First Time Buyers – “I have spent several years saving up enough for a reasonable down payment, but have now determined that in the current market, it just makes more sense to rent.”

“The biggest challenge I face is affordability,” said Dustin Strong, a 34-year-old Vancouver renter looking for a home in the $500,000 range. “I have spent several years saving up enough for a reasonable down payment, but have now determined that in the current market, it just makes more sense to rent.”

When the Globe and Mail asked readers in an online poll whether Ottawa should make it easier for first-time buyers to enter the real estate market, only 40 per cent of the nearly 2,500 respondents said yes, first-time buyers deserve a break.
“First-time buyers have all-time low rates, realistic 25-year terms, and minimum 5-per-cent down payments,” one reader wrote in our comments section. “If they can’t afford it, then the prices are too high. The hurdle is low enough for Canadians.”


Market uncertainty and bubble-talk are also holding buyers back, said James Ellis, a 26-year-old looking for a house in Kingston, Ont., with a $250,000 budget. His biggest challenge, he said, is “determining if the value of a house now is inflated or not, and whether resale value in a few years will reflect the current value once the housing market equalizes.”
“Our main challenge is beating the fear of home prices falling on us,” added Joseph, a 28-year-old looking for a detached house in Calgary. “That is what has kept us renting.”


– from ‘What first-time buyers really need: affordable housing prices’, Dianne Nice, Globe and Mail, 12 Mar 2013

There is absolutely no reason that anybody anywhere in Canada should be rushing to overextend themselves into RE, least of all First Time Buyers, and especially in Vancouver.
Prices are headed down.
Interesting statement from Joseph in Calgary: Instead of fearing being priced out, he is fearing buying and having prices drop.. this represents a change.
– vreaa

70 responses to “First Time Buyers – “I have spent several years saving up enough for a reasonable down payment, but have now determined that in the current market, it just makes more sense to rent.”

  1. This is nuts. I have so many examples of clients who have bought either a condo or townhouse – put some cheap love into it with a reno or new bathroom over a year and yeilded MUCH more than the 2% you’ll get keeping money in the bank.

    We spent 45k on 2 new bathrooms (adding one) and made easily 100k more.

    Anyone who would rather rent vs. own – anywhere isn’t ready to be a homeowner.

    What will change their mind? 10% reduction? 25%. I bet my house that someone afraid to buy now will be JUST AS AFRAID if the price for their favourite home dropped 25%.

    But guess what – prices aren’t going down 25% They’ll stay flat at worst. You can always make more than a GIC off real estate if you are smart about it. But the key is that you need to be smart….

    • Dimitri Tishchenko

      Awww, so cute. A realtor. There there little buddy, everything will be okay.

    • It is funny how being smart about real estate, seems to always be to buy buy buy. The only asset class in the world with that trait it seems.

      Is there ever a time, not buying is the smart choice?

      • Ralph Cramdown

        Goldbugs are the same.

      • But Gold is a religion. I think it comes with its own good book.

      • By the way…..have you seen the latest update to the ‘US Housing Priced in Gold Ounces” Chart? It is a graph covering 50 years of home prices in gold terms and it is charming (if not utterly damning for gold markets). The chart is telling us in no uncertain terms that it is time to get out of metals and get invested in US Housing……..

        Not that anyone up in Canada really cares. But I put it out for the local jury to decide what is in store for the American economy and precious metals going forward.

        Housing Priced in Ounces of Gold – 1960- 2013
        http://www.sharelynx.com/chartstemp/USHLSPOG.php

      • Ralph/Farmer:
        The whole issue of investments alternative to RE is arguably an important one.
        On this blog, we have tended to avoid elaborating too much on what to do with your cash if you’re not in RE, and saving as a consequence. We very much want the focus of the blog to remain Vancouver RE, not general investments — there are plenty of other places on the web discussing investments. We think the handful of ‘bear’ blogs regarding Vancouver RE do a good job of discussing and documenting our market developments, and we don’t want that to be diluted by bigger discussion that in the end does less.
        The major discussion here has always, implicitly been ‘Vancouver RE vs Cash’. And our central opinion remains that there will be a significant period where simple cash, even at very low interest rates, outperforms Vancouver RE; RE prices will deflate.

        Now, all that aside, one could argue that many who are on the RE sidelines could/can/do do better than cash in various other asset classes.
        And one asset that always, always comes up soon in these discussions is gold.
        On this occasion I am moved to respond to your exchange above:
        FWIIW, the contrarian in me still sees further upside for gold going forward: the remarkable chart which Farmer links will, IMHO, get even more extreme before it reverses (there is a similar chart showing the Dow to gold ratio, of which the same can be said – the likely target is Dow = Gold price). Why do I say that? Well, gold is currently very out of favour. Every headline talks of lower price targets, and of all the money to be made by shorting the sector. Almost all the major brokerage houses have lowered their price targets. By measures of sentiment, gold is more out of favour now than it was at the worst of times in 2008. The gold stocks are selling at more of a discount to the metal than they were in 2008.
        Most important, however, is that the big picture indicates that the gold sector bull that started in 2000-2001 has not run its full course… these large commodity cycles usually run 20 years, they end with parabolic moves, and, crucially, they end with public involvement. Ask yourself: Even though gold has been running up almost each and every year since 2000, how many people do you personally know who has put even 2% or even 5% of their net-worth in the sector? The vast majority of us would answer: very few; perhaps even ‘none’. Remember that, at the 80’s gold peak, regular folks were lining up around the block in Toronto to buy gold. Thus far in this gold bull, all that one has seen is adverts for regular folks to SELL their jewellery.. that is not how one of these bulls end. I suspect we’ll see a ridiculous phase of public involvement before this bull collapses, likely before 2020. (…and that’s another thing that doesn’t fit.. these markets usually end with rapid blow offs (parabolic moves up), and then a rapid giving up of those final gains.. we haven’t see that yet).
        We’re reluctant to discuss this too much here, many will get badly burnt if they try to dabble in this sector.. it’s intensely volatile, and the frequency and magnitude of the moves make the RE market look like some very high tech NASA slow mo footage. Also, the rabid dyed-in-the-wool gold-bugs have some very wacky other ideas, and they don’t seem to do that well in the sector despite their fervour. Despite all that, I did want to add my two cents to your exchange.

      • Thanks for your interesting comments, Vreaa. You made some good points. It does see I neglected to “Vancouverize” my post before hitting the send button. It happens from time to time especially as I no longer live there.

        It is difficult for me to not see a connection between US and European policy decisions with regards to their various Quantitative Easing and Bond buying programs and other stimulants (what others call money printing designed to lower interest rates) and the outcome for Vancouvers real estate market.

        Where gold plays a role is in the fear trades and so this is a kind of an unofficial indicator suggesting economic expansion may be on the rise (or more specifically, that a recovery in US housing is being realized) which would thus impact directly on policy decisions of the Federal Reserve.

        The implication is that exceptional interventions may be coming to a close sooner than later if housing does indeed stage a recovery South of the border and employment numbers improve.

        How this affects the Canadian markets is that we might no longer be hog-tied to the current low rate policies and therefore might begin to see rates slowly rise.

        There is also the aspect of our dollar weakening against the greenback particularly if we see strength in the economy there. Certainly I think few would disagree that the QE’s and MBS buying programs the Fed has initiated to flatten the rate curve and stimulate the US economy have played a role in the decisions of our own Central Bank.

        We already know they have been very reluctant to vary from rate policy in the US without risking driving our dollar quite a bit higher and thus bringing more harm to our exporters on the back of a carry trade over rate differentials.

        The near term impacts that I see in Gold charts such as the one I linked above is that it does suggest a rotational shift from fear trades like gold and back into real estate. It is perhaps imminent. This should be seen as a very encouraging sign for both our economies.

        A year may be all that is needed to see the ratio bottom.

        We do know that the last time this chart hit such low ratios that there were plenty of people caught flat footed and left holding the bag as gold dropped relentlessly. The fascinating relationship this chart draws between housing sentiments and precious metals speculation is hard to ignore.

        It is one graph that actually gives me hope that we will indeed see a recovery and expansion in North America that is sourced in both an improving sentiment towards homes and declining sentiments for metals (and fear).

        Undoubtedly this coming recovery will be associated with both rising inflation and rising interest rates but if employment numbers improve (thus feeding beneficially into tax coffers) the secondary impacts of deficits associated with paying those higher rates will not be so threatening.

        So this really is about housing in Vancouver in the big picture.

        Perhaps your city is the poster child for collateral damage where low rates and easy credit are concerned. Few cities in the US went to such highs without suffering a hurtful outcome and Vancouver will probably not be spared.

        All I am trying to point out though is that as we are inextricably linked to what policy transpires in the US that it behooves us all to pay attention to signals that suggest a large shift in the economic landscape may be underway. Growing negativity towards Gold as it nears the bottom of a long term chart versus average housing costs is one indicator that suggests just such a change may be coming.

        As the US recovers therefore we should see some of the risk coming off the table in our own economy as we are so dependent on their strength from an export perspective.

        The implication therefore is that housing prices in Vancouver might hold up better than some currently anticipate and this would be true for the economy at large provided employment numbers continue to remain strong.

        A “soft landing” cannot be ruled out in such a case although this idea is going to be at odds with the more bearish views on real estate. Hopefully this is a better explanation of the meaning of the chart I posted and why I think it is important we monitor gold even where Vancouver housing is concerned.

        I am no market timer meanwhile but I would not be long gold right now.

      • Ralph Cramdown

        The Way We Were:
        http://news.google.com/newspapers?id=dGxVAAAAIBAJ&sjid=5j4NAAAAIBAJ&dq=gold%20lined%20up%20afghanistan%20g%3Aloccanada&pg=2267%2C556958
        vreaa, maybe this time the average chump did the smart thing by going to a “gold party” and divesting of that old, broken jewellery. And in the last few years the typical buyers from the two most populous and gold-loving nations on earth have instead been buying… real estate in the Lower Mainland!

      • Oh man…that is too good, Ralph. I recall the panic buying well. I was not in the lineups at that point but was reading the papers with the same fascination as almost everyone else back then. Those were the days. Notice how the arguments have hardly changed in all this time. It was fluff then and it is still fluff. God love the metal heads..but they will reap what they sow. We can only hope the death of Gold comes sooner than later this time around. Most people are not as gullible today as they were back then. What a relief.

      • This may prove instructive…

        http://tinyurl.com/an4crsv

        Alternatively, for those who prefer porcine purchasing power parity infographics…

        http://tinyurl.com/avg6k5f

        [NoteToEd: Just SpitBalling/BrainStorming here, ED… but hey, what If the MapleSyrupRepublic were to abandon the Loonie and adopt a convertible BaconBacked, fully redeemable “Rasher”, instead!??… OK, there could be some problems for travel in the MiddleEast…. And I’m not too sure how well all those BMO drive thru kiosks would adapt… However, potential FX nuisances are positively dwarfed by the cultural advantages… Imagine, if you will – Bob&Doug McKenzie at their ColeMan, stubbies to hand… ProudlyEmblazoned on every note.]

      • “Most people are not as gullible today as they were back then.”

        Unfortunately, that never seems to change — groups appear to be just as gullible now as they have ever been.

        Regarding the gold market, US RE, etc. We’ll all see how it pans out, it’s fascinating. We can check in here (very) occasionally in this regard.

      • rod_jonsson

        farmer, who in the us owns any gold to sell for housing? nutters aside, pms are just alt currency … ergo a hedge against bad policy … when policy becomes sensible again, pms are a sell … that is all

      • [NoteToEd: “Ooops!”… or should that be, “Ωχ!” Hoocoodanode, an emergency EuroFinance committee meets late on a Friday – well after markets have closed – and faster than you can say, “Είμαι μια κατσίκα ψημένα γύρος κεμπάπ!”; Cypriot savers awaken to a gratis haircut. GreekStyle, as it were. Fancy that.]

      • Actually a good point, Rod. One of the reasons we have not since such a rush to gold this time around is because there is so much less disposable income than the last time around. Probably just as well.

      • [NoteToEd: Above to replace the prior CyprusBankingCrisis VidLink – taken down under ‘mysterious’ circumstances (Hmmm… either some EuroCasters are a tad worried about their DigitalSpectrum LicenseRenewals or StellarW*** has gone live ahead of schedule.)

      • [NoteToJonnson’sRod: Sometimes I truly despair… Not a single ‘Philistine’ amongst our DearReaders thought to congratulate me on ferreting out an authentic EuroCordian Medley of… MamaMia!… Money, Money, Money! {It’s a RichMan’sWorld}… concluded by TheWinnerTakesItAll. Back to Bacon for this Auteur, I guess…]

      • Ralph Cramdown

        Ok, Nem, ok. Congratulations on discovering the accordion (= slowly deflating bubble, er, balloon?) medley.

    • UBCghettodweller

      I think this guy is just trolling. It’s too stereotypical of the sorts that are pilloried on this site. Save your time people. Don’t even bother replying.

    • Could be a troll pretending to be a Realtor. Put on ignore.

    • Hey Geoff, first of all, can you please tell me your profession? And second, do you even have a clue about fundamentals in this market?…all the data is out there. Anyone would be a fool today to buy real estate in Greater Vancouver or BC in general and I don’t like it when used house salesman pump housing as a “GOOD INVESTMENT” as the market declines. I guess its better to falsify reality like what MAC did, just to make sure you get a commission from the last Sucker. I sure feel sorry for those first time buyers.

    • Say you buy a house, renovate it, and sell it a year later. How much does it have to go up in price before you make any money? Let’s do some basic math:

      Property Transfer Tax: 2%
      Property tax: 0.5%
      Realtor’s commission: 5%
      Interest: 3%

      So that house needs to go up 10.5% on top of the renovation costs just to break even. How many of your clients actually get that kind of increase in one year, Geoff? More to the point, how many have seen that since 2011? Even more to the point, how many properties do you expect to go up that much over the next year?

    • Smells like…….a slow sales month

    • “made easily 100k more”…so you sold then? If not you have gained nothing and stand to lose a substantial amount.

      Who would keep a down payment possibly worth hundreds of thousands in a 2% bank account? I sure hope you are a realtor and not a financial adviser you smart person you!

    • 4SlicesofCheese

      ” I have so many examples of clients who have bought either a condo or townhouse – put some cheap love into it with a reno or new bathroom over a year and yeilded MUCH more than the 2% you’ll get keeping money in the bank.”

      Please do share some of your examples, we can break them down and see how much they made. I am willing to be convinced, convince me.

    • Geoff Taylor, [redacted. -ed.].

      • vreaa, why not “expletive deleted” instead of “redacted”? It would be more clear what I was trying to say.

        [Good point. -ed.]

      • I sort of like that term. Was thinking I might start using it whenever the mood hits me to express honest feelings about those [redacted] Realtors we all love to hate so much. What a bunch of [redacts].

      • MPAA-NC17

    • From Mr. Taylor’s website biopic…

      …”focus on implementing a creative and strategic approach to real estate…. …targets buyers using innovative techniques… a comprehensive understanding of buyer psychology and behaviour.”…

      [NoteToEd: It was just too tempting.]

    • Real Estate Tsunami

      This is from Geoff Taylor’s blog.
      There were 3 sales in Canyon Heights in January 2013, down from 10 in 2011 and 6 in 2012.
      And get this: the 3 sales were sold for “over” 99% of the asking price.

  2. Hey Jeff! Can I call you Jeff? Do you have a vested interest?

    Care to elaborate on the numbers you posted? Cuz nothing has been demonstrated in your post so far….just sayin’.

  3. Here’s a good one… “Prince George Revival”

    Part way through, the report gets onto the fact that house prices are quite reasonable in Prince George. Fair enough…

    Then the reporter interviews some Vancouver transplants who sold off and moved to Prince George with money in their pockets. Do they buy one house and invest the rest wisely?

    Nope… they buy several houses and rent out the spares. Seems that Vancouverites can’t get out of the real estate mindset even when they have the best chance to get off the “ladder.”

    Video here: http://www.globaltvbc.com/video/prince+george+revival/video.html?v=2344577699&p=1&s=dd#stories

  4. The fact that people compare Real Estate returns to returns on GICs to make an argument is a clear indication that they have no clue…

    • Ralph Cramdown

      Up until two weeks ago they always made snide remarks about the stock market as being volatile, unsafe and going nowhere. Now that every media outlet is trumpeting that the Dow is back above all-time highs, they have to pick another comparative investment.

  5. you can tell geoff is making a valid point because of the capital letters

  6. > The hurdle is low enough for Canadians.
    $800,000 for a house for a family is one hell of a high hurdle all by itself, if you ask me. And making the poor financial choice of a 5% down payment sound like an attractive incentive is silly (especially on an $800,000 house…)

    So if Ottawa can’t make buying houses easier for first timers, maybe Victoria can by adjusting the price where the property transfer tax kicks in. Will Victoria really lose that much revenue from giving first time buyers a break on the PTT? I would think that having an extra $5-10K to put towards a down payment would be pretty helpful.

  7. W Tucker,

    So instead of the Fed gov. keeping the bubble inflated we should now pass the buck to the Provincial gov.??

    Yes they would lose revenue, as they are now with a 30% sales decrease. If you are a first time buyer hold your horny horses and wait a couple years until prices are reasonable, that would be helpful!

    $5-10k is 1% of the sale price of most Vancouver listings, realtor fees are 5%….maybe realtors should reduce their commissions instead

    • I was wondering if adjusting the PTT would allow for more first time buyers possibly being worth making the adjustment. I hadn’t expected a defence of the PTT here.

      I would certainly hold off on buying a home if I could. My situation may not allow that (long story). I, unfortunately, am starting to look outside BC.

      Certainly realtors could reduce there fees. Don’t see that happening, though. Percentage-based charges are almost always a scam. Same amount of work in 2000 as 2013 but you receive 2-3x the fee doesn’t seem right.

  8. Yes psychology is clearly turning now.
    We may be just months from the day when interest rates start to climb back to normal. I will be very interested in seeing how sellers react when that news arrives.

  9. What ‘if’ prices don’t go back to so-called fundamentals? What ‘if’ we don’t see an exit to quantitative easing by central banks for the rest of our working lives? It’s not inconceivable that we won’t be able to unwind the damage that has been done to asset prices in our life times. As a side effect of easy money, the rich get richer and the poor get poorer. That, I believe, as a Canadian myself, goes against our deep seeded socialist values. The point? Prices may go back to pre-2000 levels or it may not. If it does, it will only be a matter of time before prices go back up – if not why ever buy? Timing to buy today or in the future presuming prices will go down is ultimately still speculation.

    • “What if prices don’t go back to so-called fundamentals?”

      Let me answer your question with a question: what if pigs begin to fly?

      • To only presume prices will fall is just as silly as to presume prices will only rise. Keep that in mind.

    • What if the big one hits and Richmond sinks into the sea? Any investment involves some risk and uncertainty. Nobody can accurately predict the future. But if you base your investment position upon some fundamental values, such as price to income or price to rent, you should be able to reduce your risk. Perhaps there will be some unanticipated external event which will keep Vancouver prices rising. To buy based upon that would be speculation. To sell now, or wait to buy, because you and other people who live here cannot afford to buy here and investors have better investment alternatives, would be a prudent investment decision.

      • I would argue that ‘price to income or price to rent’ is one fundamental but not the only metric. We tend to make judgements with our own set of scenarios. Each buyer will have their own ‘fundamentals’ but for the sake of this discussion we definitely agree the over leveraged buyer is mistaken with his judgement – but actually that would apply to any market.

        You suggest an owner should cash out now. Where would you suggest they invest if they do given guaranteed rates are effectively a negative return after inflation and fees?

    • BLM: “If it does, it will only be a matter of time before prices go back up – if not why ever buy? ”

      For the utility.
      Many would be prepared to spend [fundamental value plus modest premium for convenience of ownership] for a home in Vancouver. (Not that this does NOT include paying a very large premium for you home to also be a ‘financial instrument’… THAT is speculating (the former is most definitely not).

      • Given the way monetary policies are around the world today, and the city’s remarkable links to other economies, surely we can’t ever hope for property to be priced remotely close to its utility value again, could we?

        The ‘premium’ also comes from speculators (local and overseas) who help increase liquidity (buying and selling) which is a premium in itself.

        Take out speculators and stocks, bonds, mutual funds – in fact the free economy as we know it – would pretty much cease to exist.

        Australia, US treasuries, gold, oil and countless other assets have been decoupled from so-called fundamentals for the last 10 years. It may just well stay that way for decades more. Maybe not. But both scenarios are possible.

        Should people leverage heavily to buy now? Absolutely not, as ever. Is real estate in Vancouver an attractive investment or place of residence if it is affordable to the individual? Absolutely.

      • “Given the way monetary policies are around the world today, and the city’s remarkable links to other economies, surely we can’t ever hope for property to be priced remotely close to its utility value again, could we?”

        Why not? How does the (very non-specific) “remarkable links to other economies” translate into RE prices that should be priced at two to three times fundamental value?

      • Vancouver’s economy is unusually highly influenced by the economies of Asia due to a diaspora effect. That fact is undeniable. Vancouver’s small economy makes it more pronounced.

        The fact that Vancouver’s economy is distorted by economies in Asia relative to its peers in North America does make it more vulnerable. However, with loose monetary policies and limited politically safe real estate investment opportunities in Asia, it’s hard to see Vancouver’s real estate ‘premium’ diminish in a significant manner.

        So, is it inconceivable that Vancouver’s property market may actually be heavily influenced by fundamentals beyond the city’s? Are all those well heeled pensioners or trust fund families that come to Vancouver for a better lifestyle from Asia not a part of the fundamentals in themselves?

      • rod_jonsson

        blm – if genuine, consider the counterpt on risk taken … the argument that loose money can keep mispriced assets afloat is the picking up change in front of a bulldozer trade … may work but when the reversal comes, look out

      • Rod – Very true. If there is a reversal on monetary policies there will be collateral damage. My argument against the far right bears is that counting on the world’s key economies to end monetary easing is a punt in itself. We can’t count on it. Secondly, if easing does end, inflation damage would have been done already and assets, such as property, will still be just as difficult, or more so, to attain.

      • rod_jonsson

        @blm … easing won’t end voluntarily imo … but, it can/will stop working … leveraged assets will suffer – eg. cdn RE has yet to adjust and is more vulnerable

  10. the biggest challenge i face is Transparency. And the CMHC, Realtors, Bankers, and Mainstream Media are NOT helping

  11. The snarky comment about PG’s growth says more about Vancouver navel grazing than any other comment. I don’t live in BC’s north anymore but in case you missed the bigger picture, huge developments are planned in the north…26B for Black’s refinery, for example…as you were.

    • I haven’t been there in a long, long time, Falconer… having said that, I always considered PG a WayPoint enroute to the TrueNorth… an amicable refuge before the RealFun, as it were..

      Never mind though, ‘cuz we’re InLuck – the Sun ran out of pre-packaged RE PR/EPK earlier this week and actually put an intern to work on a PG ThinkPiece which may serve to enlighten some here…

      [VanSun] – Metro, Prince George increasingly interdependent: Link undeniable between ‘Downtown B.C.’ and northern hub that generates 70 per cent of province’s export income: expert

      …”Until recently, the relationship between Prince George and Metro Vancouver could be likened to that of estranged cousins. Both shared a common heritage, but seldom acknowledged the connection publicly, preferring instead to emphasize their dissimilarities.

      Separated by geography and (some would argue) culture, these two cities — both key to British Columbia’s prosperity — were often thought of as economic islands unto themselves. Yet today, the ties that bind them are stronger and more numerous than most British Columbians realize.

      Resource-rich Northern British Columbia is the engine that drives the provincial economy. Home to only eight per cent of the province’s population, it nonetheless generates much of the province’s wealth. According to Heather Oland, chief executive officer of Initiatives Prince George (the city’s economic development corporation), 70 per cent of B.C.’s export income comes from the North.”….

      http://tinyurl.com/ajwfklz

      [NoteToEd: Now, Smithers on the other hand… that would be another story. Did you know that you can even puchase petrol there?]

  12. Even Krusty is against the refinery, never mind Dix. And the Alberta oilmen see no need for it….

  13. CanuckDownUnder

    Well said vreaa. You can denounce gold until you are blue in the face but you can’t deny its existence. Take as given that it displays every characteristic a good money has and make value judgements accordingly.

    I keep my own charts on PM/RE ratios over time. To smooth out the volatility I’ve been using a quarterly data set on nominal RE prices I found on the Sauder website. In my lifetime (1977-present) house prices in Vancouver have varied from a low of 157.5 ounces in 1980 Q1 to a high of 1044 ounces in 2007 Q3. Have I mentioned that in 2007 I was renting in Calgary for next to nothing, debt-free and buying as much gold as I could get my hands on? The current price in AUD has got me thinking about buying some more but I never buy gold while platinum was cheaper.

    And if anyone is looking for a good book on gold I would suggest What Has Government Done to Our Money? by Murray Rothbard, conveniently available for free on the internet:

    http://mises.org/money.asp

    • CanuckDownUnder

      Is, not was.

    • You have me puzzled, Canuck. You say you follow the ratios of Gold versus Housing yet seem impervious to why you might want to shift gears as the direction of that ratio changes.

      • It is by no means a trivial matter, deciding on when these ratios turn.
        For instance, take a look at this chart of the Dow:Gold ratio, 1920 – Jan 2012.

        Admittedly, this ratio is far closer to a bottom than it is to a top… but is it about to change? Historic precedent suggests that it may very well go to even lower extremes first… it may well do what it did in 1932 or in 1980.
        (And, given the lack of classic end of move signs that I described above, it seems that may well be how this’ll play out. If not, why not?)

        Now, think about that. For the ratio to go from it’s Jan 2012 value of 7.2 (it’s current value is actually 9.1) to the 1932 or 1980 levels, it looks like a relatively minor move on the chart.
        But that move would have massive implications for the assets involved.
        For the ratio to achieve those levels, the price of gold would have to go up by to anywhere between $6K and $11K from it’s current $1,591!
        Of course, the Dow would likely be changing at the same time, but still .. you get the picture.

      • Yes, that is a nice chart. What this one is also saying to me is that we are closer the end of our troubles than the beginning. There are so many similar ones that I really don’t worry like I used too. The world will not end when the ratio bottoms. We should be looking forward to another period of expansion even if it begins ever so slowly. Call me an optimist where the bigger picture is concerned. It is only the squiggly bit that remains at the end that will be giving a lot of people ulcers. Unfortunately too many of them will be stuck with big fat mortgages in Vancouver as the end approaches.

        See, I squeezed both Vancouver and R/E into my post……free pass on this post!

      • haha (re ‘squeezing’ RE into the post for a ‘pass’)

        Anyway, let’s watch how the whole thing plays out.

      • CanuckDownUnder

        Sorry if I gave the wrong impression Farmer but I am always changing gears. Sometimes buying, sometimes selling, sometimes swapping metals over a pint or two. Still renting and debt-free though.

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