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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

January 26, 2021 | The Homewreckers

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.

“Never,” says Sam, “did I think this would happen.”

He’s been a car guy for years. These days he flogs used vehicles at a big Toyota dealership in the stormy heart of Mississauga, the city-burb of Toronto with a population of about 800,000. And lately, not much traffic.

“Normally a Corolla flies off this lot as soon as it gets here,” he told me this week. “It’s the perfect second car. But now most of our business is just taking them into inventory as people give up their extra cars. They’re not driving them. And we can’t sell ‘em. Never happened before…”

Welcome to the WFH world. Bit by bit, store by store, Corolla by Corolla, it’s an economy-killer. There are about four million folks who haven’t been in the office or at the workplace in ten or 11 months. They don’t buy gas or trade in their vehicles for new ones. They don’t shop for work clothes because they live in sweats and hoodies. Besides, the stores are shut in most places. They don’t eat lunch down in the food court. In fact, the bulk of those mom-and-pop franchises have closed or failed.

As WFH continues, we have the weird dichotomy of more savings and more debt. Consumer spending has crashed while real estate transactions have bloated. New mortgage debt is running at billions per week, while $104 billion sits in chequing accounts. The distortion is epic. And, sadly, none of it is good. On one hand almost 200,000 indie businesses are failing, we’re told. On the other hand, house prices have inflated to the point where average families can never afford the average property. Something has to give.

Benny Tal, CIBC’s urbane economist, agrees. “I believe the trend is unsustainable.” He says. (It should be noted his bank is building a gleaming new headquarters/skyscraper in downtown Toronto where the commuter trains dock, also to be the head office of Microsoft).

Tal says, yeah, WFH will carry on until the herd is vaxed, but after that many employers will become the same hard-ass, inflexible overlords they were pre-Covid, expecting workers to be around at least a few days of every week. So, two concerns: “yes, your current job allows you to work full-time from home,” Tal says. “What about your next job?”

And then there’s the big real estate question. Tal figures some people who moved to the distant burbs to get a cheap house, thinking they’d never commute again, “may also need to invest in living arrangements in the city that would provide them with a base much closer to work.”  The suburban housing market – where prices have escalated far faster than in the urban core – could be impacted. “To what extent,” the economist muses, “are prices in those remote places rising way too fast?”

Indeed. Look at the Zoom Town where the unloved Toyotas are piling up. The benchmark price for a detached house in the soulless hinterland where nobody can walk to a store and whole families have gone missing in endless cul-de-sacs is $1,123,600. That’s up 13% during the year of the virus. Last month house sales in this city were 87% above those in December of 2019 – a record.

So, families can afford $1.1 million homes, but need to trade in a five-year-old Corolla worth ten grand? Sounds scary.

And what about incomes? Government largesse will end when the virus fades. The feds are already pickled in their own spending and things like additional child pogey payments will have to end. As for employers, a survey just found more than a fifth plan (like Facebook has decided) to trim the wages paid to WFHers. The logic is this: if you’re working from a location where people make less money because living costs are lower, you shouldn’t get the same as people in high-cost urban locations.

No surprise that while 44% of workers would consider relocation, that drops to only 16% if a pay cut is included. What a shock.

Naturally, the biggest WFH whack has been to cities and those who scratch out a living in the swirl of urbanity. In Toronto, for example, a 90% drop in ridership for the TTC and GO transit is devastating. Downtown business have been shuttered, locked down, restricted or starved for customers for most of a year. Wander through the underground PATH and see for yourself – literally miles of empty storefronts. Business taxes have plunged. Cities are bleeding red.

WFH may be making Amazon and the liquor store guys rich, but the economic toll’s ugly.

Good thing it ends soon.

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January 26th, 2021

Posted In: The Greater Fool

One Comment

  • 76239 says:

    “Good thing it ends soon.” Party on Garth! Oh sure, the virtual reality virus vaccine will solve all our problems! The TV told me so. TV is never wrong, right?

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