Just right

Not too hot. Not too cold. And don’t expect a rate cut anytime soon.

The latest inflation numbers, out Wednesday, show the Bank of Canada might actually know what it’s doing. As you recall, the central bankers decided last week not to cut rates, even as Trump beats his monetary guys into submission (a rate drop is still expected there in a few days). The official Ottawa stats confirm it’s different up here.

You may not believe it, but the cost of living increase is down to 2%. Yeah, I know everything you buy is way higher than last year, but that’s the spin. And it’s down considerably from 2.4% in the previous month.

Two per cent is right in the central bank’s target range. Below that (1%) and they worry the economy is languishing and needs some stimulus (I know the feeling). So they cut. Higher than this (3%) and they fret things are overheating and in need of a cold shower. Rates go up. Along the way financial markets react because the cost of money influences much. Stimulus means more economic activity, corporate profits and rising stocks, for example. And higher rates bolster the dollar, since money flows to where it can earn a better return.

Trump wants cheap money to gas stocks, fuel growth and win him another term. So, weirdly, a country with equities at record levels, full employment and robust GDP, is about to see interest rates reduced, partly because of White House pressure. But in Canada, no such luck. With central bankers in many countries about to ease rates as expansion slows, our guys are expected to stand pat.

So if you’ve been waiting for lower mortgage rates, stop. Our advice stands. When five-year terms are available from the banks at 2.8% and short loans are out there for close to 2%, take the money and run.

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It’s relatively easy to hate people posting on this blog from Toronto. Even moreso from Vancouver. You know the drill: the GTA has all the jobs. YCR has all the beauty. The rest of us are dog poo.

The latest housing news must have come as a shock to them, since both markets have shuffled to the bottom of the pack. Sales in Van have collapsed and prices are swooning. The market in Toronto is flat, boring, pedantic and expensive. Meanwhile people in other cities – where the destructive forces of speculation never really hit – seem to be happily buying and selling at a healthy clip.

CREA’s stats tell and interesting story when it comes to the ratio of houses selling to the number listed for sale. The strongest markets are now Ottawa, Montreal and Halifax. Among the very weakest are – you guessed it – the Big Smoke and that silly city which taxes people for having second homes. Moreover, when it comes to renting, Toronto is the worst market in Canada.

Why would anyone stay there? Oh, right. The rest of us are all unemployed.

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Bandit growled at me when I hauled him off licking another dog’s tasty vomit this morning, then Dorothy huffed at breakfast, saying I spend too much time on some stupid blog. So now I’m fragile. Need a suck-up. Fortunately, here’s Denis…

He and his wife emigrated to Canada six years ago (from the UK), immediately fell victim to some bad Canadian habits and got house-horny. This is their tale.

After living for three years on student income and in a tiny studio apartment in UK, we finally had full-time jobs and for the first couple of years, we wanted to live the ownership dream. We bought a new SUV and eventually a townhouse in Coquitlam. Even though we could afford to make the payments, pay back the student loans, and had a bit of money left at the end of the month, we slowly realized that we weren’t any happier than we were during our student years…

At around that time, a colleague introduced me to your blog. I read it since then and I give you a large credit in our decision to sell the townhouse in 2017. We cashed out a couple of months after the market hit its peak here in Metro Vancouver. It almost felt like a last moment sale. We only had one reasonable offer and it was at exactly the asking price. The days of multiple offers above asking were over…

Since then our portfolio has surpassed the half million mark. We rent – almost two years now. With one three-year-old kid and another one coming. We do not worry about our finances anymore. And the thought about the upcoming maternal leave or the child expenses don’t bother us. We got the financial buffer to go through at least some of the surprises that life can bring.

As cliché as it might sound, money doesn’t buy you happiness, but it bought us the ability to take time off work, time to enjoy life…

My intent in sharing this is not to pet myself on the shoulder but to say that, despite all the complaints in the comment section, Canada is a country of a great opportunities, even for those of us in our early thirties. As long as you are willing to stop whining and feeling entitled. As long as you are willing to live within your means. Care less about what your family, friends or neighbor think about your house, car or stuff. And if you are living in a city, be willing to give up on the outdated dream of owning a detached house. Not owning one will not make you any less happy in life. In fact, it made us much happier when we get rid of ours… Thank you for the great work that you do on this blog!

Ahhh, much better. Apparently there are actual people who read this pathetic blog and don’t just want to fight over the Internet. How refreshing. And, yes, the notion of owning a detached home in a major urban area within biking/walking distance of a meaningful job without gutting your finances or becoming a debt slave during an entire adulthood is… gone.

There’s absolutely no shame in renting. For disciplined people who invest instead of feeding a piece of real estate, this can mean freedom, liquidity, flexibility and the ability to properly look after your family.

By the way, Charlie – the soon-to-be-evicted dude we profiled here yesterday – sends this note: “Just wanted to send you a quick note to say thanks for addressing my inquiry on your blog. I really do appreciate the advice and input you offered on our situation. We were definitely a bit panicked when we found out we were being evicted, and I think our emotions pushed us to consider buying. But, we’ve caught our breath, and have seen some pretty good rental properties. We’ll have to pay a bit more than we currently are, but that’s not the end of the world. It’s all good now.”

Me too.

Homeless

Today’s needy Blog Dog is a solid guy with a squeeze, a canine and (regrettably) a cat. Charlie lives in Oakville where, after two years, he‘s just been booted out of his rental. Suddenly, everything changed.

“Unfortunately, our landlord has informed us that his father will require the house, and as such, we are to be evicted on September 1 (the end of our lease). He’s always been a decent guy, but I have to admit, I’m suspicious that he’s looked around the neighborhood, realized he can probably get about $600-700 more per month, and figured he’s better off to boot us out and get a new tenant at a higher rate.”

So what has Charlie done in response?

“I’ve pushed back a little bit, requesting an N12 form, as well as the required one month’s rent as compensation, but this is going to be a losing battle. So, we’re looking for a new place to live. As mentioned above, market rent has crept up, while we’ve spent the past two years sheltered by rent control. In addition, while living in this house, we’ve acquired a dog and a cat. Many of the available rentals do not want pets, so I can either cross them off the list, or lie to our prospective landlord and claim not to have any pets. Neither option seems particularly appealing.

“My partner and I had been quite content renting, saving, and investing. We had hoped to purchase a home eventually, either once we had a very solid nest egg, or some sanity returned to the GTA market, whichever came first. Now, we’re not so sure. Real estate still seems quite expensive, but I have to admit, getting kicked to the curb with 60 days’ notice doesn’t feel great. It definitely is causing a rethink of our strategy.

  “For reference, our annual household income is about $205k, and we have approx. $360k saved up, in RRSPs, TFSAs, and non-registered accounts. No debts. We’re 30 and 28 years old. Guess I’m just looking for an opinion here. I’ve attached a couple photos of our dog (as a pup) in an attempt to endear you into answering.

“Thank you again for your daily insights, and any opinion you can offer. I greatly appreciate it, and all you’ve done for the improvement of Canadians’ financial literacy, and mine.”

Yes, this is one of the most powerful nesting moments. Others include getting hitched and having a kid. Suddenly a heady mix of fear and house lust makes every single waking hour another opportunity to check realtor.ca. The irrational thought of living in your vehicle and showering in a car wash drives people to make quick, unstudied, panicky decisions. So just chill. We’ll figure this out.

The first thing to do is buy time. If you suspect the LL is tossing you just to get more rent, then offer more rent. Duh. You can afford it. Another $600 a month is $7,200 a year – which is a mere pimple on the rump of a typical Oakville house. Land transfer tax alone on a $1 million townhouse is almost $16,500 (even after the first-timer rebate). House prices are going down, not up, so waiting another year would save you far more than the additional rent. Besides, you need time. Finding a house and closing on it in five or six weeks is just silly.

Second, prepare in case your offer of extra money is rebuffed. Scour the rental market. Grab an Airbnb for a few months, if you have to. Just try to extend the period of time you’ll have to rationally contemplate a purchase.

Third, prepare. Go and get pre-qualified for a mortgage – a commitment which should remain in place until November (120 days). That will allow you to make a clean, quick and decisive offer if the perfect place materializes. Now, establish a relationship with a seasoned local realtor and, for the love of Dog, stop pouring over MLS stuff all day.

Hiring an agent to represent you costs nothing. He/she will be aware of every new listing before you even see them online, then able to advise you on neighbourhood, comparables, price history and overall value. Take your stress, FOMO and anxiety and unload them on someone else. Let your guy research listings, call the agent involved, pre-inspect and set up a viewing schedule. Then, if you offer, that person will help you write it, pluses argue for your interests during negotiations. All for free. Oakville, by the way, has a slew of seasoned house-slingers to choose from.

Can you afford to buy?

Depends. Income‘s good. Savings (for your ages) are epic. You can always sell the cat, of course, and prosper more. You can use the HBP to drain $70,000 from your RRSPs for a tax-free downpayment and defer any repayments for two years. And you can borrow five-year money now for just 2.8% (after the stress test is passed). But remember that the housing market is weak. Sales locally year/year are flat. Prices locally are declining (the median dropped $20,000 last month), and this may well continue.

Be in no hurry. Lose feelings of anger or apprehension. And you can always call your mom. She has to take you.