In comments published Thursday, Jim Flaherty, our challenged minister of finance, said, “I am worried about the US housing market and what it does to consumer confidence It’s not just subprime, it’s much bigger than that. We can expect reduced demand which is going to hurt exports, particularly in the auto sector and forest products.”
This the same guy who, when I asked him about lost jobs on the floor of the House of Commons a month ago, boasted about record low unemployment, the booming economy and our bright prospects. So, welcome to our world, Jim. Thanks for starting to tell Canadians the truth.
As I wrote yesterday, there is a lot of truth to tell. The American economy is a sick puppy, and will only get more desperate as the year goes on. The Canadian manufacturing sector is being hollowed out, and factories being shuttered now will likely never open again. Yes, forestry will be hard hit, with $43 billion worth of timber being attacked by the pine beetle because climate change means it doesn’t freeze to death in the winter any more. That, plus our loonie at par makes American lumber more competitive, and, of course, house building in the States has fallen off a cliff. It’s the perfect storm.
An inevitable casualty of this is the Canadian real estate market, which is in the same fog of denial which Jim Flaherty just emerged from. I hope for the sake of countless young couples thinking of taking the plunge into debt and granite counter tops this year that Mr. Flaherty and his boss ensure they mislead no one else. It is their responsibility.
On Thursday I received this letter from a constituent:
Mr. Turner,
I am aware of the grave threat that climate change, peak oil, the housing bubble and the current global financial meltdown/shake-out pose to Canada. You are one of the only Canadian voices that has been able to articulate the grand picture from 30,000 feet and for that you have earned my applause. The ‘reality’ of north american life is about to change but I feel at a loss as to what I should do to best prepare for or avoid the carnage. I can see the hurricane you are warning of, but feel just as ill prepared as my neighbours who still see blue skies.
As an MP I appreciate that you can’t get bogged down in personal advice, but I do hope that you might offer a suggested path for the many constituents who are in my shoes. I live in a townhouse in your riding that I bought with 15% down three years ago (10 years at 5.15%)…my wife is staying at home to raise our two children. We live modestly and don’t over-consume. My gut feeling is to sell the house (and realize the 70K gain), rent for a year or two and then buy back into the market when prices have depressed. My wife thinks I’m crazy….is the right?
I hold your opinion in the highest regard and appreciate any thoughts you might wish to share.
Kind Regards, Jason.
To Jason I would say, simply, there is only one reasonable course of action, which is to list the house as soon as possible, hope a hungry buyer comes along, and pocket the seventy grand. Go and rent a similar home for (likely) a lower monthly cost, and wait for the inevitable winds to howl through. Odds are the house will be worth less in a year than it is now, and a seller’s market will have turned into the same buyer’s feast that currently exists to the south.
In fact, you might want to question the whole notion of home ownership for a while. Consider that you face large, non-deductible costs of land transfer tax, mortgage payments, property taxes, utilities, insurance, plus hefty commission when you sell, and the lost earning potential of the money you used as a down payment. The only way to break even if is a substantial capital gain can be realized.
Given all that, you can often improve your cash flow by renting, rather than owning. Plus, if you do own a home and the market turns, you’ll find real estate to be an illiquid investment. You can always sell a stock or mutual fund with a single phone call, while it can take months to unload a home, with its value falling every day. In fact, this is already happening in spades to more expensive homes in the region – months on market, and offers for $100,000 or more off the asking price.
By the time your neighbours understand what you have just realized, it will be too late to take action.
Real estate is a fine long-term investment, when you have oodles of equity and the time to watch all kinds of conditions come and go. But for you, go talk to your wife.
128 comments ↓
Step one of handling this turn of events is to completely stop raiding the EI “surplus”.
There is a person( WC Macdonald) over on the other commentary that just seems very lost.
Everything is cyclical. Real estate is one of them and it’s about to take a downturn.
“house flippers” are about the get caught and those that bought with very little down are about to lose their shirts.
YES…everyone needs a roof….but do you NEED 3500 sq/ft and granite countertops? Because that is what so many people jumped into thinking they had a flawless investment. Think again….
Jason, if you feel quite certain that your job is stable and secure, and your family feels settled in that community, stay put.
For folks who have little ones, slipping from rental to rental, should the owner have to sell, is very hard on young families.
My guess is that your wife would agree, ***as long as your job is going to be there for you.***
If the employment situation is also tricky, then you have more to discuss than keeping the home.
That’s an ill-informed comment snce rent control laws prevent any tenant from being evicted when a property is sold, unless the owner can prove he is moving in. Tenants have far more rights than landlords, and fewer costs. The scales have tipped. — Garth
Garth:
You might consider that the US economy is an efficient gargantuan beast, accounting for 35% of the global economy plus Americans hold aprox $10 trillion in foreign assets. Housholders have a combined worth of aprox $60 Trillion and the average worker generates $78,000 in value per year. There are cracks but these are due more to excessive zeal and creativity than a lack of real enterprise. Interest rates are on the way down and the feds are ready to give the economy a shot of booster juice if necessary.
A recession maybe, but later rather than sooner…perhaps late 08 or early 09. Who knows? Certainly not me, I am a procrastinator, not a prognostater. In any case, the chicken littles should go back into the hen house lest they get more egg on their faces.
Jim Flaherty, our challenged minister of finance . . .
Challenged by what? Dim Jim (NOT the same as dim sum!) is a total wacko, doesn’t have the slightest idea of what he is doing and why he is doing it, but then again most — if not all — CRAPpers are in the same boat!
Misery loves company, ‘coz CRAP is sliding downhill fast now, and they know it.
“That’s an ill-informed comment snce rent control laws prevent any tenant from being evicted when a property is sold, unless the owner can prove he is moving in. Tenants have far more rights than landlords, and fewer costs. The scales have tipped. — Garth”
That might be of little consolation to Jason’s family, should the owner be moving into the family’s rental.
Or if the new owner took this path:
“There are other grounds for eviction, such as if the landlord personally needs the apartment to live in, if they are demolishing the building, converting the building (such as to a condominium) or doing such major repairs or renovations that they need your unit vacated.”
http://www.ontariotenants.ca/law/law.phtml#Q9
While a renter has rights, eventually, the owner gets his say, and his way.
Jason, for a young family, that can become an uncomfortable situation, especially if you have a mindset of ownership.
And what do you have 5 or 10 years out?
Listen to your wife…hard.
With all due respect, Garth, I think Jason’s wife is correct.
When you consider what it would cost them in realtor fees, lawyer’s fees, moving costs, and house rentals, is uprooting the family worth the hassle?
Personally, I would stay put and wait for things to stabilize. If Jason is in a secure job, it’s not like they HAVE to move when the market is down.
Sure, he can sell the house and gamble on the market–like playing the stocks–only with his home. Jason’s wife has obviously made a commitment to stay home to raise the children. In the present situation, she knows where she stands. If Jason sells the house out from under her–trouble. Just my 2 cents.
I appreciate your posts Mr. Turner, and for much of Canada what you say about getting out from under your behemoth house and mortgage and renting in the near future might work. However, when there is NOTHING to rent in say: the entire Lower Mainland of BC, and likely nothing until after 2010, this just won’t work for everyone. There is no connected transit from outlying areas, no way that people can responsibly commute and it worsens by the day. The infrastructure of the Lower Mainland is failing, and it will be very disruptive if and when the powers that be ever get around to fixing it. (Case in point: Cambie Street. Many businesses and families went under in that ill-planned fiasco. But it will be all sparkly and waiting for the off-shore investors in just a few more months…)
Not a likely scenario for a family to hang its hat on.
I expect to see many more homeless people on the streets, many more families. For my family I will count myself lucky if we are all still safely crammed in our rental place for the next two years. Providing we don’t get booted while the owner makes “upgrades” just in time for the Olympics
Sometimes one is fortunate in even dire circumstances.
Sad that it takes the Harper Conservatives to create even more dire circumstances for ordinary Canadians.
Jason, if you feel quite certain that your job is stable and secure, and your family feels settled in that community, stay put.
For folks who have little ones, slipping from rental to rental, should the owner have to sell, is very hard on young families.
My guess is that your wife would agree, ***as long as your job is going to be there for you.***
If the employment situation is also tricky, then you have more to discuss than keeping the home.
That’s an ill-informed comment snce rent control laws prevent any tenant from being evicted when a property is sold, unless the owner can prove he is moving in. Tenants have far more rights than landlords, and fewer costs. The scales have tipped. — Garth
Garth-I find your comment to be both ill-informed and ill-advised. What if the new owner is moving in? Believe it or not Garth, families live in basements in Halton.
That’s an ill-informed comment since rent control laws prevent any tenant from being evicted when a property is sold, unless the owner can prove he is moving in.
While technically true, that didn’t prevent one landlord of our acquaintance from evicting a whole house full of tenants because he wanted to sell the building (in Milton, BTW). They wanted to fight it, but the cost and time and effort that would have been required became an unappealing prospect.
Then there are commercial tenants who have absolutely NO rights at all in this province… but that’s another beef.
A nice picture of some protesters at the Rose Bowl.
http://dungeondiary.blogspot.com/2008/01/impeach-banner-prominent-in-rose-parade.html
Now where in this world can a person with a growing concern about their personal situation write a letter to a politician and receive a personal opinion? No spin,just an accessment by an individual who,s an expert in this field and finances. In my opinion this is a service that money can,t buy. The constituents in Halton are to be envied. My New Years Wish is to have a similar M.P. in my riding. Dream on !
Just like the burst of the Asian bubble in 1997, everyone was caught unaware until George Soros bet on the Thai baht. Then all the dominoes of pretended real estate boom came crashing down all over Asia. But is it going to happen now in North America? What is the best leverage a real estate owner can do? Will he sell the house and keep the money while renting an apartment and hopefully during the depression, he can buy another house at dirt cheap price. That is of course assuming he still has the money during the depression. But rescission brings about inflation which eats up on everyone’s savings.
Right now or after ten years, real estate is in a boom in Asia especially in China. And everyone forgets about the bubble burst in 1997.
It will be foolhardy to sell one’s house because of the things that may happen in the future. Sure, the value of real property may fall, but are you forgetting that you own your house? Don’t you think the government will just allow Canadians to just lose their homes just because of the economic downturn? Are you forgetting about cutting down interest rates by the federal government or possible moratorium on housing loans? I am not painting a rosy picture here but you have to remember that there is always a bright side in every dark picture or event. But to be very pessimistic now and act as if everything that is bad will happen and nothing good will occur in the future is senseless.
Act prudently and reasonably.
Jason:
Garth has given you very good advice, should you and your wife decide to sell, invest your money well, do not take chances, plain simple interest (GIC’s) always go up and during troubled times you will sleep well.
Renting,…you will find a nice place and your costs for shelter, will be defined alowing your wife to set a planned budget in place, then in a couple of years or so you can look for nice home that is ready set go that meets your needs not your wants. By this time you will have over 25% to put down beating that deadly goverment mortgage insurance costs. If you can stay without any strain on your family or regrets when things go south, then do it. Me I bought a modest home raised two children sent them to university and beyond and this 1050 sq ft home is just fine and besides the cats love it and that makes the lady of house really happy. And I rented first and my next move will not be a condo it will be renting once again. Bon Chance, good luck…..for starters you were wise to ask….so me thinks you and your family will do just fine.
Does this person have only 7 years left on his mortgage?
If this guy’s job is fairly secure, and he can afford his payments, he should stay put. He still has equity (even if some of the equity is initially eroded in the next year). Plus he is young and sometimes the housing market has its ups and downs. He has lots of time to stay the course.
Why panic! The 70,000$ he would realize now, would be gobbled up in no time by rent (3+ years); or if he invested, he would earn about 4.5% in a safe investment vehicle but still have to pay the 18,000 to 24,000 in his yearly rent.
I can’t believe that you, Garth, would giving such an advice. Renting only makes others richer.
Surging dollar likely to top meeting agenda
BRIAN LAGHI
From Friday’s Globe and Mail
January 4, 2008 at 12:36 AM EST
OTTAWA — Prime Minister Stephen Harper has invited Canada’s premiers to 24 Sussex Dr. next week with a letter telling them he feels their pain as certain regions of the country try to adjust to the spiralling Canadian dollar.
However, the letter, obtained by The Globe and Mail, is short on prescriptions on how to deal with a burgeoning currency that is costing manufacturing jobs, particularly in Canada’s two biggest provinces, Quebec and Ontario.
The Jan. 11 meeting will be the first between Mr. Harper and the premiers and promises to release a series of pent-up complaints that range from new legislation redistributing representation in the House of Commons to provincial concerns about the elected Senate.
http://www.theglobeandmail.com/servlet/story/RTGAM.20080104.letter04/BNStory/National/home
Did anyone see CBC’s At Issue Panel last evening on the National.
Economic Forecast ‘08
Airs tonight (Thursday)
Harper and Flaherty have warned Canadians about a downturn in the economy this year. What kind of budget can Canadians expect? And how will Dion and Layton react?
It will be available later today, Friday. Worth a watch.
http://www.cbc.ca/national/blog/video/at_issue/at_issue_economic_forecast.html
I just read in the Globe that our new Conservative government is spending $650,000 tax dollars to advertise their GST cut, picture of Harper and reminder of campaign promise. Every blogger should e-mail their rep and oppose this type of partisan abuse.
To go off topic here Dion and the Liberals have proven once again that they are opposed to allowing democracy to operate within their own party.
http://www.liberal.ca/story_13459_e.aspx
The establishment parties do not like David Orchard’s nationalism. By appointing a candidate in a riding in which he has been working for the nomination over the last few months, shows their fear of allowing the riding to decide who their candidate will be.
Dion is working to prove to the establishment that he is “one of them” and, at the same time, proving once again that the Liberal Party is not a democratic party.
Renting is simply paying some person’s mortgage for them! At least if this family stays put and rides it out, they are investing in their own equity every month. Also, you have to consider the personal side of such a move you are encouraging Garth. What if they have a dog? Are they prepared to give up that pup to move? Very few rentals allow pets. The kids would have to probably change schools and give up friends. For me, if I were in his shoes, if possible I’d stay put and ride the wave.
As for ‘climate change’, for me personally, I think the jury is still out. Sorry, but I won’t lay awake at night because Al Gore thinks I should. Try this site for a different perspective:
http://icecap.us/index.php/go/joes-blog/southern_hemisphere_ice_cover_remains_well_above_normal
There’s lots of links and it’s very interesting reading. I believe in order to learn and form your own opinion on any topic, you should be willing to consider differing opinion.
~as an interesting aside: On Dec. 31, I was preparing my New Year’s eve feast. I was thinking about this blog and personalities in general, about how some people just can’t accept a ‘nice’ person who uses terms of endearment and well wishes frequently like I do. Some people always see something sinister in it. Anyway, I went to peel potatoes with these thoughts in mind…and the first potato I pulled out of the bag was in a perfect heart shape! If anyone doubts this, I did take a pic. and can send it to Garth any time.
I now must continue my work as I have another busy day ahead. Have a really nice day everyone. Leasa
Jason, Your house is a home for your fanily, not an investment.
If you live modestly, you’ve likely got a modest house, and prices on those don’t fluctuate as badly as the 3500 square footers.
Furthermore, there’s no way you’ll be able to find suitable rental property cheaper than your mortgage payment in Halton.
Misery loves company, ‘coz CRAP is sliding downhill fast now, and they know it.
By Charles Oxley on 01.03.08 9:44 pm
You could be a plumber Charles, the first thing they teach is CRAP flows downhill.
Garth, keep up your blog as long as you can, the terrorists are trying to extinguish free thought and opinion…again!
http://www.radicalpress.com/?p=628
Jason,
The trend will be your friend. The GTA has exploded in growth because 17% of Canada’s population want to live within the GTA and therefore demand will cushion a long term price decline in housing. You really have to ask yourself why you live where you live and whether you like it or not. Renting has its headaches as well.
I can’t believe that you, Garth, would giving such an advice. Renting only makes others richer.
By Catherine on 01.04.08 5:11 am
Agreed.
If I read this correctly, Jason took a ten year fixed rate term on his mortgage. So he still has 7 years left where his mortgage payments are fixed.
Secondly, as has been pointed out, renting means money out the window. While paying mortgage, most is interest, but some comes of the principle. Whereas rent is all gone. Not to mention someone still has to pay property taxes, hydro, gas, water and insurance on a rental, costs which the tennant pays or the landlord passes on to them. Rent or own, these are still coming from your pocket.
As has been pointed out, if your job is stable, stay put. Look to history, there have been many times that the housing markets has declined, only to come back stronger. If you took Garths advice, and got the timing right, yes you could make money (assuming someone will buy your house now!). However, get the timing wrong, and after paying all that rent, realtor fees …etc…etc… you may find that you’ll end up buying the same house for a lot more than you sold it for.
I’ve told this story before, but it proves the point.
In Epsom and Ewell, prime commuter belt land for London, I sold my house for $220,000 in 1988. Six months later, it was only worth $150,000. The writting was on the wall back then that the markets were going to crash, just as they are now. Friends of mine bought at about the same time, they ended up with negative equity.
That same house now is worth $700,000!
Jason, listen to your wife.
Jason,
I would also disagree with Garth on this one. You appear to be in a relatively good position to weather the storm.
Garth in more hawkish in regard to the other investment options out there but are many dependent on investment portfolios are finding it difficult to determine what might be secure investment options.
In my opinion, selling your home and investing the proceeds is just as much of a gamble as keeping it.
Jason you have to choose whether your house is a home or an investment. It can’t be both. Having tried both sides of the coin I can tell you that unless you own more than one house, the house you live in is your home.
Cars that run on compressed air…60 MPH, range 124 miles
http://auto.howstuffworks.com/air-car1.htm
0 exhaust pollution, but electricity has to be generated to compress the air.
I think certain segments are going to suffer far, far more than others.
There’s a transition underway. Transition is going to generate winners, and it’s going to generate losers…just like what happened in the early 90’s and in the early 80’s.
At the core, I feel, is a dysfunctional energy paradigm. Energy, like the Canadian Dollar, was too cheap for too long. What the free market giveth, it also takes away.
Energy independence would have sheltered North America from the Saudi entanglement, and subsequent stagflationary spending of the US Republicans. In Canada, nothing really could have stopped Harper from spending like a Mulroney-ite, at 3 times inflation.
(that’s not a dig at you, it’s a dig at childhood memories of Mulroney continuing to borrow the the interest rates were so high…)
My own analysis of household spending patterns and inflation strongly indicates that a lot of the inflation is purely driven by higher energy cost, and there hasn’t been a single other category of spending that the median Canadian offset, aside from print newspapers and magazines, to compensate.
A few categories of spending fell in terms of real dollars, but not absolute. Furniture and appliances East of Quebec fell in terms of real dollars (not nominal).
Canadians did not stop increasing their lust for electronic goods, in spite of naturally occurring deflationary pressures (falling computer prices).
The facts are pretty damn clear from where I sit. While the price of essentials inflated over the past 3 years (food, transport, shelter), discretionary expenditure (restaurants, electronics, gambling, recreation) increased.
There was no offsetting.
And so, we’ll find ourselves in a world of hurt, because many of us are going to have to not only reign in discretionary spending to balance out the increases in essentials, but do so at an accelerated rate.
This does, to me, signal a huge problem for the service industry in many regions of Canada, as Canadians go to the bar and restaurants less, and stay in more.
That’s my informed analysis of recent expenditure trends, Garth.
For those with money to burn, i.e., waste, there is a nice little Muskoka property for a mere $22 million!
As to the American economy I think this says it well Ka-BOOM
On a positive note, Barack Obama took Iowa yesterday, and his speech was the most inspiring I have heard since JFK, the last real leader the U.S. had.
The people are rising up in the States…what will Canadians do? Probably vote against, rather than for something. That is really intelligent and really progressive. NOT!
As to the GST cut, well I received my notice from CRA regarding the changes and have to say I am pleased that the quarterly filing requirements have changed for the better, from my perspective. It now is set that if you collect under $3,000 in GST or HST then you only need file annually, whereas it was $1,500 before. The sales volume also has changed significantly from $500K to 1.5 million.
I want to thank the Cons for allowing me to use their money for a year, interest free, which in effect is a tax cut to small business. It is the least they can do whereas I have to act as their agent in collecting the GST.
On the other hand, I have tried to pay monthly, but they apparently have too many paper pushers to make that cost effective. Go figure, eh?
Funny how I can pay all my bills online, file returns electronically, but still have to go to the bank to make a GST payment. Yes, Ottawa is a progressive denizen of bureaucratic paper shuffling.
Oh well, ‘What me worry?’ I live in a Mad World so might as well think like Al does, eh?
Oh, BTW, TGIF!
Pecked to Death by Ducks on 01.04.08 9:14 am,
What happened to this idea? It was presented in 2000 and was supposed to be in for sale in South Africa by 2002 and in Mexico.
Well…at least Canadians still have the non-taxed income trusts they were promised…..wait….
Sounds to me that Jason’s plan is a gamble. But I also see that it could depend on his location in the country. I can see Calgary prices take a dive much more significantly than, say, Gatineau, where some houses are still at a very reasonable price. If I were a relatively recent home owner, I’d rather just stick to my house for a while. There will be a market slowdown (just like there currently are in UK and in Ireland, where it easily costs 400k Euro for a 700 sq ft house in a rather bad neighbourhood a few km from downtown Dublin, for example), and I see it, for myself, as a better idea just to hold on to my house until the storm clears out in a few years.
In the 80’s my elder sis and I bought a 3 level TH condo. Six or 8 mos. prior we each were renting a tiny 1 bed apt. in the same bldg. 2 blocks from the waterfront in downtown Hfx. It wasn’t cheap. We moved into a 2 bed apt further from downtown so we could save money for a house. As my sis didn’t drive and didn’t have a car, transit for her was a big concern (its still the pits here) it had to be close to downtown. Six mos later we assumed an CMHC mtg at around 8/9%. IIRC, rates were supposed to decrease, but instead, when we had to renew it was almost 19%. We renewed for the shortest timeframe available at that time (6 mos or 1 yr). We both had fairly secure jobs, but were living a little too high on the hog & with credit debt (yep, I owed $1K to visa and a $500. overdraft and won’t go into what my sis owed – she was a clothes horse, but I had car payments & maintenance). After we spent about a mo. touring in Europe, we took out a bill payer loan. Since then, I swore I’d be debt free (except for mtg and car paymments). I did it, but, unfortunately not my sis 6 mos. later was back to where she started. A couple of years later, my sis & I married, on the same day, to our present DH’s. She & her DH moved down the st. (same development) & they’re still there. Both are spenders & didn’t save for retirement. DH & I (after a long battle with the condo corp. board who were ripping us off – really bad condo laws here & v.l. story) we sold and moved into our current home. We had more than 25% down &, with sacrifice, we paid off in 7 yrs. We negotiated & got a very flexible mtg. & used computer SW to help us determine how much we’s save by paying down ASAP. Tho we had been preapproved for a bigger & more expensive home, we chose this 1 cause we like security & said if 1 of us were to lose our job, we could still afford all that owning a house entails, & still enjoy life. So we’ve been mtg. free since 97/98.
BTW, we thought about investing in real estate rather than the market, but have heard some horror stories from many who’ve gone that route. Guess it depends on the laws in the prov. in which you live. And, if you want to go into investing in rental property, you have to be willing to put into lots of time.
My advice, for what’s its worth, prolly not much
, is think before you leap.
Garths actualy right on this one
put the 75000 in Oil trusts for a 2 or 3 years earn 10%/y,
(If you’re agressive put 10-20% in the gold or silver ETF and you could might well double that portion over 2-3 years years)
save a couple grand a year on taxes and rent something cheaper than your current mortage. IN two-three years I have no doubt you’ll buy back in 20%-30% cheaper, and have at least 100,000 down payment. Perhaps by then someone will be building real green houses that take 60% less energy, win, win win!
Funny how I can pay all my bills online, file returns electronically, but still have to go to the bank to make a GST payment. Yes, Ottawa is a progressive denizen of bureaucratic paper shuffling.
By Bill-Muskoka on 01.04.08 9:43 am
Bill, I suggest you look into this again. My corporate account is with RBC and I pay both my monthly GST & Corporate taxes online. Also do all my annual filing online as well through the RBC.
C.C. Innes,
Need you be reminded about Conservative candidate Mark Warner being removed in Toronto Centre and replaced with a bible thumper? They have also replaced a couple other candidates as well. If you are pointing out flaws in all the parties , then critism is accepted. If you are saying this to smear just the liberals then you are cherry picking facts and using it as propaganda. Be fair or just don’t comment at all. I think everyone is a little tired of the BS coming out of our political system, we don’t need you adding to it.
And so, we’ll find ourselves in a world of hurt, because many of us are going to have to not only reign in discretionary spending to balance out the increases in essentials, but do so at an accelerated rate.
This does, to me, signal a huge problem for the service industry in many regions of Canada, as Canadians go to the bar and restaurants less, and stay in more.
That’s my informed analysis of recent expenditure trends, Garth.
By LoH_Numa on 01.04.08 9:24 am
Loh Numa – Agree – I & my DH used to go out to dinner 1/wk to a resto. Its now about 1/2 a year for dinner tho DH goes out more often with his buddies. I will buy thin crust, WW pizzas, at the supermarkets (for those nights I’m too tired or really don’t feel like cooking) rather than order one in as, IMHO, they’re garbage. However, even tho I prepare homemade meals 99% of the time, some of my neighbours eat junk food about 50-75% of the time, and their gurth (sp?) shows it.
By Reid on 01.04.08 10:21 am
You are correct, but that is because you have a corporate business account. I do not because why should I spend $35 per month on service fees which I have no need to use?
As a sole proprietor you have to have a dedicated business account, regardless of corporate status to file GST electronically. Another little item Jack Layton could address next time he feels the ATM issue throbbing in his head. LOL
I looked into incorporation, have had a corporate status on other companies I owned. It simply has no definite benefits for my business. In fact the tax rates would be more as a corporation.
But thanks for the kind and courteous reply.
By Reid on 01.04.08 10:21 am
In addition to my previous comment, you jogged my old brain, and actually, Ottawa is progessive, it is the banks who are not, and I too am with RBC who I have very good relationships with. Otherwise, they do a fine job(the RBC).
The Ontario PST is another matter, but they seem to have progressed as well. Even though I no longer collect PST, I still have to file semi-annually. After 4 zero balance returns they remove your PST license, which is okay. I used to sell products that PST was applicable to, but now just do consulting which has no PST.
My biggest gripe is with the too many pages required by the CRA for tax filings. They seem to have mastered bureaucratic paperwork to a fine art level. LOL
In the U.S. it takes a mere 3 pages to file a small business return, less two additional pages for Capital Gains.
We talk about saving our forests, but Ottawa is still living in a paper oriented past even with the electronic filing system.
The U.S. proposed going to a one page 1040 form.
Line 1 How much money did you make last year?___________________________
Line 2 Send it in_______________
LOL
An article in MacLeans this week about the Canadian real estate market (“Buy? Sell? Panic?”) is not quite as pessimistic. It examines the historical fluctuations of the housing market, and compares Canada’s housing prices to the rest of the world – not just the US. In fact, author Jason Kirby cites this blog; “Some are convinced the end is nigh. The housing bubble’s imminent demise is a regular topic on Garth Turner’s blog. The Liberal MP and author argues baby boomers fuelled a housing bubble of ‘Biblical proportions’ that is about to crash down. Of course, Turner has predicted prices were set to fall for several years now, and instead they’ve done the exact opposite. The thing about making predictions in a market as cyclical as housing is that eventually you’ll be proven right.”
It is almost a given that Canadian housing prices are going to fall – they have always fluctuated and always will. The question is, how bad is the next fall going to be. In Victoria and Vancouver, it may not be so bad. As the “Lotus Land” of Canada, there is a constant stream of baby boomers retiring here, buying up local real estate. This won’t last forever of course, but it’s keeping prices inflated now. In areas of Canada where local economies are driven by manufacturing or extracting natural resources, it might be considerably worse. Who knows?
A recession does seem inevitable. I’d be keen to hear what other folks think about personnel financial tactics in the months before a depression. Are there investments that have done better in historical recessions? Noble metals? Get your money out of the banks and bury it in the back yard?
Jason this review should give you some insight.
http://www.amazon.com/gp/cdp/member-reviews/ABX4HH6Z6GKPD?ie=UTF8&sort_by=MostRecentReview
What happened to the compressed air car idea? asks C. B. Innes
I didn’t realize that it had been floating around since 2000. I just heard a ten second news blurb last night and started researching it thinking that it was brand new. Localizing the pollution to a central electrical plant seems to have more merit than all of us driving around in densely populated cities spewing out toxic gases.
Does anyone know if you can type something in Word or Notepad and then paste it here. I was in the middle of typing a response and then whamoo, it went off into never never land. I might have hit a wrong key. Its not the first time that’s happened to me. I like to reread, correct my typos, language, etc. before I post and, sometimes, lower my ‘blood pressure’ before I ’say it’. This really frustrates me when my half-baked comment(s) go off to ‘never land’.
What Canada is hitched to:
THE NAKED HEGEMON
Part 1: Why the emperor has no clothes
By Andre Gunder Frank
http://www.atimes.com/atimes/Global_Economy/GA06Dj01.html
THE NAKED HEGEMON
PART 2: The center of the doughnut
By Andre Gunder Frank
http://www.atimes.com/atimes/Global_Economy/GA07Dj01.html
By kpn on 01.04.08 11:43 am
If you type CRAP, it automatically sends it to the Garbage Bin at CPC ATTACK HEADQUARTERS.
By kpn on 01.04.08 11:43 am
Yes!
This message brought to you by the “Copy and Paste” feature of Word and Windows!
But thanks for the kind and courteous reply.
By Bill-Muskoka on 01.04.08 11:05 am
Dag gummit! I need restart my Stewart Smalley personal affirmation rountine I see.
“I’m crabby. I’m crotchety. And dag gummit, people hate me”
Ah…. I feel much better now.
KPN,
You’re probably not all that alone in scaling back.
I wish I didn’t have student loans to repay. If wasn’t for them, I’d be saving a lot more money these days.
By kpn on 01.04.08 11:43 am
If you type CRAP, it automatically sends it to the Garbage Bin at CPC ATTACK HEADQUARTERS.
By Captain George on 01.04.08 12:08 pm
By kpn on 01.04.08 11:43 am
Yes!
This message brought to you by the “Copy and Paste” feature of Word and Windows!
By James- Chatham on 01.04.08 12:10 pm
Again
Well Jason you lucky devil, lots of things to sleep on..in they end it will be you and your wife. Think, Thnk Again, and Think one more time…..then make your move and do not look back…
I think the most important thing that anyone asking questions like this can do is to ask a number of people what they think and why, and then assess what they say and make your own decision.
Garth is quite good at finance, and I would definately keep an open mind about anything he says, but he’s also not perfect (Google Garth+Nortel), and everyone has their own personal biases. For example, since Garth travels so much, he has multiple residences, which might make him less attached to his primary residence than someone who bought and plans to live there for the rest of their lives… choices aren’t always as cut and dried as the dollars and cents.
Jay on 01.04.08 10:26 am,
Evidently you have not read my posts here previously. This is just another example of the manipulation of democracy that major parties use to subvert real democratic choice both within the parties and outside.
A number of years ago someone suggested that I should join a political party in order to “make a difference.” I decided to do just that and quickly discovered that it does not work.
I also know that David Orchard and his supporters have tried to “make a difference” by attaching themselves to an establishment party. There concern is over the way political sovereignty (and hence democracy) is being eaten away by the forces of economic elitism and globalization. While I do not always agree with the Orchard’s group ideas I believe they should have the democratic right to work within the system to test their views.
Conservatives, Liberals, and NDP leaders have all shown that democracy really ends at the door of the political party. These anti-democratic institutions control government and build a wall between government and the public it is supposed to represent.
Pecked to Death by Ducks on 01.04.08 9:14 am,
What happened to this idea? It was presented in 2000 and was supposed to be in for sale in South Africa by 2002 and in Mexico.
By C. B. Innes on 01.04.08 9:49 am
Ive already posted this several times here.
http://www.theaircar.com/
“When and where will the first cars be sold?
In the countries where manufacturing licenses have already been sold, production will begin immediately after the “mother” factory in France starts with the mass production. If we don’t already have associated manufactures in a country the car will anyways be there sooner or later. Most likely, the following countries will be India and Spain. If we keep up with the current plannification, the first cars should be available on the market in summer 2008.“
I’m with David Bakody. I grew up in the 50’s and, because of family financial reasons, never had a hope in hell of being able to go to Univ. Back in those days, one could get a job in 1/2 wks. I worked since 10 babysitting on weekends/summer and at 14 worked at Eatons and Laura Secord every wknd/holiday. Actually took time off school to do it. We needed the money. I, like most of my gfriends, liked fashion – cossack boots & fur hat & a fashionable coat – remember those days:-).
I did make something of myself, took university courses at night at Sr. George (now Concordia), U of O, & a couple of Universities here. I think I gave up on Economics 101 – couldn’t understand the prof. accent at the time). I worked hard. but will readilly admit now that my memory is not what it used to be. I’ll say that I have been disgusted with the Libs’ performance in the past and, if we really could see Independents change Canadian policy, I’d be all for it. I don’t see it happening now. So, I’ll support the Libs because I’d do anything to not see this non-Red Tory govt ever gain a majority. They are not traditional conservatives.
BTW Bill Muskoka – I’d move to EU if I could also. Unfortunately, couldn’t afford it. Even tho I said I hope to live till 65, my prov. pension gets reduced by whatever I receive by OAP and, as Cdns., we lose 50% if we’re out of the country more than 6 mos a year & then there’s medical insurance, which I’d never qualify for. Frig, my DH is only 51 and when I went to renew his insurance for travelling outside of Cda they asked me all kinds of questions. Never happened before.
To Jason
I am not an expert but I have owned three houses over my lifetime. Each time I sold it cost me more for the next dwelling. The last move was from a two storey 2400 square foot home we had built to a 1495 square foot condo we had built. I believe if you have some job security and if your morgage is about due and you have equity built up why not renew the morgage and take a longer amortizatization. This will reduce your morgage payment while your wife remains at home looking after your children. To assist, your wife could look for some form of in house work like offering daycare to others. Or look at some of her skill sets to see if she can work for someone from home.
In the worst case scenario if a crunch comes your wife could seek employment outside the home say evenings to reduce or eliminate daycare cost to earn a little extra cash. In fact she could do this now and put the money away for a rainy day.
The bottom line is you have a home and you have to live somewhere even if you are renting. If you do not have a job it makes it difficult to pay rent as well. At least in your home if you lost your job your severance and EI would carry you for a little while. If it got prolonged you could also use the equity in the home to work with the banks to work out something.
If you take the equity and rent and start digging into this new found wealth in time you could have very little to show for all your efforts and be destitute.
Real estate (personal residence) is still your best investment. There is no capital gains on resale. The markets shifts up and down are historic. I believe if you check the data you will find that a home has been the best investment over the years.
After reading the comments so far, I’m blown away by how deluded people are concerning recessions.
In a recession, everything goes down in value and I mean everything, except for one thing. Jobs. People are on glue if they think a sick U.S. economy isn’t going to spin Canada into one. This is how it works…
The worlds #1 customer stops spending in part to spiralling consumer confidence but what causes this? Try reduced buying power! Are people to think that when one has 80% of their equity in their own homes and their homes devalue by 40% over 2 years, that they are going to magically spend more? Are people to believe that a currency that has devalued some 30% internationally in comparison to 1st world currencies won’t see this reduction in buying power with imports? Can someone please refresh me as to what the U.S. does export these days?
Consider these factors here as they are a perfect storm:
- A falling like a rock U.S. currency created by 3.6 trillion dollars of fresh debt over 6 years. This is 40% of their total deficit by the way, its a staggering amount and a good chunk of it is created for a war which is likely one that will see no gain (other than the oil they are currently stealing from Iraq and from where I stand, its nohwere’s near enough. War is an economical loser unless you can actually own the assets you try to steal and I believe the U.S. will fail miserably in their imperial quest).
- Chinese currency and to a lesser extent Japenese currency has lowered artificially to reduce the impact of the falling U.S. dollar on consumer confidence. Folks, this won’t last forever! When U.S. spending slows to a recession level or worse, Asia will raise their currencies to offset their own economic hardships by forcing a more internalized economy (something Canadians should have done or do now, if they are smart). And what of a selloff of the U.S. dollar? The U.S. dollar is no longer majority owned by the U.S. That ended late last year. Folks, they aren’t even in control of their own currency anymore and should asian countries cash in their chips (which they can’t, their own value will devalue if they do as it will devalue the U.S. dollar even further) or even a few chips… this U.S. empire has effectively gone bust and at the same time, the world has lost its best customer.
- So what of China? Its primary economic driver is the U.S. economy. its markets are facing 10 : 1 market cap to book value valuations, absurdly high… folks, its called the domino effect. Sure China is internalizing its economy, but it can’t keep up with losing its best customer at this point in time. China will surely head into a recession if not worse, and commodities will plummet as a result of dramatically slowed manufacturing which is mainly driven by what? U.S. imports!
- And if China doesn’t import commodities like it used to, what happens to Canada? Wake up, folks, were a commodity driven economy!!! We have a rising currency and bottomed U.S. construction market that will effectively kill the structural wood market. Only pulp has a chance and even so… our lumber industry is going to hell here in BC and its got to be the same elsewhere in Canada. Rough times ahead.
So where’s the haven? What is the prime driver of our TSX and Venture PLC’s anyways… MINING! Canadians are diggers and participate in globalization like no other in this sector. Got news for you all folks.. base metal inventories are building. Commodity valuations are still good, but they likely have nowhere to go but down. If there is one grey area, it is mining but even so, this sector will suffer huge with a recession. Bank liquidity is drying up. Start ups will slow as a result of a combination of factors… lower base metal valuations and way less share offering due to vanishing liquidity in the financials.
The high dollar is hammering our logging and manufacturing. Thats not all it will hurt. We have some “special” commodities that the world has to buy such as oil and high protien wheat to mix the rest for mill quality wheat for bread and pasta’s that are… if in demand, it doesn’t matter what currency is, but outside of this, I don’t see any safe havens. it sure won’t be banks or insurance with the rising levels of bankrupcies. And if one thinks energy is safe, think again. Its called supply and demand. A world wide recession will most definitely reduce demand and oil valuations will go down, perhaps to $45 dollars a barrel bottom regardless of peak oil. Its called a world recession, folks, and peak oil doesn’t mean much if inventories build and cash flow ain’t flowin’.
The advice I have to give you and all the other Jasons of the world is this. Familiarize yourselves with what a recession actually means. Remind yourselves that this “bottom” won’t be here this year. It will just hit Canada this year. The U.S. bottom will occur sometime in late 2009, early 2010 I think, before valuations begin to rise and it will be higher commodity valuations that lifts us out.
In the meanwhile… there will be high unemployment and not just for a little while… high bankruptcies, high interest rates due to bank losses… and if this dumb assed Con government doesn’t change their minds with war spending and GST reductions we’ll see fed deficits and a falling currency which will hurt us even further because buying power, in case one hasn’t caught on, is a great thing to have, especially if a country actually has the direction on its compass to internalize its own economy. Just ask the U.S. consumer (only just not today and especially a year and a half from now, some will be quite sore with that question) what buying power means to them.
Bottom line is this, folks. A recession is coming and with it, real estate valuations will drop, personal equity will shrink, interest rates will rise to offset their losses, jobs will shrink, prepare for the worst.
To Jason: You were given good advice. You aren’t someone with treasure chests full of money, so get out if you can and rent. If you wait a year, you will be caught with a devalued home and thats not to say you can’t swing it… but what it does say is that you could lose 3 years of appreciated values or worse. It will likely be 5 to 10 years before you see the same townhouse you are in now, with the same value. If you want to own, sell and buy back in in 2 years.
And for those blue sky candidates out there… put your glasses on. The dark clouds are on the horizon and it won’t be long before they block out the sun.
BTW – let me correct my last post tho it prolly doesn’t matter, It was not Uof O it was Carleton U.
Sorry, but I like to be correct, to the best of my ability/recollection.
By Kubera Jones on 01.04.08 10:20 am
On the other hand, with a new US. president cooling the world’s political waters, some of the uncertainty that’s driving gold and oil might disappear and then, just as easily as he might make 10%/yr, he could loose the same amount.
Investing for the short term, especially aggressively, you may as well suggest Casinos Windsor, Niagara or Rama!
$650,000 for just “one” photo-op? Can you just imagine what it’s cost taxpayers since Harper’s been PM – he’s been in photo-op campaign mode since he started office. No wonder the CPC have money in their koffers – they don’t spend any of their own.
Absolutely “shameful”….
Jason, I’m with those who see a principal residence as a home and not (necessarily) an investment. And, I am more than well aware of bad advice given by well meaning investment gurus in the past. Nortel springs to mind.
You are a young family. Stability is important. While really young ones adjust fairly easily to change, parents don’t always adjust as easily, especially if the change was an imposed rather than agreed upon decision. Unhappy, uncomfortable mothers make for really unhappy families.
Older kids don’t like to leave their friends and their schools and as a child who moved frequently, to both owned and rented dwellings, I can tell you renting does have an effect on kids. Must be more careful, can’t have any damaging accidents (so play is restricted), have to wait until the landlord fixes the flood from the toilet, the washer, the dryer, the furnace, the locks, etc. Can’t make any improvements as either the landlord won’t permit it or you are improving a property you don’t own and thus flushing money down the drain.
You are living in a high demand area of the GTA in a moderately priced home. If the housing market suffers a downturn, you will lose equity, but it will be a paper loss. That is, unless for some reason you absolutely must to sell at the bottom of the market and the home you own goes below its original selling price. If (and it’s a big if) that’s what you see happening then by all means sell but if not, I’d buy myself some stability, a neighbourhood and some pride of ownership and stay put.
Most likely all you stand to lose is some paper money and where you are, if you wait a few years, you’ll earn it all back.
The thing of it is, the only time buying and selling creates a real gain, is when you are moving to a different market, (i.e. GTA to Sudbury). In other words, if your house goes down in value so do the homes of everybody else in the area. Making bigger and better (if that’s what you are ultimately looking for) more affordable. Renting an equivalent property will not be less expensive – trust me.
Sure, you can make a quick buck right now, but without the ability to predict the future, at what cost to your family, your wife, your kids?
And, what if you guess wrong? Can you live with those consequences? Can you gamble on your family.
Here is an opinion worth considering?
Will Canada’s regional growth gap narrow? The combination of still-sizzling commodity prices, softer U.S. growth and a strong Canadian dollar has widened the growth gap between Western and Central Canada. Saskatchewan has taken over from Alberta as the hottest economy in the country.
Meantime, growth will sink below 2% in Ontario and Quebec, where decoupling from the U.S. is a theory while
the hit from a strong dollar is reality. Thus, the regional
growth gap may actually widen further.
Will the BoC change direction?
The Bank of Canada will get a new governor at the start of February, as Mark Carney takes over from David Dodge after seven years at the helm. The new governor will be quickly faced with
the challenge of a soft U.S. economy and a strong Canadian dollar on the one side (arguing for lower rates),
and a tight labour market and a hot housing market on the other side. We believe the former forces will continue
to dominate the Bank’s policy decisions, and look for two
more modest rate cuts in the first half of the year.
In Epsom and Ewell, prime commuter belt land for London, I sold my house for $220,000 in 1988. Six months later, it was only worth $150,000. The writting was on the wall back then that the markets were going to crash, just as they are now. Friends of mine bought at about the same time, they ended up with negative equity.
That same house now is worth $700,000!
Jason, listen to your wife. – (I’ll kindly leave the guy’s name out of it)
This kind of logic simply baffles me. Anyone who lost their jobs and were caught with high interest rates (they didn’t have fixed or portable mortgages then) went broke in 88′. It likely wasn’t until 96 or 97 where the same house that bought for $220,000 climbed back to the same level or higher. Today, this $700,000 home is clearly overvalued and anyone who thinks this value will stay there, is smoking something other than cigs. This $700,000 dollar home might not see the same valuation again for the next 30 years. Anyone who buys this mans house for $700,000 will have a $400,000 home or less 2 years from now. Thats how recessions work. How many of you can afford a $300,000 dollar devaluation of equity over the next 2 years?
Its called reality, folks. The lot loses 20 to 40% of its value to more realistic levels, and the house itself should be valued in terms of what it costs to build new and discount from there.
Are we in a bubble? When new houses sell for less than old ones, this defies all logic. Of course were in a bubble, and its a not a small one! In a recession, real estate often sells for less than its worth, so you do the math. Is anyone willing to pay $700,000 for this mans home knowing the true state of the world, national and provincial economy to come?
Jason… sell your home. And keep in mind, that everyone listing their homes if agreeing with me isn’t the magical answer either. Its like shorting stocks. Someone loses and the consequences aren’t good no matter how one looks at it, cause were just passing the loss to someone else. Who, when they list a home selling it for more than its worth, thinks about the next guy? Its what’s wrong with this world… valuations are often unrealistic. The markets too oversold or to overvalued… you should all get my point, but for those who don’t, the point is this. In recessions, nothing is bullet proof. There is such sell pressure from so many forces, that the value of everything drops and cash is king. You don’t wanna be sitting in the sidelines wondering if bankrupcy is an option. You wanna have cash on hand for the bargains and they will come.
Lorne Mcuaig
Revelstoke, BC
Catherine said: “I can’t believe that you, Garth, would giving such an advice. Renting only makes others richer.”
Catherine, are you sure about that?
He said “go and rent a similar home for (likely) a lower monthly cost, and wait for the inevitable winds to howl through” and “given all that, you can often improve your cash flow by renting, rather than owning.”
Owning makes others richer too. Don’t forget that monthly payments on a mortgage do not just go towards the principal. There is interest as well, which makes banks richer. And when you rent, your rent may be paying the interest on your landlord’s mortgage. Again, making the bank richer.
When renting is cheaper than owning it can be much more economical and can make you richer IF you invest the difference in an RRSP or non-RRSP. Consider that in Vancouver right now the last place we rented was for $1050 in Kitsilano. The same place would have monthly mortgage payments of at least $2000+. If we pay rent of $1000 and invest $1000 we are much better off than if we had a $2000 monthly mortgage payment. Especially when you consider the fact that real estate has historically gone up with inflation (or a little more) whereas the stock and bond markets have fared much better. Most people don’t understand this because their only (or at least their primary) investment is in their home.
“That’s an ill-informed comment snce rent control laws prevent any tenant from being evicted when a property is sold, unless the owner can prove he is moving in. Tenants have far more rights than landlords, and fewer costs. The scales have tipped. — Garth”
That might be ill informed in Ontario, but out here in Alberta, tenants have no rights. My rent increased 20% per year for 2 years and the property manager said we got off lucky (they were right). On top of that, I was responsible for all property maintenance and repairs. Locking in a monthly payment by purchasing was the only sane thing to do for me and my family.
Strangely enough, with a vacancy rate close to zero, where is the incentive for a landlord to build new units when all they have to do is double the rent whenever they want? Maybe rent controls would be a good idea after all.
It looks as if the 2 cents solution was not enough to help Canadians after all.What now Harper?You had your chance and you blew it.I don’t see too many rich people worried about having to put up their house for sale.They’re too well insulated by all the goodies the CPC have given them in the last two years.Bring on the election and lets turf these hypocrites out.
I saw an ad in the Kelowna Capital News this morning, which said that Peter Mackay will be here next Friday (Jan. 11), for Ron Canaan (our local MP for Kelowna-Lake Country) to help raise funds for the forthcoming election.
It is possible that the election is closer than anyone figured. Ron and I used to work at the Kelowna Daily Courier; he was an ad salesman, I worked in the composing room. Nice person.
———————————————————
I just read in the Globe that our new Conservative government is spending $650,000 tax dollars to advertise their GST cut, picture of Harper and reminder of campaign promise. . . .
By Margaret Bedore on 01.04.08 7:36 am
Take it one step further — re-run two TV spots together, first one where Harper clearly states that the “CPC will never tax income trusts”, followed by the Oct, 31 announcement to tax income trusts, and then “live with it”.
That should make for a fairly good ad.
——————————————————
Garths actualy right on this one — put the 75000 in Oil trusts for a 2 or 3 years earn 10%/y, (If you’re agressive put 10-20% in the gold or silver ETF and you could might well double that portion over 2-3 years years)
save a couple grand a year on taxes and rent something cheaper than your current mortage. IN two-three years I have no doubt you’ll buy back in 20%-30% cheaper, and have at least 100,000 down payment. Perhaps by then someone will be building real green houses that take 60% less energy, win, win win!
By Kubera Jones on 01.04.08 10:20 am
If I were in Jason’s situation (or if single), that is pretty much what I would do.
Sell home — rent a good apartment, invest the net proceeds from the sale of the home in a variety of good, solid investments throughout the world.
I’m getting on now; from my perspective, the less material stuff that I “own”, then the better off I will be, and consequently, the easier my will is to sort out.
bY lEASA 8.03AM
Leasa,
You are a sweetheart. That story about the potato was heart wrenching. Obvioulsy, it was no common-tater. It coulda been a reminder that,”all you really need is heart”…a rareity among the Conservatives since the Reformers took over. I suppose you roasted the little guy and ate him…how cruel.
May thr force be with you. All the best…
Lorne Mcuaig
Revelstoke, BC
By brain on 01.04.08 3:47 pm
I’ve got big shoulders, so don’t worry about hurting my feelings.
Your correct, $700,000 is overpriced. The bubble will burst. But selling, I cannot agree with you.
But my point was that unless you really have to sell your house, then you shouldn’t, especially in a high demand area, such as prime Toronto commuter land.
What I didn’t tell you was that I bought that house for only $88,000 in 1984.
So
1984 – $88,000
1988 – $220,000 When I sold
If I had waited six months later – $150,000 — still a nice profit.
But the real reason is that renting,as has been pointed out, is paying someelses mortgage. So why not pay your own instead!
. . . that most poor folks spend probably 70 – 80% of their money on rent, food, and other necessities that are GST exempt.
By Marg on 01.03.08 8:31 pm
I missed this post, but from what relatives, friends, etc., who live throughout Europe have told me, a major part of the population has to rent for almost all of their lives as real estate is way overpriced.
Those individuals seem content and happy with their lot in life. An alternative is to take out 50- or 75-year mortgages and pass the home on to their heirs (which sometimes causes arguments, fights, etc.
Things may be changing, albeit slowly — apparently, Spain is now getting a little taste of what sub-primes can do if people are willing to gamble and don’t do their homework, and then seeing what the consequences are.
For my part, I still prefer to have the freedom of renting — eventually.
Sure Lorne, but living in Revelstoke, BC do you really know the market in Milton, Ontario?
Are new homes (equivalent in size, structure and location) in the GTA selling for less than older homes in established neighbourhoods? Don’t think so. If you can find one, let me know and I’ll sell my old home and buy your new one, except beware, I don’t want a pea sized lot in an unserviced area. It isn’t happening!
The kicker is, “Anyone who lost their jobs and were caught with high interest rates” (this is circa early to mid-1980’s). Are you so very certain this cycle is about to repeat itself? Frankly that experience has coloured my whole borrowing philosophy and I’ve lost every time, until the last few years – always going for fixed rather than variable. Furthermore, can you, with some reliability predict that the market in the GTA will recover in no less than 30 years?
I thought not. Give me a break. I’ve lived on this planet long enough. Nobody, but nobody, can predict the future, particularly the housing market in an highly desirable, high growth area. Sorry, the pressures on the housing market in Revelstoke, BC (a lovely area, if one likes mountains, BTW) will never be the same as that which is experienced in the GTA.
In the end, we all have to live somewhere and it may as well be in a place that we own.
I prefer a Canada as one country, with ten provinces, three territories and people — generally — get along.
In the US, this is what the Lakota Indians have laid out for their stake. Natives, of course, have been in North America much longer than the rest of us.
http://jazz-from-hell.blogspot.com/2008/01/mapquest-google-scramble-to-add-lakota.html
By Michael on 01.04.08 5:32 pm
…and all the best to you my dear Michael! That tater, was peeled, sliced and added to the others with onion in a home-made white sauce with spice and baked to perfection! The large dish was scrapped clean! Sooo yummy…everyone should taste real home-made scalloped potatoes at least once in their lifetime!
Big SMOOOCH to you!
L
Lorne Mcuaig
Revelstoke, BC
By brain on 01.04.08 3:47 pm
So, Lorne, I can only conclude from your advice to Jason, that your house/home/condo is now listed for sale. I mean, gee, if you would advise him to sell and invest the money, isn’t that what you would do too?
Its good logic James. Owning has advantages over renting… if you get in at the right price. If you don’t, you’ll lose it. It all comes down to what we can afford and what we can’t.
My point is simple. Back in 84′ the average income of a family of four in Canada was likely over $30,000 a year (I’m guessing here, but I think thats a fair guess). If you were in that category James, you could have afforded a $90,000 home with a credit rating and a job.
Today, the average family of four income went up 200% (rough guess, the national average income of four has gone up to $60,000 annually, give or take a couple G’s), whereas the value of your home went up 750%. Thats a big spread! It means the average family in Canada can no longer buy your house. They could have in 84′, but they can’t now. In essence, it would take a $240,000 a year combined annual income to afford a $700,000 home and thats stretching it ’cause taxes have to be paid. A couple of missed payments for whatever reason and the principle is gone. To be fair, I should say that what the average family of four income is in Ontario, specifically your region is, I don’t know. Its likely higher than the national average, but its a pretty safe guess that it hasn’t kept pace with real estate inflation compared to what it was 24 years ago.
What I’m really trying to say is that the stakes are much higher in 08′ than they were in 94′ due to the growing gap between what people can afford and what they can’t as well as the fact that these valuations are incredibly high in terms of what a family is getting in return. Incomes simply haven’t kept pace with real estate valuations and houses are the biggest investment most people will ever take in their lifetime. So in a sense we both make good points. Renting isn’t owning. The interest doesn’t go to the principle true, but rent doesn’t go towards anything. So owning is better than renting… but to a point because as much as some people believe a home is simply a home, it is a 100% investment no matter how one looks at it. Banks sure look at it that way… and there is such a thing as buying what one cannot afford. (and banks will make big mistakes in the overall with their policy. CIBC comes to mind. The goal of most banks overall is to profit and that means were numbers, pure and simple)
In other words, it comes down to what people can afford and the real estate market in BC, Alta and Ontario has overpriced itself in terms of what the average person can afford and that means that with or without a recession, a reality check was coming in real estate particularly in these provinces. It’s inevitable!
Unfortunately, the timing is such that with a recession or major devaluation of commodities that drives our economy, this reality check in realestate is likely to be exasterbated by a recession in commodities and manufacturing and that means the housing real estate correction is likely going to be worse than anyone is anticipating as a result. Its one thing for real estate to devalue due to common sense (unrealistically high valuations). Its quite another for real estate valuations to devalue due to the economy as well. We’ve got a double wammy coming here in Canada. The recession is not going to be as bad as the U.S. and its going to be a bit delayed, but it will come nevertheless and it will be painful, most especially in BC, Alta and Ontario where valuations have soared and are most sensitive to commodities and manufacturing.
I’m really not all that worried about people that can afford to not worry about housing valuations. They are truly the lucky ones. But for those who don’t have much principle down and paid to much… I’m feeling it for them already even if they haven’t felt it yet themselves, because that pain will come.
And what really peeves me James, is that we should have seen this coming at least a year ago. The red flags were waving a year and a half ago in the U.S. and the numbers were entering mainstream media a full year ago. This current Con government should have seen it coming and its clear with their GST cuts and cuts to taxation (particularly the rich and corporate taxes) i.e. government revenue, hunger for war (exasterbated by Harpers love for corporate lobbyists like himself in office for those wonderful after public life kickbacks) and economic policies that encourage foriegn M & A’s through the taxation of income trusts, deregulation and privatization, that this government is not the government to steer us through hard times… and they are coming! There’s nothing put away for a recession warchest, no long term plan to brace for a recession, no major plans to internalize Canada’s economy away from economic dependancy of world exports, no thought given to the environment or energy sustainability or peace abroad, cause in case readers haven’t caught on, its just not Harpers will.
In the month of Oct., U.S. real estate devalued nation wide by 6.7% in one month. One month! Every state devalued except for two. (I’m quite curious to see what the numbers are for Nov, Dec.) Currently, the average turnover for listings on the market in the U.S. nationally is flirting with 8 months and growing. Thats a whole lot more than just a common sense correction in valuations.
So yeah… who doesn’t like to own and pay on or for something that they can call their own, but when the hype and spin dies and reality hits, homes have a monetary value like anything else and only those who can afford substantial devaluations and not sweat “unrealized loss”, can put an ideology attachment on home ownership based on something other than money.
The ones that are going to go broke, James, are the ones who put ideological value on their home before the monetary one and buy what they can’t afford.
Did it again, wrote an essay here, so peace James and catch you on the next one.
After reading all the comments on the pros and cons of selling and renting due to the inpending recession.
It depends on when you entered the market. This is called timing. It is very difficult to time the markets. If you purchased your home with the idea of making a profit it may be wise to sell and take it now. The next problem that you will be faced with is when to get back in.
for Jill from Ont. I believe you have it right a very good overview and sage advice.
Some excellent postings here! It is nice to see that even when people have different opinions, that they can reason together.
I like to call it “the common sense of the common people.”
Truly this is what “digital democracy” is all about!
By Leasa 7:36PM
Now you tell me that you scalloped the hearty little Spud. What were you thinking…this Spud is for me.
Would yoy believe that the finest vodka is fermented from the potato. As a matter of fact, the Germans converted a large percentage of their potato crop to fuel the V2 rockets that rained down on London. Now, with a food crisis on the horizon we are converting corn to alcohol to run our cars causing a drop in grain stocks and an increase in prices through out the food chain; eg., beef, poultry, eggs. And thus, human stupidity marches into the future.
Sweet dreams!!!
You people are idiots. People are making decisions right now about whether it is food or heat. In Canada. Duh!
Are you so very certain this cycle is about to repeat itself? Frankly that experience has coloured my whole borrowing philosophy and I’ve lost every time, until the last few years – always going for fixed rather than variable. Furthermore, can you, with some reliability predict that the market in the GTA will recover in no less than 30 years? – Jill
I’m dead certain that a recession is coming to Canada and the cycle will repeat itself, but not in the same way. I’d say that the next generation of home owners to follow will remember the lessons that this generation will learn (likely the hard way for some) and the generation to follow will have foggy memories and the generation after that will hardly remember at all assuming world catastrophe’s such as world war, peak oil and environmental degradation don’t get them first. Sounds like you have a memory and saw the wisdom in fixed rates as history does repeat itself.
This recession will be different in severals ways from the 80’s. The reason for high interest rates in the 80’s were heavily related to currency but there were other factors including bank losses. How did banks try to recoup losses at the time? They gambled and jacked up rates which fuelled bankrupcies, paid dearly with interest on savings and the only thing that saved some of our beloved charters in truth was the feds cut spending severely, got a handle on deficits, lowered their rates and bank rates lowered, the economy itself picked up and valuations rose. Where will interest rates go this time around… speculatively between 9 to 12%. I can’t see it going any higher than 12 except maybe in the U.S. where it will be brief.
Can I say with certainty that a $700,000 home selling today won’t see that valuation again in 30 years? No I can’t. Looking back, I likely exaggerated the point but its still a point. It’ll be a while. Its called simple common sense. The majority of us don’t have historian minds for the most part and go with what we’ve experienced. When is the last time people went through a recession in Canada? You and I know, but the 40 under crowd… Can I say that real estate valuations will become over inflated beyond common sense like any high flying stock does? No… I can’t. Mabye people really do have the memory of a gnat. But logically, the point I’m trying to make in case you missed it, is that governments can step in to slow valuation growth at any time with policy. Is it popular? No. Not to corporations at least and private interests alike unless recessions make one suffer so much so, that they recognize the need for regulations regardless. Is it necessary? Yes. Tell me… would you you fear floating morgages on your home? Think back to when Canadian banks themselves told people directly and through the media to heavily consider variable rates when they were low… they knew then, Jill. Look at what banking deregulation did for sub prime. This is failed Republican policy, pure and simple and keep in mind that the majority of the million and a half forclosures in the U.S. are empty homes with a predicted 2 million more to come and that might be being… conserative. Where did these families go and where are the families going with the bankruptcies to come? Where is the social net for their soft landing? A good chunk are on the street. Can I predict riots over this? Nope. But demonstrations are happening and its a prelude. Will it happen here? We have fixed and rates if chosen and portable morgages to boot, we have high banking service costs and as a result, banks make good money in this nation assuming they stay out of high risk areas such as subprime U.S. real estate.
Marg:
I don’t own. A ski hill with 21 new runs and the longest verticle drop in North America was just built here. Valuations have doubled and tripled in just two years, with a 1500 square foot bungalo selling for $350,000 on average. I rent a house for $600 a month and if I bought this same house over 20 years, I’m looking at $15 grand a year with interest alone before principle. Regardless of the level of income, what would you do in my shoes? Throw away 15 G’s on interest and gamble hugely with an overinflated home, or rent for $7,500. What seems smarter to you?
Real estate outside of Victoria, Nainamio, and the lower mainland has gone up around… 50% levels in the last 2 years? Everywhere else in BC has pretty much doubled. Its pretty much the same with Alta’s urban and rural area’s with the North doubling over the same time frame.
And my advice to Jason was sell, pay rent and pocket the money (meaning a lowly savings account with variable interest, I might add and add to it) until the recession is at its worst which I would say… is sometime around 2 to 2 and 1/2 years from now. I didn’t say invest. I said sell and sit on the cash until the real estate market bottoms. Cash is king in any recession and that will never, ever change. Thats it! I’m typed out! Time to relax, watch a movie… happy new year just the same, one and all.
By brain on 01.04.08 8:21 pm
Well, Garth, let’s look at your figures:
If your estimate of family income going from $30,000 in 1984 to $60,000 today is correct, then that is a 100% increase, not 200%.
For a $90,000 house to increase by 750% since 1984, it would be valued at $675,000 today. Is that a typical going price in your area?–don’t know–just asking.
James, both stocks and real estate are similar in that they have to be regarded as long-term investments. That is, history has shown that in the long-term both have been shown to increase in value. It is only when you may have to cash in on either of those investments at a bad time that you lose. In the long-term, those investments tend to pay off big time. Location is the big thing. If your house is in a good location, I just can’t see how you could lose over a period of a few years.
In my area, I have seen friends/acquaintances rent for years while we paid off our mortgage. Trust me–pay off your mortgage before you retire.
By Leasa on 01.04.08 7:36 pm
Cooking tip: Never cover and then forget scalloped potatoes with Saran Wrap. It turns them PINK! LOL Not moi’s error, but it is a family joke for us.
What I didn’t tell you was that I bought that house for only $88,000 in 1984.
So
1984 – $88,000
1988 – $220,000 When I sold
If I had waited six months later – $150,000 — still a nice profit.
But the real reason is that renting,as has been pointed out, is paying someelses mortgage. So why not pay your own instead!
By James- Chatham on 01.04.08 5:49 pm
……………………………….
Obviously not in Chatham, Ontario … so where …???!!!
This one made me laugh out loud:
I see. So when all those people who have lost their homes are living in tents in Central Park, they will stop being a “drag on the economy”, leaving their real estate assets to be snatched up by the wealthy elite.
Why do I get the feeling that Flaherty has this asshole on speed-dial?
By brain on 01.04.08 8:21 pm
I’ll agree with everything you said. Fortunately, house prices in this part of Ontario haven’t inflated by as much as the larger urban areas. Unfortunately, if I had to sell and move to the Big Smoke, I couldn’t afford the homes either.
However, we’re talking about Jason here. Jason has already purchased his home, three years ago. The value now is considerably more than what he purchased it for.
If he sold and took the profit, he would have to rent. No mortgage payments and profit in the bank, all other taxes, utilities being equal, he maybe ahead.
If real estate prices drop, maybe he would be able to buy his property or similar back for less. But, the folks that have bought high and then have negative equity are not likely to sell, unless they want a black mark on their credit score and that is more problem than its worth. So now Jason has money in the bank, but there’s nothing to buy.
Now where is Jason going to invest “securely” his profits. There is no such thing as a secure investment. All investments come with a degree of risk, even GIC’s which as many have pointed out guarantee a loss when it comes to real returns (after taxes and inflation).
Or Jason can continue paying his mortgage, based on what he borrowed three years ago at 5.15% for the next 7 years. That isn’t going to be affected by falling house prices or, until the mortage term ends, interest rates.
Rents, even though controlled, will rise.
Will the value of his house fall below what he bought it for? I don’t know, but my example shows it doesn’t matter. If a house is an investment for the long term, the value will come back.
But the biggest problem Jason will have is his wife. Whatever decision they come to, she had better be onside with he decision.
I sold my house in 1989 and was what Garth would call lucky to get out. Now it’s worth double what I paid for it and I would have paid off my mortgage. I was never able to get back into the market and I’m still renting. Real estate is a long term investment. If I was you, I’d hold on especially with a 10 year mortgage at low rates. It’s a forced saving plan and even if it’s only worth what you paid for it, in 25 years you own it. In 25 years, as a renter, you’ll still be renting.
By Michael on 01.04.08 10:16 pm
Morning Michael! You know what…I do believe that we will have a world wide food crisis, that will effect western nations within 50 years. Sooner if there is ever a serious pandemic, world war or natural disaster on a global scale. Not so much because we are starting to produce fuel from food, but because this globe of ours seriously has such a tiny amount of arable soil that can actually grow a decent crop of anything. Every time I drive to any major city, I cringe when I see the new housing projects, malls and industry expanding over prime farm land.
Unlike most industrialized nations Canada has no law that stipulates that we must have so much food within our borders at any given time. No stock piles of storables like grains, potatoes, carrots, squash…nadda. In the last decade, Canada has lost over 20% of it’s farmers and the number is growing by leaps and bounds. We have become dependent on countries like China, Guatemala, Mexico, the U.S., India etc. etc. to feed us. At one time Canadians were very proud of the agriculture abilities and felt safe and secure in their food supply.
In the event of any of the disasters I’ve listed…especially a Canadian pandemic…what do you think happens to those borders? We had a tiny taste of this with SARS in Toronto. SARS isn’t half as deadly with some of the super bugs that scientist say are about to mutate to us up right walking beings.
As industrialized nations keep eating the good soil for urban spread and industry…the ability to produce gets smaller and smaller.
Canada has the most fresh water in the world. However, we are very poor keepers of our water. Without fresh water you do not grow crops. We still allow wrecking yards dot the country-side and grow. There are no provisions in place to stop them from letting the old junkers leak oil, gas, anti-freeze etc. onto bare land. Under that land sits our aqua-filter. There are also no laws for regular well testing in those areas. We dump sewer into our water and the cities say that’s okay because it’s only ‘run-off’ you know. Yet let a farmers cow crap withing 100’s of metres of a stream and all hell breaks loose.
I wonder if and when the borders shut down or there is a global food crisis if the government will knock on my door for my preserves?
Funny thing is; it will be one of those imported food products that may get the pandemic going. I call Mexican tomatoes ‘bowel bleeders’. Nuff said!
Leasa
Back to partisan politics …
Having minded my own business and given myself a couple of days rest from political “discussion”, I open the Ottawa Citizen to-day and get as far as Page 3 –
The lead article of this “Canada” section carries the headline “Be blue at your school.” It takes up 5 of the 6 columns of the page. The first picture, the face of a startled female professorial type, has the banner caption “Freak out your prof. Join the Conservatives” followed by the CPC logo.
There is another bold web image carrying the news that “The best way to freak out your profs is to tell them you believe in bucking the establishment, thinking with your own mind, and yes – ‘questioning authority.’ In other words: tell them you’re a Conservative.”
The Dr. Goebbels School of Propaganda is alive and well, with branches now operating in Canada. And all this in aid of spreading the important national news of “a Cheeky new ad campaign and website to try to engage the ‘next generation’ of Canadian conservatives …”
Now I don’t care which party is trying to improve its campus image. The fact that a political party, any political party, is trying to energize itself on campus is NOT national news. The fact that a major newspaper will devote a whole page to featuring party propaganda without labeling it “An Advertising feature” IS.
The article – less images – now is available on the just-updated Citizen site at http://www.canada.com/ottawacitizen/news/story.html?id=01615370-58c1-4bd0-a2e7-41dcaeddf43a&p=1. And I just got my subscription renewal notice!
End the federal freak show, get our Canada back, ÉCRASEZ L’INFÂMIE!
Gutsy call Garth. It is great to see someone who understands that real estate is in bubble territory and that current valuations are not supported by any sort of cash flow analysis. Having said that, I think Jason is in a different situation than anyone buying today. His mortgage rate is very low, and he bought when prices were sensible. Factor in the pain of transaction costs and I’d say that if he has a steady job he should hang on.
By Bill-Muskoka on 01.04.08 11:29 pm
Good morning William! Pink? Now, that would be an interesting sight! I’ve never had them in the fridge long enough…in the rare even there are any left-over, the next morning I fry them up with butter, sometimes I add to the mix left over ham, pork or bacon. Fry them until they get that slight crispy brown edge to em. Add an egg on the side. OH YUM! Yes, I love to cook, right at this minute I have 5 sixteen year old boys in my kitchen eating fresh from the oven raisin-banana (had some bananas that just ‘turned’ nicely) muffins, bacon, eggs, toast, juice and sliced tomato. It’s nice to hear them from my office laughing and munching away. Life is good. XO Leasa
Leasa on 01.05.08 9:09 am,
Why do you believe that the movement of arable land from the production of food to the production of energy presents no problem for world food supplies? Your overall argument does not make logical sense. Could it be that your Conservatives are subsidizing the transfer of farm land to energy production?
Mexico has already faced problems because the use of corn for ethanol is causing shortages and driving the cost of food out of reach of the poor.
Do you realize that some supporters of your party believe that we should import all our food? We need a national food policy but since it is politically more beneficial to cater to other special interests, food will remain low on the priority list of political parties until shortages threaten their power.
As our climate changes, our ability to adapt our food production to the new environment is essential. Those who see global warming, for example, as a positive change know nothing about the problems of food production.
How the Harper goobernment really works.
Minister misses point of an opinion piece
I was amused by Foreign Affairs Minister Maxime Bernier’s response to the opinion piece by Michael Byers. It is rather representative of the current government’s use of rhetoric in place of logic in responding to the needs of the country. First, Bernier opens by accusing the writer of being “one-sided and lacking objectivity.” This accomplishes two things in the propaganda battle. It suggests that the writer (Bernier) has the moral high ground in objectivity. It also suggests that Byers is in some way a flawed person. In fact, an opinion piece is not expected to be objective; it is supposed to express a viewpoint and promote the discussion of other options.
So when we have a government that believes rhetoric is more adept at problem resolution than logic, we have a non-functional government that should be discharged to history’s scrap heap as being worthless for the public good.
Therein, lies the crux of what irks Canadian’s about Harper and his ilk.
By Herb on 01.05.08 9:11 am
“The best way to freak out your profs is to tell them you believe in bucking the establishment, thinking with your own mind, and yes – ‘questioning authority.’ In other words: tell them you’re a Conservative.”
“Thinking with your own mind and questioning authority” certainly do not apply to being a Conservative MP, lol. Just ask Garth.
I wonder if any students reading this ad will connect the dots?
-R
Rob Wiebe,
I hope so. It certainly is a “Goebbelesque” inversion of fact.
If any prof I have ever encountered had been told by a student that he was a member of a particular party, the prof’s reply would have been “And that is relevant to what?”
You’ve got to love those new “Conservatives.” They are trying. They certainly are!
By C. B. Innes on 01.05.08 10:37 am
Believe it or not (typing is hard with the cat on my lap), there are areas where I do not support my government. Of course food for energy will cause problems. Big problems, just not as big as the ones I have mentioned. The use of corn for fuel is bogus. The corn lobby in the U.S. is very powerful as you know. The sugar content is much, much higher in sugar-beet & chicory and will cost less in the long run to turn into fuel. That being said, I do not buy into the large ethanol plants being built. When we were approached we laughed. When you have ‘people in suits’ running the show, it will either fail because the suits are too expensive or the only people who will actually make money will be the big oil corporations.
No Canadian farmer will be subsidized to any great degree in Canada to produce the corn for ethanol. The new facilities will. Count on it. Next, the farmer will endure all the costs to grow the corn, store the corn and truck the corn to the plant. He/she as usual will be the last one to actually make a profit on this corn. My over-all cost of production has risen 50% over the last three years and continues to increase. For my veggies, I am getting paid 50% of what I did 10 years ago thanks to Free Trade. Do the math.
Here is my solution: Sugar-beet can be grown on poor well drained soil. Every farmer has a field or two of poor land. Let the farmer produce the ethanol on his farm! He can convert his equipment to burn ethanol, his trucks to burn ethanol and run an ethanol powered generator to provide some of his power needs. If there is any left over, he can use that generator to feed back into Ontario’s power grid. No trucking of product. I know on my farm we have enough high sugar content waste product to make enough ethanol to meet almost all of our fuel needs.
Now, we have looked hard into this for our farm and there is absolutely NO help anywhere in providing the simple technology or education to do this. The governments will not even tell us if they will allow us to have this capability on our farm. If we could get a little help, my husband and I would build what we need tomorrow to produce this ethanol.
It would be a win for the farmer, a win for the environment and a win for the people of Ontario!
Yes, I also agree that no government will realize the damage they are doing to agriculture until it is too late. So much for food safety!
L
By Leasa on 01.05.08 12:17 pm
Arizona tried a major sugar beet production years ago when the Cuban crisis hit and cut off the U.S. supply of cheap sugar.
All the fields there are irrigated by the canals, but the soil is very productive for crops such as cotton (Arizona is the largest cotton producing state in the entire U.S. BTW), citrus, dates, nuts, and massive floral greenhouses.
The canals were built by the government, and are maintained under a government agency. They have made the desert productive, just as Imperial Valley, Calafornia was by manmade remedies to natural barriers.
Here in the Muskoka many people came to homestead and farm, but no one told them that about 0 to 6 inches of top soil was available on top of the Canadian Shield. They then migrated west to Manitoba, Sasakatchewan, and Alberta.
We have th knowhow, but we do not have a government that knows how things have to work, other than for their big corporate friends.
Here is another prime example of how megacorps are destroying the individuals freedom to conduct business. We can thank lawyers, bankers, and politicians for the situation.
Single-owner car dealerships driven out of market: Survey shows Canada’s independent ranks have shrunk 1,000 in decade
By Leasa on 01.05.08 10:33 am
LOL Actually, the scalloped potatoes were freshly made, but waiting for their turn in the oven, and she forgot to take off the saran wrap (Warning: Do not try this at home). It was most interesting Christmas meal to say the least.
Five 16 y.o. boys in a kitchen is about as scary of thought as I can take on a Saturday! LOL
Have a good day.
Very interesting post Garth! I agree that the real estate bubble in Canada will be bursting sometime in 2008. The US economy is already in a recession, although the economists have not got their numbers yet to confirm things.
In a post a couple of months ago I noted that the trucking industry in the US was in the tank and that it is a ‘bell weather’ industry indicating economic health. Well…the manufacturing output numbers in the US for December were announced and guess what?….a big drop in output and many economists are now wringing their hands over the fact that a recession “may be in the cards”.
It is only logical that when the economy begins to slow the first sector to be hit is trucking since fewer goods are being bought…and downstream fewer goods will be needed to be manufactured. So folks…the US is in an unofficial recession right now…it will probably be confirmed by June 2008 when the statistics catch up to reality. And, for anyone who thinks that manufacturing in Canada is not teetering….just drive by the facilities of most major truckload carriers in the Windsor to Montreal corridor. Chances are you’ll see lots of trucks parked because there’s no freight. Many fleets have even laid off their driver recruiters because they have no hiring needs. With the incredible shortage of professional drivers that has plagued the industry for many, many years this is a very serious sign.
Suggest everyone tighten up their belts a notch or two, eliminate non-essential spending, pay off as much debt as quickly as you can, and provide the highest value you can whether you’re an employee or a business owner. Revenue and margin will be tougher to get and hold onto….and so will jobs and clients.
As far as housing goes…if you’re upside down on your house now it’s probably getting too late to get out. If you plan on keeping your home and weathering the pending storm then get the rest of your debt load in order as quickly as possible.
Your house is worth the most to you when it is mortgage free. That’s something that our grandparents all understood, and something that many younger home owners somehow did not learn…or have forgotten. The best mortgage is the one that’s paid off (something we did 15 years ago when I was 40).
A good rule of thumb is to never pay interest on a depreciating asset…like a car or virtually anything you buy on a credit card. Unfortunately consumer debt in North America (and especially the US) is out of control. Bank write offs on non-collectable credit card debt is rising steeply, auto repossessions are heading up….and I suspect we’ll continue to see dramatic rises in personal bankruptcies. Not a pretty picture, but unfortunately one that is totally self-induced by individual consumers who can’t control their own spending.
Another lesson from our grandparents generation is that what you make isn’t nearly as important as what you spend…and living within one’s means in critical to long term financial success.
For anyone carrying any form of debt right now, here is a simple exercise to do…. add up every payment that you make to service debt…your mortgage, car payment/lease, loans, credit cards, etc. Now multiply that number by your marginal tax rate and add that number to your debt payments and you’ll find out how much of your income each year is simply going out to service your debt. If you’re like many people the number could be terrifying.
Now calculate how little income you would really need to live on if you didn’t have that debt and you only spent money on essentials…food (NO restaurant or fast food), houses taxes, heat, hydro, water, car insurance, car gas/repairs, and basic telephone service. For our family of five that number is under $2,000 per month (we’re within 80 km of Toronto). The stress on families when their monthly financial obligations are 3 times higher than that (or more) is no doubt severe.
Henry David Thoreau said it best…”Simplify. Simplify. Simplify.” Your financial, physcial, and mental health will all improve as a result.
Leasa,
Yesterday my son and I were discussing how micro-technology in both the farm and no-farm sector could provide major energy and environmental improvements. Your idea fits perfectly into what we were discussing.
The problem is that both Liberal and Conservative federal governments have become too focused on the economic well-being of the large multi-national corporations and globalization to bother with these bottom-up kinds of ideas.
First, Garth thank you so much for this blog. I was taken aback earlier in the week when people were attacking you ad hominem so viciously . and wanted to let you know that I DO appreciate what you’ve created here and want to tell you so!!
Next,
http://www.thestar.com/News/article/291081
This is just twaddle! Who does the Star thinks gets affected by poverty? It’s the MIDDLE CLASS! It’s OUR relatives and loved ones who fall into the economic morass/fall between the cracks as the Canucks call it .. poverty IS our issue. We all end up feeding the poor, housing them, buying them necessites and it affects everyone, and will increasingly be so as the schizomaniac, DEPRESSION to beset North America sets in.
If there are TWO THINGS that should NOT be covered up in elections, it is POVERTY and WAR PROFITEERING, although these are not popular topics in the mainstream press, and I think most of the historical/economic memes have been sest in place in 2007 where a HUGE sector of the populace do now where things are headed. This year, 2008, will be confusing to many, but it will lead to a better, more viable society IF people stay tuned into the LESSONS.
So, the press be “damned” .. and I really do hope that you and Dion – a few awakened individuals – can keep eyes on the REAL ball.
The plunge protection team/defense industries in the US/Canada are doing no one any favors right now, not anyone but the bankers and corrupted politicians who protect them. Time to get a VISION FOR CANADA in place, thinking seven generations ahead, not what the MSM thinks about!!
So this is my little pitch to YOU this week. KEEP IT UP!! when you do your schtick it warms my cynical little heart.
ps, these Harper/Flaherty voters are gonna have a right time paying to heat their MacMansions with the higher fuel costs! This idea of retiring on the proceeds of yer real estate inflation are OVER.
AND this note: IF, if, Al Gore, had had people insulate their damned houses when he was in office, THEN we would not have the wars for oil/gas and the excess use of energy going on today. There would be AT LEAST a 25% reduction in fuel expenditure. That and ALLOWING the subprime mortgage crisis are aboslutely CRIMINAL in nature.
I am a FAN of Dr. Michael Hudson, in case you are wondering. See May, 2006 edition of Harper’s magazine .. the links to that are on my blog, as is LOTS of good economic stuff. There is a Third Path of economics emerging. One that is SANE.
http://ladybroadoak.blogspot.com/2008/01/housing-predictions-for-2008-for-brain.html
Al Gore was the Vice-President, not the big banana so he probably had pretty limited ability to make people insulate their houses or anything else.
Yet another promise not kept.
http://www.theglobeandmail.com/servlet/story/RTGAM.20080105.wtories5/BNStory/National/home
Colour me not surprised.
Core …pretty limited ability to make people insulate their houses or anything else. By John
Actually John, Core had pretty limited ability period., when he was vice president. Remember this was the same guy who claimed he invented the internet.
If Al Gore would buy one day old bread at half price would he be criticized ?
You bet.
To get some facts on Al Gore’s spending on hydro see: http://www.americanthinker.com/blog/2007/03/deconstructing_al_gores_utilit.html
This was written by a Reagan Republican.
Link is from Baltimore — good lesson for us.
http://www.baltimoresun.com/news/opinion/oped/bal-op.fannie04jan04,0,1654729.story
Interesting development, if Iran follows through.
http://www.vivelecanada.ca/article.php/20080104225336913
Yet another promise not kept.
http://www.theglobeandmail.com/servlet/story/RTGAM.20080105.wtories5/BNStory/National/home
Colour me not surprised.
By Tim N on 01.05.08 6:03 pm
Actually Tim they did a pretty good job on this lobbing act, maybe not as much as they should but still better than it was. You can’t please all the people all of the time and never a liberal.
Whenever the Tories don’t keep a promise you are right on their ass. When they kept their promise on lowering the GST this blog was all over them. It makes no difference on this blog, regardless what the Tories do, it never satisfies the left wing element. It’s impossible to dialogue with the majority that post here. Colour me not surprised with your comment.
Dear Jason,
You have received good advice from both sides, but you still have to make a decision and I’m guessing still don’t know which way to go.
The answer to your problem is to act on the advice of BOTH sides.
How so?
LISTEN to what your wife is actually saying, but don’t necessarily follow her “staying put” conclusion.
Your wife loves where you live because of things like the neighbourhood, the neighbours, the stability, the schools in the area and a whole bunch of other reasons… none of them economic.
So LISTEN to what your wife loves about your current home and together with your wife LOOK FOR a similar long-term RENTING opportunity that will satisfy YOUR economic concerns.
That way both you and your wife will be happy if you find that specific renting opportunity you are looking for, and it will make for a good family transition to the new digs.
So… LIST YOUR HOUSE IMMEDIATELY, while you are looking for the PERFECT renting opportunity because YOU DON’T have to sell just because somebody wants to buy your home if you have not found the perfect renting opportunity.
In that way you will have listened to your wife in acquiring a long-term stable home and addressed the uncertainty in the housing market and addressed any financial concerns you might have Jason.
List your property now, and go rental-house-hunting with your wife!!!
Sincerely,
MB
JUNE 18, 2007
COVER STORY
By Michael Mandel
The Real Cost Of Offshoring
U.S. data show that moving jobs overseas hasn’t hurt the economy. Here’s why those stats are wrong
http://www.businessweek.com/magazine/content/07_25/b4039001.htm
So much for the way our govt’s compile & use stats.
“It’s impossible to dialogue with the majority that post here.”
Darn, Betty, why don’t you try. Extolling the virtues and superiority of the leader and policies of the CPC may be the political task of the troll patrol, but does not amount to dialogue.
Try some facts and logic, and then complain if it doesn’t work.
Whenever the Tories don’t keep a promise you are right on their ass. When they kept their promise on lowering the GST this blog was all over them. It makes no difference on this blog, regardless what the Tories do, it never satisfies the left wing element. It’s impossible to dialogue with the majority that post here. Colour me not surprised with your comment.
By Betty White on 01.06.08 6:22 am
LOL – I was a staunch Conservative supporter until this past election. I’ve voted (Progressive) Conservative in every provincial or federal election that I’ve been able to vote in. Heck – I even used to volunteer! To call me “liberal” because I point out the flaws in this government, I find amuzing.
Simply put, I expected better from Mr. Harper. And I will call him on it every time. If the party replaces him as leader, I will consider voting for the party again.
As to the GST – Yes, I’m all over that because I think it’s a bad policy. I’ve given the Conservatives credit for keeping thier promise on that – but it’s still a bad policy. Just like ITs. I agree with taxing ITs, I DISAGREE with how Mr. Harper promised NOT to tax them, and how he subsequently handled the situation, which amounted to breaking his promise and blindsiding people that trusted him to keep his word.
The part that I find aggrevating among some of the partisan Conservatives that post on this blog is that if anyone disagrees with ANYTHING this government does, they are automatically a “liberal lefty”.
As to how “good” this bill is, it’s not. It’s smoke and mirrors again, or, in my mind, not anywhere close to where Mr. Harper promised it would be.
Betty,
I should have used GST as an example for my 9:11 above. Everyone realizes that this year’s and last year’s GST cut will save individual taxpayers money, the amount depending on how much they spend on GST-triggering items. There is no argument here.
The argument made by Garth, many posters and quite a few experts is that it is a poor return for the billions in lost revenue it will cost, and that those could have been applied to taxpayers and/or the economy to greater effect.
So get a dialogue going. Let us know why and by how much cutting the GST is better than cutting income taxes or increasing program spending in some areas. The government must have done cost/benefit studies and forecasts to come up with the conclusion that cutting GST is the best way to go. It should be possible for CPC spokespersons/operatives to get that information and let us know. Then it would be possible to get discussion out of the partisan sandbox and have a dialogue above the “My old man is tougher/my leader is better than yours” level.
A lot of people said before the event that cutting the GST was a poor idea. Don’t expect them to salute keeping that promise unless you can prove that they were wrong. Remember, in a debate the “pro” side speaks first.
So… LIST YOUR HOUSE IMMEDIATELY, while you are looking for the PERFECT renting opportunity because YOU DON’T have to sell just because somebody wants to buy your home if you have not found the perfect renting opportunity.
By MB on 01.06.08 7:22 am
Jason,
This is terrible advice and simply not true. If a potential buyer offers you the asking price or more for your house, then you DO HAVE TO SELL. Either that or face the consequences, which would be
-You would still have to pay the realtor’s fee. After all, they have worked to sell your house and have fulfilled their part of the listing agreement.
-The potential buyer could also sue you for damages.
It is only when a buyer offers you less than your asking price that you have the choice to either refuse the offer or make a counter offer.
You are totally wrong. No offer is binding, regardless of the terms, until it has been accepted by the seller. When was the last time you sold anything, Marg? — Garth
Garth, my husband is a retired real estate agent, so I checked with him before making my last comment.
Let me give you an example. If I list my house for say $300,000, I am legally offering my house for that price. If a buyer offers me $300,000, he is, in effect, accepting my offer. Once he signs his offer, there is a binding agreement–offer and acceptance, if you will.
If, however, he offers me $290,000, I can simply reject the offer.
Now let’s look at all this from the realtor’s point of view. He has listed my house, advertised it, spent time showing it to possibly several potential buyers. He has fulfilled his part of the listing agreement. So if the seller suddenly rejects the listing price of $300,000, the realtor is entitled to probably 6 or 7% of #300,000–whatever percentage that was stated in the listing agreement. Let’s see–that’s $18,000 – $21,000. No small change.
You are wrong. — Garth
Jason,
Garth can continue to tell me I’m wrong until he’s blue in the face, but that won’t change the facts.
However, my advice to you would be to ask your realtor whether there are any consequences for changing your mind if a potential buyer offers you the list price. And ask him this BEFORE you sign that listing agreement.
A listing agreement is between the owner and the broker. A sales agreement is between the seller and the buyer. An agreement of purchase and sale is not legally binding until both parties have signed it. To suggest otherwise is bizarre. You are still wrong. — Garth
Garth,
I have just been reviewing the “Real Estate Pre-Licensing Manual” published by the New Brunswick Real Estate Association. In Chapter 3, Listing Agreements, I found this paragraph on page 3-3:
“As stated in the same paragraph, a commission is payable on any transaction, from any source, effected during the listing period. The commission is payable as long as the transaction closes. This means that no commission is payable if the agent is unsuccessful in marketing the property. One exception to this rule exists in some cases. Certain Listing Agreements state that if the agent is able to secure an offer at the price and terms authorized in the Listing Agreement, and the vendor refuses to accept the offer, the agent will be entitled to the commission.”
Sorry, I can’t provide a link as this document is not on line.
Yes, I know that this is law in NB and there could be variations across Canada.
Jason, I stand by the advice I gave you above.
“However, my advice to you would be to ask your realtor whether there are any consequences for changing your mind if a potential buyer offers you the list price. And ask him this BEFORE you sign that listing agreement.”
That does not mean the property is sold, obviously. Besides, I’d doubt such a statement could withstand a legal challenge. — Garth
“if the agent is able to secure an offer at the price and TERMS authorized in the Listing Agreement…”
Could one include a condition that suitable rental accomodations for the vendor would need to be procured, in the same way purchasers submit conditional offers re: financing, selling their current home, etc? Or perhaps a real estate agent wouldn’t touch such a listing with a ten-foot pole.
No, it doesn’t mean the property is sold. It means that if the owner doesn’t sell, he’s still on the hook for the realtor’s fees.
The statement above pertains to the LISTING AGREEMENT. If this statement (as shown above) is written into the listing agreement, and the realtor subsequently performs his duties, incurring expenses, and using his time, fulfilling his part of the bargain in good faith, please tell me what arguments the owner could make it court to avoid paying this fee. A listing agreement is a legally binding document.
Any idea what it costs to go to court these days? And it seems to be the norm that the losing side pays lawyers’ fees for both sides.
a commission is payable on any transaction, from any source, effected during the listing period. The commission is payable as long as the transaction closes. This means that no commission is payable if the agent is unsuccessful in marketing the property. One exception to this rule exists in some cases. Certain Listing Agreements state that if the agent is able to secure an offer at the price and terms authorized in the Listing Agreement, and the vendor refuses to accept the offer, the agent will be entitled to the commission.”
By Marg on 01.06.08 1:48 pm
Dear Jason,
A TRANSACTION is completed when there is :
1. An offer, AND
2. Acceptance of the offer, AND
3. Some “consideration” paid (money)
All three must be met in order to have a binding transaction. Therefore you never have to sell unless you accept an offer with your signature and accept a small amount of money with the offer.
Marg, does point out that the LISTING AGREEMENT you sign with the listing agent MIGHT contain a clause that says that you must pay the commission if a full-priced offer is turned down.
READ YOUR LISTING AGREEMENT BEFORE YOU SIGN IT JASON, and strike out any clause that says you have to pay if you turn down a full-priced offer.
Sincerely,
MB
P.S. Jason,
If you have already signed a listing agreement just INSIST on a Loooooooooong CLOSING DATE to ensure that you and your wife will be able to find the perfect rental accommodation.
All the best!
Alternatively he could have serious concerns about relying on complete strangers for advice on what appears to be a very important matter for him, hiw wife and two kids. The truth is that none of us, including Garth, have nearly enough insights into this family to tell them what to do. Jason, you probably should seek counsel from folks with far more involvement in your family affairs.
Garth, good post again. I sold my home recently for the same reason. It was a tough decision, but when you think logically, it’s the right move to bank the $70k. Jason, do it, the numbers make sense. For example, the interest (look for an online bank…hint, hint) on your original down payment and profit can be used to offset some of your rental payments (not all, but some).
Times are changing. My parents back in the 50’s paid cash for there home, they didn’t believe in debt. The next generation believed home ownership was a sign of success and 25 year mortgages was acceptable. Today, people are getting 40 year mortgages to “keep up with the Jone’s” and waiting for an inheritance. Ok, these are generalizations, but my point is times are changing and we need to change with it. We are at a tipping point…
Good luck Jason!
Marg, you are wrong.
Jason, like I said above, times are changing and you don’t need a real estate agent.
I didn’t read all the posts, but if you decide to sell, use a sell by owner website (there are three that can help…get them all to visit you at your home to get a good understanding of the process and the benefits). I did and I got tons of traffic and 3 solid offers…no broker’s commission.
I only recommend these sites if you are personable and your home is in good order.
It is said that when push comes to shove a house is only worth what you can rent it out for. Can you rent the house out for more than your costs to maintain ownership?
Nobody can be forced to go through with the sale of a home, but commissions may indeed be payable if an offer to purchase meets all of the terms set out in the listing agreement with the agent and that “valid offer” is turned down by the seller. Depends on the listing agreement but most are pretty standard in this regard.
I looked into this earlier this year when an agent was suggesting a relative list their property low in order to create conditions for a bidding war. The question being, am I on the hook for commissions if I turn down an offer that meets all my conditions?
Here is some information that may help.
http://ontariorealestatesource.blogspot.com/2007/11/commission-entitlement.html
Garth Turner, good god it’s been a long time since I’ve heard his name, but then I’ve been gone almost 10 years.
anyways if anyone is interested in a very indepth (American as usual) look at renting vs buying google Millionare Mom Next Door
In her world renting beat owning even a paid for home in retirement. Very interesting.
There was a long tradition of rent versus buy and income determining what one could afford ratios in real estate however folks who, for reasons of pure self-interest, announced that they no longer applied. Hences the 5% down payment scam and so on. There’s lots of reasons why the benchmarks used for decades should be put back in place in order to determine affordability, but the drop in prices to what is justified is too scary for our “leaders”.
One thing I don’t think I saw mentioned was the possibility of Jason looking for a lease-back type arrangement. This might let Jason sell his house to a speculator/investor, and rent the same house back without having to move (and at a lower monthly cost).