Tuesday, April 7, 2009

TD Economics doesn't think much of Victoria


You can read the whole report here (H/T to Nick for the find). Highlights:
New housing was largely absorbed, but too many households bought in and this will drag down demand for additional building in the years to come.

Over the long-term, the value of housing cannot exceed what households are able and willing to pay to live somewhere. House prices are necessarily tied to incomes.

An influx of wealth arguably provided the spur for anomalously poor affordability – even by B.C. standards. However, home prices must return to fundamentals over
the long-run. We project that the average house price will fall by approximately 15% relative to its current level over the course of 2009.
Emphasis mine. A projection of 15% more drop, on top of the 10% plus we've already experienced from the April 2008 peak. That's likely a conservative projection. It's a long and thorough read, and I suggest you do read it, especially the rental equivalency section.


All in all, it's a very well balanced analysis from a bank with a good track record of having stayed out of the muck.

UPDATE: Roger continues to out do the big 5 economists with his no-spin graphic statistics analysis. Big time thank you Roger.

My personal favourite: She's a hot market, if you don't compare her to anything we've seen since 1999.

113 comments:

Anonymous said...

Actually if you look at that last table you will see that Victoria and Vancouver are fairly close to their historical norms in terms of price/income ratio. This proves that it IS different here which is not very bearish at all. If you buy for the long term you will do well because everyone wants to live here.

Just Janice said...

And from Canadian Economic News we have the following with the headline -

Vancouver Leads the Way with Price Declines

(CEP News) - Real estate prices were down across Canada in the first quarter, with Vancouver posting the steepest declines, according to a new report from Royal LePage.

The average two-story home in Canada was valued at $379,636 in the first quarter, a 6.6% decrease compared to the same period a year earlier, Royal LePage reported in its House Price Survey.

Vancouver saw the steepest declines, where prices were down 12.6% year-over-year to $828,750. The housing market in the prairie provinces has been particularly hard-hit by the downturn, where the average price of a detached bungalow was down 11.2% year-over-year in Edmonton and 8.1% in Saskatoon.

In Toronto, prices are down 6.3% compared to a year ago.

"We expected a sharper decline in house prices across Canadian markets during the first quarter," Phil Soper, president of Royal LePage Real Estate Services Ltd. Said in a release.

He noted that markets were surprisingly resilient given the toll the economic downturn has taken on consumer confidence.

"Canadians in most regions should not expect the prices of their homes to begin appreciating again until the overall economy begins to stabilize, likely in the first half of 2010," he said.

Not all regions saw declines, however. St. John's, Newfoundland led the way in terms of price gains, where the average price climbed 15.6% to $265,000. The Royal LePage report said confidence was boosted by investments by Vale Inco NL and Hebron.

Prices rose in Montreal, where the average price of a detached bungalow was up 2% from a year ago, and in Ottawa, where prices were up 1.9%.

By Stephen Huebl, shuebl@economicnews.ca, edited by Ernest Hoffman, ehoffman@economicnews.ca

Metaldwarf said...

Lets kills two birds with one stone.... let me rephrase that. Lets kill two goldbugs with one nugget. The gold debate, in terms of residential real estate.

Dateline, 2012: China has sided with North Korea in support of North Korea's right to increase their nuclear missile stockpiles above 100 warheads. China and the USA cut off all trade, China demands immediate payment of the trillions of dollars of US securities they hold. Overnight the world economy bails on the US greenback as the reserve currency of the world, banks around the world collapse overnight as there is a run on all savings, in two weeks time, the G20 nations are all experiencing Hyperinflation to put Zimbabwe to shame, the dollar, euro and British pound fall essentially to zero. commodity prices and hard assets skyrocket in price, gold first crests 10,000 USD per ounce, and soon, passes 100,000 and 1,000,000 per ounce as the fiat currency it is priced in races to zero.

With paper currency worthless, RRSPs, bank accounts, insurance policies, offshore accounts all worthless; a crude barter system emerges within two weeks of the collapse. The only items worth trading are food, fuel, ammunition, and gold.

History will look back on the smart ones who foresaw the collapse, they will be remembered as heroes who tried in vain to warn the populous of their coming doom on what were then called “We-Blogs.”


So how does this doom relate to real estate?

Hyperinflation erases even the largest mortgages in only days, rather than years or decades. All banks have either imploded or have released the mortgages they held. Everyone is a homeowner, except the foolish renters, if only they knew you never lose money in real estate...

Baron VonBullionstine, one of the largest holders of gold in North America emerges from the obscurity of a small island nation soon to be known and “The independent nation of its different here and everyone wants to retire here and we have the best weather in the world-istan”

The Baron quickly begins to amass scores of real estate as the home owners soon are forced to sell as food, rather than shelter becomes their priority. As the Baron is the only buyer in the market, he dictates the price he is willing to pay for any given property, the Villa Madrona, he picked up for a steal at only two shavings off his smallest ingot.
As the first winter after the collapse engulfs the island nation, displaced families huddle in communal living spaces to keep warm, unrest begins as some of the peasants begin to burn the realistic laminate floor coverings of the unoccupied Barron owned homes that surround them. Soon entire neighbour hoods have been razed leaving large tracts of empty land, perfect for cultivation. Large community farms spring up on the empty land, geographic locations specialize in agriculture best suited to their soil and terrain. Oak Bay produces primarily Chardonnay and Merlot grapes to satiate the ancestral urges of its people. Esquimalt produces malted grain, and 40 oz glass bottles, Fernwood becomes the “industrial hemp” capital of the world.

The Barons, once portly, artificial cheese stained figure begins to wither, the farmers market quickly realizing that the once highly sought after yellow metal peddled by the Baron has little real world use, and hold little more real value than other trinkets like shiny beads or tulip bulbs. The Agrarian Race, demands more and more yellow metal for their food and biodiesel, soon the Baron must part his most favourite, large block, nicknames Mr. Yellow. And in trade only receives a snack size bag of Cheetos two years past their expiry date.


The moral of the story, other than I need to take more creative writing classes, is that a small amount of gold, a wafer or a few coins is probably a prudent insurance policy. Placing you entire savings into gold, or any other asset for that matter, is crazy. Diversify your holdings, cash, stock, bonds, treasuries, Canadian, US, global, hold different currencies, don’t place all your eggs in one basket, and if all the baskets get broken know how to make an omelet. If the world really comes to an end, you will have bigger things to worry about than your stock portfolio, or how much gold you own.

hhv said...

anon at 8:18. 15% above the historical norm. Check your numbers again. Most other markets are much closer to their historical norms. So you're right about Victoria being different. But it's not good news for the immediate future of Victoria real estate, unless you're looking to save up to 15% by buying next year instead of today.

Anonymous said...

Actually it kind of just confirms my genius in having bought in 2004 during a time when the price income ratios were below historical norms. What a prudent move on my part! I not only pay less than rent but I'm also likely to see a small apreciation in the price of my home even after the 15% "crash". Well, I'm off to waste some money on some trinkets and cheese doodles! I might even buy some gold later on this afternoon just for fun!

Anonymous said...

yeah anon 8:18, the avg for 1980-2006 is about 40% and 2008 it jumps to 57%! compare that to toronto where it doesn't deviate to far from 30% over the entire 28 years. Also, this graph is only talking about monthly payments and between 2001-2008 rates have been below historical norms. Imagine what would happen to that number if rates on a 5-year mortage were in the 7-10 percent range.

dub said...

The last table says *
*Defined as monthly payments at 5-year mortgage rate for a 25-year mortgage with 25% downpayment on an average resale price home

Given that this is based on a 25% downpayment, I suspect that ratios are likely higher for recent years - I would think that fewer and fewer people in recent years come up with a 25% downpayment, which means their monthly payments will be higher (though maybe this is offset by the 35/40 year amortizations?).

mln said...

From the endnotes in the TD report

We recognize that a 25-year, 25% downpayment mortgage may no longer be “standard”. However, we lack data on the distribution of lengths for mortgage amortization and downpayment sizes. CMHC collects this information for those mortgages that it insures, but does not publish statistics. Anecdotally, new homeowners have moved towards longer amortization periods and lower downpayments. Indeed, such a trend would explain a great deal of the recent deterioration of affordability. Moreover, we hypothesize that the short-lived 0% downpayment, 40-year amortization mortgages may have had the perverse effect of fuelling house price inflation: Many households could afford larger mortgages and were willing to bid more for a given property

hhv said...

Moreover, we hypothesize that the short-lived 0% downpayment, 40-year amortization mortgages may have had the perverse effect of fuelling house price inflation: Many households could afford larger mortgages and were willing to bid more for a given property.

Doesn't sound like the same thing that is happening now with these outrageously low interest rates too, does it? Same thing happened to start the bubble back in 2002 with interest rates almost as low as today's.

"Actually it kind of just confirms my genius in having bought in 2004 during a time when the price income ratios were below historical norms. What a prudent move on my part!"

Anon, thanks for confirming my prudent strategy that I advocate for all reader's to follow. Buy low, not high, like right now.

dub said...

Ah, that's what I get for just looking at the picture :)

Anonymous said...

Precisely. Pull tha trigger on the real estate trigger when we get back to 40% price income.

Nick said...

Nice work pulling out the relevant graphs and data. People have always paid a premium to live here, but things got out of control in the past couple of years. Here's hoping things return to historical levels of affordability in spite of the basically free money being thrown at people.

phil said...

People have always paid a premium to live in Florida too. It is the "retirement capital" of the USA, and it has been said that 1,000 people move there EVERY DAY.

Hasn't stopped their real estate freefall, and you can find lovely homes there for under $150K!

Anonymous said...

Metaldwarf, the ONLY people that came out of the last Depression unscathed were the "crazy" ones who wisely had MUCH more tied up in physical gold than they had in paper, bonds, equities, and the stock market. Especially the stock market.

Word to the wise.

Anonymous said...

Squawk, word from the anonymous to the wise, worth what you paid for it, quawk, that's ZERO.

roger said...

I have finished a couple of new slide shows and put them in The Victoria Real Estate Stats Gallery.

Oak Bay SFH - March 09 The trend for prices continues its downward trend.

City of Victoria SFH - March 09 Prices have flattened in recent months but are way down from last year.

The overall slideshow for Greater Victoria will be available soon. It is taking more time because I am adding quarterly data to the presentation.

Just Janice said...

Hmmm...lets see:
Hawaii is an Island - so no more land.
Victoria is also on an Island - so no more land.
Hawaii is largely dependent upon tourists.
Victoria is largely dependent upon tourists.
Hawaii has nice weather year round.
Victoria has nice weather year round - at least compared to the rest of Canada.
Hawaii's home prices have dropped as the recession has hit the purchase of vacation properties hard....
Victoria seems to think that it's immune to the same style of correction...
WTF is Victoria's Secret - the rest of the world desperately needs to know!

NanHousing said...

Roger, what program/site do you use to create those nice graphs of yours?

Anonymous said...

Victoria's secret is...

1) Rich asians enough said
2) Rich albertans
3) Rich Americans
4) Rich torontonians

Have these four segments of Victoria's booming real estate market been hit in this recession? Yes. Are they wiped out? No. They want to buy real estate in Victoria because it's so close to historical income/price ratios.

roger said...

NanHousing,

I use Microsoft Works as the spreadsheet and chart generator. Charts are exported as pdf, snapshots taken and saved as individual png files. Shaw Photoshare is used to create the slide shows (web application).

It is a bit cumbersome and there are better ways to do things. But I didn't feel like spending the time to learn something else once I got it all working.

Anonymous said...

"Victoria's secret is...

1) Rich asians enough said
2) Rich albertans
3) Rich Americans
4) Rich torontonians

Have these four segments of Victoria's booming real estate market been hit in this recession? Yes. Are they wiped out? No. They want to buy real estate in Victoria because it's so close to historical income/price ratios."


If this wasn't so ignorant it would be laughable.

vg said...

Overheard two guys today. One asks if they've sold yet. He says no,but he has a showing today but sounded down in the dumps because it was number 10 showing within the last while and no offers. Not even a mention of a price reduction.

Second anecdote,a friends place is finally reduced in two stages within a week after holding out for top buck for over a month and no offers.

The market is not as hot as the RE humpers are portraying as the friends house is in a very nice area of town where I expected at least a low ball offer.

Give it til summer and we will see continued price drops. Great to see TD wearing the reality glasses.

roger said...

Fellow bears....

There has been a lot of hype by VREB, Times-Colonist and some real estate agents suggesting that the Victoria RE market is making a big comeback. This is patently false. Sales are back to 2001 levels, even with all the FTBs running around with low interest mortgages. Prices are way down from the peak levels seen last spring.

One needs to remember that RE market trends are not based on one months activity. In order to see market trends it is important to also look at rolling averages, year-over-year comparisons and quarterly data. It is then possible to draw some conclusions about future market direction.

I try to make it graphically easy for readers to observe trends in a series of slideshows. I think you will find this month's look at the Greater Victoria market interesting.

Greater Victoria Real Estate Analysis

You should run the show in full screen mode by clicking the big X at the top of the slides. Use the pause and single step controls to watch the slides in manual mode.

It will be interesting to hear your thoughts after you review the slides.

HouseHuntVictoria said...

Roger, thanks for another fantastic set of graphs. I know you put a great deal of time into these. Your tremendous work is greatly appreciated in many a household, especially ours.

You can see my favourite of your new quarterly charts on the front page. Puts the spin into perspective.

I still don't understand why the TC won't publish your charts?

Anonymous said...

How about if we bears pool our money (if us poor basement dwellers have any) and buy advertising space in the TC for Roger's charts and maybe even HHV's commentary?

S2

patriotz said...

Actually if you look at that last table you will see that Victoria and Vancouver are fairly close to their historical norms in terms of price/income ratio.

Nonsense. You think an average starting in 1980 represents the historical norm? We have been in bubbles almost the whole time since, except during the mid 80's and late 90's.

The historical norm is the pre-1980 period in which house prices were around 4x incomes.

Anonymous said...

Anon 4:12- Does your Mommy know you're on the computer when you're home alone?

Anonymous said...

Just Janice: Victoria's Secret... gotta love it!

Victoria's Secret: grow-op enabled denial.

Muriel said...

CBC radio's On the Island progam just did a horrible piece on local real estate - it was as bad as anything from CanWest.

The intro started by saying Victoria's price drops are not as bad as Vancouver - so starting from a completely biased assumption that price drops are bad.

Then they talked about a Royal LePage report that apparently says prices on Victoria SFD have only dropped 0.4%! Maybe I misheard, but I'm pretty sure that's what she said. They also didn't give any dates.

And to top it off the guest they used to talk about all this was a realtor! It may have been one from Royal LePage - and so all the predictable drivel just followed.

If anyone else heard it or can give it a listen online, I hope you too will write or call in to tell them to be more responsible.

Just Jack said...

Interesting point that the norm was pre-1980's of 4 times income. Which might mean that the last 30 years of price increases have been caused by the "baby boomers" moving through the marketplace, building up equity in their homes through mortgage paydown and appreciation, thereby pushing this multiplier up to 8, 9 or 10 times.

If we are heading into a long recession with falling prices this would, for most home owners, remove appreciation, leaving only mortgage paydown as a source of building equity. Without appreciation, it is better, and cheaper, to rent and save up the downpayment and house prices would fall to or below a pre 1980's income multiple.

The last 30 years having been the bubble with relatively small corrections within this time period. Note: the begining boomers are turning 65 years old and the middle of the boomers are hitting 50 this year.

People change after 50, most switch from spenders (children have left home) to savers. Concerns change to health, travel and preparing for retirement. The late boomers say 35 to 50 usually get the shaft, by having to pay prices pushed up by the front boomers. The late boomers have typically saved far less, are highly leveraged and have a high liability to asset ratio.

Then there is the baby bust caused by the wide use of the birth control pill. Followed by the echo generation, generation X, and generation Y. Each one of these groups beeing far smaller than the baby boomers. These groups would also have far less demand for housing and far less disposable income as they pay for the boomers pensions and other government subsidies. These generations may find that their only option is to rent, just as many find today that it was cheaper to lease a car than to buy one.

Anonymous said...

Canada's economy loses 61,300 jobs in March


OTTAWA -- Canada shed another 61,300 jobs in March as employers continued to drastically cut costs amid a deepening economic downturn.


Statistics Canada said Thursday that the job losses - following 82,600 jobs the previous month - pushed the unemployment rate to a seven-year high of eight per cent, up from 7.7 per cent in February.


Most economists had expected 50,000 job losses in March.

Anonymous said...

8% unemployment rate.

remember just 200 days ago? lowest unemployment rate in B.C.I think we can use the word "crash" for employment conditions.

I now expect the same "crash" in RE.

It is good time to sell, not good time to buy.

patriotz said...

many find today that it was cheaper to lease a car than to buy one.

It cannot be cheaper to lease a car than to buy one. If that were the case leasing companies would lose money, wouldn't they?

Leasing just looks less expensive to those who can't do the math for the long term. The person leasing a car has nothing at the end of the lease term, while the person buying a car has a car at the end of the loan term.

Similarly, if it is cheaper to rent than to buy, landlords lose money. They can make up this loss only by selling to greater fools, who eventually run out.

The difference is that the car leasing companies have this figured out but the specuvestors don't.

BTW, the other reason for the big increase in multiples post-1980 was the huge drop in interest rates, which are now as low as they can go. and can only stay that low if we have a prolonged Japan-style recession.

Anonymous said...

They are looking at the monthly payment and not the end amount which is why in the last couple of years I've seen jewelery stores advertising diamond rings at only $50.00 a month and same with 40 year mortgages. They want the low monthly payment and don't pay attention to or don't care about the end amount.

S2

Anonymous said...

Here's what happened provincially:

(previous month in brackets)

— Newfoundland 14.7 (15.1)

— Prince Edward Island 11.5 (12.3)

— Nova Scotia 8.9 (8.8)

— New Brunswick 8.8 (8.7)

— Quebec 8.3 (7.9)

— Ontario 8.7 (8.7)

— Manitoba 5.1 (4.8)

— Saskatchewan 4.7 (4.7)

— Alberta 5.8 (5.4)

— British Columbia 7.4 (6.7)

-Vancouver 6.1 (5.5)

—Victoria 5.4 (4.7)

Anonymous said...

How long and at what percentage of the wage to a maximum amount does employment insurance cover?

Anonymous said...

The leasing company would be loosing money if they were buying the car from the dealer at the list price - but they are not!

Anonymous said...

EI - Maximum is approx. $423 week or 55% of weekly earnings - whichever is less.

Anonymous said...

Maximum # weeks depends on unemployemt in your area and how long you contributed. Victoria is under 6% unemployment so maximum is 41 weeks. But many will get less..

http://tinyurl.com/d97omn

Just Janice said...

One of the problems facing the car companies, is that many of them 'flunked the math' on the amount of the residual. As a result people are turning in their leases as opposed to buying them out. A lease finances the depreciation of the vehicle up until a specified period of time, and the leasor takes the risk as to what amount that may be. Leases also offer certain tax advantages for the self-employed. So, leasing may make sense, it depends who you are and what your needs are.

I think many landlords are presently losing money, but like in the stock market, they 'don't want to lock in the losses' by selling right now and have a strategy of holding out for better times. Ideally, they should be thinking of whatever loss that has been incurred as a sunk cost and base their analysis on what is the best allocation for their wealth right now (ie. what offers the most potential for growth going forward?).

Anonymous said...

"I think many landlords are presently losing money, but like in the stock market, they 'don't want to lock in the losses' by selling right now and have a strategy of holding out for better times."

What in God's name makes anyone think landlords are losing money? Lowest interest rates in decades? Highest rental rates in decades? Lower than ever vacancy rates? Hmmm, nope, that can't be it.

You think landlords can just decide today that it's time to sell? We're not talking gold bullion here. What about immediate vacancy cost as a result of a "for sale" sign and the high probability that a property would sit for 6 months? What about the cost of selling (realtor fees,) the cost of income taxes when a property is sold (landlords aren't typically in the 15% tax bracket.) If a landlord is interested in this type of investment, what about the cost of getting back in, the next property transfer tax cost; mortgage penalty anyone? You want to call this sunk cost, it can also be considered "prepaid cost."

It really is not that simple and landlords that intended to be landlords are making out quite well, thank you very much.

Granted being a landlord is not for everyone nor is it good for every and any property (and there are many people learning this the hard way these days), but to suggest that landlords as a group are losing money really does ignore the facts of life.

I'm pretty happy as a landlord, cash positive, taxable income negative, and appreciation over the past 5 years like I could have never anticipated. And yes my property "value" has retraced 10% in the past 12 months, but they're not for sale. Never is there a vacancy and problems are minimal.

Anonymous said...

I don't think the lease companies flunked the math on the residuals, they just got caught holding the bag during a deflationary period. During the boom times they were doing quite well often fetching close to retail for the return.

patriotz said...

I'm pretty happy as a landlord, cash positive, taxable income negative, and appreciation over the past 5 years like I could have never anticipated.

Do we have an oxymoron here?

Taxable income negative means you are losing money. Regardless of your cash flow.

Appreciation means nothing if you don't sell. And that clock is now running backwards.

But don't worry, be happy.

Anonymous said...

Again pipin' up with no context. I gotta concede, you are one smart fella.

I'm not getting into the details but: cash positive every month, legitimized annual loss reported on my income tax return (nice tax shelter), and mortgage principle declines significantly every month. Seems like a pretty sweet deal to me.

I know the clocks running backwards and I welcome it. In perhaps 3-4 years I'll buy another "money losing" property. Not all of us get into this for the short term gain.

Anonymous said...

"Taxable income negative means you are losing money"

FYI, "taxable income negative" seldom reflects the facts regarding profit. They are not one and the same.

victorianna said...

"I think many landlords are currently losing money..."

Emphasize the word "many." Nobody said anything about "all." My landlord, who bought the property I live in April 2008, is losing money on this property every month. My husband has many clients who bought rental properties in the past five years and are currently losing money.

That's really nice that you are a happy landlord and that your situation works for you. In no way does your personal experience invalidate the comment that the other poster made, that "many landlords are currently losing money."

Anonymous said...

Some anecdotes...I was in Victoria and Nanaimo this week. There were a number of downtown businesses in both cities that had closed up shop and there were "For Lease" signs around. There was a big building across from London Drugs Yates whose sign said "For Lease: Reduced". I think it was a comp store.

While venturing around London Drugs Yates I noticed a ton of "manager specials" on tons of product and every aisle (15-30% off). There were a lot of blowouts and clearance items around the store too. I wonder if the high prices have caught up with them in the recession and have to take a hit to keep customers coming.

womp said...

You should check out Lower Johnson. Two stores closed up shop there in the last six weeks, and the convienence store guy in the lobby of Market Square packed it in late last year.

Speaking of Market Square, there is a lot of space there that has sat vacant for months and months. It's a shame they don't do something with it (in general I mean).

patriotz said...

I'm not getting into the details but: cash positive every month, legitimized annual loss reported on my income tax return (nice tax shelter)

You cannot be cash positive and have a loss for tax purposes. You can be cash positive and break even by using CCA, but you cannot use CCA to create a loss.

If you want to argue, show us the numbers. You're the guy making the claim.

msr said...

Patriotz, depending on how he`s setup his finances he might be able to create a tax loss using CCA. The downside is if one of his tenants sues him they can attach to all his revenue streams.

The other problem is he actually had to buy all that stuff that generates a loss in the first place. So it means that he`s still underwater for his rental properties, if he were to account for all his costs.

omc said...

I don't know why the landlord is trolling, or why anyone is paying attention. He states he bought 5 yrs ago. Completely different market. If I could buy at 5yr ago prices I would. Who cares?

I know a few landlords who bought at least 1 property in the last 2 years and they are very nervous. CMHC is forecasting s a significant increase in vacancies in the coming years as the younger workers lose thier jobs and move away.

Just Janice said...

So if a landlord bought a property 5 years ago (a relatively good time to buy), and has made a handsome return in terms of asset appreciation while having steady tenants and now we're just past peak and the world is different. A smart landlord would ask if now is the time to unload the properties given what the next 2-4 years look like. If significant asset depreciation looks likely (and IMHO it does) on the magnitude of a further 30-35% decline (ie that $600,000 house becoming $400,000), then he or she may be best to reallocate his/her portfolio. Even if there are costs to doing so, as long as the costs of doing so (the cost of selling-including lost rent or the cost of terminating the tenancy, the realtor fees, etc.) do not exceed the costs of not doing so (the asset price depreciation - which may be quite large). You would then put the money somewhere else for a while. When the deflation is relatively done, you may even find yourself in an even better position to rebuild an even better RE portfolio, with even nicer metrics.

My guess is that the 'happy landlord' is really 'anxious landlord'. Probably a bit perturbed he didn't price competitively and sell last year.

I'm guessing he's trying hard to do the math, which would explain why he's trolling bear blogs. I'm guessing he's trying to figure out exactly how big the potential asset price depreciation really is, and whether or not his time tested strategy of being a landlord, has finally run its course. Reality sometimes bites hard.

To broaden his horizons outside of the MSM I would suggest he read up on Nouriel Rubini, Paul Krugman, Meredith Whitney, Calculated Risk, Canadian Economic News, and maybe visit statscan just to see what GDP and employment in Canada have done recently. Might also want to become very familiar with the 1981-82 recession...

FairfieldRocker said...

Not in Fairfield. In Fairfield the multiculturalim, environmentally friendlyness and Obama like nature means that everyone wants to live here. If you walk around Fairfield you will see what I mean. Fairfield is like a hippy commune with mercedes sedans and smart cars. It reminds people of the hay days of their youth and that is why real estate values never go down in Fairfield. It really is different here.

Ursus Minor said...

Just Jancice speculates that lanlords are losing money. A landlord pipes up to point out that he for one is not, and that in many ways conditions remain favourable for him when looking over the long term.

Where's the problem?

One person makes an assumption, another responds with personal experience. While a sample size of one certainly doesn't indicate a trend, one shouldn't discount the experience just because it doesn't fit the prevailing assumption.

Anonymous said...

"Fairfield is like a hippy commune with mercedes sedans and smart cars"

LOL!

omc said...

I just did one of those online mortgage calculations to see what kind of appreciation we would need to make a purchase make sense vs rent. We would need 4% appreciation per year over the next 10 years. I guess the market isn't ready for us yet.

patriotz said...

Just Jancice speculates that lanlords are losing money. A landlord pipes up to point out that he for one is not

ALL landlords are losing money on an opportunity cost basis. That is, they would be much better off selling their properties and putting the money in GIC's.

If a potential buyer is better off keeping his money in GIC's, that means a potential seller is worse off keeping his house.

Remember also that it is impossible for all owners to get out, because there would be nobody for them to sell all their houses to. Only the smart few will get out.

Those who bought during the bubble are also losing money on an operating basis, i.e. actually running a deficit month to month. Unless they paid a huge down payment, in which case they are losing money on an opportunity cost basis.

Anonymous said...

"...While venturing around London Drugs Yates I noticed a ton of "manager specials" on tons of product and every aisle (15-30% off)...."
Thanks for the update buddy, real informative

Fooder said...

After watching the market grow beyond the average person a few years ago it was a relief to see the expansion stop. In the lead up period it was obvious to me that things were destructively expensive, but the market took another year or 2 to run out of gas.

Now I'm having a harder time. The peak has been passed, but the low interest rates are pushing my prudent plans back years. I don't really want to plan my life around economic events, and am a little pissed off that I have no choice about it. Was it too much to ask that a home didn't become a hostage point?

I have that psychological desire to own the place I live. I also refuse to put myself in a position of feeling financial strain. So it looks like I sit waiting for 2 years for the inevitable to play out. We know there will be ups and downs, but we know where it will end up. I apologize for the rants every few months that I will have to unleash... cause there is some anger that my life is impacted by the socio-economic-demographic situation around me.

To end this rant I will say I'm thankful the economic crash has only pushed my plans back, our grandparents were shipped off to fight a war the last time this happened. My inconvenience is pretty trivial in comparison.

Anonymous said...

"ALL landlords are losing money on an opportunity cost basis. That is, they would be much better off selling their properties and putting the money in GIC's."

Really??...based on what? No really, what gives you the idea that all landlords are losing money on any basis. This is so far from reality that it is laughable. Opportunity cost is a non-issue. If I had thought that way back in April 2008 and had sold , where would my money have gone? GICs at 3%? Not likely. More likely into the market, because I wouldn't want to experience that "opportunity cost," and look at the HUGE potential for loss since then. How many Bears on here lost 40% of their next down payment to the stock market last year? I bet it's substantial.

Some posters on here really need to broaden their horizons a little. Believe it or not, not everything is doom and gloom. Many of us in fact are enjoying the current situation: cheap stocks, cheap cars, cheap interest, relatively cheap tax, tight vacancy, high rental rates, even cheap diamonds (not that I'm buyin any, because I'm too cheap:-)

ALL indicators are that this will turn around at least by 2010 and maybe through 2009. Anyone that states that they can GUARANTEE significant further price drops (which to date have been very small historically speaking) or are even really expecting them are blowing smoke.

Don't worry be happy...

Anonymous said...

"Patriotz, depending on how he`s setup his finances he might be able to create a tax loss using CCA. The downside is if one of his tenants sues him they can attach to all his revenue streams."

Absolutely no CCA, it's not typically tax effective. Show me one incidence of a tenant attaching to a landlord's income stream...I've been in this business a long time and haven't seen it happen or even it seen it threatened. Further to that, we do buy insurance for such contingencies.

womp said...

"ALL indicators are that this will turn around at least by 2010 and maybe through 2009. Anyone that states that they can GUARANTEE significant further price drops (which to date have been very small historically speaking) or are even really expecting them are blowing smoke."

Sorry which indicators were those? The three months in a row of massive job loss? The impending bankruptcy of the auto industry? The economist predictions of another 15% to go down in the housing market?

Or by "ALL indicators", do you really mean the suckers rally in the stock market and the 2010 Olympics?

patriotz said...

If I had thought that way back in April 2008 and had sold , where would my money have gone? GICs at 3%? Not likely. More likely into the market

Classic straw man argument. Refuse to debate the wise option, just defend a dumb option by coming up with an even more dumb option.

BTW GIC's were yielding over 4% a year ago. I know because I bought one.

The fact is that anyone who has held RE since the market top last spring has lost money due both to inferior yield and falling market price.

If you want to ride the market down, that's your problem. All I can say is that there will be some point in the future when it will make sense to hold on to your house rather than selling and putting the money in fixed income.

And that's when I'm buying. And no, I don't care whether your house is for sale or not. It's not special.

Anonymous said...

"The fact is that anyone who has held RE since the market top last spring has lost money due both to inferior yield and falling market price."

Inferior yield? You don't happen to have a definitian for that one do you? So now landlords are losing money on the rents as well?

As for how a landlord can be cash positive and report a loss on their T1, there are a few ways. Look up "cash damming" for starters - which, before you spring a leak, has been sanctioned by the courts.

I will actually join you on the GIC @ 4%. We bought one a year or maybe two ago in an RRSP that is a 4 or 5 year (cashable after 1 year) rate riser starting at 3-4% (I forget the exact details) and rising I believe to over 7%.

It's pretty sweet refinancing the mortgage on our house at 3.95% fixed for the next 5 years knowing that prime will likely rise through that term to 5% plus.

We had anticipated mortgage rates of perhaps 6% by this refinance. The rate of 3.95% represents a difference of aproximately $400 per month over 5 years that's now going directly to principle (we're keeping our payments the same.) What's that on the principle...$25,000? Very nice.

Now adjust the true cost of borrowing on our 5 yr fixed at 3.95% after inflation rises 2-3% through the next half decade and that's maybe another $25,000?

Everyone will make their purchase decision when it's right for them and their own set of considerations, most of which are not financial.

Happy Easter all.

Just Jack said...

Fodder said: "Now I'm having a harder time. The peak has been passed, but the low interest rates are pushing my prudent plans back years. I don't really want to plan my life around economic events, and am a little pissed off that I have no choice about it. Was it too much to ask that a home didn't become a hostage point?"



I'm with you all the way on this one, buddy.

Just Janice said...

The bulls seem to be charging the bear blogs. The may also be found in coffee shops and around water coolers. I actually overheard somebody say 'I can't see real estate dropping further in Victoria, maybe elsewheres but not Victoria'. It's different here.

Yep it sure is different here, here our average income is relatively lower than in Vancouver (at least for anybody with a degree and truly fluent in english), here we are far more dependent on tourism and retirees than elsewhere, here we are so far in denial about the potential for asset price depreciation, that when it hits, it'll hit hard (fall 2009, continuing through to 2011 with a long steady plateau thereafter).

In terms of where I would have put money last year, I would have and did put all of money towards debt reduction (student loans, etc.) - which has proven to have a very nice yield. Even if I were in a position to have put it in the market, I would have assessed the market, looked at the price to earnings ratio and relative growth over the last 5 years compared to long run trend, and I likely would have concluded that it was due for some 'correction' and I would have held off. Even now the market isn't where I'd put my money until it really does appear that we've bottomed and stability has returned. Daily swings in the market of 2-3%+++ are not stable. Your portfolio should reflect the risk you are willing to take. Right now I wouldn't risk a 25-35% reduction in my home's value, as it would also put at risk my ability to move in the future, should I need to.

The Great Depression also saw low interest rates - and asset price deflation. So if you've got a mortgage at 3% interest but the home is losing 10% per year isn't that almost the same as paying 13% interest?? Happy you've got such a 'bargain'....you can keep it for now.

beagle said...

"How many Bears on here lost 40% of their next down payment to the stock market last year? I bet it's substantial."

I bet it's not. If you were a bear on real estate you were likely a bear on the market too. Most bears were probably out of the stock market a couple years ago. They saw the bubbles getting ready to burst.

Anonymous said...

Janice-

Interesting way to think about it. That does means someone who has a 3% rate and goes down 10% is actually paying a 13% interest rate.

Those with a 5% rate and a 15% decline are paying a whooping 20% interest. Yikes.

So those getting into the market now could see themselves paying unaffordable interest rates (or "owning penalties" might be better) if the slide continues for some time.

vg said...

omc,

The landlord's only trolling for bragging rights just like SP was for her paper princess profits which have shrunk huge.

Colwood raising taxes 15% ? are landlords thinking they can pass on those costs to renters in this market ? not a hope.


As per the young moving away,Victoria is traditionally NOT a young person's town til this last 7 year boom where these temporary hot jobs were created with cheap money.

We will return to the usual 3 horse town of tourism,government and restaraunts as the younger move to Vancouver or other larger cities where the new jobs will be created or corporations rehire.

Anonymous said...

What the landlord is missing, even if they're not "losing" money in their own mind, is the fact that their rent ratios are historically bad in Victoria. Refer to the charts on this post. Victoria offers the worst ROI for almost all of Canada.

Want to be a successful landlord? Buy and rent properties in any of those cities located at the bottom left of the first graphic.

greg said...

Everyone will make their purchase decision when it's right for them and their own set of considerations, most of which are not financial.

I take the opposite view, I would say financial considerations are paramount to the decision to purchase a home, financial considerations determine the type of home and whether a purchaser can even buy.

To argue otherwise puts you in the insulting "forenter" mode of Ian Watt.

vg said...

greg,

maybe the "forenters" he invented were actually people who couldn't handle his BS and went to another agent who wasn't so annoying.

I could just imagine what it would be like when it got down to negotiation time and he's givin the hard sell. I would be running the other way looking for some Tylenol for my headache. :)

roger said...

I have been looking at the detailed report for Greater Victoria March sales. In previous posts I have mentioned that there was compression in the market with lots of inventory at the high end but few sales. Here is a breakdown of sales by price with current active listings shown in ():

0-399K [19%] 65 sales (122)
400-499K [30%] 103 sales (238)
500-649K [35%] 120 sales (326)
650K-799K [10%] 34 sales (204)
800-999K [4%] 14 sales (109)
1M-1.99MM [2%] 7 sales (160)
2M PLUS nil sales (71)

It can be clearing seen that below 500K the sales to active listings ratio is low but it rises quickly over 500K. Sellers at the top end will start reducing prices as time goes on and this will cascade down the price ladder.

As the recession gets worse and the spring sales season wanes even the low end housing sales will taper off. Right now the 500-649K segment is active with 1/3 of the sales but as this segment slows down price drops will result and this will put pressure on prices blow 500K.

patriotz said...

Inferior yield? You don't happen to have a definitian for that one do you?

Yes. If yield, which is net rental income divided by current market price, is less than borrowing costs, that's an inferior yield.

Yields for RE in Victoria today are absurdly low. Which is just another way to say RE is in a bubble.

Saying that yield doesn't matter is just another way of saying that price doesn't matter.

Yve said...

Wow, just watched that Ian Watt YouTube video...what an asshat. Is he for real? That's a spoof, right?

Reid said...

Great link on US credit and housing bubble.

US Credit and Housing Bubble

Anonymous said...

Listen up you piece of crap renters. I want YOU to talk to me about buying some real estate! Unless you want to be a renter forever and pay someone else's mortgage for life. So listen up you sacks of crap!

Nick said...

Reid said: "Great link on US credit and housing bubble.

US Credit and Housing Bubble"

Yeah, that's part of the Crash Course series. I think the entire series is well worth watching.

Metaldwarf said...

time for hilarious MLS descriptions

MLS®: 261062
General Description

BELOW MARKET VALUE!!! INVESTORS-$$$ POTENTIAL!!! Immaculate house in an amazing location with 2 suites, close to Camosun, Thriftys, Lansdowne and Oaklands schools, parks, tennis courts, and only 6 minutes to town or UVIC. Bilevel entry with living, kitchen, bath, 1 bed and office or formal dining room up. Downstairs has another bed and a 2001 built 1 bed & den suite (SOUNDPROOFED, WITH SEPARATE LAUNDRY!) New HWT (2007), vinyl deck (2006), front cedar fence (2006), asphalt driveway (2004), new roof (2001), new 100 sqft workshop (2001). THE BEST BACKYARD- 6' fenced west facing yard for pets or kids with fruit trees in abundance. Great daycare option! OFFERS REVIEWED SUNDAY APRIL 12th @ 2PM.


oh hyperbole what would real estate agents do without you

Anonymous said...

There is no way that Asshat should driving a vehicle (thanks for the word Yve.) He is either stoned, drunk (both) or as stupid as stupid gets. What a friggin ahole. Asshat.

Anonymous said...

Ian Watt is unfortunately, for real, but that video is several months old. And yes he was drunk, just not falling down.

However, I think his Audi has since been repossessed and he's gone into the business of ripping off music groups as a personal manager/coke dealer.

That line of work rewards lying more, and at this point in time, still has SLIGHTLY more government subsidies.

Anonymous said...

I think one of the aspects of Victoria that is being overlooked here -- as far as rents anyway -- is the university. We get an influx of over 13000 students every September. This number will only grow; traditionally, if young people can't get work, they go to university after graduation (and UVic had relaxed its admission standards significantly over the last few years).

Universities across Canada are seeing record enrollment. UVic is no different. And all those students need places to live.

Anonymous said...

Anon 7:07,

Good point, I know there's been lots of new dormitories built at Uvic over the past 2-3 years and I think i read somewhere that Camosun is, or will be, building some as well.

Anybody have any idea the number of dorms available at Uvic, what percentage of units may have been added recently, or any ideas of how that would skew the rental market - I don't think UVic admission or dorm numbers would have much effect (affect?) on house prices as very few students would be in the market. But a substantial increase in government subsidised dorms could lower rents in parts of S.East.

hhv said...

ah, yes, because Victoria is the only city that has a university! EVERY city in Canada has a migration of out of town students moving in during September. In Halifax, the 13K is closer to 40K. Calgary, Edmonton, Vancouver, all bigger schools, all bigger numbers of kids moving in to town.

beagle said...

As the recession continues the funding for University is going to dry up and tuition and and acceptance standards will go up. Also student jobs will not be as easy and high paying. I don't see any increase in rents from UVIC student demand in the next few years.
In fact I think more students will double and triple up and the home owners will have to deal with it if they want to keep getting the rental income from the mortgage helper.

omc said...

I know people who do the student slum lord thing and it is a much different game than regular rentals. Much higher maintenance, 1/3 of the year(min) without tennants. Lots of complaints from neighbours and people always moving in/out during the terms. You can charge more, but you are letting by room.

roger said...

Some readers may have heard or read about Harry Dent, a futurist that has studied economic cycles throughout history. He has a particular focus on asset depreciation in the coming years. Real estate is one area where he predicts significant drops.

If you are a bear or a bull I suggest that watching the following videos will be well worth 15 minutes of your time. I would be interested in your comments.

Harry Dent - Part 1

Harry Dent - Part 2

Anonymous said...

Anon 7:07, take a look at what is happening to major universities to the south, particularly in funding and enrollment.

You can cut that 13000 figure by half by the end of next year, and the remainder by half the following.

People don't have money to feed their kids let alone send them to university in a Depression. ESPECIALLY when they aren't local and have to factor in rents.

roger said...

Looks like bears aren't the only ones that saw that the boom would end. Here is an article on a developer, Concert Properties, that is successfully weathering the downturn.

Bucking industry trends pays off for Concert Properties

Concert president, David Podmore said recently that by June, his company will have about $800 million in cash.

He recalled a panel hosted by the Urban Development Institute that he took part in two years ago, where his view was diametrically opposed to other panelists.

Many expected little change in the residential market for the next several years, but Podmore expected it to collapse more quickly and Concert began withdrawing.

The company finished ongoing projects, but didn’t launch new ones.

“We just felt at the time the market was overheated and people were starting to do quite silly things. The market could not continue to deal with the increase in sales value and the increase in construction pricing.”

Anonymous said...

Anon 8:12

I thought I was bearish...

Do you really believe that in two years time the student population of Uvic will be 25% its current rate because people will be having trouble getting enough to eat. Are you preparing your bunker with survivalist gear?

That said, I agree that having a university in Victoria will have NO impact on the local RE market.

Anonymous said...

How can Uvic, Royal Roads, Camosun and the multitude of little schools have NO effect on the Re market? Of course they do: purchases by parents (may be small but definitely happens,)rentals, jobs, small business, spinoffs etc etc.

Don't expect this to dry up ant time soon. And I agree, when jobs are scarce more people go to school.

Just Janice said...

I don't know on the school thing. Historically, I think when jobs dried up, yes people went to school. However that was when they were doing it on their own dime by taking out student loans.

Now, with the expectation of the bank of mom and dad to finance the kids university, I think there's a real possibility that mom and dad might tell jr. to get a job for a bit then go to University as they can't afford it when their retirement plans have already had to be deferred. I think we'll also see quite a drop off in private school enrollments. I also think bank of mom and dad, might not be as willing to invest in RE for the duration of jr's degree, and will encourage jr. to rent (decreasing demand in the first time condo market) and come back home for the summers.

In terms of general impact on RE, I think people will want to push forward their plans to downsize or convert to rentals to limit their exposure to the RE market and reign in expenses. I think young first timers might stay out of the market a bit longer (after this initial round of silliness is done), I think those in the sell up market are likely to put off decisions to upgrade their homes. Those historical retirees (a much more significant and less transient component to the Victoria RE market) might decide to stay closer to their own children as they simply can't afford the degree of seperation that they used to. In general, I could see the factors that will shrink RE demand far outweighing those factors that would boost RE demand in Victoria over the next 3 to 8 years.

Anonymous said...

I think the last 5 year boom was the result of pent up demand that has been released somewhat. There is still a very large population of people who want to own real estate but cannot because of a lack of supply. With construction cutting back the demand will simply continue to "pent up" until the credit markets recover. Once that happens I expect house prices to double in Victoria by 2015. We'll probably have generational mortgages by then.

Just Jack said...

The one thing we do not have is pent up demand. With home ownership at an all time historical high in Victoria, and sale volumes trending down since 2007 in spite of lower interest rates and longer amortization periods.

Quite the contrary, we have an over supply of housing, most noticably in condominiums and less so in detached homes. This glut of housing will continue to increase as the attention to and confidence in real estate dwindles.


When the talk at the office water cooler turns against real estate - then the big fall is soon to happen.

Mr.4AM said...

Roger,
Re: Harry Dent - Cyclical type predictions are worth looking at, as they tend to be based on MACRO-Technical Analysis, but obviously need to take present situations and other forms of analysis into account. Recessions/Depressions are not identical, but they do rhyme.

The analysts I follow echo some similar things to Harry. DOW to fall to at least 5,000 if not worse, (US) Real Estate will fall much further and we're on the verge of a currency crisis. If you are US citizen, recommend holding 30% of your networth in gold (not necessarily all physical). But in Oil they would disagree. What drove Oil down from the $147 peak was the deflationary turn in the markets due to lower demand (and the fact that Oil was in an unjustifiable bubble).

If Harry sees things getting worse, seeing oil going up at the same time is contradictory, at least until inflation hits. Yes the peak oil theory is real, but only when demand is constant or growing.

There will come a time though in the not too distant future, when some "New World Order" (and I'm just quoting various Presidents here, and not subscribing to tin-foil hat theories)... will come and the Reserve currency is altered from the USD to something else (not necessarily gold - likely a handbasket of currencies, in small part backed by gold).

When that is announced or even prior, we'll have a currency crisis. At that point in time and/or when inflation starts rearing its ugly head back up, comodities will peak. That's when Oil and others will shine. But that may also be short lived as getting out of a depression doesn't happen overnight, not even by just changing currencies.

As for real estate, it's not a buy for quite a while. So in general I would agree about his real estate theory, but would re-analyze every 6 months, and not depend on historical macro-technical analysis Cyclical trends to make my purchasing decisions.

Mr.4AM

Anonymous said...

New world order eh?Here's Bush Sr.,and Bush Jr. on a New World Order, and then... Kissinger, Walter Cronkite, Bill Clinton, Obama & Gordon Brown ... on a "New World Order"...

Lastly and recently, Glenn Beck - "China & France want New World Order"

[insert twilight zone music here]....It's coming!

PS. Hey even CNBC is in on it! LOL

roger said...

Garth had some interesting stats today...

Let’s wind the tape forward ten years. That would place nine million Baby Boomers around Allan’s age. Unless something drastic changes, we know this: Personal savings rates will be close to zero. Half of all the Boomers will have absolutely no retirement savings. Just over 40% will have RRSPs with more than $50,000 – enough to live less than a year. Seven out of ten will have no corporate or workplace pension. And more than eighty per cent of all their net worth will be in real estate. That they can’t unload.

Greater Fool Website

Anonymous said...

April 9th, financialsense.com's analysis on a new world reserve currency. In short, China & Russia pushing for a new world reserve currency. The IMF's been propped up by a fresh new 1 Trillion (USD) in bail out funds, and still they favour gold, though it's likely premature to suggest gold be part of a new world currency reserve basket.

Anonymous said...

The thing to keep in mind for sure is that no matter what real estate will always be a long term investment where as renting is a short term transient mistake. It has been proven over and over again that if you own you will be far better off financially over the long term than renters.

Anonymous said...

What kind of sauce would you like with those pre-1950's glass door knobs?

May I suggest a 90's Burgandy with your helping of shag carpet.

Mmmmmm. Your always better off financially with a home. Ask the older residents in Oak Bay, who are living on CPP.

Anonymous said...

For sure it's always better to be on fixed income and deal with rising rents. This is unquestionably the best retirement strategy. In this way, your lifestyle continues to decline as rents rise. This is why it's best to be a FoRenter.

hhv said...

When you buy is the most important decision, far more important than the one "to buy."

Seems there's been a rash of buyers/landlords/owners lurking here recently pining their negativity on us who are comfortable with our decision to wait this nonsense out. Bitter buyer's they are becoming.

Anonymous said...

"The thing to keep in mind for sure is that no matter what real estate will always be a long term investment where as renting is a short term transient mistake."
Was it a transient mistake for the guy who took out a 1 year lease instead of buying last April? Over the long term the savings will be huge. Real Estate isn't like stocks, its not that easy to dollar cost average. Timing matters, big time

Just Janice said...

I would agree - it's not a to buy or not to buy decision. It's a does buying make sense right now? sort of decision. This depends on your income as well the prevailing market prices, the available downpayment, the available mortgage rates and the market price of available rentals. If it makes sense, great go to it. If it doesn't make sense, then other strategies are likely to be better.

Anonymous said...

Sounds like a lot of market timing to me. We could be on the cusp of another 20 bull run in real estate. You sure you want to sit on the sidelines? I'm just saying.

hhv said...

"Sounds like a lot of market timing to me. We could be on the cusp of another 20 bull run in real estate. You sure you want to sit on the sidelines? I'm just saying."

Anon, sounds like a lot of wishful thinking to me. RE is very easy to time. Anyone who says it isn't doesn't have the slightest respect for your ability to think independently. Anyone can review widely available public real estate statistics for Victoria and see for themselves.

Prices go up (slowly) with increased demand and decreased supply. Prices go down (slowly) with decreased demand and increased supply.

Where are we right now? Demand is at a decade-long low while supply is near the peak of a decade long high, with more coming online everyday. Prices are flat, MOM, and down YOY, with all analysts, including those paid for by REALTORS, calling for further price reductions of no less than 10% YOY.

Remember that in a margin account, you can win or lose big time based on debt. When prices are going up, you look like a hero, when prices are going down you look like a zero.

If I have the opportunity to save my family $50K in purchase price plus an additional $50K in interest over the term of the mortgage, I'll take it. But I think I'll save double that by waiting a year. I already saved $50K + $50K by waiting out last year. I'm willing to "risk" by waiting for an additional $100K savings this time next year.

Anonymous said...

It's not timing the market based on nothing. I just think RE will go back to its long term trends for price/rents, price compared to what ppl in the city make etc. Once it does I would buy something again.

Anonymous said...

"Seems there's been a rash of buyers/landlords/owners lurking here recently pining their negativity on us who are comfortable with our decision to wait this nonsense out. Bitter buyer's they are becoming."

I don't think so. The recent rash aside, most comments appear to be an attempt to balance the commentaries; more often that not they are countering off-side Bear-spin suggestions that all home owners / landlords are losing money and destined for poverty. This just isn't the case.

Ryan said...
This comment has been removed by the author.
Ryan said...

"Just over 40% will have RRSPs with more than $50,000 – enough to live less than a year."

This is why I stopped reading Garth's blog--he's the Michael Moore of housing bubble blogging. I agree with his larger point but it annoys the hell out of me the way he distorts facts to support his thesis.

$50,000 in RRSPs is not equivilent to one year's wages, even if $50,000 was the average or the actual wage earned by the person in question. When you retire, you get CPP and a lot of people in that generation will have a company pension as well, and you should have your house paid off. More importantly, you no longer have to save for retirement.

That $50,000 is not going to be used up in the first year, and implying that it will be is disingenuous. Yes, a lot of Baby Boomers will be screwed. Especially the ones who not only have nothing saved but actually up-sized their home during the bubble and will retire with a mortgage to pay off. The people with money in RRSPs may run out of money eventually, depending on how well they manage to adapt their lifestyle to their means. But implying that everyone, even the people with money saved, are going to be broke in ONE YEAR (!!!) is insulting.

hhv said...

"more often that not they are countering off-side Bear-spin suggestions that all home owners / landlords are losing money and destined for poverty."A bit of a stretch don't you think? I can't see where anyone has said "all homeowners/landlords are losing money." It's just the ones who've bought in the last 12 months who are clearly losing money.

vg said...

"$50,000 in RRSPs is not equivilent to one year's wages, even if $50,000 was the average or the actual wage earned by the person in question. When you retire, you get CPP and a lot of people in that generation will have a company pension as well, and you should have your house paid off. More importantly, you no longer have to save for retirement."




No longer have to save for retirement ? yee haa ! not bloody likely Ryan. CPP pays diddly squat and who says there will be anything left in 10-15 years when a major proportion of the population is sucking it dry ?

And not all or most have a pension plan. Not everyone works for the government or a corporation and many small business people only have RRSP's to rely on.

As far as a house paid off,yes you should if you think a house is a necessity in your life. Some people don't own or will always rent because of divorce and hardships in their middle years that doesn't let them back into the markets. It's not so cut and dry as you make it out to be.

Anonymous said...

Actually Ryan has something there. I saw a calculation a while back that demonstrated that approximately the first $20,000 per year of savings in RRSPs or other direct income that a person has in retirement is reflected as a direct reduction to government subsidies.

Think about medicare, OAS, GAIN, various other social programs, and yes CPP in the future (highly likely to be income tested when we get there.)

Subsidies in publically funded old age homes are income based as well. Just wait until they rearrange the medical services that is already partially income tested.

RRSPs look worse and worse as a retirement plan and I believe the new tax-free savings account will be considered at 100% of all withdrawals as the government programs move towards means testing rather than income. If you have the money we will take it.

People with incomes that can be manipulated in retirement will fair much better. BTW, Victoria is loaded with people that have pensions when they retire.

Is everyone aware that when we die all of our RRSPs (RIFs) and all other property are deemed sold and considered for income tax in that final year (assuming it does not roll to a spouse, which it will then come into her/his income in her final year.)

If you still have $300,000 in RIFs when you turn 75 and you pass away, your estate will pay tax on $300,000 at the highest tax rates in your final T1 plus the deemed sale of all property, plus whatever other income you would ordinarily have. RRSPs suck as a retirement savings plan.