The zombies

CHEESE modified

Last month house sales soared in Toronto and plunged in Vancouver. Everywhere else was boring. As this blog has spelled out a nauseating number of times, all markets are local, even though they share a remarkably similar economy. So what’s happened here? Why the tale of two cities?

That’s easy. Both are inflated gasbags where average families are being pushed to the wall to gain homeownership. Debt’s hit new levels even as mortgage rates plumb new lows. The sacrifices real estate now demands affect all other aspects of life. It’s a true obsession.

(Half an hour before downing the scotch required to write this blog I walked Bandit down Main Street past a local real estate office with listings posted in the window. There were 11 people on the pavement, scouring them. It’s a daily occurrence.)

So why did Van start rolling over a few months ago, and then plop in August? Because we hit peak house there – a price level so extreme ($1.7 million for the average detached) that local incomes can’t even come close to sustaining it. Speculation, house lust and debt snorfling took their toll. Activity peaked in late winter, and had been eroding since. So when the foreign buyer tax was applied, it was all the catalyst required to begin the broad-based correction, even though Chinese dudes (by all accounts) do less than 10% of trades.

Can this happen elsewhere?

You bet. The catalyst could be more taxes, higher rates or (more likely) your idiot neighbours, family members or employees who have no idea they’re in trouble until they are. And then we all are.

Let me share an email thread with you, dated September 7th, with Kimberly:

Her: Good morning. I saw your information online and I decided to take a chance and contact you. I am looking for a financial advisor. I am tired of being in the same position in my life. I currently have a good job working for the city with a potential to earn a lot of money. However I want to retire early so I can do the things I love to do in life without worrying about working for someone else. I need help. My husband and I have no children but we want to increase our family soon and buy a house. Thank you for your time hope to speak to you soon.

Me: Thanks for being in touch! Can you please tell me something of your financial situation?

Her: Well I have a few credit cards totaling about 8,000. I have 2 car loans totaling about 550, and our rent is $1,300. Car insurance about 370.

Me: Do you own any assets?

Her: No

Me: So how did you expect me to assist you with your finances, if you have no money?

Her: I want to invest!

Well, there ya go. Employed with debt. No savings or assets. Wants an early retirement. Planning on a family and a house. And not richer than she thinks. The really scary part is that this is mainstream. It’s becoming the norm. These people live among us!

Any doubt of that should have been wiped out by the latest survey of the Canadian Payroll Association. Wow. How sad is this?

  • Half of people would be screwed if they missed a single paycheque. Even for a week.
  • Four in 10 spend 100% of their net income.
  • A quarter don’t have $2,000 and couldn’t get it within a month.
  • 50% can’t save 5% of what they make and 39% are ‘overwhelmed’ by debt, mostly mortgage debt.

And, yes, 70% of us Maples own real estate, on which we collectively owe $1.2 trillion, at interest rates which can only rise, in a country where the economy is contracting and net job creation is negative. So, what are we thinking?

Most, like Kim, aren’t. Zombie-like, they shuffle through life feeling entitled. Kids. House. Short career, long retirement. Little financial discipline. Less literacy. No clue. And there appear (from surveys like this) to be millions of folks in the same space. These are the ones who have helped create, and now maintain, the real estate bubble where a huge amount of everyone’s net worth resides.

If there ever was an argument for diversification and balance, Kimberly embodies it. When half of us are a single week away from a financial crisis, yet GTA house sales and prices continue to soar, risk is palpable.

In a land of fools, it took relatively little to push the Van housing market over. It won’t take a lot in Toronto, either. If you doubt, look around the subway tomorrow.

186 comments ↓

#1 Randy on 09.07.16 at 5:19 pm

All Zombies live in Toronto

#2 Tiger on 09.07.16 at 5:20 pm

FIRST

#3 Bill Gable on 09.07.16 at 5:26 pm

Great article – a real classic. Thank you.

I am in the final innings, and yet I see many of my cohort, and younger, absolutely strapped. Flat Broke. Done like Dinner. They have every toy in the world and they drive flashy cars and yet they have mortgaged themselves blind and then to compound the stupidity, have take HELOCS. That’s a Demand Loan!
The next few years will provide great turbulence for a number of people, and it worries me.

#4 nubbers on 09.07.16 at 5:27 pm

Maybe buying a house would be a good idea for Kimberly. Instead of blowing the next 25 years of income on whatever, she would be forced to ‘save’ about half of her money and the other half would go to paying for the retirement of some lucky boomer.

Buy a house with what? — Garth

#5 Jimmy on 09.07.16 at 5:31 pm

I really miss Funcheez.

#6 cramar on 09.07.16 at 5:39 pm

Me: Thanks for being in touch! Can you please tell me something of your financial situation?

Her: Well I have a few credit cards totaling about 8,000. I have 2 car loans totaling about 550, and our rent is $1,300. Car insurance about 370.

Me: Do you own any assets?

Her: No

Me: So how did you expect me to assist you with your finances, if you have no money?

Her: I want to invest!

——————–

LOL. Now THAT is the funniest thing I’ve read on this blog in a long time. Just comical!

#7 Toronto Dweller on 09.07.16 at 5:42 pm

Garth, I know this is off topic, but what kind of scotch do you drink?

#8 Ronaldo on 09.07.16 at 5:45 pm

”Buy a house with what? — Garth”

That’s where the Bank of Ma and Pa comes in.

#9 isuckless on 09.07.16 at 5:48 pm

Most, like Kim, aren’t. Zombie-like, they shuffle through life feeling entitled. Kids. House. Short career, long retirement. Little financial discipline. Less literacy. No clue.
=============
So what happens when “most” of the voting population is like this?
You think that ANY politician will do something that will crumble this house of cards?
Is it possible that the savers will be punished instead of spenders?

#10 keepingyallhonest on 09.07.16 at 5:48 pm

Why the look around the subway comment?

All the “Drowning in Debt” ads? I always figured that was a giveaway that things didn’t look good if you looked under the hood..

#11 A Yank in BC on 09.07.16 at 5:49 pm

I wonder if Kimberly’s husband is as clueless as Kimberly. Do banks in Canada really loan money to people like these?

#12 Debtslavecreator on 09.07.16 at 5:51 pm

I lend money for a well known lender. The situation is completely out of control. I try my best to dissuade and educate on risk since I do not earn commission and no transaction payments but the majority of these borrowers are just impulsive and dumb
The economy is steadily deteriorating and we are in the edge of what will be the worst economic era ever. Much of the GDP and hence income in the last 10-15 yrs and especially the last 3-4 yrs was originated from the debt creation
The Rate of growth in credit has been steadily trending downward and each new unit of credit has created less and less of a unit of GDP
I fully expect a rate cut in Dec or January
They have a out a noose on the economy and I do not see a way out without severe pain
JO

#13 Context on 09.07.16 at 5:52 pm

I saw the TREB figures and couldn’t figure out whether they applied to 416 or 905 or together as GTA. I can buy traditional properties selling for a premium or higher due to the lack of supply. It depends on the sample size and sales that are above average which lifts the general average higher. I do not believe these latest figures by TREB shows us a realistic picture as they are pumping.

#14 Doug t on 09.07.16 at 5:54 pm

HGTV, canadian banks, government + foolish koolaid drinking Canadians equals debt debt and more debt. This country lost its way and now we’re gonna pay – you think 2016 has been rough just wait

#15 Jas on 09.07.16 at 6:00 pm

Garth:
You know that in Vancouver the 15% tax on foreign buyers is politically motivated. It the govt. was serious about the unaffordability of locals, the tax should have been imposed province-wide. Now whatever the percentage of foreign buyers is, they are hunting further afield…e.g. Kelowna, Victoria etc.
And we’ll see the same effect there in few years. BUT by that time Kristy will be in for the next 4/5 years. and that is what matters to a politician. You have seen is very closely how the political animal spirit thinks and acts. I need not say more.

#16 NOTHING SURPRISES on 09.07.16 at 6:00 pm

I’m a curmudgeon like you Garth, perhaps a couple years older.

I read your blog stories and shake my head.

We mandate driving instructions and testing to obtain a drivers license but we don’t mandate instructions and testing on financing to purchase living accommodations and investing.

Very sad !

#17 Ronaldo on 09.07.16 at 6:04 pm

”Buy a house with what? — Garth”

Which brings me back to December of 69 when I bought my first home. Brand new 3 level townhouse in North Van. I had just paid off all my debts and had $500 in the bank. Borrowed $3000 from my mother for the down payment. After deal went through went to same bank and borrowed $3000 telling them it was for furniture for my new home. Not a problem. I get the loan and pay back my mother. The $500 went to buy a fridge and stove. Now we’re broke, age 23. But, I had a good steady job making above average pay and the place was 2.5 times my annual income. Government gave us $1000 grant as was first home. Now we have a thousand in the bank and even at 9.5% interest, it only represented 1/3 of my own gross income plus the payment on the loan. Since my wife was working the loan payment was easily handled and still put some cash aside. Well within our means but twice what we had been paying for rent in the West End. So you see, the Bank of Ma and Pa worked back then too. My sister and her hubby decided to save for the down payment before buying which took them about 5 years to do and in that time prices had doubled. Sometimes a bit of risk is not so bad. Would not recommend this strategy at today’s prices though although I am sure that is what has been keeping this bubble inflated. I suspect the Bank of Ma and Pa would be getting a bit nervous with all the negative news nowadays so this will probably be an avenue that will be shut down soon. Interesting times we live in.

#18 Julie K. on 09.07.16 at 6:07 pm

Life hack to avoid ever becoming a zombie?

Simply zig when everybody else zags.

And the sooner you figure this out the better. If you need examples of what I mean, it is (probably) too late for you.

Peace.

#19 Context on 09.07.16 at 6:11 pm

I wonder how they come up with these stats from August. For example do they compile well defined communities for an average on sales and then average them again for a major district? One community could have a small sample with one expensive sale which throws out reality. Scarborough has 31 real estate communities for example and how many people are aware of this?

#20 Michael King on 09.07.16 at 6:14 pm

Writing from Vancouver. This market has seized up. I haven’t seen it so slow since 81-82. Realtors are resorting to desperate measures to keep the illusion of an active market alive by posting zombie listings. Check this link. On the first page, 3357 Point Grey Road is listed as sold. Check further and the page is four years old! That house no longer exists. The new home on that property has been listed for months at 13.5 million. On page 3 you’ll find 3089 West 3rd. It was sold in August 2015! This is sleazy marketing at its oiliest.

http://spicelucks.tv/mylistings.html/SearchResults.form?_pg=1

#21 Mr. White on 09.07.16 at 6:17 pm

Apropos of nothing; how does a low unemployment rate and low labour participation rate equal prosperity?

#22 Interstellar Old Yeller on 09.07.16 at 6:17 pm

Upon reading your e-mail exchange with Kimberly I had a prolonged fit of laughter and commented, “I can see why Garth drinks”.

Kimberly – your first job is to get to $0 net worth. Slay the credit card and car debt, and that will give you a taste of what you need to do to save some cash to invest. In the meantime, read this blog.

#23 jay on 09.07.16 at 6:19 pm

https://betterdwelling.com/chinas-largest-overseas-real-estate-firm-sees-surge-vancouver/

#24 Have We Saved Enough? on 09.07.16 at 6:29 pm

I admit, I am somewhat clueless with regards to the finer details of financial planning, hence we hire a professional. When hubby got a second full time job after being given the golden handshake at age 57, planner sat us down…OK you have been living on DB pension, (an exercise in austerity to my mind), with your new full time salary added into this mix, how much are you willing to dedicate to your investment savings per paycheque…answer: a sizeable portion. Result: According to your retirement numbers yesterday, Garth, we have drafted hubby’s resignation letter. One does not want to give up creature comforts and standard of living in retirement. Yet compounded savings over a lifetime plus serious saving in the final working years, leaving [email protected]B (save money) and hiring a professional financial advisor (INVEST money) made a huge difference!

As I said in the beginning of this rant, I do NOT know much of the financial business, however, how does one think they can possibly retire without a full complement of topped up RRSPs, and TFSAs plus the nonregistered stuff?

How are there so many people not understanding the concept of SAVING/INVEST?

Thanks again, for your blog.

#25 WalMark of Sadkatoon on 09.07.16 at 6:29 pm

Garth, I know this is off topic, but what kind of scotch do you drink?

Single malt. Highland or Islay. Bowmore? Caol Ila? Macallan? Laphroaig? Lagavulin?

#26 Entrepreneur on 09.07.16 at 6:31 pm

“Noise of the cheese wrapper” had a cat that when he heard the hissing of a can would run from upstairs to his dish. So one day opened a can of corn, to see what he would do; he ate the corn. I guess thinking it was tuna. We couldn’t believe it. We only did it once and he lived until he was fifteen years old.

Yup, debt/credit is the ticket to get ahead for the youth. Look what you can get when you buy a house, car, etc. on debt/credit. Looks good (and a lot did good but know the market timing and comfortable with it or are the youth conditioned to think debt/credit is just fine), live today attitude The interest rates have been low for a long time.

Checking or chequing: it doesn’t matter, the first one American and the second one Canadian (British) but the computer corrects using checking.

Wonder since the Canadian youth use the computer so much do they use checking over chequing? Of course, they can use either.

Every paycheque one should put aside what they can for a rainy day as life is so unpredictable. Every little bit helps when you need it. And (like using prepositions at the beginning of a sentence, hehe) to further your financial knowledge read some financial books, and of course, this free blog (comment section too).

#27 Van Isle Renter on 09.07.16 at 6:32 pm

I doubt that Chinese investors are looking to live in Kelowna or Calgary. Think about it for a second….

Calgary….. or San Diego…. if it takes more than a second to decide you’re delusional.

#28 S.Bby on 09.07.16 at 6:38 pm

This is what happens when we have almost a decade of abnormally ridiculously low interest rates; money appears to have no value and people borrow their brains out.

#29 common sense on 09.07.16 at 6:40 pm

That just gave me the best “sad” laugh of 2016.

It only beats an aquaintance bragging “I’m debt free!!!”

(Really? Your house is paid off too?)

“House? Hell, no. I have 2 mortgages on it for $185,000. I just don’t own any person any money.”

True story.

#30 Robert Ripley on 09.07.16 at 6:41 pm

I have my chart update on comparing Vancouver and Toronto housing prices up now:

http://www.chpc.biz/compare-toronto–vancouver.html

Toronto put in another very high Monthly Absorption Rate (99%) based on total inventory as opposed to new listings. In June the MAR was 104%. Nice work if you can get it.

AUGUST 2016
​Higher Average Prices in Vancouver than GTA:
64% more for a SFD
22% more for a Town House
23% more for a Condo

10 Year SFD Inflation Rate:
​VAN = 141% and GTA = 129%

“The sacrifices real estate now demands affect all other aspects of life. It’s a true obsession.” Garth

Agreed… it’s palpable.

#31 On the other hand on 09.07.16 at 6:41 pm

Look at the bright side: Kimberly is a renter.
That should count for some brownie points here.

#32 Context on 09.07.16 at 6:43 pm

Hey its the two day trick from TREB with a magic show on the latest August sales figures for the GTA. Any fifth grader can understand these statistics. Now on 9,813 residential properties the sales were up 23.5%, but without two extra work days the sales would have been up only 13%. Does this mean the real estate agents are only working two days a month making sales to pump you up?

#33 Bill Gamble on 09.07.16 at 6:44 pm

“I saw your information online and I decided to take a chance and contact you.” -Kimberly

https://www.youtube.com/watch?v=-crgQGdpZR0

#34 Ronaldo on 09.07.16 at 6:45 pm

#20 Michael King on 09.07.16 at 6:14 pm

Writing from Vancouver. This market has seized up. I haven’t seen it so slow since 81-82. Realtors are resorting to desperate measures to keep the illusion of an active market alive by posting zombie listings. Check this link. On the first page, 3357 Point Grey Road is listed as sold. Check further and the page is four years old! That house no longer exists. The new home on that property has been listed for months at 13.5 million. On page 3 you’ll find 3089 West 3rd. It was sold in August 2015! This is sleazy marketing at its oiliest.

http://spicelucks.tv/mylistings.html/SearchResults.form?_pg=1
——————————————————–
Many others from 2011, 2012, 2014, etc. Sleezy is right.

#35 Canada's Moist Wanted on 09.07.16 at 6:46 pm

Funny how I can remember as a kid/teenager sitting at the dinner table talking with my parents about how we got creative cutting lawns/ shoveling snow, shared ideas, saved money, sacrificed, etc. so we could buy things we wanted or needed and this was praised. Now as a father 30 years later, I am scoffed at/ridiculed when I suggest the same. Everyone now seems to think they need a latte or dinner out as a reward for getting through the day. I have tried my best but grow weary of swimming up stream when promoting saving and frugality. At best I hope to help people with focusing on reducing tax payable as the saving ship has long sailed. Thanks Garth for providing something interesting to reflect on at times. Peace everyone and love thy neighbour.

#36 Say What? on 09.07.16 at 6:52 pm

Kimberly should just buy a house. She should get creative with sourcing the money for the down payment. As others have noted, parents would be a good choice. Houses only go up, in the long term. Thirty years from now, whatever house she buys, will be worth much more. History shows that to be true. People that suggest that she pay off debt first are wrong. Debt snorflers have done really well the last decade while the cautious have suffered. With continued low interest rates, that should continue.

#37 Mark on 09.07.16 at 6:56 pm

The neat thing about Canadians being $1.2T in debt for RE is that there’s $1.2T of debt, backed by reasonable quality assets, available for savers to purchase that pays interest. And even more interest in the future as risk premia rises on account of decreased borrower credit-worthiness.

If a large chunk of Canadians are destined to be a lot poorer in the future due to excess RE ownership, that means that there’s a small chunk of wise Canadians who are set to become a lot richer in the future due to under-weighting in RE, and over-weighting in inversely correlated assets.

The example I love to give, about once or twice a week, is that of someone who bought into the TIPS (ie: the predecessor to the modern XIU ETF) back in 1990 — the peak of the Toronto RE market. By the end of the decade, with a combination of house price decreases, and vigorous stock appreciation/reinvested dividends, a mere downpayment (ie: 25%) invested caused the account to contain enough for one to purchase an average house outright, without a mortgage.

For most families who were smart enough to do this, such was a life-changing event. For those who went all-in on RE with their 25% downpayment in 1990, they basically treaded water for a decade, accumulated minimal equity, and only recently will probably have paid off the mortgage at the end of the 25-year amortization schedule. With minimal retirement funds, kids not put through school, and probably other stupidities like rented water heaters and financed cars.

#38 Andrew Woburn on 09.07.16 at 6:57 pm

Don’t tell Trump.

Since 9/11 –

Annual average number of Americans killed by:

Jihadist terrorists – 9
(includes US citizens)
Armed toddlers – 21
Lawnmowers – 69
Shot by other Americans – 11,737

https://gallery.mailchimp.com/451473e81730c5a3ae680c489/images/79fd3f3b-8df3-419b-9c59-a5d2e8d2d21c.jpg

#39 Jim Bentein on 09.07.16 at 6:59 pm

It gets worse. I’ve posted here in the past. My wife and I are Canucks who live in Mexico. I just came back from a short vacation to what I call the “new Mexico” through a patch of industrializing cities such as Leon, Guanajuato, San Miguel and Queretaro. There’s a newish GM plant outside of Leon, a new BMW plant near Guanajuato, 40 km away, a new Toyota plant is being built there and there’s a new Ford plant outside of San Miguel, 50 km from Guanajuato. In Queretaro, abou 50 km from San Miguel, Bombardier and Boeing have a huge presence. These are all real industrial jobs. Thousands of them. Meanwhile, Ontario has lost 300,000 industrial jobs in the last 15 years. In all if these cities I can buy a decent house or condo for about $100,000 Canadian. I can rent for $500-$600. Try that in your de-industrializing Ontario. How will you Canucks pay for your lifestyle in the future if the good industrial jobs are here in Mexico? Be afraid. Be very afraid!

#40 crowdedelevatorfartz on 09.07.16 at 6:59 pm

All my coworkers are paycheque to paycheque or WORSE….I have one “rocket scientist” that lives off his wife’s credit card to buy food and makes minimum payments on it each month….i figure another few months will end THAT gravy train…he still hasnt paid this months rent and its the 7th of the month because “his 70 year old retired father hasnt loaned him enough money”…..the “#1 son” is 50…..
Bitches daily about how he wants to buy a house , a harley, etc but has no money “its the asians fault for these house prices” as he hauls another deep drag off his $10 a pack cigarettes……..
Stupid people will NEVER understand…..unfortunately their allowed to breed more mouths to feed…..

I dont bother explaining anything more complicated than the crossword puzzle to him or he argues….

He’s the definition of stupidity.
“Complaining about his lot in life. Doing absolutely nothing to change it and expecting a different result.”

#41 The Spread of Foreign Capital on 09.07.16 at 7:00 pm

Garth:
You know that in Vancouver the 15% tax on foreign buyers is politically motivated. It the govt. was serious about the unaffordability of locals, the tax should have been imposed province-wide. Now whatever the percentage of foreign buyers is, they are hunting further afield…e.g. Kelowna, Victoria etc.
And we’ll see the same effect there in few years. BUT by that time Kristy will be in for the next 4/5 years. and that is what matters to a politician. You have seen is very closely how the political animal spirit thinks and acts. I need not say more.

———————–

Sorry, but you do not understand the foreign capital’s overwhelming rationale for buying in Metro Vancouver.

It has now been statistically proven by the BC government that the majority of foreign buyers were from China (80%). Most of those buyers wanted and want a diaspora community to live in because life is easier – think Richmond with friendly restaurants, community services, language signage, and a large population of similar folks (values, language, culture) Think Richmond.

They also bought in Vancouver because it was well advertised globally that prices were going up and Vancouver was a great place store of wealth. It was an easy place to park money and display wealth – Vancouver has the greatest number of sports cars per capita in North America – yes North America.

Those buyers are not moving to Chilliwack or Kelowna or Prince George as those cities do not have a diaspora community. There will not be a flood of foreign buyers driving Lambos down those communities’ streets.

As for the provincial government, the legislation they passed allows them to extend the tax to wherever they want in BC. Now that everyone knows how destructive foreign capital is for housing costs, the public will rally (and is rallying) in those communities to prevent the same thing that happened in Vancouver. There are grassroots campaigns in places like Nanaimo and Victoria.

Foreign buyers are also spooked – the tax ‘came out of nowhere’ which means investing in BC communities does not have the stability it once had.

Also, the politicians can no longer ignore foreign capital or avoid talking about for fear of being labelled politically incorrect. The BC government has allowed a dialogue to take place, and more importantly, allowed action to take place. The precedent has been set and its a profound one.

So no, there will not be mini-Vancouvers around the province. That is something that realtors in those communities want you believe to in in order foster FOMO. Every po dunk community is BC now has a realtor talking about the chinese foreign capital coming….anything for a commission right?

#42 crowdedelevatorfartz on 09.07.16 at 7:01 pm

I’m noticing a LOT more ‘for lease” signs on commercial store fronts these days in the Lower Brainland.

#43 Cecil Henry on 09.07.16 at 7:02 pm

Canadian investing Plan:

Buy a house with zero assets.

Pay off monthly interests costs of borrowed money.

Wait till house price doubles, and voila– you now own your house for FREE!! No work required. Everything else is just details.

Nice…..

#44 Rexx Rock on 09.07.16 at 7:07 pm

Toronto will catch up to Vancouver and then Ontario will pull the plug and add 15%.Kelowna and Victoria will follow.Time to make some easy money!!

#45 MSM-Free Zone on 09.07.16 at 7:08 pm

“…..According to a 2014 Bank of Montreal annual debt report, 52 per cent of Canadians carry a credit card balance…….”

“….About 45 per cent of people are not paying off those credit cards every month – that’s 45 per cent carrying credit at high interest rates.”
_________________________

Good to see they’re still teaching Calculus, Algebra, Functions, Relations, Geometry, etc. as the primary, essential mathematical tools to prepare young Canadians for every day life.

Perhaps the self-destructing Ontario Conservatives may consider coupling Consumer Math to their flip-flop on provincial Sex-Ed curriculum.

Then again, imagine the lobbying power of a former Ontario PC leader just appointed to the CEO of the Ontario Real Estate Association in preventing that from ever happening.

#46 For those about to flop... on 09.07.16 at 7:10 pm

Hey WOEY,you might find this chart interesting as well as is somewhat related…

M42BC

http://imgur.com/p5r5Zcw

#47 Cory on 09.07.16 at 7:11 pm

#25
We have looked at Mexico. Still are. Yes we know grass is not greener and all that jazz but we can easily live there on what we have now and for the rest of our lives.

The govt will save the irresponsible here. They already do through CMHC, no cap gains taxes on lived in houses, low interest rates, and so it goes. The prudent will pay and pay and pay. There are far too many living how the government wanted them to…..on credit. Now it’s here and we will pay for them. I have no doubt. And what will people do or say then? Nothing as usual. Canadians are good little soldiers and we just continue to take it as govt knows we will especially without real opposition in govt like we have now.

The corner is painted and the govt/central banks can’t get out. The right thing to do would be to raise rates and maybe then those with real, not pretend, money will spend something. That’s a real economy. This one and all the rest are illusory. House of cards.

#48 For those about to flop... on 09.07.16 at 7:13 pm

Thanks Woburn for allowing me to empty out my bad guy folder before September 11th…

M42BC

http://imgur.com/i7qvIxX

#49 RentYVR on 09.07.16 at 7:13 pm

@Michael King is absolutely right that the market here is frozen. A good friend of mine is a RE agent here and he is sending out emails to his contacts urging people to buy this “flash crash” and trying to compare it to the Brexit crash in that it’s a short-term buying opportunity before we hit new highs later in the fall. Even better is the RE agent quoted in this article: http://www.newstalk770.com/syn/112/218363/218363

My favorite quote is this:
“Here is an artificially created window but I don’t believe it’s going to last. The bottom line is markets go up and markets go down, period. There is no one on earth that is capable of predicating the day, the time, or the reason. What we do know for 100% certain is that what goes up must come down and then goes back up again.”

Sorry amigos, but RE don’t work like that. Death spiral here we come!

#50 Cory on 09.07.16 at 7:14 pm

Sorry that was #39

#51 don't tell on 09.07.16 at 7:15 pm

Don’t tell Trump.

Since 9/11 –

Annual average number of Americans killed by:

Jihadist terrorists – 9
(includes US citizens)
Armed toddlers – 21
Lawnmowers – 69
Shot by other Americans – 11,737

Why don’t you look at the numbers that tell the story:

Since 9/11:

– money US/West spent on wars
– money US/West spent on surveillance
– laws restricting privacy, civil liberties

#52 Toronto Dweller on 09.07.16 at 7:16 pm

#39 Jim Bentein
“It gets worse. I’ve posted here in the past. My wife and I are Canucks who live in Mexico. I just came back from a short vacation to what I call the “new Mexico” through a patch of industrializing cities such as Leon, Guanajuato, San Miguel and Queretaro. There’s a newish GM plant outside of Leon, a new BMW plant near Guanajuato, 40 km away, a new Toyota plant is being built there and there’s a new Ford plant outside of San Miguel, 50 km from Guanajuato. In Queretaro, abou 50 km from San Miguel, Bombardier and Boeing have a huge presence. These are all real industrial jobs. Thousands of them. Meanwhile, Ontario has lost 300,000 industrial jobs in the last 15 years. In all if these cities I can buy a decent house or condo for about $100,000 Canadian. I can rent for $500-$600. Try that in your de-industrializing Ontario. How will you Canucks pay for your lifestyle in the future if the good industrial jobs are here in Mexico? Be afraid. Be very afraid!”

——————————————————————–
You hit the bullseye on that one. Ontario is pretty much finished. To be honest the only thing we have here is flipping houses and land and maybe some financial shenanigans on Bay Street. Sunny days ahead that is for sure!

#53 bigtowne on 09.07.16 at 7:17 pm

Bank of Canada Governor Poloz is as close to the ideal of a Canadian boomer as you can get as he is just on the edge of his 60th year and being our Central Banking guru aware of the financial pox weighing down our boomer generation.

A parallel with the housing gasbag in Toronto and Vancouver is the U.S. stock market many identify as underwritten by the “Greenspan Put”. Now easily seen here in Canada as the “POLOZ put” after today’s no rate decision which is code for home buyers and homeowners in Canada as “I’ve got your back”.

Poloz believes the boat won’t take on water by leaving the rate decision in rock bottom shores. Many a Captain has lost control of the rudder by foolishly not seeing the storm on the radar.

#54 Context on 09.07.16 at 7:18 pm

#39 Jim Bentein: – You got all correct, more or less, with the exception of San Miguel. The real estate there is expensive and for $100,000 CAD its not going to happen – no way for a Casa.

#55 Trojan House on 09.07.16 at 7:19 pm

Apparently there are no Kimberly’s who read this blog. Only rich millionaires.

#56 Ace Goodheart on 09.07.16 at 7:20 pm

RE: #4 Nubbers:

“Buy a house with what? — Garth”

With a very narrow list of exceptions (like maybe one sale in every thousand) house sales and purchases are really just banks buying houses from other banks. The cash travels, by way of certified cheque, from the bank that is purchasing the house, to the bank that is selling it (yes, houses are still purchased with certified cheques – you don’t see this process unless you have worked in a real estate law firm).

All that determines the price of the average house, is the level of interest that the person who will be holding the title on behalf of the owner bank, is able to pay (notice I did not say willing, I said able – there is a big difference here).

If interest rates go up, house prices must come down. The banks can only purchase and sell them to each other, if there is someone underneath the whole great machine, willing to work and pay them interest.

So why do I always say that there is no housing bubble and that house prices will remain high?

Because interest rates can’t go up, without our government engaging in a campaign of money printing. They do not collect enough tax, particularly in the Province of Ontario, to pay a higher rate on the loans they have taken out.

All high house prices are, really, is delayed currency devaluation.

#57 Post on 09.07.16 at 7:22 pm

So Garth,

Whatever happened to your prediction of an impending implosion of the Toronto Condo market? You wrote exhaustively about and excess of 50,000+ condos waiting to hit the market.

#58 For those about to flop... on 09.07.16 at 7:24 pm

#42 crowdedelevatorfartz on 09.07.16 at 7:01 pm
I’m noticing a LOT more ‘for lease” signs on commercial store fronts these days…

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

Hey Crowdie,I took my wife over to London Thugs at 41st and Victoria yesterday to try and find a more sturdy knee brace and was shocked to see 4 or 5 businesses had closed opposite this busy spot.

Also seeing a lot more businesses closing on Fraser around 26/27th area.

Wouldn’t be surprised if they get assembled,torn down and low rise condos get built…

M42BC

#59 nonplused on 09.07.16 at 7:27 pm

I wonder what would happen if all the zombies suddenly started paying off their debt and investing, instead of spending money 10 years out on new cars and TV’s??

So let’s follow a few of the potential results through not to their logical conclusion (do I look like a chess master? 3 or 4 steps ahead is as far as I can go) but at least a little forward into this possible future.

First, if all the Kimberly’s of the world decided to pay off their consumer debt, this would deprive the banks of a very lucrative and highly profitable source of income. Interest on credit cards and even HELOCs are generally far better for the banks than mortgages.

Mortgages are of course still lucrative for the banks because of scale (they can lend up to 10 times income this way it seems). So for the bank lending someone $500,000 at 2% is just as good as lending them $100,000 at 10% so long as they get the money cheap.

But what would happen if our theoretical Kimberly’s paid off their credit card debt and also reduced their mortgage from $500,000 to $100,000 at 2%? I realize it would take a miracle but let’s suppose. The banks would be crushed. Toronto would look like Calgary.

Banks do not, and almost never have, made the bulk of their profits by taking deposits and investing or loaning out the deposits. The deposits are used only to cover bad loans in the event of a default. It’s a fractional banking system where they only have to keep a portion (and a small portion at that) of their books liquid in some sort of currency. They make the bulk of their money monetizing loans. In other words they take your mortgage and the ability to seize your house that results and put it on the “asset” side of the ledger. They can now lend against it. But if everybody pays off their mortgages those assets go away. This is not in the banks interest so they do everything they can to keep people borrowing.

The other thing that would happen if all the Kimberly’s started paying off their loans and saving would be a massive deflation in the price of everything. This would be due to the drop in demand associate with diverting so much money into deleveraging. Now for a debt free person deflation is no big deal, sure you get a wage cut instead of an increase, but everything you buy is cheaper too so no big deal. But for someone in debt, even corporations, deflation sucks because the loans become unpayable. This is why the Fed targets a positive inflation rate when zero inflation would work just fine. They want a buffer. No deflation ever and thus no massive loan defaults, defaults are only to occur due to normal business failures and job losses and such and against assets that are not worth wildly less than the loans were.

So the conclusion is that gradually rising debt levels along with gradually rising prices is the actual goal of the system. It’s how it functions. An individual can buck the trend if they come into good fortune or success, but the herd cannot or the system will fail. Not that that would be as bad as they say, everything sill still be here and we can start over, and it’s happened many times in many countries. But the existing banks get wiped out in such a scenario, which is why it’s called “bankruptcy”, and also why they will do everything they can to keep things going the way they are.

That said occasionally bubbles pop up and yes Canada is experiencing a very protracted housing bubble. It will end probably with a brief fall below the long term trend but that’s going to be a good time to buy. House prices will not go to zero. Well I guess some have in Chicago but there are compounding reasons for that.

The way the economy works is a little like a slowed down version of Monopoly. Prices cycle wildly out of control, sooner or later everybody but the winner is bankrupt, then you put all the money and houses back in the box and go eat turkey dinner.

Computers and TV’s and such are an interesting case in point of regular economics not working so well though. The price for what you get has consistently come down, which is what you would expect in a fixed rate economy but not in one targeting positive inflation. Some of it has to do with outsourcing, some to do with rapid technological advance, but it proves a contrary point: Deflation does not always lead to delayed purchasing and a downward price spiral. I know computers will be cheaper, faster, and better next year than they are today, but if I need one I need one today, not tomorrow. Food is the same way. Even if I suspect McDonald’s might drop the price of a Big Mac tomorrow, if I’m hungry now I buy one. My furnace runs in the winter pretty much whatever natgas prices are doing.

PS this leads to another side note, probably the most hilarious consumer protest ever. When Gasoline went through the roof a few years ago there was a group of brainiacs that thought they could crush the gas companies by not filling up on Tuesdays. Yep, nobody go to Conoco on Tuesdays. That’ll teach them. Not stop driving your car, just don’t fill up on Tuesday. All that did was double business on Wednesday. Idiots.

#60 F.dover on 09.07.16 at 7:30 pm

I specifically moved to N.S. so I could afford to be poor. Car insurance $370 ? Well yeah, per car per year, and that includes collision on the antiques.

Her 1300 rent sounds mighty third world standard for T.O. I paid 220 for the cheapest thing I could find in New Toronto 40 years ago. Third St, eleven unit building, backed on a lakefront park.

#61 COW MAN on 09.07.16 at 7:31 pm

Amigos:

Chances are if Kim did vote it was for Sunny Ways and T2. Don’t worry be happy and life will provide for you. If it doesn’t it is the fault of the 1%. Just saying.

#62 Prairieboy43 on 09.07.16 at 7:36 pm

Insurance rates crazy in Ontario. ($370.00/month). $4400.00/year just to drive your vehicles. Enjoy the ride.
Buy a 10 year old Honda Civic ($5000.00). Insure it for $1000.00/yr. drive, and maintain it for 10 years. Sell it for 50%, what you paid for ($2500.00). Don’t quit your day job. Now (10 years), have $$ to invest, talk with Garth, Ryan. Simple Give up something to Get Something. There must be a compromise. Time to get your hands dirty.
PB43

#63 RudyGQ on 09.07.16 at 7:37 pm

The Canadian Payroll Association survey is a well-known occurrence in which over the past four years have yielded fairly consistent numbers. The results this year should not be a surprise given past trends. What I find more surprising is that the financial status of the ’average’ Canadian employee hasn’t improved in light of this awareness being raised. One would think if you are in a boat that is taking on water the natural inclination is to take some action (any action) that would remedy the situation. When it comes to financial situations, negative scenarios can manifest quite quickly whereas to yield positive results it may take a longer period of time before favorable results are seen. It is my hope the survey will yield better results next year.

#64 rainclouds on 09.07.16 at 7:38 pm

Take a look at the average person and realize 50% are stupider than that. George Carlin

Saved 20% minimum since my 20’s and now retired. Paid the mortgage off mid 40’s. Sold 3 yrs ago. invested and growing. Amazing what long term planning and delayed gratification can do. Not rocket science.

The many cell phone zombies and complete imbeciles among us are screwed.

#65 Let's figure it out on 09.07.16 at 7:41 pm

OK… yesterday’s poster boy of prudent future retiree lives a frugal life, saving 20% of his income and invests it, so that he would not need to resort eating cat food after 65 or 70 by the time he retires, he will probably also enjoy amazing trips in his diaper.

With this behaviour he makes happy fee based financial advisors, but with the self-imposed austerity consumption he contributes to decreased employment, lower corporate sales and growth in the real economy, while driving up share prices not based on fundamentals, but flooding the saved money into stocks, ETFs.

His diabolical opposite, Kimberly was introduced today, who saves nothing, helping tremendously to keep stocks from excessive demand and bubble, unrelated to fundamentals, she does her best to help the real economy healthy by consuming her fair share, which also contributes the organic way to “create jobs” for the fellow human beings.

#66 Cory on 09.07.16 at 7:51 pm

ummm……was wrong with my post?

I went for a walk. You had to wait 40 minutes. Get over it. — Garth

#67 Bat Flipper on 09.07.16 at 7:53 pm

Garth, People stopped playing the Lotto a long time ago. Instead of dropping 20-30 a week on lotto, people are dropping 40K-50K on a house hoping it doubles or triples in value. If you are buying/owning a house in these conditions, you are wagering that housing goes up. Plebs don’t realize they can lose cash. You used to talk about the crash, but now you talk about a slow, steady grind down. Is it going to be Cowtown slide or Van bust?

#68 Fish on 09.07.16 at 7:54 pm

Garth, True Blue!!’ once again thankyou,

#69 Vundo on 09.07.16 at 7:59 pm

If she is 21 then she might be fine. If she is 31, she will need to adjust her expectations. If she is 41+, only God can help her.

#70 Don Regan on 09.07.16 at 8:08 pm

Can anyone tell me what the total Sales of properties in Vancouver are compared to the first week
of September 2015 vs 2016. Also, I live on the West
Side of Vancouver and have seen properties drop 10% plus three removed from Sale in the past two months.
All this within a few blocks of where I live.

#71 Trojan House on 09.07.16 at 8:08 pm

#38 Andrew Woburn on 09.07.16 at 6:57 pm

Shot by police so far THIS YEAR: 500+

#72 Smoking Man on 09.07.16 at 8:22 pm

Had lunch with old buddy, portfolio manager, I asked him, if Trump wins, how are you going to rebalance your clients funds.

He’s said no one knows what to do.

I was tempted to send him to Greater Fool and follow a crazy comment poster that goes by the name of Smoking Man.

Rule 1, never mix your real life with your writing life.
Real life lies alot. Writers life says it like it is.

#73 Jason on 09.07.16 at 8:33 pm

Interesting post Garth! Was a good read :)

Garth, if I have a half duplex in Langley should
I sell it and cash it when I can? I want to move somewhere cheaper, I’m single and have no kids. Thx Lavern

#74 tkid on 09.07.16 at 8:34 pm

#43 Buy a house with zero assets.

Pay off monthly interests costs of borrowed money.

Wait till house price doubles, and voila– you now own your house for FREE!! No work required. Everything else is just details.

Now you sound like Vegas in 2004

#75 E Richard on 09.07.16 at 8:35 pm

Spent a week cycling around Cape Breton Island, an unbelievable amount of for sale signs on property and houses. Most people seem to be asking an unrealistic price, guess they are hoping some rich out of province or out of country buyer will happily overpay.

#76 RudyGQ on 09.07.16 at 8:36 pm

The Canadian Payroll Association survey is a well-known occurrence in which over the past four years have yielded fairly consistent numbers. The results this year should not be a surprise given past trends. What I find more surprising is that the financial status of the ’average’ Canadian hasn’t improved in light of this awareness being raised. One would think if you are in a boat that is taking on water the natural inclination is to take some action (any action) that would remedy the situation. When in comes to financial situations negative scenarios can manifest quite quickly whereas to yield positive results it may take a longer period of time before favorable results are seen. It is my hope the survey will yield better results next year.

#77 Linda on 09.07.16 at 8:38 pm

#3 & #35 – Amen. I too see people living like they have millions (they don’t). Designer clothes, flashy electronics of the moment, lattes, buy lunch every day & no, not just eating at the local fast food joint. All or most of it financed. The debit/credit card does not help, as they just tap & go. As for statements, they are emailed & hey, easy to ignore those pesky totals. Just pay the interest/minimum & carry on….. So it goes, until the income stream is interrupted. Then, of course, it is the fault of everyone but themselves.

#78 tkid on 09.07.16 at 8:38 pm

Kimberly, right now you don’t need Garth, you need Gail Vas Oxley. Get the debt paid off, car debt, credit card debt, get it paid off.

Then get together an emergency fund. Figure out what you need $$$ for a month. Save that up in a separate bank account.

Then start saving a regular amount each month. After a year of this, you contact Garth.

You can do this. Keep in touch. You’re a blog dog now. Let us know when you have the debt paid off.

#79 Mark on 09.07.16 at 8:45 pm

“I wonder what would happen if all the zombies suddenly started paying off their debt and investing, instead of spending money 10 years out on new cars and TV’s??”

Deflation. A strong CAD$. A comatose domestic “consumer” economy. ZIRP/NIRP.

All coming to the Canadian economy soon enough. Hope you’re positioned accordingly!

#80 Hotdogs from Heaven on 09.07.16 at 8:49 pm

#62 Prairieboy43 on 09.07.16 at 7:36 pm

“Insurance rates crazy in Ontario. ($370.00/month). ”

—————————————

Expect them to rise a lot more with the negative interest rates around the world. Less than 3% of all insurers earn a profit from underwriting risks. They generally lose money on their policies, but take all that up front cash and invest it in government and corporate bonds and paper.

They are forbidden by law to invest in more speculative stocks or hard to sell assets like real estate since they need to easily sell the assets to pay claims at any time. Look what just happened in Fort Mac. Since any new bonds they buy will pay a much lower interest rate than their past investments they will need to increase cash for claims by raising the premiums on their policies.

ZIRP and NIRP are negatively affecting insurance companies as much as pension funds and the world’s savers.

#81 Jim Bentein on 09.07.16 at 8:56 pm

Re: the comment about San Miguel and affordability. I just returned from a trip there (we live in Mazatlan but are moving to Puebla, which has a spring-like climate year-round, since it’s HOT on the Mexican coast in the summer). I stayed with friends in a condo complex, about a 15 minute walk from San Miguel’s beautiful downtown. There was a unit there for sale. 1700 sq. ft., three bedrooms, 2 1/2 baths, furnished. The ask is $110,000 U.S., which is about $140,000-$150,000 Canadian. And that’s pricey for Mexico, where there are certainly no zero-down mortgages. Cost of living in most of Mexico probably one-quarter of what it is in most of Canada. And, yes, most of Mexico is safe.

#82 Renter's Revenge! on 09.07.16 at 8:57 pm

Thanks to this blog, I’m living paycheck to paycheque.

#83 Bob Loblaw on 09.07.16 at 8:59 pm

I’m a real estate bear and agree with everything you’ve said about the bubble, Garth

But if 70% of Canadians are homeowners and owe a collective $1.2 trillion in mortgage debt, that’s only about $49K of mortgage debt per homeowner (based on a pop of 35M canucks)

That’s below the average household income. Yes, many are over leveraged no doubt, but many others must be mortgage free?

Of course. And they should be doubly worried about the ones who are not. — Garth

#84 Bodenby on 09.07.16 at 9:06 pm

Canadians are so pooched…[email protected] always shows non-financially literates the “maximum they can afford”…they get stars in their eyes when they see the “number” and voila! And we wonder why we have a housing bubble. So why doesn’t OSFI force banks to lower the gross debt service ratio? It’s obviously way too high. Almost 40% being overwhelmed by debt shouldn’t be a surprise.

#85 For those about to flop... on 09.07.16 at 9:14 pm

Hey Freedom, you said the other day that you didn’t think that I was as screwed as a lot of people.

Today’s Payroll survey confirms that.

It is going to be a slow grind building up my Tfsa but I am up for the fight.

I haven’t voted in a Canadian election yet but whoever proposes to put the limit up will get my virgin vote.

People will say that there are more important issues but me having a chance at a reasonable retirement is pretty important to me.

No kids ,no house,we recycle and reuse as much crap as possible,what else can I vote for.

To finish of our discussion yesterday ,I found out that the divorce rate is 5% lower in Australia so if things get choppy we could head there.

I forgot to check the price of radiator fluid in Australia though…

M42BC

#86 Victor V on 09.07.16 at 9:15 pm

PRICE DROP – 182A Moore Avenue – MOORE PARK

http://themashcanada.blogspot.ca/2016/09/price-drop-182a-moore-avenue-moore-park.html

This house was listed at $3,180,000.

Considering that the neighbour that I am assuming looks exactly the same, just without the tree, has already sold, I assumed they priced this house accordingly.

But $3.2!?! That seems really high…

Especially when you consider that with the original house selling for $1.4, if these 2 new houses sold for $3.2 each, that means the builders would have turned a $1.4 lot into a $6.4 lot.

Kind of crazy.

But this house didn’t sell and the price has now been dropped. The new asking price for this house is…

$2,995,000.

I think there will be another drop.

#87 Context on 09.07.16 at 9:25 pm

#81 Jim Bentein:- You had better read Borderland Beat for an hour to get the real news and the definition of safe.

#88 F.dover on 09.07.16 at 9:35 pm

#83 Bob Loblaw/ if you dig in deep you will learn N.S. has the highest rate of home owner ship, AND the lowest level of mortgages in Canada. Had to happen somewhere.

#89 cramar on 09.07.16 at 9:37 pm

#40 crowdedelevatorfartz on 09.07.16 at 6:59 pm

All my coworkers are paycheque to paycheque or WORSE….I have one “rocket scientist” that lives off his wife’s credit card to buy food and makes minimum payments on it each month….i figure another few months will end THAT gravy train…he still hasnt paid this months rent and its the 7th of the month because “his 70 year old retired father hasnt loaned him enough money”…..the “#1 son” is 50…..
Bitches daily about how he wants to buy a house , a harley, etc but has no money “its the asians fault for these house prices” as he hauls another deep drag off his $10 a pack cigarettes……..
Stupid people will NEVER understand…..unfortunately their allowed to breed more mouths to feed…..

—————–

I suspect he can “afford” a lot of beer also.

Multiply this financially-challenged dude by a hundred thousand and the soup kitchen lineups of the 30’s depression will yet live again!

#90 Context on 09.07.16 at 9:38 pm

#57 Post:- I have seen the condos at all stages of development coming on stream for the Toronto area. Garth might be conservative to suggest 50,000+ as was amazed by it all as they are coming and AAA developers are involved.

#91 Insurance Guy on 09.07.16 at 9:39 pm

#80 Hotdogs from Heaven on 09.07.16 at 8:49 pm

#62 Prairieboy43 on 09.07.16 at 7:36 pm

“Insurance rates crazy in Ontario. ($370.00/month). ”

—————————————

Expect them to rise a lot more with the negative interest rates around the world. Less than 3% of all insurers earn a profit from underwriting risks. They generally lose money on their policies, but take all that up front cash and invest it in government and corporate bonds and paper.

They are forbidden by law to invest in more speculative stocks or hard to sell assets like real estate since they need to easily sell the assets to pay claims at any time. Look what just happened in Fort Mac. Since any new bonds they buy will pay a much lower interest rate than their past investments they will need to increase cash for claims by raising the premiums on their policies.

ZIRP and NIRP are negatively affecting insurance companies as much as pension funds and the world’s savers.
____________________________________________

Source for less than 3% of all insurers having a combined under 100%?

I found this which shows the entire P&C industry smack on 100% for 2015.

http://www.propertycasualty360.com/2016/03/23/a-look-at-2015-pc-insurance-industry-results-in-ch?slreturn=1473298447&page=2

#92 Freedom First on 09.07.16 at 9:39 pm

#65 Let’s figure it out

Yes. Jack A$$. Thank you. I appreciate the indebted masses contributing to all of my investments.

Besides myself paying 0 interest for a lifetime, while earning income off of the debts of others, as well as everything else I have invested in for decades, has all helped to fund my Freedom First lifestyle.

My lifestyle has been very very very satisfactory. And, I am extremely hopeful about the future.

#93 cramar on 09.07.16 at 9:39 pm

#52 Prairieboy43 on 09.07.16 at 7:36 pm

Insurance rates crazy in Ontario. ($370.00/month). $4400.00/year just to drive your vehicles. Enjoy the ride.

————–

Only true in big cities of Ontario. When we moved from K-W to small-town Essex County, I remember contacting the insurance company to notify and they said our rates are going down. Why? Because rates reflect high traffic cities where there are many accidents. Another advantage in getting out of the Big Smoke!

This time last year we fully insured three vehicles and a travel trailer for around the $370/month you quoted.

#94 For those about to flop... on 09.07.16 at 9:43 pm

InfLewenza and Robax could be bumped down to every third Saturday.

I usually watch Woeful T.V news but it was on a different station.

Some squirrel with a large nut sack just recommended on ctv news that Canadians pay down debt and invest as much money as possible to beat inflation.

Didn’t hear him mention real estate.

Can we keep him boss…

M42BC

#95 Smoking Man on 09.07.16 at 9:49 pm

#92 Freedom First on 09.07.16 at 9:39 pm
#65 Let’s figure it out

Yes. Jack A$$. Thank you. I appreciate the indebted masses contributing to all of my investments.

Besides myself paying 0 interest for a lifetime, while earning income off of the debts of others, as well as everything else I have invested in for decades, has all helped to fund my Freedom First lifestyle.

My lifestyle has been very very very satisfactory. And, I am extremely hopeful about the future.
…..

Can’t believe you’ve never felt love.. I’m thinking some rabid bitch broke your heart. Now it’s revenge time.

Urges wear off as you ferment, nothing like having a familiar wine to snuggle with in the evening.

Don’t think you get.

Still love your posts though.

#96 Butch on 09.07.16 at 9:50 pm

Risk has been palpable for 10 years and a 100% price increase now.

Seems like the risk was in not buying!

#97 Doghouse Dweller on 09.07.16 at 9:50 pm

Re: Get ready post picture
Busking

I thought yesterdays pic was a prank or photo shopped. Its genuine. Finland ,Norway, Sweden and Denmark are well on there way to becoming cashless societies. Just like Canada !

What percentage of a balanced portfolio should be in
Bottles of Scotch ?

“Rare whisky investment had reached a record high , as the value of collectable bottles of Scotch whisky sold at auction soared 69.37% in 2014”

#98 mouldyinyvr on 09.07.16 at 9:52 pm

http://www.cbc.ca/news/canada/british-columbia/vancouver-real-estate-1.3746472
YVR market ‘pushed over’ – hardly – one can only wish…

#99 Freedom First on 09.07.16 at 9:55 pm

#85 Flop

Yes. Thanks.

Also Flop. Forget the anti-freeze. Freedom is under rated.

Except by me off course. But, then again, I am the Master of “Freedom First”. Not that I care what anyone thinks, but men and women alike say I am brilliant.

This is also important. To my knowledge, and it has been proven from time to time, all of my previous girlfriends harbor no grudges, as they greet me with a hug when I see them. My lifestyle is front and center to all. A clear conscience is also a big part of Freedom.

They knew that I loved them.

#100 Smoking Man on 09.07.16 at 9:56 pm

82 Renter’s Revenge! on 09.07.16 at 8:57 pm
Thanks to this blog, I’m living paycheck to paycheque.
……

Everyone is doomed in the long run. Death has no favourites.

Why people worry about the small stuff amazes me.

It’s time for my annual Nictonite project earth report.
I’m going cover this topic in my report.

#101 Context on 09.07.16 at 9:57 pm

#93 cramar:- What is being built on Erie Street south beside the big cemetery as the old woman’s home has disappeared?

#102 Smoking Man on 09.07.16 at 10:00 pm

James,

I saw your chirp from yesterday, thank god I thought, I was was thinking I frightened you away…

Welcome back my favourite hater.

Hugs and Kisses. Oxoxox.

#103 Tudval on 09.07.16 at 10:10 pm

#41 The Spread of Foreign Capital Interesting.. so then it’s true: the tax was directed at the Chinese prospective immigrants. It is a head tax. And if your analysis is correct, once the Chinese get used to it and prices soften by about 15%, they will get back into the market. It’s what I expected anyway. I also expect
legal challenges and serious political fallout once it becomes clear what has in fact happened.

#104 MF on 09.07.16 at 10:15 pm

#51 don’t tell on 09.07.16 at 7:15 pm

A large part of the peace we enjoy here in North America is the result of the large powerful military down south whether people like you and your humanities professor believe it or not. History has shown that just being “nice” to people does not work alone without having a deterrent.

Not sure what you are getting at with Trump, but he is actually the candidate at odds with the military industrial complex.

MF

#105 For those about to flop... on 09.07.16 at 10:19 pm

#99 Freedom First on 09.07.16 at 9:55 pm
#85 Flop

Yes. Thanks.

Also Flop. Forget the anti-freeze. Freedom is underrated

////////////////////////////////////////////
It’s called anti -freeze in Canada.
It’s called over- heat in Australia.

Won’t my car overheat in Australia without it?

What did you think I was going to use it for…

M42BC

#106 45north on 09.07.16 at 10:19 pm

Former Finance Minister Garth Turner: In a land of fools, it took relatively little to push the Van housing market over. It won’t take a lot in Toronto, either.

the government can hardly say that it didn’t know about the precipitous decline in real estate in Vancouver and that therefore it could not make proper preparation.

the present Minister of Finance, Bill Morneau is doing a “deep dive” into housing. That’s fine Mr Minister but you gotta know that the Vancouver housing market is in free fall.

Jamey Hubbs works for Bill Morneau. He is Assistant Superintendent of the Office of Superintendent of Financial Institutions: is the compensation program in place designed to incent bad behaviours? And are those behaviours aligned with the risk appetite framework of the institution?

http://www.osfi-bsif.gc.ca/Eng/osfi-bsif/med/sp-ds/Pages/jh20160505.aspx

Again that’s fine. It’s fine because he said it in May 2016 before the state of Vancouver was known. It’s not fine now! We need a sense of urgency!

I’m wondering if the Office of Superintendent of Financial Institutions is up to the task which is to oversee Canada’s financial institutions in the midst of a crisis?

another poster says it is a crisis. Financial institutions are going to severely strained. Some will fail. What is the Office going to do about it?

the poster is Debt Slave Creator:

Debtslavecreator: I lend money for a well known lender. The situation is completely out of control.
The economy is steadily deteriorating and we are in the edge of what will be the worst economic era ever. Much of the GDP and hence income in the last 10-15 yrs and especially the last 3-4 yrs was originated from the debt creation
The Rate of growth in credit has been steadily trending downward and each new unit of credit has created less and less of a unit of GDP

#107 Freedom Two on 09.07.16 at 10:26 pm

#92 Freedom First

Awesome, congrats!

With your discipline setting yourself free from your ego will be easy for you, then.

That’s where real freedom starts, the wise men claim.

#108 The Wet Coast on 09.07.16 at 10:27 pm

Get a cash back credit card. Use it for everything, forget what money looks like. Some good ones out there pay 1.75%, wify’s card pays 5% for first 6 months. Still spend wisely, pay off the card every month. Its been free money for years. I figure 10K so far. Sadly most people don’t have the discipline to control their spending and pay it off every month.

#109 Context on 09.07.16 at 10:28 pm

#102 Smoking Man:- OXXO is a subsidiary company with over 14,000 stores growing faster than one of your fliers, and the holding company has some good assets including coke and beer to name but a few.

#110 Flopper Fan on 09.07.16 at 10:42 pm

#85 For those about to flop… on 09.07.16 at 9:14 pm

Flopper, the radiator fluid is on sale at Crappy Tire soon but you should listen to all of us and lay off it. You ain’t smokey and cannot tolerate this stuff.

Prestone Premixed Coolant
Now $12.74
SAVE 25%
Valid September 08, 2016 – September 11, 2016

#111 Keith in Calgary on 09.07.16 at 10:45 pm

I work with a bunch of 25-30 somethings as well as a small cadre of 40-50+ dudes like myself.

The 25-30 year olds are literally buried in debt with huge mortgages, new cars, and the latest bling crap (Apple watches and I-phones, etc). They can’t afford vacations, and no one where I work in this group really goes anywhere during their holidays for the most part unless they can drive there.

The older crew are mostly carrying huge mortgages, but they also have financial assets, older cars, and for the mos tpart, some semblance of common sense.

The huge disconnect is that the last 30 years of CREDIT FUELED FALSE GDP GROWTH…….let me say that again….CREDIT FUELED FALSE GDP GROWTH…..has only shown the younger ones a rising economy and none of them have any life basis (read : experience) of what it is like when the SHTF.

Printed out my tickets to Rio de Janeiro yesterday for this December and got distracted by a phone call and forgot about them on the printer. 30 minutes later one of my co-workers brings them over to me with a look of absolute incredulity on her face. $5,600 for two first class ducats on United. Asks me how I can afford that on my salary, said my salary doesn’t matter.

It’s gonna be fun to watch from the beach when the tsunami hits.

#112 Bram on 09.07.16 at 10:49 pm

Interesting stats from REBoGV. (I know, not impartial, etc.)

Still, they state that median price in West Van is slightly up:
http://maggie-chandler.myrealpagewebsite.com/_media/Documents/2016%20graphs/vanwest082016.pdf?inline=false

And state that median price in East Van is down at almost $ -0.2M.
http://maggie-chandler.myrealpagewebsite.com/_media/Documents/2016%20graphs/vaneast082016.pdf?inline=false

I expected west to be hit harder than east, as Asian millionaires play a bigger role there, and being less affordable than east side.

The very top end in west seems down too, though, as average price in west is down, but median up: no more crazy top end outliers there.

Teranet nrs will be out in 5 days.

Bram

#113 Fish on 09.07.16 at 10:50 pm

HI, well
Female
52
had to sell the home in 2014
Devorce in 2015
( MIGHT add was together over 24 YEARS)
done now alone with no kids,
Also had a lab, but that was given away to, sad..

#114 Freedom First on 09.07.16 at 10:51 pm

#107 Freedom Two

Yes. No worries. I mastered setting aside my emotions from critical thinking decades ago. Watching the actions of other human beings has, and continues to help me in this regard.

Living life need not be difficult, or, shudder, a burden.

Myself, I wake up grateful every day. It would be hard not to, being me.

#115 Stratford upon Avon on 09.07.16 at 10:52 pm

#99 Freedom First

To my knowledge, and it has been proven from time to time, all of my previous girlfriends harbor no grudges, as they greet me with a hug when I see them. My lifestyle is front and center to all. A clear conscience is also a big part of Freedom.

They knew that I loved them.

===

Just not as much as myself.

#116 SWL on 09.07.16 at 10:53 pm

Mark – Thanks for that Casey Research link a few days back. Finally got around to watching it.

Seems pretty clear where things are ultimately heading

@Don’t tell Trump… Reality… Most, simply are not ready for… Reality

#117 Ace Goodheart on 09.07.16 at 11:11 pm

Scotia Bank just put more sweet preferreds on the market. These won’t last (placed my expression of interest this afternoon as soon as the offering went public):

http://www.theglobeandmail.com/globe-investor/news-sources/?mid=ccnm.20160907.11G113163-001

#118 Lucky on 09.07.16 at 11:12 pm

#56 Ace Goodyear nice posts last couple of days. Teach us more please.

#78 tkid nice one! Very helpful to some who need the help. I think your response is better than using answers such as “ofcourse” or “get over it”.

#119 Mike in Toronto on 09.07.16 at 11:14 pm

#43 Cecil Henry

You’re missing a step. You take a HELOC on the first to buy a second. Then sell the second to pay off the original principal of the first.

#120 Jay on 09.07.16 at 11:15 pm

Hey Garth,

What was Kimberly’s household income? How do you know if she was living above or below her means?

#121 Butcher on 09.07.16 at 11:19 pm

The scotch I love is Jura.

#122 MOSES on 09.07.16 at 11:22 pm

The question is, with $1mil sitting in the bank making nothing, where do you invest??? GTA real estate market and the stock markets on both sides of the border are grossly OVERPRICED. Who cares about a dividend paying stock when that stock could lose 10% or more of its value!!!

#123 Pete on 09.07.16 at 11:25 pm

#56 “All high house prices are, really, is delayed currency devaluation”

That’s right. That’s where the hyperinflation is. Instead of a loaf of bread costing $2000, a $65000 house costs $2.8 million. And as long as they keep loaning money out at rock-bottom rates, people won’t figure out the mess they’re in. They don’t realize that the debt will out-live them. Only an ever-increasing housing bubble will prevent these fools (and the whole nation) from implosion. It can’t be stopped now. The hyperinflation is already here, and it must continue to escalate until it reaches critical mass. Governments are only buying time. Everything you have witnessed politically in the last 20 years has been to this end. The only possible way out would be through universal debt-forgiveness but that would crash the whole power structure worldwide; but that might be the true game plan (critical problem->violent reaction->only one possible solution NWO-communism) . The existing power structure would be replaced by the NWO.

#124 Andrew Woburn on 09.07.16 at 11:54 pm

#51 don’t tell on 09.07.16 at 7:15 pm
Don’t tell Trump.

Since 9/11 –

Annual average number of Americans killed by:

Jihadist terrorists – 9
(includes US citizens)
Armed toddlers – 21
Lawnmowers – 69
Shot by other Americans – 11,737


Why don’t you look at the numbers that tell the story:

Since 9/11:

– money US/West spent on wars
– money US/West spent on surveillance
– laws restricting privacy, civil liberties

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

But surely that is the whole point. Americans are terrified into tolerating this gross destruction of their liberties and wealth by demagogues spouting an imaginary spectre of foreign terrorists under every bed when the greatest threat to their lives comes from other Americans.

#125 Charles Lamb on 09.08.16 at 12:02 am

People in New Zealand two years ago were actually bragging that Chinese buyers were paying more than locals

http://m.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11478724

That flood turned into a tsunami and average New Zealanders are sleeping in their cars.

What a difference two years made as sleepy deniers turned into homeless binners

https://www.theguardian.com/world/2016/may/17/new-zealand-housing-crisis-forces-hundreds-to-live-in-garages-tents-and-cars

Denial is a dangerous thing. Canadians found that out the hard way. Be careful what you wish for. The truth should never be denied.

#126 Entrepreneur on 09.08.16 at 1:12 am

#39 Jim Bertein…about all the new plants popping up in Mexico and #111 Keith in Calgary…”The huge disconnect is that the last 30 years of CREDIT FUELED FALSE GDP GROWTH”

Put to the two together and there you have it. People of that nation come first, trade second, and most importantly earth’s structure.

#127 Tulips on 09.08.16 at 1:17 am

#83 Bob Loblaw on 09.07.16 at 8:59 pm

“But if 70% of Canadians are homeowners and owe a collective $1.2 trillion in mortgage debt, that’s only about $49K of mortgage debt per homeowner (based on a pop of 35M canucks)”

Love your user name. But that math could only work on the Bob Loblaw Law Blog. $49K per homeowner is based on $1.2T over 70% of 35M households. That puts every canuck adult, child, and infant in their own home. Census puts the number of canuck housholds around 13M. That’s 9M owned with an average mortgage debt of 130K. Now consider that this average includes the many who are already paid off, and the others who carry multiple times the average mortgage often on average household incomes.

#128 Karma on 09.08.16 at 1:22 am

#21 Mr. White on 09.07.16 at 6:17 pm
“Apropos of nothing; how does a low unemployment rate and low labour participation rate equal prosperity?”

1) “Prosperity” is subjective. 2) what matters is that Q/Q and Y/Y, and to a lesser extent M/M, is getting better.

For example, “U.S. job openings at record high, skills mismatch emerging”:
http://www.reuters.com/article/us-usa-economy-jobs-idUSKCN11D1UX

This “Mismatch” generally means competition for employees will increase and thus increase wages along the way.

“Job openings, a measure of labor demand, increased 228,000 to a seasonally adjusted 5.9 million, the Labor Department said. That was the highest level since the series started in December 2000 and pushed the jobs openings rate up one-10th of a percentage point to 3.9 percent in July.”

It’s not all doom and gloom…

#129 Ronald McJagger on 09.08.16 at 1:56 am

#47 Cory
# 111 Keith in Calgary

Both you guys nailed it.

Writing from the sidelines in SE Asia. Here they’ve got their own consumer credit troubles brewing. Everyone wants a new truck. Borrow. Why not. Money’s cheap and will stay that way forever. Meanwhile you just bought a deprecating asset.

Which reminds me. I like this blog. But the idea that interest rates will one day rise is laughable! Interest rates will never rise, not in my lifetime and I’m Gen X. If they rise the whole house of cards collapses. If you’re in power you can’t collapse the house of cards. It’s better to keep the slaves chained to debt, toss em a couple cookies now and then. Poloz is the cookie meister. He will save the house poor at all costs.

Garth, please, let’s squash this idea of rising interest rates once and for all. It will not — cannot — happen. (Unless of course a reset’s coming and a new game’s to be rolled out.)

#130 Karma on 09.08.16 at 1:59 am

#65 Let’s figure it out on 09.07.16 at 7:41 pm
“OK… yesterday’s poster boy of prudent future retiree lives a frugal life, saving 20% of his income and invests it, so that he would not need to resort eating cat food after 65 or 70 by the time he retires, he will probably also enjoy amazing trips in his diaper.

With this behaviour he makes happy fee based financial advisors, but with the self-imposed austerity consumption he contributes to decreased employment, lower corporate sales and growth in the real economy, while driving up share prices not based on fundamentals, but flooding the saved money into stocks, ETFs.

His diabolical opposite, Kimberly was introduced today, who saves nothing, helping tremendously to keep stocks from excessive demand and bubble, unrelated to fundamentals, she does her best to help the real economy healthy by consuming her fair share, which also contributes the organic way to “create jobs” for the fellow human beings.”

Gotta love the financially illiterate people among us. It makes smart (with money) people richer. If every one saved 20%, rather than Canada’s saving ratio of ~4% (-2% in BC), then those who are prudent and invest would be poorer than currently. No one wants more competition, so it’s a good thing financially illiterate people are like that.

And thankfully not everyone reads Garth’s blog.

#131 Freedom First on 09.08.16 at 3:06 am

#115 Stratford upon Avon

Just not as much as myself.
………………………………………………….

The truth. Perfectly stated. And as it should be.

#132 WalMark of Sadkatoon on 09.08.16 at 4:01 am

I wonder what would happen if all the zombies suddenly started paying off their debt and investing, instead of spending money 10 years out on new cars and TV’s??

Collapse of the Canadian economy. Continued contraction of the CAD. Already Happening anyway. Just faster.

#133 Wordpress International on 09.08.16 at 6:37 am

#17 Ronaldo
“Which brings me back to December of 69 when I bought my first home.”
——————————————————————–

Wow. There are some really old people reading this blog.

#134 Wordpress International on 09.08.16 at 6:42 am

#83 Bob Loblaw
——————————————————————-

So many idiots.
So little time.

#135 Wordpress International on 09.08.16 at 6:54 am

#76 Rudy GQ

“It is my hope the survey will yield better results next year.”
——————————————————————-
Hahahaha. That’s a good one.

And Santa Claus will be extra good to everyone.
And the Tooth Fairy will come.
And there will be peace in the Middle East.
And Smoking Man will quit drinking.

#136 Charles Lamb on 09.08.16 at 7:05 am

Rates will not rise because governments can’t afford the spread, so don’t look there. They can’t buy any more bonds that yield less than zero.

Instead look for helicopter money when they abandon the incredibly destructive negative rate experiment. BOJ is buying stocks instead, and soon so will the EU.

‘The question is, with $1mil sitting in the bank making nothing, where do you invest??? GTA real estate market and the stock markets on both sides of the border are grossly OVERPRICED. Who cares about a dividend paying stock when that stock could lose 10% or more of its value!!!’

If the gov starts buying stocks the PE’s are out the window and stock with scream heavenward, after all they have to buy those shares from me, and I’m not selling cheap. The PE on stress tested bank shares and preferred could be 500 or 1000 because the governments will continue to buy in order to shore up balance sheets and fund the currently bankrupt public pension system without resorting to 100% taxation.

If you are not backing up the truck on the issues affected by government acquisition you’re missing the melt up of a lifetime. If you have all your money in real estate, you’ll be sorry.

#137 NoName on 09.08.16 at 7:47 am

i was driving my older one yesterday from school home, so she asked me

dad what will hapend after us selections. i sad don’t know
she replied “orange is a new black”. that was funny, i couldn not stop laughing all the way home.

i dont think that she get that joke cuts bots ways, but that ok she’ll figure it out eventualy.

#138 Brett on 09.08.16 at 7:53 am

We live in Calgary. Never seen so many new high end pickups, 4×4’s, and high end cars.

Just passed our 19yesr old Camry to our son. We only need one car now so we kept the 11 year old Accord. Plan to keep it for years?

That is how we retired early. Scraped enough to manage a down payment on our first home above the CMHC rate in order to avoid the charge. Easy, just meant that we had to buy a bunch of gently used furniture until we could afford to buy new. Anything except going into debt to buy stuff that depreciates 30-50 percent between the store and our house. It is a value based attitude that let us sleep at night and ,along with careful investing, provided us with a very comfortable and secure early retirement.

#139 fancy_pants on 09.08.16 at 8:11 am

Well, she missed the investment opportunity when the 0/40 mortgages were removed. That was the get rich for nothing opportunity. That door has closed in more ways than one.

My advice to Kimberly: vote for T2 and if you live in the manufacturing basket of the western world (tongue in cheek), vote for Wynnie again. They will be sure to rob Peter to make your life more comfortable b/c you are a special flower.

#140 Penny Henny on 09.08.16 at 8:18 am

This is from TO Solds. This service provides members the sale price of homes sold in the GTA.

Toronto Real Estate Sold
Publication Temporarily Suspended
Posted: 07 Sep 2016 02:46 PM PDT
We have received a “cease and desist” letter from legal counsel to the Toronto Real Estate Board. Accordingly we have temporarily suspended publication of the Just Sold report until the legal issues can be resolved.

#141 crowdedelevatorfartz on 09.08.16 at 8:18 am

@#89 Cramar

Oh, yeah smokes come first, booze second.
His teeth are rotting out of his head. His 6 year old daughter has never been to a dentist. His wife sits at home smoking cigarettes watching tv ( he arrives home from a 2 hour commute and starts cooking supper and doing laundry because she’s spent the day on the internet “job searching…..for the last 3 years).
The epitomy of “tralier trash”.
I feel sorry for the kid but THAT apple wont fall far from the tree…..with those “parents” as role models….
Stupidity literally breeds stupidity

#142 Renter's Revenge! on 09.08.16 at 8:19 am

#100 Smoking Man on 09.07.16 at 9:56 pm
82 Renter’s Revenge! on 09.07.16 at 8:57 pm
Thanks to this blog, I’m living paycheck to paycheque.
……

Everyone is doomed in the long run. Death has no favourites.

Why people worry about the small stuff amazes me.

It’s time for my annual Nictonite project earth report.
I’m going cover this topic in my report.

Cool. Will it be made available online, or are those reports classified?

#143 suburban coyote and pup on 09.08.16 at 8:19 am

Hi Kimberly (is she real or is this a chew toy for us Garth?).
tkid had a great suggestion re Gail Vaz-Oxlade. She has very readable books around financial literacy and if you are not a reader check out her shows Money Morons, Princess and Til Debt do Us Part. Great basic tough love, with practical and compassionate advice and skill building practices.

#144 AfterTheHouseSold on 09.08.16 at 8:28 am

Unifor selects General Motors as its bargaining target.
“If we are going to have a dust-up, we might as well have it immediately, Dias said.”

http://www.cbc.ca/news/business/unifor-automaker-bargaining-1.3749427

Trudeau speaks at Unifor convention. If ‘a picture is worth a thousand words’ then this says all you need to know.

http://www.cbc.ca/news/politics/trudeau-strategy-union-ndp-1.3735987

#145 isuckless on 09.08.16 at 8:32 am

“What we do know for 100% certain is that what goes up must come down and then goes back up again.”

One word – Nortel

#146 Farsyd on 09.08.16 at 8:34 am

I thought it was an error but instead it was likely a massive disturbing common tell. Kimberly said her car loan was 550. She thinks of debt in terms of payments and not the total debt she owes. This is why the planet is up to its eyeballs in debt and why the siren song of low rates has doomed a nation on the shoals. Even without a rate increase. When I signed for my first mortgage many years ago, I felt like puking because the prospect of owing that much frightened me so. Now people just get comfortable with low interest payments. By the way, my price to income ratio was 1.0 back then, low by historical standards, tiny by 6.5 to 1 today.

#147 lol on 09.08.16 at 9:13 am

Maybe buying a house would be a good idea for Kimberly. Instead of blowing the next 25 years of income on whatever, she would be forced to ‘save’ about half of her money and the other half would go to paying for the retirement of some lucky boomer.

Buy a house with what? — Garth
————————————————————–
Garth you must be kidding. It cost nothing to buy a house. All you need is a good mortgage broker who will charge between 1500 to 2k and come up with fake paper. Fake pay stubs, fake Notice of Assessment etc. You know the drill
Now don’t tell me they don’t have 2K because they don’t need.
If you don’t know the brokers, look closely and you will find one in your big tall bank building where you hang around

#148 AfterTheHouseSold on 09.08.16 at 9:21 am

“When we put so much of our consumer debt into the housing market and rates go up, more disposable income gets consumed within that consumer wallet and therefore it stunts longer-term growth, McKay said.”

http://business.financialpost.com/news/economy/canadas-economy-could-take-15-years-to-reinvent-itself-warns-head-of-royal-bank-of-canada

#149 pBrasseur on 09.08.16 at 9:21 am

All high house prices are, really, is delayed currency devaluation. #56 Ace Goodheart

Not exactly. Governments propping up housing bubble IS roughly equivalent as printing money. That money, created by the magic of fractional banking (which is fine when not tempered with by government), is funnelled into the economy via the mortgage market which we all know in Canada is massively supported by the government’s CMHC.

The increase in money circulating to buy houses does in no way correspond to productivity and/or income growth in our economy (it is even worse than it looks because much of the current growth is artificial growth fed buy unsustainably rising debt), yet to the economy it feels like fast income growth, better yet extra income that’s immediately spent locally, very powerful job creator. No wonder politicians love to promote RE…

But because debt/income can’t grow forever this kind of artificial growth cannot last indefinitely. When it does stop one thing that will happen is that people will realize that they are poorer than they thought, spending will decrease and the economy will falter. The class of asset that most benefited from the money printing scheme will be the most affected by the correction, so yes (contrary to what you say) house prices will fall. The boost in economic activity provided by the bubble will become a bust, many jobs will be lost, many lower skilled workers will find themselves in a very difficult situation, for a long time. That we should expect. The rest is speculation, for example the CAD$ might fall too if the Canadian situation is bad relative to others, interest rates may even go up is the bond market becomes a bit scared, the expected loss of income by Canadian governments may trigger some pretty nasty public finance crises, etc… We’ll see how it unfolds but in general we should know to expect bad things

If it’s any consolation it’s not just here. Politicians around the world try to stimulate the economy, the most direct way is to borrow and spend but many policies have the effect of encouraging others to borrow and spend, that way that don’t have to do it themselves. Look at Denmark for example, government has relatively little debt despite comprehensive social programs and a socialist dream, economy seems nice and prosper, everything look fine and dandy until you realize that households carry a 300% debt to income ratio! Now how does that not blow up at some point?

#150 WalMark of Sadkatoon on 09.08.16 at 9:41 am

#137 NoName on 09.08.16 at 7:47 am

Clever

#151 Dups on 09.08.16 at 9:57 am

Check this out on Netflix, it hits the nail on the head on most topics that matter most in our lives:

“Where to Invade Next” by Michael Moore

An eye opening classic example how North American ways and management fails all of us vs. Europe etc.

We should learn a few things from countries that have better results…

#152 TurnerNation on 09.08.16 at 10:02 am

Order more hair nets at the General.

WSJ 13% of economists expect Sept rate hike.
74% expect hold off till Dec.

#153 Bytor the Snow Dog on 09.08.16 at 10:12 am

@113 Fish

What is the point of your post? Are ya lookin’ for a date?

I hear Freedom First is available.

#154 CT on 09.08.16 at 10:21 am

I just read total monthly sales for the GTA for August 2016 were 9,813.

I track this number every month when it comes out from the TREB. Guess how many sales were reported when the July monthly number came out a month ago? 9,813. I’m not kidding.

#155 doobiy on 09.08.16 at 10:39 am

Garth

Think you need to get some theme music to accompany this blog….what about “What a fool believes” by the Doobie Brothers?

#156 Context on 09.08.16 at 10:50 am

Smoking Man when your in New Orleans for the conference bring copies of Chapter #1 because a few of those dudes have publishing companies and might gamble on your new book. Keep thinking #1 seller with cash flow rolling in with a guest spot on TV as a famous author.

#157 doobiy on 09.08.16 at 11:04 am

#79 Mark on 09.07.16 at 8:45 pm

Deflation. A strong CAD$. ..”

As Ronnie Ray-gun would have said….there you go again….

The CAD$ will plummet versus the USD…..

Okay, okay…it may be strong versus some currencies, Turkish Lira, Botswana etc….

#158 Noel on 09.08.16 at 11:11 am

What kind of scotch do you prefer Garth?

Some things a man canna reveal. — Garth

#159 Sheane Wallace on 09.08.16 at 11:13 am

‘Wealth’ based on debt:

http://www.cbc.ca/news/business/statistics-canada-debt-income-financial-1.3634166

https://data.oecd.org/hha/household-debt.htm

note that all of the countries with higher debt than Canada have much better social net – benefits, free education, pensions.

#160 Ole Doberman on 09.08.16 at 11:30 am

Government is getting ready to take your pension:

https://www.armstrongeconomics.com/world-news/taxes/the-preparation-for-seizing-private-pensions/

Seems surreal to happen in the US – but it did happen in Poland already.

#161 Context on 09.08.16 at 11:42 am

#154 CT:- Imagine my utter shock that the Real Estate cartel might be rigging the figures. They used the two day trick to pump good tidings for the greater fools to start buying again as well.

#162 TREB lawyers on the chase... on 09.08.16 at 12:39 pm

http://www.mortgagebrokernews.ca/news/cease-and-desists-letter-sent-to-agent-sharing-sold-data-213466.aspx

#163 Sheane Wallace on 09.08.16 at 1:10 pm

The only place to ‘invest’ with no money is the real estate market. Borrow for down-payment , get huge mortgage insured by CMHC and leverage tax-free gain.

Many people – flippers, builders, became multimillionaires with almost no taxes paid due to government/BOC/CMHC stupidity.

Let the government tax them if they need money.
From me they tax my fart.

#164 Victor V on 09.08.16 at 1:11 pm

#162

For those looking to see what the http://www.torealestatesold.com website *used* to look like before the realtors shut it down, here’s a link:

http://webcache.googleusercontent.com/search?q=cache:CSf_CORQtLEJ:torealestatesold.com/+&cd=1&hl=en&ct=clnk&gl=ca

#165 Bottoms_Up on 09.08.16 at 1:13 pm

#151 Dups on 09.08.16 at 9:57 am
———————————————–
Are you suggesting that more vacation time (equaling less stress and less sickness, and more productive employees), an extra monthly paycheque in December ‘just because’, welcoming unions and paying a living wage, less school hours and no homework (to produce the top students in the world), providing healthy, fresh foods in schools, and teaching table manners and good eating habits, free tuition and abhorrence toward debt, disarming police and treating prisoners with dignity, are somehow something to be aspired to?? ; )

#166 pBrasseur on 09.08.16 at 1:15 pm

«note that all of the countries with higher debt than Canada have much better social net – benefits, free education, pensions.»

I think the sense of security provided by the social programs and pensions stimulates borrowing and lending, this is certainly true in Scandinavia. But to be fair other countries also have more generous social programs than Canada without the household debt binge, France or Italy for example. Maybe some of it is cultural or circumstantial but I think if you look more closely you’ll find that countries with very high household debt ratios usually have in place some kind of scheme or regulation to facilitate credit. Others (without the very high household debt) tend to compensate with huge public debts. Only some countries may have what it takes to generate enough growth to overtake their debt problem(s), hopefully the US will be among them, doubtful IMO if the democrat run congress..

Goes to show socialism is unsustainable, as the totally inept economic system it is, no matter the method used to create it a lot of «imaginary wealth» will be melting away in future years!

#167 Ace Goodheart on 09.08.16 at 1:19 pm

RE: #149 pBrasseur

Agree with everything you wrote.

My only concern is, what will the “number” be at the end of a deflationary cycle?

Countries that have experienced rapid currency devaluation as a result of excessive government debt, have been left in a situation, when the smoke cleared, of really ridiculous looking currency values.

Take any number of examples: Mexico, Greece, Italy, Argentina, to name a few. The “old folks” among us who went backpacking in Europe before the Euro, will remember that 1000 Italian Lira was worth approximately 90 cents and 1000 Greek Drachma could not purchase you a can of soda pop. 1000 Mexican Pesos used to be worth around $1 US.

This sort of rapid decline in currency value would have to have an effect on house prices. In Italy, for example, a house that used to be worth $100,000 Lira before the currency crash, ended up being worth a million Lira afterwards. The house didn’t increase in value, the currency crashed.

South Korea had the same problem (how much is 1000 Won worth, around 90 cents US?).

All of these currencies used to have value, all were destroyed by government debt.

I have shown previously that if interest rates on the Ontario Government’s $300 billion debt were increased by 1%, the Ontario Government would be effectively bankrupt and unable to function financially.

Our Federal Government is more solvent and not likely to default, however it still has $632 billion in debt. Again, raise interest rates by 1% and you are cutting a lot of programming and services to pay the extra costs.

Also the Feds will likely have to bail out the Province of Ontario, whose debt is almost 1/2 of the Federal debt (and Ontario is actually the most indebted sub-sovereign entity in the world).

Also consider, our wonderful socialist government has actually backstopped ALL of the most risky mortgages in Canada through CMHC (if you have to use CMHC to get a mortgage, you are borrowing sub-prime, with not enough of a down payment and likely not a good enough credit score).

What that means, is if interest rates go up, not only is the government responsible for paying double the interest it is paying now, but IT ALSO HAS TO BAIL OUT ALL THOSE RISKY, FAILED MORTGAGES.

It’s all tied together. If housing blows up due to an interest rate increase (which likely, it will) then the government gets taken along with it. The solution will be, print money. Which devalues our currency, and makes houses “worth more” (though, not really, because the currency will just be worth less).

If the government artificially holds interest rates low, then you get an exodus of capital out of Canada. Either way we’re in trouble.

That is why I don’t have any investments at all in cash-based financial instruments.

#168 Victor V on 09.08.16 at 1:29 pm

Morneau still mulling measures for ‘highly charged’ Toronto and Vancouver housing

http://business.financialpost.com/personal-finance/mortgages-real-estate/morneau-still-mulling-measures-for-highly-charged-toronto-and-vancouver-housing

Canadian Finance Minister Bill Morneau said additional measures may be needed to manage the risks associated with the “highly charged” Vancouver and Toronto housing markets, even after British Columbia imposed a foreign buyer tax.

Speaking Tuesday in an interview in Hong Kong, Morneau identified housing as one of the “key” issues for his administration in coming weeks and months, and said policy makers are trying to assess the local and national “implications” of Canada’s two most expensive markets.

“We are going to remain on top of the dynamics in order to consider whether we need to take actions,” said Morneau, who took over as finance minister after Justin Trudeau’s Liberal Party won power last year. “That’s an area of focus to make sure we’re managing those risks in a way that protects Canadians.”

#169 DM in C on 09.08.16 at 1:36 pm

“We live in Calgary. Never seen so many new high end pickups, 4×4’s, and high end cars.

Just passed our 19yesr old Camry to our son. We only need one car now so we kept the 11 year old Accord. Plan to keep it for years?”

We just sold our 2001 Pontiac with 300k+km — our kids don’t want their licenses, we offered them the car, but nope, thanks. Transit works. I suspect it is so they can use their phones and not be distracted by driving.

Got a used truck from a dealership in Cochrane for a great deal. Plan to drive that into the ground too. Not everyone blows their brains out on the newest and latest.

#170 Ponzius Pilatus on 09.08.16 at 1:40 pm

Someone asked about which scotch Garth is drinking.
I have it from reliable sources that he gets it shipped from the liquor store in Akroyd Mall in Richmond, BC.
Kept under lock, a bottle is 6,000 plus taxes and bottle deposit.
Only the best for Garth and his clients.

#171 Context on 09.08.16 at 2:04 pm

Memo for Bill Morneau:- The train left the station and whatever you have in mind will be too little and too late as the corruption in the Toronto real estate market goes beyond the pale. Did you ever consult Garth Turner on these matters with a substantial time based fee?

#172 pBrasseur on 09.08.16 at 3:14 pm

«This sort of rapid decline in currency value» is equal to high inflation or even hyper-inflation. #167 Ace Goodheart

Typically it happens when investors (or even ordinary citizens) dump a currency because they no longer trust it and no longer trust its economy. Happens a lot in South America where populist politicians often make extremely stupid decisions, investors then run for the exit and everything collapses. Argentina in particular seems to be fond of that scenario and repeats it over and over!

Mind you South-American politicians don’t hold a monopoly on stupidity, we certainly have our own collection of morons and utopians. But I think we are still pretty far from hyperinflation in Canada, although a further drop of the CAD$ and higher inflation down the road in IMO almost a certainty. This is after all a normal outcome when you print money.

I see your point though, if the currency become worthless then a 1M house becomes «normal» because 1M is not worth much, problem is with such extremes a loaf of bread would cost 20$, prices on everything imported would be astronomical and our economy would collapse, I just don’t think this would be possible without the entire RE market collapsing as well.

#173 TrucMuce on 09.08.16 at 3:31 pm

That chart posted here recently is now in Mortgage Trends. Strongly suggests people to refinance… now.

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2016/09/clock-ticking-on-80-ltv-vancouver-refis.html

The 10-yield U.S interest rates look like they are breaking out from a tight range. Traders are starting to bett on much higher rates starting now. See J.C Parets on twitter. Other pros are talking about it. May be the real thing this time.

#174 Victor V on 09.08.16 at 3:36 pm

[POLL] Who won the NBC Commander in Chief Forum…Trump or Clinton?

https://www.facebook.com/DonaldTrump/posts/10157655351440725

#175 Millenial on 09.08.16 at 3:44 pm

Hey Garth,
I dnow you hate the Zero Guy, but check this article, you’ll like it.

http://www.zerohedge.com/news/2016-09-08/dog-re-elected-mayor-third-term-proving-politicians-are-useless

#176 Smoking Man on 09.08.16 at 3:46 pm

#156 Context on 09.08.16 at 10:50 am
Smoking Man when your in New Orleans for the conference bring copies of Chapter #1 because a few of those dudes have publishing companies and might gamble on your new book. Keep thinking #1 seller with cash flow rolling in with a guest spot on TV as a famous author.
…….

Self publishing. Have made some huge channels via Twitter access to 100 million readers not to mention 100 die hard core fans on GF.

I figure I’ll sell around 1000 copies, which to me is a great achievement.. Considering 7 years ago when I started contributing to the comments section of GF I was completely Illiterate. Mistakes now are when the stupid phone swaps out my words, or in the evening once I’m into the Jack.

#177 Context on 09.08.16 at 3:52 pm

In Toronto the greater fools think they are all millionaires by buying debt to leverage with cheap cost of money. What could possibly go wrong with their million dollar condo or traditional residence in the wrong location? The bubble bursts and they have lost the original down payment and are going underwater so now they are broke. This reminds me of the movie called Three Days Of The Condor whereby the international hitman Joubert turns to Robert Redford who wants to return to NYC. Joubert tells him it is all going to happen like this.

#178 Johnny Boy on 09.08.16 at 4:04 pm

#176 Smoking Man on 09.08.16 at 3:46 pm

#156 Context on 09.08.16 at 10:50 am
Smoking Man when your in New Orleans for the conference bring copies of Chapter #1 because a few of those dudes have publishing companies and might gamble on your new book. Keep thinking #1 seller with cash flow rolling in with a guest spot on TV as a famous author.
…….

Self publishing. Have made some huge channels via Twitter access to 100 million readers not to mention 100 die hard core fans on GF.
I figure I’ll sell around 1000 copies, which to me is a great achievement.. Considering 7 years ago when I started contributing to the comments section of GF I was completely Illiterate. Mistakes now are when the stupid phone swaps out my words, or in the evening once I’m into the Jack.
…………………………………………………….
Seriously your still illiterate.

That should be “you’re.” Sheesh. — Garth

#179 westcdn on 09.08.16 at 4:28 pm

Go figure. The average and median price of detached house in my neighbourhood have increased 5% YoY here in Calgary. I am sure that renovations count because the houses are 40+ years old. We do get big lots, amenities and a good location.

The guy in my basement has gifted some of his lottery win to his daughter as an early inheritance for a down payment. She has 3 daughters (1-4). She hasn’t worked for since she conceived her 1st daughter and her husband is a minimal wage worker with periods of unemployment. I believe their current income consists of the new family benefit allowance with some EI. They went with a CIBC affiliated mortgage broker and were “preapproved” for I guess a $325,000 mortgage.

The daughter looked hard to find a house suitable for five plus granddad in the basement. She found a house in her area with a large lot and being the same age and size of my place. Her offer of about $395,000 for a 1250 square bi-level was accepted conditional on financing. The house is perfect for them – good neighbourhood, large yard and in great condition. My GITB (guy in the basement) will get a finished walkout 2 bedroom basement suit. If the deal goes through, he will provide daycare and rent. He figures it will allow him to lock and go.

GITB says the “preapproved” is a 5 year fixed at 2.34%. I will be amazed if it goes through. The mortgage broker, bless his heart, will shop the mortgage application if CIBC balks. Meanwhile, my youngest daughter returns to work after a 6 month maturity leave to pay bills. My granddaughter is cute (reminds of my mother) and my latest grandson looks to be big.

I bought some European REIT shares today. I am conscious I have put myself out on the risk tree limb and plan to survive.

#180 salonist on 09.08.16 at 4:35 pm

What do the experts say?

Experts that spoke with Global News say there is no easy fix to the problem of soaring energy rates that have led to roughly 567,000 Ontarians owing more than $172.5 million in unpaid hydro bills.

http://globalnews.ca/news/2928324/ontario-wont-be-able-to-reduce-soaring-energy-costs-anytime-soon-say-experts/

#181 Smoking Man on 09.08.16 at 5:00 pm

#180 salonist on 09.08.16 at 4:35 pm
What do the experts say?

Experts that spoke with Global News say there is no easy fix to the problem of soaring energy rates that have led to roughly 567,000 Ontarians owing more than $172.5 million in unpaid hydro bills.

http://globalnews.ca/news/2928324/ontario-wont-be-able-to-reduce-soaring-energy-costs-anytime-soon-say-experts/
……
In bye election in Scarborough few days ago the libtards lost a riding they had since 1988. Librals will be eviscerated next go round no matter how much pouroging and reshuffling she does.

Wynee is going down.

#182 Context on 09.08.16 at 5:02 pm

#180 salonist:- Those condos in Toronto that are high in the sky are sucking up big hydro bills per square block. On the other hand a traditional residence has options with using the latest solar technology to lesson the long term impact. Then there is the heat pump technology and many others to consider with a step at a time. I prefer a metal roof rather than shingles for example as they too have improved.

#183 Greg on 09.08.16 at 5:22 pm

#38 Andrew Woburn on 09.07.16 at 6:57 pm
Don’t tell Trump.

Since 9/11 –

Annual average number of Americans killed by:

Shot by other Americans – 11,737

Get your facts straight. Most- occur in GUN FREE ZONES like Chicago. If you can’t say ‘no’ you have no freedom. Stalin, Pol Pot, Mao loved a disarmed populace.
http://www.scaruffi.com/politics/dictat.html

#184 maxx on 09.08.16 at 8:30 pm

#53 bigtowne on 09.07.16 at 7:17 pm

“Many a Captain has lost control of the rudder by foolishly not seeing the storm on the radar.”

There is no rudder.

#185 Fish on 09.08.16 at 9:51 pm

RE #153

HI, thanks for asking, but I just thought I would introduced myself to all of the fine clan
Thanks

#186 SitesTree.com on 09.09.16 at 5:30 pm

Looks like stock market got busted today…