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Real Estate Crash in Canada?





There was an interesting report by Merrill Lynch that Canada could be facing a similar real estate/financial crash that the U.S is facing right now.  The rationale being that Canadians have turned from being savers to spenders with an increasing net household deficit.  While I agree that the real estate market in Canada is due for a healthy correction, will the correction lead to significant foreclosures, thus resulting in our banking system crashing?

What had me confused about the sheer number of people declaring foreclosure in the U.S, was WHY?  In a nutshell, the reason is that people gave into the American Dream of owning a house without having the ability to afford it.  The teaser mortgage rates that they were given would temporarily allow them to make their payments.  While borrowers knew that eventually the mortgages rates (thus payments) would go higher, most expected that real estate would keep increasing, thus refinancing when they needed to.

What happened?  The real estate market started getting more houses for sale than there were buyers, thus decreasing values.  This lead to a chain reaction of borrowers not being able to refinance at the higher predicted price which in turn resulted in foreclosures due to the inability to make the mortgage payments.  With a high number of foreclosures, the lenders now have a bunch of non performing debt on their books with few buyers out there.  If you have enough upside down mortgages on the books, it can turn ugly pretty quick.  This is why the big mortgage companies in the U.S are looking for either bankruptcy protection or government help.

So, back to the question at hand, could this real estate crash/foreclosure mess happen in Canada?  I believe that home values can definitely decrease due to supply/demand factors, but I don’t believe that many Canadians depend on their home values or refinancing to make their next payment.  In addition, there aren’t that many “teaser/subprime” mortgage products offered to Canadians.

What do you think?  Do you think Canada could face what the U.S real estate/financial market is going through now?





116 Comments, Comment or Ping

  1. Personally I can’t see us going the route that the States. Thankfully (for lack of a better word) they have blazed the trail for us and allowed us to place some measures into place.
    By oct 15 all mortgage lending will be max 95% with max 35yrs. Most banks are starting this trend as early as Oct 1 (RBC for one)
    Will we see a market correction…..yes.
    Will some people be hurt similar to the States….yes
    But, thanks to CMHC for having a somewhat “governing body” behind the banks lending we should escape most of the issues facing the States.
    Sitting here now in Florida I can see LOTS of foreclosure and auction signs. I’ve even read in the local papers about “house raffles”. Owners are selling tickets on their houses in hopes to raise enough capital to dump their home and avoid bankruptcy. $100 tickets on a $250,000 home…..I sure hope we don’t see this in Canada.

  2. 2. David V

    I was discussing this report with my boss and he wondered why it is we are hanging on every word of a company that obviously has no way to forecast it’s own demise but is ‘able’ to forecast a real estate crash.

    It seemed like a reasonable point to me. Looking forward, a friend of mine bought a house five years ago and got a ten year fixed rate mortgage. But assuming he would have got a 5 year mortgage, the rates have crept up from approximately 5.8 percent to 7.4 percent (rough figures from http://www.mississauga4sale.com/rates_1year_5year.jpg).

    At 5.8 on 200 000 he was paying $1255 per month, now he’d be paying $1450. A $200 difference, which is not insignificant, but I don’t think enough to cause a crash.

    But, what do I know (as a soon to be buyer, I’d like a crash).

  3. 3. Nurseb911

    I’ll copy what I wrote over at Canadian Capitalist for anyone interested:

    “I don’t think we’re going to experience a MELTDOWN, but a rational person has to expect some stagnancy in RE prices across Canada when you look at where they’ve come in the past 5-7 years.

    If the historical average rise of RE prices in Canada is say 4%, then we’ve been outpacing that considerably over the past half decade.

    Now have the fundamentals of the Canadian economy changed so drastically that we’re now in a “new period” of RE growth and 4% will cease to be the norm?

    I don’t think so and while a drop of 10-12% would put us back to more attractive RE values across the country accelerated trends tend to go up too far and back too far. In Ontario I expect prices to decline just on the basis of the 41k layoffs in the manufacturing sector that are coming into effect Nov 1.”

  4. 4. Al

    Get a grip, I’m a Realtor on the front lines in Victoria. I see the disaster that is slowly unfolding. Don’t fool yourself into believing that Canadian 40 years ams aren’t the American version of subprime. Rampant overbuilding, greedy speculators, and buyers that just ‘need to get in right now’. The writing is on the wall people.

  5. I also do not believe that Canada would be unaffected by the US financial crisis. Even if your real estate market had no gray areas for manipulations it is hard for me to believe that Canadian Banks do not have any exposure to the toxic US bonds that caused so many financial institutions in the States to fail.

    That’s what makes me hesitant in purchasing TD..

  6. 6. Basim

    i don’t think we will see the disastrous problem as the states here in Canada. There is one thing that reports do not take into account is a factor in determining peoples ability to pay debt, that is the “underground” economy. Most Canadians, when push turns into shove, will find a way to do odd jobs for cash to support themselves and their families. my 2 cents

  7. 7. AndyBuck

    I think that in Canada this will be a highly localized affair. Certain areas of the country have been built into a bubble (BC, AB, SK) and you will see the hardest correction there. Other areas, such as the Maritimes (NL being an exception due to Oil and Gas) and Quebec have generally been more conservative and will not be impacted as hard. Ontario will be hit and miss due to layoffs and people moving around to find new jobs.

    Again, when speaking about Canada, you have to realize that each part of the country has it’s own drivers and not all are created equal.

  8. 8. Chuck

    I see the real estate market taking a hit, but not as severe as the US market.

    A lot of these problems also stem from interest-only mortgages. A lot of people overbid houses because they were paying interest only. They bought on speculation that the bubble would continue to grow, and now that its not they’ve got all kinds of problems, and have to pay out their car lease, pay for the “no payments for 24 months” furniture guys and basically the credit crunch is catching up to them.

    We are in the process of renewing our mortgage. Our bank requires an appraisal for the HELOC, and they actually put the appraisal on the low side. (my renovated house was appraised for only $10k more than the fixer-upper down the street is selling for)

    P.S. I’d love to see if my home town (London, On) can maintain its housing bubble. Tonnes of 400-500k homes built in the last 3-4 years, with next to no economic growth to support them.

  9. 9. AndyBuck

    @Chuck

    You’re from London, eh? I grew up just south of there (St. Thomas) and I was thinking of maybe picking up a bargain basement price house there in the next 2-3 years. They keep on building sub-divisions even AFTER over 3k job cuts were announced. Sounds like a Phoenix, AZ problem to me. It’s very similar to what happened to the Chatham area in the 1990s. You can still get a heck of a deal on land there, if you happen to be able to find a job.

  10. 10. Ben

    I wonder if the argument for/against dropping money on your mortgage vs. your RRSP will change now that people need equity in their homes more than ever?

    Isn’t the worst that can happen in Canada being that your home will become worth less than the principle on your mortgage?

  11. Interesting to see the negative bias toward the Canadian real estate market. I agree that each province is it’s own economy and real estate will be affected accordingly.

  12. Funnily, I made a post on the same topic but I couldn’t find the Merrill Lynch report online. Reading the report, I think that the authors draw conclusions based on rather questionable assumptions. Is a real estate slowdown or decline likely? Absolutely. A crash? Anything’s possible but the report isn’t making a convincing case for one.

  13. 13. Gates VP

    I don’t know if home ownership is really part of the “Canadian Dream”, though I’m not really certain if we even have such a thing :)

    I think that AndyBuck really nails it: you have to realize that each part of the country has it’s own drivers and not all are created equal.

    There were a bunch of homes built last year in Edmonton. Lots of homes, all priced to sell in the 300k+ region. Problem is, that’s too expensive and consequently, they’re not selling. I don’t know if the the bank is really “eating this”. The prospectors are likely the investors losing money on the deal.

    Winnipeg definitely has a bunch of over-priced homes popping up. But I don’t see the 20-somethings swooping in to buy these homes.

    Vancouver definitely has some issues, with lots of interest-only loans and “over-priced” housing. But Vancouver (and Toronto) are really their own beasts. Like New York and some other “international cities”, I don’t expect their prices to follow some form of “market reason”.

    And the banks who issue most of the mortgages still seem to be making money. I definitely think we’re in line for a correction, there will be some drops in home prices, and maybe a few foreclosures. But a slowdown is most of what I expect.

    (Give it a few more years and watch for retiring baby boomers to actually help family house prices go down as they “down-size”. I’m not convinced, that baby boomers are going to “retiring on-time”.)

  14. 14. DadTopics

    I see a small real estate correction happening, but nowhere close to what it happening in the U.S. I believe this for the simple reason and that Canadians and their financial institutions “in general” are more conservative than our American counterparts. We’re just not as highly leveraged as them so we can endure a bit more of a hit to the pocketbook. However, we should prepare for the repercussions of the U.S. economy screeching to a halt.

  15. 15. the_peel

    Do you think that the reason that the US was so eager to borrow so much from the bank is partly due to the fact that one can claim against the mtg interest? Since in Canada, we can’t do that, I think it causes us to be more conservative in our borrowing habits.

    I would like to hear MDJ’s views on what we as Canadians should watch out for in the event of the US economy crash, just as a hypothetical study.

  16. 16. Vee

    Just thought those of you interested in this topic should definitely take a look at http://www.greaterfool.ca . Great posts by Garth Turner, author and renegade Liberal politician, on the bursting real estate bubble in Canada.

  17. Hey all – good topic for discussion.

    I’m sure you’re all familiar with the ideas of “Self Fulfilling Prophecy”. Unfortunately, for the past two or three years, at least, there was a perception on the market that real estate never goes down. Whoever told people that forgot to mention the words “in the long run”.

    Likewise, the media has been telling us for months that we’re “in a recession” or nearing one, etc…and the new gut feeling out there is that the sky is falling.

    The reality is that neither is true. Real estate is not a guaranteed way to get rich (despite the best efforts of the loser real estate seminar guys to convince people that it is) and it’s not deserving of a crash (here in Canada).

    40 year amortizations were not super risky because they were only offered to people with great credit as a stepping stone into the housing market. Zero down is far riskier, of course – IN THE SHORT TERM.

    If the Garth Turner’s of the world and all the other Chicken Littles make enough noise and enough people notice it, then we will potentially have an over-correction on the downside and you’ll see some suffering. But that’s just what it would be – an over-correction. I think everyone needs to take a deep breath and relax.

    We started going down the sub-prime road a bit in the last couple of years – but thankfully the States was our canary in the mine…they blew up before we could get to that point.

    To Gates VP – those properties in Edmonton are selling…sales have been quite good, in fact. There was more construction than needed so it’s taking awhile to get through all the inventory, but the reality is that Edmonton is still a destination for people who are looking for good paying jobs and a relatively low cost of living. In fact, according to Benjamin Tal from CIBC, Edmonton is now one of only 2 “buyer’s markets” in the country. We’ve over-corrected and with the supply we have, it’s a good time to be a buyer.

    My 2 cents…

  18. 18. nobleea

    I blame Robert Kiyosaki.

  19. 19. Patch

    I’m a real estate lawyer and one of the differences that I did not realize until recently is that most of the mortgages in the states have no recourse against the borrower personally – that’s why borrowers can just walk away and all the lendor can do is foreclose.

    Here, every residential mortgage is a freehold interest mortgage – the lendor can foreclose on the property, go after any funds in an account or both. I think that should make a difference here.

  20. That does make a difference…as does the fact that we can’t deduct interest on a typical principal residence mortgage (Smith Manoeuvres aside). The urge to refinance constantly down there for consumer, rather than investment, reasons, creates more risk because the typical Loan-to-Value would be higher, on average.

    I ran through our stats for last year and my average LTV was around 60.4%. Considering all the first-time buyers we work with, and the 100% financing rules that were in place, that’s not bad at all.

  21. 21. Vee

    The Garth Turners of the world will in no way cause an over correction. That is ridiculous. He and others like him may prompt people to wake up, ask questions, research. As a result people may become more discerning rather than just accepting the spin carefully laid out by self interested government and industry insiders.

  22. 22. Vee

    re#17-The Garth Turners of the world will in no way cause an over correction. That is ridiculous. He and others like him may prompt people to wake up, ask questions, research. As a result people may become more discerning rather than just accepting the spin carefully laid out by self interested government and industry insiders.

  23. Not a crash but a correction- although a severe one in some parts. Some areas will be hit harder than others but its hard to say “Canada” is going to correct when some areas of the country are going to fare better than others. Just as Manhattan and Chicago have had a correction and Miami and Southern Cal a crash, you’ll probably see mini-versions play themselves out all over Canada in that what happens in Victoria (having been there in Spring, I agree with one of your commentators that it is simply over-built) may not happen in Calgary which may not happen in Toronto etc. etc.

    Remember U.S. has mortgage interest deductibility, non-recourse mortgages (I commented on Canadian Capitalist about this today), Fannie and Freddie (CMHC works structurally different), larger pools of mortgages to package etc. which all make bad times worse. Canada, modest as we are, never do great and never do terribly. We are always middling good or bad.

  24. 24. mjw2005

    I just hope prices come down from the high prices of today….so I can afford to buy a house, put some money away for retirement and live a little on a middle class income…..I hope they do fall….not saying they will but I hope they do…..

  25. 25. Kevin

    I agree with that a “correction”, will take place here in Canada, but not a crash. Although the U.S. crash will affect our economy, it won’t be to the same degree as our neighbours. Loans will be harder to get now so obviously spending will go down. This is probably good because we can’t run our society on credit for ever. We need to start treating our businesses like our personal finances and try to spend less than we make.
    I also think that the housing market will slow down. This should lead to the amount of house “flippers” out there. I’d like to know what percent of our housing market are flippers. Part of our problem is that alot of flippers put a coat of paint over the house, cover up major problems, make it look nice and sell the house for a rediculous amount. Here’s to the days when you can actually get a house inspector again, without being passed up for another guy who didn’t get one.

  26. The correction may have already started.
    I review weekly the 2+ bedroom condos available in my neighborhood on the Montreal island and for the last several months I see the inventory up from 59 condos to 74 and a few announcements for reduced price.

  27. 27. paul s

    The issue is not really as much about real estate pricing for me, it’s more about leverage and debt.

    Do the people have the money to pay their mortgage? I think in general yes.

    Do people have low equity positions in their homes, or have gotten into the risky Smith Man? Possibly. If this type of situation is widespread, then we have the makings of a meltdown.

  28. 28. andrew

    “Patch” makes an excellent point. In the US, with zero down and the ability to withdraw increases in housing value via HELOCs, why would anyone stick with a leveraged house that loses value? If they walk away all they get is bad credit, and they can keep all the money they took out with their HELOC abuse. I tend to think canadians on average have more of their own money in the deal, and the ability of the bank to go after other assest would make it harder for people to just walk away and let the bank eat the losses.

  29. 29. Jon Kepler

    As is the case in Florida and other places, condos have also reacted differently than houses, as they were the most overbuilt. I think that may be an issue in Toronto (reasonably close to where I live), but on the other hand, I don’t live in a condo.

  30. 30. Guelph Mom

    As home buyers looking for our “next” home in a Canadian town with notably high prices, we sure to WISH that we could predict the economy and real estate of times to come. An average 3 bedroom home in reasonable condition seems to run at about 300,000-330,000.
    We have found one at 306,000.00 and wondering whether to “pounce” or wait to see what will happen over the next few months. On one hand, we don’t want to be the ones who end up over-stretched and struggling if the economy declines. On the other hand, we don’t want to look back and know that we could have got a great house at a good cost. Does anyone know of any other good websites on this topic? And, what is the consensus–buy now or wait it out?

  31. 31. Gates VP

    Hey Alberta Mortgage Broker;

    Thank you for the update on Alberta. I moved to KC in January, but do have designs on going back. However, the low Cost of Living thing is a little tough to believe.

    My $1200 Millwoods apartment (with great location) had about 900 sq ft & 1.5 bathrooms. My $1200 KC apartment (in top-notch location) has 1100 sq ft, and in-suite washer/dryer/dishwasher & 2 baths. In Winnipeg, $1200 probably gets you any apartment you want.

    Don’t get me wrong, for high-end professionals, the extra salary will more than justify the extra cost of living. But if you’re making 35k / year working Convergys in Edmonton you’d get a lot more mileage making 30k / year working Convergys in Winnipeg.

    (and yes YMMV :)

  32. 32. Telly

    I don’t believe that all Canadian RE is due for a crash, but there are a number of cities (Vancouver most notably) that will likely see similar (or worse!) declines to some cities in the US that are making headline news. Everyone keeps bringing up sub-prime loans as being the cause of the crash in the US but the truth is, sub-prime losses are a result of prices falling from inflated levels to normal levels. The problem for all loan losses (even to “normal” people) is that the loan amount exceeds the fundamental value of the collateral (the house).

    We’re in a global real estate bust. Why should Canada be any different?

    What ultimately (once you remove the emotional factors) drives home prices is rent-price ratio – the difference between the price of the house and the amount of rent tenants would pay to live in it (i.e. a $300k house that rents for $1000/mth or $12k/yr would have a ratio of 4%).

    In the US, the ratio averaged 5.29% from 1960 to 1995. From 1995-2006 the ratio dropped to 3.5%, a historical low. There are plenty of examples in cities in Canada (Vancouver, Calgary, etc.) where the ratio is ~0.5%.

    I’m in a fairly depressed market (Windsor, ON) that hasn’t seen any real RE increases over the past 5 years since we purchased our home. The rent-price ratio for our home is approx. 9%. Check your local area & compare.

  33. Gates VP:

    All good points. Renting isn’t something I factored into my posts, but glad you brought it up

    About a year ago rents had skyrocketed in Edmonton (right near the peak of the market and very low inventories). Makes sense, that, if you can’t buy a place, rents will also get tighter.

    Around that same time the folks on the left were clamoring for rent controls and more subsidized housing. Thank goodness it never went through. The market, overbuilt, responded and the natural reaction is going to be for rents to come back down to normal. Lots of inventory means speculators who were hoping to flip condos for a quick buck will have to rent them out. That will increase rental availability (supply up) and rents will come down. I agree 100% with the poster on here about flips – the speculators really are the cause of most of the problems. TV Shows like “flip this house” don’t help.

    Interesting to note how the City of Edmonton’s affordable housing project has had very few applicants for it. (Trying to find a link to news on this, but can’t).

  34. 34. Golden Opportunity

    Guelph Mom- If the house you are looking at ticks most of your boxes, suits you and your family for the next few years, and is within reason for your budget you very well may miss out on a great opportunity if you do not snap it up now. I would buy it, enjoy it, and not look back. In the long run having a home that works for you and your family is more important than *maybe* getting a slightly better deal as the market corrects.

    I’m bracing for the comments of those that disagree!

  35. 35. Jon Kepler

    Golden Opportunity, I don’t think you’re going to have too many people going against you on that. What’s the point of getting a good deal if you end up unhappy with your purchase?

  36. 36. ToonTownRob

    One of the things that people don’t seem to allow for is that the cost of real estate is NOT totally market (demand) driven. This is true for the re-sale market, but the “bottom-line” cost of a new house is a function of building costs, not demand. If there is no demand, the houses simply don’t get built. The price doesn’t keep dropping like it has in the states, where people are giving re-sale houses away to stop their day-to-day financial bleeding.

    Here in Saskatoon, we have seen a tremendous surge in the market over the last two years. The Merrill Lynch report said our houses were over-priced by 50%. The author of this report is probably basing their assumptions on partial numbers which showed house prices increasing in the last year by 110%, and not the whole picture. The reason that house prices in Saskatchewan have increased so dramatically is because they had been basically flat for 15 years. When the rest of Canada woke up and realized that you could by an average 3-bedroom house in Saskatoon for $135,000, and we have tons of good jobs going unfilled, people outside the province (half of whom grew up here anyway) realized they could sell their $600,000 monsters and buy a house here for cash with no mortgage and still have a $100,000 in the bank and a great job – and housing demand skyrocketed along with the prices.

    So even with increases of 85% the prices are still low compared to most major centres in Canada. How ML can suggest that our houses are over-priced is beyond me. As a manager in the construction industry, our new homes are selling roughly for the same prices as resale houses – not at some big premium, because that is what it costs to build them. How can these be overpriced?

    The number of houses on our MLS has gone up dramatically. I believe that much of this is due to sellers (many pushed by real estate agents looking for listings) who list their homes for hail Mary prices in the red hot market we’ve had. They’re not really interested in selling, but if they can get THAT amount of money for it then they will. Well, those houses aren’t selling and sit on the market and make it appear to be stale. Some of those sellers who listed at a hail Mary price in case someone came along and took it have dropped their price to something closer to an actually selling price, further giving the impression that the market is stale. But interestingly enough, the average SELLING price (not the listing price) has actually increased between January and August. So, with lots of houses listed but not really for sale, and many not selling because they are ridiculously priced, many buyers are all sitting on the fence and waiting… and waiting… hoping that the price will drop. The recent economic news in the states just makes them more anxious to do nothing, so they wait more and the market appears to be slowing more… but it really is just an appearance.

    I think this is just a plug in the pipe, and the fundamental pressures that drive the market are sound. All of a sudden the flow will start again and when it does, all those buyers who have been waiting will start to panic and the pendulum will swing back the other way again.

    Financial disasters aside, unless the population actually starts shrinking the demand for housing will be there, the cost to build it will not drop significantly, and ultimately the cost for re-sale houses will remain stable.

  37. ToonTownRob, thanks for your insight and input. I have an off topic question, how much does a builder make / house in SK? I’m looking for a ballpark figure.

  38. 38. cannon_fodder

    I’ve heard that the market is pricing in at least a half point cut in the lending rate in the US and that commentary suggests that Canada will follow suit. I believe that this will be somewhat temporary as the US will need to print more money to deal with their ballooning deficit (don’t forget they are still waging an expensive and unpopular war). That will lead to inflation which will likely result in increasing interest rates.

    If what I’ve read is really happening in Canada (no more discounts on prime rate mortgages) then the housing affordability is going to be tougher – unless the prices come down.

    My prediction is that in certain areas of the country (where unemployment is low) the prices of houses will fare better than areas where unemployment is high – regardless of the run up of the housing prices. I think that where mortgage rates are headed and regional employment will be be the most significant factors to housing prices.

  39. 39. Guelph Mom

    This has been helpful – though sometimes hard to make a decision with such a variance in speculations about the economy and the real-estate market. Frequent mention on the radio about the worry over a possible recession. Would not want to buy our dream home only to hit a recession next year and not be able to afford the mortgage (due to possible surge in gas prices, grocery costs, etc). Anyone predicting a rise in mortgage rates?

  40. Guelph Mom:

    On the contrary…rates going up would slow the economy down even more than it already is, so the more likely scenario in the next year or so is for rates to decrease.

  41. 41. Telly

    However, the discounts available on mortgages are getting smaller by the day, so even if the prime rate goes down, mortgage rates are still going up for new mortgages. Only a few months ago friends of ours were able to secure a prime – 0.85% variable rate. The same lender could only give us prime – 0.75% on our cottage last week and that is tough to come by anymore with any of the big banks.

  42. 42. Dan

    I don’t think but i am sure we will go to 1/2 the price by 2009 2010

  43. 43. Guelph Mom

    Dan – you think we will go 1/2 the price of what by 2009, 2010? I sure hope you don’t mean property values! We took the plunge and put a conditional offer on our dream home…we put our first home up for sale and got close to asking price in 4 days – just waiting for closure. Hopefully, any crashes in the coming year will be relative – so that by buying AND selling when the market is stable will mean that we are on even ground. We also did okay with a mortgage rate. I guess the financial pressures in comin g months could be not only real-estate but also other bills for household and living needs. Funny that our incomes never seem to rise relatively with the cost of living. Anyway, I hope we do okay. I believe in the “self fulfilling profecy” theory. Some people are claiming doom and gloom for Canada – but I would like to think that this will not be the case.

  44. 44. philip

    Judging from the current worldwide economic turmoil, there is no question that there will be a real estate crash in Canada. Most significantly in British Columbia and in Ontario and Quebec.
    Vancouver will be hardest hit as homes will lose 30 percent of their sellable value. And this is only the beginning. As the prices begin to start dipping, some will sell but most will have a wait and see approach in general..As prices continue a downward spiral, there may be a rush or panic to sell. If there ever is a selloff panic, the average single family house in Vancouver will be roughly 210,000 in 2010.
    Sell now not later!

  45. 45. Jon Kepler

    Philip, the Vancouver market is significantly different than the general market in Canada. Sure, maybe Vancouver won’t be so great, but that doesn’t really matter to the rest of us. The crash in the US was helped along significantly by broke banks and 105% mortgages – both of which we don’t have here.

  46. 46. Scott

    Something else along the lines of location is…well, location! I live in Victoria — an island. There’s only so much land to build on and live on. Scarcity plays a part in pricing here unlike a different location such as Edmonton where they can just keep building and expanding until the cows come home.

    I watched some show a couple years ago with a Dutch economist (he was some kind of Tulip Bubble genius), he crunched hundreds of years of RE stats and said that on average RE only rises 1-2% annually over time. Not such a great investment if you don’t happen to buy at the start of a boom/bull.

  47. 47. Victorian

    Scott,
    I have lived in Victoria for the past 29 years and this is my third RE cycle. A drive outside the main cities of Vancouver Island will reveal vast wilderness towards the interior of the island. Almost all development here is along the coast. Most of the wilderness is currently tied up in tree farm licenses but with the closing down of the logging industry on the Island, many of the Timber companies are looking at developing their land into subdivisions. This has already begun in communities west and north of Victoria. Any expansion of this will probably be put on hold for now as the market softens but the precedents have already been set and will take off once the market picks up again in 3 to 5 years.

    Many people here have purchased homes in the past couple of years with 5% and 10% down. Our market is projected to correct 25 to 30%. With the credit crunch banks will be reluctant to renew mortgages on homes that are worth 20% less then the mortgage and people will have no choice but to walk away. They probably have little if any savings and will be forced to declare bankruptcy.

    I bought a 2Bdrm rental house in Victoria in 1990 for $110K and sold it for $179K in 1995 at our last peak.
    I had purchased a 16 suite apartment building in Saskatoon in 1995 for $200K and sold it in 1998 for $326K at their last peak.
    My plan was to have 2 apartment buildings in each province because the RE cycles are not in sync across the country. Divorce in 1998 took me into bankruptcy but by that time I had 1 apartment building in Port Alberni, 2 in Winnipeg and 1 in Saskatoon, diversifying a RE portfolio by buying in different regions of the country is an excellent hedge against RE cycles which are inevitable. Unfortunately it isn’t much protection from marital breakdown which statistically is almost as inevitable.

  48. 48. Sean

    Having grown up in Oshawa most of my family and friends are employed by GM or one of the small proxy companies from within the motors industry. I have noticed that now most of the people I know (80% or so) who purchased a home in southern Ontario are now looking for a way out of their mortgage, they have already sold the new mini van and the family cottage they purchased 5 years ago is now listed with MLS; and not selling! The only thing they have to look forward to is the compiling interest at the end of each month. With GM pulling out of Oshawa, the trickle effect it will have on the many smaller companies whom feed GM with parts and services are on the way out as well! This coupled with the detearating global economy will surly have an effect on the real estate market in Ontario!

    Almost everyone I know has multiple loans for things they couldn’t afford to purchase outright (boats, home entertainment systems, second vehicle, cottage) as well as the fact they are all still paying off their VISA from last Xmas! Living well beyond their means is common for Ontario folks whom lived with a false sense of job security for the past 20 years. Now they are faced with the real possibility of “long term” unemployment! I mean, how the hell do you “re tool” an entire province?

    So… Real estate professionals and the government of Canada can say what they want about the economy or its direction in Canada, what I am seeing are thousands of hard working people forced to cash in their tokens, go back to school and learn something other than threading the same nut on the same bolt as a means to pay for the “Canadian Dream” a house, cottage, snowmobile, bass boat, stocked beer fridge in the basement ect…

    This year there will be no jetski under the tree, instead I plan to pay off the Visa and throw a new set of rubber on the van!

  49. 49. GuelphMom

    This has become a very interesting forum topic and one that has me clenching my teeth wondering what it will all mean….
    I don’t think that I am alone when I say that the unknown is not a concept I particularly enjoy — especially this time. With my family to consider I want to make sound choices and do anything that I can to safe-guard us for the future.
    When and where will this economic crisis hit the hardest? When will we know when the end is in sight?
    What will it mean for the middle-income family not relying on jobs in the automotive industry and not racked with credit card expenses and other uppaid debt (other than mortgage)??
    This may sound very simple but I just need to make sense of it all.
    Is anyone safe????
    I have recently heard the saying “what goes down must go back up”…
    will this apply to real-estate?
    There has been no really evident change in housing prices here YET, but things are certainly slower than usual. Prices still seem to be holding steady. If we did see a drop in value and selling prices in the new year, when would those prices rise again to what they are today????
    Sometimes I really wish I had a crystal ball!

  50. 50. Scott

    Just to take away any glimmer of hope you may have, “what goes down must go back up” is a COMPLETE fallacy! (It’s not even a Law of Physics!)

    Have a look at the Nikkei (Japan) stock market. In 1990 it was at 40,000, it’s all-time high. Like America, credit and housing bubbles (partly) fueled its collapse. Today, nearly 20 years later, it stands at 8,500 — down 80% from the high.

    It NEVER went back up.

    So things that plummet may not drop any further, but there’s no rule which states they must return to whence they came. They could just lay in deathly stagnation for decades.

    It took the Dow Jones about 20 years to return to pre-Great Depression values. So maybe things can “go back up”, s-l-o-w-l-y.

    Perhaps the questions should be: Can you retire on 20% of your net worth? Or wait 20 years to recover the whole ball of wax?

  51. 51. Gates VP

    Hey Sean: Having grown up in Oshawa most of my family and friends are employed by GM or one of the small proxy companies from within the motors industry.

    Your story is the prototypical “mill town” housing situation that I’ve brought up multiple times elsewhere. Owning a place in a location with one primary source of jobs is a significant risk. What you’re seeing now has happened dozens times over the last 100 years in cities based around mines, factories or some other local resource.

    Oshawa is just getting the double-whammy. The shop is closing and much of the global economy is over-extended, so it’s not like you’re just seeing some temporary shift.

    Of course, there are some good things coming out of the whole crisis, but it really depends on “how you look at it”.

    …what I am seeing are thousands of hard working people forced to cash in their tokens, go back to school and learn something other than threading the same nut on the same bolt…This year there will be no jetski under the tree, instead I plan to pay off the Visa and throw a new set of rubber on the van!

    It’s good that you’re seeing this now. Frankly we need more people with more elaborate skills than this. On a global scale, the whole nut/bolt thing is very low value. If we want Canada to be a top competitor on the global stage, we need smart people like you solving big problems (like the energy crisis).

    If your skill can be done by anybody, then it will only command the price of the lowest bidder. Right now, simply living in Canada makes you a high bidder. If you’re watching this happen, now is the time to back to school and start training. Look into night classes, talk to EI. Canada has a big EI surplus. Now is definitely a time to cash in those tax dollars, get some EI money and find a new career.

    Remember, you’re competing with people across the world who don’t own one home (let alone two) and have never owned a car. They work 10 hour days (which is down from 12) and they live in a place the size of your basement. To provide long-term value, you either have to do something they can’t do or something they can’t “do from there”.

    I’m not trying to be mean or angry or harsh here. Frankly, I work in IT. I’m living this. I’m competing against a bunch of off-shore programmers in India. Microsoft has a 1000+ person mobile development department in India (on top of support), we’re not just talking small potatoes here. All kinds of big businesses are moving operations to where they make the most financial sense.

    Don’t get me wrong, Canada is a great place to live, I love it there (says a guy living in the US). We have a standard of living that is nearly unparalleled in the world. Right now, everyone else wants to live like we do, actually, they’d probably be happy with half of what we have.

    I think it’s fair that we start to justify our place in the world by showing that we’re capable of competing in the global marketplace. Both at a national and a individual level.

    I know that it’s frustrating to have to “cash in the chips”, but there’s no apology that any of us can make that can make that better. I have a bachelor’s degree and my job carries little extra inherent safety. Fortunately, we (as in we Canadians), have been setting aside money in the EI fund for just such a crisis. Might as well use it.

  52. 52. Scott

    From real estate crash to occupational crash? The way in which the world economy operates is currently going through major turmoil, upheaving everything the past 2-3 generations laid down. It will reassemble itself in a brand new fashion that everyone will have to get used to. This includes new valuations for houses and real estate; new valuations for “old world economy” jobs; new valuations for those industries that power the “new world economy”; etc., etc.

    The $24/hr union guy might not have a hope in hell keeping his job as ‘bolt screwer’ when all is said and done. I don’t have a clue as to what the hot industries will be in 2010 and beyond. Anyone?

    Just consider yourself lucky you didn’t quit your job 3 years ago to jump on the realtor bandwagon. There’s an occupation with a double whammy!

  53. I wouldn’t classify what has happened yet as a crash, it is definitely a recession though. The market will right itself, but before it does, those who can would do well to purchase real estate at a lower price. There are a lot of great deals available right now!

  54. 54. Jon Kepler

    Scott, since you asked, I’m going to guess that alternative energy isn’t going anywhere, especially with Obama now in.

  55. 55. Scott

    AR (and all realtors):

    I’ve read articles from different sources stating a “normal” or “natural” residential house value is around 3.5 times the median income of that given area. Is this something that holds true through real estate history? Or is it just another number someone made up?

    If this were the case, and the median Canadian household income (2 people, no children) is around $55-60,000, that would mean a “natural” valuation for a Canadian house is around $200,000. According to CREA, the Sept/08 national value is almost $290,000 — 45% over-priced?

    Since we all know wages increase at a dead man’s pace, do we have to look forward to loosing nearly half the value of our homes, or more if we live on the West coast?!

  56. 56. Sean

    Anything under 250k in BC is a DUMP! Most homes I consider a family home (which has more than 10000 square feet of land) is priced at around 300 to 375k.
    I have been in the market for 3 years now and if the prices don’t drop I plan to purchase in Ontario where I can buy a 5 acre lot with a 2000 square foot home built in the 70′s for under 250k! (That’s water front property btw!) In BC that’s a million dollar investment! “fts!”

    I don’t wish to look at another miss treated poorly maintained moldy home in BC for around 300k

  57. 57. Scott

    Agreed with the West coast standard of residential “upkeep”. Seems like people were just riding the wave of higher prices the last decade and not doing anything “real” (upgrades/improvements) to increase the value of their house. Now there is a glut of garbage houses out there. The financial crisis will force people into paying for “real” things, and not just dreams of cashing in on the market in 2 years time. No one will be buying these run-down houses until they are either fixed up or bought out by a developer at rock-bottom prices. There are a few property developers in Victoria trying to sell “fixed up” slum/crack houses. It’s not working too well.

    I bought my West coast house 3 years ago in a foreclosure ($75,000 under market price!). It is 87 years old and has had 4 owners. I would say none of them took care of the house, and some of them did many stupid and damaging “improvements”. Instead of buying a slightly better house that would have still needed improvements, I decided to buy the junker and spend the “saved” money to do upgrades, thus resulting in a lot of brand new aspects to a mistreated property.

    [As a side note, my mom's house in Edmonton sold in 2003 for around $190K. It went through 3 subsequent owners, all of who did NO work on the house (and I mean literally NO work!). The last sale price was $430 in 2007. +126% increase on the back of...nothing?! Of course the markets were not sane!]

    I read that because of all the foreclosures etc, many people are being forced back into rental situations. Because of the increase in renters, rent is now increasing! Looks as though you have to pay more no matter what you do. Just the swing of the pendulum. The house prices fall, the rents increase, equilibrium is established once again.

  58. 58. Gates VP

    Hey Scott;

    I don’t have a clue as to what the hot industries will be in 2010 and beyond. Anyone?

    Some easy guesses?

    IT isn’t going anywhere. SysAdmin jobs may become the “new mechanic”, but the number of very difficult IT problems continues to grow. Plus we can’t remove “programmers” from the equation.

    “Alternative” Energy, but really just energy in general. We’re in a financial crisis right now, but the world itself is hurtling towards an energy crisis. If we could octuple the world’s energy supply tomorrow (i.e.: double it three times). We could find a use for that the day after. The Net abounds with examples, I won’t bore you.

    Bio-engineering. Yeah we’ve been through a “bio-tech” bubble. But with the advent of Cloud and Distributed computing and wonders like the PS/3 Folding @ Home success, we’re bringing more and more power to bear on the problems in biology. We’re due for a massive breakout on this front. (also see Stem Cells)

    Nano-technology: is still in the early phases. So early that the tech is basically just a money sink. But the possibilities of harnessing nano-machines are simply so huge that it’s going to blow over at some point.

    Actuarial / Data Analysis. We live in a world swamped by data. It’s an experimenter’s wet dream, we have tons and tons of knobs. The problem is still the same. How do we analyze the data and how do we ask the right questions so that we can draw meaningful conclusions. As always, bad questions will inevitably draw useless answers. Wall Street is already filled with “Quants”, I expect businesses large and small to start using or out-sourcing this type of data in meaningful ways.

    So we have Computers, Physics, Bio, Chemistry and Applied Math. Sounds like a good time to be in Sciences.

    Smart People. Turns out smart people are still in demand pretty much everywhere.

    Of course YMMV :)

  59. 59. Sean

    it would seem we may be adopting a “Green Technologies” aproach to our new auto employment problem in Ontario. I think it’s the best bet considering we are allready tooled for the auto industry! and the “Lee Iacocca’ proxy consept will make it allmost impossable to do anything but for the auto industry! From what I am told there will soon be research and development companies formed in southern ontario in the new year! what I am not told is wether or not they will be infact working with the automotive industry. Investing in alternitive energies and or green products may not be such a bad gamble in the near future!

  60. 60. Ben

    This economic slowdown actually opens many doors. Although the sub-prime mortgage caused this collapse….it was the oil prices that popped the bubble. I predict that the world has had it with paying energy companies (oil, ng, electric, etc.). Within 10 years we will see electricity become as plentiful as oxygen. It is super easy to generate….so why are we all paying so damn much for it? Like Sean said….GAMBLE Canada….become a leader in alternative energy. Find us a way to distribute electricity cheaply and cleanly…and let’s sell it to the rest of the world.

    May I suggest we start with solar….lol

  61. 61. Gates VP

    Hey Ben;

    I agree that Canada is in an excellent position to become a world energy leader. We have massive amounts of sources for Hydro energy (see Manitoba Hydro) and no lack of space to set up miles of windmills. I’ve been personally told by some “people in the know” that factories in Kenora and further east could remain solvent if they access to Manitoba’s energy at Manitoba prices.

    Canada is the #1 producer of Uranium. And again, we have “out of the way” places to put these power plants.

    Obviously the Oil Sands are a giant pit of energy (albeit quite stubborn, it takes something like one barrel of oil to pull out three more). But the type of expertise that goes into managing the oil sands is pretty invaluable. And it’s not like Oil is just “going away”, it’s a very valuable source of portable energy that’s going to be around for a long time (given that batteries have mostly topped out).

    We also have Ballard, which despite the obvious 6-year stock drop does indeed ship & develop product.

    Who knows maybe energy is the future of Canada?

  62. 62. Sean

    After this mornings meeting I have learned that there will be 4200 jobs lost in southern Ontario by Jan. or early Feb! These positions are within GM; this spells the beginning of the end of the North American Automotive industry. The Gov of Canada has no bail out plan and the US will not invest in the Canadian motor industry! So… with this as a reality, the “untold” amount of jobs lost as a direct result of this is said to be staggering!
    We have officially entered a recession! And from what I understand from the rate at which the market is declining we may actually see a restructuring of the global economy, last time anything like this took place was in I think 1932! So what’s next? It would take years to retool for a “green” industry not to mention billions of dollars! The flag ship of Canada has floundered! With no help in sight anytime soon I’m curious to see what the near future will bring.

  63. 63. Harvo

    Relying on any industry that uses combustion for energy (auto, oil, utility companies) is no longer secure. The world has decided that it is fed up with pouring a liquid into their vehicle to make it operate. Not only does it makes the planet warmer it makes zero sense. The traditional auto industry should have disappeared in the 70′s but special interests groups kept it alive. It shouldn’t have taken a rocket scientist to know that the end of the combustion powered vehicle was upon us. We cannot keep a dead industry alive with tax revenue for the sake of maintaining employment. It actually hinders progress and progress is growth.

    If we quit complaining and got down to business by retooling these factories to produce CDN made electric cars, wind mills and solar panels we’d be laughing. I guess that just isn’t the CDN way.

  64. 64. Scott

    Harvo: is the whole WORLD REALLY “fed up” with oil? Or just the cost of oil? I bet 100% of oil users love what oil does for them; and I’ll bet at least 99% of ‘oil haters’ love what oil does for them (i.e. FOOD and HEAT!).

    It doesn’t matter that drilling for oil and burning oil “makes zero sense”. Pretty much most things humans do are illogical.

    The thing with oil is, what substance/technology will replace oil/internal combustion engine in a cost-effective, efficient, wide-spread manner?

    I highly doubt there will be anything viable for 25 years or more — especially with governments being involved.

    Perhaps that is one band-aid for the housing/energy crash — build ALL new homes and retro-fit ALL existing homes with “green” tech. Would create a lot of jobs, cut dependancy on oil/gas, as well as making homes more valuable, both intrinsically and monetarily (“Buy a Green home and save $2000/year on heating costs!”). Just an idea.

  65. 65. Harvo

    Scott,

    Your question: “The thing with oil is, what substance/technology will replace oil/internal combustion engine in a cost-effective, efficient, wide-spread manner?”

    The answer is so simple; electricity.

    Electricity is so easy to produce that it should be free, yet we are slow to adopt new technologies because it would result in the short term loss of jobs (and profit). Many CDN provinces still burn coal to heat the water that produces electricity. How in 2008 can we still be doing this? Electricity can now be produced using solar panels and wind turbines that require no combustion whatsoever. Solar does not even require a lubricant.

    Consider this….somehow we have decided that it is more efficient to cover our roofs with petroleum based shingles that wear out in 15 years rather than with energy producing solar panel that double as a weather shield?

    Electricity can power vehicles, heat homes, purify water, preserve food, illuminate darkness and even diagnose disease. It is very easy to produce and can be done for free. The solution to oil is very obvious once we clean the oil out of our eyes.

  66. 66. Gates VP

    OK Harvo. You’re not making a lot of sense here.

    The answer is so simple; electricity.

    Electricity is a form of energy. The world uses energy on a pretty consistent basis from heating home, to running factories and server farms to shuttling people around the planet.

    Combustible materials (coal, oil / gas, natural gas) currently make up well over half of the energy being used by humans. Some of these materials have their particular specialties. Natural Gas is great for cooking (more efficient than electric stoves). “Gasoline” used in cars is an energy-dense material with a reasonably low volatility. Gasoline is actually very good for moving vehicles around, we’re just wasting a lot the gas energy moving the car (instead of the cargo). But it’s not like we’re going to suddenly retro-fit diesel big rigs (where gas = moved cargo) with a bunch of electric motors and solve the energy crisis.

    If we could erect a thousand wind turbines tomorrow, it still wouldn’t solve the Canadian energy crisis. If I converted every Canadian vehicle to a “Tesla Roadster” tomorrow, we wouldn’t have enough electricity on the grid to power them. Even those imaginary 1000 wind turbines wouldn’t solve the problem. We’d have to start burning gasoline in plants just to make up for the shortfall. :)

    The long-term plan is going towards the use of so-called “renewable sources” (wind, water, sun) and the movement of energy into batteries and a giant distributed grid. Of course, now we have to deal with the waste / recycling of these batteries (for which we basically have no facilities and which also require more energy) and we have to create this mass of batteries (for which we really don’t have the plants / materials available).

    Either way, Harvo, your suggestion of using “electricity” to solve Canadian (or even world) energy problems is disingenious and shows a serious lack of the underlying problems. You’re not going to win any converts, people in the know are just going to wonder if you made it past grade 12 physics.

  67. 67. Harvo

    Gates VP,

    I respect your rebuttal but find it incredibly short-sighted and I think that you are missing the point.

    You are correct that gasoline is an “an energy-dense material with a reasonably low volatility.” but this is completely irrelevant because it only applies when using the combustion of gasoline to push turbines, which is ridiculous and archaic. If we leave petrochemicals out of this discussion (I’d be glad to have it in another forum) you would know, being the physics expert that you are, that there is currently nothing oil can do that electricity cannot do in a more efficient manner, technologically speaking of course.

    You mention the Telsa electric car and the fact that our ‘grid’ could not support a completely electric automotive industry. First, your information is wrong. Second, you are again thinking with a lack of foresight. The very idea of having a centralized power grid is completely out of date. Each household, apartment building, office tower, etc is capable of generating its own power. Although the existing technology needs to improve and come down in cost, it would be no different than the current LCD television market. Take a look a an LCD television from 10 years ago….that’s right….they didn’t even exist, even though the technology was invented by Sharp 40 years ago. It is not until there is a consumer demand for these products that both price and efficiency improve. Remember grade 12 economics?

    Your paragraph about the obstacle of “waste / recycling of these batteries” shows us that you are really missing the point. Recycling the batteries???? Is this a joke? No factories???? Maybe the 100,000 people soon to be out of work in the automotive sector help build and retool new factories? If you look at the issue on a macro level you’ll realize that there is no energy crisis; there is only a ‘using fossil fuel for energy crisis’.

    So Gates VP, you’re not going to win any converts, people in the know are just going to wonder if you made it out of Alberta. How is the weather in Calgary?

    P.S. Grade 12 English taught me that ‘disingenious’ is actually spelled disingen-u-ous. Or maybe it was grade 12 computer class and they day they taught us about spell-check?

  68. 68. Jon Kepler

    Harvo, electricity cannot power transport trucks, ships (the exception being nuclear), or jets, and won’t be able to in the foreseeable future. The oil industry will not be going away. There is no non-combustion based solution to oil.

  69. 69. Sean

    okokok, so some people have rather “grand” ideas as to the technology involved in battery or hydrogen powered fuel cells! Yes, some day it may very well power ships and heavy equipment, but for now we are stuck with light duty applications. Electric cars are not near as efficient as some would think, although we are advancing these technologies at leaps and bounds we are still a very long way from a battery powered mass transportation! Let me give you one small example! My buddy bought his 16yr old kid one of them new electric scooters, not the cheapo ones at Canadian tire, this one actually looks like a licensed vehicle! I believe it cost well over $1200 or so. the problem is that the scooter never achieved its “4 hr. run time” instead it was more like 2! its battery began loosing its charge memory from day 1!! Its specs only pertain to flat surfaces (go up 1 hill and you will understand what I mean!) and the regenerative breaking isn’t as effective as you would think! And yes, they replaced the battery only to repeat the same results! I know what you’re going to say next! “Well, my forklift at work goes all day on 1 charge! I have but 1 thing to say to that, your forklifts battery bank weighs about 2tons and costs prob around 20k! ask anyone in the motors what happened to most of their AGV’s that were installed in the 90′s, there all gone! too expensive, high maintenance big problems! all this said I would like to add one more thing! what makes people think that what took North America 100 years to developed, something that is integrated into our way of life, the moving gears of industry, what makes them think we can just “flip a switch” and be “green”? It isn’t nearly that easy! it would take hundreds of billions dollars not to mention years of “re tooling” just to come up with something to bring to north American markets, only to be second to manufactures whom have been developing hybrids for almost a decade now? Doesn’t sound like much of an investment now does it?
    Ballard? Well, there is a reason only NASA uses this technology, its damn expensive and VERY high maintenance! the space station and shuttles are pretty well the only applications suitable for this cell.

    Ok, so all this said there is still the “wage\union and skills” issues do next deal with! How will we compete with automotive manufactures that are already tooled and pay their employees the equivalent of $2.50 can.? They sell theirs for 10k! We can’t even paint a car for that price lol! So, I guess what im trying to say is that for now, the NA auto industry is DEAD! The Gov can pump as much money as they want into the auto industry! But unless there is a market for over priced under developed electric and hybrid cars, there won’t be anyone to actually sell them to!

  70. 70. Harvo

    Jon,

    Electricity can power anything. Just because the items you mention are currently not powered by electricity does not mean it is not possible. And why is nuclear an exception? All those reactors do is heat water to produce steam to drive turbines to produce electricity. It is that energy which powers the largest aircraft carriers and submarines in the world. Although transport trucks are soon to be a thing of the past because they will be replaced by electric/hydrogen trains, hybrid transport trucks (and buses) will be readily available in 2009 (Volvo). My guess is that 90% of the transport trucks in the world will cease to exist within the next 2 decades. And although electric air travel technology is still in its infancy it too is very possible and will become a reality soon. Do any of you think that it is a coincidence that Bloomberg just added a wind energy index to their site? The rest of the world is catching on but Canada just has too many ‘commodity based’ investors still drinking the Kool-Aid. I guarantee you that you will get left behind if you continue to think that oil has a future. We are in the infancy stages of a massive revolution. Widespread access to cheap and clean electricity will do to the world’s energy needs what the Internet did for information sharing. And if you think that this transformation will happen gradually think again. Consider this, we did not even have access to the Internet just 14 years ago.

    By the way….Irving Oil just announced that it is reconsidering building a second refinery in Saint John, NB….very peculiar in the midst of such an energy crisis and after 10 years of planning? It is because the Irving’s see the writing on the wall. Oil will not be valuable for longer enough to make that refinery profitable.

  71. 71. Sean

    umm, I’d like to know more about your resources Harvo! where the hell are you getting your stats and info from? and what does nuke power got to do with transportation? if your considering mini nuke power gen sets everywhere then forget it! for the same reasons we dont store hydrogen in common vehicles! If you get into the physics of the technolagy you may learn the “why” and why notz” of the industry. I dont wich to go into detail but consuder the implications that go allong with the “mini nuke plant” consept! I dont think it is possible anytime soon, the person or persons that “invent” or overcome the major problems with alternitive fuels will be the “new age Bill Gates” bank account and all! so the race is on! who wants to be rich, all you have to do is invet a hybred that actually works!

  72. 72. Harvo

    Sean….with all do respect…what the hell are you talking about?

    Although I said nothing about ‘mini nuke power gen sets’ as you call them, the reality is that they are in fact being developed as we speak.

    http://www.engadget.com/2007/12/19/toshibas-building-a-micro-nuclear-reactor-for-your-garage/

    I am fully aware of how a reactor works, but thanks but offering to teach be the why and why notz of the industry. So before you put more words into my mouth I’ll reiterate that I only used the reactor example to point out that reactors are used to produce ELECTRICITY which is used as the source of ENERGY. Last point…I am not sure if you’ve ever heard of a company called Toyota? But they just sold their 1 millionth hybrid car….so I’ll assume that it works just fine.

    Where is Gates VP when you need him?

  73. 73. Scott

    You guys are funny. Now do you know why there is no easy road to a “solution”? Everyone pulls in a different direction and the problem goes no where…

    And I, as a self admitted layman, have to agree that electricity may solve a portion of the world’s energy problems, but it is not a cure-all. I’m sure people much, much more intelligent than I would second that opinion.

    As for Toyota selling 1 million hybrid cars, great for them. As J.Kepler pointed out, ever see an electric 18-wheeler, electric cargo ship, electric transport plane, etc? I haven’t. Electricity is suitable for SOME applications, not all.

    I’ll hold onto my oil stocks until then.

    (And how did the “Housing Crash” thread turn into the “Energy War” thread?!)

  74. 74. Sean

    We were discussing southern Ontario’s automotive industry before the conspiracy spewing tree hugger found the thread. It had to do with real estate dropping due to the failing export industry in Oshawa. and no, Toshiba’s 1million car sale is a gimmick, they are no further ahead than SABB or Mitsu in the development of an actual hybrid or emission free power plant. Some people don’t realize the scope of the problem that the NAAI is faced with. THERE IS TO DATE NO PRACTICAL MEANS OF TRANSPORTATION OTHER THAN FOSSILE FUELS! A FEW MAGLIFT TRAINS AND SOME SUBWAY LINES WILL NOT SOLVE OUR PROBLEM! HYBRIDS ARE STILL UNDER DEVELOPMENT!

    go ahead, ask me what I do for a living! ! I would love to start a new thread!

  75. 75. Harvo

    Tree hugger? I love oil. We have 2 cars, a 30Hp Evinrude, a 11Hp snow blower, a generator and even a gas-powered leaf blower. I also heat my home with oil. But this doesn’t negate the fact that I can see beyond next February. If Southern ON wants to keeps those auto jobs they need to change their outlook immediately. Sean, call me whatever you want my man but it is people like you who are going to speed the process up. If you are lucky the government might buy some you time and if you are really lucky it might buy you enough time to retool and rethink about what my kids are going to demand to buy….and it isn’t a gas powered Silverado. The big 3 need to stop concentrating on how we can get back to yesterday and think about how to make some $$ tomorrow. Canada could become a leader but we’ll probably just bottom feed like we have been in recent years.

    Anyways, I am outta here….sorry again to the admin for going off topic.

  76. 76. Sean

    Ok, first off, I apologies for the tree hugger comment! It’s just that I have had far too many seminars where some dude believes we have always had the technology and it’s the oil tycoons that are preventing its development. These people have and are still claiming they have the technology to eliminate fossil fuels all together! and that there is absolutely no reason we can’t change over by umm, next Monday! your argument at first seemed typical of their mentality but after “carefully” reading what you wrote I now understand where you’re coming from and I totally agree! Sorry bro!

  77. 77. Scott

    P.S. — another reason why oil will continue to play — WAR. Still lots and lots and lots of military vehicles and weaponry around the globe is powered by oil and gas. I don’t really see an ‘electric rocket’ exploding on future battle grounds any time soon.

    On that note…

  78. 78. Sean

    On that note…..

    MLS reported a 300% increse in property listings for Sept. and Oct.

  79. 79. Jon Kepler

    Obviously, that 300% increase isn’t so great, but there have been no less than 3 real estate transactions in my extended family in the last little while, and so far, they’ve been getting reasonable enough prices. I know that might change – I’m just reporting what I know.

    We did view three different condos in Toronto recently, however those prices aren’t doing nearly as well (part of the reason why we were looking).

  80. 80. sion

    oil goin down cars maby the new hot thing

  81. 82. Green tech.

    I am in school taking heating ventilation air-conditiong and refrigeration. I’m pretty sure there is always going to be a market in temperature control for industrial and comfortability applications….maybe even “halting our rising ocean levels” applications. Energy efficiency and sustainability are huge selling points that drive this market right now.

    I also have one of those union jobs which I don’t put much faith in. I thank the union for their hard work and believe in unions, and I will support them 100%, but the bottom line is you can’t depend on them without putting some faith into yourself and your abilities. I realize that many people have financial and family obligations and it’s hard to find time to re-educate but knowledge is definitely power. Just think about everyone running the country: while you may not agree with their views they are almost all highly educated. If education was free in this country we would be a lot better off but you will never see that because it is a “socialistic” view-point.

    The sad reality is I am predicting jobs are going to be cut at my work within the next 3 years. By that time I will be making pretty good income as a 3rd year apprentice. Being part-time still at my union job I will probably be laid off with a decent severance package which should give me my 25-30% down for a house in a slumped RE market right before, or just after it starts to mend. It’s sort of a dark kind of wishful thinking but I can definitely see it happening.

  82. 83. Scott

    Sort of weird logic: getting laid off = buying a house! Especially when you need a j-o-b to get a mortgage. I’m pretty sure those NINJA days are over. But, take what you can get! Wait another 6 months or so and go to the States and buy 2-3 houses. :)

    As far as politics and unions…I can’t talk about either, I get far too upset. I work for one and side-by-side with the other, and I deeply despise both corrupt entities. But I still need to feed and house my family so…Catch 22.

    (A final stab at the oil industry: oil will never die because the world uses plastic in EVERYTHING…even electric cars.)

  83. 84. Banarvey

    Although oil is currently used to make most plastics it is certainly not needed. Plastics (petrochemicals) can be made from bio-fuel created from algae (which is available in virtually unlimited supplies). It can also be made using a new process by refining naturally occurring glucose.

    http://www.sciam.com/article.cfm?id=turning-plants-to-plastic-replacing-oil

    The only reason we have been using oil for so long is because is was cheap, plentiful and we didn’t care about our environment. I guess the times have changed? The world is never going to forget $140/barrel oil and petroleum is soon to be just a page in our grandkid’s history books.

  84. 85. Sean

    real estate thread! enviornmental threads can be found on David Suzuki’s web page!

  85. 86. Sean

    so, anyone know where the cheap property is?

  86. 87. Sean

    actually, the world has allways known high oil costs, it’s us in N.A. who will have to get used to a different market! we have lived far too long with fixed cheap fuel costs, with asia and India on the “NEW” high demand list, OPEC wont be able to provide us with prices our industry has evolved around.

    We Need to “Re Tool! “; and Yesterday would have been nice!!!

    is real estate dropping in ontario yet, lmao!

  87. 88. Sean

    AAAADDDDMMMMIIINNNNN! hehehe, could you please purge this thread allready?

    thnx.

  88. 89. Scott

    CHEAP REAL ESTATE?!?! I would say one of two places:

    1) U.S.A. in about a year;

    2) Other countries (eg. South America)

  89. 90. Sean

    this thread is dead!

  90. 91. Harvo

    Dump your commodity/utility stocks because the future is here.

    http://abcnews.go.com/GMA/SmartHome/story?id=6255279&page=1

    Tony Clement also announced today that Ottawa will not be giving a bailout to the Big 3 auto makers unless it is for the immediate retooling of their factories. The combustion engine is dead.

  91. 92. Sean

    we were aware of this 2 months ago, if you read this thread from the beginning you will realize that it’s about real estate in Durham and surrounding areas being effected by the crash of the big 3! About 2 months ago the problem was realized in fact, the Gov. stated it will not invest in something that there is no market for! unfortunately the prob is much more than the demand for mid size and SUV’s! It all starts with the “Lee Iacocca” restructure of the automotive industry in north America!
    it boils down to an industry that can not retool easily (would take years!) let alone hundreds of billions of dollars! its much more than contracting a bunch of CNC operators to build new tooling. the industry is messed up, we cant compete with the Asian market because we cant get anyone to work for $3 an hour with no benefits or union protection! the entire NA auto industry will not enter a “hybrid” market for many reasons other than even that that! besides, Hybrids are still in development and are incredibly expensive!

    no market for GM Ford or Chrysler! at least not in Canada anyway.

    Go back to school and learn something other that threading bolts to get the Canadian Dream! lmao the whole deal just sux!

  92. 93. Scott

    Harvo: the Boulder, CO. situation is not all it seems to be. Read the article instead of the headline.

    “several green high-tech companies, [have] invested $100 million…[in] 50,000 homes…decked out with the latest in environmentally-friendly, energy-saving technology — including solar panels, electric cars and, for some, a specialized heating, cooling and lighting system…”

    That’s a cost of $2,000 per home.
    Could YOU go out and buy an electric car and solar panels for 2K?

    What’s the rest of the story? What is the TRUE cost? What are the business and political practices fueling the “revolution”?

    As I posted earlier: “Perhaps that is one band-aid for the housing/energy crash — build ALL new homes and retro-fit ALL existing homes with “green” tech. Would create a lot of jobs, cut dependancy on oil/gas, as well as making homes more valuable, both intrinsically and monetarily (”Buy a Green home and save $2000/year on heating costs!”). Just an idea.”

    No doubt that it is a great idea, but it has REAL costs that must be acknowledged and addressed! Not just glossed over to make yet another feel-good “green” story.

    I’ll hold onto my Suncor shares for a while yet, thanks.

  93. 94. Harvo

    Scott,

    The point of the article is not to say that you should be retrofitting your home today. It is to point out that the technology exists today. Currently it costs approx $50,000 to ‘get off the grid.’ This number will soon be $25K and then $10K and so on. Not only will the price come down but the efficiency of the technology will improve. And yes, I did read the article thanks!

    I realize that Suncor is near a 52 week low and is probably a good buy right now but so is Vestas….only Vestas has the momentum going for it and Suncor has the momentum going against it.

    FYI…for $50K this company will free you from the grid….http://www.secondsourcepower.com/

  94. 95. Sean

    Actually HARVO, once again you have gone off topic! the thread is discussing “REAL ESTATE CRASH in ONTARIO” due to global/NA economy as well as the fading of the big 3 primarily, Oshawa and surrounding areas!

  95. 96. Harvo

    LOL….Sean you are killing me. I agree that we have gotten way off topic but there is probably just me, you and Scott left reading this thread. I am not sure why you think this thread was about the Big 3? Go read the original post….it has zero to do with the Big 3.

    Real estate…yes it will crash but not because people are defaulting on their mortgages. It will be because the entire country needs a correction. Even in markets were there hasn’t been a drop in unit price (yet) there is a now a surplus of available properties. It is only a matter of time before supply and demand dictate that prices must cool (NS, NB, PE, NL, QC even the Yukon). BC, AB and the GTA are screwed and in store for a massive correction. Common sense has seen this coming for a long time. I don’t know anything about the prairies…maybe someone else could fill us in?

    Within the next couple years I predict…read…I predict only….that AB will see the largest correction. With the price of oil plummeting and the demand for oil plummeting even more there will really be nothing keeping those prices where they are. Let’s call a spade a space….what does AB have to offer other than oil? Tourism and maybe some lumber. There will be a massive residential exodus and ‘for sale’ signs everywhere. I sucks for the Albertan’s who are native but nobody will be feeling sorry for them I’m afraid.

  96. 97. Sean

    the Auto industry in Durham Region is the primary source of income, I was only referring to the loss of employment and sad lack of skills. 300% increase in MLS listings in southern Ontario, no one is buying! said nothing about “mortgages” but I did quote “selling off assist”; I have noted a trend in southern Ontario, people are scared! not buying, those who can are expecting a dramatic drop in real estate prices and will hold out for months if not years. all I have been trying to point out is there is “NO” bail out plan, atleast not the type of plan Ontarians are expecting! Ontario is now and will remain for several years a “have not” province; “according to the prov gov.” Real estate has been for 6 or 8 years now a booming market, prices are quite high! yet they seem to be on “pause” I don’t see this as a sustainable market for long. of course prices are going to drop! but the question is “how much” and for how long? Will fuel prices stay low enough to regain confidence in the NAAI? or will there ever be a market for the product manufactured in Ontario? or will people decide to buy into the much cheaper more efficient products manufactured in the Asian market? with the loss of some of our larger corporations added to this (Nortel, Lasco Steel, Inco, ect.) “the list goes on and on, and is growing at an alarming rate!”, there has to be a substantial drop in real estate in the new year, from what I understand it’s expected to be around 40 to 60%!

  97. 98. Sean

    good point! no one here but us 3, lol

    I have a discussion group on facebook “Global Challenge and Change” I
    would like it if you two would join! you both make good points and have lots of great stuff to add! prob even make you admins! lol.

  98. 99. Harvo

    Hmmmmm….I guess this is the first stage of “I told you so.”

    http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=13adff3f-db12-40d9-92ac-4517eb470e2d

    Like it or lump it….oil is going away and going away fast….starting first with that tar sand oil.

  99. 100. Jon Kepler

    Just for the record, I’m still reading.

  100. 101. Harvo

    For those of you still reading this thread (that I have not annoyed to the point of alienation) I have another link from today’s Globe that substantiates my argument. We all know that fossil fuel and combustion is not going away tomorrow but I think many of us agree that it will not be a profitable commodity within 5-10 years. Smart investors are the ones who recognize trends before the masses catch on. Usually once a stock or industry is hot it is too late to make more than a slightly above average return. I am by no means an environmentalist and by every means a capitalist but I can see that the ‘green’ trend is not going to die. There is going to be boatloads of money to be made in the very near future from all sources of ‘green’ advancements. Be it wind, solar, auto, paperless documentation, synthetic polymers, waste incineration, water purification and desalination, electricity decentralization (homes producing their own power), and so on. There is where the world is headed. It is going to have fast and furiously. I know that stocks in oil, coal and utility companies have reached their tipping point and are going to be in a ‘sell’ position really soon. if you want to be ahead of the trend I suggest taking a close look at your portfolio and consider a redistribution of assets.

    http://www.theglobeandmail.com/servlet/story/RTGAM.20081119.wgreen19/BNStory/National/home

  101. 102. Harvo

    Here is the answer to the Big 3 crisis. Start producing domestic versions of these:

    http://automobiles.honda.com/fcx-clarity/

  102. 103. Scott

    Got one thing to say about Haro’s predictions:

    “…paperless documentation…”

    Wasn’t that supposed to have already happened with the magical invent of the might computer oh so many years ago? Now we use even MORE paper!

    Just look at VHS vs Betamax for another example. The better technology LOST! Even though the professionals continued to use Beta, the masses glommed onto the weaker of the two technologies (for various reasons).

    The world may be headed (fast or slow) toward all this new technology, be it ‘green’ and/or otherwise, but don’t be so sure that their reality will equal the theorized predictions.

    And, as usual in the human world, everyone will NOT be on the same page at the same time. This will be sure to stall the process of progression in said techs globally.

  103. 104. Harvo

    Scott,

    You make some excellent points but the thing that you have failed to address is something called the “knowledge doubling curve.” This is the phenomena that measures how quickly the world doubles its knowledge. The time it takes for knowledge to double started out as a linear rate and is now progressing at an exponential rate. Obviously this is due to the Internet…similar to the way that you and I are conversing right now. Just 10 years ago we would have no way of even knowing each other existed unless we somehow happened to meet by chance. Now we can share ideas and thoughts within seconds….and thus share knowledge. It is for this very reason that the world will transform itself (good and bad) very quickly. Even in the mid-eighties when the VHS vs. Beta thing happened it was not easy to get accurate information because we relied on print media which made us more susceptible to marketing lies. Fast forward to the HD vs. Blu-ray debate of today. The world has decided that neither will survive because renting or buying a physical DVD of any kind makes no sense when we can stream 1080p though our television. I don’t think anyone thinks that Blockbuster has any kind of future and I would be surprised if we don’t see it collapse for good within the next year or 2….being replaced by Netflix and its soon to be competitors.

    A technically you are correct that the world consumes more paper than it did in the past but this stat is totally flawed. Being a former Xerox employee I can tell you that the peak year for per capita paper consumption was in 2000…but for some reason we seem to have actually plateaued since then and consumption is slowly decreasing. This is only because developing countries are just catching up. All across the industrialized world newspapers are folding or going paperless. The Christian Science Monitor just announced that it was going paperless…so I am sure others will follow.

  104. 105. SP

    It is wishful thinking for those who think that Canada will not experience a real estate crash (or a slowdown if you prefer). There are over-capacities everywhere in real estate in Canada for these past ten years mainly as a result of the commodity boom, which has been decimated in the past year. The manufacturing sector in Ontario is also now officially obliterated. Since Canadians choose to tie their economy (and incidentally their jobs) directly to the US market instead of diversity into the global market, Canada will suffer economically as a result of the looming US depression, If you got layoff or at risk of soon getting layoff and still think about purchasing a home, you must be coming from Mars (or without any financial sense). With no demand and plenty of existing and new supply, the market will go down if not crash. Lesson for Canada, it is wiser to diversity into the global market instead of fully depending on the US, which by every measures is on a historical decline.

  105. 106. Sean

    Like I was saying in the beggining of this thread! GM is gone, south Oshawa is screwed! if ya don’t think this is true then why is there a 500% increse in the amount of property available on MLS? and there not selling! Vancouver Island is showing the same things, in fact, i have allready noted a 20% avr. price decrease on Vancouver Island allone! and this is just the beggining, what’s up next? lol, 1 million people in ontario comming off UI all at roughly the same time should be interesting, baby boomers packin up and buyin extremely cheap retirement packages in southern USA is another hard fact! dont think people will leave? I beg to differ! what you would pay for out here (ex. 1 acre water front cottage with boat and dock in canada is about 240k, in southern US you can pick up the same sorta deal for about 50k !

  106. 107. Sean

    another point is that canada has in the past and is still very dependant on our manufactureing, export industries. seeing how international trade is on the brink of destruction (at least fore a few years) I don’t see how our small industry sector will survive? the larger industries could retool and commit to an “in demand” or local market but that dosn’t seem likely, well atleast not on a national or large scale.

  107. 108. Some dude

    Every mortage in canada is a teaser: 5 year agreement only. In the states you can lock in mortage rates for 30 years which gives more stability. Look what happened there. The big melt down is a couple years away when all mortgages will reset. Interest rates will rise. House values fall. Mortgage goes upside down. Need for more money down at renewal. Can’t afford payments… bankrupt. It is a deck of cards when housing prices average 6 times income (versus historical 3 times income). I am trying to sell my house before that happens.

  108. 109. Me

    We now know that the real estate market in Canada is going to crash. Even the Feds have warned us that this is pending. If your home is worth 70% of its value in 5 years you will have weathered the storm better than most Canadians….especially those in the hyper-inflated markets of Toronto, Calgary and Vancouver.

  109. 110. Fred

    Manufacturing in Canada is toast and will never return. The HST hits in July and interest rates have only one way to go.

    Record low interest rates have fueled the re market and those new buyers who took the free money will pay the price. This time next year will see buyers wishing they hadn’t taken on dept.

    Maybe there will be some bargains just over the horizon.

  110. 111. Michel

    The real estate of Canada will crash just like the states the higher the housing prices the bigger the crash the only difference is the banks wont go under due to central morgages program but don’t be fooled it will appen and soon the housing market will crash every where in Canada . Most people owe more on there morgage than when they first both there homes . Worst of all Canadian owes between 3 to 7 times there yearly income when it should be 1 time your yearly income . The interest rates will go up because that is the only way to get out of a recession and yes we are still in a recession soon to be a depression .

    Do your research we are right now at the same point of the great depression of 1929 just about one year before the great depression they were in the same
    place in he market , great way to find is do a silver to copper ratio or gold to copper or dow to silver or dollar to silver . I,ve been in real estate for the last
    15 years and some places like Vancouver will colapsse by 80% Toronto 40 to 50% Ottawa 20 to 30 % in the first crash and more will come .

  111. 112. Calmness

    First off, your decision to buy or sell is not only dictated by the current market but by future markets and the length at which you will let your investments sit. If you buy a house now for $110,000 dollars in Winnipeg and two to three years from now it is only worth $70,000 dollars and you don’t sell it, do you loose anything? The answer is simply no.

    Inflation dictates that the value of your home will most likely go up over the long term. So if you are getting into the rental business and planning on holding onto these homes over 25 years don’t worry about it, you can keep draining the equity out of the home during this period and re-investing it, not to mention it will be your tennant repaying the $30,000 dollars that you lost!

    Some spectators would say that the reduction in house prices would reduce rental rates, wrong again. First off even if the prices of houses drop, the interest rates are increasing, so a cheaper home may actually be more expensive the a more expensive one was over the last 10 years. On top of this if the real estate market is going to collapse and you haven’t over extended yourself all those individuals who have absoulutely horrible credit can’t buy these cheaper homes and guess what rentals win again. Just because you lose your house, doesn’t mean you lose your job.

    Now for the real concern in relation to the real estate market. THE RETIREMENT OF THE BABY BOOMERS. You know all those people who bought those really big houses and are getting ready to sell them and over flood the market in a time when younger people are not in the financial position to buy them. Yes this could be a problem, in the short run.

    First off if the prices of homes are plummetting then chances are boomers will hold onto them for as long as they can, but over the next 15 years as the rest of the boomers retire do not expect to make money in the executive class real estate (a.k.a. your rich daddy’s earning wage), however a slight correction. Yet again rental property will be okay especially since everyone is going to be down sizing.

    Lastly, for those of you who are young, remember when the stock market dived and everyone told you not to buy when it was at rock bottom, well they are WRONG! The depression of the 30s made some of the richest families that exist today, however, they were young not old people then. Invest wisely and ensure that you can suffer short term losses and invest like crazy because in twenty years when the market has stabilized and inflation has increased the value of everything you will be laughing, cheers.

  112. 113. Harv

    Great comment Calmness!

  113. 114. Michel

    100% SURE Canadian’s owe 3 to 5 five time’s there yearly salery should not be more than 1 year salery just think interest rates as to go up a five year mortgage
    should and will be around 12% its like laws of physics if you want a strong economie we need to have higher interest rates .
    Lest just think for a minute if interest rates stays low like they are right now all penssion funds will go bankrupt including our C.P.P. . There is a colapse of real estate coming for a lot of other reson’s to like the economie right now there will be
    more and more factories closing because of the U.S. are not bying anything since there economie is worst then ours and there dollar is loosing value every day and our dollar will be higher very very soon . When everyone starts to sell there homes to try and make a quick $$$$ homes will stop selling because in these last few years homes were sold for 3 to 6% more in one year but that will end very soon . I was calculating when recession started and alot of factory’s closed its about 12 to 18 months ago so that mean’s that people are loosing there U.I. or allready did . Most started working at a minimum wage job or on welfare but these people don’t count as unemployed . Now is the time where these people stated to put there homes for sale but thats just the begginning.

  114. 115. Moti

    Hi Frugal,

    I’m still here, still hooked!
    Your blog post is from 2008. What are your views now?

    Given that its 2012, there was no real meltdown. and that the government is not raising rates this year it seems, are you not concerned at the amazingly high price of real estate in canada? is there a price correction looming i wonder..ie are we at the height of it..like when apple was poised to break 700 and it came down to 620…

    what may a potential first time buyers (aka me?) face?. With prices where they are right now, i would have to get a mortgage thats 5 times my gross annual.

  115. 116. Gates VP

    @Moti: there are really only three ways this can happen.

    1. House prices come down (fast or slow).
    2. Incomes rise to make houses more affordable.
    3. House prices stay permanently more expensive and a generation of high income earners live without ever being home owners.

    I think #3 is highly unlikely, but houses could stay very expensive for several years. Honestly, I think the baby boomers are key. We have an entire generation of empty nesters living in family homes and they either need to downsize or die off. In either case, more houses come onto the market.

    #2 is going to be hard as many Canadians already have record high income levels. The Median household income in Winnipeg is almost 2x that of the Kansas City. That’s a big gap for two first world countries, Canadian incomes are really quite high.

    #1 is the likely route. Housing prices are going to drop slowly over the next decade or so. Nobody wants them to drop fast, that’s too dangerous, but everybody needs those prices to drop slowly because house prices at 4x to 5x income are just too high. Especially in Canada where property taxes tend to be higher (thanks snow removal).

    Here’s my litmus test.

    I have a buddy that’s very frugal. He works a high-paid professional engineering job (university degree, in-demand field, relatively stable). His wife works a nursing job. Both late 20s. They have a brand new kid. They both live very frugally, no student loans, no expensive vices, operate on cash.

    They are the picture perfect “starter home” family.

    They live in Edmonton, and they don’t have money for a home. All of their adult lives they have basically watched home prices pull away faster than they possibly save for a down payment. When those two can afford a home, then the tide is turning. Until then, housing is just over-priced and will be pulled downward.

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