Karma

Human nature is the enemy of financial success. We’re emotional, easily swayed by the opinion of others, so we suck when it comes to success. When others rush in and prices rise, we follow. When people retreat and things decline, we hide. Invariably we buy high and sell low. It helps explain why just thirty-six million people have $2 trillion in household debt, why a fifth have nothing saved, 70% are worried about retirement but doing squat about it, home ownership rates are extreme yet houses are unaffordable.

People usually fail because they’re financially illiterate and make bad decisions. But, being human, they shift the blame.

In Canada, after a decade-long real estate orgy in which families loaded up on debt as never before because it was so cheap, forcing house prices to record levels, a crap property in a big city like Toronto, Mississauga, Vancouver or Victoria costs $1 million. It’s an economic and social morass. A crisis, even. Billions that should be saved, invested and put aside for decades to come are being plowed into a single asset. Young couples are shut out. Children delayed. An unsustainable situation created.

And we did it to ourselves.

This blog has told you for years what’s happening, and why. House lust, illiteracy, greed, speculation, FOMO and an unhealthy attitude towards debt created this mess. It was not guys from China, Iran, Seattle or some other province. It was you.

The proof is now in.

BC’s the epicentre, where politicians got elected telling voters that foreign buyers were responsible for stupid house prices. By taxing them into oblivion, the new government said, prices would fall. Middle class people could buy again, just like it was 1985. That was despite evidence locals were responsible for 95% of transactions across the province. But sometimes facts don’t matter. So eight in ten citizens blame others, not themselves.

The foreigners, scant before, are now gone. In the first six months of 2018 offshore buyers all but disappeared from the Lower Mainland, where 99% of property transactions were local-to-local. Across the entire province the number of non-residents purchasing real estate was a paltry 1.9% – down from an insignificant 3.3% at the end of 2017. In half a year there were fewer than 250 sales involving foreigners. Compare that to 35,600 sales in 2017 in Vancouver alone.

So have prices dropped, even as the real estate market’s been rocked by higher anti-Chinese taxes, mortgage restrictions, a speculation tax on Albertans, an empty-houses levy penalizing part-time residents, a special tax on more expensive homes and an open anti-foreigner campaign including calls for a total ban?

Nope. The benchmark price in Vancouver, at $1.093 million, is 10% higher than a year ago and has hardly shifted all year. Yes, sales have dropped – but far more than the total number of foreign buyers. Meanwhile condo prices have inflated dramatically and detached values fallen – entirely consistent with a population base that can no longer afford its own housing. As sales fall, listings rise. Existing owners, in other words, cannot find buyers willing (or able) to pay. These people are priced into their own properties, while the buyers are priced out.

Meanwhile the fiction continues that external factors caused this mess. Insights West found 84% of Van residents blame Chinese dudes for a housing crisis. It’s a finding the pollster himself called “misguided.”

This weekend I received the note below from Angela.

“I am 30 years old, no debt, $20,000 saved. Once my career gets going, I am expecting to be bringing in $3,000 after tax a month. My boyfriend should soon be matching that. My salary is on a grid and hopefully will work its way up to close to $100,000 in 6 years.

“I am not against renting, when I tell people this is my plan once my income is more steady (currently I am supply teaching), they look at me all sad (puppy dog eyes and all). I am very educated and am working on a second math degree, I am not stupid and understand numbers, something most of them do not. I know renting is the key to being financially stable, but is it for the rest of my life? At what point can a couple or family own a home without digging themselves in a hole they can never escape?”

Given what people have done to themselves, Angela, given the debt they have swallowed, the rashness of their actions and the gamble they have taken, you’re on the best path. This market will not last. The emperor has no clothes. The gasbag will deflate.

The cost of money will continue to rise, household finances will degrade, confidence will falter and house prices will correct. With nothing but air underneath and equity blowing away, there may come a day people wish they hadn’t shamed those who wanted to move here and be their neighbours. But I doubt it.

133 comments ↓

#1 Alex on 08.19.18 at 3:40 pm

That’s the old school Garth I’ve been waiting for!

Doom and gloom for the housing market.
I have a feeling the stock market will be taking a far bigger correction. So where does that leave us to keep our money in?

With global economic expansion, rising inflation and record corporate profits, why would stocks decline? – Garth

#2 ByeByeVan on 08.19.18 at 3:48 pm

Vancouver is dry and brown. It ‘s honestly worse than Los Angeles which is actually a desert. Try to find a nice green grassy spot for a picnic in a park in the summertime… when you find one, let me know. I can’t wait for the rain so that this city looks decent again.

#3 Nova Johnny on 08.19.18 at 3:58 pm

I agree with the Boss (Garth) on much of what he says. One thing concerns me that I have never heard him mention. If real estate tanks, how much exposure do the Canadian banks have on their balance sheets. Lots, I suspect. So is the same thing going to happen here that happened during the GFC in 2008 to the US banks. Are they going to need bailouts? Probably. Will this “extra” money that the government will be forced to create out of thin air affect the purchasing power of our retirement dollars. I suspect it might. Since we are not a global reserve currency, like the US, is it possible that we could see a large currency devaluation here in Canada? No one knows for sure, but if real estate tanks, so will the banks. Then what do we do?

#4 akashic record on 08.19.18 at 3:59 pm

I am looking at properties in various Mediterranean countries, by the sea, and the Toronto, Vancouver property prices don’t seem to be outrageously out of line.

2 bedroom condo rentals vary between 1K-2K Euro (CAD 1.5K – 3K) per month.

#5 Penny Henny on 08.19.18 at 4:04 pm

Hey Smoking Man.
The bungalow at 59 James St finally sold (4 months on the market) for $860k.
Not as much as you got but it was also not as nice. It was also a FSBO

#6 YVR2ZRH on 08.19.18 at 4:15 pm

I hear Garth and his constant message that the foreign buyer was not the problem. However, their impact on the market was very big. They were the largest players in the $3M+ segment and the primary reason property prices were being fueled at the top end.

At the bottom end, prices were being fueled by house lust and cheap credit – – plus – – the money from bank of M&D – – who were being funded by the Chinese dude.

Now that the Chinese dudes are out – B20 is in, the Spec tax is in and the empty homes tax is in – – the market is toast and being torpedoed. People should celebrate this. The government can create an environment of promoting the market or trying to kill it. Right now – the people have demanded it be killed and this is just the way it is.

I know you should be careful what you wish for but if the market were to fall by 50% – I think the majority of residents in the province of British Columbia would be fine with that.

Prices have not fallen so much yet- but the trend is in, condos are finally showing inventory increases, and the top end (the area the Chinese dudes had the largest impact) has been dead for 18 months. Prices at the top are down 10-15% – – So – one cannot say that the tax had no impact. The tax will kill the top and B20 plus interest rate moves will kill the bottom.

So – one cannot claim the foreign buyer tax had no impact – – it did for sure – – but the B20 and interest rate rises will take care of the rest of the market movements.

#7 casta on 08.19.18 at 4:28 pm

While I don’t think foreign buyers are a significant factor in our current housing crisis, it does appear that adding 330,000 + new Canadians a year through immigration is definitely going to have an impact on housing supply, especially in the GTA where many choose to settle. This is not an anti-immigration statement, just a fact. The rate of new housing development in the GTA can not keep up. And yes, many new Canadian families can not afford to buy a home on their own when they come to Canada, but it is becoming much more common for several families to purchase a home jointly. On my street alone, there are at least 3 multi-family dwellings (These are standard single family homes). This continuous demand is why the market is not going to collapse as you suggest; based on the numbers, there is just not enough housing to supply increasing population numbers in the GTA. I do expect housing will remain flat for several years though, as it was increasing at an unsustainable rate, it just won’t drop to the levels you imply in most of your commentary.

I do not imply, nor have I forecast, collapse in the 416, but a long melting process. Elsewhere expect bigger trouble. – Garth

#8 I’m stupid on 08.19.18 at 4:31 pm

#4 Akashic record

I am looking at properties in various Mediterranean countries, by the sea, and the Toronto, Vancouver property prices don’t seem to be outrageously out of line.

2 bedroom condo rentals vary between 1K-2K Euro (CAD 1.5K – 3K) per month.

– ————-

So you’re comparing beach side Realestate in probably touristy hot spots to Realestate in Toronto and Vancouver. That’s a great comparison lol.

If you’re going to make comparisons you need to look at Price/rent or price/income or rent/income ratios of various places.

#9 Windsor guy on 08.19.18 at 4:37 pm

am looking at properties in various Mediterranean countries, by the sea, and the Toronto, Vancouver property prices don’t seem to be outrageously out of line.

2 bedroom condo rentals vary between 1K-2K Euro (CAD 1.5K – 3K) per month.

How can u compare a Mediterranean country by the sea with a canadian city?

#10 Catalyst on 08.19.18 at 4:42 pm

‘I know renting is the key to financial stability’

Totally wrong. I think many people conflate this blog with anti-ownership. The message is balance which means if you can afford it, if you are settling in a community for a while (5+ years) it may be better to buy. Grow your earnings, focus on the family, dont fret about housing so much.

#11 Stan Brooks on 08.19.18 at 4:52 pm


And we did it to ourselves.

I don’t think so. Who is ‘we’? I certainly did not and have no intention to pay for the fallout.


https://ca.finance.yahoo.com/news/canadas-big-banks-building-capital-cushion-case-housing-crash-moodys-150119263.html

While the basket of lenders may be better prepared to absorb losses from a housing shock, the Moody’s stress test found aggregate losses from the stress tests jumped from $12.1 billion in 2016 to $14.3 billion in 2018.

Banks are preparing for something big.

Now imagine for a moment what the fallout could be in the insured mortgage space, where liability is on CMHC and Co, all 1 close to trillion of it/insured mortgages.
200 billions?

Now an interesting question is what do you do if you have substantial amount of cash with the current bail-in legislation (in the ‘unlikely’ event of the crap hitting really the fan), do you buy government bonds yielding minus 50 % in real return in the next 10 years or have some serious nervous breakdown in the coming shaky times.

I would be monitoring capital outflows closely.

I don’t think BoC can isolate itself from US Fed policies and it becomes highly likely we hit the wall in the next year or two, big time. No high chance of US reversing monetary policies by that time, they might go away with mild recession. But the great white north?

Fun times ahead.

#12 The Greater Cauliflower on 08.19.18 at 4:54 pm

Garth, I respectfully disagree with some of your report.

FACT:
Foreigners are registering numbered companies in BC and buying properties using these shell companies. When the sale is recorded, the buyer(ie. numbered company) is considered as ‘local’ therefore obfuscating the true foreign ownership.

When the facts you know aren’t facts you like, make up your own. – Garth

#13 Calvin on 08.19.18 at 4:56 pm

This is a good explanation of the difference in thinking between a liberal and a conservative.

A young woman was about to finish her first year of college. Like so many others her age, she considered herself to be very liberal, and among other liberal ideals, was very much in favor of higher taxes to support more government programs, in other words redistribution of wealth.

She was deeply ashamed that her father was a rather staunch conservative, a feeling she openly expressed. Based on the lectures that she had participated in, and the occasional chat with a professor, she felt that her father had for years harbored an evil, selfish desire to keep what he thought should be his

One day she was challenging her father on his opposition to higher taxes on the rich and the need for more government programs.

The self-professed objectivity proclaimed by her professors had to be the truth and she indicated so to her father.

He responded by asking how she was doing in school.

Taken aback, she answered rather haughtily that she had a 4.0 GPA, and let him know that it was tough to maintain, insisting that she was taking a very difficult course load and was constantly studying, which left her no time to go out and party like other people she knew. She didn’t even have time for a boyfriend, and didn’t really have many college friends because she spent all her time studying.
Her father listened and then asked, “How is your friend Audrey doing?”

She replied, “Audrey is barely getting by. All she takes are easy classes, she never studies and she barely has a 2.0 GPA. She is so popular on campus; college for her is a blast. She’s always invited to all the parties and lots of times she doesn’t even show up for classes because she’s too hung over.”

Her father asked his daughter, “Why don’t you go to the Dean’s office and ask him to deduct 1.0 off your GPA and give it to your friend who only has a 2.0. That way you will both have a 3.0 GPA and certainly that would be a fair and equal distribution of GPA.”

The daughter, visibly shocked by her father’s suggestion, angrily fired back, “That’s a crazy idea, how would that be fair! I’ve worked really hard for my grades! I’ve invested a lot of time, and a lot of hard work! Audrey has done next to nothing toward her degree. She played while I worked my tail off!”

The father slowly smiled, winked and said gently, “Welcome to the conservative side of the fence.”

If you ever wondered what side of the fence you sit on, this is a great test!

If a conservative doesn’t like guns, he doesn’t buy one. If a liberal doesn’t like guns, he wants all guns outlawed.

If a conservative is a vegetarian, he doesn’t eat meat. If a liberal is a vegetarian, he wants all meat products banned for everyone.
If a conservative is down-and-out, he thinks about how to better his situation. A liberal wonders who is going to take care of him..
If a conservative doesn’t like a talk show host, he switches channels. Liberals demand that those they don’t like be shut down.
If a conservative is a non-believer, he doesn’t go to church. A liberal non-believer wants any mention of God and Jesus silenced.
If a conservative decides he needs health care, he goes about shopping for it, or may choose a job that provides it.. A liberal demands that the rest of us pay for his.
If a conservative reads this, he’ll forward it so his friends can have a good laugh. A liberal will delete it because he or she is “offended.”

#14 Damifino on 08.19.18 at 4:59 pm

#6 YVR2ZRH

…if the market were to fall by 50% – I think the majority of residents in the province of British Columbia would be fine with that
—————————–

Of course they would. Who wouldn’t love to shed that burdensome ‘wealth effect’ and get the chance to write a huge check to the bank at their next morgage renewal?

#15 Danny on 08.19.18 at 5:01 pm

Garth usually I quote one of your sentences before I begin my rant….but…..there were so many truthful facts today, I could only repeat your whole blog.

So all I can say is that the madness continues in Etobicoke for condos. We have been renting for 2 years in a rent only high rise tower where 3 rental towers are located.
We were hoping that condo prices would have come down in Etobicoke….but….nope.
They have gone up between 25 and 30 percent in the last year.
In particular one high rise condominium building which mostly seniors buy into has skyrocketed….this year.

One unit we really liked…2 bedrooms and two bathrooms…1,000 square feet which….2 years ago were selling for just over $500,000 just sold in just one week for the asking price of $750,000….yes wow….and at least last another 6 units sold very high in just the last month.

Is this just a consequences of Boomers in Etobicoke selling their 70 year old ranch bungalows for about $1,2000,000…..and paying much more for condos because they still are hitting the jackpot with their sold houses?

It sounds like what you said before…..the boomers are mainly to blame for high real estate prices….not immigrants and foreigners…..as Howdy Doody Doug Ford seems to be blaming.

There are too many boomers making millions on old basement flooding bungalows who are definitely not tight about their new money….when it comes to buying condos in their old stopping ground of Etobicoke.

Thank heaven for the very few fairly new rent only high rise in Toronto which the City is requiring of some new developments, otherwise…..renters are going to be squeezed out of private condos if prices keep rising.and their condo owners sell.

Were will the tenants go?

Will Ford help the “little guy “…..I won’t hold my breath.
He is just starting up his demolition crew against renters.
It won’t be long before his big developer friends who enriched his campaign start to ask for their end of the bargain.

Otherwise why move so fast on…….Smaller Toronto City Council……becsuse it…….means fewer Councillors needed to support big development!

And these smaller number of Councillors will in a year later give themselves a huge pay increase for themselves and their future larger staff!

If Ford is really concerned about costs….why didn’t he just freeze the cost to run Council….for many years?
The Province eventually controls municipal budgets….so why the “Bully “…..attitude?

#16 Oakville Stinks on 08.19.18 at 5:01 pm

I predict a recession by this time next year. Yield Curves Are inverting and the economic numbers they’re spewing out are just as fake as TREB’s.

The recession will bring the crash in the housing market here in the GTA. 5 years from now houses will be at 50% of what they are today!

#17 Stone on 08.19.18 at 5:02 pm

#3 Nova Johnny on 08.19.18 at 3:58 pm
I agree with the Boss (Garth) on much of what he says. One thing concerns me that I have never heard him mention. If real estate tanks, how much exposure do the Canadian banks have on their balance sheets. Lots, I suspect. So is the same thing going to happen here that happened during the GFC in 2008 to the US banks. Are they going to need bailouts? Probably. Will this “extra” money that the government will be forced to create out of thin air affect the purchasing power of our retirement dollars. I suspect it might. Since we are not a global reserve currency, like the US, is it possible that we could see a large currency devaluation here in Canada? No one knows for sure, but if real estate tanks, so will the banks. Then what do we do?

———

Have a balanced and globally diversified portfolio of ETFs that pays regular distributions in a tax efficient manner. Then, you won’t need to care. Easy peasy.

If you’re not interested in that, then, by all means, prepare for the pending apocalypse. LOL

#18 Stone on 08.19.18 at 5:05 pm

Meanwhile the fiction continues that external factors caused this mess. Insights West found 84% of Van residents blame Chinese dudes for a housing crisis. It’s a finding the pollster himself called “misguided.”

———

Only 84%? That seems low. I guess the other 16% are the Chinese dudes. LOL.

Yeah, I’m still laughing.

#19 Alex on 08.19.18 at 5:10 pm

That’s the old school Garth I’ve been waiting for!

Doom and gloom for the housing market.
I have a feeling the stock market will be taking a far bigger correction. So where does that leave us to keep our money in?

With global economic expansion, rising inflation and record corporate profits, why would stocks decline? – Garth —

Garth:
Trump losing the senant & the house.
Trade wars
Terror acts
Global debt at all time high
Global interest to fulfil debt repayment will be at all times high.
Weather forecasts for the next 4 yrs could lead to droughts in some emerging markets
China financial crisis
Saudi and other Mid East countries turning their backs on us.
Trudeau

There could be as many reasons to say why it wouldn’t crash as there is to say it would.

What makes Canada any different than Turkey ?

If you worry about things you cannot know or foretell, have a balanced, globally diversified and liquid portfolio. – Garth

#20 Stan Brooks on 08.19.18 at 5:12 pm

#9 Windsor guy on 08.19.18 at 4:37 pm

I am looking at properties in various Mediterranean countries, by the sea, and the Toronto, Vancouver property prices don’t seem to be outrageously out of line.

2 bedroom condo rentals vary between 1K-2K Euro (CAD 1.5K – 3K) per month.

How can u compare a Mediterranean country by the sea with a canadian city?

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

Most Mediterranean countries – Spain, France, Italy (not to mention Greece, Turkey) have much lower rents than 2 k Euro, in fact less than 1 K Euro even less than that if not directly by the sea.

For that money (1.5 k) you are lucky renting basement ‘apartment’ in GTA.

Nobody in the whole wide world except Canada lives in basements.
This is due to the fact that we have shortage of land (beep, that was the BS sound indicator), in fact due to our exceptional stupidity.

Now next step is to compare prices with Paris, London and Hong Kong and state that our basement apartments should cost more than penthouse on Mayfair.

Look at incomes boy and at cost of living.
Do you know what is the price of (real, not artificial GMO full with pesticides) food in Europe? 1/2 to 1/2 of of that in Canada.

Sure.

#21 Richard on 08.19.18 at 5:15 pm

Your comment to writer #1 “why should stocks decline” You have not read your guest blogger of yesterday and if you did you don’t agree with his comments of a declining market in 2019-20.

It’s not 2020. – Garth

#22 Fluorine on 08.19.18 at 5:19 pm

Calvin

… and a free thinking centrist will ignore it as the nonsense it is.

There are more than two sides to choose from, including choosing no side at all… which the vast majority of any population falls into, despite the massive social and political pressure to become polarized and factional.

#23 Where's The Money Greedo? on 08.19.18 at 5:22 pm

“So have prices dropped, even as the real estate market’s been rocked by higher anti-Chinese taxes, mortgage restrictions, a speculation tax on Albertans, an empty-houses levy penalizing part-time residents, a special tax on more expensive homes and an open anti-foreigner campaign including calls for a total ban?

Nope. The benchmark price in Vancouver, at $1.093 million, is 10% higher than a year ago and has hardly shifted all year. Yes, sales have dropped – but far more than the total number of foreign buyers.”
+++++++++++
I guess there’s 2 sides to this story-the realtor lies and the truth:

https://vancouversun.com/business/local-business/some-realtors-believe-major-price-correction-underway-in-metro-housing-market?video_autoplay=true

So who is telling the truth? My guess NOT the realty board of liars….

#24 Linda on 08.19.18 at 5:37 pm

Angela, you can still purchase a house if you want to. What you may have to do in order to be able to afford a home of your own is look at purchasing in places where home affordability is still in existence. So forget YVR or GTA unless or until the housing market melts like snow in a chinook. If that never happens & you are set on living in either of those locales, your choices right now are to somehow get approved for debt slavery for life or rent.

Renting is the way to go & use that time wisely. If you don’t know what you like, try renting various styles of housing – condos, townhouses, two story, split level, bungalow etc. Obviously not all at once, but explore what type of housing truly works for you & take the time to determine whether you are an inner city or suburb type or even someone who doesn’t want big city living.

As for purchasing, look around to see whether deals are out there – deals like houses being auctioned off for non-payment of property taxes, foreclosures & the like. Sometimes builders go under & the property they control is auctioned off. Don’t disregard the possibility that a fully serviced lot in a good location could end up being where you build & live. Also explore prefabricated housing manufacturers. I’m not talking a trailer but an actual erectoset style of house. Green Terra Homes is a Canadian company that uses steel framing & has an intriguing selection of ‘green’ housing options. There are many other manufacturers whose products may be what you are looking for.

Yes, all this research will take time & effort, but should an affordable buying opportunity present itself knowing what you want will be invaluable. If nothing else you should have a good grasp of housing prices & know whether that ‘deal’ really is a deal or just a sucker bet. Good luck!

#25 Mom and Dad on 08.19.18 at 5:41 pm

Sorry about the late payments on that loan you gave us for the down payment to buy the house.

We can’t afford to pay you back anymore.

Whoopsie!

#26 oopswediditagain on 08.19.18 at 5:44 pm

https://vancouversun.com/business/local-business/some-realtors-believe-major-price-correction-underway-in-metro-housing-market

“There has been a drop of 25 per cent in average home price and 22 per cent drop in median home price since the highs of 2017, according to Bonner.

“Detached, attached and apartments on the west side are now all experiencing price reductions and while this is creating good buying opportunities, buyers are holding off in anticipation of further declines,” Bonner wrote to clients in a note.”

#27 Where's The Money Greedo? on 08.19.18 at 5:45 pm

Garth I think you should enlighten us on the rules behind bail-in legislation mentioned by a previous commentor, give a laymen’s view and what it entails for our savings in banks and inflation and the devaluation of the Canadian dollar.
I find it hard to understand all the scenarios that could befall savers and their money in the banks in our country.
Thanks.

Done several times already. There would be no impact on depositors. Besides, will never happen. Not even close. – Garth

#28 A. Anyong on 08.19.18 at 5:50 pm

I don’t think it is going to matter much how educated we are regarding saving money to purchase a house since Global Warming is heading in the direction it is. Doesn’t this present climate remind one of the 1930″s?

#29 Dolce Vita on 08.19.18 at 5:55 pm

A lot of push back today Garth, you unsinkable guy.

RE is like a pyramid scheme. For those at the top to cash out, many more need to come in at the bottom. That isn’t happening, so it’s frozen for now until something happens to make people sell at any price, typically some type of economic shock.

Garth you talk slow melt, yet give no evidence which is unusual for you. As I posted a couple of days ago the 1980-2011 HPI chart, find me the slow melt in that chart. There is none unless slow = 1.5 to 2 years @ 40% price drops. The bigger the peack, the greater the fall. This peak is gigantor compared to former price peaks.

I agree it will deflate very soon and that will be in 4th Qtr.

If Trump tariffs auto and I believe he will as early as next month [per the level headed Rona Ambrose], then it will be a rush to the turnstiles to get out at any price in 416 Land. Job losses will abound, debt is historic and the result worse than anything we have ever seen in Cdn. RE.

My belief that Trump will tariff Cdn. Auto is based on his doing already doing the unthinkable by tariffing China hard with more tariffs to come for them. If nothing else, Trump is consistent.

#30 KLNR on 08.19.18 at 6:15 pm

@#13 Calvin on 08.19.18 at 4:56 pm

LOL, generalize much? Why does everything have to be BxW with you folk.

#31 AK on 08.19.18 at 6:22 pm

“#19 Alex on 08.19.18 at 5:10 pm
“Trump losing the senate & the house.”

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

LMFAO. Who is he going to lose them to ?? Maxine Waters and the Democrats ??

Good Luck with that…

#32 TRON on 08.19.18 at 6:25 pm

Never assume that Chinese money is smart money. I was told by an anylist with a third party lending hedge fund that the Chinese were convinced by realtors to leverage their first purchase in the Westside market to buy 1 or 2 more properties on speculation. Rising interest rates, stress tests and foreign buyers tax may be why people think prices are going to crash but instead it could be a classic case of following the herd off the cliff.

#33 Bobby on 08.19.18 at 6:27 pm

You are indeed correct Garth. I’m completely surprised at the level of financial illiteracy among Canadians. Here on the west coast a government came to power telling the masses that most everything is free, that someone else will pay and life will be that much more affordable.
However, many are quickly waking up to the reality that it is them that are in fact paying. With the highest gas prices in North America and the soon to be seen skyrocketing car insurance rates, BC is in shock. Where is the $400 rental rebate the NDP promised as rental rates are rising due to the myriad of fees and taxes that have been brought in by this completely incompetent government.

This is going to get ugly really fast and Canadians have only themselves to blame. But of course someone will have to be held accountable. Remember it’s always someone else’s fault. Watch it be the smart person who saved and scrimped, they’ll be the new bad guy.

#34 Lesli on 08.19.18 at 6:27 pm

With global economic expansion, rising inflation and record corporate profits, why would stocks decline? – Garth
///////////////////////////
The same reason a real estate market corrects when it’s Overvalued, Overpriced and the Illusion that prices don’t go down.

Things do not decline just because they advance. Conditions have turned negative for housing and remain positive for equities. – Garth

#35 AB Boxster on 08.19.18 at 6:28 pm

15 Danny on 08.19.18 at 5:01 pm

It sounds like what you said before…..the boomers are mainly to blame for high real estate prices….not immigrants and foreigners…..as Howdy Doody Doug Ford seems to be blaming.

There are too many boomers making millions on old basement flooding bungalows who are definitely not tight about their new money….when it comes to buying condos in their old stopping ground of Etobicoke.

————————————————-
Yes it must the be ‘evil’ boomers again.

It is well known that the boomers all conspired to push up the cost of housing over the past 20 years.
All 9.6 million of them secretly got together and thought of the best way to screw over the next generation.

Deciding not to sell their homes at fair and reasonable prices, not to sell unless they received obscene amounts of money.

And the poor millennial and gen x generation being forced to pay these prices. Forced by the evil boomer generation. Forced by their boomer parents to get into the housing market, no matter what the cost.
Forcing them to take huge cash amounts to enable down payments on their forever dream homes.

Oh the humanity!

And the stupidly low interest rates over the past 15 years, combined with the fact that gen-x or gen-y really don’t care about actually ‘paying’ for anything, (hey it’s fine as long as ‘I can make the monthly payments’), and the fact that the 300K immigrants to Canada settle in only one of two areas (Toronto or Vancouver), and that your generation was willing to pay these stupid prices on 50 year old crap homes, rather than exercise some financial intelligence…
that, of course , had nothing to do with it.

Nope, it was them selfish mean old boomers.

Happy to see that the millennial gen will be willing to sell their houses at a massive discount, in order to be ‘fair’ to the next generation.

As social justice is so important to your generation, we will expect no less.

#36 AK on 08.19.18 at 6:29 pm

#21 Richard on 08.19.18 at 5:15 pm
“Your comment to writer #1 “why should stocks decline” You have not read your guest blogger of yesterday and if you did you don’t agree with his comments of a declining market in 2019-20”
=====================================
Nobody knows what is going to happen in 2020, so it’s a moot point to speculate.

#37 EASY on 08.19.18 at 6:29 pm

With global economic expansion, rising inflation and record corporate profits, why would stocks decline? – Garth

………

they are. International in the red, Emerging Markets in the red. TSX barely in the black

trade wars, skyrocketing debt (this trump administration cant do simple math)

the next black swan is likely debt related and just like 2008 … ‘why would stocks drop’?

YTD gain for the Dow is 4% and the S&P 6.5%. What decline? – Garth

#38 Stan Brooks on 08.19.18 at 6:34 pm


Done several times already. There would be no impact on depositors. Besides, will never happen. Not even close. – Garth

I generally agree with such view.

But it bothers me why there is a need to legislate such scenario, if the case is highly unlikely?

It really is not 100 % clear to me who really controls the cost of money in mid to long term, but it seems the clowns at BoC can only control the cost of money short term via variable rates and the cost of money/interest rates in mid to long terms is really controlled by the Federal Reserve in US through their 10 and 30 years treasure yields and monetary operations and enforced by the banks.

Frankly I am starting to believe that BoC has no influence whatsoever on mid to long term mortgage rates and their ability to suppress mortgage rates in such/raising USD rates environment is very limited.

Considering the likelihood of potential real estate decline by 70 % + in the big Canadian cities, where majority of the risky mortgages are (it declined comparable % in Japan, the world exporter of the last 3 decades and comparable in Ireland) I can’t imagine what will happen in case mass defaults occur due to crashing real estate markets.

One the ‘wealth’ effect from housing disappears… it will be an utter, complete and totally unmitigated disaster.

Don’t ignore the panic elements here, in 2009 Flaherty was able to pull the rabbit out of the hat with the 0/40 mortgages but now my guess is that in case of mass defaults/or lack of buyers banks will simply stop lending as there is no way currently the government can force them to.

And I simply can not see (short of uber inflation and deficits 5 % of GDP) how more buyers can be lured into the already ridiculous housing market.

Bringing more poor immigrants on board will not help as no bank will lend them (rich or even middle class immigrants do not come here any more) and government can not guarantee more fake subprime mortgage through any Ponzi/guaranteed by taxpayers schemes.

I see (probably in my delirium after the 3rd glass of whiskey) the not very unlikely case of completely dead frozen housing and credit markets and severe difficulties for the financial system combined with complete crash of the economy and the currency.

The problem is that 3 drinks mean normally nothing to me and if the chance of the above described crash of markets and frozen economy is even 30 % (in my opinion it is 60 % + and constantly rising) I would not hold anything above 100 k in cash in individual deposit accounts, not to mention that foreign currency deposits /i.e. USD are not insured.

Just my 2 cents.

#39 AK on 08.19.18 at 6:35 pm

#34 Lesli on 08.19.18 at 6:27 pm

“The same reason a real estate market corrects when it’s Overvalued, Overpriced and the Illusion that prices don’t go down.”
====================================

The S&P 500 is trading @ a forward PE of 17.62. How is that overvalued?

You should stop listening to the BS on BNN and CNBC.

#40 jimm on 08.19.18 at 6:44 pm

This blog has told you for years what’s happening, and why. House lust, illiteracy, greed, speculation, FOMO and an unhealthy attitude towards debt created this mess.

…so the BoC and “emergency rates” had nothing to do with it?

Reading comprehension. Fail. – Garth

#41 Stan Brooks on 08.19.18 at 6:47 pm

#29 Dolce Vita on 08.19.18 at 5:55 pm

Agree, I believe the shit show will be comparable in size, maybe even much bigger, but definitely much smellier than the bragging ‘we are different, sound economy’ crap we where fed in the last decade and a half.

Finding somebody to blame won’t solve the problems once hungry retirees storm the parliament and beat the crap out of the french villa guy.

#42 crowdedelevatorfartz on 08.19.18 at 6:48 pm

@#38 AB Boxster
“Happy to see that the millennial gen will be willing to sell their houses at a massive discount, in order to be ‘fair’ to the next generation.

As social justice is so important to your generation, we will expect no less.”

+++++++

from one evil Boomer to another…..

Well said.

#43 Stan Brooks on 08.19.18 at 6:52 pm

Lovely:

https://ca.yahoo.com/news/prime-minister-justin-trudeau-march-153835135.html

#44 Binder Dundat on 08.19.18 at 6:53 pm

@#13 Calvin

The next time you feel the need to rip off someone else’s writing from a Buisiness Insider article dates six years ago…. just don’t.

https://www.google.ca/amp/s/amp.businessinsider.com/liberals-vs-conservatives-2012

#45 Andrewt on 08.19.18 at 7:03 pm

#22 Fluorine on 08.19.18 at 5:19 pm
Calvin

… and a free thinking centrist will ignore it as the nonsense it is.

There are more than two sides to choose from, including choosing no side at all… which the vast majority of any population falls into, despite the massive social and political pressure to become polarized and factional.
—-
Amen to that! The shortsightedness of people who believe in a mythical scoreboard somewhere that counts points in a “libs vs cons” game is ridiculous.

#46 Yes Prices have Dropped on 08.19.18 at 7:18 pm

“So have prices dropped, even as the real estate market’s been rocked by higher anti-Chinese taxes” “Nope”

Excuse me?

Vancouver Detached average sales price fell 16% year over year in July. Median sales price registered a 3% decline.

Benchmark prices have not moved. Thus, affordability has not improved. And yet the evil foreigners are gone. Who will you blame now? – Garth

#47 How much fool on 08.19.18 at 7:21 pm

When was the last time Vancouver single family homes sold for 20% below assessed value?

Currently happening as I recall.

#48 This smells like foreign money on 08.19.18 at 7:28 pm

Foreign buying was as high as 18% in Richmond pre NDP.

400 Billion and some change in BC Property registered to corporations protected behind local law firms.

Several more hundred billion tied to smurfing operations by supposed “locals” acting on behalf of oversea buyers.

Students and homemakers (primary occupations listed on land title) apparently can afford 30 million dollar homes in Vancouver.

It never ends.

When 95% of overall YVR buyers are locals it seems more constructive to talk about them. You drank the Kool-Aide, eh? – Garth

#49 Where's Justin on 08.19.18 at 7:33 pm

Glad Justin is parading around and touring Canada instead of showing up to the table to negotiate and secure the future of Canada.

I guess he has resigned to the fact he ain’t winning the next election and wants to live it up to the fullest.

Party on.

Our country is screwed. We have nobody at the table as debt piles on.

#50 Tedfiftyfour on 08.19.18 at 7:44 pm

#13 Calvin
A conservative apparently knows the minds of others
A liberal doesn’t care to.

#51 Tedfiftyfour on 08.19.18 at 7:50 pm

@#13 Calvin

The next time you feel the need to rip off someone else’s writing from a Buisiness Insider article dates six years ago…. just don’t.

https://www.google.ca/amp/s/amp.businessinsider.com/liberals-vs-conservatives-2012

BIG FAIL CALVIN!

#52 BlogBear on 08.19.18 at 8:02 pm

@#13 Calvin

Not a great analogy at all, plagiarized or not.

Even from the starting point assumes a level playing field…2 people at College…

When in Real Life it’s not for most! Won’t go into the rest!

#53 No RE decline on 08.19.18 at 8:14 pm

7 casta on 08.19.18 at 4:28 pm
While I don’t think foreign buyers are a significant factor in our current housing crisis, it does appear that adding 330,000 + new Canadians a year through immigration is definitely going to have an impact on housing supply, especially in the GTA where many choose to settle. This is not an anti-immigration statement, just a fact. The rate of new housing development in the GTA can not keep up. And yes, many new Canadian families can not afford to buy a home on their own when they come to Canada, but it is becoming much more common for several families to purchase a home jointly. On my street alone, there are at least 3 multi-family dwellings (These are standard single family homes). This continuous demand is why the market is not going to collapse as you suggest; based on the numbers, there is just not enough housing to supply increasing population numbers in the GTA. I do expect housing will remain flat for several years though, as it was increasing at an unsustainable rate, it just won’t drop to the levels you imply in most of your commentary.

I do not imply, nor have I forecast, collapse in the 416, but a long melting process. Elsewhere expect bigger trouble. – Garth

—————-

And to the same point above, as multi families decide to purchase single homes , they will find the very near 905 hoods ,with generally bigger square footages and lot sizes ,equally attractive , therefore no bargain prices there anytime soon.

#54 akashic record on 08.19.18 at 8:30 pm

#8 I’m stupid on 08.19.18 at 4:31 pm
#4 Akashic record

So you’re comparing beach side Realestate in probably touristy hot spots to Realestate in Toronto and Vancouver. That’s a great comparison lol.

If you’re going to make comparisons you need to look at Price/rent or price/income or rent/income ratios of various places.

—-

Pretty much all Mediterranean coast-line is touristy.
At real hot spots you can double the prices or more.
Foreigners consider Toronto and Vancouver as Canadian tourist hot spot.

#20 Stan Brooks
The idea is to live by the sea, in stable places, which takes off the list Greece and Turkey.

Agreed on food, hopefully the Monsanto merger won’t force Europe to cave on GMO and introduce cancer causing food poisoning.

#55 Pete on 08.19.18 at 8:34 pm

Unfortunately, the prime rate is still very low and lenders are still giving out equity loans to keep the bubble inflating. The gas bag will keep inflating for another 12 to 18 months before RE sell stats start to normalize. The media will continue to “sell” average price increase even though it’s mostly condo generated.

#56 MF on 08.19.18 at 8:43 pm

#35 AB Boxster on 08.19.18 at

I’ve said it before but Gen-x were the real winners of the housing bubble. They got the last non contract, benefit paying jobs pre 2008 and bought into the market around 2000-2007.

Ask anyone who works with Gen x individuals and they will tell you that all these people talk about is their ugly home renovations and how much their ugly houses are worth.

Millennials are only reacting to a manipulated market. Those of us who exercised “financial literacy”, shunned debt, tried to invest, and save got screwed.

Those of us who took the plunge and “only paid the monthly’s” were rewarded by the system.

MF

#57 would-be buyer on 08.19.18 at 8:57 pm

I went to open houses today for the first time in 2 years in Vancouver and prices in Vancouver West are down. 1300 sq ft. townhouses listed at just over $1M would have gone in bidding wars last year for $1.3M. There was NO ONE at the open houses. Prices are tanking. Can’t wait.

#58 Ronaldo on 08.19.18 at 8:57 pm

#3 Nova Johnny on 08.19.18 at 3:58 pm
I agree with the Boss (Garth) on much of what he says. One thing concerns me that I have never heard him mention. If real estate tanks, how much exposure do the Canadian banks have on their balance sheets. Lots, I suspect. So is the same thing going to happen here that happened during the GFC in 2008 to the US banks. Are they going to need bailouts? Probably. Will this “extra” money that the government will be forced to create out of thin air affect the purchasing power of our retirement dollars. I suspect it might. Since we are not a global reserve currency, like the US, is it possible that we could see a large currency devaluation here in Canada? No one knows for sure, but if real estate tanks, so will the banks. Then what do we do?
—————————————————————–
I would think that the banks would be very concerned with the huge debt that people are carrying in Helocs and other lines of credit including vehicle debt. Most are up to their gills in monthly debt payments. When prices start to fall and some of the kiddies need to sell at a huge loss, we may see a lot of the same people (parents) who got them into the mess to begin with rushing to help bail them out since we wouldn’t want Billy to default on his mortgage would we? What a mess we are in.

#59 Dee on 08.19.18 at 9:03 pm

I just dont see any positives for the cad$ through all this. U.s and canada moving in complete opposite directions. There has to be a breaking point for canadians with rising rates. Housing market is doomed I just hope for the best for the canadian dollar. Talking to regular ppl every day and i can tell you, everyone is all in on housing.

The only positive is that housing related costs will decline in canadian dollars but if cad falls against usd every other cost is likely to rise. Anyone committed to a monsterous mortgage is screwed in every which way. The downside is too hard to predict. Doomer isnt my default position but seeing everyone assume that housing investment is a riskless proposition at any cost is beyond concerning

#60 yvr_lurker on 08.19.18 at 9:05 pm

#43

“So have prices dropped, even as the real estate market’s been rocked by higher anti-Chinese taxes” “Nope”

Excuse me?

Vancouver Detached average sales price fell 16% year over year in July. Median sales price registered a 3% decline.

Benchmark prices have not moved. Thus, affordability has not improved. And yet the evil foreigners are gone. Who will you blame now? – Garth
———————————————————–

So now according to Garth we are to believe the benchmark prices that are set out by the realtors that are put forth to mask any actual volatility? Nope… I don’t believe them one bit, only used here to support an incorrect assertion that foreign money had nothing to do with the run up in prices. Perhaps not condos yet, but prices of detached on the westside at all levels are clearly coming down (see the links by a few commentators on this blog) and from http://www.realtylink.com where places are being relisted at lower prices or else just sitting.

In the end I guess it makes no difference because all of the arguments are driven by one’s politics, Garth included. If we read between the lines, perhaps the point that Garth raises is “who actually cares one whitt about how much foreign influence there has been..3% 5% 10% .. whatever”, just focus on making financial decisions that do not pickle yourself in debt, and don’t blame others for your bad decisions. Perfectly fine argument I’d say.

So what are we to do? For as long as I can remember, the well-off have always used political connections, articulate but self-serving op-ed pieces to try to influence law makers to not put forth any changes that decrease their standing, and other influences Witness the recent rallies by property owners in Point Grey against Eby’s surplus property tax and lobbying UBC to fire Davidoff (or we won’t give donations to UBC they claimed).

In my view, the large segment of the population in BC that have been severely impacted by the housing affordability crisis has only recently realized that they may have the numbers and voice to lobby for change and that they should not just role with it (move to Winnipeg if you are not happy with the prices). This is why the NDP was elected and why they still enjoy considerable support.

In order to to have healthy communities it is clear to me that we do not need tons of empty high-rise towers and houses all over the city, money-laundering going uncontrolled, and nepotism at all levels of Gov’t coddling foreign interests.

I don’t care if it is insular thinking or not, but the BC Gov’t should be setting rules and focusing priorities to help local people in this province, and to have a long-term view to ensure that our local kids can make a life for themselves in this province. I have been delighted with the policies with the NDP-Green coalition, and Eby in particular. Let’s see where we are in three years from now with all of this. I am cautiously optimistic. Not self-serving here, as I have a paid off for place in Kits; just have a different mind-set then the group that want to “pull the ladder up” on the next generation.

#61 IHCTD9 on 08.19.18 at 9:09 pm

“I know renting is the key to being financially stable, but is it for the rest of my life? At what point can a couple or family own a home without digging themselves in a hole they can never escape?”
————

You’re 30, so let’s say in 6 years you’re making 90k, and for kicks (and easy math), let’s say the BF became hubs and also makes 90k, so you and hubs net 132k, or about 11K after taxes, ei, and CPP – rough math

In six years you have a DP and start shopping. A worthy – non mildewy – home in the GTA/GVRD is 1 Mil, and 5’er is 4.5%. Seem reasonable? Probably too reasonable.

That’s an $6000.00 monthly taxes in, or 55% of your combined net. You’ve got $5000.00 left for everything else including investing. You’ll be 4 years from retirement before it’s paid off.

Monthly bills
Electricity – 200.00
Heat – 150.00
Insurance – 200.00
Investing – 2000.00 (1.6 Mil by 66 if you start at 36)
Food – 650.00
Total – 3200.00

Budget for living life after bills are paid – 1800.00/month

You could buy a house and save effectively, but it’s all going to be a rush starting at 36. All my price, expenses, and interest numbers are lowball and incomplete, but I highballed your combined income. Above scenario is rosy to say the least.

If 1 million doesn’t get you damn fine crib 6 years from now, it doen’t seem worth the undertaking IMHO.

#62 Ronaldo on 08.19.18 at 9:15 pm

#15 Danny

”It sounds like what you said before…..the boomers are mainly to blame for high real estate prices….not immigrants and foreigners…..as Howdy Doody Doug Ford seems to be blaming.”
====================================
Yes Danny boy, it surely must be the boomers alright. We were also responsible for the large increases back in the early 70’s when we stormed into the market. Yep, we’ve done a heck of a job of pushing those prices up these past 48 years or so. Couldn’t possibly be anyone else could it? I wonder if the GenXer’s had anything to do with raising prices since they’ve been into the market now for the past 33 years. Not sure who to blame since we know it wasn’t foreigners. Let’s blame Garth.

#63 Ronaldo on 08.19.18 at 9:20 pm

#25 Mom and Dad on 08.19.18 at 5:41 pm
Sorry about the late payments on that loan you gave us for the down payment to buy the house.

We can’t afford to pay you back anymore.

Whoopsie!
———————————————————–
Exactly. Going to be a lot more wealth disappear as mommy and daddy shovel more of their disappearing equity into a dead investment. Divorce and bankruptcy lawyers will be busy.

#64 froggy on 08.19.18 at 9:24 pm

#7 casa my two cents but if that’s so that multi family are moving into house’s that’s because there trying find a way to make it more affordable way to expensive that’s probably at the tails end of a bubble but won’t work never does so for your take on 330000 immigrants i think that canada has been building over 200000 new dwelling each year and i would guess that more than 200000 canadians die each year so i guess what your saying that we’ve over build between 60 to 100 thousand units each year for maybe 10 years so yes it will be a slow but harsh melt very hard to sell when your under water will make it worse and a reccession to top it off i think i’d rather be in cash and invested like garth says

#65 dakkie on 08.19.18 at 9:27 pm

Toxic Mix in Canada: Spiking Inflation, Variable-Rate Mortgages, and a Housing Bubble

http://www.investmentwatchblog.com/toxic-mix-in-canada-spiking-inflation-variable-rate-mortgages-and-a-housing-bubble/

#66 Ronaldo on 08.19.18 at 9:28 pm

#42 crowdedelevatorfartz on 08.19.18 at 6:48 pm
@#38 AB Boxster
“Happy to see that the millennial gen will be willing to sell their houses at a massive discount, in order to be ‘fair’ to the next generation.

As social justice is so important to your generation, we will expect no less.”

+++++++

from one evil Boomer to another…..

Well said.
——————————————————-
And from the oldest and most evil. I will second that.

#67 rhannic_reid on 08.19.18 at 9:39 pm

And yet the evil foreigners are gone. Who will you blame now? – Garth

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

Hmmm … the evil foreigners are gone and prices have stopped going up exponentially. Must be a coincidence?

The market was rolling over before the latest tax onslaught. It’s public sentiment, not fleeing Chinese dudes, that brings things down. – Garth

#68 greyhound on 08.19.18 at 9:56 pm

“With global economic expansion, rising inflation and record corporate profits, why would stocks decline? – Garth”

Some of us think that stocks are at the level they are primarily because of central bank QE bond buying. Now they’re starting to “remove the punch bowl” with what amounts to quantitative tightening. Historically the CBs have kept doing that until something breaks.
Reversion to the mean has always happened before, why not this time? Why must we wait until 2020?

QE ended years ago and the Fed has raised rates 7 times in 18 months. Your argument is old, tired and incorrect. – Garth

#69 jane24 on 08.19.18 at 10:03 pm

4 Akashia Records

Beach locations in Europe are very cheap if you get out of the tourist areas and into where real people live. As an example you have the tourist Amalfi Cost in mid-Italy. Expensive and full of tourists but just continue south into Basilicata and you have the jewel that is Maratea where the Italians go on holiday. Same stunning views but bargain rents. Then the further south you go the cheaper it is. Sicily outside of the tourist areas is VERY CHEAP and everywhere has a sea view.

Re the cat lady, this is very tacky. Someone claiming to be a professional agent wearing fancy dress. If she has $500 free she should give it back to the sellers. It is after all their money.

#70 JPN on 08.19.18 at 10:06 pm

Respectfully read Garths blog for years, bought and sold numerous homes in the Okanagan, own a few now. Just purchase a duplex “both sides” had people standing in line to rent. Cash positive before my first mortgage payent. I’m at a loss.. when does this end? We are not supposed to buy but “who is to own the rentals then?”

Just asking.

#71 DON on 08.19.18 at 10:09 pm

Sentiment is slowly changing. Gone (for the most part) are the rates will never rise and prices will go up forever commentators. Now were are talking about how bad thongs could get. WE HAVE TURNED A CORNER – MIND THE GAP FOLKS. Now anecdotal data will circulate and sink in for some who will sell in a stealth manner…get out before others.

#72 Fish on 08.19.18 at 10:12 pm

Bloomberg TV Canada ends in-house shows and cuts 22 job

https://www.theglobeandmail.com/report-on-business/bloomberg-tv-canada-ends-in-house-shows-and-cuts-22-jobs/article36021522/

#73 Headhunter on 08.19.18 at 10:25 pm

Wow. Seems to be a hissyfit over boomers and the following generations. No its not the boomers fault as most just went with the flow. But is WAS easier so its “big boy” pants time for those in denial.

Cue GE in “The pete” closing its doors was a toxic place to work but what struck me most about the WSIB cancer victims is the amount of people that said.. “i worked there for 40 years along with my father and husband. (or vice versa multiple family members)

40 years payday is thursday. Never missed a meal.

We had cradle to grave employment and cheaper everything. Or more disposable income take your pick.

#74 Smoking Man on 08.19.18 at 10:25 pm

Karma. It’s bull shit.

The more bad ass you are the better you do.
The term is a losers excuse for not being bad ass enough.

What is wrong with millennial chicks. No interest is there own age group girly men. At the flamingo pool today. I had many 1/2 my age say let’s go, must be the missing tooth. and they would have. Then the bad ass wife , pissed off at god for her hot flashes in desert makes an entrance. The tiny tight chicks scattered.

Just saying . bad ass wins every time.

#75 Lorne on 08.19.18 at 10:31 pm

#46 Yes Prices have Dropped
“So have prices dropped, even as the real estate market’s been rocked by higher anti-Chinese taxes” “Nope”

Excuse me?

Vancouver Detached average sales price fell 16% year over year in July. Median sales price registered a 3% decline.

Benchmark prices have not moved. Thus, affordability has not improved. And yet the evil foreigners are gone. Who will you blame now? – Garth
……
So now we are okay with believing “benchmark” numbers if they support your argument….though you have called these “fankennumbers” for years because nobody can understand them so they are simple to adjust to support a position the real estate market prefers. Seems a bit ingenuous!

Read past blogs. Lots of price details from multiple sources. – Garth

#76 BlorgDorg on 08.19.18 at 10:33 pm

Spent 2 days this weekend in my (rented) condo in downtown Toronto with no power, due to the flooding on Lakeshore last week. Lost the entire contents of my fridge and freezer, no A/C in August with 2 young kids. Not fun but we made the most of it.

Garth has written about poor condo construction and special assessments at length, but the topic of infrastructure hasn’t really come up. Between the (now prolonged) Ford era and political dysfunction impacting municipal services, combined with tens of thousands of new residents within a few square km in the core, liveability is getting significantly worse each year.

Who cares whether your condo is an “investment”, changes in value, or falls apart at the seams, if basic needs like power, transit, sewerage, etc. are steadily eroding around you?

Given the number of new condos still going up and how much worse things have become in only the past 5 years, I struggle to imagine what 416 Condoland will look like a decade or more from now. Yikes.

#77 Exurban on 08.19.18 at 10:36 pm

#18 Stone

Only 84%? That seems low.

It seems low to me also. I’ve been living in the Lower Mainland for 40 years and I don’t think I know anyone who doesn’t think foreign money played a major role in driving up house prices. And I know left, right, centre, European, Asian, you name it. The only places I have ever seen fanatic denial about it are this blog and a commenter on Zerohedge named Pitz who shows up for evry thread about Vancouver.

Foreign money played a role, but was only one influence of many. It did not cause insane pricing, but it did elect a socialist government. – Garth

#78 The real Kip on 08.19.18 at 10:58 pm

“It was not guys from China, Iran, Seattle or some other province. It was you.”

Moi? Really? I never knew!

#79 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 08.19.18 at 10:59 pm

Good heavens, Toronturds, when will your murderous rampaging stop?

https://www.thestar.com/news/gta/2018/08/19/deadly-weekend-puts-city-on-pace-for-nearly-twice-as-many-homicides-as-last-year.html

This summer has exposed the brutal reality of life in the GTA. It is UGLY.

This weekend, people stabbing to death poor seniors. Earlier, local people shooting at children, and even children shooting at adults.

The whole GTA is going down the drain socially. Who in their right mind would seriously want to invest in an overpriced crapshack there just so their family could become a target for this explosion in violence?

The GTA is a cesspool that is one of the least livable places in all of Canada. As the cost of money increases, expect the misery and violence to double again next year. The whole foundation of life in the GTA is based on real estate delusions for far too many.

A deplorable fifth rate place to be. Come to the rest of Canada and see what real quality of life looks like.

(And leave your weapons behind, Toronturds)

#80 OttawaMike on 08.19.18 at 11:18 pm

I found some video of Smoking man at the Flamingo:

https://www.reddit.com/r/instant_regret/comments/98m5rl/showing_this_old_dude_the_time_of_his_life/?utm_source=reddit-android

#81 millmech on 08.19.18 at 11:20 pm

56 MF
The two millennials that chose to work at the plant today got paid $80/hr and worked a twelve hour shift, 5% RRSP matching, all in a $1000 day, not bad for two mid twenty year olds that chose apprenticeships over University.

Millenials have it great, $15k signing bonuses, 100k+ jobs a year with great benefits, the company I work for is still short eight tradesmen and can not find suitable cadidates, hence the signing bonuses!

#82 georgist on 08.19.18 at 11:41 pm

Bought Nov 2016 $3.5MM, sold at $2.6MM, 900k loss excluding transaction costs.

Some smart cookies into Van Real estate.

https://twitter.com/mortimer_1/status/1029918364020297729

#83 Notagreaterfool on 08.20.18 at 12:08 am

Some realtors believe major price correction underway in Metro housing market

https://vancouversun.com/business/local-business/some-realtors-believe-major-price-correction-underway-in-metro-housing-market?video_autoplay=true

#84 Why can on 08.20.18 at 12:15 am

When 95% of overall YVR buyers are locals it seems more constructive to talk about them. You drank the Kool-Aide, eh? – Garth

Yes, 95% of residential buyers were local – when stripping out residential real estate purchased

#85 Bob Dog on 08.20.18 at 1:20 am

This blog is starting to smell like Fox News. It’s a wing of the conservative far right.

Homes in Canada are expensive not because of increased wealth or a booming economy. Homes are expensive because the government is a corrupt puppet regime controlled by a criminal banking cartel.

We are all debt slaved because a pack of Ferengi have put the country up for sale to the highest bidder.

#86 Chinese Dude on 08.20.18 at 1:32 am

The Real Estate market in China is even more crazy than YVR and Toronto. Condos in first-tier cities, like Beijing, Shanghai, and Shenzhen cost more than $1 million. The problem is GLOBAL. Cheap money was everywhere during the past 10 years.

Many new immigrants can easily buy YVR Real Estates by selling their properties in China. However, those people are not considered as foreigner buyers, even if 100% of their money comes from China.

Being a Chinese dude myself, I think the real problem is land restriction. BC restricts real estate development on agriculture land reserve, while Ontario has a “Green Belt”. With limited supply, it’s easy to create a Real Estate bubble.

#87 Stan Brooks on 08.20.18 at 1:35 am

Pretty much all Mediterranean coast-line is touristy.
At real hot spots you can double the prices or more.
Foreigners consider Toronto and Vancouver as Canadian tourist hot spot.

#20 Stan Brooks
The idea is to live by the sea, in stable places, which takes off the list Greece and Turkey.

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

Then we need to look at rents for condos /houses by the beach.

Mississauga, Markham, Scarborough are hardly tourist hot spots and a basement apartment there ‘fetches’ 1.5 k.

As for Turkey and Greece, you should visit, in my mind they qualify much higher than Mexico and most Caribbean countries in terms of stable and safe tourist hot spots.

#88 Where's The Money Greedo? on 08.20.18 at 1:36 am

Re: #38 Stan Brooks on 08.19.18 at 6:34 pm

“The problem is that 3 drinks mean normally nothing to me and if the chance of the above described crash of markets and frozen economy is even 30 % (in my opinion it is 60 % + and constantly rising) I would not hold anything above 100 k in cash in individual deposit accounts, not to mention that foreign currency deposits /i.e. USD are not insured.”

So Stan you feel that the $100k is safe?

The Irish collapse : https://en.wikipedia.org/wiki/Post-2008_Irish_banking_crisis

So the banking cartel (IMF) took over Ireland, changing gov’t completely, as wiki says; ” a total restructuring of the Irish Government occurred as result of this.”
So is this another way of a bloodless coup, but by other means than what happened in the US in George Jr’s second win?
Seems we’re headed that way, for a total takeover by TPTB, all backed by this present gov’t and the banks. Or has it already happened, why everything is kicked down the road for years?
Garth, you always point out that ETFs, etc are liquid, but what about another 2008 credit freeze, where, at least I, couldn’t retrieve my investment until THEY wanted to do it, meaning my Credit Union (Vancity), used all lies in the book to avoid my wishes. If I would have got my money out when I asked for it, I would have had gains of 10%, instead I lost 25%. A pox on all those involved.
If it’s in someone else’s hands, is it not prone to the freeze, n’est-ce pas?
How do you protect yourself if you have your investments out of your possession, how can you get anything other than your investment adviser’s word. It didn’t work last time with me.

#89 Where's The Money Greedo? on 08.20.18 at 1:51 am

Re: #49 Where’s Justin on 08.19.18 at 7:33 pm
Glad Justin is parading around and touring Canada instead of showing up to the table to negotiate and secure the future of Canada.

I guess he has resigned to the fact he ain’t winning the next election and wants to live it up to the fullest.
++++++++++++++++++++++++++++++++++++++++
Read my last post. It’s all in the plan.
Gov’t has already been taken over in 2008, just doing the master’s bidding…..kicking the can down the road until we’re all snagged, then Ireland 2008.
All in the plan.

#90 Arto on 08.20.18 at 1:57 am

#6 YVR2ZRH

Thanks for rebutting Garth with your perfect analysis

#91 SH on 08.20.18 at 3:05 am

#13.

Except you are making some very strong assumptions:

Taxation is a price to live in a civilized society. I do not understand how it can be considered theft. It’s a price you (really all of us) pay to have a country we want to live in. If you pull out taxation and targeted reinvestment into non-profit generating activites, you will end up with a society run entirely by market forces. The down side of such a society is that little resources would be invested into activities which have little immediate payoff. Modern society was not built because of commerce or finance. It was built on the back of scientific revolution… A non-profit activity like art. Fruits of that work, like Einsteins equations, sometimes take 80 years to make it into mass produced gadgets/tools. Almost every single technology you use was started as some government grant at some publicly run university somewhere in the world. Garth is absolutely right that the current housing mess is our own making. But conservatives in my family like to blame the government for this or that, but have little actual knowledge what the government does or can do. For example, they call taxes theft, but are the ones to use health care resources the most, and have no clue that 40% of provincial budget goes directly to health care. I haven’t met too many educated conservatives (well Garth is an exception) who communicate clearly actual substance. Now, I consider myself a liberal, but not because of any issues you brought up. I consider myself a liberal because I do not believe that the market should decide everything that goes on in society, because of how markets tend to behave and what they incentivize. And if taxes is a way to remove some of the market forces, then so be it. If that makes me liberal, fine with me. And most ‘liberal’ profs, who you were so ready to criticize and mock are liberal for exactly the same reason. None are lazy. What it takes in this country to make it in academic system… No one in their right mind would call profs underachievers or lazy. They just don’t like the market system running the society. And they have some valid points.

#92 MSM-Free Zone on 08.20.18 at 3:15 am

A little late, but, excellent Saturday blog, Ryan.

Nicely balanced with real (as opposed to ‘alternative’) facts. A real keeper for future reference.

#93 Stan Brooks on 08.20.18 at 4:39 am

Establishing new highs in the worlds idiocy/cretinism index:

1. Just saw a bed for rent in a basement ‘room’, shared (the room) with unknown number of occupants. Not sure if the bed is shared. Not sure how many ‘rooms’ are in the basement. Not sure if the ‘room’ has ‘windows’. Probably 6 people sharing basic washroom/if any and ‘kitchen’.

2. BoC now that the ‘official inflation’ is 3 %, unofficial at 8 % +, bastardizes further their own bastardized already ‘inflation’ index:

http://www.investmentwatchblog.com/toxic-mix-in-canada-spiking-inflation-variable-rate-mortgages-and-a-housing-bubble/

…no problem.

Like the Fed and other central banks, the Bank of Canada has its “preferred” measures of inflation. And they’re a lot lower, of course. Which is the point. But unlike the Fed, it does not use a core index “without food and energy.” Instead, it has three measures (definitions) that have been statistically “trimmed:” CPI-trim, CPI-median and CPI-common.

Its stated goal is to keep inflation as measured by these three indices at the 2% midpoint of “an inflation-control range of 1% to 3%.” And this is how these three indices stacked up in July:

CPI-trim: 2.1%
CPI-median: 2.0%
CPI-common: 1.9%
Statistically trimming the hot items out of an index works miracles, though it makes this trimmed index even more meaningless to consumers because consumers, who live in the the real world, cannot trim those items out of their budgets quite so easily. So now, after a proper trimming of the index, the BOC is right on target.

Among economists, the clamoring has already started for the BOC not to raise its target rate at its next meeting in September since its preferred measures of inflation are “under control,” even while the overall CPI is threatening to run amok.

……

I am sure soon the ‘preferred’ BoC index will be further adjusted to include only the cheapest TVs found by the crappiest manufacturer in the world and I picture Poloz announcing with triumphant face yearly inflation of only 2 % for the crap, so no need to increase rates.

It would be hilarious if it was not so serious, inflation is here and the bozos at BoC can not do anything about it.

Did I say: run away with your money WHILE YOU STILL CAN?

#94 FOUR FINGERS WATSON on 08.20.18 at 4:48 am

Billions that should be saved, invested and put aside for decades to come are being plowed into a single asset.
………………………

Not only were these billions mal-invested, they were NOT invested in business and industry where the real wealth and jobs are created. We have a lot of catching up to do.

#95 FOUR FINGERS WATSON on 08.20.18 at 5:25 am

#74 Smoking Man on 08.19.18 at 10:25 pm
Karma. It’s bull shit.

The more bad ass you are the better you do.
The term is a losers excuse for not being bad ass enough.

What is wrong with millennial chicks. No interest is there own age group girly men. At the flamingo pool today. I had many 1/2 my age say let’s go, must be the missing tooth.
………………………..

You left out the part where the boyfriend meets u in the parking lot with a baseball bat and takes your wallet and your watch.

#96 MF on 08.20.18 at 7:04 am

#81 millmech on 08.19.18 at 11:20 pm

You are right but we are 10 years past the 2008 meltdown at this point. I’m only now starting to see some boomers contemplate retirement, which appears to be opening up some positions. My cohort (aged 35) were 25 during the 2008 meltdown, so we had to endure the job market I described (contract work, low benefits, lower pay) during those crucial 25-35 ages of career development and savings.

Ironically those who bought RE in 2008-09 fared better than the others!

MF

#97 Dan on 08.20.18 at 7:32 am

Teacher girl probably has to move.

Calgary is rated 4th best city to live in and you can get a nice house for 400k.

#98 Remembrancer on 08.20.18 at 7:37 am

#6 YVR2ZRH on 08.19.18 at 4:15 pm

Seriously, how many people in BC overall, the LM or whatever are impacted at all by what happens in the $3M+ housing market?

#99 Karl on 08.20.18 at 8:08 am

The tailwinds remain for GTA. Inventory levels are low and demand increases. That is irrefutable and undeniable.

And as another poster wrote above, someone needs to own in order for someone to rent.

So Garth, in order to have the majority rent (because they would have to for your recipe of “balance”) either we leave all ownership up to a small gaggle of elites or we go communist with government owned housing – neither is very appealing.

As often said here, the old days aren’t coming back.

#100 maxx on 08.20.18 at 8:13 am

@ #15

It’s not “the Boomers”, it never was “the Boomers”, it’s stupid low rates.

The cost of cash is far too low, and has been for years post GFC, brought to us by half-wit monetary policy. Boomers simply got in first by way of birth order.

Quarter-wit policy brought about the reduction in TFSA limits.

#101 Remembrancer on 08.20.18 at 8:16 am

#74 Smoking Man on 08.19.18 at 10:25 pm
#95 FOUR FINGERS WATSON on 08.20.18 at 5:25 am

Sure, they’re interested in ‘dates’ SM… And also those nice men taking their grand daughters to Vegas for the weekend…

#102 jess on 08.20.18 at 8:32 am

working but can’t afford rent

working poor who are homeless
sls:shit life syndrome

https://www.nbc.com/dateline/video/city-of-angels/3779455

#103 crowdedelevatorfartz on 08.20.18 at 8:34 am

@#74 Smoking Hot man
” must be the missing tooth……”
+++++

Nah, It was yer bunions…..

#104 milly on 08.20.18 at 8:41 am

I wonder what your thoughts are on currency diversification? Is it worth holding some US dollars right now?

I have written often about the value of a 20% US$-denominated component of a balanced portfolio. – Garth

#105 Stan Brooks on 08.20.18 at 8:48 am

#91 SH on 08.20.18 at 3:05 am
#13.

Except you are making some very strong assumptions:

Taxation is a price to live in a civilized society. I do not understand how it can be considered theft. It’s a price you (really all of us) pay to have a country we want to live in….

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

What you quote is theory.

You sound like the same hot air balloon as this ‘hope and hard work’ guy:

https://ca.finance.yahoo.com/news/trudeau-formally-announces-apos-ll-230756228.html

Taxation is supposed to be fair but it is not.
1. Public corporations are favored while private are robbed.

2. Asset owners including housing are favored, savers are not.

How much did you pay on that primary residence appreciation? Zero, right?

Now, can workers get back 500 k in taxes from the government who taxed them to death on their work/business income while you were ‘tax free gaining’/if sold on your real estate?

Will a doctor get back his pension savings stolen from the greedy wild bill?

When the above happens I will knowledge taxes are fair, in the meantime I will be paying them somewhere else.

Enjoy 4 more years of liberal bull crap and hey, make sure you pay you fair (according to bill, the minister of just taxes) share.

70 % record no rental income on their tax forms and pay to taxes on flipper properties.

What is CRA doing? Going after the doctors and plumbers so lil’ french villa guy can grow the business of his dad’s company.

#106 PT on 08.20.18 at 8:48 am

This blog has told you for years what’s happening, and why. House lust, illiteracy, greed, speculation, FOMO and an unhealthy attitude towards debt created this mess. It was not guys from China, Iran, Seattle or some other province. It was you….Yes, I get that…and it probably accounts for some, but not giving any credit to Central Bank (low interest rates for ages)and our Government (40 – year amortization, RRSP withdrawals, etc), that’s not fair or accurate.

Low rates have been mentioned repeatedly. But just because money’s cheap does not excuse people from borrowing their way into oblivion. It’s still their fault. – Garth

#107 dharma bum on 08.20.18 at 8:57 am

#28 A. Anyong

I don’t think it is going to matter much how educated we are regarding saving money to purchase a house since Global Warming is heading in the direction it is.
——————————————————————–

Sorry. You’ve come to the wrong blog.

You must have been looking for greaterhoax.com.

#108 IHCTD9 on 08.20.18 at 9:14 am

7 casta on 08.19.18 at 4:28 pm

And yes, many new Canadian families can not afford to buy a home on their own when they come to Canada, but it is becoming much more common for several families to purchase a home jointly. On my street alone, there are at least 3 multi-family dwellings (These are standard single family homes).
_________

Stats Canada calls these “economic households”, and they actually don’t make a whole lot more than traditional households make – roughly 80K IIRC.

This is probably the future all around. Another trend is what the government calls “multi-families” ie: Mom with two kids from two previous Men living in house with BF with his 3 kids from two previous Women along with his brother and her Mother in Law from Husband #2, plus a friend of one of her kids. These are more or less impromptu economic households that evolve naturally over time when everyone involved can’t afford to pay normal rent IMHO.

This change in social attitudes will reinforce house prices, and that will lead to more economic households being formed. Most probably feel their collectively owned house is an “investment” and the sale will put money in their collective pockets some day.

If these trends continue (they will 100%) – it will only lead to more of the same until the old school idea of a couple buying a house and starting a family disappears altogether into the background noise of 7 figure priced crap houses, stagnant wages, and neighbourhoods crammed with 4X as many people as they were designed for.

These households will be concentrated into certain areas in the future, and they are essentially the beginnings of an eventual slum.

#109 joblo on 08.20.18 at 9:47 am

#97 Dan
“Calgary is rated 4th best city to live in and you can get a nice house for 400k.”

Also, from what I hear Calgary is rated #1 best city to live in if you like wearing gas masks.

#110 joblo on 08.20.18 at 9:51 am

Hooray!
T2 is running in 2019.
Keeping this tire fire burning.
Peoplekind, vote T2 in 19, nonstop glowball entertainment!

#111 Multilevelmark on 08.20.18 at 10:43 am

How can just one off shore investor create a real estate mania and rapid house price escalation?
Think of it as a pyramid scheme. Do the math, throw in greed factor and as property owners see sales demand they increase their home price. The market goes crazy in a matter of months .i.e. Vancouver and Toronto
Here it is!
Off shore investor has 40 million $ to invest. Buys a 40 million $ mansion. Mansion owner who sold now has new found wealth. It is invested in 4, 10 million $ properties. The 4 owners who sold then invest in 8 new properties (2 each at 5 mil) with their new found affluence.
Follow this chain with same simple logic at each level, each owner who sells reinvests in 2 more properties with proceeds from his previous sold property.
Chain of Greater Fools [email protected] [email protected]@[email protected]@[email protected]
1-2-4-8-16-32-64 a total of 125 deals. Total value 40 mil $ at each level for grand total of 280 mil $ in homes in one chain. Multiply this by several 100 off shore investors and we quickly see the effect of outside money on any market. Granted every deal would not see all the cash reinvested with money left for cars, boats, vacations, summer homes, gambling etc. Investors may jump in at any level with same logic all based on demand pushing up prices.
Also consider many of the deals would be more than the cash available for reinvestment resulting in many large mortgages and total added volume in sales for the chain. This results in many houses sitting empty as revenue is primarily in the manipulated appreciation.
Bring 100 big investors into and area over a 5-6 year time frame and the price escalation is astounding.
Pyramid real estate with outside manipulation sucking in the locals resulting in the fallacy “prices always increase” until the big money investors disappear. Then watch out!

#112 Wrk.dover on 08.20.18 at 11:21 am

#111 Multilevelmark on 08.20.18 at 10:43 am

Good crunching! If these people matched their money with borrowed no interest money and doubled their activity especially.

BINGO!

#113 TheDood on 08.20.18 at 11:38 am

#97 Dan on 08.20.18 at 7:32 am
Teacher girl probably has to move.

Calgary is rated 4th best city to live in and you can get a nice house for 400k.
________________________________

Rated by whom? Calgary is a nice city, lived there for nearly 10 years. But you have to like the cold and be able to handle 7 month winters. Even in summer, as soon as the sun goes down, its cold!

#114 Lorne on 08.20.18 at 11:50 am

#46 Yes Prices have Dropped
“So have prices dropped, even as the real estate market’s been rocked by higher anti-Chinese taxes” “Nope”

Excuse me?

Vancouver Detached average sales price fell 16% year over year in July. Median sales price registered a 3% decline.

Benchmark prices have not moved. Thus, affordability has not improved. And yet the evil foreigners are gone. Who will you blame now? – Garth
……
So now we are okay with believing “benchmark” numbers if they support your argument….though you have called these “fankennumbers” for years because nobody can understand them so they are simple to adjust to support a position the real estate market prefers. Seems a bit ingenuous!
……

Read past blogs. Lots of price details from multiple sources. – Garth
……
Then why use the “frankennumbers” you have derided for years?

#115 TheDood on 08.20.18 at 11:59 am

#99 Karl on 08.20.18 at 8:08 am

The tailwinds remain for GTA. Inventory levels are low and demand increases. That is irrefutable and undeniable.

And as another poster wrote above, someone needs to own in order for someone to rent.

So Garth, in order to have the majority rent (because they would have to for your recipe of “balance”) either we leave all ownership up to a small gaggle of elites or we go communist with government owned housing – neither is very appealing.

As often said here, the old days aren’t coming back.
__________________________

Yup! Homeownership no matter the cost to your financial well being……onwards and upwards……The Canadian Dream!

#116 Home Slice on 08.20.18 at 12:10 pm

Are the deplorables starting to figure things out yet?

US firms to Trump: Don’t raise tariffs on more Chinese goods

I thought Trump said trade wars were an easy win

“If you look at the filings, a lot of them are mom-and-pop businesses saying, ‘Please don’t do this to us,’ ” said Bryan Riley, director of the Free Trade Initiative at the conservative National Taxpayers Union.

Who is really paying for corporate America’s tax cuts???

“The tariffs will have little to no impact on the sourcing options of members in the trailer manufacturing community,” the company wrote. “We will just be getting a 10 per cent tax, payable to the general treasury.”

https://app.tmxmoney.com/news/cpnews/article?locale=EN&newsid=f53425&mobile=false

#117 BobC on 08.20.18 at 12:45 pm

#116 home slice

The worst thing you can do is listen to CNN.
Step at a time:

https://mobile.reuters.com/article/amp/idUSKBN1KV08M

#118 James on 08.20.18 at 12:59 pm

#74 Smoking Man on 08.19.18 at 10:25 pm

Karma. It’s bull shit.
The more bad ass you are the better you do.
The term is a losers excuse for not being bad ass enough.
What is wrong with millennial chicks. No interest is there own age group girly men. At the flamingo pool today.
I had many 1/2 my age say let’s go, must be the missing tooth. and they would have. Then the bad ass wife , pissed off at god for her hot flashes in desert makes an entrance. The tiny tight chicks scattered.

Just saying . bad ass wins every time.
_________________________________________
So what your saying is 40 year old woman are really into you!
Huh, knock Las Vegas woman off of my old man bucket list!

#119 Linda on 08.20.18 at 1:10 pm

In the rent vs. purchase debate timing is a huge factor. To purchase in the most expensive housing markets today is truly only for financially blessed & there is no doubt renting is by far the most financially rewarding option IF the renter does indeed invest the difference between renting & purchasing in a balanced, diversified portfolio.

Using the average life expectancy for a woman I took the current average monthly for a 2 bedroom apartment in Canada ($989/month) & multiplied it by the number of years between age 18 to 84 (66). Presuming no change in rates the cost of renting over that time frame came to $783,288. I then added up all the costs to date for our house & added property taxes, utilities & house insurance to that total. Using the same number of years as I used in the rental calculation I came up with a cost of $909,000 for the same 66 year time period. The difference between the two amounts is $125,712. Now if I adjust for the time period between actually purchasing a property & age 84 that amount is reduced but as we would have been paying rent I didn’t bother adjusting the time period.

But that was buying in the 80’s when housing prices were at reasonable levels even though mortgage rates were between 12-14 percent. At today’s prices rental costs would have to be at truly extortionate levels – as in $3,000 to $4,000 per month for a 2 bedroom – to make renting as expensive as purchasing. General wisdom is that a house paid off in 15 years will cost twice the original purchase price. Thus a house costing one million would cost two million IF paid off in 15 years. A 20 year time frame results in the tripling of the original purchase price; a 25 year mortgage period is 5 times the original purchase price. I’ve not researched what a 30 year time frame would do to end pricing but if 25 years is 5 times then 30 is likely 8 times the original purchase price. Hence the ‘unsustainable’ comment by Garth when it comes to today’s housing prices.

#120 IHCTD9 on 08.20.18 at 1:15 pm

#91 SH on 08.20.18 at 3:05 am
#13.

Except you are making some very strong assumptions:

Taxation is a price to live in a civilized society. I do not understand how it can be considered theft. It’s a price you (really all of us) pay to have a country we want to live in.
__________________

It is can be considered theft if the tax revenue is subsequently squandered by funding Women’s issue organizations in Saudi Arabia, or Climate Change initiatives in China or any boutique / partisan / ideological BS that panders to a minority of Canadians.

There is also a ceiling to what can be reliably collected (Laffer Curve theory) whereby total taxation much beyond ~70% does not increase actual revenues collected.

It’s pretty easy to visualize: Would you work if the government took 90%? How about 80%? How about 70%? I could definitely find more beneficial things to do with my time than work for 30% net or less.

If the price to live in civilized society is 95% of your income – do you think something not quite right is happening? Maybe that it should not be that expensive?

The same might be said by those shelling out more than half their income in taxes in Canada right now…

#121 Karl on 08.20.18 at 1:45 pm

Linda,

I enjoy your posts as they are well written. However your latest one is very wrong.

“General wisdom is that a house paid off in 15 years will cost twice the original purchase price. Thus a house costing one million would cost two million IF paid off in 15 years. A 20 year time frame results in the tripling of the original purchase price; a 25 year mortgage period is 5 times the original purchase price. I’ve not researched what a 30 year time frame would do to end pricing but if 25 years is 5 times then 30 is likely 8 times the original purchase price. Hence the ‘unsustainable’ comment by Garth when it comes to today’s housing prices.”

A 650K home with a 25 year mortgage will cost you 272K in interest at a 3% rate. A high of 5%, for argument sake, would be 482K in interest. How are you getting 5x the original price??? You’re saying the 650K house is costing 3,250,000?!

#122 conan on 08.20.18 at 1:47 pm

Time to short Tesla?
I say yes.

#123 jess on 08.20.18 at 2:17 pm

Wayne James abused his trusted position as a senator for the people of the U.S. Virgin Islands by stealing tens of thousands of taxpayer dollars to pay his own campaign and personal expenses,” said Assistant Attorney General Benczkowski. “Public corruption undermines confidence in our government institutions and the rule of law. Wayne James’s conviction is a testament to the commitment of the Criminal Division and our law enforcement partners to hold accountable those who breach the public’s trust for their personal gain.”

James was indicted in October 2015. From January 2009 through January 2011, James served as a senator for the U.S. Virgin Islands. According to the evidence admitted at trial, in or about April 2009, James began submitting requests to the Legislature of the U.S. Virgin Islands for funds, ostensibly to pay for research, copying, and translation of historical documents housed at the Danish National Archives related to the Fireburn, a revolt against slave labor that took place in the Virgin Islands in the 1800s. Though James initially did use some of the requested funds to pay for the research project, he soon began to take money for himself. By 2010, James fabricated entire invoices and simply stole the money. James caused the Legislature of the Virgin Islands to pay him over $90,000, approximately $70,000 of which he took for himself. James used the misappropriated government funds to pay his re-election campaign expenses and other personal expenses after his legislative salary was garnished from a tax levy of more than $197,000. ”

https://www.justice.gov/opa/pr/former-virgin-islands-senator-convicted-wire-fraud-and-theft-federal-program-funds

=========

Neighbours will snoop and tell if they suspect you’re a tax evader

More than 40,000 people called HM Revenue & Customs’ (HMRC) tax evasion hotline in 2017-18, twice as many as in the previous year, the organisation disclosed in response to a freedom of information request. The calls resulted in the taxman paying out £343,500 in rewards to informants.

===
$330b. greece exits

=
“those who own or manage” companies who cause the companies to engage in “tax avoidance, evasion or repeated non payment of taxes” and then use the insolvency process so that the company avoids paying the tax. In some cases the business may continue to be operated through another company. This is referred to as ‘phoenixism’.

…”HM Revenue & Customs (HMRC) already has power to make directors liable for company tax liabilities in certain situations. In addition insolvency law allows assets which have been distributed to be clawed back in some circumstances.

However, HMRC’s powers do not apply to all taxes. The government is therefore proposing that HMRC’s power to transfer liability for tax debts to company directors and officers should be extended to transfer liability to tax debts “to the persons responsible” for the avoidance, evasion or repeated non payment of tax when there is a risk the funds will be lost to insolvency. They also propose making these people jointly and severally liable for the company’s tax debts.

#124 jess on 08.20.18 at 2:37 pm

Financial Reporting Council:
“Ethical Standards are critical in supporting the confidence that third party users can reasonably have in financial statements in circumstances where, of necessity, they only have incomplete information to judge whether the auditor is in fact objective. Where those standards are breached such that the auditor’s independence is lost, user confidence is likely to be undermined; the FRC makes clear by these sanctions the seriousness with which such breaches and their consequences are viewed.”

self interest
https://www.frc.org.uk/news/august-2018/sanctions-against-kpmg-and-senior-statutory-audito

===

this applies here to good advice
Avoid investment and pension scams

https://www.fca.org.uk/scamsmart

===============
more stick less nudging
The number of enforcement actions opened by the Financial Conduct Authority (FCA) has rocketed by 23% during the last 12 months, with the number of investigations into governance issues and financial crime soaring.15 Aug 2018

Ben Brown of Pinsent Masons, the law firm behind Out-Law.com.
“Transforming an established culture will inevitably require the enforcement of acceptable standards of behaviour. For these reasons a robust code of conduct and disciplinary policy are becoming increasing essential in the financial services sector. Failing to improve culture and governance will leave firms exposed to enforcement action and potential penalties in the event the FCA has reason to investigate the firm or an individual in the future,” said Brown.
https://www.out-law.com/en/articles/2018/august/fca-enforcement-senior-managers-regime/

#125 jess on 08.20.18 at 3:09 pm

nudging “self reporting ”

WASHINGTON — A business that violates federal law — by failing to pay overtime, fouling the air, or committing financial fraud — could have an easier time avoiding the harshest penalties under the Trump administration if it agrees to come forward and cooperate with authorities.

White House officials said the new enforcement strategy will encourage businesses to do the right thing. But critics warn that it fosters bad behavior.

=
Under Attorney General Jeff Sessions, total DOJ penalties against corporations fell 90 percent from $51.5 billion in President Barack Obama’s last year to $4.9 billion in Trump’s first year, and the number of enforcement actions against corporations fell by 22 percent from the Obama’s last year. Plea deals dropped to 50 compared to 117 in Obama’s last year.

https://www.nbcnews.com/politics/white-house/trump-hits-corporate-violators-feather-n899431

In Trump’s first year, EPA penalties dropped 94 percent – the most of any of the federal agencies analyzed in the report. (Public Citizen’s analysis of EPA enforcement includes actions against corporations, municipalities and individuals.) Under former EPA Administrator Scott Pruitt, the agency decreased penalty sums against polluters from $23 billion in Obama’s last year to $1.4 billion in Trump’s first.

In one such case, the EPA announced five weeks before Trump’s inauguration that it was seeking $4.8 million in penalties against the pesticide manufacturer Syngenta Seeds for violating safety rules that protect workers from being poisoned. Trump’s EPA cut the penalty a year later to $550,000 – just 11 percent of the original fine.

The sharp decline in overall penalties holds true even excluding the extraordinary enforcement orders issued in the final years of the Obama administration, during which the government fined oil giant BP over the 2010 Deepwater Horizon spill and automaker Volkswagen for cheating emissions tests. Even excluding those cases, which were completed under Obama, total penalties under Pruitt still fell by 84 percent in Trump’s first year.

Because enforcement actions can take years to complete, the steep declines at the agencies are especially noteworthy, considering most of the investigations would have begun under Obama and the agencies’ career staff remain relatively unchanged.

“Trump’s ‘zero-tolerance’ enforcement policy against first-time border crossings and street crimes has rightly grabbed headlines,” said Rick Claypool, a Public Citizen research director. “But what makes this even more shocking is how these so-called tough on crime policies coincide with policies that decrease prosecutions and penalties for giant lawbreaking corporations.”

The agencies included in the report are the U.S. Transportation Department’s Aviation Consumer Protection Division (total penalties down 11 percent), the U.S. Interior Department’s Bureau of Safety and Environmental Enforcement (down 13 percent), the Commodity Futures Trading Commission (down 80 percent), the Consumer Product Safety Commission (down 43 percent), the DOJ (down 90 percent), the U.S. Environmental Protection Agency (EPA) (down 94 percent), the U.S. Labor Department’s Equal Employment Opportunity Commission (down 19 percent), the Federal Communications Commission (down 85 percent), the Federal Trade Commission (down 65 percent), and the Treasury Department’s Office of the Comptroller of the Currency (down 53 percent) and Office of Foreign Assets Control (up 465 percent), and the U.S. Securities and Exchange Commission (down 68 percent).

#126 Gravy Train on 08.20.18 at 3:11 pm

#116 Home Slice on 08.20.18 at 12:10 pm
“Are the deplorables starting to figure things out yet?”

No—and they never will. By definition, anyone capable of learning (and figuring things out) is not a deplorable. :)

Trump once said, “I could stand in the middle of Fifth Avenue and shoot somebody, and I wouldn’t lose [any of my base].” I agree, and I’d go even further and say: Any of the voters in his base would be pleased to be the one shot. :)

#127 jess on 08.20.18 at 3:15 pm

sounds right especially with real estate prices

Gerrit De Geest

Washington University in St. Louis – School of Law

Date Written: August 1, 2018
Abstract

This working paper contains the introduction and first chapter of a forthcoming book on the relationship between marketing and inequality. I argue that the dramatic rise of income inequality since 1970 has largely been caused by advances in marketing. Marketers have become better at creating and exploiting market distortions in legal ways. The legal system, in principle, prevents the deliberate creation of market failures, but it has not evolved at the same speed. Business schools have outsmarted law schools. This chapter offers an introduction to a new, general theory of marketing. Although marketing is meant to improve markets by bringing products to the right customers, it often does the opposite—creating “value” to businesses by making prices less transparent, splitting informed and uninformed consumers, making products incomparable, locking in consumers, exploiting psychological biases, creating network externality effects, or preventing price wars. Over the time span 1970–2015, the impact of marketing on the economy has steadily increased. Few markets have not been turned into less competitive ones by marketers, trained at modern business schools. This has significantly increased the amount of artificial profits (“rents”) in the economy.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3228329

#128 SilverSon on 08.20.18 at 3:22 pm

Low rates have been mentioned repeatedly. But just because money’s cheap does not excuse people from borrowing their way into oblivion. It’s still their fault. – Garth

Indeed. If people buying RE simply refused to pay ridiculously high prices, they wouldn’t be taking on the debt and the prices of RE wouldn’t be nearly as high. I can’t sell my clock radio on eBay for $10,000 if nobody will pay that – I have to lower the price until it sells or I’ll never be able to sell it. Similarly a boomer cannot sell a house for $1-million if the moisters refused to pay that. Locals created this mess – low rates were just an enabler.

The way I see it, boomers are just indirectly taking money from their own kids anyway … but doing it in such a way that doesn’t make them feel guilty about it. For example, if Sally’s parents convince her to pay $1.5-million to buy Frank’s parent’s house and Frank parents convinced him to pay $1.5-million to buy Sally’s parent’s house, then Sally’s parents and Frank’s parents might as well have just taken the $1.5-million directly from their own kids. But banks and governments don’t want people to realize this because they’re making piles of money while everybody does this to one another.

#129 SimplyPut7 on 08.20.18 at 4:09 pm

#72 Fish on 08.19.18 at 10:12 pm

https://www.theglobeandmail.com/report-on-business/bloomberg-tv-canada-ends-in-house-shows-and-cuts-22-jobs/article36021522/

Can’t see behind pay wall, is everyone gone?

That doesn’t seem like something CRTC would allow.

#130 Jack BeNimber on 08.20.18 at 4:48 pm

And now from India

https://qz.com/1356817/investors-with-more-diverse-portfolios-build-more-wealth-over-time/

#131 Ronaldo on 08.20.18 at 6:18 pm

#126 Gravy Train

Trump once said, “I could stand in the middle of Fifth Avenue and shoot somebody, and I wouldn’t lose [any of my base].” I agree, and I’d go even further and say: Any of the voters in his base would be pleased to be the one shot. :)
————————————————————–
The news media has a way of twisting things around. If you listen to what he said, he is saying the the polls (pollsters) are saying that his popularity is so high that if he was to stand in the middle of 5th Avenue and shoot someone he would not lose any voters. He was simply repeating what the pollsters were saying.

https://www.newsweek.com/trump-voters-republicans-overall-actually-dont-care-president-shoots-someone-638462

#132 The Middle on 08.20.18 at 6:19 pm

#22 Fluorine on 08.19.18 at 5:19 pm
Calvin

… and a free thinking centrist will ignore it as the nonsense it is.

There are more than two sides to choose from, including choosing no side at all… which the vast majority of any population falls into, despite the massive social and political pressure to become polarized and factional.

———————————————————————————–

Exactly.
Enough already with reducing complex issues into binary decisions.

That game remains a simple, and perfected, pattern that benefits only a tiny segment of society:
Play the left against the right, the right against the left and sit comfortably in the middle profiting from their misguided self-interest.

#133 Gravy Train on 08.20.18 at 7:32 pm

#131 Ronaldo on 08.20.18 at 6:18 pm
“The news media has a way of twisting things around. If you listen to what he said, he is saying the the polls (pollsters) are saying that his popularity is so high that if he was to stand in the middle of 5th Avenue and shoot someone he would not lose any voters. He was simply repeating what the pollsters were saying.”

https://www.newsweek.com/trump-voters-republicans-overall-actually-dont-care-president-shoots-someone-638462

Did you actually read the article that you posted? The poll was conducted after—not before—he made the claim. Go back and reread the article, you simpleton! :)