Garth Turner in Vancouver – “By the time things trough the average price will likely be 40% lower, with a return to 2005 levels. The impact will be substantial. Maybe life-altering.”

“Last night in Vancouver I told people the correction now decimating homeowners’ equity is real, and just starting. The 15% price correction and 30% collapse in sales foreshadows what is yet to come. By the time things trough the average price will likely be forty per cent lower, with a return to 2005 levels. The impact on people who bought in the 28-month delusional period between late-2009 and last March, when I told you what was coming, will be substantial. Maybe life-altering.”
– Garth Turner, well-known blogger and housing bear (greaterfool.ca).
The crowd at Garth’s presentation was larger than at his last appearance here, a fact that likely reflects changing Vancouver RE sentiment. See here for Garth’s own account of the event.
If any readers were present, please share your perspectives on the meeting.

This from ‘Poorboy’ in the comment section at greaterfool [21 Aug 2012]:
“My favourite part of the event: the self-professed financial advisor in the audience who didn’t get where the downward pressure on prices would come from since he wouldn’t sell his million dollar home for 300,000 less.”

51 responses to “Garth Turner in Vancouver – “By the time things trough the average price will likely be 40% lower, with a return to 2005 levels. The impact will be substantial. Maybe life-altering.”

  1. Not only was the crowd greater, it was sold out in the first day.

  2. Carioca Canuck

    I am sitting here in YVR right now, got sent here for a week long bizz trip.

    Yesterday while walking down West Broadway in search of a place to have lunch, I made the following observation after settling into a chair at Fatburger.

    Never before have I seen a city where sooooo many people are on the streets during the middle of the afternoon, they appear to be unemployed and without any visible means of support, yet they can buy a $20 burger and fries. Odd that……..other than RE flipping and drug money, what else has YVR got for an economy ?

    Lots of for sale signs out there during my drive around town……WOW.

    • See Douglas Couplands “Everything’s Gone Green” or jPod. Both touch on the all too real (but it seems like a farce) situation of no one doing anything real for a living in Vancouver.

    • I would fit your description. I’m a programmer, and I mostly work at home. Worked on Sunday, took the kids to the PNE on Monday. Didn’t spend $20 on a burger and fries though.

    • Tourists?

    • There’s a lot of students in downtown Vancouver. I think there is around 100 or so ESL schools, as well as Simon Fraser University and UBC downtown campuses, and a whole whack of beauty schools.

  3. Regarding Garth’s presentation lats night, if you read his blog, the presentation was review. I think it was a good service call, he probably got a few new clients out of it. He talked about balanced portfolios and what you need to have in them, why his beloved preferred shares are better than common, why we should own bonds. He talked about how the world is not ending but we are going to have a lot of continued volatility, ie US election, Europe. Corporate profits and share prices have deviated from their usual path but the gap will close in the future, corporations will again perform well. We will not have a repeat of 2008 in terms of a stock market crash. He had a few charts illustrating that Vancouver is deluded and crazy, our RE is overvalued by 40% and will return to 2005 levels. That may take a few months, it may take a few years. The rubber will meet the road in 2016-ish when all today’s mortgages reset at higher rates. Rates aren’t getting lower. Canada’s growth will stumble along, but it will grow, the US RE has reached the bottom, Europe will sort itself out (eventually), money will again become more valuable, paper assets are going to have their day again soon. He reviewed his rule of 90 wherein you take 90, subtract your age and that’s the percentage of your net worth that should be in RE. One person asked why you would have any net worth in RE if it’s going down. Good question, he said, obviously you don’t want that. There were a lot of his photoshopped pictures that got a good chuckle from the crowd, a bull and a bear in a boxing ring with the bull about to get smoked by a chair, a guy holding a baby bear while the mother is standing right behind him.

    The presentation was what I expected, a lot of review from his blog. I hate to say anything negative because Garth and his partner Scott came all this way on their own dime. It was an informative evening, but his presentation had shortcomings. In usual Garth fashion there were a lot of topics touched on but no depth on any one thing. He talked fast. Really fast. He said a few times, “I’ll talk more about that later,” but never did, something he does that drives regular blog readers crazy, always saying he’s going to explain a topic in a later post but then doesn’t.

    A lot of the graphs were sort of cut off on the screen. I don’t know if they were cut off because they didn’t fit, or if it was on purpose that labels were missing. There would be a chart without any indication of where it came from, it could’ve been immigration trends for Turkmenistan for all I know, the X-axis would have demarcation lines but no label, then he’d have arrows pop up saying, “This is 2001. This is 2011.” Sources? If it is it’s scary, but I never really knew for sure. A lot of the slides flew by too fast before I could even digest them.

    As a loyal blog follower it was nice to go see him speak in person and I appreciated him coming out. The presentation was what I expected it would be.

    ~ Angela

    • Great summary of last night’s presentation. I agree with you on all counts.

      Thank you Angela.

    • Great summary, Angela. I share your sentiments on the “negatives”. If I were viewing the materials for the first time with a critical eye, I would not believe everything he said. On the other hand, I did see the graphs he showed in other places and thus can attest that he’s not making them up to mislead the crowd.

    • Key messages were:
      – Get out of Real Estate esp, in Vancouver
      – Your portfolio should be a) Balanced b) Diversified c) Liquid (or close to it)

      It was pretty entertaining on what could be a real bore-fest and best of all it was pure Garth live and in the flesh.

  4. Garth was instrumental in de-brainwashing me and making me realize The Matrix for what it is. And for that he has my eternal thanks.

  5. It was a financial planning talk. Main message was diversification. He certainly gives a good talk and doesn’t pull punches in making some calls on how he sees the future. At the end of the day the advice was solid, but didn’t rest on any asset class or idea. Interesting that he doesn’t advocate individual equities: this is a reasonable, but rare approach.

    My CFA radar found no glaring issues with the advice, which was mostly to own a little of everything and to own the right asset classes in the right types of account. He praised “active” portfolio management, but is loath to pay for it, which was misleading, although there are the well-priced asset managers that Rob Carrick is always talking about. You pay 1% instead of 2.5% and get better quality help.

    Surprisingly little on housing at this lecture. I was reminded more than usual that housing is his loss leader.

    One attendee asked about her plan to take 100k in HELOC and give it to him to manage. This is not diversification, but it’s better than taking same to buy a condo.

    There were a lot of @benrabidoux charts, unattributed, and one or two images from @canadawatchdog, unattributed. He gave some comparisons in the style of @meliss604.

    Biggest story was the packed massive hall on a gorgeous August evening when there were presumably many patios and seawalls going wanting.

    Next stop is the @vreaa symposium.

    • “Biggest story was the packed massive hall on a gorgeous August evening when there were presumably many patios and seawalls going wanting”

      Thanks for taking one for the team, Thomas. The sunset was horrible, just horrible, if it makes you feel any better.

      The unattributed stuff is unfortunate. Turner should know better than anyone to give credit. Get it?

    • Garth “I’m the Greatest” Turner pilfering other people’s material and claiming it as his own?! That would be copyright infringement and the copyright may well be owned by Ben’s employer…doubt they’ll be happy with Turner stealing material and using it to troll for clients.

  6. Sounds a lot like his previous Vancouver event, which I did attend. Except that now the local Zeitgeist is more aligned with his core message. Yes, Garth is repetitive — by necessity, as we all wait for the bubble to truly deflate. And yes, he can play somewhat fast and loose with facts and figures. I go to people like Ben Rabidoux or jesse, as I used to go to VHB, for a more careful unpacking of the data associated with real estate. And VREAA for a more diverse experience. Garth is a populist, and he’s found a formula that works, and he’ll be remembered as the guy who really focused a spotlight on the bubble. The form of his message may have certain shortcomings, but that doesn’t mean he isn’t right.

  7. curious (genuine) … when did garth turn ‘visionary’ on the housing bubble? was it before or after the us bubble very obviously got out of hand? from what i used to read on his blog, the ‘problem’ i have with garth (and i don’t recall him ever answering this) is he refuses to apply the same logic on RE and household finance to the rest (eg. why is it acceptabe for world govts to continue spending by levering up on low rates -> important consequences for bond prices, fwiw). meanwhile, the bona fide ‘visionaries’ are unanimous we are setting up the mother of all fat tail events. and if you follow the daily-weekly-monthly crumbling of european finance, as one example, it is hard to argue against. the world won’t end but the conventional view is definitely not positioned for this. so beware the garth – a little, anyway. http://tinyurl.com/yzjzph4

    • Ralph Cramdown

      If you look at Garth’s oeuvre, he’s been focused on the consequences of demographics (i.e. the baby boomer pig moving through the population python) and its effects for a long time.

      If I may reply with my views, the reason household finance and national finance aren’t directly comparable is that (except in the event of a household lineage wealthy enough to live off income from assets) households generally reach peak earning years followed by decline, depletion of capital, and death. Not so with nations, hopefully. I’ve got no problem living in a country with, or invested in a company with, a debt:GDP ratio that’s constant (i.e. debt continuously increases), but I’d want to be a pretty rich household before I’d try that trick at home.

      • rc, don’t disagree with that logic. tho maple kingdom aside (perhaps), rest of the 1st world isn’t holding constant debt/gdp. vis-a-vis garth, variations on this have been raised repeatedly but i’ve only seen him dance around citing sov debt/spend as some prerequisite for growth. otoh, dealing with the consequences of this should be a big if not THE big investment theme. perhaps garth knows stuff he’s into and can be nimble enough – then, i imagine there is a way to avoid getting trampled while exiting. as usual, won’t matter until it does and then it will in hurry – an important risk.

      • Ralph Cramdown

        Well, I’m a Keynesian — I think there should be a countercyclical role for governments, in an optimal economic world. To a certain extent, we have this, with unemployment insurance and welfare. If I had to, I could live with a government that kept spending constant through good times and bad, i.e. one unfarmiliar with 100 year old advances in economic theory. But to be constantly assailed by people who say the government has to tighten its belt in tough times, i.e. to be part of the problem rather than part of the solution, that annoys me.

      • how did we get to this? perhaps i’m guilty of leading it – unintentional. pt was not what is right to do. what we think will not matter to that outcome. pt is garth (sorry to keep picking on him but he is a good example) does great job of putting the spotlight on how the RE bubble has perverted household finances. however, refuses to put the same light on the public finances, which are in a far worse state. this is a critical consideration that the conventional view continues to find reasons to ignore – why? maybe because it is the mother of all the credit bubbles. europe is having financial doomsday now – can’t keep thinking that day will never come.

      • “constantly assailed by people who say the government has to tighten its belt in tough times”

        You are assailed but look at what they do, not what they say. It’s my view that lowering taxes when output is at full capacity makes things trickier later on. And raising taxes a la HST and carbon tax increases when employment is suffering is certainly not a vote winner. As we have seen.

  8. isn’t Garth remembered for the journalist that switched to politics, but failed, and went back to journalism? I don’t want to sound harsh on Garth, this is actually to be commended. Klein is an example of a journalist that switched to politics and was successful, but so did El Duce, and he was a success, until he wasn’t. Anyway, if you want to understand Garth look at his horoscope. Of course you must train yourself first to understand and appreciate this technique. Since y’all get passing grades with the Rent/Price exercise, there’s hope yet.

    • The thing about internet is that you can’t delete traces of things you said in the past. Eventually, they come back to haunt you… Here are some great quotes from Garth!

      Garth Turner, currently in the news for being kicked out of the Tory caucus, used to write a weekly column on personal finance. Over six years worth of columns are archived on his website and not to pick on Mr. Turner, but the columns provide a perfect illustration on why you shouldn’t pay any attention to finance gurus in the media.

      November 20, 2000: After Nortel has fallen 50% in a month and trading $40: “So, here’s a strategy: If you own Nortel, or a mutual fund holding it, don’t bail out now. We are near, but not at, the low point. If you do not own Nortel, then this is the time to start accumulating it, or a good science and technology fund with exposure to the company. If you’re a gambler, then roll the dice and leverage. If you’re a wimp, don’t read or watch any news for the next six weeks.” (NT changed hands at $2.60 today).

      December 4, 2000: Mr. Turner is wildly bullish on equities and is dismissive of an email from a financial advisor who is suggesting bonds: “Will the Nasdaq again reach 5,000 and the TSE 300 attain 11,000? Will it be warmer again in April? How about clipping this column and taping it to the fridge? Let’s see who was truly dangerous, when the flowers are back.” (Nasdaq closed today at just above 2340).

      February 19, 2001: Nortel has just announced that it is losing money and laying off 10,000 employees and is trading around $30: “Now the bright side of this is that since every market correction is also an opportunity; since we all know the Internet and technology will still be the backbone of the future; since the economy will resume its growth in a while; and since the markets will reflect that, this is an excellent time to be buying, and the wrong time to be selling.”

      July 2, 2001: In a column titled The Four Lessons of Nortel, Mr Turner writes “Don’t get your investment advice from the media”. Something we can agree with.
      September 29, 2002: NT is trading just over $0.70. “As for Nortel, is it worth buying at 70 cents? Sure — a few shares. If the big tank happens, you can frame them for the bathroom.”

      http://www.canadiancapitalist.com/why-you-shouldnt-listen-to-media-gurus/

  9. On the graphs. . . I would actually say that at least the majority of the graphs were credited. There were some for sure that did not give you all the information you needed to understand the source and to give credibility to the graph as being a fact. He also did Voodoo trendline analysis on the graph which showed the Y/Y Vancouver price changes. Those trendlines were technically inaccurate and quite silly. But it did look good.

    On his photoshopped pictures . . . well – the one that stood out was the one which said “In the long run, the car will be cheaper”. . . . .

    Good presentation in general and it was a packed house. I would say 750 people.

  10. Was talking to my dad yesterday who’s a bull. He has a house built in the late 80s in Killarney area, a 44 lot or rather and he’s confident he can still get 1.3M for it today.

    I told him, prepare for drops of 40-50%. He says that will never happen and proceeds to tell me all the reasons why, even as I showed him evidence of dropping prices and increasing inventory in Richmond, Van West, West Van, Fraser, Main etc. My mom was then like, well we’re in Killarney and it won’t drop here. First, it was, Metro Van will never drop, then Vancouver will never drop, then Van East will never drop… now it’s Killarney will never drop?

    My parents are totally out to lunch. They still think people are bidding on 900K bungalows in Killarney. I suspect the majority of the population here in lotusland is like that–they only read what’s presented to them by RE agents and the MSM. We’re in for a rough ride.

    • a 44 wide lot has good redevelopment potential – so your Dad is correct, it won’t ever be worth 50% of what today’s value is. I wouldn’t rule out a 25% haircut though. Who knows? Live your life – if you need to raise a family and want stability go shopping for deal

      • F1 predicting a 25% decline. That’s big news! Welcome to the Bear camp… It took you time, but you finally got there. Congratulations.

      • And how long before he claim that he said RE price will drop 25% all along??

      • 4SlicesofCheese

        “Live your life”

        But only in a house, not a condo, or townhouse.
        And only if you buy it, god forbid your rent it.

      • f1 -> You’d previously stated that SFHs wouldn’t drop by more than 10% to 15% at the very most.
        Have you changed your mind on that?

      • 4SlicesofCheese

        Whats that big dust cloud I see?

        Oh its just f1 vanishing everytime he gets called out on anything.

      • How does becoming bearish follow from “wouldn’t rule out a 25% haircut”? I wouldn’t rule out a 5% rise in prices by 2014, but that doesn’t make me bullish.

      • 25% down is more drastic than 5% up, for one thing. For another, F1 had consistently (until recently) denied the possibility of a fall in prices beyond 10-15%. After recent evidence disproved this prediction, there’s been a distinctly bearish shift in F1’s tone. What there hasn’t been is any acknowledgement that he/she was wrong.

      • Well I’ve been wrong — lots — but I don’t go around telling everyone about it. It’s common courtesy to keep my success at being wrong to myself, so as not to make others feel inadequate.

      • I think it’s fair game to ask that we provide evidence for our assertions. And if we can’t, they should be called out.

      • “25% down is more drastic than 5% up, for one thing. For another, F1 had consistently (until recently) denied the possibility of a fall in prices beyond 10-15%”

        25% is avg price. Hardly means lower prices when westside halt in sales brings stat down. Talk to me when benchmarks are off 20%

      • “I think it’s fair game to ask that we provide evidence for our assertions. And if we can’t, they should be called out.”
        Ha, good one. Evidence? I agree we occasionally see some of that but most posts here are anecdotes, opinions and wishful thinking (on both sides).
        However, I would like to point out one observation I have made, the posts by formula1 are always polite and respectful (at least those we see), even if they are often light on the facts. I can’t say the same for the bears who respond to him/her. It is always amusing to watch how a simple little comment from f1 can provoke such anger and sarcasm.
        So at the risk of poking a bear or two, thank you f1. I rarely agree with your message, but I do appreciate the way you deliver it.

      • F1, help me understand. Above you said you wouldn’t rule out a 25% decline for Killarney, which is not a westside neighbourhood.

      • @Allen. Price-to-rent. Income-to-price. Population statistics. Jobs numbers. Historical precedent. The list goes on.

      • 4SlicesofCheese

        A polite troll is still a troll.
        You have to understand everyone here has given f1 a fair shot to explain his/her contradictions and proven false statements.

        But f1 never chooses to admit being wrong or addressing anything when caught in an oops moment.

        After awhile we just default to making sarcastic statements to anything f1 says.

        ie “buying real estate is built on debt.
        The only difference in today’s market is that you’re paying the bank less to borrow.
        For everyday working folks the % of take home money dedicated to their mortgage is unchanged from 15 years ago”

        How is this not a troll statement.

        But you are right Allen we should not feed the troll.

      • Hi 4Slices, completely agree, and f1 really needs to step up his/her game. It would be really interesting to have a smart, well-informed bull visit this site. Regardless, at the end of the day it’s all about the numbers, and only time will tell.

    • 20 year old houses, the intermediate compost not quite ready for my rose beds. (Just taking the role of the land speculator, no offence intended!)

  11. Garth Turner made a point of saying he didn’t think, as so many others did, the housing market would correct beyond a mere 15%. He viewed opinions of a 40% meltdown as alarmist and inaccurate. Is he now switching to 40%? I realize people make re-adjustments to their thinking, but I think he was playing it safe by sticking to 15% for so long.

    • Sorry but Garth has never wavered from his projecting a 15% correction nation-wide on average. Of course real estate markets are local, many people don’t seem to grasp the fact correction percentages will be all over the map, literally, on a regional basis. Garth has always said BC = ground zero.

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