Monday, February 16, 2009

Protect yourself

Roger suggested a positive topic at the beginning of the last post in comments:
how to protect yourself and your family in this downturn. Many of us have been through one or more recessions in the past and we could contribute some positive suggestions on what folks can do to weather the storm. Hopefully, this might help some of the readers, many of whom never post but visit the site on a regular basis.
I know what I'm doing: paying off any outstanding debts and minimizing all non-necessary expenditures. Any necessary expenditures I am trying to source locally and attempting to support the little guys who have made positive contributions to our communities. I'm going to leave it at that.

What are you doing? What tips do you have for readers of HHV on how to weather the storm? What do you do to keep your chin up during this period of hyper doom and gloom?

And in case you just want to discuss real estate meltdowns, here's the latest BCREA graph:


Roger added a green line to show you the last time sales were this low and his pink lines show you the speed at which sales are falling off the proverbial cliff. Imagine what this graph would look like if it were adjusted on a per capita basis? Shudder at that thought, eh?

63 comments:

Village said...

Not to post jack... But, me and the wife are the proud parents of a new baby girl Kairi.

Born 12 Feb 09, and weighed in at a whopping 9lbs 10oz. The sleepless night have begun. (It's not too bad, just partially sleepless)

Village said...

Topic related, having a new baby was probably not the best way to protect oneself going into a recession. =)

Anonymous said...

Good grief, how many more times do we have to mention this HHV?... hehe

Buy gold of course!

No seriously, look at what gold is doing in Canadian dollars for the past 2 months.

Anonymous said...

Good timing for this post. Financial Post has just put up an article today saying that
[Canadian] Household debt loads in 'danger zone'
and that household debt in Canada has risen more than $90,000 in 2008 and total debt-to-disposable income ratio rose to 140% last year according to Clarence Lochead's meeting with the Victoria's Association of Family Serving Agencies.

Imagine that, "a non-profit agency promoting the well-being of Canadian families". Perhaps they can start off by suing the Real Estate Boards across Canada for misleading joe6pak.

Oh it's nice to dream.

roger said...

HHV,

That graph was in today's BCREA report. My only contribution was to add the green and pink lines to highlight the low sales and the rate of decline in the market.

roger said...

Tips for Surviving the Recession

1. Reduce credit card interest charges Most credit cards have a high rate of interest (20%). Those with unpaid balances are spending more than they have to. Visit your bank and ask for a card with a lower rate of interest. No frills (rewards, insurance etc.) on the card but a lower interest rate. A second option is to negotiate an unsecured line of credit, at a lower interest rate, and pay off the credit card balance.

2. Reduce debt Now is the time to start paying down those student loans and credit card balances. Cut back on all non-essential expenses (vacations, dining out, "toys" etc,).

3. Save enough to last 6 months Very few people have iron clad job security in a recession. It is essential that you have enough to pay your bills in the event of job loss. Don't fall into the trap of thinking that a HELOC or credit card is your emergency fund.

4. Avoid unnecessary expenses Until you get your debts under control and your savings cushion in place stop spending on things you can do without. Those coffees at FiveBucks add up quickly over a month or two. Brown bagging lunch will save hundreds every month.

5. Use cash instead of a credit card This is a great way to cut expenses. Impulse buying will drop dramatically and every purchase will be judged more carefully.

6. Start a budget There are many budget templates around on the net. Once you have completed a budget start tracking expenses. I use Microsoft Money and all non-cash expenses are downloaded from the bank. Very easy and enlightening.

7. Avoid brand name items At the grocery store you will often find "no name" or house brands that are identical or superior to more costly national brands.

8. Buy items on sale This is especially true at the grocery stores. Many items can be purchased at lower prices with a free customer loyalty card. Stock up the freezer.

9. Home cooking with basic ingredients Meals prepared with basic ingredients are much cheaper than pre-packaged foods. As you get better at it they even taste better.

greg said...

I don't have much to add myself, but in the US, they started down this path almost 2 years earlier than we did. Hope it doesn't take us 2 years longer to get to the other side.

What might happen and what should we do? How about cultivating a sense of community?

In the meanwhile, Charles Hugh Smith has tons of great and varied posts on this subject.

Try this one, or this one about the script of survivalism.

Reid said...

Roger has a great list. Some other additional ideas to consider:

1. Reduce to one or ideally no car – auto costs are the largest expense after your home
2. Ride bike/take bus to work
3. Brown bag it at work
4. Ensure the person you marry understands living below your means and shares the same financial goals as yourself (I learnt this through personal experience; a huge waste of money)
5. Understand that investing for your retirement is actually far more important than buying a house and ensure your budget includes an allowance for this. The sooner you start in life the easier it will be later. Use RRSP and TFSA programs. Target 70% of your pre-tax income as a viable retirement income
6. Either cut your credit cards or only use for specific expenses – the credit card will kill any budget unless you use them wisely
7. Research everything before you buy as you often can buy things for 25% to 60% off if you invest a little time and creativity
8. Never buy a house in a bubble and always save at least 20% before to you acquire one (it teaches you how hard saving money is)

Anonymous said...

I think it's also important to get in tune with the job market both locally and other areas. Get in contact with people you went to school with and see what they're up to. Contact old co-workers. Ask people you work with to be references should something happen. It's best to prepare for a possible job loss before it happens.

dub said...

I just saw that Global News at 10pm tonight (Monday) is going to run a segment on Victoria RE - apparently Victoria is about to turn around and make a come-back. Something about low interest rates and FTBs getting their pre-approvals ready for the Spring.

The sad thing is, it's probably true to some extent. I've been hearing quite a bit of talk amongst co-workers and friends that actually have bought the "what a great second chance to get into the RE market before it continues it upward trajectory" garbage that's being spewed out.

Sadly, IMHO, these people are probably making a big mistake that will haunt them for a long time to come.

But hey, I've been wrong before and I'll certainly be wrong many more times to come. Maybe this is one of those times. Maybe I'll be priced out of the market forever.

Anonymous said...

Congratulations Village. A healthy little girl. How are your wife's nights? Ha, ha.

Back to topic. Everything everyone above said.

S2

roger said...

dub said:

I've been hearing quite a bit of talk amongst co-workers and friends that actually have bought the "what a great second chance to get into the RE market before it continues it upward trajectory" garbage that's being spewed out.

There seems to be a lot of talk but not many sales compared to last year. How many of these folks are actively ready to sign on the dotted line or are they just waiting or tirekicking?

BTW - Why not send them an email with a link to the Victoria Real Estate Stats Gallery? No spin there - just the facts. A few might be convinced to wait for prices to stop falling and flatten out.

roger said...

Village

Congrats on the new addition to your family!!

Anonymous said...

I'm a mortgage broker in Esquimalt and I can tell you that the market is ready to explode. My phone has been ringing off the hook with first time buyers getting mortgage approvals in time for the spring.

I think you would be crazy not to buy now before the prices start to go way up again and you get priced out forever.

Fooder said...

I'm a natural bear and have been plunking savings away for a while... I should be ok for about 3 years of bills without working.

I'm focusing on local spending. That actually means spending and extra few dollars per trip to shop somewhere locally owned. Still taking my car to the local garage for maintenance. Buying vegetables from the farmers market.

Cutting back on frivolous spending is a no brainer in my books. Making sure to still spend out and about in the community is an important second part for me. All of Victoria will be better off if we take all the money spent at future shop, wallmart, etc. and spread it around.

I hate to say it but restaurants have slipped off this list for me. It is putting money locally, but restaurant prices seem more bubbled than real estate. On the other hand if you have one of those gems that are still reasonable hang on to it with your life.

Reid said...

Bring on the FTB this spring. This will bring on a whole bunch of new listings as many sellers have been sitting on the sidelines waiting.

Even if the market improves and somehow stabilizes (which could only happen in Victoria), just defer your purchase because many of these purchases will end up in foreclosure in a year or two once reality settles in and job losses take place.

womp said...

Womps have:

1. Cancelled cable several months ago, saving $36/mo
2. Renegotiated our cell phones yesterday, saving $25/month (and getting a ton of new features we didn't have before... it's amazing how much their published "packages" rip people off compared to what the "loyalty" department will offer you...)
3. Reduced to one vehicle about two years ago, womp bikes to work now and loves it (saves probably $4k/year)
4. Aggressively paying down remaining student loan at blinding speeds
5. Topping up savings every month


One thing I'm doing opposite to every other poster is paying for everything by credit card. I have my VISA account set up to automatically be paid off in full every month if I forget to do it manually, so I never run the risk of an interest charge. I also find two distinct advantages to this:

1. I can download every transaction to Moneydance, and track our spending extremely precisely
2. I get reward points which I redeem for straight up cash for my RRSP. I typically can earn $200 or more a year with just everyday spending I put through on my card.

I never make impulse buys because shopping in general fills me with impulses to flee, I hate it :)

Mr.4AM said...

Spring buyers? You have got to be kidding me. The world economy is on the brink, even more so than 2008 and people think it's time to buy?!?

Fools - all of them.

Bill Moyers (former Economic Chief of the IMF and current MIT economics professor) is interviewed and discusses the "corruption" of the current US government with focus on Obama's finance appointees and their banking backgrounds.

Until such time as banksters actually lose their power and government influence (requiring all government appointees with former banking backgrounds to be thrown out of government), the economic crisis will continue.

Here's part 2

This ain't over by a LOOOOOOOOOOOOONG shot.

ALT-A mortgage roll overs in the US are about to explode, and there's still waves and waves and waves of other critical stuff going down the tank... US commercial real estate being just one of them, but Japan, UK and Ireland also being up the creek with no paddles. The IMF just announced they will run out of money in 2009 to perform bail outs. The list is a very long one, and there's no resolution in sight, and people in Victoria are still buying houses?

Maybe they should have watched CNBC's House of Cards (8 minute preview).

Or maybe they should watch on PBS tomorrow (Feb 17th) INSIDE THE MELTDOWN (30 second preview - read text below video section).

This is going down hard people, though it will still drag on for a couple more years.

All great depressions start with a depression, all depressions start with a severe recession, all severe recessions start with a recession, and all recessions start with excessive greed and excessive ignorance.

The greed and ignorance factor has been off-the-charts 'round the world - Victoria included.

Mr.4AM

Mr.4AM said...

Womp said "One thing I'm doing opposite to every other poster is paying for everything by credit card. I have my VISA account set up to automatically be paid off in full every month"

I started doing this in late 2007, as I got tired of my Visa bill due dates changing every other month and me missing payments even though I had 100% of the money set aside for them. Here and there, every other month they would ding me $20 in late fees or so. Now, thanks to auto billing this has stopped and I continue to collect my avion/air-mile points.

One would think that changing due dates every other month on your visa card would be illegal, but sadly it's not, and neither are all these other additional "criminal" credit card company manipulations.

Anonymous said...

We have also used our visa for pretty much everything and it's automatically paid off. The problem I'm finding i that it is way too easy to spend. It's like the money isn't yours.

Every month the visa bill is $2,500 regardless it seems how we attempt to budget. We have turned back to cash. No air miles but you actually see the money flowing out and think twice about spending it.

Mr.4AM said...

Yes that's a good point, I can see how that could go horribly wrong with undisciplined spenders. Out of sight, out of mind.

However, it is still a good idea if you don't spend too much on extras. I'm not too bad in that category. My excesses are the starbucks coffees a few times a week, and buying nutella with the groceries, but my wife takes the cake, I have never seen anybody as thrifty as her. She insists that if I must buy her a present for Xmas that it be during boxing day week, or if for birthday from used victoria, and if I don't she gets really upset with me for wasting money! In fact, she's the one who told me about automated payments with Visa.

Sometimes I joke with her that she must have starved to death in some previous life, but obviously I'm thankful she's not a spender. As a result we manage to save some 50% (after tax) of our monthly wages... and she's a student at the moment.

I think we're already doing pretty much everything on those lists except that I haven't yet bought a bike to go to work. I plan to do that in the next couple of months though.

beagle said...

Only problem with Visa is the expenses the merchant gets stuck with. Every purchase Visa skims 1-2% so in the end we all pay more, sucks!

As for a savings tip, get a small freezer and a vacuum bagger. Buy and cook large meats like turkey, ham, roast, etc. Also you can buy in bulk on sale and vacuum pack it.

Reid said...

Things are getting real ugly in California. This is one of about eight global crisis concerns I read this morning. Things appear to be falling appart fast out there.

California Deficit

roger said...

Another money saving tip. Don't buy a luxury condo: TC reports Luxury condo sales feel economic pinch

As financial uncertainty rips through real estate markets, sales numbers and average prices are dropping in B.C. and luxury condominium projects have been postponed or had construction dates pushed back.

hhv said...

Dang Roger, there goes my sure-fire ticket to the good life in early retirement. How am I going to replace that freedom 45 plan?

Mr.4AM said...

Reid, yup... Cali is about to hand out 20,000 lay off notices in government *today*. Ouch!

To me the biggest jaw dropper in the past few days was Japan's GDP contracting 12% !!!!!!

That's insane.

This is starting to feeling like Sept/Oct/Nov 2008 all over again... except we're only in February.

Mr.4AM

B2B said...

My ideas on money saving are a bit extreme in some respects, but here they are FWIW:

1. Own only one car, if you must, and make it an old one. If you drive a 1968-1978 or so car with a (for the time) smaller engine, you can pay $1500 for the car in good shape and do all the repairs yourself. I paid $12 for the starter drive part when my starter drive failed, and rebuilt it in the kitchen. If you don't like Detroit irons, buy and drive a 1978-1984 or so Honda or Toyota: parts are not quite as cheap as old domestics, but the engines are strong and they're cheap on gas. A few hundred dollars invested in tools over time will mean no more $500-and-up repair bills and you're way ahead of the money.

2. Don't have a TV. You can watch all sorts of televisual entertainment on the computer for free - set up your living room with a computer and nice flatscreen (monitors are far cheaper than TVs for the same size).

3. Don't have a cellphone. I keep a few quarters on hand and simply use payphones. Not as disruptive as you would think - most pubs have payphones, and when I want to use a cell is often when I'm at the pub and want to invite someone to join me.

4. Join the Co-Op and fill up with gas only there. You get about 6 cents a litre back and the nominal price is the same as all other gas stations. It's free money IMHO.

5. Try to get your employer to let you work from home some or all of the time. You generally end up working longer hours, so the employer wins, and you can suddenly write off a portion of your rent and bills, as well as have your employer pay for your internet and phone.

6. (should be #1) pay off ALL debt before "saving" any money. If you have one dollar of debt, you have no business saving any money, since it's not net savings at all.

Anonymous said...

A suddenly thought, the similarity between realtors and financial advisors.

“Anytime is a good time to buy.

Look at the return chart.

Although you lost money in the short term, the picture looks pretty good in the long term.”

roger said...

anon 8:58 said:

It's best to prepare for a possible job loss before it happens.

Very good point. Here is an interesting article on how to prepare


What's your alternate plan?

Anonymous said...

Based on the performance of the stock market today (DJIA -250), I predict that GM WILL go to bankruptcy and will layoff thousands of auto workers.

Let’s see what in BC budget this afternoon. I expect deep “cut”.

Anonymous said...

Shouldn't we have one on the impacts of US stimulus and BC budget on RE?

roger said...

anon said:

Let’s see what in BC budget this afternoon. I expect deep “cut”.

Should be OK here in Victoria. Civil servants will all keep their jobs. We are insulated from the mainland economy and lots of FTB's are buying real estate.

All is well - don't worry, be happy.

Reid said...

More on the auto makers crisis

Auto Crisis

Reid said...

Link to BC Budget being released right now.

BC Budget

omc said...

Just a few thougts.

My wife and I are getting preapproved soon, but we are not buying till at least the fall.

I was in the marina coffee shop here in Oak Bay yesterday and couldn't help overhear another realty conversation. He was an older out of towner looking to buy a condo. By the way he was talking (Louldly) about other subjects you could tell he was quite impulsive. He then said to his friend, or realtor I can't be sure, he had decided not to buy as the prices were crazy and he thought they would be lower next year. His next rang very true. He counter acted the argument that prices would go back up again with; 'yes, but after the rest of Canada recovers'. The realtor, or friend, agreed and said he probably had a window of a few years.

roger said...

Vancouver makes it to the top of the least affordable housing list. Victoria is not far behind.

Least Affordable Cities

msr said...

Roger,

Do you know where or how they got the income numbers? Because, if you go to: http://www40.statcan.gc.ca/l01/cst01/famil107a-eng.htm it says the median Vic family was earning almost $72,000 instead of the $56,000 they are proposing.

Anonymous said...

Could it be in US dollars?

Nick said...

Doesn't look like a lot of job losses in the public service, at least not this year. However, there won't be any pay raises coming and no new jobs, so don't look to the public service to replace any of the job losses in other fields...

Anonymous said...

What a weird world. BC Liberals release conservative budget. Federal conservatives release liberal budget.

Anonymous said...

Here's another money saving/making tip. For those of you that aren't into buying gold, because they don't believe it will replace the existing fiat currencies...


... no worries, they've just come out with freshly minted NEW WORLD ORDER COINS made out of 99.9% pure Silver!

Pretty funny eh?

PS. Silver is up some 25% from 6 months ago, and theoretically, it currently has more upside than gold.

roger said...

TC had this article on BC budget:

Government cuts will ripple through Victoria's economy

Government hopes to save $1.9 billion through "administrative efficiencies" over the next three years - money it will reallocate to key ministries such as health care, education and social services.

There will be a noticeable impact for local Greater Victoria businesses that feed the daily workings of government.

Less travel by provincial staff cuts into transportation industries like Helijet and Harbour Air seaplanes. The budget calls for a 22 per cent reduction in public servant travel, down to an annual total of $57.8 million.

Ministries have been told to reduce professional services, such as hiring consultants, by 23 per cent and start to look at existing government employees for expertise.

Local companies that provide such things as IT support, will find fewer available provincial contracts.

Anonymous said...

Here's a tip a couple of years ahead of its time. Survival tips from Argentina's economic collapse.

A long but very worthwhile read.

Anonymous said...

Anonymous wrote: I'm a mortgage broker in Esquimalt and I can tell you that the market is ready to explode. My phone has been ringing off the hook with first time buyers getting mortgage approvals in time for the spring. I think you would be crazy not to buy now before the prices start to go way up again and you get priced out forever.

I'm a realtor in Esquimalt and I can tell you that the number of listings is about to explode. My phone has been ringing off the hook with unrealistic sellers who want to list in spring. If you're looking to buy something, don't look at anything unless it's listed below assessed value, then offer 25% off THAT.

Anonymous said...

Nice "New World Order" coins. I see that the coin has the all seeing "eye" and the pyramid which are symbols of Freemasons.

Ah Hah, so all this is the Freemasons, just like in early US history.

Phil said...

Holy crap, has anyone seen the press releases on the Obama mortgage plan?

It will.. "Protect home owners and investors from falling home prices. If we act boldly and swiftly to arrest this downward spiral, every American will benefit."

What about the people who can't afford to buy now and are waiting. How will they benefit? Ridiculous!

Anonymous said...

Have no fear... Obama couldn't wipe his ass without Hillary, and she's busy trying to put out the wars he's trying to start up again.

Everything that moron (Obama) does will tank. It was pre-ordained before Soros ever bought him office.

Nick said...

Not sure if this was posted, from the TC a couple of days ago. Good to know what our fearless leaders believe...

The local wish list for Flaherty's largesse

Here's a compressed outline of the select group of Victoria community leaders views.

The real estate stall is overblown. The market is down slightly and it's a good time to buy a house. Banks have tons of money on hand, but they're spooked. They're changing the rules on the fly and freezing out builders in the middle of projects.

The Island is still insulated. A recession will hit later here than anywhere else. If there's infrastructure money around, post-secondary education should be thought of as infrastructure. People go back to school in tough times, so colleges and universities need cash to accommodate and train them.

And here's a partial list of other things that need doing: A Belleville Street arts centre, a new cruise ship dock, a tech park expansion, a bigger graving dock, more sports training facilities, a better ballpark and energy retro-fits everywhere. Plus, the Royal B.C. Museum is apparently falling apart and needs a major rehab.

roger said...

We have been hearing reports of increased buyer activity but there does not appear to be a similar increase in sales. This article may have an explanation.

In a buyer's market, devaluations cancel each other Deals are great - but current home's fallen worth is a problem.

Housing prices may be falling but there's still a psychological hesitation by move-up buyers willing to take the plunge because their current homes have depreciated, says housing experts.

As Jennifer Podmore of MPC Intelligence points out, while the company has noticed more people visiting open houses, there hasn't been a corresponding increase in sales. "MPC has been doing daily monitoring and we've seen a huge level in traffic to sites. We're definitely seeing more people looking," she says.

And while there are sales happening it appears those who aren't pressed to sell are opting not to put their home on the market.

roger said...

Real estate pumpers are always talking about how high tech is a strong segment of the Victoria economy.

Victoria will take a budget hit

Greater Victoria's economy will take a hit as the provincial government begins slashing internal costs in a round of "belt-tightening" that has local businesses worried.

Local companies that provide government with such services as computer support, will find fewer provincial contracts.

"It's definitely not good news for those companies," said Dan Gunn, executive officer for the Victoria Advanced Technology Council.

Of the more than 800 local high-tech companies in Greater Victoria, 25 to 35 do significant direct work with the province and could see cutbacks of up to $50 million in work, said Gunn.

Anonymous said...

IT companis smelled the smoke last month, they have already laid off some people. they will lay off more in the coming week.

roger said...

In Calgary Realtors deciding it's time to leave the business

But as the Calgary housing market continues to dip, some real-estate agents are deciding it's a great time to leave the business.

There were 5,510 licensed realtors in the Calgary area as of last week, compared with the 5,700 working here for most of last year. The drop in numbers coincides with a 34 per cent decline in sales of single-family homes and condos during the last three months of 2008 from the same time period the year before.

Board statistics show that its member-ship totals have only gone down at two points in the past 30 years: during the mid-1990s market slump, and during the energy crash of the 1980s.

Anonymous said...

Haircut and a shave

Anonymous said...

RE: Haircut and a shave

And they STILL paid $480,000 over what it could sell for in two years.

On a GOOD day with blindfolded buyers.

Anonymous said...

good luck on that one.

hp said...

Another haircut:

2046 LANSDOWNE RD
MLS# 251156
2009 Assessment $728k

May 29/08 $1,095,000
June 18/08 relist $999,999
July 30/08 $949k
Aug 14/08 relist $849.9k
Oct 27/08 $749k
Nov. 10/08 695k
Feb. 17/09 SOLD at 670k

That is called following the market down.

roger said...

hp,

Are you seeing many sales on PCS in the last week? I am not seeing that much action.

Any other readers care to comment on their PCS and Matrix sales?

hp said...

Roger,

I have only seen 2 sales on PCS in the last week in the areas I look at (mostly Oak Bay). Listings have picked up a little. About half are relists from December, the other half are new.

Anonymous said...

I'm an IT consultant in Victoria and things are booming right now. Great time to buy a house.

roger said...

anon said:

I'm an IT consultant in Victoria and things are booming right now. Great time to buy a house.

You should snap one up in Esquimalt. Things are hot there right now.

Dumb Canuck said...

IT Consultant hasn't hit his first fiscal year end yet! (and is tongue in cheek)

womp said...

Re: Haircut and a Shave

Did anyone else notice the address on that listing? Cracked me up.

Anonymous said...

Thanks for pointing that out Womp, that was good for a chuckle.