Two houses, two families, two cities, two questions. No, this is not reality TV. Just reality.
Hi Garth: I’m in a little pickle of a jam,andÂ I need some hard advice/guidance. I just turned 24 this past september, i have a small family 2 kids and a lovely wife.Â IÂ am on the verge of paying off my house through a lot of hard workÂ and a few good little investments.Â I haveÂ put ALL of my hard earned money into my house. We built a house ourselvesÂ and saved a fair bit of money so we have some equity built in. But here’s my problem, sure my house is going to be paid for but i have no cash , zero because itsÂ all in the house. I am proud of paying off my house but its a very bitter sweet feeling, all my money in one investment, scares me! i don’t know when work will dry up, could be this winter or maybe i’ll stay busy for another year, i don’t know
i was raisedÂ and toldÂ toÂ pay the house off first before any toys, cars, vacations. we did our best. what should i do, we have been trying to sell our house because i don’t like the idea of putting all my money in one place, i should have been more thoughtful,Â weÂ have had the house listed for almost a year and dropped the house price nearly 150,000 dollars, ( shows how inflated the housing market is). We areÂ starting to lose money on the house, and thinking about staying knowing that the housing market will never reach the heights of what we seen. We have had a lot of showings, even offers but they have all fallen through.
there seems to be no buyers, a lot of tire kickers.Â I took action and i got a heloc out against my house in case of emergency, soÂ I have some cash flow in a sense. I’ve exhausted my options, and I’m looking for options, ideas, any angle that i have missed. I do realise how luckyÂ i am to haveÂ a soon to be paid for house atÂ my age. maybe im over reacting,Â But as a father of 2 little ones you always worry about the future.
IÂ don’t have issues with you posting this on your greaterfools website. AsÂ I would like to know what peoples thoughts are.Â I know my grammar sucks, what canÂ I say I’m a welder. â€“ Paul C.
No shame, pal. Youâ€™ve obviously succeeded according to the rules you were taught. At your age to own a home free of debt is unimaginable for many.
Having said that, you’re right to worry. If demand for your trade wanes, you have no reserves to carry you through (and it sounds like you’re the sole source of income). Arranging for a line of credit was smart, since that will give you emergency funds, but itâ€™s no solution to having every single egg in one basket.
If financial security is your goal, then you’ve little option but to sell, raise cash, relocate, downsize and get the extra money working for you and your family. If the propertyâ€™s not moving, then itâ€™s at the wrong price. You may feel like you are â€˜losingâ€™ money by knocking the asking price down again, but after a year itâ€™s the only path to follow.
Try taking it off the market until after Christmas, then list it again at a lower level. That way it can come out as a fresh new listing, instead of a tired dreg. And you might want to spring for a staging.
Thanks for reminding us of how a house can become a trap.
Hi Garth: I have no trouble admitting that I am a fool, but I am hoping that there are many greater fools than myself and I am doing my best to educate myself out of foolishness. Please bear with me, my understanding of economics, politics, and finances is sadly limited. I have two questions for you and sincerely hope you can help me understand the greater picture better. I am sure you get a lot of mail, and I know you can’t possiblyÂ answer all of it, but I can hope right?
1.When the Canadian government intervened and pushed the interest rate down to keep the real estate business moving to keep money moving and keep people spending, what other options did they have to stimulate spending in the face of the rapid change in the global economy?
1.Â Can you seeÂ any way that this RE bubble bursting situation can be avoided at this point?Â What would it take, from the government, banks, or the public?
Don’t get me wrong, I am all for it bursting. We are holding our breath and keeping our happy little family of three in a 1 bedroom 560sq ft condo in Kits (that crazy Realtors have priced at $400,000) and waiting for the day when the cash we’ve saved up will be worth something a wee bit larger. While the Realtors keep telling us to fear the rising interest rates, the math doesn’t work – how do you justify bidding up an already overpriced home by another $200,000? I’ll keep working on the down payment, take a raise in interest rates, forgetÂ the bidding warÂ increase, andÂ possibly have a more reasonable price insteadÂ – thank you very much!
Thank you for your blog. You have helped me understand many issues that I wasn’t able to piece together on my own and you’ve got my husband and I both hooked.
Family of sardines in Vancouver
Those are not fool questions. As for monetary policy, the Bank of Canada moved lockstep with many other central banks to crash rates in the wake of the market meltdown and the collapse of credit markets last year. Was it necessary?
History will tell. We canâ€™t yet. Certainly there was concern banks could fall like dominoes and governments had a role in backstopping the system. Thatâ€™s why Ottawa spent tens of billions buying up bank mortgages. Itâ€™s also why the BoC moved to flood the system with liquidity and ensure the banks had access to all the money they needed.
But that doesn’t exactly explain why consumer rates went so low and have stayed there so long, since (unlike the Yanks) we did not have a collapsed housing sector to reflate. In fact other than the mortgage orgy this year, the lowest rates in history have done little if anything for the car business, appliances or other durable goods sales. But it sure has blown gas into a real estate bubble which isnâ€™t in anyoneâ€™s interests.
What can prevent this bubble from bursting? Ultimately, nothing. The pendulum has swung too far in one direction to stop at the middle now. Pent-up demand from last year has been satisfied. Future demand from next year has been sucked into the present by cheap money and the threat it might increase. Higher rates are a certainty in 2010 as governments compete for money and the US moves to support its currency.
This market will not just slow down, it will shudder to a halt.
But, seriously, they want $400,000 in Kits for 560 square feet? And three of you live there?
You want advice? Get out.
Thereâ€™s so much more room on this side of the rocks. So much less delusion.