The Wealthy Barber Podcast - Ron Butler: Real Estate, Mortgages and The Housing-Affordability Crisis | TWB Podcast #8

Episode Date: January 28, 2025

Our guest this episode is Ron Butler—a 30-year veteran of the mortgage industry and owner of Butler Mortgage. Some of you may recognize Ron from his social media rants or his “Angry Mortgage Podcast” where he uses colourful language and profanity to express his opinions (and share his wisdom!) on the world of real estate and mortgages.  In this episode, Dave and Ron discuss all things real estate including the pros/cons of using a mortgage broker, where they think interest rates are headed, whether people should use fixed- or variable-rate mortgages and much, much more.  Enjoy this entertaining and insightful episode. Show Notes 00:00 – Intro & Disclaimer 00:57 – Intro to Ron Butler 03:20 – Pros/Cons of Using a Mortgage Broker 05:29 – Canada vs. USA Use of Mortgage Brokers 08:19 –  Where Ron Thinks Interest Rates Are Headed 09:47 –  Divergence Between Haves vs. Have-Not 11:48 – Fixed vs. Variable Mortgage Rates 13:54 – Parents Helping with Down Payments 18:02 –  The Financialization of Housing 20:07 – Where Are Housing Prices Headed? 25:51 – The Small-Condo Market 30:09 – 30-Year Amortizations 32:10 – High Transaction Costs in Real Estate 34:46 – Renovations 39:37 – Big vs. Small Homes 43:23 – High Housing Costs Causing People to Leave Canada 46:10 –  The Housing-Affordability Crisis 51:42 – Rapid-Fire Questions 57:16 – An F-Bomb-Filled Ron Rant 59:03 – Conclusion

Hey, it's Dave Chilton, the wealthy barber and former dragon on Dragon's Den. Welcome to the Wealthy Barber Podcast, where we'll be hosting some of the top minds in the world of personal finance. Yes, that's to balance me out. The podcast is about making the subject not just easy to understand, but dare I say, even fun. Honest. Whether you're trying to fund your retirement, figure out how to build a down payment, save making the subject not just easy to understand, but dare I say, even fun, honest. Whether you're trying to fund your retirement, figure out how to build a down payment, save

for your kids' education, manage debts, whatever, we'll be here to help you do it. Before we jump in, a quick but important note. Nothing we discuss here should be taken as investment advice. We don't know you and your personal financial situation, so we're here to tell you where specifically to put your investment dollars. We're here to educate, get you thinking and we hope entertain. But please do your own research and or consult with your financial advisor before taking any action. Hello everybody it's Dave Chilton, The Wealthy Barber with The Wealthy Barber podcast and I am excited about today. I have one of my favorite social media stars. I watch everything he puts out.

I find him very informative but also very entertaining. Ron Butler from Butler Mortgage. We'll talk a little bit more about the company in a while. Very knowledgeable guy. He can be a little cranky, I like that. He can be very opinionated but he's extremely knowledgeable, funny and most importantly smart. We're gonna talk today not just about mortgages but about all things real estate related. Very very excited about it. Ron is known for his extremely colorful language and we are

saying to him today be careful but don't be perfect. So walk that line somehow, some way. Now Ron, what you don't know before we start this interview is long before you and I touched base about this, I used to imitate you at our office. So all of them follow you on your social media platforms and I would come in in the morning and I would do a Ron rant imitating your expressions and your foul language and your opinions and I do a wrong rant imitating your expressions and your foul language and

your opinions and I really got it down but I will spare you going through that right now. Before we get rolling on the field of real estate, tell us a little bit about Butler Mortgages at a nationwide firm located in Toronto, family business, anything you can share. Yeah, we're a family business, a mortgage brokerage. We're located in Toronto. I'm in Toronto. We are licensed in three provinces, British Columbia, Alberta, and Ontario.

And how many mortgage brokers do you have working for you? Well, we're really a different setup. We're a bunch of employees. There are a bunch of employees. All of our people are employees. So there's no commissions involved. We just work on getting the lowest possible discounted rates for everybody in Canada.

And how many family members are involved? Me and my son and my spouse. Is your son the boss or are you the boss? He is absolutely the boss. I'm old as a hill. The great thing about you, David, is your dad's still with us. So there's always somebody older in the background.

But I am the oldest. You're the old guy?'re the old guy. How old are you? Do you mind me asking? I'm 67. Well you look just fine and you and I aren't far off for heaven's sakes I'm 63 although I think I only look 62. I've always thought that look when you're younger. Hey but this is actually a really important question and it's gonna sound like I'm setting you up for a sales pitch but I'm not. I'm asking because I get asked all the time. What are the advantages of dealing with the mortgage broker, and in your mind, why don't more Canadians go that route?

Well, the advantage is choice. I mean, that's ultimately the advantage. If you go to TD Bank, no matter how wonderful the person you're dealing with at TD Bank, they only have one set of products to talk to you about, they only have one set of answers. If you're not qualified to go with TD Bank, that's it. You can't go with TD Bank. And you have to start all over again. So the benefit is choice. But I'm not a mortgage broker who wants to criticize the Canadian banking system. These big banks that

we have in this country are the entire backbone of the mortgage industry in Canada. And as Dave McKay said not too long ago, there's actually a rate war going on for probably the first time in my career, a legitimate no holds barred, we're going to get a low rate offer to you amongst most of the big banks at any given time. So it's a particularly competitive point in Canada. Is there any downside to going to a mortgage broker? I mean, how could there be? I mean, if they don't have as good a rate

as the bank you're already dealing with, then you just go back to the bank you're already dealing with. Yeah, that's the extent of it. I mean, the disadvantage that the public sometimes encounters is that for the mortgage broker to just do the basics of their job, they've got to extract a ton of information, they've got to verify a bunch of documentation,

just to give an effective quote. So sometimes people find that irritating. They say, oh my god, I've supplied all these documents, I've supplied all these tax documents, I've supplied all this income information, I've supplied all this stuff to you and my bank's still got a better offer. I mean, I'm mad. Well, you can go talk to Peter Rutledge in Ottawa about that. Exactly. The pretend of financial institutions because we are required to develop this kind of information on everybody in order to give them a direct approval. That's all there is to it. Well, yeah, mortgage fraud has been such a problem

and so I think it makes sense that you guys are doing deeper dives on these people. I find it's interesting when I'm south of the border, I have a lot of US friends, I would say the vast majority, I'm guessing 70 to 80% of them use a mortgage broker every time they get a mortgage. It's just a bigger part of the culture. And in Canada, that percentage is much lower.

First off, is that right? Is my sampling representative of what's really taking place? And secondly, why? Why is there a cultural difference if I'm on the right track? Depending on the state, it could run as high as 90% mortgage broker. And in Canada, it is around 50% or just under. To illustrate the main difference, the biggest mortgage suppliers in the United States, the biggest mortgage companies in the United States

are non-banks. Rocket Mortgage is the biggest mortgage company in the US. So they're typically driven by direct consumer or through mortgage brokers. So there's, and that's a lot of historical reasons behind that. Canada started's a lot of historical reasons behind that. Canada started as a federal banking system. We had banks from coast to coast that followed the railway as they were building it across Canada. There were bank branches right from Toronto, right from Montreal, all the way to every stop along the line. There was a bank branch opening.

They did not have that in the United States up until fairly recently, like 30 years ago. You couldn't even bank outside your state. That's right. Banks were limited to be state only. So the mortgage brokerage situation grew up in the states because there was a need to move. Well, make it really simple. If there's a lot of people with a ton of deposits in Vermont, and a ton of people who needed mortgages, but not much deposits in Texas, there needed to be a way to get the money from mortgages in Texas from Vermont. And that was mortgage brokerage. Now we've been on air for almost five minutes and you haven't

sworn yet. Are you okay? I can fix that. My understanding is this show is sponsored by a bank. So it's not sponsored by anybody. We take no, no, we take no, we take no sponsor. We've actually turned down a lot of sponsorship money because I'm making sure that everybody watching understands that we don't have any vested interest. We're just kind of moving on. So all of the information we put out social media, everything else, there's no sponsors involved, but if you need to swear, you feel it, you can do it.

Aiden will BP out later. We don't have a problem with that. Well, I'm on CTV and BNN every once in a while, so I can not swear for a limited period of time. But that's fine. I know, and I see you biting your tongue occasionally when you're on BNN. I can tell you're fighting it back.

You know, your point about the railroad towns is so interesting because when you go into them now, even, you go into the list of walls of the world, you can see the beautiful big downtown buildings from 100 years ago are still there. And you explain to people all the banks had major operations in each of those towns across Southwestern Ontario,

in fact, across most of the country. Okay, moving on, let's talk interest rates. Of course, it's a topic on everybody's mind right now. It's a challenging one. It always is difficult to forecast anything but we're looking at an environment where US bond yields on the long bond have been going up a little bit but in Canada we have a very slowing economy. What's your best bet how all of this is going to come together and what it's going to lead to on the interest

rate front? Well it's probably based on what just happened a few hours ago the inauguration of Donald Trump it's possibly based on what just happened a few hours ago, the inauguration of Donald Trump, it's possibly the most uncertain and volatile time we've seen for interest rates in Canada, mortgage rates in Canada, probably in my whole 30 years. So you really don't know what he's going to do. If you eliminate what Trump might do, what trade war might happen, if you eliminate that, the only direction for the Bank of Canada is down. You'll either see another reduction down to 2.5,

if the economy really gets bad, and the economic problems in Canada are starting to look highly regional. They're really focused on Ontario. But guess what? I mean, they gotta do something. If the bad news in something if the whole of the bad news in Ontario pulls the whole average down in Canada, unemployment rises significantly,

GDP contracts even more. We're going to see lower rates from the Bank of Canada, barring a trade war. That's the only intelligent thing I can tell you. Yeah, I think you're right on all of that. And it was interesting this morning. We're taping this on the 20th, obviously. You know, it's funny, we talk about a recession in the slowing economy, and even in Ontario, of course, where it's hitting hardest, but yet you go to the higher end restaurants, they're packed.

You go to the airport and it's often packed and the flights are packed. It's hard to match all this up to what you're reading on the economic figure front. Is this a bifurcated society with the haves and the have-nots and the haves are still able to do all of these things and not really feel much of a slowdown? You know my favorite economist of all economists in Canada is Francis Donald at RBC. Yeah. And Francis recently put this brilliant concept together that the

whole story of Canadians financial lives is based on those who bought a house before 2015 and those who bought a house after 2015 or worse yet are still renting right so we are experiencing this incredible divergence of economic Situation for individuals in Canada the divergence is just becoming unbelievable. And let's face it, David, as much as you don't live in Toronto,

you've been to Toronto. Yeah, I'm there all the time. So this is what you and I both know. The most rich people in this country live in Toronto. That's it. So those restaurants are gonna stay busy. The reality is when you have a lot of rich people, you're going to have this complete divergence from the way people live.

I can assure you based on the conversations we have in the mortgage business, there is still a lot of trouble, a lot of problems, a lot of difficulties that people are experiencing. Oh, for sure. I mean, I see it all the time because I'm sent all these financial plans and the default rate's low on the mortgages. The problem is people can make the payment but not do any additional saving. So they can't fund their RSPs,

they can't fund their TFSAs, they can't have a lot of fun. I mean this is the true definition of house poor. And with the interest rates having clicked up and many people refinancing and I'm seeing it in the worst way than I've ever seen it. So yeah, you're absolutely right. It's made times tough. To that end, when you look at the interest rate environment and your forecasts, are you suggesting variable rate for the vast majority of people?

We're suggesting variable rates for the vast majority of people and we've been making that same suggestion for the last nine months. You know, it's... Here's the thing about fixed. You made the correct point. There's an influence in the bond market of all things US. It's not totally US influenced, but it certainly is affected. The mortgage rates in the United States are 7% and up. Our mortgage rates almost all start with a four, and eventually we're going to see some starting with a three

when it comes to variable rate mortgages. But there's got to be some action out of the new president at some point. Whether it's this year or next year, Donald Trump doesn't want to be remembered as the president who seized up young people buying homes in the United States. I mean, there's going to be some moves on that high 7% rate on mortgages soon. I don't know quite what they'll look like, but in Canada, look, here's the main thing Everybody should be aware. If the economy gets so bad the Bank of Canada could take emergency measures. The Bank of Canada, as much as it just published a report saying, hey we probably shouldn't

do QE in the future, they could do QE. They can do quantitative easing again. And rates can fall. They can go to 2 and 1 half. They can go to 2. Sure, I think the banks made a conscious decision, the Bank of Canada's made a conscious decision not to interfere as much in the economy as has happened in the past, but if things get bad enough, there's a lot of things they can do. I agree, but the challenge is

you're not doing it in lockstep with the other countries. You're not doing it in lockstep with the US and therefore if we take them down dramatically, let's say to two the dollar obviously gets hit inflation then kicks in and then you might have to take them back up striking all the right balances here. I wouldn't want to be the Bank of Canada governor. We've just got so much debt in our society now that we almost have to have lower rates for people to be able to survive and certainly to thrive and as I mentioned do the savings

which leads into the big topic, the housing affordability issues. And I'm rewriting the original The Wealthy Barber right now and I'm on that chapter and of course I'm working through all the math and I'm out there speaking to people in their 20s and 30s and to Francis's point, those people are not homeowners yet in most instances. Man, it's tough. All of the old metrics that we used to push,

don't spend more than X percentage of your gross income, you know, da da da da da. It's so difficult for them to follow unless they have a lot of help from parents. Are you seeing a lot of help from parents and what are your broad observations on the affordability challenges? We've seen a lot of help for parents historically. When I started in the mortgage business 30 years ago,

parents might give you five grand to help with your down payment. Today they're giving you a quarter million dollars to keep you going. It's true. They're pushing your inheritance forward in order to you to afford a house. But that plays out, David. It just plays out eventually. First of all, these people are starting to, these parents are starting to get a little bit worried about the economy too.

Their investments when they were making 5% on GICs is pretty good. If they're down to 2.75, it might not be as good. If the markets turn, yeah, we've had such good markets. If the markets go into a soft two, three, four year period, which could easily happen, I think a lot of the parents doing that will reassess. And of course, one of the two parents is living to be so old.

They're starting to look at their costs for assisted living and help down the road and think, geez, I better not put myself in too tough a spot. So you're right, it does play out. There's only so many parents and grandparents that have the financial ability to without taking on too much risk, step in and help to these levels.

By the way, my father, who will be watching this podcast, did not give me 5,000. He gave me nothing. So I'm not a big fan of that. I laughed. Remember that report that came out? I think it was the CIBC last year or the year before and said 21%, a figure along that line

of people getting help on the down payment from their parents. And I'm thinking, what? It's way higher than that. Like when I talked to young people buying houses, it wasn't 21%. It was 51. It was 61. The vast majority were getting help from parents or grandparents. Would you agree based on what you see? Sure. At the high point of the boom in 2021, which was like real estate Christmas, there was never anything as good as 2021 in the real estate business in Canada. Parents were supplying vasts of, there was billions and billions of dollars being moved between parents to children.

That's absolutely the case. Not as much anymore for the reasons you cite. And also, you know, it's just a lousy economy in big chunks of Canada. It's not so bad in Alberta. It's probably just fine in Quebec. But there's parts of Canada that are experiencing hard times. If you're in the construction business in Ontario or British Columbia, it ain't pretty. If you're in the banking world in Toronto, you're not sure if you're going to be laid off. I mean, there's a lot of pressures in that environment. I'm not

saying all the banks are laying people off, but I am saying they're not hiring anybody. So you've got to take that for a fourth. Well, your construction example is bang on. I mean, think about three, four years ago, all the new builds going up. And so companies making trusses, companies making doors, they were all booming to the nth degree and man did it fall off a cliff. I mean there's so little happening in that particular space right now and so you're right that'll ripple right through the entire economy. It's sad as we talk about this that the old joke choose your parents wisely has now actually become an important commandment in personal finance because without

parental help it's so difficult. How about single people? I mean obviously if they have spectacular incomes they might be fine but the days of a single person buying a home and of course in our generation we saw it all the time those days are almost over. They can't put together the down payment but in most instances even if they could the mortgage costs especially with high property taxes high insurance and everything else would overwhelm them. You've almost got to get married now. Even if you don't love the person, it's so key just to get a financial partner.

You're not going to love them eventually anyway. I know that's what you're going to say. So you might as well get to that early and get a higher income. Look, I got to stay out of the marriage counseling. I'm no goddamn good in there. That's for sure. But the reality of life is everything you've described is true. And it's true almost in the entire Anglosphere, whether it's Australia or Britain or New Zealand, all of our countries have got a problem.

And some of that problem derives from problems with foreign capital moving into the country, people bringing money in from other countries, pushing up the cost of real estate. That was in the past, that was maybe 10 years ago, was very big. We've had problems with super low interest rates, like a decade of almost zero interest rates. And people got very enthusiastic about, finally, the financialization of housing.

To say that, hey, this isn't a place where I wanna buy this house and just raise my family and fix it up the way I want to fix it up. That's why I want to buy. It's also, this is a key investment in my portfolio. It might be the key investment that I make in my life, which is all wrong. You and I went through early stages of our life where literally nobody thought that way. The only advantage of buying a house was you'd

get a mortgage 25 years later you'd have a mortgage burning party and then you'd have no payment to make instead of renting. That was the whole financial base. That's all changed. If I'm not, if my house isn't going to go up seven percent a year I'm not sure if I want to buy one and that's way, way different and really not sensible. You know, I really saw it three, four or five years ago, I had friends and colleagues buying places and they were not intending on renting them out. They were buying them, not necessarily to fix them up and flip them either,

just to hold them for two and three years. They were so confident in the capital appreciation potential, much like we saw in 2006 state side. And that's never a good sign. So we really have been financialized in the housing market to the nth degree and we'll get to the Airbnb's and all of those matters later but I think you nailed it. It's the foreign capital that came in over that one stretch. It was definitely something that influenced the market greatly and then of course anytime you run interest

rates where we did that low, that long, you're gonna have tremendous borrowing. The costs of carrying on a monthly basis got lower and lower and this is where we are right now. Are you surprised that housing prices haven't gone down a little more? I'm talking single detached right now based on interest rates going up. It's less affordable now than it was even three and four years ago to buy a home because the housing price decline hasn't offset the higher rate. Well there's a whole bunch of reasons for that but But maybe the first way to react is patience. That may change.

Right. Look, here's what you and I know from hanging around with bankers. The most important thing to a banker about defaults on mortgages, they have three keys to it. Unemployment, unemployment, and unemployment. That's what they think is the most important three things about mortgages defaulting. And we're at 9% in Toronto unemployment today. And the cracks are finally starting to emerge. Don't get me wrong. I'm not even slightly suggesting that the Canadian banks have any problems because I know right no they don't but will things change will there

be more pressure on lower prices heck I mean we in Ontario today we have the most we have the biggest surge in listings in the last three weeks we've ever seen in the in God knows how long and there aren't too many buyers so we may see a shift in pricing soon yeah you make a very important point there you've got a lot of people out there saying hey the supply side is starting to really take care of itself and therefore prices should be falling but I find that a lot of the listing prices aren't realistic they're not market clearing prices in

any way and the buyers can't afford to jump in at those levels so you're right to have the two match up you're gonna have to see prices come down a little bit I don't think there's gonna be a big fall though. I mean I'm not a great forecaster of anything, it's certainly not a real estate markets, but there's some people online, they've got big followings on YouTube and other social media channels and they're very knowledgeable, very well informed, very well researched who think the market could go down 10, 20 and 30 percent. I still think there's enough pent-up demand that it's unlikely to fall that much. Thoughts? It breaks down by product.

This is something that we haven't had to think about for almost forever in the housing business. But if you own a particular kind of housing product, if you own a tiny condo, I know we'll talk more about that later, but if you own this tiny condo, and there are a ton of them, and in southern Ontario, they're about 80% of all that was being built for the last seven years in terms of unit growth. So if you own that particular product, you could have a legitimate bad result in the fall of prices. If you own single family, well, they quit building those in Ontario in 2018.

It dropped down to 20% of all new starts So if you don't build them you create scarcity and scarcity supports price Yeah, you know when I'm talking to young families since I'm rewriting the book and I'm out there, you know with friends of my kids Etc. They don't want these small condos. I mean even as a first-time buyer, that's not really what they're looking for They're still hoping to get involved in the single detached home market. A lot of them, of course, can't afford to buy anything early on because of the needed down payment,

all the things we've discussed. And so they're patiently building up the down payment. By then they've got a spouse. They may have a child on the way. So again, they don't want a small condo. They wanna go straight to the home and there aren't enough of them around to the point I made earlier.

That's why I don't think in the single detached market, you may see the big fall that some are forecasting. Yeah, I mean we can probably expect to see some of the really unusual price issues come, they may be affected. Like I don't know why a house in Elmira, Ontario needs to be a million one. Like I haven't, and as much as I like Paris, Ontario, I don't understand why it needs to be a million one. Like I haven't and as much as I like Paris Ontario, I don't understand why it needs to be a million two. By the way, Paris Ontario for those listeners in other parts of Canada, it's nothing like Paris, France. All right. No, but it's very pretty. It is very pretty there. It's very nice people, but it's nothing. There's nothing going on in Paris,

Ontario. So why a house needs to be $1.2 million there, I do not understand. So I certainly understand why in the heart of 416, a house needs to be $3 million. But I don't understand why. I'm just suggesting there's some pricing anomalies that have gone on in Ontario. I don't know why a house in Fort Erie

needs to be 800 grand either. So there's some, and then I don't know why a house in Agassiz, British Columbia needs to be 800 grand. So let's push that. Why does it need to be there? Is some of it because material costs are up and of course taxes around the construction and the land are up? Why have those prices moved to the extent they have?

Some people are paying that money. It's mostly legacy. It's the legacy of COVID. It's the legacy of work from home. It's the legacy of I can move to Paris, Ontario and continue my job as a data stack manager in Toronto. And some of that's all circling back to not working out. The price growth in Paris, Ontario and Agassiz, BC,

you can absolutely track to 2021. You can just nail it down, it's clear. So the retrenchment of those prices, they just may need to happen. I mean, that's a possibility. But to your point, in other cities, there's no reason for the prices to particularly go backwards because we don't build any new products

in low rise housing in those other cities and in those other metros. We just don't. So should they go down? A little maybe, but to your point, 30%, I'm not sure. I don't think we'll see anything in downtown Toronto or downtown Vancouver or Surrey or Markham, I don't think we'll see any of those single families go down 30%

Do you live in a little tiny condo you talk about them all the time? Do you live in one? Hell no, not at all. I Don't know if I'm gonna fit through the hallways in some of those places. I mean really well They got truly wacky now were people actually living in those when they came onto the market, or were they almost all rental units, Airbnb, et cetera? Everything under 500 square feet was a rental. Interesting.

And what's happened to that market now? I mean, Airbnb obviously has undergone huge changes in Canada with municipalities either limiting through great regulation or in some case, eliminating it and saying it's no longer that has to have been having an impact in the market is that one of the reasons by the way the rent prices are coming down is because you're getting more of these units coming on the market the problems with small condominiums and it will also spread to Vancouver it's it's

only just touched on Vancouver but it's certainly in full throat in in 416 and it's headed for a really bad time by the time we get to the middle of the year. There's a perfect storm. It's a perfect storm of immigration slowing to zero. It's a perfect storm of rents deteriorating for that reason. It's the perfect storm of the end of Airbnb, the war on Airbnb. It's a perfect storm of higher interest rates. I mean, you know, even at 4%, why should a 485 square foot condo be $650,000? I mean, you know, and finally, the fact that there's just built too many of these units. Yes, I agree. Too much supply.

If you focus on one product, that one product can get out of whack. I'm off topic and we'll go back to real estate and everything else in a moment, but you're such a natural in social media because I think you've nailed the most important thing, you're authentic. You are who you are. Like you're just on there

and you're gonna give your opinions and you're gonna laugh and you're gonna do all those types of things. And I think that's why people like you, they intuitively trust you. You're not massaging the message, you're not trying to have're gonna do all those types of things and I think that's why people like you, they intuitively trust you. You're not massaging the message, you're not trying to have it come across as being politically correct or appeal to all people at all times. Was that something you decided to do consciously or did it just come to you as soon as you

were in front of the camera? Well, I'm literally the far invited me to join the Canadian club. Nobody invited me to be on the board of directors of one of the infinite number of government advisory boards. I was always a complete outsider. And I also felt strongly from day one that this incredible change in the way ordinary people are treated in the housing industry was wrong. By the time I was involved in it long enough to appreciate it I said this stuff's crazy. I mean this doesn't make any sense that I would have

a chance to buy a house in a relatively easy way. would have a chance to buy a house in a relatively easy way. You had a chance to buy a house in what's, I mean, we all thought it was hard as hell. But looking back at it, it was pretty damn simple. For sure. Why is it now almost impossible? Like, how did that happen?

How did the most basic functionality of a country, the size of Canada, like the size of this country Somehow we ran out of land in Ontario. That's magical and The prices had to go through the roof like and to a point where if you were the look I always try to make it simple if you were the man assistant if you're the meat manager at Loblaws and Your wife was a nurse practitioner You could you could definitely buy a house.

You would absolutely be able to buy a house, and even though it was just a struggle to get started, you could do it. It is absolutely, totally impossible unless your parents give you 300 grand today. That is totally impossible in Southern Ontario. And the wrongness of that, well, I guess it just kind of got me going. I mean, it gave

me a voice. And so here we are. No, I couldn't agree with you more. And it's interesting, by the way, how many people our age haven't clicked to this yet. They will come back and say, oh, it's no more difficult now than it was when we were young and interest rates were higher than you try to show them the basic math. It takes a bigger percentage of your income now to enter the housing market than it ever has. And again it pinches all other things. Speaking of which, do you use any guidelines so not just as a mortgage broker when you're dealing with Brands family, like what's your big picture thinking on the the metrics? You can go up to 30 years now, it's gone from 25 to 30 years and sometimes that freaks people

out. They say well let me show you the calculation of just how much extra debt that is, how much more I'm going to end up paying in 30 years. The news I've got for everybody is mortgages have never been easier to prepay than they are today. Never, like never. The products are all built in a way that you could pay the whole mortgage off in six or seven years if you had some tremendous windfalls in your life or vast increases in your income. I mean, you can pay up to 20% of your mortgage off every single year. It's allowed. It's just allowed. You sound exactly like me.

I say the same thing on stage is that oftentimes you're best to take the 30 or M even though on the surface it looks like more interest because it gets you in and it leaves you enough money each month to be able to afford to do some proper savings and again if the interest rates low enough you may be better going that route the TFSA etc but to your point over time you can pay down that mortgage you can in essence change that amortization of course you can change it on renewal so I couldn't agree with you more and frankly it's interesting a lot of people make that point so when you read the articles criticizing people for going with the longer M's, very

seldom do they sell the other side of the coin, which I think makes great sense. No, everything you say is correct. With flexibility to pay your mortgage off sooner, just get in. Get the house you want. I mean, the idea that's pushed by some people that, oh, just grab one of these terrible, terrible condos and that's your starting point No, don't do that. Don't be forced to live someplace you hate and have constant increases in Condominium fees every month don't do that

I mean but try to find if it's humanly possible try to find that low-rise Doesn't have to be a house could be a townhouse trying to find that low-rise opportunity that suits your lifestyle So you'll be happy to live there. I always tell people the same thing. You've got to be happy to live there. If you move in and hate it after six months, the transaction costs will kill you. I mean, they're just too high. I mean, real estate isn't like stock markets. I mean, right now, I've never seen transaction costs as low as they are today to be involved in equities. They're like, okay?

Everything in real estate's really expensive. I mean, every single thing is super expensive, so you can't do transactions a lot. You know the problem with this podcast? You and I agree on everything. We're not having any controversy and yelling and swearing and screaming. But that's another point that I make all the time,

that I get annoyed sometimes with advisors, but even real estate agents for not pointing out to people when they say, well, I may move in two or three years, then don't buy. Okay, because unfortunately the cost of moving is so high that unless you think markets are gonna roar ahead, like they did at times during COVID, you're gonna end up behind

because you've got the commission, obviously, which again, remember, isn't just on the equity, your commission is on the entire price of the home, but you've got the commission obviously which again remember isn't just on the equity your your commission is on the entire price of the home but you've got the land transfer taxes you've got the cost of moving including stress and everything else couldn't agree with you more when you go to buy a home you should be thinking a fair number of years out that you're gonna be staying there growing there etc and then you may make one move you remember the the famous book the millionaire next door they talked about one of the common denominators among people who handle

their money well is they move extremely infrequently. In fact, a lot of them only own one at the most two homes in their entire life. Well Warren Buffett's been in the same house for 48 years so what can I tell you? Yeah exactly, and it's not that fancy a home. Oh no, no, it's not. I mean but we got it, Warren's still eating at McDonald's every morning, so we got to maybe question that. Even though, you know, let's just get this out in the open. The food at McDonald's is delicious.

It's not good for you, but it's delicious, OK? I'm with you. Enough of these guys who say, oh, yeah, you say at McDonald's, oh, that's terrible. No, it's not good for you at all. Don't send me any lawyers letters, McDonald's. But it is delicious. I mean, there's a reason people eat there as much as they do.

There's a reason that David Lynch drank a cup of coffee and ate a piece of apple pie every day in his life. Every pie, yeah. OK, you know, like, come on. I mean, we got to, everything doesn't have to be organic. Okay, you know like come on. I mean, it's you know, we got it. We got it. Nothing. Everything doesn't have to be organic Eat what you like God knows I've been doing it all these years And you're happy So there you go. He's having I made it to 67. So it's got to be okay. Do you like A&W?

Sure, I mean it's all delicious all of its delicious I'm kind of with you again Again, we're agreeing on that too. All right, I've got something I was excited to talk to you about because I never hear it anywhere else. We look at the real estate figures, what kind of growth we've had over the years, what's the average annual rate of return on a home, et cetera. And it's been quite decent. It's been quite good lately, of course.

But I've always argued it's dramatically overstated because it doesn't count the ongoing maintenance which can be between anywhere between 1 and 3% of the value of the home not including the land but more importantly none of the data takes into account renovations. And so for an example I have a friend he buys a house for $600,000 he sells it years later you know many years later for 1.5 million he goes what a great return he's put $500,000 into it. That can't be ignored in the analysis, obviously, and none of the data properly reflects

all the money people have spent over the years renovating their homes. What are your thoughts on that point? You know, it's almost like telepathy, because that is one of the most amazingly true points, particularly in cities, big cities, particularly in big cities, particularly in big cities. There is this unbelievable keeping up

with the Joneses element to big cities. One thing I can tell you about medical doctors. So if somebody in the hospital gets a Ferrari, there's gonna be a lot more Ferrari in the next six months, okay, in that parking lot. So everybody who renovates their kitchen, all of their friends are going to renovate their kitchen. It's so true.

The level of attention to renovations and the amount of money that's poured into homes, like anybody who buys something they think is a 25 year roof, I got news from you. Those shingles are going to fly off in about nine years. They're all going to be on the ground somewhere. So house maintenance. Yeah. Boy, we could spend the next topic could be about these, uh,

the future of condominium fees. The Strata and condominium fees are just going to go through the roof in this country in the next 10 years. Well, look at Florida. I mean, some of the stories my friends are dealing with, they're hard to even believe. We had a friend friend a really good friend I say we because my son is here $160,000 assessment. Yeah for the floor because they came in and changed some of the rules and how they have to examine foundations, etc Now, I don't know if we'll go to that extreme here

But there's constant surprises and remember a lot of these condos are relatively new so five and ten and fifteen years from now What's gonna happen with all of these you are gonna get some shocks and that scares the heck out of me. I like knowing my costs as well as I possibly can. Going back to the rentals, this is one of the reasons that I've always been very, very hesitant about pushing people to lines of credit. I like the fact that they're often a lower rate,

there's convenience associated with them, but the darn things are so enticing, people can't resist taking advantage of the available capital and it often pours into the rentals and puts them in a tough spot. Oh that is so consistent. I mean today almost every bank in their mortgage offering almost insists you take some type of line of credit. They do. It could start just next to nothing but they've got all kinds of systems to allow it to grow. Now the

bank regulator might be stepping in on that a little bit in the next couple of years. You might see less of it, but yeah, every single time they want you to take a product that has a line of credit associated with it. By the way, that's legit. It's legal. In other words, they can actually offer you a rate incentive to take a line of credit, and there's nothing illegal about that. That's not tied to selling because they're giving you a benefit for to take a line of credit and there's nothing illegal about that that's

not tied selling because they're giving you a benefit for the product as well. So it is absolutely true and it's amazing how many people tell me, yeah, my bank advisor told me to take this line of credit on my house for emergencies. Okay. So is that kitchen rental an emergency? I'm not sure it's an emergency. Okay. I talked about all that in the wealthy barber returns and I said these emergencies are turning Okay, so is that kitchen rental an emergency? I'm not sure it's an emergency, okay? I talked about all that in the wealthy barber returns

and I said these emergencies are turning into hot tubs, trips to Mexico, new kitchens and so on and so forth. And the capital's there, you can make interest only payments. Interest rates at that point were ridiculously low. But of course you eventually have to pay the money back. A lot of people in essence are turning these lines of credit into quasi manmade, self-made reverse mortgages and they're going to worry about it very late in life when they get an inheritance from their parents etc but yeah the amount of debt I see coming on

to these for rentals and your point about people competing on the rental fund is bang on. I always tell people to whatever you budget for your rental the final cost will be 2.2 times that plus 10,000 for divorce counseling. Book it. That formula works every single time. So yeah that's always been a major problem but again the fact that none of this is reflected in the data really amazes me. Now I don't know how you would do it because of course people can't write off the rentals on their principal residence therefore they're not keeping perfect documentation, it's not filed in your taxes but we all know that these returns are overstated because they don't count

this very very big expenditure that almost everybody takes on over 10 and 15 and 20 year periods. Oh it's so true and we haven't even touched on the fact that the average size of a new home has grown so much in the last 35 years. It's off the charts. So if we look back on the average home that was being built in the 1970s, yeah, that's 50 years. But still, those homes on average were around 1,300 square feet. And that's a single-family home, by the way. That's right. So here we are come show up today it's about 2600 it's doubled but wait there's more. The fertility rate in Canada has fallen off a cliff people are having far less children there's four bedrooms in a

house that if we're lucky only like only two are ever used if one of the people has sleep apnea okay so that there's very true that there's two people running around a 2800 square foot home and why like why did that happen? So I sound like me. Yeah, I mean, you know, it's interesting. I love small homes and I just put a video out the other day on that. I live in a 1300 square foot home. I find them cozier. They're easier to take care of. I hate stuff. I think one of the reasons I'm such a happy person is I don't like stuff, I don't like toys, I don't compete with others.

I don't want any of it. I don't have a garage. Because I don't have any stuff to put in it. So I just start my car with a timer in the morning, just hit the button. But you're 100% right, these new homes, and forget 2,600 square feet, look at all the people we know that live in 3,900,

4,500, et cetera. It's absolutely insane to me. Even in this little house I live in, I have a room I don't go in. Like it's like I'm cramped in here and I told a story in this video that I have a lot of friends that they've gotten divorced over the years have been quite panicked about being forced because of financial challenges to move into a smaller home and it's devastating to them and they love the neighborhood and everything else and six months later they're in the smaller home and they're saying oh my

Gosh, I love it here. It's so cozy and it has character and it's less expensive. Obviously the property taxes are lower I love smaller homes and I think for a lot of people trying to get in as first-time buyers Look for a small hidden gem save some of the money that way again Not easy to find everything expensive, but that's something they should be prioritizing to And not easy to find everything expensive, but that's something they should be prioritizing too. Hey, David, I hate to tell it to you, but you're an incredibly small minority about not liking stuff.

All right? Yeah, it's true. There is a whole industry that did not exist when you and I were in our 20s. Did you ever see a self-storage facility when you were 22? No. And now they're popping up everywhere. Yeah, so here's the deal.

You have so much stuff, you need a separate place to put your stuff and pay rent for it. I mean, it's unbelievable. But yeah, people want stuff. And you are a minority, a tiny minority. We love stuff today. I'm not sure that's going to change tomorrow. But it is absolutely one of the

reasons you need a home equity line of credit if you like stuff. I'm honestly unsuccessfully so far but I'm trying to change that. I talk about it all the time and how I find that when I can get people to spend less on stuff and more in experiences and also save more they're happier and we have so much testimony from people saying hey once I broke the habit once I didn't start you know always defining myself by my stuff, but instead spent the money elsewhere against save more. My happiness quotient went up significantly. So hopefully we'll see a trend toward that. I do find some of the younger people are that way. They're much more experience oriented than stuff oriented. And again, some of them want to get off to a good saving habit. I'll tell you one of the biggest myths out there is that younger people are bad with their money. There's a split, lots are, but boy,

I'm meeting a high percentage of them that are very good. They're using online platforms to buy inexpensive ETFs to build up their RSPs and TFSAs. They're educating themselves by watching videos and taking courses. The ones that are grabbing this are really grabbing it better than even our generation did. You know, one interesting aspect of the extreme difficulty of getting into a home is young people who successfully decide to leave Canada to much cheaper jurisdictions. Yeah. I'm literally dealing with people today to help us out on a specific IT project. people today to help us out on a specific IT project. They're Canadians, but they're living almost the whole of the year in Costa Rica.

And they describe to me the ridiculously low cost of living in Costa Rica. Now I feel bad about that because that's some parents who aren't seeing their kids. And grandkids, yeah. I agree. You know, it's, now, David, I got news. David, I got news, there's nobody having kids, okay? Like- Don't tell me that, I've got two kids, I want them to have grandkids.

But you're right, people are having far fewer kids. And I'm in Waterloo, as you know, and of course we're seeing the same thing with some of the tech companies now relocating down to Texas, and they're saying, look, we're not anti-Canada, we're not anti-government, we're not anti-the problem is we can't get talent. The talent doesn't want to come from University of Waterloo or MIT and come here because the taxes are so high and the real estate costs are so high, we can't get them. So we're not making a

political statement, we're making a survival statement to get the top talent to run our tech company. We got to go down to the states. So among all the different reasons why ridiculously, like as my tagline is, batshit crazy house prices in Canada. So one of the worst parts about batshit crazy house prices in Canada is people leaving. Because to your point about Texas, you could buy a pretty nice house in parts of Texas for $200,000. Absolutely. It is a 7% interest rate, but that is, there's hope.

You have hope of owning a home in Texas. Absolutely do. It's quite possible. There's no hope of buying a house for a young person without massive parental help in 416. Not a low-rise property, it just doesn't exist. So that's where we're at. Bad outcomes for a lot of different reasons. And in some cases, it is true, super expensive real estate

is the source of so many problems. So many problems. I mean, you can't, you've also got to chalk it up to an entrepreneur, a young person coming out of university who wants to do something on their own. Would they not just go into real estate instead of trying to invent a new widget or trying to work on a new piece of software? Isn't it easier to make money in real estate in Canada or historically has been for the last 20 years?

And there's your productivity loss. I mean you're not going to innovate. I agree with all of that. Now look at you look at all the people struggling on the affordability front and therefore they're renting. Do you think rent is throwing your money away? Well rent's not throwing your money away if you couldn't handle the you know if you're paying 2200 a month and you're okay with where you're living you're comfortable with where you're living versus spending forty nine hundred dollars a month to own a home then I can't say I cannot say you're throwing your money away agree totally that

doesn't make sense would would you be better off for your life if the house a price of a house was much less, if you could buy a nice comfortable home, not the biggest, for $4.99 instead of a million dollars and have a manageable mortgage and enjoy your life and save some money and go on a trip once a year. Yeah, that would be the ideal, but until we ratchet down these ridiculous house prices in Canada, most of Canada, that's not going to happen. You know what's fascinating is we call this an affordability crisis. We call it a crisis.

We hear that word all the time, but yet when you're talking to people to the point you made earlier about the economist, the people who are already in the homes don't view it as a crisis. In fact, they view it as a windfall. And if you go to them and say, geez, we really need to get home prices down 20 and 30 percent to help younger people, they're like, ah, that sounds great in theory, but Dave, in practice, I'm relying on some of this money. I may sell this home later in life and turn that capital into something that spins off an income I need. I may use a reverse mortgage, etc., etc. So none of us really want our house to fall

in value. And so we've got these two groups. You've got one that's not hoping for the house and then the rest of them that are and that makes this a very challenging situation even from a policy perspective. Well it's worse from a policy perspective for this reason. The old people vote like old farts like us vote every single we vote in every kind of election we vote in provincial we vote vote in city elections we vote in every kind of election, we vote in provincial, we vote in city elections, we vote in everything. You're going to get all kinds of policies at all levels of government designed to support old farts.

And that's the wrongest thing you could imagine. We got some money, we're doing okay, we're fine. So sure, some people need some help. But if you look at the numbers, speak for themselves, the wealth of Canada is concentrated in, mainly in old women, because women outlive men. Yeah, the men die. And my god, I mean, it shouldn't be this big a disparity.

But because we're the ones who vote, hell, we're even the ones who contribute to political parties. That's right. So it becomes, the policies of the country become ridiculously skewed toward us who are the winners already. It's not a great thing. No, absolutely bang on. And you're right, it tends to be older women because the men die. My dad's in an assisted living facility and he's constantly surrounded by women, constantly

trying to date. I said, dad, how do you even get all these women? And he said, my competition is dead. And I think he's, he's nailed it because it's not charm. I can assure you of that. He's got that right. His competition is in fact dead. So no, I agree with you in all of that. And what a tough position for the policy makers to be into some extent and that some don't want the prices to go down. Many others do. I find that parents are very good they don't want their price to go down but they realize how tough it is and the kids and they're saying hey if we all have to take a hit if this goes down but here's my last question before I go into a very quick round. You're voted Prime Minister, you're

voted in as the leader of a party and then you become Prime Minister. What kind of steps do you take to try to address this problem? Well, first of all, you have to find a way to cut off transfer payments to provinces that support municipalities who have unbelievably high development charges. If $300,000 is, if you buy a house for a million and $300,000 is going to the city or the province or whoever, that's totally crazy, that doesn't make any sense at all. So attack that issue head on, then attack the issue, and again, you can release some federal land, but you've gotta make it hard on the province

to enforce crazy things like Greenbelt. Now, I know there's gonna be a thousand people who live in the Greenbelt or 10,000 are suddenly gonna start firing up their computers and saying, no, no, you fat bastard. I mean, we we need to we need our green belt. I mean, that's the best farmland in Canada. OK, my position on that is simple. Shut up. OK, the there's we get all our what farmland, what farmland for the five months of the year you can farm vegetables in Canada?

I mean, come off it. And we're all eating blueberries from the United States right now. And I'm absolutely sure that the people in other provinces can keep growing cattle and pigs and chickens for us. We're not going to go out of business on those things. We must eliminate, in every province, but Ontario is by far the worst, we must eliminate artificial barriers on building new homes. And then finally we've got to look at it and see when we release those lands, we've got to make sure that a

bunch of existing billionaires don't buy those lands up and flip them three times. And by the way, a prime minister doesn't have direct control over those things, but the prime minister of Canada has at his disposal or her disposal the most money. You know, you could withhold transfers and you can starve out people who want to do the wrong thing. And you know, that would probably be my first move. Okay, interesting. All right, we're gonna go through a quick round here. I'm gonna say a subject, give me three or four sentences on it.

Sure. Make them incredibly insightful and very funny. No pressure. Okay. Toronto condo market, what's gonna happen? It is a crash. It is a crash that will have people screaming like, like babies for years to come.

Okay. Next one. When you move, what happens with your mortgage? Get asked that question all the time. If you're lucky, you can port it, but most people can't port it for a simple reason. Nobody buys a house that needs exactly the same mortgage they have today. Therefore, they've either got it to shrink, which which no bank wants to do so you got to break it and start a new one or you got to increase it which you've got to find new money and that's expensive money so it's as simple as that. I get asked a

lot does it ever make sense to break my mortgage pay the fees to refinance at the lower rate in the states it often does in Canada can it as well? Yes well it always does in the states that often does in Canada, Canada as well? Yes, well it always does in the states because there's no penalty. Right. So the states is always a win. In Canada it may. If you are just drowning, if you just can't make the payments, it makes sense to pay the penalty, throw it into the new mortgage and get yourself an affordable payment because we've had those things happen. Right. We've had people lose jobs, we've had people's renewal was too high, those things can happen.

But you must calculate it carefully. You must, if you're just thinking about it, you have to say, look, I've got to recover the penalty within 18 months. If I don't recover the penalty within 18 months, I better just wait. That's right. Right, okay. Next one, would you be a landlord right now? No, I never wanted to be a landlord

I'm not suited to be a landlord and I've stayed away from being a landlord my entire life But when you look at it right now, I mean you've got all the problems with tenants and yes There are bad landlords out there too But the tenants have really learned to game the system especially in Ontario and BC when it's taken so long to get in front of the review boards and this problem that used to be This big is now something you're hearing about nonstop. Again, it's just made its way out. In the zeitgeist, people understand it.

So that's a problem. Then of course you've got rents coming down a little bit, costs with property tax, insurance, and everything never stopped going up. I think the math is challenging, but especially when you properly account for the risk on the tenor front. Agree with that?

100%, it was a lot easier to be a landlord with a 1.99 interest rate. Absolutely. In a new world of normalized interest rates, with these high house prices there's almost never a reason to be a landlord. When you look at property taxes right now it's crazy the percentage jumps that we're seeing in some cities but not just once Year after year after year for three and four and five year periods We're gonna run into a major problem here where some homeowners just say I can't afford it anymore

What are your thoughts on that? My thoughts are that the truest thing is No municipality no town no city Ever found a way to cut expenses. True. Absolutely not. So if inflation is 3%, please explain to me why in the city of Toronto you do the average of 8.2% increase over the last three years. They just overspend. They overspend endlessly. They waste money completely. There's no controls whatsoever, and no matter how many politicians try to tell you there are controls, it's not true, they just

disintegrate money. So the real question is, can we please find somebody who'll say, I will cut expenses at City Hall. Until you find that person, you're in trouble. Okay, two more and I'll let you go. Student housing, you think it's gonna be under pressure with the changes to the foreign students and all these other things we've already spoken about today? Really important to understand that the actual universities like for quality degrees, that student population from other countries is not gonna change too much. It's more colleges. It was always a small, small segment. The colleges, the crap two-year certificates at community colleges, that's what blew up.

That's the whole place that's where everything went completely haywire, bad people, bad ideas. And those communities? No. is and that's where and those communities, no, those community college situations are gonna shrivel down to nothing. Okay, commercial real estate, interesting times obviously with people working from home and all the other things that have happened, I think you're gonna see more and more people forced to come back in.

Remember the banks of course are the primary lenders to a lot of the commercial real estate owners. The last thing they wanna do is see them fall under financial pressure. Do you think we're going to see more people forced to go back to work in the office? And what's your general feeling about commercial real estate? Obviously it changes region to region, but on a big picture front, what are you thinking? Jamie Dimon runs the biggest bank in North America. He said I'm bringing everybody back five days a week.

That's not necessarily because he thought it was a good idea to have everybody back, but he sure as hell has a lot of commercial real estate mortgages. So there is pressure. There will be more pressure for people to come back. That said, with the change in immigration, we're probably going to reach net negative sometime in 2026 and there just may not be the same kind of need for, and there just may not be the same kind of need for stores or for offices that existed in the last 20 years. There just may not be and that puts pressure on the price of commercial real estate. Okay well I want to thank you for coming on. I meant what I said earlier. I love your stuff. Like I watch all of your

videos, I listen to the podcast. I mean you're a very funny guy, and you put them out quickly. Like a lot of times news comes out and you're just grabbing your phone and firing something out. You've got a very loyal following. I think your authenticity, as I said earlier, rings with people and really,

I mean how many people are following you? Like some of these videos are going over huge. Yeah, on all platforms in Canada it's about 216,000. Yeah, that's very impressive. Plus, I've never heard about and then such a precise number. It's about 216,000 for 12 days. Well, there's hundreds involved there, right? Yeah, exactly. Okay, now I'm giving a trigger warning to our listeners.

If you don't want to hear a little foul language, you need to X it right now. We're done the primary part of the interview, but you can't let Ron go without him giving one of his big lines. So fire away with some f-bomb of some sort. Look, the fuckery involved in Toronto traffic never fucking ends, okay? Like, no matter, matter like Olivia Chow needs more money for roads to do what to fucking destroy more roads Look if you have to David, you know this you take the train in and then you're doomed Like you can't the minute you walk out of the train station You can't even walk properly in that fucking city anymore. Okay, you come we walk down the street There's a sidewalk just fucking ends. You have to cross the street to keep going.

Like Toronto, you're the worst fucking city for traffic and fuckery on earth. Like find a way to fix it, please, Jesus. Very well done. That's the real Ron. I'm glad that we had you surface late, but at least people got to see the real guy. Hey, seriously, that was very kind of you to find the time.

You're a busy fellow and really enjoyed having you on. My pleasure, Dave. I've actually, I watched you on a stage when you were doing the original wealthy barber presentations 39 years ago. Yeah. So you've been doing it for a while, but I remember that, I remember that day.

That's good. Well, I'm surprised to remember you're very kind. A lot of people try to block me out so for you to keep that memory 39 years that's impressive. Anyway be well and thank your staff for facilitating this. Thanks a lot Dave. Okay. Take care. Bye bye.