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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

August 6, 2017 | Fake News

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.

 

On Saturday, when I go riding and let one of the fancy portfolio managers blog, poor Ryan caught grief for suggesting you might want to have $1.25 million in your jeans when you tell the boss to shove it. The deplorables in the comments section suggested he’s an elitist, Porsche-driving dilettante hopelessly out of touch with real people. Of course, only part of that’s correct.

So, do you really need seven figures in your RRSPs, tax-free and non-reg accounts to retire? Depends on the kind of life you want, of course. You can live in the woods, collect government pogey, and smoke ‘coons over the campfire Friday nights, or you can get by like a regular person. All it takes is money. Cash flow.

What’s the biggest reason millions will retire without enough to get them through to the end? Residential real estate, of course. For decades of their lives, people who have bought houses they could not really afford will see their cash flow sucked off in (rising) mortgage payments, property tax, insurance, new roofs & furnaces, granite countertops, commissions, fees and overhead. If properties stop going up in value perpetually (it’s already happening) the whole idea your house is your retirement plan goes kaput. You end up being 60 or 65 with a crappy pension and the bulk of your net worth in a single asset at one address that could be illiquid. If the real estate market sucks the year when you need money, you lose.

Well, this is not about Ryan’s hurt feelings, or even retirement. Today we dump from a great height on realtors and the shameless, lazy Canadian media that enable them. Together they lead so many Canadians into the morass of debt and entanglement, condemning them to golden years defined by KD, Costco and used Hyundais. Shudder.

Here’s what I mean. Look at what CTV and the Canadian Press just reported:

 

Is Montreal real estate ‘sizzling’? It’s a meme the media’s been trying to craft since BC, then Ontario, adopted anti-bubble measures to chill Vancouver and Toronto (it’s working). Local realtors are stunned and delighted. Just look at the statement days ago from real estate board spokesguy Mathieu Cousineau: “For single-family homes, market conditions for resales are increasingly favouring sellers, which explains why price increases have been more sustained in recent months.”

And here’s what the nation’s biggest news agency just reported:

“Canada’s hottest housing market these days may be Montreal. The Greater Montreal Real Estate Board released data Friday showing that 3,075 homes were sold in July, an increase of 16 per cent compared with a year ago and the most for the month in eight years. That contrasts with Toronto, where sales last month plunged 40.4 per cent while in Vancouver they dropped 8.2 per cent. The price of homes in Montreal was also higher, albeit still well short of levels seen in Vancouver and Toronto. The median price of a single-family home in Montreal rose to $323,000, up eight per cent from July 2016.”

Wow. Seller’s market. Sales surging. Best in eight years. Prices rising. Eight per cent increase. Sizzling!

Based on reports like that, buyers start thinking they should rush in and snap up properties which are bloating in value, certain to increase their net worth and puffery. And that’s precisely the point of realtors twisting, torturing, manipulating and squeezing  data until it squirts out the desired conclusion: It’s a good time to buy. What is there to lose?

Here are the facts.

In July 3,075 properties sold in urban Montreal – the second-biggest real estate market in the nation. That was a disaster – 22% fewer than in June. In fact in that prior month 3,952 houses changed hands, which was a 21.8% crash from April (5,057 deals). July sales ended up being 36% less than during the spring. (Yes, it’s a slower time of year, which makes ya wonder why CTV says it is ‘sizzling’.)

Prices? They’re stuck in the mud. The average detached house fetched $323,000 in July, which was actually down $5,000 (or 1.5%) form June. Values have remained in in the $310K to $320K rage now since the spring, right through the period when Toronto was collapsing and (supposedly) gobs of money were flowing into La Belle Province.

So while the realtors and the media say one thing, the numbers say another. Sales have declined monthly since May. In the last 60 days the volume has fallen drastically – more than 20%. Prices have increased by about 4% since the end of March, or not enough to cover the cost of buying or the commission on selling. And the average price of a detached in the region is 73% less than in the GTA, which should tell you something.

Now, Montreal’s a great city. In many ways it makes Toronto look like Timmins on a Tuesday. But it’s not the same. In Montreal only 55% of people own homes, because they prefer to rent. (They don’t really like getting married, either.) In Toronto the home ownership rate is 68% and people get horny about Wolf stoves.

The bottom line is that there’s no real estate frenzy in Quebec. They save their hormones for what matters. You should try it.

 

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August 6th, 2017

Posted In: The Greater Fool

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