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March 17, 2017 | Outta Here

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

It was somewhat insufferable visiting Calgary a few years ago. Oil topped a hundred bucks, and everybody looked down on lowly peons from Toronto. Even the car rental guy snorted a bit when he saw the Ontario driver’s licence.

Well, arrogance lives in the east now. If you’re a homeowner in the GTA, or anywhere close, you’re a god. You make money by waking up. Showering. Eating. Writing in to pathetic blogs.

“So,” says Mark, “my wife, daughter and myself currently live in Newmarket in a detached home that we purchased our home in late 2014 for $590,000 and it’s worth $1.1 million. That’s quite the profit in 2.5 years. So an option we are leaning towards is selling, and then renting for until we are ready to leave town and go north or east.”

Smart boy, Mark. Especially since you bought with little down and have zero other financial assets.

“So my main questions are what would your opinion be on that scenario? Good idea or bad idea? We don’t want to miss the boat on making maximum profit for our house, but we also don’t want to lose out on money if we would just wait a year to 2 years and then sell. Everybody is telling us that we’re crazy, and to wait.”

Well, let’s flash over to BMO economist Robert Kavcic who, like many others on Bay Street, have recently found their voices with respect to the Canadian real estate time bomb. Here’s his advice: “It’s pretty much the best time to be selling a Toronto home in at least 30 years. Supply-side fundamentals have been left in the dust.”

Even CREA, where old realtors go to croak, agrees. What is happening now in our giant bubble market, it says, “is without precedent.” Plus, it ain’t just 416, where the average crappy detached house fetches $1.5 million. Or 905, where the hairdressers live and a single is now $1.1 million. Prices in faraway places like Barrie, Guelph, St. Catharines or (shudder) Omemee have been zipping ahead almost 30% a year. Even in uncommutable London, the locals are watching Toronto “investors” moving in to snap up $225,000 houses so they can convert them into student rentals. Well, there goes the neighbourhood…

And did you see the news about bank economist Doug Porter’s little story regarding two young professionals in Toronto with a hefty $100,000 deposit and making $225,000 – almost the one percenters the steerage section of this blog wants to tax into the dust? Well, says Doug, the market has screwed them, too. The most they could pay and carry would be $987,000. “At best they can afford a semi-detached home on the fringes of Toronto, or maybe a low-end detached home verging on teardown status. Now just imagine the predicament a more typical couple of more modest means faces in the current market environment.”

TD eggheads agree. Our collective real estate stupidity – that lets a guy like Mark grow his asset from $590,000 to $1,100,000 in 30 months without lifting a finger – threatens the entire economy, they say. Arrogant, puffed-up, egocentric homeowners who suddenly believe they’re financial geniuses are getting more over-extended by the month. Consumer borrowing is on the rise and HELOCs are out of control – as people dip into their windfall equity or feel the wealth effect a bubble market brings.

“Home prices across the GTA and surrounding areas appear to be detaching from fundamentals and are simply unsustainable,” says the bank. And when Toronto blows, the spray will hit everyone. As reported here often, just about every economic and financial body in the world agrees, from the IMF to the World Bank, all the big credit rating agencies, the Economist, the Bank for International Settlements, legendary economist Robert Shiller and the Bank of Canada. But your Mom, of course, knows best. It’s always a good time to buy, honey.

Hey, and here’s CIBC economist Bejamin Tal, who just wandered in to get a GreaterFool muffin, the kind with gravel on the top. “Toronto is an unaffordable city,” he says. “We need to see the propensity to rent in this city rising and we need to see it now.”

Huh, Benny? You mean there’s nothing wrong with being… a renter?

“Basically what we are trying to tell you is that if you are 35 years old and have two kids and are renting, nothing is wrong with you – that should be the norm.”

Well, you’ve seen everything now. A senior spokesguy for a bank that makes billions lending out mortgages telling young couples they should be tenants, not owners. If that doesn’t tell you something about where we’re headed, nothing will.

Sell, Mark. The only reason not to is greed. It’s always fatal.

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March 17th, 2017

Posted In: The Greater Fool

One Comment

  • Andrea says:

    The Chinese dudes are bidding up Toronto like theres no tomorrow. Every agent tells me they are the only ones offering and are bidding against each other. It makes one wonder what the politicians are doing. They seem to forget who they get their votes and salaries from!! Total incompetence . Yet the dirty laundered money is being planted with no other contribution to society. All on the backs of tax paying citizens. Citi. Makes on wonder if all those that sacrificed and fought for this are full of regrets. Ontario tax payers and contributers can barely afford to live in the vicinity. YIKES!! So sad.

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