listings for more than $2 million, in a town of just 180,000.

“I am one of those [email protected] (the green one) and I have been reading your blog for years,” Linda says. “Although I get a little defensive when I read how you characterize most of us, I wanted to write to you (finally after pondering for 3 years) to tell you how it really is in our culture.”

Normally, because I love the sound of my own typing, this blog gives you my view on our weird world. But I think this [email protected] has something worthwhile to say. So here is the letter she sent to me yesterday, right around the time her branch was closing for the day. As you will learn, she’s in charge of dishing out financial advice and mortgages. What may surprise you is that she cares.

“I lose sleep over clients who take all of their liquid savings and even some from their parents to over pay by thousands buying paper/glue/wood-chip particle homes in Oakville for $800-$1million? Yes I am a Financial Advisor in Oakville, your favourite town.

“I’ll tell you a story that had me up at night last week:

“A married couple who currently live in a modest town house in Oakville worth maybe $600,000 from the Banks perspective however from this clients, they seem to think it is worth $700-$730k depending on how low they price it (hoping for a bidding war!)

So they found their dream home up the street – listed for $979,000.

“They end bidding $110,000 over-asking! They won the home! Omg!! Original Formica kitchen, parquet flooring, a pool!

“Frantically, we put the new deal together to have it approved. There is a slight issue though. They did not do any type of condition on the sale of their home and waived their financing condition right away.

“The bank went to appraise this property they put an offer in on and it was appraised $30,000 less than what they offered! (PP: $1,090,000 AV: 1,060,000. The clients were super pissed we didn’t appraise this house or their current home “properly” whatever that means.

“You need a down payment of $215,000 on a purchase price of $1,090,000 for a conventional 25 year amortization mortgage. $872,000 at the rate of 2.55% your monthly payment is an eye watering $3,928.

“Now they need an additional $30,000 because the appraisal came in lower so now their total down payment needed (not even including the $20,000 land transfer tax due on closing!) so this total rises to $245,000. Well… if a bank appraised their property for $600k, they owe $480,000 – what are the chances of someone buying this property at $720,000 which is the amount needed to make this deal work otherwise the deal is dead?

“It has been pretty obvious on why they are not appraising these properties at the bidding war prices. No major bank wants their names in the newspaper as a potential reason as to why the housing market is so crazy and over-inflated.

“I advised against this deal from the very beginning for several reasons, not just lack of cash and so many variables that could go wrong. I should mention their income is amazing but they are at 42 percent TDS due to RRSP, car and school loans for their kids. All of these debts are staying while they move to their dream home yet their homeownership expenses are rising.

“I know what I am about to tell you goes against everything you have been telling your blog readers about Bankers, that we are out for the kill and will do just about anything for a sale. Well, I am an “old school” banker who came before the money-hungry “Advisors” we have now. I would love to show you my credentials some time.

“Believe it or not, I did all I could do:

“I tried to talk them out of it. I wanted to show them the facts and the benefits of staying right where they are.

“I showed them my Andex Chart to show them house prices are not normal like this. Talked about inflation/deflation/depression.
I even spoke of index funds and low risk ETFs they could invest their RRSP cash into (too risky! She said)

“Anyway – the purpose of my email was to tell you a story from the “field” and to let you know REAL bankers have a heart and take the responsibility of telling their clients what decisions are good/bad. They do exist!

“Love your blog and I share it with my co-workers and less house horny clients all the time! It has not affected my business in any negative way because there are people out there who know this cannot continue, it is basic supply vs. Demand.

“Rates will go up one day and I love being told “oh yah not for awhile though” from the 55 year old couple who just signed a 30 year amortization mortgage for $800,000 as it basically means they don’t give a shit about tomorrow, they just want what they want today. Worry later!

“Keep it up Garth! You do have little minions sharing your word to the masses outside of this pathetic blog. Signed, Banker with PFP.”

This story is remarkable because it is commonplace.  Society, like this blog, bristles with accusations that immigrants, Chinese dudes, speculators and 1%ers are responsible for turning houses into commodities, bloating prices as never before.

But Linda knows better. We’re in the midst of a fadish frenzy propelled by people obsessed with real estate, unafraid of debt and financially suicidal. That’s why risk has spiraled higher, yet most are blind to it. Why high prices bring only higher prices. It explains panic buying, reckless desire and a world in which average people can no longer afford average homes. Unless they willfully imperil their families.

The people in this tale inflated their existing home’s worth, then inflated the price of the next one. Already with a heavy debt level, they added more. They ignored advice. Succumbed to emotion. And if the market stalls, turns, corrects or just stagnates, their reward is stress and loss. Every day we’re doing this to ourselves. Any day now we shall start regretting it.

Keep fighting, Linda.

196 comments ↓

#1 Josef on 04.22.16 at 6:50 pm

First!!! Hahaha

#2 For those about to flop... on 04.22.16 at 6:52 pm

After a couple of the bosses posts this week and my decision to become a specialist in Yoloism, I think I am going to hire this guy as my financial advisor…

https://m.youtube.com/watch?v=yJFrkNY4n1g

M41BC

#3 Trojan House on 04.22.16 at 6:56 pm

I hear a divorce coming. Could be before closing on this property but at the very most, within a couple of years after closing…

#4 calgaryPhantom on 04.22.16 at 6:57 pm

“I would love to show you my credentials some time.”

—–
That’s what She said.

#5 Rexx Rock on 04.22.16 at 7:01 pm

How can rates go up when we have zirp?Soon we will have nirp!House prices are crazy but the Ponzi scheme will continue.

#6 Jon G on 04.22.16 at 7:11 pm

And it starts: Urbancorp files for bankruptcy. http://www.bloomberg.com/news/articles/2016-04-22/toronto-condo-builder-urbancorp-files-for-debt-restructuring

#7 TheSpangler on 04.22.16 at 7:11 pm

$1million bucks to live in Oakville, man that sucks. What do people do in Ontario other than buy houses and have babies?

#8 Mike as in Mike on 04.22.16 at 7:12 pm

Excellent post Garth!

Thank you Linda for sharing. Please take a seat and join us for popcorn as we watch what happens to these people (and many others like them). At least you tried to warn them.

#9 Joseph on 04.22.16 at 7:17 pm

Vancouver Real Estate Speculation Threatens Future of Metro Van Farmland

http://www.richmond-news.com/news/weekly-feature/real-estate-speculation-threatens-future-of-metro-vancouver-farmland

#10 BOOM! on 04.22.16 at 7:18 pm

Oh, Linda the learned banker. I am so sorry for you, having to deal with people so blind to RE risk.

Yes, Garth I know and you do to that in the kingdom of the blind the one-eyed are king, but that means we have no depth perception either.

I am truly amazed how you, and countless Lindas’ out there can try to teach, preach, howl, and educate people every day often with few tangible results.

I am just glad you take the time to DO it, and sometimes the message gets heard.

Got a charge out of the comment low volatility ETF was (TOO RISKY)…. too bad she was’t seeing Las Vegas, Phoenix, or even Chicago when the depths of the housing mess was upon us. Amazing what falling home prices, and demand can do.

Toxic assets anyone?

M64WI

#11 Madcat on 04.22.16 at 7:19 pm

So I’ve been thinking… I’m curious about the Boomers and how indebted they are now that they’ve been living off their equity and lending their kids down payments to ‘get in before it’s too late’… I’m wondering what’s going to happen if a glut of Boomers croaks in the middle of a housing meltdown whilst still owing big bucks to the bank… Is the banking sector prepared for this possibility (the one where they can’t recoup the money they’re owed because the asset is now worth half the price they financed it for)…

#12 not 1st on 04.22.16 at 7:20 pm

I am sure at some point Linda (if thats here real name) was all too happy to dig out her HISA, GIC and mutual fund ‘prospectus’ to show that couple.

#13 Joseph on 04.22.16 at 7:20 pm

Vancouver REal Estate called unpoliced, unregulated, and rampant

https://www.youtube.com/watch?v=y5hQ1qZAzSY

BCNDP has town hall to discuss problems of lack of regulation. Over 800 attend. Thanks to Christy Clark, who has done nothing to curb this problem. Of course Bob Renne the condo king has fundraised for her.

#14 Okanagan on 04.22.16 at 7:21 pm

Keep trying Garth – your message is getting through to some of your readers – just hope it isn’t too late for the rest in the GTA and YVR!!

#15 TRT on 04.22.16 at 7:23 pm

People buying now have options if market crashes.

Many have assets overseas. They will declare bankruptcy and tough it out for 7 years overseas. Then will return.

Let the state eat the debt implosion. Hasn’t that been how it aways has worked?

#16 Love my Kia on 04.22.16 at 7:26 pm

My banker has good morals too, he keeps things real.

He is a mutual fund rep with the lion bank who deals with only high value accounts and he also takes issue with the state of real estate today. When I first bought a home he tried to keep my debt levels low, he still does today.

Like a patient who should trust a doctor with their life, I trust him with my $, even with the high commission his employer charges. I often bug him to go independent, the guy has what it takes in the IQ department.

#17 Andrewski on 04.22.16 at 7:27 pm

A young family bought a SFD in our ‘hood 30 months ago for $440K, which was under the assessed value as a retired lady had lived in the home for decades and spent little to update. The new homeowner said he spend $75,000 updating the home. Recently they listed their home for a whopping $798,888, almost $300K more than they paid to buy and update & they wonder why no one even put in an offer. The home owner told me he invests zero dollars in to RRSP’s, TFSA’s or RESP’s because they are a rip-off for consumers! He is waiting for a Greater Fool to make an offer. What a dufus.

#18 Sore Butt on 04.22.16 at 7:27 pm

When I bought my first house I had a big mortgage (although it would be considered a down payment today), pulled money out of my RRSP, and the realtors had to come to some agreement on their fees to make the thing work because at that time CMHC wouldn’t insure more than $175,000. Then my wife kicked me out and I discovered that even if you don’t get to go in the house anymore you are still on the mortgage and liable for any missed payments. Luckily my ex-Father-in-law took over. The lesson learned? Never share title with someone who isn’t paying in.

The financial disarray of divorce forced me to rent for some time, but once the dust settled I bought another modest home and immediately put a non-conforming suite in the basement. Over some years I paid that mortgage off.

Having paid off the mortgage, I vowed never to have another one (unless you are using the money to invest, one of Garth’s “Money Road” strategies but so far I haven’t found anything I thought made it work for me, ie. guaranteed safe income higher than the mortgage payment would be and managed for taxes properly. Still an option though.)

I eventually remarried and sold the house, renting a larger one (at a tidy profit because of the housing bubble). But eventually I bought again, paying more for the new house but with cash I had saved.

This story is no longer possible today for most people because the mortgage for even a modest house is so large compared to their incomes. The mortgage on my first house with the ex was about 3 times my salary. The mortgage on my second house was only 2 times salary and I was able to pay it off in 10 years just by putting 100% of my bonuses against it and making bi-weekly payments. Today that story is not possible. People have 5 times or more ratios. They can barely keep up with the interest even with their bonuses. And the problem is bonuses are largely a sign of the times, in good time they are plump but in times like this you are lucky to still have a job, the bonus pool is pretty small.

So no more bonuses + 5 times ratios + dire economic conditions and I feel for the masses.

So here is another interesting thing to think about. If real estate does correct, and you are underwater on your mortgage, it is very hard to renew without coming up with what the bank perceives to be the missing money. Read the fine print. This is one good reason to convert to a 5 year now, if you can afford it.

#19 Trading Naked on 04.22.16 at 7:28 pm

Dear Linda, I hope you have a good skincare routine, because if your customers make you #facepalm so much during your workday (and I imagine they do), the oils on your hand will transfer to your face and make you break out.

#20 prairie person on 04.22.16 at 7:33 pm

A member of my family was a credit union manager for twenty years. She did her best to educate people who came in looking for loans. If they were starting a business, she advised keeping costs low, not borrowing to buy splashy furniture. If they were borrowing to buy a house, she explained about mortgages and interest. most people weren’t interested. All they wanted to know was what were the payments. She was on a salary, not a commission so there was no pressure to load people up with the biggest loan possible. I hate to say it but people did equate debt with equity. I have a big house, a big truck, big equipment, I’m rich. Few understood, even after she explained about interest costs, how little was taken off the loan. A house is visible, a truck is visible, an office with expensive furniture is visible. A big debt load is invisible. People don’t think the bank owns ninety percent of this house. My share is just one bedroom. No. They think, this is my house, that is they think that until they can’t pay the mortgage. Then, of course, it is everyone else’s fault. You shoulda becomes the refrain. You shoulda told me. There are a lot of people who’ve got older but not a lot who have grown up.

#21 Basil Fawlty on 04.22.16 at 7:35 pm

One day, asset prices will correct to their true market value. That day, there won’t be enough Tylenol and Pepto Bismal for all the sorry people.
Just China’s debt alone has gone from $800B in 1995, to $30T today.
People suffer from “normalcy bias” and ignore the biggest credit bubble and accompanying malinvestment, in history.

#22 Smartalox on 04.22.16 at 7:36 pm

Thanks Linda for your postcard from the edge.

I did a double-take halfway down the page when I reached the statement about “amazing incomes… but total debt service (TDS) at 42… school loans for the kids…”

It’s that last part that got me, and it wasn’t until near the end of her note when she stated the couple were 55 years old that I realized, the couple that she described weren’t young, nubile rookies.

If these people have kids with school loans (Presumably for post-secondary schools, though possibly post-post secondary, since student loans don’t require payments before graduation) they should be on the verge of down-sizing, not up-sizing, since the kids should be moving out and starting their lives in a few years, after graduation.

But no, these people are doubling down on a larger house, a ‘dream home’ they’ve likely been coveting for some time. Talk about drinking the Kool-Aid!

Personally, I can’t think of a better way to satiate the ‘dream house’ lust, than sell a principal residence for a massive, tax-free gain, invest the nut, and rent that dream home for half the carrying cost – plus stick someone else with the maintenance and the taxes!

#23 Smoking Man on 04.22.16 at 7:36 pm

Blog dogs everywhere. Meeting one tonight in Vegas for a beer.

Mission Accomplished Area 51 crossed the line by a foot. Oh and cheetahs. Stage exactly how I saw it in my mind for the book.

Click my name for pics.

Trying to talk my son out of buying a condo. He hates paying his land lord. Making him rich as he sees it.

Kids is all I’m saying.

#24 Debt on 04.22.16 at 7:36 pm

It’s a lot of risk and debt but in the end they will probably be able to sell the house next year for 1.5 millions… It’s just the way it is.

#25 crowdedelevatorfartz on 04.22.16 at 7:39 pm

Spoke to a friend in Ottawa today. He’s all excited about the purchase of one side of a duplex “fixer upper”. A 50 year old brick cube with no yard and zero privacy on a busy st. $450k.
Oh and his wife is getting laid off.
Did I mention they have two other mortgaged properties?
The “rule of 90” seems to mean “Debt free at 90 years of age”

#26 Give us this Blog our daily Garth on 04.22.16 at 7:41 pm

Love hearing stories from the other side, and from your readers. Here in 604, there is a real estate story every day on the 6 o’clock news. This is a train wreck that people can’t help but watch, talk about, or want to be a part of.

#27 Doug t on 04.22.16 at 7:43 pm

Plenty of room on the bandwagon people – get your house while you still can cause 2016-2017 is up up up.

#28 Buy Low Sell High on 04.22.16 at 7:45 pm

Houses have turned into Giffen goods, an economic term that signifies higher demand with higher prices.. This defies the traditional demand curve mapping a given level of demand at each price. We know it today as FOMO, or alternately known as HOMO, Herds On Massive Overdrive!

#29 Chris on 04.22.16 at 7:47 pm

The effect of bidding wars on housing prices can not be understated. It is crazy out there. It started this spring in Durham region. A house priced at 450k sold for 570k. Single garage detached house. I mean the buyer went to a totally different price range so he can buy the house. Why didn’t he look at houses priced in the 500k to start with. Maybe he will even end up paying less. It is all about winning. And losing a bidding war is psychologically damaging. But if the person wins, he does not talk about overpaying, all he talks about is that he won the house, like a prize or something. And people are overpaying by so much because they think the price will keep rising and will compensate for whatever they overpaid in no time. If they wait, the next house is going to be priced at the winning bidding price for this one and they may end up having to pay even more to win the bidding war for the next house. In a rising market, that is what happens to people psychologically. It is the norm now in GTA and am sure in Vancouver. Someone in psychology should be writing about this phenomenon. Anyway, I bet that guy who overpaid 120k on a 450k house is from Toronto proper because that is the Toronto style of buying houses.

#30 Freedom First on 04.22.16 at 7:47 pm

Linda is an angel.

In everything and everywhere I go I surround myself with angels. Whether it is business, acquaintances friends, family, anyone, I either totally avoid, delete, or limit my exposure to people who are not angels.

Being on my own since 17, I became street smart as well as book smart. I can sweep aside people who are not kind and trustworthy in an instant.

I have friends and family who are angels, and have been in my life forever, or for many decades. Mind you, I don’t work, or live, with anyone. Perfect.

#31 the Jaguar on 04.22.16 at 7:52 pm

The reality is that Bankers like Linda are not that common anymore. They have been replaced by young fresh faced people pleasers who only understand the ‘sales’ culture that banking has become. If the [email protected] doesn’t get an approval for the amount the house hungry are looking for (usually more than they can afford and with no accounting for rate increases over time) the house hungry get angry and storm out to another loan shark. If you want to witness real bullying be a fly on a wall in a bank office. It’s interesting that ‘exposes’, ‘tell all’s’ and ‘best sellers’ have been written about many industries, but not the day to day operations of banking. It wouldn’t be because it’s dull and boring. Quite the opposite. If you think it’s a money business, forget it. It’s a people business. They see it all. The good, the bad, and the ugly. Banks are where the windfalls, the dreams, the agony, the cheating or divorcing spouses, etc., all arrive on a daily basis. It could be a great idea for a new reality show. The most interesting part is the entire banking industry in Canada is about to change completely. But nobody is paying attention to what is happening.
It will be like Albertans waking up and scratching their heads when oil suddenly plummeted. “What the hell happened, Hoss?”. It will be just like that, only all across the country. Toronto last, of course.

#32 Thaya on 04.22.16 at 7:55 pm

Hi Garth,
Do you think there would be a correction in the next 5 years? It seems this housing would never stop. No matter how bad is the economy.

#33 Mr Happy on 04.22.16 at 7:56 pm

“…What assets to buy? Keep reading…”

Still reading….still waiting….

Already covered. — Garth

#34 TurnerNation on 04.22.16 at 8:16 pm

Email protected.

You couldn’t pay me a million bucks to live in Dorkville!

#35 Metaxa on 04.22.16 at 8:19 pm

Story Time!

after High School I traveled way up north, sort of following some friends who were going to work in the nickel mines to pay for university.

anyway, I ended up in a small, dry, isolated reserve with zero idea of what I was going to do.

ended up with a Manitoba fur trader license and long story short sent two bales of furs down to the Winnipeg auction at Christmas and then 2 1/2 bales to the Montreal auction in the spring.

Returned to Saskatoon to go to university and hooked up with a lady who was daughter #3 of a farmer/rancher down south.

He had bought the house his daughters all had lived in while they went to uni. one after the other with some overlap. I was quite enjoying my time with #3 (and she me, as well) when one night she put forth the proposition that I purchase the house as she was graduating and heading east for advanced degrees and such.

now I had a bunch of money from those fur auctions so I was intrigued.
She thought I could buy the house for $21,000.

This is a three bedroom in walking distance to the University campus in Saskatoon. in the early 1970’s.

Dad was miffed as that is what he had paid for the thing for daughter #1 a decade earlier but being a Saskatchewan farmer he bit his lip and honored his daughter #3’s offer.

So…I traded furs up north for a year and a half, made some money and had a girlfriend sell me her father’s house for about a third of what it was worth on the open market.

That is how I got my start being the handsome, rich, loved and beloved man I am today.

What this has to do with today’s post I have no idea but it is a heck of a story, no?

#36 ILoveCharts on 04.22.16 at 8:21 pm

So I just removed subjects on an offer for a place after holding out for years.

I may be the greatest fool.

Was hoping for a more uplifting post this evening.

#37 bdy sktrn on 04.22.16 at 8:23 pm

did trudeau just say ‘uh’ about 100 times in 3 minutes on cbc?

i, uh, want, uh, to uh, move canada, uh, to a more, uh sustainable, uh, future.

he sounds moronic.

#38 boonerator on 04.22.16 at 8:27 pm

I hope Linda kept real good records of their conversation or taped it (unethical, I know) because such people will be looking for scapegoats when it goes south.
They could never make bad judgements, it must have been [email protected]

#39 -=jwk=- on 04.22.16 at 8:31 pm

If your income is a function of how many dollars you’ve lent, you naturally try to loan as many dollars as possible. Residential mortgage banking is no longer about assessing risk, but finding creative way to originate as many loans as possible.

I lived in Los Angeles from 2000-2005 and saw the same thing – it’s not a competition for the best clients, it’s a competition to get the clients as much as you can.

Linda’s couple will go to a broker, and the deal will get done. it may even wind up back at TD!

#40 Eco Capitalist on 04.22.16 at 8:37 pm

All I want to know is where do you people go hunting for places to rent? All the web sites I’ve tried turn up mediocre places at prices higher than my current mortgage payment.

#41 james on 04.22.16 at 8:40 pm

When the lady at the bank warns you that this is a risky deal and a bad time to buy, you should probably listen. It is the old police officer / investigator heuristic: if someone tells you something against their interests, it counts for more than if it is according to their interests.

#42 Smoking Man on 04.22.16 at 8:59 pm

Damn just heard Prince Died. He should have stayed in the Hospital, if I didn’t I may have had the same fate. That was a nasty thing that hit me. Apparently the Dr’s almost called center for desise control in USA. Lucky they didn’t.
That would have killed the Vegas Trip.

My tin foil hat says they want to kill off bommers. No money for pensions or nursing homes..

RIP Purple Rain. Same age as me.

#43 Senta on 04.22.16 at 9:07 pm

Came to see your take on the Duffy story. Maybe tomorrow, Garth?

Listen to the speech he gave in the Senate before departing. All you need to know. — Garth

#44 Julia on 04.22.16 at 9:16 pm

TDS of 42 with kids. Daycare costs are not even factored in TDS calculations.

In the financial sector myself I have heard of consumers complaining all the way to the ombudsman when getting declined for a mortgage or not getting as big a mortgage as they deserve.

#45 Suede on 04.22.16 at 9:20 pm

For you HAM lovers..

http://www.zerohedge.com/news/2016-04-22/valued-16-it-sold-68-million-7200-seconds-inside-story-vancouvers-wildest-property-d

#46 Ronaldo on 04.22.16 at 9:21 pm

#43 Senta

And here it is:

https://www.youtube.com/watch?v=JDPhah83k6U

#47 Mark on 04.22.16 at 9:23 pm

“In the financial sector myself I have heard of consumers complaining all the way to the ombudsman when getting declined for a mortgage or not getting as big a mortgage as they deserve.”

Hilarious. But on that note, its probably a good thing that the banks have mostly sold off all their own RE, and just rent particle board buildings (or at least that’s what they do around here). That way, they can just walk away from communities if the heat is turned up on them too much in the housing bust. And if some crazy person takes a bulldozer (or flamethrower) to the bank after they’re turned down for a mortgage renewal, well, the bank won’t be out a dime.

#48 For those about to flop... on 04.22.16 at 9:25 pm

“When you do the math, 215 claims over four and a half years, I overcharged the Senate, they said – and we didn’t challenge their math – $437.35, which, on 215 claims, works out to $2.03 a claim.”

The above statement is from Mike Duffy in his senate speech which shows you how petty they were being…

M41BC

#49 Julia on 04.22.16 at 9:26 pm

#38 boonerator

If the house gains value and it turns out in their favour, they were smart. If they lose, it’s the bank’s fault for lending them too much.

#50 rainclouds on 04.22.16 at 9:26 pm

Four Friends have bailed or in the process here in YVR.

-month ago buddy sold, main and 19th, bidding war 1.6m. he is a family man and has decided to rent (“better place, new, bigger)

-Last week buddy sold on 41st and Vic 1.1m (he is planning on renting)

-This week two! One couple own a condo that has been rezoned (higher density), Got twice as much as he was asking last year, 1.7m, going to Victoria

Last Couple listed today, 1.1m with the likelihood of a bidding war. Gonna rent

None of these folks needed to sell as they had lots of equity. Lightbulb moment in delusional Hipsterville? Will there be a rush to cash out?

Hard to say …………….

#51 Rook on 04.22.16 at 9:32 pm

How come no one is talking about what is about to unfold in the GTA!

#52 Panhead on 04.22.16 at 9:36 pm

#35 Metaxa on 04.22.16 at 8:19 pm
So…I traded furs up north for a year and a half, made some money and had a girlfriend sell me her father’s house for about a third of what it was worth on the open market.

Great story but dutell … sheared Canadian beaver?

#53 Marius on 04.22.16 at 9:49 pm

http://www.cknw.com/2016/04/21/the-lynda-steele-show-7200-seconds-to-60-million-vancouvers-craziest-real-estate-deal-2/

#54 WalMark of Sadkatoon on 04.22.16 at 9:52 pm

$1million bucks to live in Oakville, man that sucks

my friend lives in a $1m semi in Oakville. $1m doesn’t go far in that insane town. just MLS it and watch the crazy first hand

#55 WUL on 04.22.16 at 9:52 pm

FLOP:

Good for your plucky Flyers. Join me down the hall at the Broadstreet Bullies Blog and I will give you my analysis.

Hon Turns (his hockey nickname) is losing patience with me.

#40 Eco Capitalist:

Where to find cheap rentals? Fort Mac. Bonuses are the Northern Lights and cheap lawyers and hookers.

#56 Cecil Henry on 04.22.16 at 9:54 pm

I don’t get it.

Almost none of these people ‘own’ a house.

They just have a giant mortgage they plan to pay (theoretically) over some 30 years.

And someone else will be to blame if they can’t. I’m not buying them out. That’s for sure.

#57 45north on 04.22.16 at 9:56 pm

good for you Linda. For having integrity and courage.

#58 WalMark of Sadkatoon on 04.22.16 at 9:59 pm

#29 Chris on 04.22.16 at 7:47 pm
In a rising market, that is what happens to people psychologically. It is the norm now in GTA and am sure in Vancouver. Someone in psychology should be writing about this phenomenon.

i think you’re right and I hope they use YVR and YYZ as case studies. to be fair it’s primarily YYZ and YVR where real estate prices have been hockey sticking upwards like this and dragging everybody into debt hell

#59 WalMark of Sadkatoon on 04.22.16 at 10:02 pm

How come no one is talking about what is about to unfold in the GTA!

they are talking about it. unfortunately they’re all using recency bias and saying that prices will continue skyward for years

#60 Big Dipper on 04.22.16 at 10:04 pm

For each $100,000 borrowed, mortgage payments will be about $450 per month – at 2.5% mortgage rates.

Most younger buyers ignore the house asking price and determine affordability based on monthly payments.

Offering 50-100k over asking is no big deal for those with a reasonable income. Until interest normalize this dysfunctional housing market will continue.

#61 Freedom First on 04.22.16 at 10:07 pm

#49 Julia on 04.22.16 at 9:26 pm

#38 boonerator

If the house gains value and it turns out in their favour, they were smart. If they lose, it’s the bank’s fault for lending them too much.

You are an angel also!

#62 BS on 04.22.16 at 10:07 pm

ILoveCharts on 04.22.16 at 8:21 pm
So I just removed subjects on an offer for a place after holding out for years.

I may be the greatest fool.

Don’t worry. We are just reaching the new paradigm phase of the chart.

https://people.hofstra.edu/jean-paul_rodrigue/images/Manias%20Bubbles.pdf

#63 common sense on 04.22.16 at 10:15 pm

Nice to see ethical people (who enjoy sleeping soundly at night) working to sincerely assist the greedy by attempting to talk them OUT of bad decisions…Thank you Linda…you just improved TD’s overall great rating for true customer service. Thanks for sharing this Garth.

Freedom First…Thanks for getting back to being your pompous self again. You were just too human there for so long I was starting to wonder that you truly had a heart.

Still not holding my breath for a rate increase anywhere in 2016 til post US election..

#64 HD on 04.22.16 at 10:17 pm

@#125 maxx on 04.22.16 at 2:09 pm

Thanks for the advice. I will keep that in mind for sure

@Nemesis

Thank you buddy. Always nice to hear from you :)

Best,

HD

#65 wallflower on 04.22.16 at 10:20 pm

Yep, it’s the Wild West out there. My sister just arranged a consolidation mortgage, first (all debts rolled into), which amounts to my guess 80% of house sell number and she has NO legitimate income. None. Falsified paperwork.
This is USA 2008.

#66 Ole Doberman on 04.22.16 at 10:32 pm

Garth there seems to be more talk of a world currency coming – electronic money, maybe RE is a hedge of some sorts for the transition.

Any thoughts?

#67 mark on 04.22.16 at 10:34 pm

From a financial planning perspective if a person is going to receive a set amount of money from the government and lets say a small pension from a future employer DB program that guarantees you a set amount this is a non volatile asset, could a person not view this as a bond component in a balance portfolio?
For argument sake lets say $1000.00/month of my income will come from this guaranteed source how do you weight it in your portfolio, so you can invest more in equities and view this as part of the fixed income part of my portfolio and then maybe can ignore some of the low yield fix income bonds as this money is guaranteed (sort of speak) from the government and DB pension plan?

I am not sure if i am explaining my concept, i guess what i am trying to say is how to view and weight the money i know i am going to get from CPP and a DB pension plan so i can adjust for more equities in my portfolio, or maybe this is not a good idea?

#68 For those about to flop... on 04.22.16 at 10:34 pm

#55 WUL on 04.22.16 at 9:52 pm
FLOP:

Good for your plucky Flyers. Join me down the hall at the Broadstreet Bullies Blog and I will give you my analysis.

Hon Turns (his hockey nickname) is losing patience with me.

#40 Eco Capitalist:

Where to find cheap rentals? Fort Mac. Bonuses are the Northern Lights and cheap lawyers and hookers.

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

Hey WULLY,perhaps delaying the inevitable but we are fighting back.
I was actually going to write you a couple of hours ago when it started but I thought I better not as it wasn’t Saturday night free for all.
” Cranky” Turner doesn’t mind as long as there is some finance involved.
I am glad we switched out our goalie as Mason is overrated just like home owning a condo in Vancouver.

You see what I did,I tied sport in with home ownership..

Ah forget it…

M41BC

#69 JO on 04.22.16 at 10:41 pm

Hi Garth
I too am work in the industry
Just this week got 4 apps from average folks who are desperate to further indebt themselves against these imaginary asset values and use it to buy more inflated RE
I too talk them out of it but mostly to no avail. This is completely out of control. The majority of people will be insolvent within 5 years and many will blame all but themselves
We are not all bad people . There are certainly many corrupt idiots and frankly at some banks/CUs the work environment requires staff to push the limits of ethics but some of us do care and work hard to advise properly
Many of these people will not take NO for an answer and you should see how they react when we try to explain why they should not go ahead
I rather sell a MF then a large mortgage to these average buyers
The system is completely out of control. I have never seen it like this

#70 Frank on 04.22.16 at 10:55 pm

Man, I hope you’re finally right at some point. I’ve been renting for a decade and while better than buying it’s getting worse. Living costs in general are too high. A correction would do the market good.

#71 Cici on 04.22.16 at 11:13 pm

That photo is way too cute

#72 ARP on 04.22.16 at 11:49 pm

Thank you Linda for sharing — had a good first TD experience not that long ago, which was a big change from my dealings with an unnamed “red” bank for the past eon or two.

#73 IKnow on 04.22.16 at 11:52 pm

#13 Joseph on 04.22.16 at 7:20 pm
Vancouver REal Estate called unpoliced, unregulated, and rampant

https://www.youtube.com/watch?v=y5hQ1qZAzSY

BCNDP has town hall to discuss problems of lack of regulation. Over 800 attend. Thanks to Christy Clark, who has done nothing to curb this problem. Of course Bob Renne the condo king has fundraised for her.

———————–

Christy said it’s the BC economic growth plus refugees from Alberta, stupid.

#74 ulsterman on 04.22.16 at 11:52 pm

I’m surprised by the number of bears STILL trotting out the same old “I can’t believe these idiots buying THAT house for $1.1m!” Folks, we’ve been calling the buyers in Van and T idiots for 10 years and they’ve made out like bandits, tax free. I don’t know when this market will eventually roll over, but i certainly would criticize someone paying $2m in Van for a SFU. Based on the last 2-3 years it’s more likely to be worth a few hundred grand more next year than less. Who would have thought last year at its maddening peak that houses here could be worth 30% more today – look at the Sullivan Heights of Burnaby, BC just as one example.

What’s going to bring down the market soon? Significantly higher interest rate? A slow down in Chinese buyers? A significant tightening in mortgage lending? The Bank of Baby Boomer Mom & Pop suddenly deciding real estate ISN’T a good investment. Riiiiiight….

There are ordinary people in Vancouver who have made 500-750k equity gains on suburban SFH’s iun the past 3 years alone. That’s a lifetime of saving or investing for most people.

#75 tkid on 04.22.16 at 11:54 pm

Photo is adorable.

#76 Moonbeam WTF?? on 04.23.16 at 12:26 am

DELETED

#77 TheAwakenedOne on 04.23.16 at 12:31 am

Garth,

This Linda’s got brain and a good heart – such a rare species nowadays. Is she single ???

You have my email – kindly forward it asap pls ! Tell her that I’m already in love with her, does not matter if she’s 50 – age is just a number.

I’m renting and single, in my mid 30s – got a balanced portfolio, and I love dogs, especially Labs ! :O)

#78 diharv on 04.23.16 at 12:44 am

Can someone please tell me what [email protected] stands for ?

#79 Darren on 04.23.16 at 12:46 am

Garth,

Best.
Post
Ever!

#80 observer on 04.23.16 at 12:55 am

Live in Vancouver.

If you listen closely every night you can hear the elders whisper…

Precious… Precious …Precious….

Smego want Precious Real estate…

Hey garth you should post a picture of Smego hugging and humping a Vancouver special home

#81 TRT on 04.23.16 at 1:57 am

About to buy 3 detached homes on west side of Vancouver. Will try to carry them for 6 months and then put them back on market. Hopefully I can net a cool $1.5 million +.

If market implodes, which likely it won’t , I can always go overseas and live at my dads place for 7 years until my credit clears up.

Worth the risk. Do not try if Canada is the only country you know. Lol

#82 Sean on 04.23.16 at 2:00 am

It’s a tough time out there for any responsible financial planners (at least in Vancouver and T.O.). Preaching the the non-converted, sacrilege day after day. And most of them don’t have blogs with hundreds of thousands of readers.

#83 Smoking Man on 04.23.16 at 2:16 am

Life is short.

Live everyday like it’s your last. No regrets.

Now if we can figure out away to get the guy doing the dead body to put a smile on its face.

Why is every stiffs face so serious.

Smile , That’s the way I want to go out….

Got the scare of my life two weeks ago… going out serious.

Not me……

#84 Smoking Man on 04.23.16 at 3:41 am

High heals , don’t do it ladies. Bunions. It projects the firm calf , a dumb dude thinks it goes all the way up.

Dudes kids come from the sweet spot.

Lots of dumb dudes around . I’m observationaly seeing this. The human matting game.

Flip flops ladies. Fk the dumb men… comfort is everything.

Thet don’t like it.. next……..

#85 Freedom First on 04.23.16 at 3:48 am

DELETED

#86 Freedom First on 04.23.16 at 3:54 am

#63 common sense

Yes. I only speak the truth. Thank you!

#87 jane 24 on 04.23.16 at 4:00 am

The bit that I don’t get is why a bank would loan 55 year olds money until they are 85!! Their incomes may be great but how about their pensions?

Here in England it is very difficult to get banks to advance new mortgages once you hit 55 even. The terms can be no more than your 70th birthday and you have to show them how you intend to totally pay it off in those 15 years. So we couldn’t trade up even if we wanted too as you couldn’t get financing but then we don’t have a CHMC back-stop, the risk is totally the banks to bear.

We traded down 2 years ago in our early 60’s and although it took a bit of getting used to a small bungalow after a big family home now we are very content. Small houses mean small bills, convenient living and more cruises.

#88 data on 04.23.16 at 7:43 am

Intersting

https://youtu.be/Tq-JOFViE9M

#89 Terrence on 04.23.16 at 8:17 am

Canadians are the biggest buyers of real estate in the world combine that with low interest rates (that will go lower) and capital inflows from the rich around the world we should have housing prices increase continually until @ least 2020! These dimwitted individuals are in over they’re heads, but they won’t lose money on the new dump if they play the cards right, but why wouldn’t they just buy a new builder cookie cutter house for that amount of money? As for the bankster lady ,cry me a river that’s how you make a salary, by letting idiots do what idiots do best which is ,borrow to in order to finance a lifestyle they can’t afford right now, because hey” you are richer than you think ” right?Party on GARTH!

#90 Bottoms_Up on 04.23.16 at 8:20 am

Look at this horrible story….a mom doing the right thing, allowing her kids to play outside in her fenced-in backyard (including a 10-yr old), and she gets child services interrogating her….

http://www.theglobeandmail.com/news/national/winnipeg-mom-in-hot-water-after-kids-play-in-backyard/article29716605/

#91 MF on 04.23.16 at 9:11 am

#74 ulsterman on 04.22.16 at 11:52 pm

Lol surprised?

Buddy these markets are a result of a complete failure of policy at every level. All central bankers are complete failures and are now just trying to keep it going for as long as they can. They wont be able to. They have resorted to “talking down the dollar” and negative rates and are clearly becoming powerless.

It’s not just the interest rates, it’s also the unchecked money laundering and the subprime lending.

The market here in the gta and gvr are a runaway freight train with a driver that is totally incompetent at the helm. There is no instance in history where this has worked out okay.

MF

#92 gut check on 04.23.16 at 9:28 am

@ #84 Smoking Man on 04.23.16 at 3:41 am
High heals , don’t do it ladies. Bunions. It projects the firm calf , a dumb dude thinks it goes all the way up.

Dudes kids come from the sweet spot.

Lots of dumb dudes around . I’m observationaly seeing this. The human matting game.

Flip flops ladies. Fk the dumb men… comfort is everything.

Thet don’t like it.. next……..

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

I love you

#93 For those about to flop... on 04.23.16 at 9:31 am

Hey WULLY,I wasn’t going to tell you this part of the story as the comeback isn’t complete, but I’ll put it out there anyway as I don’t think anyone from Washington D.C reads this crummy blog.

When we were 3 games down in the series ,I sent the boys a rallying email telling them to stick with it and I accidentally sent an attachment from Greaterfool ,and apparently some of the players thought it was bulletin board material.

Apparently nothing gets the boys fired up like when they see a chart from VREU….in particular when a couple of them see the infamous Oak Bay 2010/ 2014 price comparison chart with the word “recent” included they go ape shit.

Also a couple of the boys have found it good for target practice, apparently they blow it up to be the size of a net and have fun picking off all the asterisk with the pucks……..*………….*……………..*

If the Philadelphia Flyers do come back beat the Washington Capitals, I think I will send them the chart where VREU compares prices in Vancouver to Winnipeg that will really get the guys fired up.

You just don’t mess with the Peg…

M41BC

#94 Bytor the Snow Dog on 04.23.16 at 9:42 am

@78 DIHARV

If we told you we’d have to kill you… unless you recite the Pledge of Allegiance to the Garth!

#95 JamesA on 04.23.16 at 9:46 am

Everything is not always as it seems:
http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

Sorry if it has already been posted. Its worth a read though.

#96 Jay on 04.23.16 at 9:53 am

With all fairness to the guy at Banks who are doing the right thing, when I bought my house recently but I was delighted to see my 20% down payment and desire to login my interest rate for 10 years.

He was telling us some stories of people who he thought absolutely should not be buying houses who were, and this wasn’t Toronto or Vancouver.

#97 KJ on 04.23.16 at 10:00 am

“our culture” – that’s rich

#98 crowdedelevatorfartz on 04.23.16 at 10:03 am

@#37 bdy skytrn
“Trudeau……..he sounds moronic…”
*******************************************

No arguement there.
So on Shakespeare’s birthday( AND , oddly enough, his “death” day) shall we look at some famous quotes that may apply to the former school drama teacher cum Prime Minister?

“Better to be a foolish wit that a witless fool”

“Hell is empty, all the Devils are here.”

“God has given you one face and you make youself another”

“No legacy is so rich as honesty”

“A fool thinks himself wise but a wise man knows himself to be a fool”

#99 tallyhohoho on 04.23.16 at 10:05 am

http://www.theprovince.com/business/real-estate/vancouver+real+estate+buyers+flooding+into+victoria/11871017/story.html

Uh-oh…the Victoria guy with the 70s-style x’s and o’s housing charts ain’t gonna like this….

#100 crowdedelevatorfartz on 04.23.16 at 10:05 am

@#80 Observer

OMG!
THAT WAS HILARIOUS !

#101 BOOM! on 04.23.16 at 10:14 am

Ah…. as Linda’s story noted the borrowers here had a 42% TDS. (Honestly not certain what TDS means), but it looks like 42% debt ratio at 2.55% mortgage rate.

Throw in any rate hike and it gets ugly, quickly.

The BIG question is:

WHY would a ‘responsible Bank’ lend to anyone with THAT high a ratio? I thought debt ratios needed to be around 33-35%. This is a tax-payer guarantee of last resort, right? While the Banker may want mea-culpa’s for being against the deal, it appears the Bank might rather “DO” the deal, even if it iOS unwise for the borrower?

Am I reading this wrong?

#102 crowdedelevatorfartz on 04.23.16 at 10:20 am

@66 Ole Doberman
“there seems to be more talk of a world currency coming – electronic money…..”
********************************************
wasnt it called “bitcoin”?

While there has been talk amoung some countries about eliminating large denominations ie 500 Euro note or the $1000 Canadian bill ( quietly being recalled and destroyed by the Mint)because it was found only drug dealers and organized crime seemed to be handling those denominations. ie When polled, most people have never even seen a 500 euro much less handled one, same with the $1000 bill.
So some scandinavian countries are dabbling with the idea of a cashless society to try and eliminate tax cheats and crime but I’m dubious.
If there is a way to cheat people will find it.
Take Africa as an example. People dont have easy access to banks but there is a healthy trade system going on via cell phones. People trade cell phone credits like cash and when they can eventually cash then in for material goods they do…..
Pretty hard for govts to tax a barter system.

Cash and money will be here for a while yet until computor systems can handle a “bitcoin” type exchange ( instant , simutaneous updates on every bank computor worldwide to avoid fraud…..)

Financial institutions are looking at it but it wont stop frauds like this…….

http://www.google.ca/url?url=http://business.inquirer.net/208247/hackers-steal-100m-from-bangladesh-bank&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwir-uqO-qTMAhVG9mMKHdhrAUkQFgggMAI&usg=AFQjCNFYPkjKRcz5pyyhGVkqcjUcIdviuw

#103 Man on 04.23.16 at 10:47 am

What does [email protected] stand for?

#104 Silent the people on 04.23.16 at 10:54 am

Good story and good post! Thank you Linda! The nice lady @ the bank {[email protected]}does exist now and then!

#105 crowdedelevatorfartz on 04.23.16 at 11:07 am

@ Brazil ExPat
Quality construction by Olympic contractors?

http://www.google.ca/url?url=http://www.sportsnet.ca/olympics/rio-bike-lane-built-olympics-collapses-killing-least-two/&rct=j&frm=1&q=&esrc=s&sa=U&ved=0ahUKEwjx8eKmhKXMAhVKw2MKHWHVDtIQFggnMAU&usg=AFQjCNGija5rd3i7eoy6b5Hu5Rd9kcOHBg

Shades of things to come?

One wonders if the US will pull out due to “security concerns” ,then the Russians to pull out because of their “dope testing” concerns…..

Is Dilma in jail yet?

#106 Doug in London on 04.23.16 at 11:11 am

I have my own story about [email protected] There are rumours the bank I mention here might also be the green one. Some years ago [email protected] invited me in for a free review of my mutual fund investments with that bank. She suggested I buy Energy Fund, as it has a been a star performer and everyone knows oil prices will keep going up forever and ever just like the prices of those houses in Oakville. I said I cashed in the last of my Energy Fund not long ago because it had a good run and planned to stay away from it for now. The punch line? That was in February 2008 and I think we all know what happened over the following year.

#107 macroman on 04.23.16 at 11:29 am

Hehe, Linda @green…

Oh the irony to the US housing implosion and the famed robo signer Linda Green.

Garth are you playing us? Naw…

#108 Linda on 04.23.16 at 11:36 am

Boom! The rate is very low closer to 2.35. Total debt service ratio at 42 percent is the lowest rate a bank or CMHC for insuring purposes will consider.
-it calculates mortgage; property tax, heating plus utilities excluding cable. Condo or other ownership fees plus 3 percent of any revolving credit limit available to you despite utilization plus any loan payments like vehicles, RRSP, etc. Divided by your gross income x 100.
-anything over 44% could be approved with good assets, income, guarantors on exception.

#109 salonist on 04.23.16 at 11:55 am

trt
agree, you should go live with your dad.
you wont be here to sponsor invasive immigrants.

harper to Obama, “that’s a no brainer”

Re-open criminal investigation and question Harper, says policing expert…. this is from a 2015 article

http://www.nationalobserver.com/2015/08/23/opinion/re-open-criminal-investigation-and-question-harper-says-policing-expert

sociopaths,gather in packs, and “the leader of the pack”….is that you preston

#110 Moonbeam WTF on 04.23.16 at 12:10 pm

DELETED

#111 BS on 04.23.16 at 12:12 pm

ulsterman on 04.22.16 at 11:52 pm

I’m surprised by the number of bears STILL trotting out the same old “I can’t believe these idiots buying THAT house for $1.1m!” Folks, we’ve been calling the buyers in Van and T idiots for 10 years and they’ve made out like bandits, tax free.

Tax free? Last time I checked everyone who owns property pays property tax and transaction taxes. Not quite tax free. It is one of the few things that is taxed just for holding it.

Most people made nothing anyway. Only people who have sold and not bought back in have made money. Paper gains are meaningless in a bubble unless you exit before it pops. That will be a very small percent of people who have bought in. That is the way bubble work. Few can make money. Even property developers will end up losing when they are stuck half way through projects and prices collapse.

If a house was poor value 5 years ago it still is. Same house, same location, same mortgage payment. Plus 5 years of paying more than rent which offsets any mortgage principle paid down. Then in the future you are chained to an asset that is worth less than you paid.

#112 ronh on 04.23.16 at 12:21 pm

My next door neighbor has listed the home for sale. Asking price is at least 65K over others in the hood.
First potential buyers where young (30ish) with bank of mom and dad in tow. Yes, I’m nosey.

#113 Yuus bin Haad on 04.23.16 at 12:25 pm

[email protected]: “I advise against this deal.”; married couple: “We don’t give a shit.”; [email protected]: “OK, sign here.”

#114 Renter's Revenge! on 04.23.16 at 12:35 pm

#90 Bottoms_Up on 04.23.16 at 8:20 am

” Look at this horrible story….a mom doing the right thing, allowing her kids to play outside in her fenced-in backyard (including a 10-yr old), and she gets child services interrogating her….

http://www.theglobeandmail.com/news/national/winnipeg-mom-in-hot-water-after-kids-play-in-backyard/article29716605/

That’s pretty messed up. I already generally hate other people because I think they’re idiots (unless they prove me wrong) – I know, it’s anti-social, but that’s the way it is for me. But this story just adds fuel to the fire. Neighbors should at least talk to each other rather than reporting them to the authorities. Like, what is this, Soviet Canada?

On the other hand, the youngest child was 2 years old, which I think is too young to leave alone, and the oldest at 10 years is not old enough to supervise other children (it’s 12 by law), so the mom should really have been outside watching the youngest one.

#115 HellandBack on 04.23.16 at 12:56 pm

http://www.theprovince.com/business/real-estate/vancouver+real+estate+buyers+flooding+into+victoria/11871017/story.html

Uh-oh…the Victoria guy with the 70s-style x’s and o’s housing charts ain’t gonna like this….”

The Vancouver people moving there probably won’t like what they see. Homeless and mental health problem is out of control. Not the post card city anymore.

#116 Linda on 04.23.16 at 1:21 pm

Doug in London: that is a direct violation of the MFDA CODE OF CONDUCT that any representative sell you a single Sector fund with no other funds adding diversification and it is an extremely risky fund! I hope you cashed out in time.

#117 understood by few on 04.23.16 at 1:45 pm

#115 HellandBack

——–
Ha. Only if that’s what teranet reports.

Check out the crea hpi graphs for fraser valley vs victoria (for sfd). The correlate nicely until the valley goes parabolic. With all the news around Vancouver buyers raiding victoria my bet is victoria will soon follow the valley (regardless of whether it’s true people are coming over… The hype is enough to cause panic buying).

#118 BOOM! on 04.23.16 at 1:49 pm

#108 Linda

To me, this seems like quite a HIGH number. A family needs to plan for other things as well.

Perhaps it is merely the difference in perspective. Darn little maneuvering room there when 42% of income is for shelter costs! (Assuming I am understanding this transaction correctly).

Our family always wanted to live, and not merely for a house.

Still recall a realtor telling me I “qualified” for a home that was like 3.5 times my total GROSS annual income, and mortgages rates back then were between 7.25-7.5%
YIKES!

I dare not think they would have told me I qualified for in a “low rate” environment!

“Honey, let’s go buy a house we really can’t afford.”

#119 Nobody on 04.23.16 at 1:51 pm

So if you aren’t a licensed financial advisor and have a fiduciary duty to the bank and not to me, and you “advise” me not to buy a house which subsequently rises in value by 20% – do I get to sue you or the bank for the loss?

Remember this is a bank that is currently paying out $Bn in fines for advising customers to buy payment protection insurance which it knew it would never pay out on.

#120 46 and 2 on 04.23.16 at 1:51 pm

I think this bitumen pipeline is going to save us mentality in Alberta is hilarious, and I live in Calgary.

A few facts….

1) At current output there is ample EXISTING outgoing shipping that can transport the goo all over the place instead of one delivery point.
2) Future bitumen output may actually decrease…..It will not increase. The long term money is gone from the tar sands.
3) Shipping the goo using anything but a pipeline does not require that the bitumen is diluted with solvents to move it down the line, an added cost at both ends.
4) If you think Alberta and Quebec can do a deal over this you need to get off the pipe.
5) If you think Trudeau can referee this see #4
6) If it ain’t broke why fix it?
7) Unless it is a direct line to the big market, with long term contracts in place, stop talking about pipelines, they are not going to help and they are not going to happen

#121 Ole Doberman on 04.23.16 at 2:06 pm

#102 crowdedelevatorfartz on 04.23.16 at 10:20 am

@66 Ole Doberman
“there seems to be more talk of a world currency coming – electronic money…..”
********************************************
wasnt it called “bitcoin”?
———————————————————-
No not bitcoin.

A new reserve currency replacing the US. Will be electronic. As the US phases out and China becomes the new financial powerhouse. Maybe by 2020.

#122 Ace Goodheart on 04.23.16 at 2:09 pm

Pity. The couple referred to above are just over the thresh hold for CMHC (price must be under a million dollars). If they had only not put in that bully bid, they would only have needed around $72,900 to close a $979,000 house using CMHC.

Total mortgage insurance premiums for this purchase would have been $32,619.60

Yes people are actually doing this.

#123 Exurban on 04.23.16 at 2:42 pm

Not exactly on the topic of this post, but totally on topic for this blog, four U.S. Congressmen are promoting a bill to create a new simplified tax-free savings account. Their memo reads like a Garth post:

A Complex Tax System Prevents Americans From Saving

Unfortunately, as taxes and onerous regulation continue to increase, the U.S. personal savings rate has decreased to 5.5 percent. Our savings rate was two to three times higher than that in the 1970s and 1980s, with a peak of 17 percent in 1975.

Today, many lack the recommended savings level of three to six months of income. In fact, according to a recent Federal Reserve survey, only 53 percent of adults would be able to cover an emergency expense of $400 without selling an asset or borrowing.

Part of the problem is the tax code being too complex, making it difficult for people to understand their options to invest and save for the future. A more streamlined and flexible saving account to enable and encourage savings is needed. To that end, we have introduced the Universal Savings Account Act, legislation that will empower all individuals to set aside money for all of life’s challenges and opportunities.

Similar to Roth Individual Retirement Accounts, the Universal Savings Accounts established in our bill are designed to offer tax-free earnings and distributions without the restrictions, confusion, and penalties associated with other tax-advantaged accounts. With these accounts, any American adult could save and invest up to $5,500 per year of post-tax income without being burdened by additional taxes when those investments grow.

#124 Entrepreneur on 04.23.16 at 3:31 pm

I think Linda’s part of the story is the absolute truth but I also think like #91 MF in that the mix is fueled by “not just the interest money, it’s also the unchecked money laundering and subprime lending.” Being naïve on money laundering is passé, too many drug lords (noticed on the news 30 shots in one night in Vancouver). A person would have to be naïve to think this is not about drug money, wake and smell the coffee.

Welcome back Smoking Man and with a vengeance, nothing is going to hold you back.

#125 Juno on 04.23.16 at 3:43 pm

Linda why should you care. If you didn’t loan these people the cash someone else will.

Everyone is in HEAT! and you don’t want to get in the way of some wild animal in HEAT.

Just do your job and enjoy the show

#126 WUL on 04.23.16 at 3:45 pm

#120 46 and 2 on 04.23.16 at 1:51 pm

I think this bitumen pipeline is going to save us mentality in Alberta is hilarious, and I live in Calgary.

oiloiloiloiloiloil

I read your comment with some interest. I have wondered about the mentality as well but I lack the knowledge and experience to critically analyze the issue.

Support for your position can be found in the following three short articles. I do not know if the arguments can simply be dismissed with the usual AB response, “Yeah right, those lefty enviro-nut rags.”

http://ipolitics.ca/2016/04/11/build-a-dozen-pipelines-alberta-it-wont-help/

http://ipolitics.ca/2016/03/01/the-business-case-for-energy-east-just-fell-apart/

http://thetyee.ca/Opinion/2016/04/20/Myth-of-Tidewater-Access/

#127 Linda on 04.23.16 at 3:51 pm

To nobody- this is why we do decline deals of the TDS is above 42 percent. Secondly, everyone is qualified at the 5 year posted rate (4.64) to benchmark against raising rates therefore no one is really approved at these bottom low rates. Another way the banks are trying to protect the market – they are not financing these “bully” offers or bids. With the exception of a few homes priced way below market value, most appraisals come in at the original listing price or slightly above so that we are not financing the overages.
People sign on the dotted line….they take agreements to their lawyers, etc. At the end of the day ALL INVESTMENTS HAVE RISK and if you don’t understand that, you should not be buying a house!

#128 lee on 04.23.16 at 3:59 pm

Great article in Star biz section today talks about strength of Toronto spring housing market. So much for those of you arguing we are almost out of steam in Toronto. It’s just getting started. Expect at least seven more years of this till sprices double again then there will be a short rest.

The house-humping Toronto Star. Great source of objective (advertising) information. — Garth

#129 Linda on 04.23.16 at 4:06 pm

Also to NOBODY: I am a licensed Advisor through MFDA, not IIROC (very different)

We never straight out advise clients to do one thing or another. The facts are presented, clients already know if their monthly budget is going to be tight by adding extra housing costs, etc. So the answer is no you cannot be sued one way or another.
It is similar to making a decision about what stock to buy. Your buddy recommends a hot penny stock, you run to your Advisor who DOES have a fiduciary responsibility to reject an unsuitable trade. What do you do? A: open a self directed trading account and buy it yourself b. Take the advisors advice because deep down you know penny stocks are dangerous or c: sue the advisor because he made you miss out on a big gain but thank him when you didn’t buy because the stock ended up loosing.
The banks can only “advise” with facts, not opinions.

#130 Bram on 04.23.16 at 4:34 pm

Still steaming ahead in my neighbourhood:
Small 1950s house, on 29ft lot, in east Vancouver.
$2m ask. Ugh. To be fair, it’s almost in west.
Neighbour across the street already sold with the same ask, but that house was bigger.

https://www.realtor.ca/Residential/Single-Family/16845102/66-E-42ND-AVENUE-Vancouver-British-Columbia-V5W1S3

Every month, prices seem higher here.

Just a few years ago, Ontario st was the divider between 1M+ and <1M homes.
Then it became a 2M divider, only briefly it seems.

Bram

#131 Dups on 04.23.16 at 4:59 pm

I was at my local home depot today in north London ON. There was a informative class going on and there were about 50 Chinese folks with a translator sitting down and listening to how homes are maintained. No word of a lie. Never seen this before.

#132 TurnerNation on 04.23.16 at 5:19 pm

Mindless Canadian sheep like us are not taught success lies in taking risk and buying and selling – while managing or hedging riskiness.

We’re taught Buy an obedience certificate, Sell our labour to a corporation; Buy a house.

‘Atsa’ll folks.

#133 TurnerNation on 04.23.16 at 5:30 pm

How a 416ixer sees the GTA/905 area.

To the west have Schlong Branch then Dorkville, Pisisssauga, Scamalea.

Further west, Churlington then Tilton and Dolton.

Northwards: Snarkham, Yaughn, Ditchmond Hill.

East: Snickering. Zitby.

(I can’t publish my euphemisms for Ajax and ‘Shawa…)

#134 salonist on 04.23.16 at 5:32 pm

I had posted.
wordpress pops up with blank page with,

“you are posting comments too quickly. slow down”

wordpress has me confused with mark

work around
https://frique.me/blog/disabling-wordpress-comment-flood-prevention/

trt, you should go live with your dad,you wont be sponsoring immigrant invaders then.
disgusting.

#135 Julia on 04.23.16 at 5:32 pm

#108 Linda
I believe that Banks have to qualify on the 5 year posted rate, can’t use the lowest rate.

However, the 3% of other credits included is on utilized amounts, not authorized limit. It used to be on authorized limit but has been made more generous over time.
So don’t use your revolving credits when applying for the mortgage but go ahead and max them later.

42% is much too generous. Monthly daycare or nanny costs, gym memberships, cell phones, Netflix etc…All monthly commitments and not included.

#136 Ace Goodheart on 04.23.16 at 5:40 pm

RE: #129 Linda:

“Your buddy recommends a hot penny stock, you run to your Advisor who DOES have a fiduciary responsibility to reject an unsuitable trade. What do you do? A: open a self directed trading account and buy it yourself b. Take the advisors advice because deep down you know penny stocks are dangerous or c: sue the advisor because he made you miss out on a big gain but thank him when you didn’t buy because the stock ended up loosing.”

(d) None of the above.

I’d start with the “hot penny stock” website (if it has one). See if I can find the financial statements and prospectus. Read the same. Dig deep, see what the company does. If possible, go and buy one of their products. Take it home and see how it works. Try to break it. Get a feel for it.

Then call them. Companies have telephone numbers. Try to talk to someone relatively high up in the chain. Middle managers are useless, spout worthless corporate policy they don’t understand. Find someone with a brain, and discuss. These people usually will not lie to you.

Then, do the metrics. What is the book value? What is the earnings per share? Look at the debt to asset ratio. Look at outstanding bonds. Have they issued a bunch of preferreds lately? What are the yields? Can they pay them, or are they borrowing? What is the cash flow? Net cash available after expenses? Tax liabilities? Get a good feel for the financials.

Then look for upside. That is the hard part. You have to be inventive. People buying shares of “google” back in the 1990s would have to have figured out that this worthless little company building an advertising base on some weird computerized “net” would one day take over the world (literally). To buy good penny stock you need to have vision.

But no, I would not take my “buddy’s” advice nor would I listen to an advisor, nor would I sue anyone if something went wrong.

I am a venture capitalist. I don’t put my money behind crap, worthless stuff. I investigate before I buy. You should too.

#137 Observer on 04.23.16 at 5:47 pm

All well and good for Linda, the [email protected] to write Garth with her concerns about people borrowing up to their eyeballs….but maybe she should write to the Bank of Canada instead. It’s their cheap money policy that’s driving this.

#138 crowdedelevatorfartz on 04.23.16 at 6:05 pm

@#121 ole doberman
“A new reserve currency replacing the US. Will be electronic. As the US phases out and China becomes the new financial powerhouse. M
*******************************************

2020 ? Nah, too soon if ever.
China has its own looming problems to worry about before proving to the world they can replace the good old “greenback” with the communist “redback” renminbi.
Bigger deficits, slowing exports, dubious GDP reporting, increased unemployment, corruption, free speech crack downs, on and on and on.
The US has a while to go yet….mind you , that being said if Ted Cruz or The Donald have their finger on the button…..who knows?

#139 For those about to flop... on 04.23.16 at 6:12 pm

04.23.16 at 4:34 pm
Still steaming ahead in my neighbourhood:
Small 1950s house, on 29ft lot, in east Vancouver.
$2m ask. Ugh. To be fair, it’s almost in west.
Neighbour across the street already sold with the same ask, but that house was bigger.

https://www.realtor.ca/Residential/Single-Family/16845102/66-E-42ND-AVENUE-Vancouver-British-Columbia-V5W1S3

Every month, prices seem higher here.

Just a few years ago, Ontario st was the divider between 1M+ and <1M homes.
Then it became a 2M divider, only briefly it seems.

Bram

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

Bram,I live probably 5 minute drive away from you ,these are some of my observations of this area over the last decade or so.

In 2002 I was living in the Main and 41st area ,not the nicest part of town but not the worst.
Upon arriving I heard all the Westside/ Eastside jokes but there are certain areas where I can't tell the difference.

Leading up to 2010 I noticed as the cost of housing went up the centre of town seemed to be moving East.
I myself moved to my current location near Fraser and 41st.

That all changed as soon as the plans were finalized to build the Canada Line in time for the Olympics.
With the densification of this area sealed the centre of town swung back to the west even though the prices of housing continued to rise.

In the remaining time since 2010 the condo construction has blossomed on Cambie but died on Main st except for a few projects around the Olympic Village.

Yes people still crave the Westside address but with a lot more selection of new construction on the Eastside between Cambie and Fraser this has helped to blur the line a little as to where the unofficial centre of town is.

In my mind when I think of the Westside starting, I think of Cambie as the boundary,but professionally as some one who works on Luxury Housing for a living ,work wise I see Granville St as the boundary.

I know for flipping the address with the w is sexier, but if you are going to live there for a long time,shop at the same supermarket,go to the same Doctor etc. who cares.

I know some people worry about school catchment areas but instead of pissing money away on a house why can't they send jnr to a private school?

Yeah,I know gotta have THAT house…

M41BC

#140 Blogbitch on 04.23.16 at 6:21 pm

This post provided excellent food for thought. I find it inspiring to know there are credible people like this [email protected] out there. Imagine if the whole industry taught and promoted ethics. Might not do much in the short term, but in the long term, we might not hang ourselves as a nation.

#141 Ace Goodheart on 04.23.16 at 6:26 pm

http://bgr.com/2016/04/22/tesla-model-3-photos/

Elon Musk, the most intelligent person in the world?

Nope, a venture capitalist. He didn’t even invent Tesla, he just got behind it and capitalized it with his wealth.

Canada is working towards carbon emission reduction targets, that would result in every gasoline and diesel vehicle being taken off the road:

https://ipolitics.ca/2016/04/21/pbo-puts-pricetag-on-canadas-emissions-targets/

Our new generation of folks, hate cars, trucks, and carbon emissions. They love computers, internet and zero emissions technology:

https://newmatilda.com/2016/04/20/australian-universities-should-listen-to-students-and-divest-from-fossil-fuels/

What do we take from this?

I believe oil is dead (or dying). At least as a fuel. It still has a purpose for making many other products, including pretty much everything plastic.

I see in the future, law suits against oil companies for the destruction caused by global warming and the health problems caused by vehicle emissions. Just look at what is happening right now to Volkswagen (they may well be destroyed by their silly attempt to “cheat” on emissions testing).

The future appears to be battery technology. Centralization of charging facilities and electricity generation to fuel these facilities. It’s much easier, to control the carbon emissions of several large electricity generating facilities, then it is to control the emissions of millions of individual internal combustion engines.

Who will operate and control the electric car charging stations in the world?:

(trick question):

https://www.teslamotors.com/supercharger

Ever heard of “first mover advantage”?

People, especially young people, are being raised to hate the gasoline and diesel engine. This is a major shift, a game changer, that investors cannot ignore.

#142 jess on 04.23.16 at 6:46 pm

banksters idea of due diligence?

http://www.ag.ny.gov/press-release/ag-schneiderman-led-state-federal-working-group-announces-5-billion-settlement-goldman

#143 For those about to flop... on 04.23.16 at 6:47 pm

Ace ,and any one else interested in battery technology…

M41BC

http://www.dailymail.co.uk/sciencetech/article-3551661/The-batteries-LIFETIME-Nanowire-technology-charged-thousands-times-without-losing-capacity.html

#144 Trading Naked on 04.23.16 at 6:50 pm

Hey, Bank of Mom and Dad! Are you afraid that Junior’s going to miss out on the property ladder if you don’t help them buy now? [email protected] is giving a seminar to show you how!

You May Be the Key: Helping your kids buy a home

“With housing prices skyrocketing in the Vancouver market, it can be extremely difficult for young people to get into the market or upgrade from their starter home. As parents, you want to give them a helping hand. There are a number of options to assist, but you also want to ensure you don’t jeopardize your own financial future.

Join our panel of financial and legal experts to learn about:

* The range of financial options
* Legal implications, risks and strategies
* New trends including co-ownership
* Protecting your own financial future”

https://www.blueshorefinancial.com/Campaign/Seminars/

#145 HellandBack on 04.23.16 at 6:59 pm

#117,

The numbers don’t support the house humping article of those “flooding” Victoria. 70% still from Victoria. Notice how they never have numbers to back up the story? Paid industry hype.

#146 jess on 04.23.16 at 7:17 pm

“Internal Revenue Service’s (IRS) enforcement of tax laws, including reducing the net tax gap—the difference between taxes owed and taxes paid—which was last estimated to be $385 billion.”

page 6
http://www.gao.gov/assets/680/675425.pdf
===========================

#147 Harbour on 04.23.16 at 7:29 pm

How does a 55 year old couple qualify for a 30 year amortized mortgage of $800,000

#148 Fed-up on 04.23.16 at 7:55 pm

I was out walking the pooch in a neighbourhood I know well.
Look at what 600K buys in Scarborough north of Kingston RD these days.

https://www.realtor.ca/propertydetails.aspx?ref=E3468438&boardid=82

Houses on this modest little street were selling for less than half that 8 or 9 years ago.

What will stop and reverse this? Higher interest rates? Less foreign buyers? Lower immigration? Tighter lending rules? Aging boomers? Booming balanced portfolios making real estate look like a bad idea?

I used to think so. I will believe it when I see it. In the meantime the joke is on side liners.

#149 For those about to flop... on 04.23.16 at 7:55 pm

Hey WULLY, time for our Saturday night free for all post.
About to start watching the Blues vs Hawks.

I want the St Louis Blues to win as I believe it will increase my chances to sell my SLB whiskey glass I have for sale on eBay for $12…

Garth,your a good man…

M41BC

#150 Fed-up on 04.23.16 at 8:06 pm

“They ignored advice. Succumbed to emotion. And if the market stalls, turns, corrects or just stagnates their reward is stress and loss.”

———————————————————————————–

Our balanced portfolios have done all of the above 4 out of the last 8 years and 7 of the last 15. We’ve been told that we shouldn’t care, so what’s the big deal right? At least they get to live in their home while they wait it out. And that’s only if house market lays an egg.

Just an observation.

A portfolio that lost money in half of the last eight years is neither balanced nor diversified. A 60/40 account with the correct geographic weightings returned an average of 6.3% annually over the last six years, two of which (2011 and 2015) were stinkers. — Garth

#151 For those about to flop... on 04.23.16 at 8:40 pm

A portfolio that lost money in half of the last eight years is neither balanced nor diversified. A 60/40 account with the correct geographic weightings has returned 6.3% over the last six years, two of which (2011 and 2015) were stinkers. — Garth

////////////////////////////
I know different people have different expectations but with everything that went on last year I was glad just to break even.
I actually lost a couple of hundred dollars but I call that a fee for stupidity after I got carried away and done some extra curricular investing by donating some money to an Indian fund.
I have a couple of uncles there on my wife’s side,next time I will just give one of them the money instead…

M41BC

#152 Prairieboy43 on 04.23.16 at 8:51 pm

Linda did her job. People are deaf, dumb and blind. Majority have to learn the Hard way. Begins as a child.
That is why there are 0.1%,1%, 10% and 90%. Darwin was Correct.
Little article to those slugging it out in Alberta. Good Luck!https://youtu.be/qzdK28lP1HY
PB43

#153 Money supply on 04.23.16 at 8:55 pm

Virtually all governments, 95% of households and individuals are in debt one way or an other.

Where is all the money supply to cover it comes from?

By extending the balance sheet, due to ever growing productivity?

#154 6.3% on 04.23.16 at 8:59 pm

A 60/40 account with the correct geographic weightings returned an average of 6.3% annually over the last six years, two of which (2011 and 2015) were stinkers. — Garth

—-

Can we see past sample portfolios with the revelant details?

You mean the stuff other people pay for? — Garth

#155 Millmech on 04.23.16 at 9:06 pm

#148 Fed Up
Doing very well being on the sidelines.Will be financially independent by 50 no worries here!

#156 Catalyst on 04.23.16 at 9:10 pm

One of the things that never gets mentioned is the appraisors. These guys get referrals from the bank and they put together these fake appraisals to make the deals work. Alot of wheel greasing going on….

#157 Tony on 04.23.16 at 9:30 pm

Of all the cities near the GTA I’ve yet to see a poorer city than Oakville. The average car on the road is more than 20 years old and poverty abounds. Any city close to Mississauga or Brampton will get poleaxed in a real estate meltdown.

#158 Tony on 04.23.16 at 9:50 pm

Re: #121 Ole Doberman on 04.23.16 at 2:06 pm

2020 sounds about right to me. I was guessing around 2020 many, many years ago.

#159 Owl Eyes on 04.23.16 at 10:24 pm

Garth and blog readers, you gotta see this. A new low in misrepresenting data:

“The myth of Vancouver millennials leaving town because of the high cost of housing”

business.financialpost.com/personal-finance/mortgages-real-estate/the-myth-of-vancouver-millennials-leaving-town-because-of-high-cost-of-housing

“Cameron Muir… says the percentage of the population 20-34 continues to grow. He says in the city of Vancouver the percentage of the population made up of millennials has grown by 9.5 per cent while the figure is 18 per cent for metro Vancouver.” [okay…]
“An examination of population estimates for the region reveals that millennials are, in fact, not retreating from Vancouver, and that the population aged 20-34 years old has increased significantly…”
{Hang on.}
“Using population estimates from British Columbia Stats, the economist finds between 1995 and 2005 the number of 20-34 year olds in the city of Vancouver rose by more than 5,500 individuals or almost 3.5 per cent to reach 160,000. From 2005-2015, it grew by 15,800 or 9.5 per cent to reach 181,000”.

Wait. So Millennials are a bigger cohort than GenXers is what you’re saying right? Shouldn’t you compare millennials to millennials? That is, what did the 10-24 year old cohort look like 10 years ago?

Best figures I could find from 10 years ago were here
http://www.statcan.gc.ca/pub/89-638-x/2010004/c-g/11085/c-g1-eng.htm

If you could animate this population pyramid it would be interesting to see whether any of the millennial cohort in fact “evaporate”

#160 Mark on 04.23.16 at 10:34 pm

“What will stop and reverse this? Higher interest rates? Less foreign buyers? Lower immigration? Tighter lending rules? Aging boomers? Booming balanced portfolios making real estate look like a bad idea?”

All it took for the Canadian RE market to peak out was Flaherty (RIP) cracking down on subprime credit through the CMHC in the 2013 Budget. Prices have stagnated across Canada ever since and have even fallen in some locales. The only ‘increases’ you may hear about in GVR/GTA are on account of the dramatic shift to the sales mix seen in those cities.

“Nope, a venture capitalist. He didn’t even invent Tesla, he just got behind it and capitalized it with his wealth. “

So far his recent companies have only succeeded at destroying capital. And that’s with receiving huge levels of government subsidy. So he’s more of a ‘crony capital destroyer’, rather than a ‘venture capitalist’. The ordinary operation of capitalism would flush someone like Musk out to sea.

“Canadians are the biggest buyers of real estate in the world combine that with low interest rates (that will go lower) and capital inflows from the rich around the world we should have housing prices increase continually until @ least 2020!”

Highly doubt anything will return Canadian housing to growth in the post-2013 era until the overcapacity in the sector is liquidated. I agreed with another poster the other day that 2022 may very well be a bottom.

Rates are going lower, yes, but for the reason that the excess demand that was pulled forward by the RE bubble up to 2013, is now being replaced with the opposite. That is why the CAD$ was able to basically fall off a cliff and no inflation appeared. Now with the CAD$ in the early stages of recovery mode, CPI is comatose, and the BoC is likely to make additional policy rate cuts on account of falling demand and the falling housing market.

As for capital inflows, no evidence of that. Evidence more strongly points to foreigners selling Canadian RE. The CBSA’s concern these days is primarily in clandestine outbound currency, not inbound.

#161 Mark on 04.23.16 at 10:44 pm

“Virtually all governments, 95% of households and individuals are in debt one way or an other.”

One man’s debt, is another man’s (or woman’s) asset.

For instance, mid-career public servants may very well still be carrying a mortgage for a couple hundred thousand at this point. But they might have a half million dollars in their pension, at a 60/40 equity to bond allocation.

Are they in debt? Yes. But if their proverbial “balance sheet” was collapsed, the debt owned by their pension would cancel out their personal debt.

This is one of the reasons why I am so opposed to RRSPs/TFSAs/RPPs. They force people to have these different silos for their assets, instead of more rationally paying down debt with their savings. In the above example, for instance, it is the financial intermediaries that are enriched as they collect fees and spreads on the investments, and they collect fees and spreads on the borrowing. Get rid of the RRSP/TFSA/RPP’s, and people would be able to efficiently manage their affairs, reducing such “grab” by the financial sector.

We also know that every dime lent out by the banking system must be borrowed by the banks (ie: banks cannot unilaterally create money), so someone is sitting on the other side funding the banks that extend all this credit. These creditors are often our wiser friends and neighbours who have put money aside and have lent it to banks, or invested it in bank preferred or common shares.

#162 6.3% on 04.23.16 at 10:44 pm

#154 6.3% on 04.23.16 at 8:59 pm
A 60/40 account with the correct geographic weightings returned an average of 6.3% annually over the last six years, two of which (2011 and 2015) were stinkers. — Garth

—-

Can we see past sample portfolios with the revelant details?

You mean the stuff other people pay for? — Garth

——

No… Other people pay for the future.

The past goes for the record.

#163 understood by few on 04.23.16 at 11:12 pm

#145 HellandBack on 04.23.16 at 6:59 pm
#117,

The numbers don’t support the house humping article of those “flooding” Victoria. 70% still from Victoria. Notice how they never have numbers to back up the story? Paid industry hype

———-

I don’t doubt the numbers don’t support it. Every article is along the lines of “tons flock to Victoria” but it’s an anecdote by a realtor with a few clients interested in the market (I.e. their anecdote doesn’t even invoke sales.
).

Paid? Ha. Doubtful. It’s clickbait. Modern media doesn’t give a shpoop about facts, they care about impressions, clicks and conversions. People love realty, so the media is glad to publish any sort of hearsay that will generate some ad revenue.

I think people give realty associations and realtors a lot more credit than is due. If you think there is some organized group pushing hype in real estate you haven’t dealt with realtors. Worst organized “profession” I have dealt with.

#164 understood by few on 04.23.16 at 11:13 pm

Oops

Invoke = involve

#165 WalMark of Sadkatoon on 04.24.16 at 1:42 am

Where is all the money supply to cover it comes from?

lending. lending creates money.

#166 WalMark of Sadkatoon on 04.24.16 at 1:44 am

Nope, a venture capitalist. He didn’t even invent Tesla, he just got behind it and capitalized it with his wealth.

nobody cares about the investor of tesla car. that person can’t be that intelligent if they made no $ from it and nobody knows who they are.

#167 WalMark of Sadkatoon on 04.24.16 at 1:48 am

blog dogs who can’t make $40/hr commenting on musk. lol

failures

#168 BS on 04.24.16 at 2:06 am

6.3% on 04.23.16 at 8:59 pm

A 60/40 account with the correct geographic weightings returned an average of 6.3% annually over the last six years, two of which (2011 and 2015) were stinkers. — Garth

—-

Can we see past sample portfolios with the revelant details?

Here is one where you could have got about 7% in one diversified ETF.

https://www.blackrock.com/ca/individual/en/products/239562/ishares-growth-core-portfolio-builder-fund

#169 lee on 04.24.16 at 2:57 am

But the Star is talking of what it takes to buy in Toronto’s hot market. Could they possibly be manipulating?

#170 westcdn on 04.24.16 at 3:10 am

Katherine,
I was doing some back reading and I saw your note. I feel the pain but stay the course – my two cents worth!

#171 Mark on 04.24.16 at 6:40 am

Here’s a brain scratcher for the blog. An acquaintance of mine who runs a not-too-successful one-man carpet cleaning business is listed on a Canadian private REIT’s offering memorandum registration documentation as a unitholder who acquired units of the REIT as an accredited investor. $20k worth of units.

I’m pretty darn sure he doesn’t have a million in investible assets, especially since the owner of the units is his numbered holding company which could not plausibly have a million in retained earnings. So is it plausible that he lied to buy the REIT units?

Who gets in trouble if someone misrepresents their status as an accredited investor? The issuer who didn’t perform due diligence? The investor who may lose certain legal remedies against the dealer? Or is the accredited investor “thing” in Canada just a giant joke that my acquaintance exploited to buy shares when ordinarily he would be prohibited?

#172 Mark on 04.24.16 at 6:54 am

Did my previous question to the blog about accredited investors and REITs go through?

If it did, I’d like to know how much trouble an issuer can get into if they’re selling securities and falsifying the paperwork to indicate that the purchasers are accredited.

Seems to me this is stuff the securities regulators go for injunctions on, right?

I won’t use names or even give hints, but the more I dig, the shadier the “private” REIT looks.

#173 Julia on 04.24.16 at 7:07 am

Listen to the realtor, market goes up 1% a month, you can’t wait! Your $600,000 house in January is going to be $640,000 in September!

http://www.thestar.com/business/2016/04/23/spring-housing-market-a-whole-other-level-of-insanity.html

#174 the big short part II Canada on 04.24.16 at 9:09 am

Mark this day April 22, 2016, the day CDN housing began its tumultuous downward spiral!
1. Urbancorp receivership announced on friday
2. All bubbles climax with the maximum amount of particpants, I believe we just hit the cusp that friday
3. Price discovery is lost, inability to price assets
4. Unusual price spikes upward
5. Extreme leverage
6. More builders will go bankrupt, TSX will take big hit -20% or more, companies listed below will all have negative equity within 6-12 months

Establish equity short positions in the following; Equitable Trust, Home Capital, Genworth MI Canada, Go Easy Ltd, MCAN Mortgage, First National Financial

#175 6.3% on 04.24.16 at 9:12 am

#168 BS on 04.24.16 at 2:06 am

6.3% on 04.23.16 at 8:59 pm

A 60/40 account with the correct geographic weightings returned an average of 6.3% annually over the last six years, two of which (2011 and 2015) were stinkers. — Garth

—-

Can we see past sample portfolios with the revelant details?

Here is one where you could have got about 7% in one diversified ETF.

https://www.blackrock.com/ca/individual/en/products/239562/ishares-growth-core-portfolio-builder-fund

===

Thank you!

The link you mentioned at one of your other comments was also very interesting (www.marketoracle.co.uk).

#176 maxx on 04.24.16 at 9:20 am

#67 mark on 04.22.16 at 10:34 pm

“From a financial planning perspective if a person is going to receive a set amount of money from the government and lets say a small pension from a future employer DB program that guarantees you a set amount this is a non volatile asset, could a person not view this as a bond component in a balance portfolio?
For argument sake lets say $1000.00/month of my income will come from this guaranteed source how do you weight it in your portfolio, so you can invest more in equities and view this as part of the fixed income part of my portfolio and then maybe can ignore some of the low yield fix income bonds as this money is guaranteed (sort of speak) from the government and DB pension plan?”

Excellent question. Useful too.
Rough guide is to take the amount of your monthly pension(s), and using a financial calculator (there are many online), work out the total value based upon your likely longevity (family history). Take that number and rate it against your other accumulated non-pension assets.
The result is not written in stone, but it will offer perspective. Should your circumstances change, good or bad, you’ll need to recalculate – only takes a few seconds.
http://www.investopedia.com/calculator/fvcal.aspx

P.S.: Don’t take your eyes of off the risk component!

#177 maxx on 04.24.16 at 9:56 am

#113 Yuus bin Haad on 04.23.16 at 12:25 pm

[email protected]: “I advise against this deal.”; married couple: “We don’t give a shit.”; [email protected]: “OK, sign here.””

Precisely.

#178 For those about to flop... on 04.24.16 at 10:47 am

#167 WalMark of Sadkatoon on 04.24.16 at 1:48 am
blog dogs who can’t make $40/hr commenting on musk. lol

failures

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

That’s pretty rich from a guy who would like to make 40 dollars an hour for commenting on Mark….failure…

#179 BOOM! on 04.24.16 at 11:45 am

#161 Mark

“Virtually all gov’t, ad 95% of households, and individuals are in debt one way or an other.”

Is this a fact, or opinion? I believe the government debt, as they bond & borrow for many projects. Young people tend to hold student debt, maybe credit card, and auto debt. Household formation, one wants to own a home.

There are shall we say ‘debt cycles’ in ones life.

The younger, tend to have more debt. Certainly by say age 50 something all debt should be nearly gone, and a larger focus on retirement planning, and investing.

By retirement time, one would hope to be debt free, with adequate resources, beyond the government promise.

As for a saving vehicle, (say for an “emergency fund” or a short term savings goal like furniture) nothing beats an account with easy access. A bank, CU works well, but pays little.

As for an “investing vehicle, the RRSP, and TFSA are the best designed options an average guy could use. These vehicles assist in tax avoidance on numerous levels, provide tax free, or tax deferred growth of assets held therein, for a long time period – think retirement.

I don’t quite understand your comment of …”grab” by the financial sector? Fees, Mark? We all pay for them. One needs to be mindful of the costs of fees.

To my understanding, it would appear that vast under utilization of RRSP, TFSA, or RRP by the average Canadian is a much larger problem -than say the ‘fees’.

Just and observation

M64WI

#180 Victor V on 04.24.16 at 12:02 pm

https://ca.finance.yahoo.com/news/1000s-more-oil-gas-job-192100501.html

A new labour market outlook forecasts a sluggish recovery for Canada’s oil and gas industry over the next few years, with an estimated loss of up to 24,000 direct jobs in 2016, which would bring the total number of losses to roughly 52,000 since the start of 2015.

#181 Mike in Toronto on 04.24.16 at 12:30 pm

#174

Urbancorp is going bankrupt because 18 months ago, the legal system broke up the shell game builders have been using to manufacture crap and shield themselves from lawsuits.

I’m sure the money’s already been sucked out of the company and a Urbancorp2’s corporate paperwork is underway.

#182 DON on 04.24.16 at 1:04 pm

#163 understood by few on 04.23.16 at 11:12 pm

Paid? Ha. Doubtful. It’s clickbait. Modern media doesn’t give a shpoop about facts, they care about impressions, clicks and conversions. People love realty, so the media is glad to publish any sort of hearsay that will generate some ad revenue.

I think people give realty associations and realtors a lot more credit than is due. If you think there is some organized group pushing hype in real estate you haven’t dealt with realtors. Worst organized “profession” I have dealt with.
*********************

The Province is a hack paper for advertisers, nothing more than that. You must be kidding with respect to being objective and reporting the truth. Those newspaper are having serious problems lately, losing readership, not paying into the recycling program – instead it offers the BC Provincial banana republic government advertising space (election year).

Realtors professional – yah you are understood by few alright. Shills and trolls only. Cameron Muir – lol.

#183 Julia on 04.24.16 at 2:00 pm

#181 Mike in Toronto
“…the legal system broke up the shell game builders have been using to manufacture crap and shield themselves from lawsuits.”

Explain what changed?

#184 TurnerNation on 04.24.16 at 2:04 pm

I guess US publically traded Petsmart is the horse to bet on.

Codi Wilson, CP24.com

PJ’s Pets has announced it will be closing 27 locations across Canada, including 11 in Ontario.
“We are saddened to say that we are closing our doors after almost 50 years of serving the pet community across Canada,” Brad Hamilton, the vice president of PJ’s Pets, said in a news release issued Friday.

#185 BOOM! on 04.24.16 at 2:09 pm

#152 Prairieboy 43

Good link. Shows the tough times in the Oil Patch.
Thanks.

M64WI

#186 Rexx Rock on 04.24.16 at 2:11 pm

How can real estate go down if interest rates are going lower.I see 3 or 4 years of 10% to 25% growth in houses prices each year in the strong economic growth areas of Toronto,Vancouver and Victoria.Pick a GIC at 2% or a house at 15% a year in profits.Good times for homeowners in these cities and a lifestyle everyone wants.

#187 TurnerNation on 04.24.16 at 2:12 pm

This Month’s Toronto Life magazine has a young couple paying close to 700k once all fees are in for a sht little post-war bung, originally designed as a breeding shack for randy soldiers’ return.

Remind anyone of year 2000 tech stock bubble, every sht little stock got bid up??

#188 Mark on 04.24.16 at 4:34 pm

“Is this a fact, or opinion? I believe the government debt, as they bond & borrow for many projects. Young people tend to hold student debt, maybe credit card, and auto debt. Household formation, one wants to own a home. “

I didn’t write that comment, but I am inclined to believe it is fact, strictly speaking. After all, if one literally owes money to the electric company, they are “in debt”, even though they may very well have millions of dollars “in the bank” to pay the bills.

The point I was trying to make was that debt itself isn’t bad. Its the net worth position of an individual that matters most. And the sensitivity of their net worth position to changes in the economic environment. For instance, one-asset investment strategies are *highly* sensitive to changes. Balanced portfolios, quite a bit less so.

As for an “investing vehicle, the RRSP, and TFSA are the best designed options an average guy could use. These vehicles assist in tax avoidance on numerous levels, provide tax free, or tax deferred growth of assets held therein, for a long time period – think retirement.

I view those programs as band-aids to an otherwise broken system. They force money into “silos”, for which it is difficult, if not impossible, to allocate personal wealth efficiently. For instance, its not rational to own debt (ie: have GICs, MBS, etc.) in a retirement plan, and also have a mortgage. You’re basically just paying spreads both ways, on both the borrowing, and the investing. These spreads disappear to the financial sector.

To my understanding, it would appear that vast under utilization of RRSP, TFSA, or RRP by the average Canadian is a much larger problem -than say the ‘fees’

With the amount of debt that most Canadians of RRSP/TFSA contributing age are in, its perfectly rational that they’re not utilizing such plans. Mortgage pre-payment outperforms most of what people are actually buying in their TFSA’s.

More builders will go bankrupt, TSX will take big hit -20% or more, companies listed below will all have negative equity within 6-12 months

Only problem with that theory is that there’s practically no companies listed on the TSX of any level of significance with involvement in the housing sector. Canadian Tire is about as close as you can get on the TSX60, and they’re arguably not all that involved with housing per se. Even retailing is minimally represented in the index.

#189 yeng ying on 04.24.16 at 5:36 pm

#187 TurnerNation

a sht little post-war bung, originally designed as a breeding shack for randy soldiers’ return.

—-

What nation?

#190 Fed-up on 04.24.16 at 5:54 pm

What I stated was correct:

#150 Fed-up on 04.23.16 at 8:06 pm

“They ignored advice. Succumbed to emotion. And if the market stalls, turns, corrects or just stagnates their reward is stress and loss.”

———————————————————————————–

Our balanced portfolios have done all of the above 4 out of the last 8 years and 7 of the last 15. We’ve been told that we shouldn’t care, so what’s the big deal right? At least they get to live in their home while they wait it out. And that’s only if house market lays an egg.

Just an observation.

A portfolio that lost money in half of the last eight years is neither balanced nor diversified. A 60/40 account with the correct geographic weightings returned an average of 6.3% annually over the last six years, two of which (2011 and 2015) were stinkers. — Garth

“stalls, turns, corrects or just stagnates”

———————————————————————————-

2008,2009,2011,2015 and so far 2016 all fall under one or more of those categories.

Investors have been told not to panic so why should home buyers that have seen nothing but growth for the past 15 years?

#191 Bat Flipper on 04.24.16 at 5:55 pm

It has been like this since 2008… Except, the stakes are much higher now, and the risk is greater than it has ever been before.

TBH, many people view the stock market as risky since 2008 and housing as a ‘sure’ thing.

These ones see that they have received huge gains in the market in the past several years. They want to leverage to the max to take full advantage of rising prices.

[email protected] will never be able to talk these people out of buying. If they don’t approve their mortgage, someone around the corner will. There is hundreds of lenders now with privates, alternatives, etc.

#192 Boom! on 04.24.16 at 6:41 pm

#188 MARK

Putting money in an RRSP or TFSA should be invested in mainly equities, in my opinion. They younger you are 100% is not out of the question. Why? Simple, the investment has time to recover, and time IN the market is most important. People need to keep their mitts and emotions off these things as well. Leave it alone!!!

A 20 or 30 year old doesn’t really need bonds in there. At 40 maybe a small allocation to soften the inevitable dips. at 50 years more (say 25%), increasing somewhat to retirement. Thereafter a 60/40% seems fine.

In the meantime you will be paying off the home, or try your best to do it. I am a big advocate of doing both at once, if you have stretched to buy the home, maybe you can’t for many years – this means a poorer retirement, unless you shed the home, it would seem to me.

I don’t live in an area where homes are priced in nose-bleed territory so it difficult to comprehend the prices.

I do remember double digit mortgage rates, though, and few under 50 can understand that either.

The circle continues…

#193 Mewbacca on 04.24.16 at 6:57 pm

For all those who were wondering, [email protected] stands for The Nice Lady (or Lad) At The Bank.

#194 james on 04.25.16 at 2:29 pm

#23 Smoking Man on 04.22.16 at 7:36 pm
Blog dogs everywhere. Meeting one tonight in Vegas for a beer.
Mission Accomplished Area 51 crossed the line by a foot. Oh and cheetahs. Stage exactly how I saw it in my mind for the book.
Click my name for pics.
Trying to talk my son out of buying a condo. He hates paying his land lord. Making him rich as he sees it.
Kids is all I’m saying.
……………………………………………………………………..
Nice stock photo buddy, now here is a real searcher who did Groom Lake two gates and Tikaboo Summit.
http://www.teleis.com/2011-review.htm

#195 Tyler Durden on 04.25.16 at 3:55 pm

I’ve worked in the same role as Linda for a few years (at the big Blue guys) and her story is pretty standard in my experience in the industry. Of 40 or 50 advisers that I worked with over the years as colleagues, maybe 5% of them might stray from SOME of the principles of smart finance that are discussed in this blog.
I never understood Garth’s mis-characterization (IMO) of financial advisers at the big banks. What she did (the Andex chart, discussing debt servicing, advising clients to maybe save their money instead, etc etc etc) is all par for the course. We even had a graph at my bank that compared the performance of the S&P/TSX to the 6 biggest real estate markets in the country since 1989. You can easily guess what performed best by a mile. You can also sadly guess what the clients would decide to do anyway.

#196 Mike in Toronto on 04.25.16 at 4:02 pm

#183 Julia

http://www.thestar.com/business/real_estate/2014/09/26/the_lawyer_who_is_taking_on_torontos_condo_developers.html

“Charney has already won a critical victory in the falling glass and faulty balcony cases that could change all that: The court has agreed that the development companies are just as much a part of the lawsuit as the affiliated building companies they created.”

Comments from more knowledgeable people would be welcome, but it looks to me like developers can’t hide as easily as they used to. So now the parent companies can go bankrupt.