Entries from November 2017 ↓

Desperation

Poor Evan. Herewith his tragic story unfolds, in four emails.

Monday night, urgent to Garth:

I don’t know how quickly you answer but tomorrow is the day I draft a purchase agreement for a house purchase.

I’ve become an addict of reading your blog the last two weeks and mainly because I’m about to purchase a house and I’ve become worried so much after reading your blog! My girlfriend and I have lived at home till now (32 & 33yrs old) and are dying to move out and “get life started”. Two months ago we decided the market has seemed to cool and were both ready. We had hell of a time deciding where to live because of the costs, being close to family, a commutable area for both of us as we work in opposite directions and where we want to be for the next ten years for children and so forth.  We found a home we want to buy, she’s fallen in love with it and we have the chance to buy it without real estate agents for a slight discount (if that can even be said and I don’t believe it its one, just the seller trying to pocket even more). The thought of delaying getting our life started scares us both. We want a house to call home and we both hate the idea of renting where we cannot call it home and can never do what we want as it belongs to someone else. It doesn’t match us well. If we buy this home then we want to plop down for the next ten years and call it our own at least.

We both have savings over 350k combined and have a combined salary currently at 160k as an engineer and health inspector. How bad of a decision am I looking at for buying a house now and carrying a mortgage of 600k and not looking to move for at least 10yrs? We NEED a place to call home, we both want a family SOON and the thought of waiting for the market to play out is lost time in getting life started at our age which should be sooner than later. I’m worried that if I let this house go it will be a regret.

I’m stressing and have gone back and forth if I should do this tomorrow. Don’t know if you reply to these emails of desperation but thought it might be worthwhile to see if you were able to respond.

My sympathetic, empathy-drenched response:

Why do you need to purchase right now? You know rates are going up, mortgage regs are about to change, and that all houses are cheaper in January.

Stop being so wussy and emotional about this. Your life doesn’t start when you get a $600,000 mortgage on a house that may be worth less in a few months. Screw your silly head back on.

Emotionally-crippled Evan eked out a reply:

Wow you responded! I know my emotions have really got me going on this. Hence me sending this email at this time of night!

Yesterday I told her no to the purchase and explained why, today I reverted and said we just need to not keep our eggs in one basket and diversify and go ahead with the purchase. Tomorrow I may revert back with a no (on her birthday no less). The emotions have taken control on losing the house that we’ve “fallen” for and would hate to be wrong on this.

I could tolerate a 5% correction in 2018 for the sake of buying the home we want but not the outcome that you’re predicting. That would devastate her and I.

And, this morning, this arrived:

On the way to the bank I told her that I didn’t want to go through with it this morning. I devastated her and made my gf enraged on her birthday….. sucked really bad but I really hope we’ve done the right thing by not buying this house. She believes that we’ll never find a house that fits what we need again.

I’m hoping that we can buy a place come next March/April as it seems to be an almost must for her. Renting is off the table as well. Here is to hoping you’re right! I think my relationship sort of depends on it!

Is Evan sleeping alone tonight? Maybe every night until there’s an accepted offer? Sounds like that’s where the relationship is headed – suggesting poor Evan has a girlfriend problem, not a real estate one.

There are a few reasons I am boring you with my correspondence. Primarily to provide a first-hand account of what a house can do to healthy brains. It eats them. Owning a home with a giant, throbbing, rate-sensitive mortgage on it becomes the holy grail of existence when, of course, it’s only shelter. For Evan to equate property ownership with ‘starting his life’ at age 32 is beyond pathetic. So much for the frolicking liberty, inhibition, risk-taking and adventure-seeking years of his youth. The dude just wants to turn into his parents. Nobody needs to own a house to (a) get married or (b) have a kid. Just to get bedded, apparently.

Second, this is what helo parents end up with when they keep their kids locked in the basement well into their thirties. All that mothering, cloistering, cocooning and sheltering is creating a generation of dependents who need to slide from one bosom to another. Listen, moisters. There is nothing scary about independence. Nothing wrong with renting. Nothing to be gained (except a bigger down payment) from living endless Groundhog Days in the place where you were born. Adulthood starts when you become an adult, not when your folks let you out.

Third, Evan couldn’t stand more than a 5% real estate correction? Yikes. Don’t buy. 2018 is going to turn out to be one scary year for residential real estate in some markets as mortgage rates increase, the stress test is established and inventory swells this spring. Anyone rushing to buy in 2017 with less than 20% down should plan on losing it.

Fourth, sex and realtors don’t mix. Any relationship that depends on you buying a $800,000 piece of property for a person you haven’t married and don’t even live with yet is destined for a fail. She doesn’t want you, Evan. She’s hot for quartz and hardwood.

This morning in the car when you triggered her was the moment your life began. Now go home and do it to mom. Then email me like a man.

Gross

Normally, it’s a good idea not to discuss things you’re ignorant about. Like how pre-pubescent girls feel. What drives people to get so damn much life insurance. Why anyone cares about Meghan Markle. How parents could buy an evil doll named Cayla. Why people cry when they’re happy. Where NDP supporters come from. Who the hell Noah Cyrus is. And bitcoin.

The digital, doesn’t-actually-exist, alternative currency didn’t quite make it to $10,000 a unit on Monday. But close. Stunning. Bitcoin has added 45% in two weeks – something which took the US stock  market three years to achieve. It’s ahead 17% since…Friday, for god’s sake. Some people say once the $10,000 mark is reached, the thing will move in staggering multiples. Meanwhile the volatility of bitcoin has touched 100%. And you thought Donald Trump was unpredictable.

As Bloomberg reported yesterday, when the chart below was published, bitcoin – the love money of the dark web, hacker-ransomers, online drug dealers and sex slave traffickers (as well as Microsoft, Intuit and PayPal) – now has a bigger market capitalization than 470 companies listed on the S&P 500. Next month a major bitcoin futures exchange opens, allowing Wall Street monoliths and pro traders to move in and shellac the newbies and tech boys.

Maverick Toronto real estate broker Alex Prikhodco is a bitcoiner, and has been so since 2012, when one was worth a measly $200. “As a programmer I looked into the algorithm and I got absolutely fascinated with the way it worked,” he tells me. “Whoever came up with that was an absolute genius! Nothing like this has ever been done before. I told some of my friends that I bet bitcoin is going to be worth over a $10k a pop at some point and possibly much, much higher, not a question of if, but a matter of when. People laughed at me of course, much like they did when I was telling people real estate is gonna crash shortly.”

Prikhodco admits bitcoin is risky, and he would never touch it for his RRSP. Plus, yes, it’s in a mother of a bubble – but one with the potential to increase by a factor of (maybe) 27. We should note here that the dude is also an urban survivalist who owns gold, guns “and a decade worth of ammo.” That’s a lot of squirrels, or whatever he plans on stalking.

Here is why bitcoin is less risky than Canadian real estate, however: “Most people who hold bitcoin are not leveraging 10 to 1 to buy bitcoin (unlike real estate). Real estate is overvalued not because of what an average family can or can’t afford (which is irrelevant), but because people bought a bunch of real estate they CAN’T afford for the single purpose of speculation and signed up for loans they’ll never be able to repay. And now we see the results of that. “

But what about bitcoin being a digital entity, only worth something as a commodity, or holding purchasing power, when there’s electricity, a server, a functioning Internet and your iPhone is charged?

“If internet goes lights out, so would the banks, ATM’s, Interac payments, stock market, cell phones, traffic lights, subway system, electricity supplies, real estate, toilet flushing (remember 2002 blackout?) and the most important thing to us all – your blog, that we will all dearly miss. Bitcoin is not the only thing that relies on the internet, far from it. If internet goes out – life as we know would be unimaginable and losing some bitcoin would be the last thing on your mind.”

Prikhodko (and others surfacing here to shed expert light on cryptocurrencies) admit the next surge in technology could result in a better digital store of value, rendering bitcoin obsolete in a hurry. Governments could outlaw it in unity, fearing the impact on fiat currencies and central banks. Snaky people could corner the bitcoin mining business. And wild, unbridled, unregulated speculation, reminiscent of stock markets a century ago, could simply blow the thing up should a wave of shorts move in.

Remember what JPMorgan boss Jamie Dimon said after calling bitcoin a fraud: “If you’re stupid enough to buy it, you’ll pay the price for it one day. The only value of bitcoin is what the other guy’ll pay for it. Honestly I think there’s a good chance of the buyers out there are out there jazzing it up every day so that maybe you’ll buy it too, and take them out.”

Dimon’s a financial genius, by the way. And he’s right. Bitcoin has a far greater chance of going thermal than it ever does of replacing the US currency.

But, wow. It’s now worth about $150 billion. Ten grand a coin seems reasonable this week. Maybe tomorrow. Or by the time I finish this sentence. Believers like Prikhodko say that’s less than two-tenths of one per cent of the world economy, so stop sweating things. Lots more to come because hundreds of millions of people no longer trust paper money. And when parents buy toddlers dolls that are Bluetooth-enabled with online AI functions, anyone born after 1990 is best suited to, you know, blogging about dogs.

I’ll shut up now.