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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

Garth Turner

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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.

August 3rd, 2020 | Simple

The Greater Fool - Over the last decade we’ve endured much. Credit crisis recovery, US debt ceiling panic, oil price collapse, Trump, trade wars, protectionism, Brexit, Bitcoin, Hong Kong, record debt and now the first global pandemic in a century. Stock markets swooned in a serious way four times. Interest rates collapsed. GICs pay 1%. Houses are inflated. Wages […]

August 2nd, 2020 | The Crash

The Greater Fool - “We’re doing a story about the potential for a residential real estate crash,” the email from glitzy mag Toronto Life read. “The premise is basically that prices have held steady for the past few months, despite crippling economic conditions, so does that mean the bottom will inevitably fall out?” A follow-up phone call materialized from the editor (I explained no crash was near). Then another note arrived. Housing is a hot thing these days. Apparently, even bigger than the virus and glory holes. ‘Okay,” I relented. ‘Send me the questions.’ “Has anything surprised you about how the market reacted during the pandemic? Pls explain.” The current market sucks. Bidding wars. Blind auctions. Bully bids. Multiple offers. Prices rising double-digits. Many are incredulous how this could take place in the midst of a global pandemic with the downtown core a ghost city and a withering 13% unemployment rate in the GTA. Eight million Canadians have been on government pogey for four months, and the GDP has crashed the most on record. Yet when it comes to real estate, we’re partying like it’s 2017 again. The reasons are profound, and temporary. There was no spring market in 2020, since we were all going to die of Covid, and stayed home in our underwear. Hence a big pent-up demand once it appeared life was going to carry on. What normally happens in April this year took place in June. Second, lots of demand was unleashed on scant inventory. Available listings shrank faster than a dude in the Humber when the virus arrived. Live showings halted. Owners were totally unwilling to have anyone view their homes. The choices for buyers once public fears started to dissipate were thin. Good properties were immediate objects of desire and competition. Prices popped. Third, money’s cheap. Ridiculously cheap. The major lenders are quietly giving mortgages for less than 2% on a five-year term. Even decade-long loans are 2.5%. As central banks rushed to rescue the economy from the pandemic, rates were slashed and billions thrown at buying up mortgage securities. Liquidity is sloshing over the gunnels. As mortgage costs decline, of course, people can borrow more money on the same income. So they are. The fact we no longer have any fear of excessive debt is driving real estate higher, unwisely. But these things are temporary. The demand surge will temper. More properties will hit the MLS. Unemployment will stay elevated. Any economic or public health reversal now could make those who overpaid in June regret things in November. “You mentioned the likelihood of a potential residential real estate crash is “basically zero.” Can you flesh out how you came to that conclusion?” Sure. If this were Calgary or Kelowna or Windsor, a protracted period of decline would be no surprise. Lots of places in Canada will have many problems for the next couple of years. But the GTA will fare better, because of a highly diversified local economy, the financial core, migration and the synergy of a six-million-strong market. No, no crash – which we’d define as a 20% price correction. But this does not mean a rosy market, either. There are several worrisome trends. “You mentioned there might be a flatlining in the 416. What factors do you think would contribute to that? How long would you expect that to last before prices recover?” After this little boomlet, it reasonable to expect a far different market to emerge. As mentioned, swollen unemployment is not going to shrink anytime soon. It will be well in 2021 before we get back to the levels of February. Second, a serious number of people deferred mortgage payments, ending in the next few months. An unknown number will still be without work and forced to sell, so more listings. Also many coming up for renewal may be unpleasantly surprised at the reception they get from lenders who were just denied six months of payments. And big troubles with condos. Airbnb has collapsed. Pre-virus, the GTA had over 21,000 short-term rental properties. Hundreds of those have been hitting the market lately, with thousands more to come. Add to this the 15,000 units coming available as new construction is completed over the next two years. Supply will overwhelm demand. This is why condo prices and rents will decline, pulling the entire market back. Finally, the virus. It freaked out millions. No surprise that detached sales in 416 have actually declined while those in the boring, soulless expanse of 905 have jumped. People want backyards. Front doors to the street. No elevators or garbage rooms, corridors or parking garages. Besides, Covid showed that a lot of companies can function perfectly well with employees working remotely. So no need to spend three hours a day on the QEW and Gardiner Expressway. The burbs are suddenly sexy. The clogged Kingdom of 416 is tarnished. “How do you think it would impact the market if there was a much-dreaded second wave of coronavirus?” Like an asteroid. Combine that with joblessness, more shutdowns, the condo plop, mortgage deferral cliff, CMHC rule tightening (no more HELOCs to finance rental props) and more risk-averse lenders and the market would be a smoky hole in the ground for at least a year. Until the vaccine. But why would this happen? We’re all wearing masks now. Leaping off the sidewalks from each other. Lining up like ducks at the grocery store. Washing hands all day and bathing in sanitizer. This is not March. The authorities are not going to lock down society or turn off the economy again. If infections rise and hotspots develop, so be it. The virus risk ain’t going to zero. It never will. And it will be a long, long time before the herd is dosed and social distancing ends. The best time is to buy a house is when you need it and can truly

July 31st, 2020 | Us, 1. Them, 0

The Greater Fool - Friday of a long weekend. Yahoo! In the middle of a pandemic. Yuck! These are weird days, as this pathetic blog chronicles. In the last 24 hours, for example, more evidence some industries are in deep poop (technically speaking) while others are feeding off Covid. Air Canada’s revenues have collapsed 89% and its stock is […]

July 30th, 2020 | Bug Update

The Greater Fool - Just another day on the farm. Ninety thousand more bank workers told to stay home. Trump suggests the election (that will likely defeat him) be delayed. The American economy contracts the most in, oh, 200 years. You don’t need to pay your income taxes now until the end of September. And a ten-year mortgage costs […]

July 29th, 2020 | Deeper & Deeper

The Greater Fool - Did you think it would take this long? Me neither. The hammer came down mid-March. Now it’s August, almost. Yesterday Scotiabank says it  decided few, if any, workers would return to its gleaming, 68-storey Toronto head office tower at King & Bay Streets in 2020. In the spring. Perhaps. Google announced a few days ago […]

July 28th, 2020 | When Fear Wins

The Greater Fool - If you’re a wuss, these are tough days. Not only do you need to fret about being infected while shopping for prunes at Loblaws, but the whole financial world seems, well, nuts. The stock market might have jumped 48% since the end of March, rewarding risk, but savers and equity scaredycats have been seriously whacked […]

July 27th, 2020 | All That Glitters

The Greater Fool - There was a time I believed in gold. I saw it as a noble defender against inflation which steals the worth of paper money. Anonymous currency you can covet, hide in the back garden and use when the zombie apocalypse arrives. Portable insurance against war, pestilence, insurgence, revolution, chaos, social disintegration, asset confiscation, mayhem or […]

July 26th, 2020 | The Bad Idea

The Greater Fool - So a quarter million people received double CERB payments, amounting to $442 million. They applied twice, once through the CRA and again through Service Canada. We also know over $11 billion in virus payments of $2,000 a month are going to children living at home who worked part-time in the last year. Ottawa will send […]

July 24th, 2020 | Are You Sure?

The Greater Fool - The realtors are at it again. Listing low. Holding off on accepting offers. Stoking bidding wars and blind auctions in which the vendor (and her agent) hold every single card. And those CCs are back. That’s code on a listing cut for certified cheques which must accompany offers. The standard amount in Toronto is currently […]

July 23rd, 2020 | Head Faking

The Greater Fool - Sales of detached houses in Toronto fell double-digits last month. But deals for properties in the burbs – even the faraway ones – rose by just as much. Toronto condo listings are growing like mushrooms in the humidity, Rents and prices are under pressure. Meanwhile in Muskoka and the Kawartha locals say the market’s on […]

July 22nd, 2020 | The Big Infection

The Greater Fool - Could Covid take out the leaders of both Canada and the US? The virus that just won’t quit has lasted longer than most people imagined, continues to chew its way through society, has levelled economies, erased the jobs of hundreds of millions, has public finances circling the drain and now, spectacularly, weakened both Trump and […]

July 21st, 2020 | The Surprise

The Greater Fool - Have you ever noticed the way media covers financial stuff? Never fails. When the market loses 2% in a day, it ‘plunges’ as ‘investors stampede the exits.’ This is big news. Pay attention and be terrified. However, when stocks add hundreds of points in a day, the story is buried, and preceded with, ‘Markets moved […]

July 20th, 2020 | Not There Yet

The Greater Fool - The Royal Bank of Scotland has told its 50,000 employees not to bother coming back to work. Until sometime in 2021. Hmm, so it’s Scotland, not Canada. But this is definitely a trend. Not just working remotely, but the conclusion of major corporations that the virus will rage for a long time. A long, long […]

July 19th, 2020 | So Now What?

The Greater Fool - My buddy Ryan stirred the loins of the rightist barbarians who roam the barren steppes of this blog, bareback, when he dissed the Trudeaus. Papa and junior. Together they’re responsible Ryan pointed out, for half the trillion-dollar debt that Canada will shoulder by the end of the year. Deficits and debts result from political decisions. […]

July 17th, 2020 | Unintended Consequences

The Greater Fool - Welcome to the Friday edition of the not-a-virus, real estate, investing, macroeconomics, canines, babes (can I say that?) & balanced portfolio blog. Even if you’re not quite sure about your pronouns, we’re here to help. And the price is right.  Worth every damn cent. First a follow on yesterday’s head-scratcher about how real estate values […]

July 16th, 2020 | Huh?

The Greater Fool - It’s, like, eleven feet wide. Midtown Toronto. No parking. Asked $1.5 million. On the market one day. Multiple offers, sold for $1.8 million. With land transfer tax and closing costs, add another $90,000. So, yes, almost $2 million. While this transaction was happening, Toronto mega-mayor John Tory was moaning the city faces a $2 billion […]

July 15th, 2020 | The Burden of Fear

The Greater Fool - When the virus came, the Vix spiked and markets tanked, fear seized Jason. He’d given me a couple of hundred grand in an RRSP to invest for his retirement in a decade. “But wait,” he said. “There’s no way I’m investing now.” When the spring arrived, volatility had crumbled and markets were higher by a […]

July 14th, 2020 | Going Hyper

The Greater Fool - Chris worries a lot. These days it’s about the guys running this joint. “My hubby and I are in our late-50s,” she tells me.  “We’ve worked hard, bought a house for half of what [email protected] told us we could afford, went without fancy cars and vacations, so that we could make double payments to pay off the […]

July 13th, 2020 | Beware the Algo

The Greater Fool - Roughly 2,000 people a week, every week, ask for their mortgage payments to be deferred. Yes, this is atop the 750,000 (or so) households who have already told their lenders they cannot/will not make the monthly. The banks continue to accept deferral applications, and will do so until September. As a certain pathetic blog reported […]

July 10th, 2020 | The Temptation

The Greater Fool - What did the nation’s housing agency mean when it warned about a ‘deferral cliff’? (Because it appears most people think this is a nothingburger.) Housing Armageddon, apparently. After all, about 750,000 households are currently withholding payments on $180 billion in mortgage debt, blaming the virus. One third of the Canadian workforce is unemployed (despite this […]

The Greater Fool -   Peter and Janey bought an investment condo, pre-con, three years ago. “For capital gains, of course,” the suburban blog dog says, “but also for some steady retirement income. Three more years, and I’m done with the grind. The monthly cash flow is a big piece of our plan.” Or not. Covid happened. Who knew […]

July 8th, 2020 | Neck Deep

The Greater Fool - By now you know the news. Red ink and guts everywhere in Ottawa. Harper’s $56 billion credit crisis deficit was just a warm up for Trudeau’s $343 billion pandemic hole. The last time the feds spent like this we were in World War 2. We’ve just seen the first credit downgrade in 25 years. And […]

July 7th, 2020 | The Predictable

The Greater Fool - “I’m a dude that’s trapped in Eastern Europe,” writes Marvin, “due to divorce/child custody.” Hmmm. Sounds serious. But I didn’t ask. “I’ve enjoyed your blog for many years, and to be super honest, as I sit in this hell-hole, reading it each night along with your witty remarks makes me feel a little closer to […]

July 6th, 2020 | Blather

The Greater Fool - Blog dog Dan has way too much time on his hands.  Must be a teacher. “With the help of a javascript and a perl script,” he writes, “I extracted these stats from the comment section of greaterfool for the entire month of June, 2020. Yep, it includes every posted comment for the entire 30 days. It never ceases […]

July 3rd, 2020 | The Descent

The Greater Fool - This won’t take long. It’s been an interesting few days. Canada’s BD on Wednesday. US this weekend. Muted, tentative and confused in both nations. We’re on a journey. Destination, fuzzy. Public sentiment is alternating between fractious and fearful. I titled yesterday’s post ‘Polars’ for a reason. Opinion is splitting quickly, deeply. This damn pandemic has […]
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