The obvious

Stan and Mary are 62 and 58 respectively, live in a paid-for house he figures is worth $1.1 million, have crappy defined-contribution pensions and want desperately to retire. Or quit and find something else. “Got to be more to life that this,” says a guy who’s worked 23 years in the automotive parts business. (She’s clerking for an office full of real estate lawyers, and sees the writing on the wall. “Way less busy now.”)

Like most, they’ve shoveled the bulk of their net worth into the house, have scrawny, malnourished TFSAs and inadequate amounts in their pension plans – maybe $150,000 between them. But no debt. That makes them financial rock stars, compared to their adult kids. (“Boy,” he reflects, “are they ever screwed…”)

They want to sell the house, downsize and tell their bosses to shove it. Here’s the plan: buy a two-bedroom condo for about $650,000, invest the rest and live large. Then they talked to me. Big mistake, I said. Let’s do the math.

So, ditch the house. That’s a no-brainer, since their pensions plus CPP/OAS will hardly support a good retirement lifestyle in the big city they love. Besides, the place needs serious work over the next few years – the basement’s original, the roof sucks, Mary hates the kitchen and the furnace has a bad ‘tude. Property taxes are eight grand a year now and seem to keep rising. It’s all a drag – besides, there’s a big pile of money sitting there doing nothing.

Selling today (as opposed to three months ago) may yield a million, if they’re lucky enough to snare a buyer this summer. After paying 5% commission, that leaves $950,000. So now, downsize to a nice two-bedroom condo, or rent one?

If they purchase, and find something for $650,000, they’ll have to shell out $19,000 in double land transfer tax in the 416 along with the purchase price (because no bank is going to give them a mortgage as they enter retirement). Now there’s $280,000 left.

If that’s placed in a balanced, globally-diversified portfolio of low-cost ETFs with 60% in growth assets (equities and REITs) and 40% in fixed income (corporate bonds and preferreds, mostly), they should expect about 6% after any management fee (figure 1%, tax-deductible). The income generated from that would be $1,400 a month, mostly untaxed since it’s structured as return of capital payments. But, sadly, condo fees ($500), property tax and insurance amount to about $900 a month, leaving just $500 to party with.

Is renting a better option?

The full house proceeds of $950,000 similarly invested would produce (at 6%) about $57,000 a year, or $4,750 per month. Rent for a two-bedder (a nice one) in that hood is $3,000, and comes with no property tax bills, no monthly fees, cheap insurance and no special assessments. So, if the entire rent were paid for out of the investment returns, it would leave $1,750 a month for living, or actually grow the nestegg by more than $20,000 a year.

There’s also a strong argument that S&M would actually have more financial security by not buying – and likely more emotional stability, as well. After all, their investments would pay the rent, add to their wealth, and they’d still have almost $1 million in liquid wealth – accessible any time if their circumstances changed, if health costs materialized or they wanted to travel like upscale bourgeoisie nomads for five years.

And what of the risks involved with both scenarios? Each contain downside. Investment portfolios fluctuate in value month-to-month, and some people worry about that. But over time returns have been consistent. And while a rerun of 2008 is unlikely, even that storm passed relatively quickly for people with this kind of portfolio – a 20% dip for a year, then a strong recovery.

There’s a good argument real estate now carries greater risk. Asset values are at record highs while interest rates sit at record lows. As that relationship changes, property values will probably decline and along with them liquidity. Could Stan and Mary could get out if they needed the cash? A 20% decline (totally possible) would wipe away more than $130,000 in net worth – with none of the loss deductible. Ouch.

Meanwhile condo fees could increase. So could property values. There could be a special assessment to repair a salt-riddled parking garage, install new elevators or replacement windows. All of this would affect the property value, and none of it could they control.

How’s this even a contest?

It isn’t. Buying is emotional. Renting is logical. The real nut these kids now face is selling.

174 comments ↓

#1 yvr2zrh on 06.27.17 at 6:06 pm

First . . . .

(Can’t believe I have proposed such a useless comment)

#2 Penny Henny on 06.27.17 at 6:12 pm

Property taxes are eight grand a year now and seem to keep rising.-GT
///////////////////

8 G’s property tax in 416 and the house is only worth a Mil?
They are getting screwed royally.
My Taxes were about 3700 and even at todays prices I could still probably sold for 900,00

#3 Nicky 9 Doors on 06.27.17 at 6:14 pm

I pass by this house everyday on my way to work:
https://www.remax.ca/on/toronto-real-estate/na-97-holland-park-ave-treb_c3810716-lst/
It went up for sale in early April, and is still on the market despite being a bus ride away from the Bloor line. I have followed the three price adjustments made with great interest.
At first it was listed for 1,088,000.
Then about a month later the owners must have wanted to stir up a bidding war so it was relisted at 960,000.
And now since I’m guessing there was no bidding war they bumped it up to 1.2 million.
… Interesting developments. I wonder how much longer their closing day champagne will be sitting in the fridge for.

#4 Sean on 06.27.17 at 6:18 pm

What’s that, 6 international organizations warning we’re in for a financial crisis soon?

https://betterdwelling.com/canada-hits-two-critical-warning-signs-financial-crisis/

If you’re buying into this right now, you deserve the 30% price drop coming for you.

#5 Nicky 9 Doors on 06.27.17 at 6:18 pm

oops. Here’s an amendment to my first comment. Looks like the house was taken off the market a week ago.
this is it if anyone is interested:
https://www.zolo.ca/toronto-real-estate/97-holland-park-avenue#InputFullname

#6 Lumpia on 06.27.17 at 6:20 pm

Liquid and being mobile is way better for these oldies. What are they thinking? Smh

#7 age before beauty on 06.27.17 at 6:21 pm

#164 Lahdeedah on 06.27.17 at 1:51 pm Not gonna lie, husband and I, instead of looking to upgrade to a ridiculously overpriced house we can’t afford right now thanks to the 3-yr boom, from a 2012 condo purchase, we are now seriously considering selling it and moving into a rental for $2,500/mo. (Don’t tell the greater fools!) By doing that, we’ll erase all our debt, and stash the remaining cash into an investment portfolio, a la Garth, and wait for the housing market to level out. In the meantime, we’ll have the space to raise a family without feeling overwhelmed.

*************************************
Good idea, imho, you will relieve a lot of stress. But be forewarned that having those kinds of large & liquid funds in your account is Addicting!!

btw, I suspect this is possibly similar to what some strapped Calgary folks are juggling. This spring, I noticed a number of people (families with very young kids) moving ‘laterally’ as in to a different (but definitely not better) hood or home.

At first I was puzzled, why go through a stressful move for basically no ‘gain’….? Then it occurred to me these folks may be floating Helocs/debt they can’t service or need to unlock equity as they are not liquid enough to stay afloat. Just a theory.

#8 ILoveCharts on 06.27.17 at 6:23 pm

1) “because no bank is going to give them a mortgage as they enter retirement”
As long as they apply for the mortgage before they quit, I’m sure they will be fine. I got a mortgage last year when I was unemployed! I can send you papers to prove it.

2) Houses are at records highs.. but so are the markets. Cheap money has inflated everything.

2)

#9 Nothing is selling on 06.27.17 at 6:24 pm

People who say my house is probably worth X should try and sell it and see NO ONE is buying. Without FRAUD houses wont be able to sell. Mortgage fraud only reason why prices went so high. Now speculators want out so who will buy? Only a sucker would in this crashing housing market.

#10 Oakville stinks on 06.27.17 at 6:30 pm

Living or buying a condo in Toronto is not only harmful financially but feom a health standpoint as well since most are located beside or beneath a cell tower shooting radiation straight at them 24/7.

Look it up for yourself.

#11 HoweStreet.com on 06.27.17 at 6:32 pm

Ross Kay on HoweStreet.com Radio:
Pay Down Mortgage Quickly or Keep the Cash?
Flawed BC real estate laws favour foreign buyers at tax assessment time.

http://www.howestreet.com/2017/06/26/pay-down-mortgage-quickly-or-keep-the-cash/

#12 MF on 06.27.17 at 6:33 pm

Yes there are risks to both strategies.

Rents are not stable and can increase. Also, you miss out on any capital gains the owner may get if the condo appreciates in value. This has been the story for the past 15 years in the GTA and, yes it’s been frustrating.

MF

Capital gains can turn into capital losses. Why would you even contemplate that in retirement? — Garth

#13 dosouth on 06.27.17 at 6:36 pm

Contrary to your noted opinion Garth, banks do enjoy chasing the mortgage of us retireds and garnering great rates.

It comes from using 5 different banks throughout our lifetime and letting them compete for our business over that time. They’re still competing. Maybe an exception but in talking to western friends here not a problem with them either…..

#14 Mark on 06.27.17 at 6:40 pm

“2) Houses are at records highs.. but so are the markets. Cheap money has inflated everything.”

Yet the emerging markets, Canada, and Europe are still beneath levels first seen 9 years ago. So its pretty hard to argue that ‘cheap money’ has inflated everything. Just underweight the stuff that’s done exceptionally well over the past number of years of ‘cheap money’ and you’ll do fine. That would primarily mean long-term bonds and US stocks.

#15 Hans on 06.27.17 at 6:47 pm

#94 acdel on 06.26.17 at 12:46 am

#79 Smoking Man

Umm, stop applying for jobs and work for yourself!!!

After all, are you not the one that has mentioned on numerous occasions on how much you made on FOREX, or was that the J.D. talking?

I am such an idiot for replying to this post!!
—————–
Just ignore.
All his made up stories are just for attention.

#16 I'M NOT POLOZ on 06.27.17 at 6:48 pm

Bank of Canada governors Poloz & Wilkins are suffering from deflation because the CPI is at 1.3%. Seriously? Are they measuring clearance sales at Saks Fifth Ave for price differences?

Good news is that the Loonie is at 76 cents, but not for long…Poloz wants a 50-cent Loonie to boost exports. Poloz only talked up the Loonie because Summer vacation is coming and Poloz & Wilkins need their summer tan in a foreign luxury getaway, which is priced in $US or $Euros.

When Winter arrives, Poloz will be clamping down on the Loonie value while Morneau wants to visit you where you live to work for free.

#17 TortyPapa on 06.27.17 at 6:48 pm

RE across the board is DOWN 10% in 1 month (as of June 24th)!! Why is this not making any news in Vancouver??? Honestly that is crazy.

https://www.zolo.ca/vancouver-real-estate/trends

#18 InvestorsFriend on 06.27.17 at 6:49 pm

Who Shoveled Their Net Worth Into a House?

Like most, they’ve shoveled the bulk of their net worth into the house, have scrawny, malnourished TFSAs and inadequate amounts in their pension plans – maybe $150,000 between them. But no debt. That makes them financial rock stars, compared to their adult kids. (“Boy,” he reflects, “are they ever screwed…”)

****************************************
No doubt the bulk of their net worth is in the $1.1 million house. Nice imagery with the shoveling of net worth into the house. Another fine article.

I suspect thought that not a lot of shoveling ever happened. Most or much of this house net worth appeared from thin air in most cases? Sure they paid the mortgage but did they originally buy for like $200k?

They got lucky. Now, time to cash in the chips.

As for new highly mortgaged buyers today, they have indeed signed up for 25 years of hard shoveling labor.

#19 Mike in Calgary on 06.27.17 at 6:51 pm

Two possible issues with renting:

1. Rent could get jacked up (outside Ontario I guess)
2. Landlord to decide to not renew lease and pitch you out.

#20 JCM on 06.27.17 at 6:52 pm

Similar houses to 97 Holland Park in that neighbourhood seem to be selling for around $800k (the few that are actually selling — Oakwood-Vaughan is ice cold).

Asking $1.2M was probably some sort of performance art.

#21 Freedumb on 06.27.17 at 6:52 pm

#1 yvr2zrh on 06.27.17 at 6:06 pm

First . . . .

(Can’t believe I have proposed such a useless comment)

__________________________________________

I find your post inspirational!

#22 Guy in Calgary on 06.27.17 at 6:58 pm

To offer a contrarian point of view, this goes to show that with home ownership, individuals with poor savings habits can just buy a house, work for 25-30 years to pay it off, then liquidate it. Invest the proceeds and enjoy the golden years. Of course you want to avoid purchasing at these levels but as a long term hold, for some people paying down the mortgage beats paying rent. This is not ideal nor a superior strategy, but it can work for some people. The lack of liquidity would scare me but hey, to each their own.

You cannot likely not expect this type of appreciation going forward but you can at least afford to live off more then cat food.

It worked in a certain economic context. Those days seem to be ending. — Garth

#23 TortyPapa on 06.27.17 at 7:00 pm

Down 13% in Burnaby the last month!!! Crazy!!

https://www.zolo.ca/burnaby-real-estate/trends

#24 lions bay on 06.27.17 at 7:06 pm

Visiting Vancouver this summer. Had some free time so went to a open house of cheapest listed home in Lions Bay. It is listed at 1.3 million. House was in ok condition but needs TLC. The views from the house were just amazing, no words to describe it.
The realtor was a very nice old lady and she honestly explained that the sales are very low this summer but all houses in her experience so far are getting multiple offers. That house itself had 6 offers and all over asking.
I have been talking to people I know here and they just have no idea of interest rate going up or that NDP/Green thing etc.. It feels like they are literally living in a bubble.. Not just realstate bubble but something feels like they are detached from reality in some sense.

#25 Pepito on 06.27.17 at 7:11 pm

“And while a rerun of 2008 is unlikely…”
______________

So, from ” never in your lifetime” to “unlikely” now. But this time it might be worse. The feds are out of ammo worldwide. That 60/40 might just take a tad longer to come back, maybe a lot longer.

#26 crowdedelevatorfartz on 06.27.17 at 7:11 pm

While I agree that selling the house and renting is definitely the way to go….
$47k per year on $950K invested?
A little optimistic these days dont you think?
Or is that a long term average?

#27 valuator on 06.27.17 at 7:11 pm

Nothing lowers the value of your house like the attempt to sell it.

#28 Ronaldo on 06.27.17 at 7:22 pm

It would appear that Stan and Mary could be in a position to collect the GIS once they turn 65 if the income from the $280,000 ($1400/mo.) is not considered income but rather return of capital and gains inside their TFSA (maxed out) are not considered when determining elligibilty for the GIS. In addition, the GIS is not taxable. I’d certainly consider that if I was in their shoes. Free money.

#29 Please Nothing is Actually Selling These Days on 06.27.17 at 7:24 pm

Those 2 retired folk missed the bus. I live in Toronto where taxes they are paying seem about right and NOTHING is selling. Everyday, fresh new 4 sale signs, with ridiculous prices that sit and sit. If you didn’t sell in March you are toast! Looks like your friends will have to continue working! This ship has sailed.

#30 Vancouver is CRASHING like Toronto on 06.27.17 at 7:25 pm

Vancouver RE is CRASHINGF HARD!!!! like Toronto!

Wow what a CRASH

TortyPapa on 06.27.17 at 6:48 pm RE across the board is DOWN 10% in 1 month (as of June 24th)!! Why is this not making any news in Vancouver??? Honestly that is crazy. https://www.zolo.ca/vancouver-real-estate/trends

#31 ELIA5 on 06.27.17 at 7:27 pm

“The income generated from that would be $1,400 a month…” — That number includes increases in asset prices too, right? Not just dividends. Something is telling me of course it does but I’m in no condition to work the math.

Total return. — Garth

#32 Nonplused on 06.27.17 at 7:28 pm

“Buying is emotional. Renting is logical.” -Garth

This comment struck me for some reason today. In a “free” market, both renting and buying should be competitive, with landlords earning a decent return for hosting shorter term tenants or or those who present a credit risk.

In the old days, when the housing market made sense, it made sense to own because you din’t have to pay the landlord’s premium. The mortgage, taxes, upkeep, and such were less than the cost of rent because the landlord charged a premium to those who could not buy for whatever reason. Either that or owning offered intangible benefits like a bigger house or bigger yard.

Now that’s all screwed up because of the housing bubble. Everyone is putting a line in the calculation showing capital gains, even landlords which allows them to lower the rent they need to make the project make sense.

This is exactly the problem as in the gold market, where people look at it and say “carrying costs are 2% per year for fees and storage, but it will go up X percent per year because it’s a sure thing.

The fact that the rent vs. owning equation is so far out of balance has to indicate the market has been manipulated. In a functioning market, one should be indifferent excepting for the time of use function. It should operate like renting a power tool, you buy it if you need it long term otherwise you rent.

#33 Sellers and Potential Sellers Need to Wake Up and Smell the Coffee on 06.27.17 at 7:30 pm

GTA real estate market has literally seized up. I live in High Park / Bloor Area and nothing has sold recently. As I was driving down my tree lined streets passing open houses, all the lights were on, but nobody was there. This market is going down like cement over a balcony. . .quick fall and then SMASH. The party is over people. Anyone who says now, my house could sell for. . .I just shake my head. Wake up, real estate Armageddon is here. I hope those late to the party are good at coping with years of a hangover.

#34 Smoking Man on 06.27.17 at 7:31 pm

Great social media, networking tool for small biz.

https://www.alignable.com/

#35 Halton / North Milton Dead. on 06.27.17 at 7:35 pm

Looks like there was a “Do Not Resuscitate” order given for the Halton / North Milton real estate area of the GTA. I feel sorry for whoever bought late 2016 early 2017, they are in for a world of hurt as there house equity evaporates every single day.

#36 La la la on 06.27.17 at 7:41 pm

That’s the fat lady singing in the GTA.

#37 powder_hound86 on 06.27.17 at 7:42 pm

One critical flaw in your thinking Garth is you assume returns are assured. They are not. These people will be in a real bind if they follow your advice and there is a great downturn in financial markets that doesn’t recover quickly.

>It worked in a certain economic context. Those days seem to be ending. — Garth

Yes those days are ending, with them the days of guaranteed returns by simply index investing may also be ending.

A balanced portfolio is not simply index investing. Moreover anyone with that kind of money to invest would have an advisor to add risk-protection, right? — Garth

#38 Asterix1 on 06.27.17 at 7:48 pm

They should definitely sell their house and rent. They could always purchase a condo or house later if they really wanted it.

Prices have taken a nice drop since their all time highs obtained a few months ago. (from Zolo numbers)

Aurora = Average -22%, Median -21%
King= -41%, -36%
Markham= -20%, -19%
Mississauga= -12%, -12%
Newmarket= -24%, -28%
Oakville = -18%, -19%
Richmond Hill= -22%, -27%
Toronto= -10%, -10%
Vaughan= -23%, -20%

Even after these drops, the pricing of a property in the GTA is still completely ridiculous and unsustainable. I could easily see another 30% drop in the city of Toronto.

For other towns around, who knows how bad it will get! “Location, location, location” and these places don’t have it.

#39 Wierd on 06.27.17 at 7:55 pm

Cat caught another baby rabbit today, only this time managed to kill it before we intervened. We rescued the first one (I did not know they could scream, but they can).

Made me think, haven’t seen very many wasps, any bees, not too many mosquitoes either this year, and the cat has caught no mice. She usually brings us one (or part of one) every other day. We have a couple of trees that are normally a buzzing with bees when they are in bloom, this year the bloom came and went with hardly a bee. I have my usual wasp traps out but the only thing in them is flies.

Weird.

This place isn’t too far away from here as the wind blows.

http://www.cbc.ca/news/canada/british-columbia/take-cover-emergency-declared-at-hanford-nuclear-reservation-in-washington-state-1.4106507

Probably nothing though, I am sure if nothing else the mice and wasps will return. Bees are dying off all over the place but that is probably pesticides.

#40 WUL on 06.27.17 at 7:58 pm

I saw an update today on the rebuild in Fort McMurray. The Horse River Wildfire of 14 months ago destroyed 1900 buildings or 2400 residences. 72 families have moved into rebuilt homes and 820 development permits have been issued. Slow and painful like my jogging.

You made a good case today, Turner. Thanks.

#41 dakkie on 06.27.17 at 7:58 pm

Canada is WAY More Expensive Than the U.S. The Economic CRISIS Here Will be MUCH WORSE!

http://investmentwatchblog.com/canada-is-way-more-expensive-than-the-u-s-the-economic-crisis-here-will-be-much-worse/

#42 Newcomer on 06.27.17 at 8:07 pm

@#19 Mike in Calgary

Two possible issues with renting:
1. Rent could get jacked up (outside Ontario I guess)
2. Landlord to decide to not renew lease and pitch you out.

————-

The first one is a bit like saying that prices at your local grocery store could get jacked up, and the second one is like saying that the grocery store might close. Those things may be true, but would you buy a farm and grow your own food to hedge against it?

#43 Doug in London on 06.27.17 at 8:25 pm

So, if they don’t have much money, why didn’t they sell (as in cash in their winning lottery ticket) when prices were higher and there were less listings?

#44 Rargary on 06.27.17 at 8:25 pm

When condo fees and property tax go up so does the rent

Rent controls. — Garth

#45 Parking Ticket on 06.27.17 at 8:28 pm

Private parking lot at building that is exclusively occupied by doctors and lawyers.

No change, quick visit to doc’s office and waiting for prescription.

Parking ticket $65.00 with a private parking operator in “central” White Rock, BC.

Most I’ve ever paid in Munich was 20 Euro and I parked all day near a great museum.

That is Canada.

#46 I thinks I know something on 06.27.17 at 8:28 pm

“And while a rerun of 2008 is unlikely, even that storm passed relatively quickly for people with this kind of portfolio – a 20% dip for a year, then a strong recovery.” – Garth

———————————————————

Yes, but that was a debt fueled recovery for the finacialarkets. ZIRP and QE saved the day (or maybe just delayed the inevitable). Can the same happen again?

#47 S.Bby on 06.27.17 at 8:31 pm

#24 Lions Bay
Was she talking about last year? Because that’s not the case now. I watch Lions Bay out of mild interest as I know people living there and I see the same houses listed week after week on MLS. Lions Bay gets hit with some of the worst winter weather and is well known for power outages and flooding mountainside creeks. No thank you.

#48 I thinks I know something on 06.27.17 at 8:32 pm

Maybe Stan and Mary should consider a reverse mortgage. If they could get a big chunk of money it might make sense.

It never makes sense. — Garth

#49 Renting on 06.27.17 at 8:35 pm

Not for me . No can do.

No one is kicking me out of a place to live .

I’ll own the house AND a portfolio .

Diversified :)

#50 S.Bby on 06.27.17 at 8:38 pm

#23 TortyPapa
Down 13% in Burnaby the last month!!! Crazy!!

Yes it is becoming noticeable in Burnaby as asking prices are softening again and not much is selling. Prices seemed to take a breather earlier this year for a month or two and the market perked up a bit, but it now looks like it is dropping more again. Many houses have been on sale since last winter and it’s funny to see the realtor ads with pictures of snow on the ground in late June.

#51 boonerator on 06.27.17 at 8:39 pm

Renting is the no brainer all right and for a reason that needs emphasis.
Seniors with a guaranteed and sufficient income stream are a very desirable demographic for landlords.
Quiet parties, no bounced cheques and long term tenancy (if the landlord keeps the place up).

We sold in 2014 and got our annual rent increase at the townhouse complex in Victoria.
From the notice
“Provincial Rent increase for 2017 is 3.7% which is $61 per month”
“Your rent increase for 2017 is $45 per month”.

Last year was a similar story, less than the maximum allowed. And we got a new deck and much better fence around the yard.

So, yes, there are landlords who do not gouge for maximum profit. These guys seem to consider low turnover worth enough money to forsake short term profit.

#52 mathman on 06.27.17 at 8:42 pm

In the west end of Toronto – nice places with finished basements and parking are still moving…at list. other places that are semi-shit are sitting.

The flight to quality has begun – no longer are people paying silly prices for crappy semi’s. First sign that rationale behaviour has come back.

on another note along my theme of aspirational purchases and us being county of pretend rich people. I was at my friends cottage this weekend, his father is probably worth $50 Mil. Self made. Drives an BMW X5, which is probably 2% of his annual net income.

another “guest” drove up in a nice C Class AMG. He is my age after speaking with him probably makes 60k and his car is 150% of his annual net income. No secret why a 1% exists, people are sheep.

#53 BlogDog123 on 06.27.17 at 8:47 pm

How can we rent? What will we say at those dinner parties with our house-owning friends? They won’t believe us. They’ll think we’re poor losers who sold too early.

#54 nick on 06.27.17 at 8:51 pm

Those posting zolo stats need to realize that sales type mix is a huge factor in the average price. You can see the change in mix on the graph.

#55 WUL on 06.27.17 at 8:51 pm

#39 Weird:

A rabbit screaming. When I was a kid, we had a coyote call to assist in hunting them. Made by Herter’s I think. It imitated the death scream of a rabbit. Coyotes like dead rabbits. A Hinterland Moment.

#56 People are Strange on 06.27.17 at 9:02 pm

The market reeks of speculation. That’s one thing I disagree with Garth. The average person (or couple) could not have been approved for mortgages to cover these prices. It could be US or overseas but I think ‘out of country’ speculation accounted for at least 30-40%. But what do I know.

I’ve made good money on a few transactions over the years but the total cost of ownership was within the average Joe’s wheelhouse. Not now! This is nuts!

#57 Wrk.dover on 06.27.17 at 9:06 pm

Stan selling or keeping, either way he had best be climbing the ladder on these long evenings and replacing that roof bundle by bundle. He is not too old, but probably too entitled to sweat that tax free equity.

Looking at his numbers (which he obviously has never done) is as depressing as his future, especially since he forgot he wanted to sell until the peak was in the rear view mirror.

Some day a refugee like him will occupy my guest house, but not until they realize they have to exit Toronto to live much better on much less. He did admit his life sucks up to now, there is a start.

#58 yorkville renter on 06.27.17 at 9:09 pm

I live in arguably a very tony 416 neighbourhood, in a large condo with a huge terrace and I rent for many hundreds less than $3,000. renting is the easy answer here

#59 People are Strange on 06.27.17 at 9:20 pm

The one positive thing that’s come out of this is that people are actually fixing up some of these homes in the hammer. It’s been a long time coming!

#60 Freedumb on 06.27.17 at 9:25 pm

#15 Hans on 06.27.17 at 6:47 pm

#94 acdel on 06.26.17 at 12:46 am

#79 Smoking Man

Umm, stop applying for jobs and work for yourself!!!

After all, are you not the one that has mentioned on numerous occasions on how much you made on FOREX, or was that the J.D. talking?

I am such an idiot for replying to this post!!
—————–
Just ignore.
All his made up stories are just for attention.

_-____—-

All my family says I look like a movie star. True.

#61 Linda on 06.27.17 at 9:32 pm

The problem with selling a house is that you may not get the price you expect to receive. Plus you then have to clean up, clear out & put the place on the market in a shape that will attract (you hope) a greater fool. Then you have to find new digs if you do manage to sell that puppy & oddly enough, people who lived with ‘x’ problem for years/decades do not want to deal with the same problem when they rent – further, they are much more picky when picking out new digs – to the point where paradise itself is not quite good enough. Not to mention dealing with all the stuff one has accumulated over the years.

Add in the undeniable fact that literally thousands of people are hoping their house will fund their retirement. What happens when all those homes hit the market at roughly the same time? Better to think ahead & ensure your house isn’t your main source of retirement income if & when you do retire.

#62 TalkingPie on 06.27.17 at 9:53 pm

All this talk of fear of getting evicted really makes me appreciate the tenancy laws in the country’s second largest city. It’s basically impossible to evict a good tenant (the sole exception being if the landlord will use the lodging to house his personal family once the lease term is up – even a property sale isn’t an accepted reason), and rent increases are capped around 3%. In 10 years I haven’t gotten a bigger increase than about $30, and I currently live in a new build in a rapidly developing neighbourhood.

The roads are crappy, taxes high, and you have to adapt to the funny-talk, but otherwise living here is pretty great: a car is optional, rentals are cheap and plentiful, culture is great, and a decent house within 45 minutes’ commute of the city is less than $400k.

#63 The time is now on 06.27.17 at 10:07 pm

#61

FYI, we’re a decade away from what you speak of.
http://www12.statcan.gc.ca/census-recensement/2016/dp-pd/pyramid/pyramid.cfm?type=2&geo1=01&geo2=01

It will be quite the period in 10 years, when all the boomers sell at once. No one will come away unscathed. Millenials (in their mid-30’s) will be an unhappy generation, and so will the boomers. Gen Z will clean up!… till they realise they have to live with their Millenial Parents hahahahahahaha!

#64 NoName on 06.27.17 at 10:34 pm

interesting read

A German email provider has closed the account of a hacker behind the new ransomware outbreak, meaning victims can’t get decryption keys.

https://motherboard.vice.com/en_us/article/new8xw/hacker-behind-massive-ransomware-outbreak-cant-get-emails-from-victims-who-paid

#65 n1tro on 06.27.17 at 10:35 pm

“And while a rerun of 2008 is unlikely, even that storm passed relatively quickly for people with this kind of portfolio – a 20% dip for a year, then a strong recovery.” – Garth
———————————————————
Yes, but that was a debt fueled recovery for the finacialarkets. ZIRP and QE saved the day (or maybe just delayed the inevitable). Can the same happen again?

———————————————————
Yes. As stated yesterday, CBs don’t want to destroy the economies in which they are supposedly “helping”. If the “unlikely” event happens, we will see the “mother of all QE” (MOAQe new term?) which bullion lickers are hoping for.

#66 NoName on 06.27.17 at 10:41 pm

Paywall
interesting read

1984, far east current day

an Liping pumped her bike across a busy street, racing to beat a crossing light before it turned red. She didn’t make it. Immediately, her face popped up on two video screens above the street. “Jaywalkers will be captured using facial-recognition technology,” the screens said.

https://www.wsj.com/articles/the-all-seeing-surveillance-state-feared-in-the-west-is-a-reality-in-china-1498493020

#67 AnonKW on 06.27.17 at 10:43 pm

A loaf of bread 25 franc, a daily laborer’s wage 10 franc, the french revolution. A teacher’s salary 10000 shillings, a modest lunch 25000 shillings, a failed state.

A single detached house 2 mil, average annual salary 80k, …. When you need a doctor/lawyer income to live in a house in a city Something gotta give!!!

#68 crowdedelevatorfartz on 06.27.17 at 10:50 pm

@#39 weird
“Made me think, haven’t seen very many wasps, any bees, not too many mosquitoes either this year,….”
*******

You’re not weird , You’re observant.
Worse winter and Spring in years in BC’s lowermainland.
Its almost July and I’m waiting for Spring flower to bloom. I’m watching Seagulls nest building.
Frogs are still croaking at night for the mating season.
This Spring/ Summer this year is late late late.
Hopefully we have a warm Fall or lotsa late born animals are gonna “croak”

#69 Jeff on 06.27.17 at 10:53 pm

Not sure if it would make sense for these folks or not but maybe they could keep the house, sink some cash into the basement and rent that out to bring in some money… Assuming this couple lives another 25-30 years it may not be a bad deal for them.
Lots of people going to be looking for basement apts very soon, and rents will be going up as a result of people not wanting to own.

#70 Bottoms_Up on 06.27.17 at 11:08 pm

A better idea than renting is move to a different city. They could buy a decent townhouse in Ottawa for $200,000. $300/month to cover taxes and condo fees (outdoor maintenance covered). Leaves them $750,000 to invest, churning out $35,000+ per year in cash. They could actually both retire, put food on the table.

#71 NoName on 06.27.17 at 11:14 pm

read !

https://www.washingtonpost.com/graphics/2017/world/national-security/obama-putin-election-hacking/?tid=sm_tw&utm_term=.07f4b171253b

#72 Bottoms_Up on 06.27.17 at 11:14 pm

#63 The time is now on 06.27.17 at 10:07 pm
——————–
I’m not so sure about that. While anecdotal, all of my family members in 80’s held on to their houses as long as they could. I have a neighbour who is 70 and no signs of wanting to leave the family home.

#73 NoName on 06.27.17 at 11:19 pm

Remember that video that i posted somr time ago china peak bike share, guess what its here (us).


LimeBike, a San Mateo, Calif., upstart backed by Andreessen Horowitz, adapted China’s dockless bike-sharing model for U.S. consumers, Ms. Chan said at The Wall Street Journal’s D. Live Asia conference Friday. The company’s smartphone-activated bicycles, which use designated public spaces for parking instead of docking stations, were first rolled out by Beijing-based Ofo Inc. and Beijing Mobike Technology Co.

Also, Apple Inc. recently added payment services to its iMessage chat service, taking a page from Tencent’s playbook, Ms. Chan said.

http://www.foxbusiness.com/features/2017/06/09/u-s-tech-companies-now-copycats-chinese-peers-andreessen-horowitz-partner-says.html

#74 neo on 06.27.17 at 11:21 pm

#35 Halton / North Milton Dead. on 06.27.17 at 7:35 pm

That may be true for everything except higher priced cookie cutters in Milton 3,500 to 5,000 sq/ft total living space with some type of premium lot. An all time record was made in the middle of this downturn of a house on Sales Court of $1,700,000. It was listed for 1,750,000. That is a record for a subdivision home in Milton by a country mile. There is still greater fools out there.

#75 G1 on 06.27.17 at 11:44 pm

Given that you are probably right in predicting a housing downturn due to overvaluation and excessive debt it’s not wise to predict investing in stocks that are also overvalued and have been propped up by central bank money printing and buying on margin which is the how people over leverage their investments and are forced to sell when market tanks and it will given that Trump will be the perfect goat to blame for the crash. The diversified portfolio at this time should include at least a 30 percent portion tied to gold and silver that are the most undervalued assets and have stood the test of time. If you recommend stocks now is the time to recommend solid gold miners with low AISC, great management and growing production. These will be the true winners when the FED reverses course as they will need to cut rates and not raise them when the next recession hits. Paper currencies are a fraud as governments always take the easy way out and try to inflate debt away which is the reason that all paper currencies in the past have failed and in the end we will need to go back to some form of a gold standard but at that time gold will be at least $5,000 an ounce so now is the time to buy it and treat it as an insurance policy.

Gold – down 30% in eight years. Great choice, right. — Garth

#76 A place to call home on 06.28.17 at 12:00 am

Thanks everyone for your comments and insight to my comment yesterday. Very helpful to get some outside perspective.

#77 Newcomer on 06.28.17 at 12:20 am

@#69 Jeff on 06.27.17 at 10:53 pm

Lots of people going to be looking for basement apts very soon, and rents will be going up as a result of people not wanting to own.
——————-

As it happens, when people don’t want to own, the unsold houses get rented out and rents go down. Check out rents in Calgary for an example.

#78 TWO FINGERS WATSON on 06.28.17 at 12:24 am

#67 AnonKW on 06.27.17 at 10:43 pm
A loaf of bread 25 franc, a daily laborer’s wage 10 franc, the french revolution. A teacher’s salary 10000 shillings, a modest lunch 25000 shillings, a failed state.

A single detached house 2 mil, average annual salary 80k, …. When you need a doctor/lawyer income to live in a house in a city Something gotta give!!!
-–————————————–
Real estate is no longer local, it is global thanks to the Internet. The word is out, no capital gains tax, low interest rates, easy financing, anyone can buy a house and flip it for tax free gains. The locals residents will be priced out forever unless the whole system changes.If you doubt the influence of foreign capital you should spend a few days or a week walking/driving around Vancouver and suburbs.

#79 Fortune500 on 06.28.17 at 12:25 am

I wonder how many Millennials working in automotive parts and as clerks at lawyers offices will be sitting on the future equivalent of $1.1. million homes when it comes time for them to retire …

#80 Government Science Thought Police on 06.28.17 at 12:46 am

#68 crowdedelevatorfartz

Spring is delayed this year because of global warming due to trace additions of CO2 to the atmosphere, and if you don’t believe it you are a denier.

There are no sun cycles, only global warming.
There are no natural weather events, only global warming.
There is no sea ice, only global warming.
There are no polar bears, only global warming.
There is no social justice because of global warming.
Nevada and Arizona use to be temperate until global warming.
Flooding is because of global warming.
Glaciers have been retreating for 200 years because of global warming.
High snow packs are because of global warming.
Al Gore needs a private jet and a 30,000 sqft house jet to combat global warming.

All of this can be solved if you pay so much tax that you can’t heat your house or drive your car. We, the GSTP (Global Science Thought Police), say so. We still get to heat our houses and drive our cars because we are combating global warming.

#81 Joe2.0 on 06.28.17 at 1:38 am

Lionsbay
Pass
Lived there for 8 years.
Bizarre community, nannys spend more time in the houses then the wanna be but not quite West Van wanna be owners.

Good for grow ops though as the police are an hour away if your lucky.
Dark, no stores near by or restaurants or food shopping and Inconvenient road closures due to weather, floods and accidents.
Passss

#82 Steve French on 06.28.17 at 2:36 am

https://www.breakthroughonline.org.au/disasteralley

“Australians could live in an Asian region with 150 million climate change refugees this century…. on the present path of climate warming, the consequences will escalate to such a level of disruption and conflict that “outright chaos” may result, and militarised solutions could play little, if any, role compared to the scale of the problem.”

“Australia’s political, bureaucratic and corporate leaders are abrogating their responsibilities to safeguard the people and their future well-being. They are ill-prepared for the real risks of climate change at home and in the region.”

“The risks [of climate change] are either not understood or wilfully ignored across the public and private sectors, with very few exceptions.”

—————

#83 YVR RE down in price but condos seem to do good on 06.28.17 at 3:00 am

Not a Realtor here.

My Realty Check shows almost all of YVR RE down in listing price save Langley (+$5.4K) and Abbotsford (+$16K).

Overall price drops to price increases about 2:1, respectively (down 1216, up 564 properties).

Average list price drop is -$61K.

When you examine “Multiple Change Properties”, the price increases are nearly all Science Fiction list prices by the Realtors, typically well above e-ValueBC assessments.

They are basically and artificially pumping the market to show price increases until reality sets in, still 2:1 down.

From Zolo you can see sales mix skewed to Condos in Surrey for example and show Condo price increases but in general people buying cheaper and in outlying areas.

Seems like the appetite for overpriced RE and FOMO in YVR has come to an end – for some time now.

As if financially, buyers are all tapped out. Not a good sign for YVR RE and the Financial Sector.

#84 Market Price not what you think it is worth... on 06.28.17 at 3:04 am

Agree with another Commentor that your house is worth what the market will pay and NOT what you think it is worth.

If all that has been said here over the past month is true about 416 RE et. al., then our Blog protagonists are in trouble.

Lucky if they sell and unlikely they will get what they think their house is worth.

Case in point about putting all your eggs in 1 basket, RE. Not liquid and hard to dump in a down market, if you can at all.

I wish Stan and Mary the best of luck but I believe their calculations are a fool’s errand.

#85 Freedom First on 06.28.17 at 3:41 am

S&M have quality problems. Keep it that way and listen to Garth.

Any fears that S&M may have are imaginary.

I know people with far less than S&M living frugal lives who are happy and fearless. And I also know people who
have far more than S&M who are not happy and live in fear.

Also, and I know this as a fact, it’s great to be me.

Freedom First
Master of Freedomonics

#86 I-DONT on 06.28.17 at 4:44 am

Vancouver RE is CRASHINGF HARD!!!! like Toronto!

Wow what a CRASH

TortyPapa on 06.27.17 at 6:48 pm RE across the board is DOWN 10% in 1 month (as of June 24th)!! Why is this not making any news in Vancouver??? Honestly that is crazy. https://www.zolo.ca/vancouver-real-estate/trends

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

Because the CREA has been paying the News companies and forking tons of $$$ to them for the past 10 years.
To spread the Real Estate Propaganda to keep suckers horny to buy.

Once the cash dries up then its no holds bar. But for now Crea is still trying to keep the flickering lights on…..

#87 Rook on 06.28.17 at 5:40 am

Garth,
Have you ever been kicking out of a rental place you have been trying to make a home? I have twice in Victoria in 2 years.
Renting is quite emotional as well.
Not saying I disagree with your analysis of that couples financials. I disagree though how you never mention downsides to renting.

#88 neo on 06.28.17 at 6:11 am

#54 nick on 06.27.17 at 8:51 pm
Those posting zolo stats need to realize that sales type mix is a huge factor in the average price. You can see the change in mix on the graph.

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

Sales mix works both ways. Milton for example bottomed out at $739,000 average prices a couple weeks ago. It is back up to $763,000 but that has mostly to do with sales mix because most of the houses sold the past week have been detached homes with very few semis/towns. Also, sales of estate homes in rural Milton skew the average as there was a $2.6 and $1.9 million dollar sales this week. That said, even with the multiple homes getting just over a million dollars this week. Those same homes were fetching $1.2 to $1.3 million 6 weeks ago so the trend is still way down.

#89 NoName on 06.28.17 at 6:44 am

Interesting read

http://uk.mobile.reuters.com/article/idUKKBN19J0S7?il=0

#90 Mark on 06.28.17 at 6:46 am

So how far is this CAD$ rally (in USD$) going to continue? At this point, rate hikes are most likely completely off the table. Could we see another 5 cents and put rate cuts on the table due to deflation thus induced? How underwater is Smoking Man at this point on his “sell USD$, buy CAD$” trade that he was telling us to make a few weeks ago?

#91 Shawn on 06.28.17 at 7:46 am

Imagine it’s the year 2025.

Will the price of oil be closer to $80/bbl or $40/bbl?

Hard to say…

#92 Grey Dog on 06.28.17 at 7:46 am

Garth, maybe this would be the time to write a paragraph or two about the compounding nightmare that a reverse mortgages is; the commercials on TV make it look so easy, but I have known little old ladies that lived to regret this decision.

#93 Pepito on 06.28.17 at 7:49 am

ETF investing has been around about 20 years. It is now probably over a 2 trillion $ trade. In this time, the market has had 2 serious crashes of around 50% both followed by heavy CB intervention via easy money policy with the last intervention lasting close to a decade. The size of the downturns and the consequent CB interventions have been unprecedented in history.

At this point in time, diversified ETF portfolios are generally thought by may in the financial industry to be a godsend. Low maintenance, attractive fees, reliable 6% returns and bullet proof. Buy the dip, rebalance and forgetaboutit. Sounds good. Too good, in fact. And you know what they say about that.

Can investors depend on ETF based diversified portfolios to continue to provide such returns and low risk into the future? Only time will tell, but I wouldn’t bet on it.

#94 Here's The Deal on 06.28.17 at 7:56 am

Here’s the deal:

No matter how you slice it, these two people are not financially ready for retirement.

They don’t have enough.

They need a minimum of 10 more years of working and SAVING EVERY POSSIBLE CENT.

In the meantime, they need to educate themselves on how to live simply and frugally.

And forget about staying in the GTA during the retirement years.

#95 James on 06.28.17 at 7:56 am

been reading this blog off and on for a couple of years

Still waiting to see the canadian real estate crash.

Poor blind believers.

No crash is likely. But a correction is a certainty. For those with debt, it’s the same thing. — Garth

#96 TurnerNation on 06.28.17 at 8:25 am

#52 mathman – here on the King St. West party strip in TO I’ve never seen so many new Mercedes – and their AMG models (a barking exhaust note follows).
Looking in side all young people driving.

Busy day planned. Morning will be some Cultural Appropriation. The pm will involve some short of shaming – haven’t decided which, maybe Portfolio Shaming.
All whilst basking in the enjoyment of my privilege (of paying 50% of my income in taxes + consumption taxes).

#97 TurnerNation on 06.28.17 at 8:33 am

Yorkville renter sounds like condo 18 Yorkville ave. There’s huge terrace and party room. Friends live there of mine.
I see Zaza coffee now is Coco – was there last week.

#98 maxx on 06.28.17 at 9:12 am

“Meanwhile condo fees could increase. So could property values. There could be a special assessment to repair a salt-riddled parking garage, install new elevators or replacement windows. All of this would affect the property value, and none of it could they control.”

Those very things happened in our building, leading to a wave of people wanting to sell and get out. And the problems are far from over…..meantime, we’ve locked the door to our assessment-free rental unit to soak up the natural beauty of St. Lucia.

Renting is sooooo liberating and sweet.

#99 Ace Goodheart on 06.28.17 at 9:12 am

I still find it hard to believe that you are actually getting a 6% return after fees off of a 60/40 split using only ETFs.

ETFs are my laggards. Safe but boring and the return I get off of them is around 2% on the bonds and maybe 3-4% on the equities. They are not impressive by any means.

My total return year to year is around 15-20% (did 16% last year) including dividends and distributions. My best performers dividend wise are the REITs. Capital gainer are all tech stocks right now (but you have to constantly rebalance as these things are bubble stocks, even the well known ones).

I do not get 6% off of my ETFs. Never have. I keep them because they are safe and they cushion things in a downturn, and because it’s very hard to be diverse in bonds if you are buying them directly on the market (if you consider how bonds are bought and sold to actually be a “market”) because you have to buy very large quantities of individual bonds.

Not sure how you are doing that (6% return on an all ETF portfolio). I have never managed to get that sort of return out of those things.

#100 SWL1976 on 06.28.17 at 9:12 am

#68 crowdedelevatorfartz on 06.27.17 at 10:50 pm

@#39 weird

“Made me think, haven’t seen very many wasps, any bees, not too many mosquitoes either this year,….”

*******

You’re not weird , You’re observant.
Worse winter and Spring in years in BC’s lowermainland.
Its almost July and I’m waiting for Spring flower to bloom. I’m watching Seagulls nest building.
Frogs are still croaking at night for the mating season.
This Spring/ Summer this year is late late late.
Hopefully we have a warm Fall or lotsa late born animals are gonna “croak”

———

It’s called weather modification and manipulation. It has been happening for well over a decade now. You may still figure it out one day… But, first you have to stop making stupid comments and using hack comedy as your personal self defense mechanism to a harsh new reality

#101 Lahdeedah on 06.28.17 at 9:19 am

#7 age before beauty on 06.27.17 at 6:21 pm

Thanks for the vote of confidence. It seems like it’d be the sane thing to do. The debt (mostly on my husband’s side), has been starting to really get to me. And I certainly don’t want any more of it. I want something more than paltry a paltry savings account, and a condo with not enough space…just to say I “own” something…seems dumb. Well, not that impressive if your financials are otherwise C- with zero growth. Even though I’ve owned 2 properties so far in my life, I bought at the right time. But I feel like the time to own, for the space we want/need, is dwindling.

Matter of fact, check out mine and my colleagues’ post-grad research paper, posted on the MRIA website two days ago, regarding millennial trends and housing in Toronto/GTA. We were selected to publish a brief synopsis on their blog.

This study took us 6 months to do, our base was 422 participants, who completed a 30-question survey online via social media, over 4 days in field.

https://mria-arim.ca/membership/chapters/emerging-leaders-task-force/emerging-leaders-blog/posts/living-in-a-bubble-millennials-and-the-overheated-toronto-gta-housing-market

#102 Calgary Rip Off on 06.28.17 at 9:53 am

The location of the rent vs. mortgage hasn’t been examined totally.

Most of the posts here dictate that rents are always lower than mortgages. That isn’t always happening, and often the rents are more than the mortgage. And that is the flawed logic in renting. Secondly, not all areas have “rent control”. In some areas there is no guarantee that your rents will not increase on a whim of the landlord.

For example: This property for rent: https://www.rentfaster.ca/ab/calgary/rentals/panorama-hills/house/huge-home-and-lot-in-310959

This house likely was $300K when it was mortgaged initially. Now they are renting it for $2000K+ per month! What madness is this? This is what the market demands in NW Calgary. So likely if you get a mortgage in the same area the cost will be likely close to this rent. Yes there are taxes and much upkeep. At $2000K+ per month, are you likely to have much to invest?

On the other hand, there are properties like this: https://www.rentfaster.ca/ab/calgary/rentals/forest-lawn/main_floor/3-bedroom-mainfloor-in-forest-54700, in Forest Lawn Calgary, that are affordable, if you want to live in this safe area(sarcasm).

Perhaps examine other provinces and areas besides Toronto or Ontario. Not everyone lives in that area.

Overall the information was helpful in terms of dealing with the realities of selling a place and then calculating how much is left over and what to do then to live for costs, the small variables of area and location just need to be looked at.

#103 Game Over on 06.28.17 at 10:25 am

Hey Garth,

is this the BIS article you referenced the other day?

http://www.bis.org/publ/work628.pdf

#104 Tater on 06.28.17 at 10:37 am

#99 Ace Goodheart on 06.28.17 at 9:12 am
I still find it hard to believe that you are actually getting a 6% return after fees off of a 60/40 split using only ETFs.

ETFs are my laggards. Safe but boring and the return I get off of them is around 2% on the bonds and maybe 3-4% on the equities. They are not impressive by any means.

My total return year to year is around 15-20% (did 16% last year) including dividends and distributions. My best performers dividend wise are the REITs. Capital gainer are all tech stocks right now (but you have to constantly rebalance as these things are bubble stocks, even the well known ones).

I do not get 6% off of my ETFs. Never have. I keep them because they are safe and they cushion things in a downturn, and because it’s very hard to be diverse in bonds if you are buying them directly on the market (if you consider how bonds are bought and sold to actually be a “market”) because you have to buy very large quantities of individual bonds.

Not sure how you are doing that (6% return on an all ETF portfolio). I have never managed to get that sort of return out of those things.

—————————————————————–
Likely the issue is that you don’t know what you are doing.

#105 Asterix1 on 06.28.17 at 10:39 am

Will this finally be the end for all these posts saying that “interest rates will never go up” or “expect interest rates to go down”?

Since Poloz spoke today, probability of BoC rate hike now stands at 66.8%!

#106 Bob on 06.28.17 at 10:42 am

Garth, regarding rent controls
that only works if you never get kicked out of your (rented) home.

See this article, single mom struggles because rent is going up and she can’t afford it… says she may have to pick between putting down her dog, buying her kids shoes, or providing a roof over their head.

http://www.straight.com/life/925406/renters-vancouver-my-11-year-old-and-i-are-nearly-homeless-im-full-time-professional


I agree with 90% of what you write, but I’m curious, how do we solve problems like these? Is this one of those “Sorry, you’ll have to make sacrifices, and not everyone can afford to live in Vancouver area, so suck-it-up and move?”

What’s interesting is the article ends up with the advice to the kid “get a good job and buy a house” so you don’t get kicked out of your own home.

#107 MarketPundit on 06.28.17 at 11:11 am

RE: ECB Forum on Central Banking

Funny how Poloz just bragged about the importance of investing in the models, but totally ignored the the second part of the question pertaining household debt and extremely high real estate prices in Canada.

#108 Smoking Man on 06.28.17 at 11:19 am

#90 Mark on 06.28.17 at 6:46 am
So how far is this CAD$ rally (in USD$) going to continue? At this point, rate hikes are most likely completely off the table. Could we see another 5 cents and put rate cuts on the table due to deflation thus induced? How underwater is Smoking Man at this point on his “sell USD$, buy CAD$” trade that he was telling us to make a few weeks ago?
…..

What can I say other than ouch. Easy come easy go.
Crystal ball is broken it happens some time. But if you step into ring, you are going to get punched in the face a few times.

Way better than being a spectator that types like a robot.

#109 X on 06.28.17 at 11:26 am

Poloz talk sounding more than a 50-50 for upcoming rate decision…..

#110 Susanna on 06.28.17 at 11:30 am

#85 Freedom First on 06.28.17 at 3:41 am

S&M have quality problems. Keep it that way and listen to Garth.

Any fears that S&M may have are imaginary.

I know people with far less than S&M living frugal lives who are happy and fearless. And I also know people who
have far more than S&M who are not happy and live in fear.

Also, and I know this as a fact, it’s great to be me.

Freedom First
Master of Freedomonics

——————-

What stage of menopause are you in Mrs. Freedom?
I’ve noticed an erratic writing pattern from you that could only be considered “hormonally” driven. I’m pre menopausal but I’ve known lots of women to suffer from the same sort of mood swings you are going through. Thanks for being so vulnerable with your feelings. You’re a beacon of hope to all of us women who follow your posts religiously.

#111 MarketPundit on 06.28.17 at 11:32 am

Central Bankers have to be let go off. Now we need to decipher what they are saying. really? what a total farce! how can businesses operate in such economies. CB’s just create more chaos, whether intentionally or not.
http://www.bnn.ca/poloz-reiterates-low-rates-have-done-their-job-1.791061

#112 James on 06.28.17 at 11:37 am

#90 Mark on 06.28.17 at 6:46 am

So how far is this CAD$ rally (in USD$) going to continue? At this point, rate hikes are most likely completely off the table. Could we see another 5 cents and put rate cuts on the table due to deflation thus induced? How underwater is Smoking Man at this point on his “sell USD$, buy CAD$” trade that he was telling us to make a few weeks ago?
………………………………………………………………..
Enough that he had to sell his house, boat and cottage.

#113 lions bay on 06.28.17 at 11:37 am

#47 S.Bby on 06.27.17 at 8:31 pm

The realtor I spoke looked like worked particularly in north/west van. In my knowledge anything less 1.5 is still moving fast. Anything more than 2 million is just sitting. I also have noticed houses in Lions bay that are listed for more than 2 million are on market for months. So probably she was talking about starter homes and townhouses which are still selling fast.
Some people like living on mountain no matter what. Views are awesome. You live in Edmonton for 3 years and then tell me. I don’t want to live in anything remotely flat :)

#114 Alistair McLaughlin on 06.28.17 at 11:38 am

@ #70 Bottoms_Up

They could buy a decent townhouse in Ottawa for $200,000″

In 2004 they could. Not today. $200K for a townhouse in Ottawa gets you an aging pile of crap in a declining neighbourhood. Decent townhomes, like the one I’m renting, are going for $300K. Nice newer towns in in-demand hoods are going for $320-$340K.

$200K in Ottawa will get you a stacked condo with outdoor parking. Or a box in a high rise with $600 per month condo fees. OK places to live, but I’d rent, not buy.

Now, if said couple wants to spend $300 to $350K on a nice town, then yes, absolutely a move to Ottawa makes sense. I’d rather buy a nice town for $350 in Ottawa than pay $3000 per month to rent a box in the sky in Toronto. Some will argue Ottawa is too “boring” and cold. They’re retired for crying out loud. Unless they retire rich (they ain’t) a boring lower cost city should be exactly what they’re looking for. And winter is winter. Toronto isn’t exactly a tropical paradise in February either. They’ll get used to the snow. Maybe with the money they save moving to Ottawa they’ll be able to afford a month in warmer climes every winter.

#115 Martin on 06.28.17 at 11:44 am

Fake story, Toronto has one of the lowest property tax rates in the entire Golden Horseshoe and it’s impossible to have $8,000 property tax on a 1 million house. This is not Dallas, Texas.

#116 Geezer on 06.28.17 at 11:50 am

Garth, you regularly mention the return of capital structure as an option.

Can you explain this a little better? Do you simply mean investing in ETFs that payout RoC or is there some other structure you are referring to here?

#117 You Decide on 06.28.17 at 11:58 am

How low will prices go? Only as low as sellers are willing to sell their properties for. If they can’t get the numbers they want/need many sellers can take it off the market and remain or rent it out. We seem to forget that the US housing crash was due to a large amount of foreclosures due to NINJA loans, and rate resets.

Fortunately, Canada has a low default rate on mortgages, and it continues to be low. Many people will still default; however, it won’t be a lot and it won’t be in a short amount of time.

If the Gov gets scared, they can always reinstate looser mortgage guidelines to keep the peasants from revolting. Just like BC did with that Down payment gift.

#118 Wrk.dover on 06.28.17 at 12:03 pm

If a reverse mortgage gave an actual reverse mortgage, as in so much/month for a set number of years, everybody could use one after consulting an actuary.

But no, they give you a big percentage of the house worth all up front, so you invest that, and they charge more interest than your investment bears likely, while you live on the hopeful investment interest while making no payments.

In the end they own/won the house because the interest due ate your remaining principal.

When they introduce my idea, I will sign on in my seventies.

#119 Wrk.dover on 06.28.17 at 12:08 pm

When will the final troll learn that gold is kryptonite to Garth-not to be mentioned here? For good reason.

#120 CAD-USD on 06.28.17 at 12:17 pm

The more I read the comments section the more I see certain posters have a greater probability of hitting short term bets than others

Kudos to those that swan against the crowd and called for a rise in the Canadian dollar

#121 nick on 06.28.17 at 12:17 pm

#115 Martin

Its not hard to pay that much, especially in high tax areas like Brampton.

#122 InvestorsFriend on 06.28.17 at 12:19 pm

Mortgage Delinquencies in Alberta remain low

Okay so mortgage delinquency figures are said to be useless and lagging. But the figures are hard to believe.

Latest numbers http://www.cba.ca/Assets/CBA/Files/Article%20Category/PDF/stat_mortgage_db050_en.pdf

These figures cover only the major banks and (wierdly) Manulife Bank). The sub prime lenders like Home Capital are not included here.

Alberta 90 day delinquencies are at 0.46% as of April.

This is up from the lows of 2014 of 0.27% but is unchanged since December. Quite a bit lower still than the 0.80% figures of 2011.

I suppose Alberta unemployment is not all that high but still… About 3% of the population that were employed are no longer working.

Ontario is at lows of 0.11%. Are we supposed to believe that only one mortgage in a thousand in Ontario is 90 days late? I mean there should be that many late just due to things like problems paying on estates and a few people on extended vacations who forget to make sure it gets paid.

In British Columbia despite those high prices and mega mortgages and paltry average incomes it is just 0.19% or 2 out of a 1000 who are 90 days late! This beggars belief.

With these low delinquencies, lending on mortgages by the big banks at least would appear to very low risk indeed. And CMHC must be highly profitable and pay out little. (It is and it does pay out little)

It may be a lagging indicator, but surely at some point if house prices drop and people have negative equity these delinquencies must rise. In the U.S. in 2009 these figures were massively higher.

#123 Game Over on 06.28.17 at 12:28 pm

Low interest rates are done. They are screwing up the financial system. While they worked in the beginning of the crisis, they are now a net cost to the system.

Savers will be somewhat rewarded as CB’s realize that the only way to boost aggregate demand is boost nominal rates to usher a return to proper risk premia, increase depositor’s returns (good for all the pensioners, pension plans) and increase spreads, which will increase bank balance sheets and that will lead to increased inflation and investment activity. You will see at least 2% CB rate soon and watch for inflation to follow because as the BIS has learned, low rates cause people to save more because they cannot grow their money fast enough, lowering demand as a result.

You can guess what that means for Canadian RE, which will adjust to the downside as a result. And no, I don’t think they care if the weak get squeezed out. The reckoning for them and the system is inevitable.

http://www.bis.org/publ/work628.pdf#sthash.DGNOxy16.dpuf

#124 Ace Goodheart on 06.28.17 at 12:43 pm

RE #104 Tater on 06.28.17 at 10:37 am

“Likely the issue is that you don’t know what you are doing.”

I’m not sure if that’s true. I beat the market every year. My problem is not with making money in the markets, my problem is how do you do that with ETFs?

The ETF seems to be structured so as not to make a very good return. It is an instrument whose operation is limited by a particular index, so it has almost no control over what it holds or what trades it makes.

The ETF also does not seem to always move in tandem with it’s chosen index (whatever that may be). Nor does it pay distributions in a manner that resembles a stock or a bond.

I can’t see how index fund investors are able to beat the markets. The whole nature of an index fund makes it into an instrument that is designed NOT to beat the markets.

The returns also do not appear to be linear as is often described here, ie you do not get a linear 6% return each year.

I know how to pull 15-20% out of the markets each year, but I am unable to do that using index funds.

#125 Renter's Revenge! on 06.28.17 at 12:57 pm

I’m starting to think that fundamentals like median price to median income ratios don’t matter in the housing market anymore.

Maybe they mattered in the past when most people lived into their 60’s and then croaked, and the vast majority of the housing market consisted of young buyers. Now with a third of the population over the age of 50, and living into their 80’s and 90’s, sitting on paid off houses, a huge segment of the market consists of people buying houses based on existing equity, not income.

Just look at today’s example couple, who think $650,000 is a reasonable price for a two-bedroom condo (it’s not), and are willing to pay that price, because, like, who cares? They’re downsizing from their “million dollar” house, and they’ll have money left over to live off of in retirement anyways. These aren’t exactly discerning buyers, if you know what I mean.

So does price to income ratio matter anymore in the housing market?

When the market “reverts to the mean”, which mean will it revert to?

#126 James on 06.28.17 at 12:57 pm

Just watched this on TV this morning and got a kick out of American politics. Senate Majority Leader Mitch McConnell just moved the goal-line again with the GOP Healthcare bill. They can not get enough republicans onside so what do they do? Not when the going gets tough the tough get going, but rather when the going gets tough change the rules and start to bully your players. Kansas Sen. Jerry Moran, Ohio Sen. Rob Portman, and West Virginia Sen. Shelley Moore Capito are the latest Republicans to say that they oppose the bill. What has become of the GOP?
Jesus I miss Rob Ford he was more interesting than these old fogies.

#127 Smoking Man on 06.28.17 at 1:05 pm

#112 James on 06.28.17 at 11:37 am
#90 Mark on 06.28.17 at 6:46 am

So how far is this CAD$ rally (in USD$) going to continue? At this point, rate hikes are most likely completely off the table. Could we see another 5 cents and put rate cuts on the table due to deflation thus induced? How underwater is Smoking Man at this point on his “sell USD$, buy CAD$” trade that he was telling us to make a few weeks ago?
………………………………………………………………..
Enough that he had to sell his house, boat and cottage.
……
Dont forget everything else in this house is for sale too.

Dont need it where Im going. Enjoy communism I’m so out of here.

https://youtu.be/lR5iuTWM6g8

#128 Waiverless on 06.28.17 at 1:18 pm

#122 InvestorsFriend

In a liquid market you’re not going to have a lot of delinquencies. People run into trouble in their mortgage they sell and there is no default. In a down trend market once you’re house is not liquid – that’s when the trouble starts. So in truth low levels of defaults are totally too be expected in an overheating market. I believe the same issue occurred during the 2008 GFC.

#129 jess on 06.28.17 at 1:25 pm

https://bepsmonitoringgroup.files.wordpress.com/2017/06/if-presentation-1706.pdf
corporate liability rules net accountants
———————————-
EU’s Fourth Money Laundering Directive being implemented into UK law

Companies need to tighten prevention procedures to avoid falling foul of ‘relevant person’ rules in the Criminal Finances Act, particularly when it comes to potential breaches of tax rules
=========================

The Regulations also introduce a ‘criminality test’
‘criminality test’

7.12
“The Regulations clarify that an estate agent is to be considered as entering into a “business relationship” with a purchaser as well as with a seller. This means that estate agents must apply customer due diligence checks to both contracting parties in a transaction. This clarification has been made because evidence suggests that the purchase of real estate is an attractive and lucrative option for money laundering purposes. It also became clear that many estate agents did not consider the purchaser to be their customer, consequently not doing customer due diligence

Money laundering can undermine the integrity and stability of our financial markets and institutions. It is a global problem, however, and the UK must play its part in strengthening our regime and working with international partners to tackle money laundering. The National Crime Agency (NCA) judge suspected proceeds of corruption are laundered through the UK each year. Money laundering is also a key enabler of serious and organised crime, the social and economic costs of which are estimated to be £24 billion a year…”

http://www.legislation.gov.uk/uksi/2017/692/pdfs/uksiem_20170692_en.pdf
==========

The top 50 global banks allegedly involved in a $21 billion Russian money-laundering scheme
Max de Haldevang
March 21, 2017
https://qz.com/938504/the-top-50-global-banks-allegedly-involved-in-the-20-8-billion-russian-laundromat-money-laundering-scheme/
British banks handled vast sums of laundered Russian money
https://www.theguardian.com/world/2017/mar/20/russian-money-and-the-global-laundromat-what-uk-banks-said

==============================
adverse and severely adverse models
For this year’s stress test cycle (DFAST 2017), which
began January 1, 2017, the Federal Reserve conducted supervisory stress tests of 34 BHCs.
Dodd-Frank Act Stress Test 2017:
Supervisory Stress Test
Methodology and Results
June 2017
https://www.federalreserve.gov/publications/files/2017-dfast-methodology-results-20170622.pdf

according to the FDIC’s March 31, 2017 database. The federal deposit insurance fund as of March 31, 2017 has on hand only $84.9 billion
https://www.fdic.gov/bank/analytical/qbp/2017mar/qbpdep.html

Number of FDIC-Insured Problem Institutions
March 31, 2017 112
Assets of FDIC-Insured Problem Institutions
March 31, 2017 $23.7b.
December 31, 2009 $402.8b

#130 InvestorsFriend on 06.28.17 at 1:27 pm

Buying Home Capital GICs

I have never bought a GIC in my 30 years of investing but 2.5% for one year beats other short term rates.

I did some checking:

With TD Bank or TD Direct (TD Waterhouse) you cannot buy these. They have not offered Home Trust or Home Bank GICs since 2011 for whatever reason. For that reason I cannot conveniently buy even if I wanted to.

With RBC direct you can buy these . For RBC clients click on Top GIC rates and Home Trust pops right up. 2.5% for one year 2.8% for five years. Not a bad rate given the total security and lack of volatility. But you are locked in for that period. Maybe worth thinking about for non-taxable accounts. This will not last. It could be gone this week if approval for the Buffett investment goes through as planned tomorrow.

#131 NoName on 06.28.17 at 1:34 pm

First sign of dimentia.

https://www.google.com/amp/www.newsweek.com/rich-people-america-buffett-629456%3Famp%3D1

#132 Ronaldo on 06.28.17 at 2:02 pm

#120 CAD-USD on 06.28.17 at 12:17 pm

The more I read the comments section the more I see certain posters have a greater probability of hitting short term bets than others

Kudos to those that swan against the crowd and called for a rise in the Canadian dollar
—————————————————————
And higher to come. Near par by years end along with rise in precious metals. Banks will take a major dip. At least that’s what my crystal ball shows. Time to readjust the weightings in the portfolio.

#133 Asterix1 on 06.28.17 at 2:06 pm

#128 Waiverless, you are 100% right!

Same thing happened right before the 1990 Toronto crash!

“Late Mortgage Payments In Ontario Fall To The Lowest Since The 1990 Crash”
https://betterdwelling.com/late-mortgage-payments-in-ontario-fall-to-the-lowest-since-the-1990-crash/

Ontario Mortgages in arrears
Feb 1990 = 0.12%
Feb 2017 = 0.12%

This is going to be Epic! Everything is lining up perfectly for a big price drop! Raising rates will get the wrecking ball moving in the right direction!

#134 Where's The Money Guido? on 06.28.17 at 2:23 pm

The BC Lieberal gov’t just found another $1.3 billion dollars floating around to try and entice sheeple that they are still the best that BC can expect.
Su-ure they are, getting that extra money, they say, through extra revenue. In reality, it was stolen from BC’ers through exponential ICBC and Hydro rates (which go directly into their buddies’ pockets in IPPs).

In 2016, the B.C. government handed out $348 million in royalty credits and approved the carry-over of more than $520 million in future royalty credits by oil and gas producers, according to the Sierra Club report.)
Malaysian-owned Pacific Northwest LNG donated more than $18,000 to the B.C. Liberals since 2014, while Indonesian-based Woodfibre has found itself in the midst of a growing scandal over illegal donations.

The Globe and Mail recently revealed that two Woodfibre lobbyists were reimbursed by their company for more than $75,000 in donations to the B.C. Liberals. This practice, which conceals the true source of political donations, is illegal. The investigation has now been handed over to the RCMP. Woodfibre also donated close to $60,000 under its companies’ names.

These donations took place while Woodfibre negotiated a subsidy on electricity rates and other tax breaks from the province.
Additionally, in 2013, the B.C. government announced a seven per cent LNG tax — but as the import price in Asia collapsed, this rate was cut in half to 3.5 per cent.

Sierra Club argues the subsidies go beyond the LNG industry, and apply to Kinder Morgan’s Trans Mountain pipeline as well. That pipeline will be powered by subsidized electricity at a cost of ratepayers of at least $27 million per year, according to the Sierra Club report. Across the 20-year life of that pipeline, the subsidy will amount to $540 million.

Kinder Morgan and its Alberta-based backers, the Canadian Association of Petroleum Producers, the Canadian Energy Pipeline Association and oilsands producers contracted to ship oil on the new pipeline, have donated nearly $800,000 to the B.C. Liberal party.
https://www.desmog.ca/2017/03/27/b-c-liberals-locked-huge-subsidies-big-fossil-fuel-donors-report
I’m betting that extra billion was earmarked to pay to their insider corps. who were big donators.

This BC gov’t cannot let anyone in to see the books because it will end up in criminal charges for the perpetrators like Crusty-DeJong-Coleman.
Those shredders are going 24 hrs. a day I’m sure while they try to cover their tracks.

#135 Where's The Money Guido? on 06.28.17 at 2:48 pm

More info on illegal donations to BC Lieberals that the RCMP is investigating:
https://dogwoodbc.ca/woodfibre-donations-political-favours/

By our count, Woodfibre LNG and their staff have donated at least $166,934 to the BC Liberal Party since 2013. Donations start to ramp up almost immediately after the substituted environmental assessment was approved, putting the provincial government in charge of conducting the environmental assessment on behalf of the federal government. Nevermind that B.C.’s Minister of Natural Gas Development, Rich Coleman, who was responsible for reviewing the environmental and social impacts of Woodfibre LNG, also has a mandate to develop an LNG export industry — and he’s one of the BC Liberals’ largest fundraisers. Sure, let’s ignore that conflict of interest.

#136 Entrepreneur on 06.28.17 at 2:48 pm

If sells #128 Waiverless and that is one option but this single mother trying to sell her run-down house, sat for awhile, then the bank offered her a house for the same mortgage payment. She was happy as the house was newer and in better shape.

I think there is less mortgage delinquencies #122 Investor Friend because the banks do not want a repeat of the past defaults.

#137 InvestorsFriend on 06.28.17 at 2:54 pm

What Happened to the Republican Part?

#126 James on 06.28.17 at 12:57 pm asked:

What has become of the GOP?

*****************************
The GOP Grand Old Party (Republican Party) was taken over by the popular Donald Trump who was not really a republican. Some would say taken over by a lunatic. Has some good ideas but is also dangerous in many many ways. As someone said he has not supporters but fans.

#138 The True State of Victoria on 06.28.17 at 2:58 pm

While VREU rambles on about how Victoria and the surrounding communities sales are collapsing, but continuously fails to acknowledge that prices are going up, many have pointed out that surrounding communities are having massive price increases and bidding wars.

Yes – bidding wars, full price, on the market for days type of hysteria in places north of Victoria

Cobble Hill – 1319 Bonner Crescent
– assessed 475k in 2015 and 497k in 2016
– listed for $639k in May
– on the market for 2 days and sold 5% over asking – sold for $668

Cobble Hill – 3575 Pechanga Close
– assessed 408k in 2015 and then 496k in 2016
– listed June $539,900
– listed and sold June $580k
– on the market 8 days and sold 7.5% over asking

Mill Bay – 607 Bickford Way
– assessed 549k in 2015, then 610k in 2016
– bought in July 2015 for $520k
– listed June 2017 for $699k
– sold June 2017 for $700k after 8 days on the market
– a whopping 35% increase in less than two years

So please VREU, stop misleading people with your hope inducing ramblings about the stages of a collapse or the collapsing Victoria sales when on the ground examples show you are out to lunch.

When you can tell us wall why prices are increasing when sales are collapsing (and you discount the fact that low inventory is a driver), then come back to the discussion table…

Otherwise, please stop posting your drivel.

#139 Alistair McLaughlin on 06.28.17 at 3:04 pm

@#117 You Decide,
How low will prices go? Only as low as sellers are willing to sell their properties for.

You really don’t understand how housing market corrections unfold do you? Yes, many sellers take their houses off the market. But many others don’t have that luxury. Death, unemployment, divorce, job changes and illness are just a few reasons why people might have to sell. Housing corrections are characterized by falling prices and falling volumes.

Falling demand is what triggers every housing correction. People get scared, they see prices start to fall, they get more scared, they start to wait. This becomes a self-reinforcing trend as demand, prices and volumes drop further. Home sellers do not control the market. A house is only worth what the highest bidder will pay. Refusing to sell does not stop the market price of your home from dropping. It only stops you from discovering precisely what that price is.

As for the NINJA loan foreclosures and defaults in the US, they only took off after the market started to totter. In a rising market, an indigent home-debtor can always sell the home and pay out his mortgage. That becomes impossible in a falling market. That’s why we can safely conclude that people who point to low default rates as a sign the market is healthy don’t know what they’re talking about. Default rates only increase after the market is in serious trouble. Corrections cause defaults. Defaults to not cause corrections, though they can be part of a self-sustaining feed-back loop that keeps housing prices spiralling lower once the correction starts. The default rate is a lagging indicator.

#140 InvestorsFriend on 06.28.17 at 3:13 pm

Delinquencies

#128 Waiverless on 06.28.17 at 1:18 pm responded to me:
#122 InvestorsFriend

In a liquid market you’re not going to have a lot of delinquencies. People run into trouble in their mortgage they sell and there is no default. In a down trend market once you’re house is not liquid – that’s when the trouble starts. So in truth low levels of defaults are totally too be expected in an overheating market. I believe the same issue occurred during the 2008 GFC.

****************************************
I agree. And also banks keep lending people new money to pay old debt. Will be a different story if house prices are dropping and credit is drying up.

#136 Entrepreneur on 06.28.17 at 2:48 pm also responded to me saying:

I think there is less mortgage delinquencies #122 Investor Friend because the banks do not want a repeat of the past defaults.

********************************
Agreed they don’t want delinquencies but at the same time they have given credit liberally. Are they now hiding the delinquencies through such things as payment holidays and offering reduced payments (extended terms)? Are they doing everything possible to avoid a delinquency getting on the books and is this just kicking the can down the road? Time will tell.

#141 paul on 06.28.17 at 3:19 pm

#137 InvestorsFriend on 06.28.17 at 2:54 pm

What has become of the GOP?

*****************************
The GOP Grand Old Party (Republican Party) was taken over by the popular Donald Trump who was not really a republican. Some would say taken over by a lunatic. Has some good ideas but is also dangerous in many many ways. As someone said he has not supporters but fans.
—————————————————————–
These look like supporters, not fans to me.

http://www.theblaze.com/news/2017/06/28/see-how-trump-supporters-respond-to-starbucks-staffers-who-mocked-woman-in-trump-t-shirt/

#142 IHCTD9 on 06.28.17 at 3:20 pm

#117 You Decide on 06.28.17 at 11:58 am

How low will prices go? Only as low as sellers are willing to sell their properties for. If they can’t get the numbers they want/need many sellers can take it off the market and remain or rent it out.

_________________________________________

This may be true within a short time horizon. At some point, an owner will need to sell, even if for no other reason than age.

Now, while an individual owner may be able to hold out not selling for years or even a decade or two – the market on the other hand, can refuse to pony up longer than you can live.

Over the long term – it is buyers who determine what an item is worth. Always has been, always will be (in a free market…).

#143 InvestorsFriend on 06.28.17 at 3:22 pm

Bank Mortgage Delinquencies

The figures were just updated this week. But the bankers association site indicates they were posted June 5. I just talked to them and they explained it was because they did not want those figures to move ahead of some other stuff on the web site. So sort a technical work around, they back dated it but they say they had a good reason for that.

They said they tweeted out the figure telling people how the Canada delinquency rate was down slightly.

But these are figures they supply voluntarily to the market so I guess beggars like me can’t be too choosy.

#144 Lahdeedah on 06.28.17 at 3:23 pm

RE: #115 Martin on 06.28.17 at 11:44 am

Taxes on a $1 mil house are roughly $6,880 a year, so its not far off. That’s roughly $573 a month

Ex:
Estimated property tax = Assessed Value x Residential Tax Rate for 2016

= ($549,586 * 0.6879731) / 100 = $3,781.00

http://www1.toronto.ca/wps/portal/contentonly?vgnextoid=859f4cd308a16410VgnVCM10000071d60f89RCRD

#145 IHCTD9 on 06.28.17 at 3:31 pm

#128 Waiverless on 06.28.17 at 1:18 pm #122 InvestorsFriend In a liquid market you’re not going to have a lot of delinquencies. People run into trouble in their mortgage they sell and there is no default. In a down trend market once you’re house is not liquid – that’s when the trouble starts. So in truth low levels of defaults are totally too be expected in an overheating market. I believe the same issue occurred during the 2008 GFC.
________

Excellent point. I know a couple who did just that years ago. Bought a place, got into trouble financially a couple years later – sold out in a few weeks and moved into an apt. Problem solved in less than a month. They then found better employment somewhere else and moved out of the area altogether.

Pretty easy to see home owners who get in over their heads pulling the trigger into a rising market – especially since there is money to be made at the same time.

#146 Lahdeedah on 06.28.17 at 3:31 pm

…and of course, for taxes, it depends what the assessed value of the home is versus the market value. Not the same thing.

http://www.realtor.com/advice/sell/assessed-value-vs-market-value-difference/

#147 IHCTD9 on 06.28.17 at 3:34 pm

#121 nick on 06.28.17 at 12:17 pm #115 Martin Its not hard to pay that much, especially in high tax areas like Brampton.
_____

Brampton is high tax? I’ve always understood house prices were lower in Brampton.

#148 Renter's Revenge! on 06.28.17 at 3:49 pm

On further thought, my comment at #125 sounds like a bit of a tautology, i.e. something like, “house prices are high because house prices are high”. I guess if house prices fall (for whatever reason), there’ll be less equity to support house prices. So maybe there shouldn’t be any cause and effect relationship between equity and prices, just a mathematical one. Maybe fundamentals still matter after all.

#149 Julia on 06.28.17 at 3:50 pm

It’s easy to avoid defaulting on your mortgage when you have a HELOC. When rates rise, or values decline and banks carve back the lines, that’s when the problems will hit.

#150 Julia on 06.28.17 at 4:02 pm

#147 IHCTD9
House prices are generally lower in Brampton than Toronto if you compare the same house in terms of size.
Prices are cheaper in the sense that you get more house for the same amount of money.

If I read this right, to pay $8,000 in taxes in Brampton your house would have to be assessed at $750,000.

http://www.brampton.ca/EN/residents/Taxes-Assessment/taxation/Pages/Tax-Rates.aspx

#151 n1tro on 06.28.17 at 4:05 pm

#147 IHCTD9

Brampton has high house prices and high taxes. Why? It’s the 2 families in 1 house along with the basement dweller(s) sending all their kids to the schools causing a drain on resources. Didn’t help the former mayor paid herself the highest salary among other mayors in all of Canada either.

#152 Mark on 06.28.17 at 4:05 pm

“When you can tell us wall why prices are increasing when sales are collapsing (and you discount the fact that low inventory is a driver), then come back to the discussion table…”

I don’t have data for Victoria per se, but in Toronto/Vancouver, over the past few years, prices have stagnated, while the Realtor-reported ‘averages’ in what they actually were transacting in changed significantly. The reason for this was a dramatic change in the sales mix as brand new properties and higher-end properties were disproportionately represented in the mix of properties that actually transacted.

As far as ‘inventory’ goes, high prices should result in lots of listings. Its actually falling prices which suppress listings, at least for a while until the foreclosures and panic sets in. Which it hasn’t as of yet, hence the ‘low inventory’ particularly in the GTA/GVR even though prices are falling.

#153 Mark on 06.28.17 at 4:07 pm

“And higher to come. Near par by years end along with rise in precious metals. Banks will take a major dip. At least that’s what my crystal ball shows. Time to readjust the weightings in the portfolio.”

Woah, are you nuts? We still have to go through at least 2 rate cuts (maybe into NIRP). And precious metals seem to just be treading water. Par would be nuts, but probably not in the cards this year unless the Canadian housing crash accelerates dramatically.

#154 IHCTD9 on 06.28.17 at 4:10 pm

#94 Here’s The Deal on 06.28.17 at 7:56 am Here’s the deal:

No matter how you slice it, these two people are not financially ready for retirement. They don’t have enough. They need a minimum of 10 more years of working and SAVING EVERY POSSIBLE CENT. In the meantime, they need to educate themselves on how to live simply and frugally. And forget about staying in the GTA during the retirement years.
______________________________________

One sentence regarding their retirement said it all: “in the big city they love”.

They live and want to retire in the GTA somewhere (obvious due to the combination of auto industry, failing RE market, and big city all being mentioned)

Now, I understand that some folks do in fact WANT to spend their last days engulfed in a haze of smog while trapped in an endless line of brake lights fading off into the horizon en-route to their 500 sf box in the sky.

This makes no sense to me, but hey, to each their own…

…but wanting to retire in the GTA – is their real problem. I think that is why Garth made the big city statement. They are going to have a hell of a time trying to comfortably pull it off IMHO.

They may be a lot further ahead learning new hobbies such as fishing, hiking, hunting, ATV’ing that is prevalent in other locales where rent for a two bedroom is 1200.00/month.

#155 James on 06.28.17 at 4:25 pm

#127 Smoking Man on 06.28.17 at 1:05 pm

#112 James on 06.28.17 at 11:37 am
#90 Mark on 06.28.17 at 6:46 am

So how far is this CAD$ rally (in USD$) going to continue? At this point, rate hikes are most likely completely off the table. Could we see another 5 cents and put rate cuts on the table due to deflation thus induced? How underwater is Smoking Man at this point on his “sell USD$, buy CAD$” trade that he was telling us to make a few weeks ago?
………………………………………………………………..
Enough that he had to sell his house, boat and cottage.
……………………………
Dont forget everything else in this house is for sale too.
_______________________________________
Dont need it where Im going. Enjoy communism I’m so out of here.
https://youtu.be/lR5iuTWM6g8
…………………………………………………………….
Mericka won’t take ya, so Cuba it is hey! So sad no more postings from Niagara Falls Casino on how we are all tax farm slaves and you are the great Gazoo.
https://www.youtube.com/watch?v=zoSiKpqvD9Q

#156 Freedom First on 06.28.17 at 4:28 pm

#110 Susanna

Susanna. I’m here to help.

My only request is that my fan club be open to all of today’s genders.

#157 Newcomer on 06.28.17 at 4:56 pm

@ #102 Calgary Rip Off on 06.28.17 at 9:53 am

In some areas there is no guarantee that your rents will not increase on a whim of the landlord.

—————

Just like there is no guarantee that your phone service won’t increase fees on a whim. Except, of course, that they fear you would go somewhere else if they raised them. The landlords I know in Calgary have recently been lowering rents, not on a whim, but because their tenants could find cheaper elsewhere. The free market, baby! Got to love the efficiency.

The way some people talk about renting, you would think they had never purchased a service before. If you’ve been to a restaurant, stayed at a hotel, or rented a car, you know how this stuff works.

#158 Stan Broock on 06.28.17 at 5:10 pm

Interest rate increase for the Loonie?

No way.

At the first sing of any meaningful rate increase the ‘economy’ will roll over.

#159 Victor V on 06.28.17 at 5:14 pm

Canada’s long ride with rock-bottom interest rates appears to be ending: Stephen Poloz has dropped his biggest hint yet that the Bank of Canada will soon push Canadian interest rates higher, perhaps as early as July

http://business.financialpost.com/news/economy/canadas-long-ride-with-rock-bottom-interest-rates-appears-to-be-ending/wcm/8a96c286-0e67-454a-af60-c0b99aeaa0bb

Canada’s long ride with rock bottom interest rates appears to be coming to an end.

Stephen Poloz, governor of the Bank of Canada, has dropped a big hint that for the first time in seven years, the bank will be pushing Canadian interest rates higher.

The loonie rallied as high as 76.71 U.S. cents on Wednesday, its highest level against the U.S. dollar since February.

#160 Victor V on 06.28.17 at 5:16 pm

http://www.bnn.ca/drag-from-cheap-oil-largely-over-bank-of-canada-says-1.791428

CALGARY, Alberta – Interest rate cuts in 2015 have done their job, two top Bank of Canada policymakers said on Wednesday in separate appearances that ramped up market expectations for a rate hike in July.

Governor Stephen Poloz and Deputy Governor Lynn Patterson both said the worst is now behindCanada after the central bank’s rate cuts two years ago helped the economy weather weak oil prices, suggesting it is now time to end the ultra-low interest rate environment.

“It does look as though those cuts have done their job. But we’re just approaching a new interest rate decision so I don’t want to prejudge,” Poloz said in a European interview published by CNBC on Wednesday.

“But certainly we need to be at least considering that whole situation now that the … excess capacity is being used up steadily.”

The bank will make an interest rate announcement July 12.

#161 Shyster Mortaggae broker on 06.28.17 at 5:19 pm

nvestorsFriend on 06.28.17 at 1:27 pm Buying Home Capital GICs I have never bought a GIC in my 30 years of investing but 2.5% for one year beats other short term rates. I did some checking: With TD Bank or TD Direct (TD Waterhouse) you cannot buy these. They have not offered Home Trust or Home Bank GICs since 2011 for whatever reason. For that reason I cannot conveniently buy even if I wanted to. With RBC direct you can buy these . For RBC clients click on Top GIC rates and Home Trust pops right up. 2.5% for one year 2.8% for five years. Not a bad rate given the total security and lack of volatility. But you are locked in for that period. Maybe worth thinking about for non-taxable accounts. This will not last. It could be gone this week if approval for the Buffett investment goes through as planned tomorrow.
—————————————————————–

You shyster mortgage broker. Home Capital can going bust anytime. I wouldn’t risk locking in for a week yet alone a year or five years. Who wants to wait months or even years to get money back if and when they go bust

#162 The True State of Victoria on 06.28.17 at 5:34 pm

#152 Mark

“When you can tell us wall why prices are increasing when sales are collapsing (and you discount the fact that low inventory is a driver), then come back to the discussion table…”

I don’t have data for Victoria per se, but in Toronto/Vancouver,…”
——

And full stop. You are right, you have no data or understanding of the market in Victoria or South Island so try not to extrapolate the GTA and YVR experience here.

And everyone is tired of your ‘prices have not gone up since 2013 because of the sales mix’ stichk. You have been discredited because of that ridiculous statement.

Again, weigh in when you have some data about the Victoria/South Island market.

#163 Penny Henny on 06.28.17 at 5:41 pm

#144 Lahdeedah on 06.28.17 at 3:23 pm
RE: #115 Martin on 06.28.17 at 11:44 am

Taxes on a $1 mil house are roughly $6,880 a year, so its not far off. That’s roughly $573 a month

Ex:
Estimated property tax = Assessed Value x Residential Tax Rate for 2016

= ($549,586 * 0.6879731) / 100 = $3,781.00

http://www1.toronto.ca/wps/portal/contentonly?vgnextoid=859f4cd308a16410VgnVCM10000071d60f89RCRD
///////
FYI Lahdeeda,
assessments are WAY below actual cash value.
My assessment was for 620, house sold for 950 at the end of may. taxes were under 3750. this is typical

#164 Mark on 06.28.17 at 5:42 pm

“Stephen Poloz has dropped his biggest hint yet that the Bank of Canada will soon push Canadian interest rates higher, perhaps as early as July”

With Canada explicitly in month-over-month deflation, which is likely accelerating at this point? Good luck with that, lol.

““But certainly we need to be at least considering that whole situation now that the … excess capacity is being used up steadily.””

Excess capacity? There’s mountains of it in Canada. Huge numbers of workers of all kinds unemployed or underemployed. That is why inflation will not appear, and with the amount of labour liberated from the RE supply industry over the next few years, the capacity gap is likely to grow dramatically.

Has weed been legalized in Ottawa or something? Because this talk of rate hikes is delusional.

#165 Penny Henny on 06.28.17 at 5:43 pm

The GTA might be way different but what I wrote for Toronto proper is true.

#166 Penny Henny on 06.28.17 at 5:48 pm

#152 Mark on 06.28.17 at 4:05 pm
“When you can tell us wall why prices are increasing when sales are collapsing (and you discount the fact that low inventory is a driver), then come back to the discussion table…”

I don’t have data for Victoria per se, but in Toronto/Vancouver, over the past few years, prices have stagnated, while the Realtor-reported ‘averages’ in what they actually were transacting in changed significantly. The reason for this was a dramatic change in the sales mix as brand new properties and higher-end properties were disproportionately represented in the mix of properties that actually transacted.
//////////////////////////////

FYI for all. Mark hasn’t the slightest clue on this subject

#167 A Reply to #122 InvestorsFriend on 06.28.17 at 5:51 pm

“[Mortgage delinquency figures] may be a lagging indicator, but surely at some point if house prices drop and people have negative equity these delinquencies must rise.”

An article that’s been circulating today (see #103 Game Over on 06.28.17 at 10:25 am) has this explanation (pp. 9-10).

“Persistently low interest rates may also create disincentives to address a debt overhang and resource misallocation, fostering what has been graphically called a ‘zombification’ of the economy. The best known channel here works through the banking sector. Low rates reduce the perceived need for banks to clean up their balance sheets. They tend to encourage banks to roll over rather than charge off non-performing loans in a number of ways. Lower rates increase the expected recovery from non-performing loans by reducing the discount factor.

“Specifically, the decision to charge off or roll over will depend on how the expected repayment from a loan compares with its liquidation value, which is typically its collateral value. So, for given collateral values, higher discounted repayments can induce more banks to decide to roll over a larger part of their bad loans, in particular in crisis times when the market for collateral can be depressed and illiquid.

“And they reduce the opportunity cost of carrying non-performing loans on the balance sheet, as the returns from alternative investments, and the cost of funding the bad loans, are low. All this saps banks’ intermediation capacity because rolled-over bad loans crowd out new lending for more productive borrowers. In turn, this can complicate the prudential authorities’ task of identifying and resolving weak institutions, in concert with other policymakers.

“Here, too, nominal rates may have a prominent role to play. This is because they influence banks’ funding costs and are commonly used in the discounting of nonperforming loan recovery values. It is also because some loan covenants become less effective when interest rates, and hence contractual repayments, are very low. In general, distinguishing viable from less viable business becomes harder.”

http://www.bis.org/publ/work628.pdf

#168 espressobob on 06.28.17 at 6:02 pm

#91 Shawn

Excellent point. I’m sure as you do, commodity plays are pointless. Short term nonsense that generally underperform global index investors over the long haul.

Me thinks Bogle would approve.

https://en.wikipedia.org/wiki/John_C._Bogle

#169 espressobob on 06.28.17 at 6:34 pm

#124 Ace Goodheart,

Seriously? Maybe you would share your trading picks in advance with us dumbasses since you know more than we do?

This would be most amusing.

#170 Deplorable Dude on 06.28.17 at 6:34 pm

#126 James on 06.28.17 at 12:57 pm

“What has become of the GOP”

There is no GOP or Democrats it’s an illusion for the voters…they are all swamp creatures….beholden to same lobbyists who pay for the their election campaigns.

In reality there is only one party….the Uni-Party.

To quote the from the link below.

‘The legislative priorities of the UniParty are driven by lobbyists. Those same lobbyists remain in place regardless of election outcomes. The lack of forward progress on Trump economic policy initiatives is specifically because congress doesn’t set the legislative priorities, the lobbyists do.’

https://theconservativetreehouse.com/2017/06/21/the-politics-of-professional-procrastination/

#171 Ace Goodheart on 06.28.17 at 7:19 pm

#169 espressobob on 06.28.17 at 6:34 pm
#124 Ace Goodheart,

“Seriously? Maybe you would share your trading picks in advance with us dumbasses since you know more than we do?

This would be most amusing.”

I don’t think you guys are dumbasses. Quite the contrary. Among the various places I like to visit on the net, the comments section of this one is particularly good for stock tips.

I’m just trying to figure out how someone makes 6% per year on an ETF only portfolio. I can’t do it (maybe I’m a dumbass, quite likely). I have been able to make 4% on a 60/40 split ETF portfolio, well diversified. That is about it. I can make much more just playing around in the markets.

I can’t share stock tips directly on here. That is apparently against the law.

Oh well.

Troll the net for all the finance forums and read them. There are tons. You find lots of good stock tips if you dig a little.

#172 Ronaldo on 06.28.17 at 10:56 pm

#153 Mark on 06.28.17 at 4:07 pm

“And higher to come. Near par by years end along with rise in precious metals. Banks will take a major dip. At least that’s what my crystal ball shows. Time to readjust the weightings in the portfolio.”

Woah, are you nuts? We still have to go through at least 2 rate cuts (maybe into NIRP). And precious metals seem to just be treading water. Par would be nuts, but probably not in the cards this year unless the Canadian housing crash accelerates dramatically.
—————————————————————
Have been called worse by better men. Talk to you in November and see how things are progressing then.

#173 WUL on 06.29.17 at 12:09 am

Inflation. The cost of public celebrations such as Canada Day on The Hill. Security costs. Calgary is considering hosting the ’26 Winter Olympics. The pro forma security costs are higher than the entire ’88 Olympics. Buck up taxpayers.

#174 jess on 06.29.17 at 7:43 am

122 InvestorsFriend on 06.28.17 at 12:19 pm

2006:1 1.36 ………………..2010:1 10.02
Delinquency Rates
All Banks, SA
https://www.federalreserve.gov/releases/chargeoff/delallsa.htm

https://fred.stlouisfed.org/series/DRSFRMACBS?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=categories