A virgin's lament: 'Looking at hell-holes'
Hi Garth,
I was just introduced to your blog after receiving a note from my landlord to check you out. I recently let him know that my wife and I are interested in buying a home over the next few months and that we’d likely be moving out before the end of the year. He quickly introduced me to your blog and explained how right now real-estate agents are regularly pressuring him to sell his home, promising ridiculous pots of gold at the end of the buyer’s rainbow.
After reading a few of your articles and reflecting on my experience in this market so far, I know that it’s not a great time to be a buyer. We’re in no financial rush to buy, other than sitting on a pretty big down payment and putting $22,000 towards rent on an annual basis (which is extremely frustrating). Since starting our search, we’ve looked at hell-holes asking for $440K and incredible properties listed the same and selling for 150K over. It’s like we don’t know what anything is actually worth any more.
I’m a commerce grad, and I have studied economics long enough to know that demand is far outweighing supply right now in Toronto, which is obviously affecting prices. I know the HST and interest rate conditions have caused an increase in the total number of buyers. So I guess after that long preamble I have three questions for you.
1. As a new buyer, how do you judge what a fair price to pay for a home in Toronto is any more?
2. What do you expect in the short term once interest rates rise and the HST goes into effect?
3. Is it just stupid to buy right now? And if so, how long do we need to suck it up and keep renting?
Any guidance would be much appreciated. I’m sure you get a ton of questions on a regular basis, so I understand if you don’t have time to get back to me. I look forward to more great posts now that I’ve discovered your blog. It’s going straight to my RSS reader. – Alex
Well, Alex, I have posted your note to me because we love new virgins here @ Greater Fool. Naiveté is so refreshing. And to find one with a principled landlord is even more unique. So, welcome. Addiction has its rewards.
You best point is, “we don’t know what anything is actually worth anymore.” This defines a market which has strayed from fundamentals into hormones. People want houses so badly that they pay almost anything for them, which imbues real estate with such value that it makes others want it even more.
This madness is fueled by dirt-cheap money, which many newbies totally fail to recognize. Because a mortgage is, oh, 2% today, that becomes the norm for first-time buyers, who base their entire budgeting process on a number which is extreme, and about to swell like a horny blowfish. These emergency rates, combined with 5% downpayments, 35-year amortizations and banks willing to lend to people with no money since the government is backing them, have created the situation you now face.
Half-million-dollar skanky dives. Greedy sellers who even don’t bother rinsing curlies out of the sink before a showing. Real estate agents who collect commission for showing up. And a disconnect from reality for a commerce grad like you.
But, Alex, there is hope. This will not last. So let me get to your questions:
(1) A fair price for a house is what people can afford. That seems to be somewhere around four times income today with these cheap rates. With normalized mortgage costs, fair value is probably a little less. The media income in T.O, is about $77K, so the average house should cost $308,000. The average now, however, is $431,500 – a $123,000 premium. Yes, Alex baby, this means the market is overvalued by 28%
(2) What comes next? Well, my view is that 2010 will be a tipping point. The combination of rising interest rates this summer with the HST, more job losses (check out Siemens), government cutbacks and buyer fatigue will start the process. Sales volumes will fall even as prices rise, then both will decline together – starting a process which will probably last for years.
(3) Stupid to buy now? Yeah, Rahim Jaffer stupid. Your LL may like cashing your rent cheques, but he’s actually saving you from your own self-destructive juices. Wait as long as you can. All of this year, for sure. And a good chunk of 2011, too. You may end up with a higher mortgage rate, but a far smaller loan. A smart boy like you would get that.
So, Alex, we welcome you to this oasis of contrarianism. Drink deeply, son.
And don’t mind the dogs. They always do that to a new leg.
126 comments ↓
Looks like my dad’s house back on The Rock
Garth,
Alex will miss out on the $750 the Canadian government so generously offers first time home buyers. Never mind that this generousity is money the Govt does not have and is borrowing from all taxpayers. This government is fuelling the real estate bubble at all Canadian taxpayer expense. So maybe Alex should buy and get in on our governments generousity before it is too late.Here is the information:
Canada Revenue Agency
http://www.cra.gc.ca
Skip to content | Skip to institutional links Common menu bar linksFrançaisHomeContact UsHelpSearchcanada.gc.caAbout the CRA > Federal Government Budgets > 2009
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First-Time Home Buyers’ Tax Credit (HBTC) What is the home buyers’ tax credit (HBTC)?
How is the new HBTC calculated?
Am I eligible for the HBTC?
What is a qualifying home?
Who is considered a person with a disability for purposes of the HBTC?
If I buy a house, can my spouse or common-law partner claim the HBTC?
My friend and I intend to jointly purchase a home, and we both meet the conditions for the HBTC. Can we both claim the credit?
Do I have to register the acquisition of the home under the applicable land registration system?
How will I claim the HBTC?
Do I have to submit any supporting documents with my income tax return?
Is the HBTC connected to the existing Home Buyers’ Plan?
Where can I get more information about the new HBTC?
——————————————————————————–
1. What is the home buyers’ tax credit (HBTC)?
For 2009 and subsequent years, the HBTC is a new non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009 (i.e., generally means that the closing is after this date).
2. How is the new HBTC calculated?
The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750.
3. Am I eligible for the HBTC?
You will qualify for the HBTC if:
you or your spouse or common-law partner acquired a qualifying home; and
you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.
If you are a person with a disability or are buying a house for a related person with a disability, you do not have to be a first-time home buyer. However, the home must be acquired to enable the person with the disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.
4. What is a qualifying home?
A qualifying home is a housing unit located in Canada acquired after January 27, 2009. This includes existing homes and those being constructed. Single-family homes, semi‑detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify. A share in a co‑operative housing corporation that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.
Also, you must intend to occupy the home or you must intend that the related person with a disability occupy the home as a principal place of residence no later than one year after it is acquired.
5. Who is considered a person with a disability for purposes of the HBTC?
For the purposes of the HBTC, a person with a disability is an individual who is eligible to claim a disability amount for the year in which the home is acquired, or would be eligible to claim a disability amount, if we ignore that costs for attendant care or care in a nursing home were claimed for the Medical Expense Tax Credit.
6. If I buy a house, can my spouse or common-law partner claim the HBTC?
Either one of you can claim the credit or you can share the credit. However, the total of your combined claims cannot exceed $750.
7. My friend and I intend to jointly purchase a home, and we both meet the conditions for the HBTC. Can we both claim the credit?
Either one of you can claim the credit or you can share the credit. However, the total of your combined claims cannot exceed $750.
8. Do I have to register the acquisition of the home under the applicable land registration system?
Yes. Your interest in the home must be registered in accordance with the land registration system applicable to where it is located.
9. How will I claim the HBTC?
Beginning with the 2009 personal income tax return, line 369 is incorporated into the Schedule 1, Federal Tax to allow you to claim the credit in the year in which you acquired the qualifying home.
10. Do I have to submit any supporting documents with my income tax return?
No. However, you must ensure that this information is available, should it be requested by the Canada Revenue Agency (CRA).
11. Is the HBTC connected to the existing Home Buyers’ Plan?
No. Although some of the eligibility conditions for the HBTC and the Home Buyers’ Plan are similar, the two are not connected. Your eligibility for the HBTC will not change whether or not you also participate in the Home Buyers’ Plan.
12. Where can I get more information about the new HBTC?
The CRA encourages taxpayers to check its Web site often—all new forms, policies, and guidelines are posted there as soon as they become available.
Date Modified: 2010-03-02
Top of PageImportant Notices
Just remember one thing,
VALUATION IS VARIABLE!
DEBT IS CONSTANT!
You can go from one nicely placed money in pocket ready to spectate and pounce to shackled to debt ready to put one in your head scenario!
It’s different in Canada alright!
Alex – make yourself feel better about renting
I bet you have already done this, but in case you have not – cost out what you are saving each month renting versus buying.
Buying at $600K – a cool $1500 per month interest
Property taxes – $250 – $300/m
Upkeep – like new water heater, roof , furnace, toilets, etc. – $50 – $150/m depending on how old the house is.
Cost of commuting because the only house you liked that was affordable was in Pickering.
And keep your landlord he sounds like a good guy.
Best to take Garth’s advice as far as Toronto is concerned. I too, have had realtors harass me to sell. I put it to them that if it is such a good time to buy then they should sell their home. That usually shuts them up.
There are some OK places but from what I can see, sellers are trying to dump places that they have wanted to for years. This spring is going to be ugly. People will pay basically anything. Obviously it is better to have a lower principal than a lower rate and higher principal.
Bound to correct at some point but Toronto is filled with citiots indeed.
RE: STUPID BEARS
Wow – that was quite the rant, hope you come back.
As for your statement that most of the bears on the blog are 20 somethings that have been left out sitting on the sidelines – you should read a bit more carefully.
There are many of us that have seen this all before (me for example going all the way back to the meltdown of the early 1980s).
I have owned several homes and two rental properties and am now out of it all because I think things have just gotten silly.
YEP, I may be wrong – but from what I have seen of bubbles in my life I think there is a better chance that the market will see a major correction than continue to hurtle upward.
Market Value Defined
“The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably, and assuming the price is not affected by undue stimulus”
I think we can safely assume that what homes are selling for right now is not true Market Value.
OK Garth,
if houses on avg should cost four times median income, then the median income in Vancouver must be less than Toronto, because there are hardly any head offices or large companies. Say its around $70,000. So a house should cost around $280,000. They are now over $900,000. What is the likelihood they will drop to anywhere near $280,000? Have they ever been priced at 4 times the median income? If so, when was the last time that happened?
That’s why I love your blog!
Nothing worse than losing a good tenant!
“Real estate agents who collect commission for showing up”
You’ve got to be kidding. It’s that crazy out there? Is this basically agents charging retainers?
This is not going to end well…
Garth,
Forgive me if you’ve covered this somewhere already, but there is still uncertainty over what the new rules mean regarding qualifying mortgage rates come April 19.
CHMC is not clear, mortgage brokers seem confused and bulls & bears are arguing over it.
It comes down to 5 year posted rates and 5 year discounted rates.
The part that IS clear is for people who will end up choosing a variable rate or a fixed of less than 5 years. They will have to qualify at the posted rate of 5.39%.
The ambiguity comes in for people who will be choosing a 5 year or longer fixed rate. Some say these folks will have to qualify at the same 5.39 while others say they get a loophole and will get to qualify at the discounted 5 year which is around 1.5% less.
Any chance you can clear this up?
If it wasn’t already posted here’s the new qualifying rate
Well I have owned in Toronto. Any person telling you that your rental payments are money down the drain is an idiot. How about $3500/ year on property tax. You won’t see that again. Let’s add $2000 per year to heat your house. Electricity, house insurance, water bill -maybe another $3000. And then the mother of all utilities – mortgage interest. You are now well beyond your rental payments. Oh you need to fix something? Your landlord covers that. As an owner you get to spend 4 grand on a new roof. The list is endless.
Wait a while to buy…
Feel better about renting by taking some ‘newbie’ home slaves (renting from the bank, think they own a home)-friends out to dinner at a 5star and pay cash for your dinner…and theirs too. Discuss the pro’s and con’s of paying a massive mortagage off vs. your freedom.
Choose some newbies about a year and half into “ownership”; the romance of the ownership will have passed a little, you’ll get a more truthful response…
Return home have a beer, contemplate……..
If the landlord is pro renting and thinks homes are undervalued, wouldn’t it make sense for him to let his renters go and sell the place as fast as possible?
Sorry, I meant homes are overvalued. Please edit for me Garth.
Thanks,
Nolan
Garth – you (and so many others) frequently compare median or average house prices to median incomes. Why should there be any relationship between the two?
I have long questioned the supposed relationship so many propose exists. Why should the “average” family be able to afford the “average” house. Such a premise seems to suggest that every family should be a home owner. A world without a rental market to speak of. Since we know this is simply not the case (and never will be in any major center), why do ‘we’ continue to compare average incomes to average home prices? Both figures of interesting indicators of entirely different things, in my opinion, bu do not have the simple linear 4x relationship.
curious.
Alex, welcome, come in. Perhaps some other suggested reads; I’m guessing that your economics profs were Chicago school, or Keynesians or Friedmanites or some such. Luckily I was never taught economics. So I could reject the non-sense non-reality derived from these twits based on the fictionally rational homo economicus. The Austrian school (nicely summarized by Rothbard in The Case Against The Fed http://mises.org/books/fed.pdf ) and the reality of behavioural economics (see Dan Ariely’s Predictably Irrational) may be of great interest.
Welcome again.
Not sure what to think of the landlord. We all act in our own self interest, and usually talk our book. Why does he want to keep the tenant so bad? Does he suspect rents are falling? I mean, I got a pretty good landlord too, but he takes every opportunity to offer to sell me the place. He wants out, but I am pretty sure I cannot/will not hit his number.
If you imagine the landlord is as selfish as anyone else, he either has a lot of equity and wants to keep a good tenant, or he thinks he will not be able to re-rent the property at the current rate.
I don’t understand why the landlord wouldn’t sell if realtors are calling him all the time asking if he would. If he thinks prices are extended and had any business sense, he’d hit the bid and kick the tenant out.
Something about this letter doesn’t sound right. I think we’ve been set up again by a realturd trying to make it sound like landlords are desperate to keep tenants or something. But I don’t know why they would, if it’s hard to keep tenants rents are falling which makes owning less good.
This letter doesn’t make sense. The only plausible motivation for the landlord is if he knows rents are falling and he can’t get what he paid for the property if he sells. Otherwise there is no motivation for him to be so magnanimous with his advice.
Landlords are landlords because they are real estate bulls, or were when they bought. Something is wrong with this letter.
Just got this in an email tonight and had to share with the blog dogs,
I know this house in VAN proper would sell for 300K but even by toronto standards I think its a joke.
http://www.realtor.ca/propertyDetails.aspx?propertyId=9211310
MLS®: W1805558
7.25 feet X 113 feet, thats not a typo, the house is 7 feet long!!
its a “MUST SEE” it even has 100 amp service, for what I don;t know. Judging by the measurments listed it is a whopping 264 sq feet. WOW.
Im not even joking that my garage is bigger then that.
169K/264 sq feet = $640 a sq foot,
In the very upscale, excutive, exclusive area of Dufferin and Rogers
Don’t get caught in the market value trap.
You buy when it makes sense for you – not what someone else is willing to pay.
Make a budget with a realistic estimate of what you can afford to pay as a mortgage. Live a year on this budget. Save the difference between rent and the hypothetical mortgage payment and invest it in a TFSA, max out your RRSP’s , pay off debts, develop a credit rating, always say hello to your banker, bring flowers home to your spouse every Friday.
Find the neighbourhood you would like and the home you would like to own.
Wait
Wait
Wait
Buy when the prices come down to your budget. Be realistic. Don’t try to guess the bottom. Have fun.
Not arguing with the overall argument that real estate is overpriced, however I do not think that this statement is accurate:
“The median income in T.O, is about $77K, so the average house should cost $308,000.”
Wouldn’t this number be warped by income distribution? Something like 30% of people rent here in Toronto, the vast majority of which are at the low end of the income spectrum which drags the city average down. I know that this is true in other cities, but Toronto does have a rather large segment of people at the top of the scale as compared to elsewhere, almost all of whom own expensive properties.
I’m not justifying housing mania due to it being ‘different here’, just saying that using average number may not be a good reflection of how overpriced the market is.
Garth, are there any statistics out there that use a median price ratio rather than an average price ratio that might provide a more clear comparison of cities in Canada?
Go ahead Alex jump in the water’s warm.
Also if you get into financial trouble later you can always sue Toyota to help you out like this infamous Prius driver did :
http://jalopnik.com/5491101/did-bankrupt-runaway-prius-driver-fake-unintended-acceleration
I’ve seen/lived through 2 crashes in Toronto, 1982 and 1989. This time is different, credit is easier and cheaper than ever in history. I am even starting to believe the price run up has considerable “legs” but ask yourself: How lucky do you feel punk?
(with apologies to Clint)
1) So for Vancouver:
Current median total family income $75,000 /yr (extrapolating av $3000 / yr increase from StatsCan 2006 data)
http://www40.statcan.ca/l01/cst01/famil107a-eng.htm
Feb 2010 benchmark price for detached in GVA $800K
http://www.rebgv.org/housing-price-index?region=Greater+Vancouver&type=all&date=2010-02-01
4 x $75K = $300K reasonable house price
So GVA houses are on average $500K overpriced. Holy doodle.
2) On recession-proof jobs:
#97 kc on 03.11.10 at 4:35 pm
“only 2 things in life are 100%…. death and taxes, you must be an undertaker”
Death and taxes 100%. Really? Dude, yesterday I saw a kid get out of a Bentley Continental GT and skulk his draggy-ass pants into a 7-11 for a Slurpee. He’s going to die one day but he ain’t payin’ no taxes. Maybe that’s why he can afford a house in this town.
#111 & #113 Jake on 03.11.10 at 5:44 pm
You’re in med school. I was also. Good move. You’ll be fine. Go into a specialty that treats seniors primarily. Works for me. I’m just lucky I finished school before tuition skyrocketed.
“what about least recession proof jobs?”
How about these?
http://www.huffingtonpost.com/2010/03/11/the-13-funniest-help-want_n_493654.html
I like number 6.
Welcome Alex…after today you will no longer be a virgin. I was in your shoes a year ago…should I get into this insane market???My wife is about to leave…then I checked the cap rate on my rent with the house I am in….3%!!! (divide how much your total yearly rent is by the market price of the house) Anything under 5% and you should feel good about renting.
So, sit back Alex, enjoy the pretty pictures Garth puts up 5 to 6 days a week (Except bumper testicals) and feel good about having a landlord that has a copy of Money Road in his back pocket.
L8er!
#99 junius on 03.11.10 at 4:40 pm
Thanks for the book references. I will read them.
{dry-humping Garth’s leg}
Garth,
Please do a posting on recourse mortgages and defaults. Do Canadian lenders tend to go after mortgage defaulters if a house sale doesn’t cover the mortgage? How tough is it for someone to get out of this kind of debt through bankruptcy? Is a defaulter responsible for the 3 months interest and firstborn child penalty for not completing their 3 or 5 year term? What does a typical mortgage default look like in Canada?
How many ways can owning a home eat 22K in a year? Here are some I can think of:
1. 25 years paying ONLY principal on $550K – which will get you a “starter” (a.k.a dump) downtown in the current market
2. Interest ONLY on a mortgage of $1.1M at 2%, $440K at 5%, and just $275K at 8% (notice how quickly affordability erodes with small interest rate changes).
3. New roof and leaky basement in the same year
4. 3K annual property tax, 1K water and garbage, 1K house insurance and $1400/month mortgage payments ($270K @ 4% over 25yrs)
5. My favourite: the condo/townhouse special assessment to fix something or to build the reserve fund back up after an expensive year.
Most people don’t understand how interest works and are completely unaware that they will most likely pay double (even triple) the borrowed amount unless they accelerate payments. 35 year ams are no favour to anyone.
The ‘affordability strategy’ my husband and I used was to only borrow half of what the bank offered and then double as many payments as possible. This meant we only looked at the absolute bottom of the market (for a long time, too) but the plan was that we could absorb one job loss or triple interest rates, since we were riding the variable. Luckily, neither occurred but we did get nailed with tree, roofing, chimney, and plumbing issues all in a short span – cost? A year and a half’s worth of double ups and way more than 22K!
Alex is in reasonably good shape. Keep renting for now — it will be easy to notice when TSHTF. As a poster said (something like): LIQUIDITY = FREEDOM.
Remember Toronto 1989 when the first round of sheepelettes were herded into the slaughterhouse.
Decent landlord to boot. You scratch my back, I’ll scratch yours.
——
Timing is everything — note how the article uses the line “. . . “Imperial collapse may come much more suddenly than many historians imagine.”
Yellowstone Kick start the other fault lines first, get them rumbling and ready!
Link at end with pic. Last sentence is good — 2012: A Preview! The date in link is interesting (Feb. 22 — that was when the Hadron Collider was started, the week following the Chile ‘quake.
Several days ago, speculation was the next major ‘quake would be around Japan or Iran.
Pic is better — money plugging the toilet up.
EM inflation? Never heard of it.
There’s those names again.
My advice, keep renting.
Typical long term renters are paying under market as landlords would prefer not to have constant tenant turnover and keep their rent increases minimal.
We rent. We have two kids and a dog to boot.
I couldn’t be more happy. Waterfront with waterviews. No taxes, no maintenance. Full amenities.
Only a few minutes walk from all the Olympic venues.
It was a fun February btw. Didn’t have to fight in traffic/transit or find a parking stall.
I’m paying a fraction of the costs of owning.
However, you MUST… save and invest the difference.
This is KEY!
We’re liquid and our net worth is rising steadily month over month.
Meanwhile those we know who own are shaking in their boots.
Hello Alex,
I feel for you guys, it is very difficult to know what to do. We sadly, listened to the contrarians in November 2008, sold our home in Vancouver when the market crashed and lost 30% of equity. That pathetically amounts to at least $300,000 of tax free money.
We are renting right now and it sucks large. You want to make sure you are on the same page as Garth and the blog dogs – you will find that many on this blog are misanthropes ( Garth not included of course!). They make you feel like you are some sort of leper for wanting to nest and make a home for yourself – insisting that you are yuppie scum who have bought the lies of HGTV instead of recognizing that you just want what your parents wanted and their parents wanted..a home…
They tell you to that you are a fool to want to live somewhere with a pulse like Toronto or Vancouver and you should be content with living in RR#5 newfoundland or jacksonville florida for 1/100 of the price. Sorry guys, LIfe is too short to live in the burbs and the city comes with a price because everyone wants to live there ( and the fact that eveyone wants to live there raises AND sustains prices)
So, selling our house was the WORSE thing we ever did – once you are in the market, DO not leave it, hedge your bets if you must and move to a more afforable property in case things go south. Who cares if prices come down 20% when they already went up 30%? you need a place to live for heavens sake- real estate is cyclical it goes up, it goes down…follow history
However, the damage is done.. we know we screwed up with selling however, I think we would be fools to buy in this sellers market..we have no choice but to wait for awhile…LIke you, however, I just hope it is not the wrong choice. It is the supply/demand thing that speaks the most volumes for buying now – if there is no supply how can there be this monumental crash about to happen? a correction yes, but bollocks to a crash
However, dont listen to anyone else including a bitter chick like me -You are a smart guy, think about responsible limits,would you be ok paying the bills if one of you lost an income? Most importantly, dont look at a home as an investment, look at it as a place to live.
I am sure none of this is helpful , but chin up honey, these are troubling times, I think Garth is right with telling you to wait but who has a crystal ball right?
Good luck to you Alex
Alex:
The capital cost of home ownership ( read purchase price ) is at or near the TOP …. the ongoing operatating costs of home ownership ( read mortgage interest, taxes, utilities, etc. ) are at or near the BOTTOM.
Given that you are a commerce grad and have studied economics, you are already two steps ahead of Finance Minister Flim Flam Flaherty. Stay the rental course, as short term pain for long term gain will win out.
http://www.waterwarcrimes.com shows the real judiciary and political status in this country (anyone else other than a politician would be in jail for possession of a $1000 in coke in their car). All crooked and on the take. That’s why it’s taken 5 years and yet the BC Rail theft is still not in court. Toss them all out with a revolution and then place bean counters in there with HUGE penalties for digression (like death or life in jail). Get rid of all these crooked bastards now!!!! Is this the fight you’re speaking about Garth????? I hope so…….
Alex…
take a look around for some older places a liitle farther out for rent …some older places to…email friends. You never know…maybe a friends parents could be renting an apartment or basement suite… there are lots of options
good luck
I see Stevie went on You Tube to bring the internet to the House of Commons. Do you wonder if he knows of any other MP who have tried this? Conservatives do learn, but slowly very, very slowly.
I know laying down the $22,000 per year hurts but if you want to live in TO I’m afraid you’re stuck with it. Costs of owning a home are expensive, especially for older houses, and especially in TO with their fancy land transfer tax, rising property taxes and insane market prices.
If you are indeed intent on buying, have you considered moving away from Toronto? Houses are a lot cheaper if you move further out and may not be touched as badly from a RE correction in the future.
PS. I’m a landlordin southen ontario and am in the process of selling all my rental properties….prices are high, tenant quality is low and we’ve fixed the buildings up to the point where they can’t get much better. Can’t wait for the money to hit my bank account and be out of this business (for now at least…). let the tax advantaged, effortless dividend income start to flow…
This beauty was listed last week at 329.
Relisted 50% higher a week later.
What gives?
http://www.mls.ca/PropertyDetails.aspx?PropertyID=9216118
House price can also be compared to per capita GDP, in Canada the historic norm is apparently 6 times that. In Canada houses are 333K and nominal per capita GDP is about 38K ($US).
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29_per_capita
Median house price in Canada is now 8 time GDP, about 1/3 above historic norm.
In the US, our competitor and client, homes cost 175K and GDP is 46K. Houses cost 3.8 time per capita GDP.
Considering wealth and productivity homes are currently about twice more expensive in Canada than in the US. Obviously given the economic integration of the two countries that can’t last.
I echo the request for a blog post on defaulting on mortgages. What’s ahead for people who bought high and need out? For the banks that lent to them? And how does the taxpayer figure into all this?
#19 K1
That house is famous. Been in the papers many times. Probably a bargain just for the novelty and bragging rights. Who else in Canada has a 7.5 foot wide property with a house on it?
Sorry only one visitor allowed at a time.
On a related note, the employment figures are in and there were over twenty thousand jobs created (woo-hoo!)
Now, forty-thousand jobs created were in the public sector (we won’t mention those private sector losses- who needs ‘em), as we all know, is excellent! It means the economy MUST be hopping along like Daddy Carney says it is.
In fact, just yesterday, I saw 6 hard working public employees ( Department of Roads) cutting down some branches. Well, one of them was cutting down branches (the young guy) and there were two guys at either end of the sidewalk (controlling sidewalk traffic), and three guys standin’ there watchin’.
When you think about it, these ARE the kind of jobs we need. Real jobs! Gov jobs! This is great! Who needs to slave away taking business risks, or sweating it out in a Siemans plant, or growing tomatos, or mixing concrete! Those jobs are for suckers!
Oh, and Alex, before you buy a house, try this little experiment. Say, you pay 1800 per mo renting, but the cost of ownership (your mortgage (and all the other stuff)) is going to be, you know, say 3200 per mo. Well, try for 6 months putting that ‘extra’ 1400 per mo aside (in a sock somewhere, under the bed) and see how much fun that is.
If it is FUN, buy your house.
If is isn’t FUN, don’t buy your house.
Good luck.
Not only informative but friggin’ hilarious to boot.
“And don’t mind the dogs. They always do that to a new leg.”
God, I love starting my day reading Garth.
Garth,
I’ve seen you speak twice. Neither of those times did you make use of the word ’skanky’.
Please…next time…just once for the Dogs in the audience?
#19 kitchener1 – I’m surprised that’s even legal.
i’m in the same boat, alex buddy…
but lemme ask why in the world you’re renting a place at $22K a year. i have a wonderful 2 bedroom 1000sq ft apartment in the west end for under $13K a year.
if i were to “invest” in a condo of that size in my area i’d be paying double or triple that sum.
sure, our place isn’t totally posh with granite countertops and stainless steel appliances and “laminate” flooring, but we have a big balcony, a great property, and enough actual square footage to entertain 25 people.
in this market property prices and rents are all completely out of whack. it makes no sense to purchase when it costs so much more. a place to live is an expense. the less i pay for that expense, the better!
1/
Toronto RE prices are rising…like catching up to Vancouver’s…but the rate of increase seems like a bubble.
2/
The Loonie continues towards Par with the US Dollar…forget about Ottawa raising interest rates friends.
3/
New specific “Spec” taxes will be initiated, not higher interest rates.
4/
Higher interest rates will kill what’s left of Ontario’s export manufacturing economy….Ottawa wants an 80 cent Loonie friends.
5/
Can anyone explain this current phenomena of rising RE prices in TO w/ a rising Canadian currency?
Nostradamus jr.
I heard a nice Home Town pumpin “be true to your school” style artical on the radio in to work this morn. It was about the Iranian community buying houses and condos. They see the Canadian market (specifically T.O) as a real estate safe haven and are spending enormus amounts of $ on real estate in T.O!
Approx 5 yrs ago they were buying up everything in Dubie!,…however that market has gone flat…
So. Canada! Ohh Canada! Toronto! this is the new market.
So. Garth? What do you think of this.
Should they be using the old theory, (buy when others are selling, sell when others are buying)…or is there something different here?
Adding to #3 comment. My house in SW Ontario is paid for. I keep track of my house expenses on my computor. The house expenses which include taxes, insurance, utilities such as gas, water, sewer, electric, and minor repairs on my 9 year old house – they come to $8000/year. 40% of that is taxes alone.
So Alex – don’t under estimate the expenses other than the mortgage. If you add the $8000 expenses to the interest only portion of the mortagage, don’t be surprise to be the same cost as your apt or more. Remember a mortgage is most interest for a number of years.
So the only advantage of home ownership would be a rise in the house value, and Garth is making a arguement that it may actually decline from here.
a/
Are Toronto RE prices rising to Par with Vancouver’s?
…How many of these home buyers are foreigners who recognize Canada’s true value and safety?
(Natural resources and teenie tiny population and it’s isolation from the rest of the Overpopulated world.
b/
…Worthy of a repost…w/ thanks
#33 Disgusted In BC
http://www.waterwarcrimes.com
Nostradamus jr.
@21 Wookie
Then explain the myriad speculators sitting on luxury condos – all with their sights on the high end of the renters market.
Also, I’ll never understand the mentality that paying xx dollars for somewhere to live with virtually no responsibilities is ‘throwing money away’ while forking over the same amount in the form of interest payments to a bank is not??
I can remember the late 80s when interest rates sky-rocketed. Trying to predict what mortgage rates will do in the next five years is a fool’s game but keep in mind it’s not up to Flaherty or Carney.
‘Investors’ have run up stocks and junk-bonds pretty much as far as they’ll go, a further rise in commodities will bring out the pitchfork crowds – ‘Bond vigilante’ is the new trend to watch for.
Excellent article today here: Why buying a house is a bad investment
http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20100315_10019_10019&utm_source=business&utm_medium=rss
Alberta was the only province with a “notable employment loss,” with 15,000 fewer people having jobs there in February. There was little change in Ontario and Quebec, while gains were seen in provinces such as British Columbia, Nova Scotia and Saskatchewan.
I remember the collapse of the late 80s bubble. I was a teen back then admiring Tom Vu (sp??) getting rich off real estate one moment and the next moment the market just nosedived. Bubbles alway burst.
>.#5 omg on 03.11.10 at 10:11 pm
>RE: STUPID BEARS
[snip]
>As for your statement that most of the bears on the
>blog are 20 somethings that have been left out sitting >on the sidelines – you should read a bit more carefully.
>There are many of us that have seen this all before (me
>for example going all the way back to the meltdown of
>the early 1980s).
[snip]
Job stats are a joke! Like we need more government jobs!
Garth, we may have to book the saddledome for your trip to cowtown, 2nd venue completely booked out after the first one was also too small.
As for our virgin, i really think he just wanted confirmation that he’s on the right track.
#39 Nancy
I certainly concur! We need a blog exposing mortgage defaults, and forecasted defaults for the coming 2-3 years!
To me, DEBT is the ugly beast hiding in the bushes waiting to pounce!
I am also interested in the Canadian stats of personal indebtedness with comparisons to the past and other countries. I know we have general numbers like 141% but is there any other side to the story?
Personally , my values says something’s a miss today with the numbers…either some people have one hell of a lot of secret money that I am not aware of or we’re skunked!
Alex:
1) rank the stability of your jobs
2) rank how long you think you’ll be in the area
3) measure the afordability of the mortgage you may take on at a higher rate (i.e. 7 or 8%)
4) Consider how much equity you can build over the next 5 years at 4%, and how much the market may go down (i.e. you’re going to pay over $110,000 in rent over the next 5 years– this money towards a mortgage would give you over $50,000 in equity, thus a drop in house price from $500,000 to $450,000 over that time essentially would do no harm)
5) consider if you’re the type of person who likes to spend time in home depot and doing things around the house.
6) consider that although house prices may be in a bubble, this bubble may just persist for another few years
7) consider that your landlord recommended you to this blog because he’s just trying to get you to stay a renter
I know a 24 year old woman, one year out of school, single, who is at a place where they just announced big layoffs. She is concerned she may get let go, because the layoffs will be senority based. If she is let go, she’ll get about $5000. She has $10000 saved for a down payment.
She has been approved for a $375,000 mortgage, and she wants to know if I think its a good time to buy a house.
All her friends are telling her it is, and even her Dance Instructor thinks its a good idea!
Sigh.
#16 mork – Why should the “average” family be able to afford the “average” house. Such a premise seems to suggest that every family should be a home owner.
I think the premise of that benchmark is more that, with median home prices historically being 3x that of median income, the people who were financially fit to own a home, were able to do so. Doesn’t mean that everybody with a median income could own a median home – just that there was “a balance” in the market.
#31 badkitty – It sucks that you hit it 300k large when bailing out. If you’re already 300k in the tank though, why would you still bail out. At that point, it’s almost like an extra 100k loss on paper would be much easier to swallow than an actual loss of 300k?
In view of Helena Guergis’s meltdown at the airport not long ago and her husband Rahim’s purchase of a get out of jail free card please join me in asking the Prime Minister to randomly drug test members of his cabinet starting with Helena. This practice is common in the Canadian Forces, professional sports, among employed persons in a position of trust and even truck drivers. Seems asking it of cabinet members would not be unreasonable considering the ever increasing control they have over our daily lives.
And oh yeah. you could buy half this frigging island for $750K.
Charles.
function called repo 105
whereby you can repo a position for a week and it is regarded as a true sale to get rid of
net balance sheet.”
Lehman used Repo 105 for no articulated business purpose except
“to reduce balance sheet at the quarter‐end.” Rather than sell assets at a loss, “[a]
Repo 105 increase would help avoid this without negatively impacting our leverage
ratios.” Lehman’s Global Financial Controller confirmed that “the only purpose or
motive for [Repo 105] transactions was reduction in the balance sheet” and that “there
was no substance to the transactions.”————————-
…Lehman did not disclose, however, that it had been using an accounting device
(known within Lehman as “Repo 105”) to manage its balance sheet – by temporarily
removing approximately $50 billion of assets from the balance sheet at the end of the
first and second quarters of 2008.20 In an ordinary repo, Lehman raised cash by selling
assets with a simultaneous obligation to repurchase them the next day or several days
later; such transactions were accounted for as financings, and the assets remained on
Lehman’s balance sheet. In a Repo 105 transaction, Lehman did exactly the same thing,
but because the assets were 105% or more of the cash received, accounting rules
permitted the transactions to be treated as sales rather than financings, so that the assets
http://lehmanreport.jenner.com/VOLUME%201.pdf
http://lehmanreport.jenner.com/
============
Warnings by Mr. Liu
http://www.henryckliu.com/page212.html
the repo time bomb
Gee……sure a lot more ‘med students’ on here lately.
You’d a thunk they’d be waaaaay too busy.
Just saying……
Trust me……..I’m a doctor!
The scale of corruption in the US financial/Government systems is both breath-taking and depressing. If you thought America is going to “recover” anytime soon and pull Canada along behind it, sadly, it does not seem it will work out that way:
“What The Lehman Report Proves: Financial Insolvency”
http://market-ticker.denninger.net/
“The Lehman Report on which I wrote last night regarding deeply troubling issues surrounding the Lehman Bankruptcy, has laid bare some very ugly facts relating to our financial system, corporate governance, and our government’s active complicity not only in the Lehman collapse, but in ongoing balance sheet shenanigans and the current investment picture.”
“Accounting Fraud, Short Sellers & the SEC”
http://www.ritholtz.com/blog/
“Pathetic
All in all, the entire system failed. The situation is utterly disgusting, and if the investing public pulls its money out of the completely corrupt public markets for a generation or more, it would not surprise me . . .”
“The Empire Continues to Strike Back: Team Obama Propaganda Campaign Reaches Fever Pitch”
http://www.nakedcapitalism.com/page/2
“”I’ve seldom seen so much rubbish written by people who ought to know better…”
All of those are top economics Blogs written by people who trade the market daily, not leftist academics who have never been out of the ivory tower. They have been saying the same things for years, from back when they were called “bears” or “doomers” by most. Sadly for the critics, Bloggers were correct, MSM and “economists” entirely wrong (some 15-20 out of 15,000 global pro economists saw this crisis approaching) – now these are the same talking heads they trot out on pimp TV to tell you “the recovery is strong”. With that kind of credible predictive record (about 0), I’ll take the Bloggers every time.
Some may disagree. Such is life.
@#50: “Also, I’ll never understand the mentality that paying xx dollars for somewhere to live with virtually no responsibilities is ‘throwing money away’ while forking over the same amount in the form of interest payments to a bank is not??”
Agreed 100% and this is my standard response to those who talk about “throwing money away” on rent. Mortgage interest and taxes go nowhere to increasing equity in a home.
When they reply that I’m just paying someone else’s mortgage, I point out that that “someone else” bought near a market bottom in the mid-90s and if I were to buy the same property today, I’d pay three times as much.
I think I’d rather pay someone else’s $100k mortgage (and have him absorb taxes and maintenance) than try to cover my own $400k mortage.
http://www.businessweek.com/news/2010-03-12/companies-poised-to-issue-most-debt-since-2006-canada-credit.html
“Economists predict the Bank of Canada will raise interest rates 125 basis points by the end of the year, according to the median forecast of 10 economists in a Bloomberg survey. Governor Mark Carney pledged to hold rates at a record low 0.25 percent through June.”
@16 mork sayd:
//I have long questioned the supposed relationship so many propose exists. Why should the “average” family be able to afford the “average” house. Such a premise seems to suggest that every family should be a home owner. A world without a rental market to speak of. Since we know this is simply not the case (and never will be in any major center), why do ‘we’ continue to compare average incomes to average home prices? Both figures of interesting indicators of entirely different things, in my opinion, bu do not have the simple linear 4x relationship.//
Exactly. There is no linear 4x relationship. That is why your suggestion that each family entitled to own home is wrong. It shows that family with less and less income can afford less and less of home and after certain cut line there is no small enough home that can be purchased with those family incomes. 4x is valid only in these low rates conditions. Otherwise it’s rater 3x. Why that relationship important is because it shows how much of your disposable income goes to service your mortgage debt, therefore deteriorating your life style. At 4x, 5x, 6x, etc. you don’t have life anymore. All you have is mortgage payments, bill payments, credit card payments, and overtimes to cover for money shortages.
I think that is why Garth calls it insanity. People agree to become debt slaves to own “property”. People are misled or tricked to believe that they “own” the home, or will own it in the future. They are told that this is what “pay yourself first” means. And most importantly they cannot distinguish between asset and liability. They lied to believe that residential property is asset, when in 99% of all cases it is liability. They cannot count and cannot see farther than 20 cm (where dot line is). People don’t know real value of money or real value they are paying for homes. They think that they pay 400K for home and usually they are puzzled then I tell them that they in fact will pay ~1.2M (principle + interest) for that piece of junk, which is their after-tax combined salary for 24 to 40 years. Then they need somehow to earn some extra money to cover everyday expenses and pray that nothing bad happens for those 24 to 40 years (job loss, disability, etc.). This is what 3x is all about.
We’re not doing that to a new leg… it’s just raining!
#41 Tim wrote “When you think about it, these ARE the kind of jobs we need. Real jobs! Gov jobs! This is great! Who needs to slave away taking business risks, or sweating it out in a Siemans plant, or growing tomatos, or mixing concrete! Those jobs are for suckers!”
Couldn’t have said it better myself. I *do* feel like a sucker for not working a government job. I get less pay, less vacation time, less benefits, longer hours… we should ALL work for the government, that would be great!
And according to the unemployment report, we are well on our way, adding 46000 government jobs and 14000 wal-mart jobs in past month. That’s three public sector workers for every private sector worker.
I couldn’t help but be reminded of this old classic, “The Smartest Dog”:
~~
Four men were bragging about how smart their dogs were. One was an engineer, the second man was an accountant, the third was a chemist, and the fourth was a government worker.
To show off, the engineer called to his dog, “T-Square, do your stuff.” T-Square trotted over to a desk, took out some paper and a pen and promptly drew a square, circle and triangle. Everyone agreed that was pretty smart.
But, the accountant said his dog could do better. He called to his dog and said, “Spreadsheet, do your stuff.” Spreadsheet went into the kitchen and returned with a dozen cookies. He then divided them into 4 equal piles of 3 cookies each. Everyone agreed that was good.
But the chemist said his dog could do better. He called to his dog and said, “Measure, do your stuff.” Measure got up, walked over to the fridge, took out a quart of milk, got a 10-oz. glass from the cupboard and poured exactly eight ounces without spilling a drop. Everyone agreed that was pretty impressive.
The three men turned to the government worker and said, “What can your dog do?” The government worker called to his dog and said, “Coffee Break, do your stuff.” Coffee Break jumped to his feet, ate the cookies, drank the milk, took a crap on the paper, had sex with the other three dogs. Then Coffee Break claimed he injured his back while doing so, filed a grievance report for unsafe working conditions, put in for worker’s compensation and then went home for the rest of the day on sick leave. They all agreed that dog was bloody brilliant.
@10 – best place on Meth:
Actually, this HAS been cleared up. Announcement was yeterday (or maybe the day before).
For 5 year fixed, the qualifying rate is the contract rate.
For fixed less than five year, and ALL variable regardless of the term length, the qualifying rate shall be the GREATER of the contract rate and the Benchmark rate.
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2010/03/official-announcement-on-qualifying-rate.html
#7 Tom
Probably 2001when I bought! I am one of the lucky ones. I got approved for what was at the time three times my yearly wage and I put 5% down at 25 years. I bought just before it went from a buyers market to a sellers market.
My 696 sq ft condo, block away from Transit in New Westminster, BC cost me 90K, had I purchased 6 months to a year earlier the top floor 1000 sq ft units where around 65-70K and are now selling for almost 300K now. Mine is assessed for 188K but would go for over 200K on the market which is over double what I paid.
I was thinking the 400-600 sq ft Condos for 175K in Vancouver was way too high in 2001 never mind now!
I was lucky and will keep what I have. To buy something newer or bigger in this market would be past stupid. I want to be able to retire!
Alex, keep renting! I do not know if Garth will be right but the advice he is giving sounds pretty sound to me! Who knows what is going to happen shortly and I agree it won’t be pretty so live within your means and don’t lock yourself in tonnes of debt. I just unloaded the LOC and credit card debt. Next the student loan and to paying down that mortgage!
My copy of Money Road is on its way! Can’t wait to read it! This blog is my morning ritual!
Cheers!
#30 Kansai_92,
You said, “However, you MUST… save and invest the difference. This is KEY!”
I second that. The forced savings of homeownership remains one of the most important tangible long term benefits. If you are renting you must be disciplined enough to put aside income every month into savings. You also have to avoid the trap in Toronton and Vancouver or renting at the edge of your financial means in order to do this.
Once the amount of money you are saving is equal to ore more than the amount you would be paying down principal you are in a good position to do the math effectively. Then you can weigh all the costs of ownership from taxes to fixes against the potential value rise in the market. It is more apples to apples that way.
However, I agree. Saving that money is important and usually where renters go wrong.
#31 Badkitty,
Why is that you Re bulls always have to come on here and attack all of the Bears like we are miserable people living in our parents basements waiting for the world to end? Why don’t you try making an intelligent argument instead of running people down.
Persuasion is never effective when it is combined with insults.
This blog is getting too kinky for me!
349 NDS Jr.,
Where is your information that most of the buyers are foreign in either Toronto or Vancouver?
The current market is primarily being fueled by young and local buyers who are taking advantage of low interest rates.
Happy birthday Garth .Just in case I miss Sunday .
I am not sure if this has been posted on this blog before (a Search feature would be helpful, Garth).
I caught part of this radio show a few weeks ago. Experts on Call, on a local Ottawa AM all-news channel. Presumably they run similar shows on their stations in other cities in Canada (the station is owned by CTVGlobeMedia).
In the part I happened to catch, the Realtor is advocating purchasing a house from a new development near a University in Ottawa, so that your kids can live there while attending school. Basically the idea is that you use this investment to pay for the kids’ education! Buying at 2010, let’s see, what are the odds of that working out as planned??
No disclaimers on the risks involved with any of the ideas discussed (all appear to be around the theme: get rich quick with real-estate). Aan archive of recent shows (audio streams) is posted here:
http://www.bennettpros.com/Radio_Shows/page_2198292.html
From yesterday#147 jr on 03.12.10 at 2:18 am
“How do they raise money–with declining tax revenue?”
One needs to ask WHY there has been declining revenue
=======================
What is “economic substance”?
The economic substance doctrine says that a transaction must have a meaningful economic purpose or investor risk to be legitimate. A correlation to the economic substance doctrine is the business purpose doctrine, which says a shelter should have a legitimate business purpose outside of the tax savings. The question of whether to codify — or write into law — an “economic substance rule” is at the heart of the current controversy over legislative efforts to address the abusive tax shelter problem.
Most agree that at the core of the abusive tax shelter problem with is the “economic substance” doctrine. That is, if a company enters a transaction strictly for the purpose of lowering its tax rate, the deal lacks any sort of business or economic purpose and should be considered bogus. There is a great debate over how to address the economic substance question. Former Treasury Secretary Lawrence Summers has proposed a broad rule to outlaw any transaction that lacks economic substance. Others maintain, however, that a broad rule is difficult to interpret and would interfere with legitimate business transactions. They say that the problem can be brought under control through a piecemeal approach that addresses specific abusive transactions. Here are the views of Summers, former IRS officials Charles Rossotti and Larry Langdon, Senator Charles Grassley, former Assistant Treasury Secretary Pamela Olson, U.S. Rep. Lloyd Doggett, and leasing industry lobbyist Ken Kies on the economic substance issue.
http://www.pbs.org/wgbh/pages/frontline/shows/tax/reform/substance.html
====
How did concern about abusive tax shelters emerge?
Under U.S. law, corporations are allowed to keep two sets of books — a bullish book income report released publicly to shareholders and a lowball tax income report provided to the IRS. Schedule M on the corporate tax return is where companies reconcile differences between what is reported to Wall Street and what is reported to the IRS.
In the late 1990’s, officials at the Treasury Department noticed that the gap between book and tax income — known as “Schedule M gap” — was widening. “There’s always been a gap, but the gap gapped,” says former Treasury Secretary Lawrence Summers. “There was discontinuity. The income to shareholders went up rapidly. The taxable income reported to the IRS stayed the same, and in some years, actually declined. It was pretty obvious that the reason had to be more shelter[s] and activity of various kinds.”
+ How has sheltering affected corporate tax revenues?
In October 2000, Robert McIntyre, director of the Institute on Taxation and Economic Policy, released a study that looked at the tax rates of 250 large U.S. corporations between 1996 and 1998. The study found that in 1998, the average effective tax rate companies were paying was 20 percent — in contrast to the corporate tax rate of 35 percent. “Lately, we think the rate is down to about 15 [percent],” McIntyre says. “In other words, companies are paying less than half of what they’re supposed to.”
It should be noted that McIntyre’s study does not identify how corporations reduced their effective tax rates or to what extent illegitimate tax shelters may have contributed. But, McIntyre believes that the effective rates were much lower because “there are so many [tax code] loopholes, so many shelters.”
As effective corporate tax rates have dropped, so too has the total share of the tax burden shouldered by corporations. Over the past 50 years, says McIntyre, corporate tax revenues have averaged about 17 percent of the total tax take. But now, he says, corporate tax revenues account for 7 percent of all tax revenues collected by the government — the second lowest level since the Great Depression
==========Perfectly Legal”
This is the first chapter of Pulitzer prize-winning reporter David Cay Johnston’s book that explores the U.S. tax system from the perspective of the individuals involved: the working-class parents, the IRS employees, the corporate taxpayers. This excerpt examines how the tax system contributes to the widening gap between rich and poor in the U.S.
What Piketty and Saez showed from the official government data was that two decades after the promise that lowering tax rates and reducing regulation would benefit everyone, the income gains were flowing straight up to the top of the income ladder. Even the derisive description by critics captured in the phrase “trickle-down economics” was not proving out. At the bottom there was less money for food, shelter and clothing. Four out of five Americans were making less or were no better off in 2000 than in 1970.
http://www.nytimes.com/2004/02/01/books/chapters/0201-1st-johnston.html?pagewanted=2
#41 Tim on 03.12.10 at 8:13 am
said:
”
Now, forty-thousand jobs created were in the public sector (we won’t mention those private sector losses- who needs ‘em), as we all know, is excellent! It means the economy MUST be hopping along like Daddy Carney says it is.
In fact, just yesterday, I saw 6 hard working public employees ( Department of Roads) cutting down some branches. Well, one of them was cutting down branches (the young guy) and there were two guys at either end of the sidewalk (controlling sidewalk traffic), and three guys standin’ there watchin’.
When you think about it, these ARE the kind of jobs we need. Real jobs! Gov jobs! This is great! Who needs to slave away taking business risks, or sweating it out in a Siemans plant, or growing tomatos, or mixing concrete! Those jobs are for suckers!”
———————————————————
Tim,
Where do you get the figure that over 40,000 government jobs were created last month?? I call BS.
And I don’t know where you live, but almost all roadwork now is contracted out to private companies – so most likely it was private sector workers, whose companies have endless fat government contracts, and not government workers you saw.
31 # bad kitty,
sorry u feel that way…like I mentioned before I sold in 2006 but it was more of of family problems than money issues. i do agree some of these blog dogs are kinda of extreme. But I ddon’t think Garth ever suggested to sell when your financial poisition was favourable ie mortgage almost all paid off.
just people who have way overextended themselves.
on the lighter note through the post 2006 years i made enough to cover most of my rent thru investments divedends etc… of course it doesn’t matter because housing went up 120-150 k since then
i think you lost perspective when you decided to sell… life is how you see it really. You can look at this ” poor choice” as an opportunity to buy the place ( maybe smaller) but nicer in the future and to learn from other people decisions, investment chpices and personal growth development. Right now you should go on vacation…get a little perspective. Don’t stress out too much. Don’t get burned out over housing. The house can’t love you back.
life is like a marathon …there is uphills ( some kiiler ones) you may jog a little slower , but you get there eventually.. for argument sake you do buy a smaller place later on and now you are more wary of TF savings plan and RRSP options to maximize returns. over the next 15 years your nest eggs grows much more than your friends because you took the time look outside of the house for other ways. Your friends may be worried about having enough money sto spend in their retirement years . But your not worried at all because your nest eggs are much more liquid and growing.
but you have to do something…not just wait for a correction. opportunity is only there if you look.
good luck…take some time off
@50 artisuseless
Don’t ask me to explain toronto condo investors, they’re as foolish as a nortel investor in 2000 if you ask me.
I stand by my assertion that median statistics are much more valuable for comparing relative price ratios than using averages. I just can’t seem to find any such stats.
Edmonton listings keep on trending higher
http://www.edmontonrealestateblog.com/
#48 Alister on 03.12.10 at 9:10 am
——————————————-
As a renter I paid insurance, gas, electric, water, heat, t.v. etc. and even had to paint the walls upon leaving. Some renters have it better than others.
#75 Genghis on 03.12.10 at 1:04 pm
—————————————
The first time home market in Ottawa is blistering hot right now. If that’s a first time home near the University of Ottawa, it stands to do very well. And, at $600 rent per room, could likely be a stable, positive cash-flow property for as long as students continue to attend the UofO.
#63 JW on 03.12.10 at 11:13 am
——————————————
In my case, I WAS throwing money away in rent. At $16,000/yr, (plus utilities etc.), I was renting a place in the burbs. Now, $16,000/yr goes to the bank, roughly 1/2 in interest, and 1/2 towards equity (forced savings! ; )). So really, the extra I’m paying is the property taxes and the maintenance. I am also in the position where I can afford my mortgage at higher rates. My first home is centrally located, and no longer am I throwing my money away in rent!! By the way, having been an ‘owner’ now for 6 months, my place has appreciated 8%. So, buying a home was the best decision of my financial life. That is why I stress everyone’s situation is different and buying can be the right thing for you at any time. Just be sure to buy the right house.
76 jess on 03.12.10 at 1:08 pm
******************************
Thanks for the link–very informative-
Ken Lay accounting–lives on–at the corporate level-
***********************
One needs to ask WHY there has been declining revenue”
********************
I expect personal taxes to leap and revenues to declining in that money grab too-as unemployment rises and people revolt-by using invisible commerce-to hedge against high taxes –
Governments throwing money at the deflation monster and every policy they implement-has a deflationary effect to it–
#79 Wookie
Thats because people “they” don’t want people without their head up their wazoo making an educated and informed decision.
Looking more and more that interest rates and going to burn higher.
http://theprudentindian.files.wordpress.com/2008/05/egg-on-face1.jpg
@ Big Al.
http://www.cbc.ca/money/story/2010/03/12/jobs-february.html
Oh, and the ‘Department of Roads’ was working just yesterday, in Elora, while I was passing through. Now, that is unless there’s a private company ACTUALLY called ‘Department of Roads’ that sends out crews of 6 GUYS to cut a few branches, in which case I was mistaken.
Since you call my post BS, I’ll call you Big ‘Gov’ Al…
BTW As far as outsourcing… if where you’re from, they are outsourcing government construction work to the private sector, that is a GOOD thing. Being as I’m a ‘young contractor’, I’ll take the work.
…. One last thing, Gregor, that joke was WICKED.
When you accept that shelter – along with food and heat – is one of life’s three essentials for survival you stop worrying about renting or owning and just accept that you need to spend the money on a roof over your head one way or the other. No-one expects a ROI on their weekly groceries or heating bill – they accept it’s a necessary expense. The whole reason behind this bubble is that somehow RE has become seen as an investment first and shelter second.
In this market buying and renting seem to be the same thing and anyone who tells you just now that renting is throwing money away is either a realtor or a worried owner.
#75 Genghis
I listened to the radio program:
What a con job!
The woman sounds like a good talker…but not a lot of intelect there.
It’s interesting that they only stuck to how much money that you could have made as opposed to the huge divide between economic fundementals and the gains that were made in real estate (Ottawa) over the last 6 yrs…but that would require intelect!
Reminds me of those Saturday morning U.S infomercials they had before the American bust!
“Ian Pollick, economics strategist with TD Securities, noted that while the private sector shaved 7,500 jobs, the public sector added 45,600 positions.”
Recovery?
#31 Badkitty
You are absolutely right on so many fronts! Who cares if prices go down a whopping 30% in a couple of years when it has gone up close to 100% if not more in the last 8 years (in major centres)? Hell prices went up nationally 20% this year alone…who cares if it goes down 20% next year or the year after!
Real estate is a long term investment and as such you deal with the ups and downs. Bears here will never admit that those that sat out during the run up will NEVER EVER EVER get a chance to buy at pre-boom prices (2002). Those days are long long over, especially in all your major cities like Vancouver and Toronto.
And unlike the US, there is no oversupply issues here. Many developers came to the brink of oversupply in 2008, but thankfully the credit crisis happened (I am sure I will predictably get chastised for saying “thankfully”), and a bunch of projects were scuttled, thereby decreasing supply. Of course the bears cheered this on, only to screw themselves over in the end. A key component of a crash is the oversupply – bears just don’t like to acknowledge this now that there is no oversupply!
It is a funny thing. In 2008, people would cheerily post here about another development that went under, and momentarily gloat. They failed to realize the impact on supply on the market. Now who is laughing at the lack of supply now? Oh right, sellers and bulls…
Nol chance for interest rate hikes in North America.
…U.S. & Canada keep printing money…you think they want to start inflation by raising interest rates?
Ottawa will raise spec/profit taxes on home investor/speculation profits before they will raise interest rates.
..Could last 5 years, even longer…
Everyone forgets to mention here that “New housing construction” dies the day the HST comes in.
Then we restart a renovation industry of existing homes.
…Add Centralization of Govt Services to the big cities and voila…reasons that Toronto and Vancouver become even bigger cities….because that’s where the jobs are.
Nostradamus jr.
#90 Vancouver Rocks on 03.12.10 at 5:01 pm
—————————————————
It is difficult to wrap one’s mind around the cost of buying in Vancouver. How do property virgins do it (or do they…..)? Do they make their $5,000 monthly mortgage payment by credit card, then use their home equity LOC to pay off the credit card (i.e. essentially finance the home purchase with the rising equity, thus never really having to use real earned wages to pay the mortgage)?
http://www.timescolonist.com/business/Victoria+wants+double+fees+builders/2673031/story.html
this one’s for you JR
http://vimeo.com/9963640
#7 Tom, “Have they ever been priced at 4 times the medium income? If so, when was the last time that happened?”
Actually Tom, there was a time when they were priced at 2.6 times the medium income and by that I mean ONE INCOME, not two and at a time when interest rates for a 5 year term was 10%. I can say that from personal experience. My first home purchased in December of 1969 was a brand new 3 level townhouse located in Lynmor Villlage at 933 Old Lilooet Road in North Vancouver. It was brand new, 3 b.r., 1.5 bath, full unfinished basement, underground parking and best of all 20 minutes to downtown Vancouver. The selling price was $20,800 with a downpayment of $3000 or about 14.4%. Interest rate of 10% over 5 yrs with 25 year amortization. My salary, an average salary, was 8000 per year. Therefore, cost of unit was 2.6 times my annual salary. Today, same unit is priced at $469,000 and a comparable salary today would be $48,000 which now represents 9.7 times annual salary. So today, if I was to buy the same unit and I put roughly the same downpayment of 69,000 that would leave me with a $400,000 mortgage. Now, if the interest rate was 10% as it was back then the interest alone would be 40,000 per year. So what has happened? Today, I would not be able to afford to buy that same home even if the interest rate was half what it was back then. So where did all that extra value come from? Certainly not from the building, its 40 years old and deteriorating and there sure is not much ground below it that’s for certain to justify anything near that value. Has me buffaloed. Oh by the way, that same unit sold for around $72000 during Expo 86 which is roughly what it was selling for after the big runup in prices from Jan 73 to autumn of 74 and which dropped like a rock like the rest of the real estate did when the oil crisis hit. A house I purchased in Pt. Coquitlam in Feb. 73 for $26000 rose to $48000 by summer of 74 and crashed back to $40,000 that fall. A slight 20% correction. At the time that we bought the house real estate was selling fast and furious and often sold before the sign was in the ground. We had to pay full price for the house to get it as prices were rising so quickly. At one point, that little place was going up in value at the rate of $1000 per month in the short time that we had it (18 months). And oh yes, there were bidding wars back then too and realtors were still playing the same games with first time buyers back then too. Interest rates were still around 11% at the time. Anyway by that time I was making $12000 per year and the house peaked at $48000 so that would have equated to 4 times my salary at that point. Not sure what happened after that as I moved from Vancouver to the far north and away from the rat race and never looked back. Hope this answers your question.
#89 Prophet,
“Ian Pollick, economics strategist with TD Securities, noted that while the private sector shaved 7,500 jobs, the public sector added 45,600 positions.”
Recovery?
Interesting statistic.
Maybe gov’t is working towards a magic number of those whose bread they butter which will allow it to more easily apply the heel of its boot to the rest of us as our wealth and privileges (as opposed to rights) erode away.
Soon there may be two main classes of Canadians — those that work for the gov’t and those that don’t. Wouldn’t this scenario be very divisive among working class Canadians?
Private sector paying jobs generally paid more than gov’t jobs, although gov’t jobs had good benefits including a great pension. There is a report in the US that states the average gov’t employee makes 7.5K per year more than the same job in the private sector. Why? It was the other way around before.
IMO if you have savings—hang onto them,once you invest them in anything you risk losing them,if you have a job–be thankful many do not and job security in these times in most occupations is a dream.Do not be fooled by the political lies and stimulants that got us into this mess or their unemployment statements….after all simply look at their balance sheets and get a clear picture of how incompetent they are……but in all fairness they certainly looked after the banking industry
#90 Vancouver Rocks,
Wrong as usual. Many 2009/2010 Bears were Bulls back then and made money in the run up from before 2000. The fundamentals started looking bad by 2006 and the market began to fall in 2008. It might still be falling if it wasn’t for emergency interest rates.
The stock character of the Perma Bear is your favorite argument but it is not connected to reality. There is a time to be positive about market conditions and a time to be concerned. Now is time to be concerned.
Most 2010 Bears simply do not believe in the current market fundamentals. It is no more complicated than that and not permanent state of mind. We know that emergency rates will not last, economic headwinds are mostly negative and wages have not and will not rise to improve affordability.
This is not 2002. We have to look forward in order to make intelligent decisions. Markets have risen and fallen in the past. Face it, we are at the end of a Bull market run. Affordability is now key and it is eroding from all ends. Taunting people about the past will not change the road ahead.
# Vancouver Rocks.
You are absolutely misinformed on so many fronts and i’ll answer some of those questions for you.
Who cares if prices go down a whopping 30%?
Recent homeowners
Who cares if it goes down 20% next year or the year after? Again recent homeowners
You said that Bears here will never admit that those that sat out during the run up will NEVER EVER EVER get a chance to buy at pre-boom prices (2002). I say first of all Never say never and secondly how can you assume that every bear has been sitting on the fence since 2002 hoping for a price correction.
You said that those days are long long over, especially in all your major cities like Vancouver and Toronto.
I say why are they over?, remember the 80’s
You said and unlike the US, there is no oversupply issues here. I say that you are a delusioned Canadian
You said that many developers came to the brink of oversupply in 2008, but thankfully the credit crisis happened. I say that what saved the housing business is govt intervention and excessively low interest rates.
You said that when a bunch of projects were scuttled, thereby decreasing supply. Of course the bears cheered this on, only to screw themselves over in the end. I say that the bears could not care less for overpriced projects that got cancelled, heck Calgary is full of them
You said that a key component of a crash is the oversupply – bears just don’t like to acknowledge this now that there is no oversupply. I say that the crash had nothing to do with oversupply but rather people with no money unable to pay back cheap loans when interest rates went up, Canada has not yet seen any crash in real estate so which part of the western world are you refering too?
As for gloating, It seems like the kettle trying to call the pot black when it comes to gloating.
Anyways my bullish blogger from Vankong, enjoy paying for the 2010 Olympic Games and that spec house you bought in the east end.
92
In regards to your question of how first time homebuyers actually buy in Vancouver, the following explanations stand.
1. Very few FTBs buy the much quote 950,000k house in Vancouver. Rather, they buy the 400-500 starter condos. The exceptions are those with parental assistance, but even without that, all you need is a 50 k down payment and you can get your million dollar pad with two solid incomes. However, it’s the trade up buyers who have been in the market for years that buy those homes. They are accumulate a lot of equity after a 7 year bull run.
2. Vancouver has the highest percentage of young adults by government definitions (18-30) living at home in Canada. Much of this is cultural, where members in certain communities (Asian, East Indian just like Greeks and Italians in Toronto) do not leave home until they are married as renting is a huge waste of money in their eyes. When you leave at home for a couple years, it is very easy to accumulate a large DP when you have no expenses (someone making 30k living at home is much better off than someone making 60K having to rent). Factor in that 40% of the city is made up of primarily two ethnic minorities, and that people are getting married later, you have a situation where FTBS come to the table with very very large DPS that more than offset the high cost of houses. The do not need massive salaries to afford their homes…
3. Many FTBs also have large DPs from “unconventional” living arrangements by “traditional” living standards. In many communities, houses are bought by groups of immigrants who live 3-4 families to a house. Once that house is paid off, they facilitate migration of other relatives to purchase the next home, and repeat the process. When you have 3 extended families living together, all of which are committed to paying off the house, “average 2 person family incomes” are meaningless. These types of living arrangements also are more absorptive of economic shocks, as they do not rely on a sole breadwinner.
It is not rocket science. Posters from other parts of the country fail to realize that cultural attitudes and practices play into the market, and that you cannot simply use deterministic economic models to assume a crash will happen. The era of leaving your nuclear family home when you are 18, renting for many years trying to save a DP, and buying a house when you are married and settled career wise is dead in this city. That era still exists in other parts of the country, but not in two key metro areas – Vancouver and Toronto. That is why there is some truth to the statement all RE is local, and why blanket statements of universal crash are coming are meaningless. Many of the experts fail to see this…if you live here then you would see this and you would adjust your expectations of an impending crash accordingly.
Some Vancouverites posting on here will try to refute this, but they know that this is an accurate portrayal of the RE landscape
#96 Coho,
Indeed. It become increasingly irritating how the MSM reports on the economic numbers. A significant number of jobs came from the temporary jobs here in Vancouver for the Olympics. Those are mostly gone now and all will be gone by the end of March.
There is nothing negative about that but why is it not pointed out? Why treat us like mushrooms in the dark?
The U.S. is going to go through the same thing with their census hiring. It will ad temporary jobs. Just watch how the cheerleader media report it as further proof the recession is ending. Meanwhile the private sector is not hiring.
Don’t be too hard on cluless real estate Bulls, every market needs bagholders. Why they think everyone who figures real estate is overpriced is just a bitter renter, who cares. They have to go to great lengths to justify their position anyway, judging by some of the totally absurd points they attempt to make. I own real estate now, have owned more in the past – I still predict Canadian real estate will fall 40% or more by 2015 or so. So what? Is it mutually exclusive?
Just you nevermind the fact that real estate has been rising for 12-13 years now, and the average Bull market is about 8 years. Or that prices have risen to where there is no affordability, at a time of record low interest rates. Or that the long-term average of mortgage rates is around 8%, a level which would destroy today’s values. Or that the declining price phase of a falling real estate market typically lasts 4 1/2 to 6 years ,then is dead flat for a couple more after. Or that people who bought at the last peak 20 years ago did not see the price recover to that level for 12 or 13 years.
Nah, nothing to see here, move along. Go ahead, buy more real estate, go get a bigger mortgage, what are you waiting for? At these rates, get a few! Come on! hurry! Buy now or be priced out forever! They aren’t making real estate anymore! It’s SO different this time!
Normal people back on Planet Earth, disregard above paragraph. The sun went over the yardarm early today, TGIF.
# 79 Wookie – If you go back about 3 weeks the ‘median’ vs ‘average’ was discussed here. The recent study, that rated Vancouver very high on unaffordability only behind some cities in Australia, used median values.
My old fashioned real estate textbook used “3 X average family gross income” to “average real estate price” as a “normal market”, any ratio above 4 was into unaffordable.
Of course back there in the good old days, they never conceived of a bubble big enough that the SFH ratio would reach 15 in Vancouver, and 6 in Toronto, lower for condos. That would have been considered a market condition so out of balance it should not be able to occur. “The Madness of Crowds” and all that. A Tulip Bubble of our very own, be proud.
# 89 Prophet – Sssssshhhhh! None of that truthiness stuff here! People might think the economy isn’t doing so great, and stop consuming. Then the whole pyramid could collapse, and it would be all your fault. Lets just pretend a healthy economy is one in which the private sector is laying off while Governments hire. Uh huh.
Maybe those damn Keynesians were right? That’s the solution, the Government could just hire everyone! You know, they have that system in Brunei (all citizens get a check every week from the Government but don’t work) and it has one of the highest suicide rates in the world. Something about the value of productive work for a healthy populace. Even worse when alcohol is prohibited, you can’t even drink. What a nightmare, living in a tropical paradise with a guaranteed income. Life is so harsh.
#100 Vancouver Rocks,
These are factors in Vancouver and Toronto. There is no question. What you have said is factually true.
However these same factors exist in many other cities including US cities from New York to Miami to San Francisco and more affordable cities in Canada such as Montreal. They are not unique to Vancouver or Toronto and in no way support a continued affordability gap in the range that currently exists.
#94 jess on 03.12.10 at 5:26 pm
this one’s for you JR
**************************
jess–thnx again–he’s right on–
We’ll never “fix” this–
Until we deal with the “off balance sheet debt”
It needs a whole new re-set–
And we can’t do that until–like he says–
Off balance sheets-are exposed to the light of day–
Which would mean–mark to market–
Which the very mention of the words–
Makes Bernake turn white–
Some very derivative savvy people have said–when this thing first (Bear Sterns) blew up–if all the CDO/CDS paper was marked-right then–that it may have carried as much as 70% real value/30 % debt to cash–
The remaining 30% was still a catastrophic number that would have had to be defaulted on–but-had they made the banks default–allowed the share and bond holders to be wiped out–then–nationalized the banks–fired everyone–then sold the good paper–then–printed enough money to make depositors whole-plus enough to re-capitalize the banks under new management and sustain daily commerce transactions–the whole thing could have been doable–but–
It wasn’t done–because it would have broke the crooked bankers–
The opportunity was lost–instead–
We decided we could just print money and stuff it into banks–with enough extra–of course- for billions in CEO bonuses and somehow–everything would magically start working again–
So here we are–trillions of dollars later–with the exact same problem–”off balance sheet accounting”
No mark to market–just pretend it doesn’t exist–
The debt to cash value differential-was-30% -but now-
Since the collateral that underpinned it all—
“Homes/autos/toys etc”–has fallen drastically-in price value since then–causing-
The debt to cash value to increase/negative leverage–by a wide margin-
We are heading into what we should have done in the beginning–and we’ve already printed so much–that–
we will be doing it with a much weaker currency–
And worse–with high unemployment-
http://www.youtube.com/watch?v=ZbWRfBZY-ng&feature=related
Instead to cut have of freeloaders from public sector Canadian government hiring 46 000 more parasites, working 9-0-5 (starting at 9, finishing at 5, doing 0).
Canada printing money, blows debt.
Why?
Are they so stupid?
No,
The are trying to prolong today’s social quiet.
They celebrate today; to die tomorrow.
after me, the deluce
apres moi le deluge
Here’s an article for those who don’t think housing prices can bust quickly. Generally I trust Bloomberg but this was definitely a WTF? kind of headline:
Shanghai Housing Prices Drop 10% in 1st Week March, News Says
By Bloomberg News
March 10 (Bloomberg) — Shanghai’s average housing sale price dropped 10 percent to 18,549 yuan per square meter in the first week of March from the previous week, Shanghai Securities News reported, citing Shenzhen World Union Properties Consultancy Co.
Prices for housing in China’s southern city of Shenzhen fell 14 percent to 18,266 yuan per square meter, according to the report.
To contact the reporter on this story: Jian Guo Jiang in Shanghai at jjiang@bloomberg.net
http://www.bloomberg.com/apps/news?pid=20601089&sid=aWam2fm2Y5gk
Yes, that’s TEN PERCENT in ONE WEEK!
The better half and I have an agreement in place. She doesn’t ‘get’ Monty Python. I don’t understand Drs. OprahPhilOz. We’re both happy with that!
Fear not. Even Feng Shui has bad hair days. The pointy-haired boss’ face in the last panel is self-explanatory!
Remember Copenhagen as a front for the introduction of a one-world govt.? Thieves Europe was destroyed by “Tulip-mania.” Now they fall for Carbon-mania? Suckers!
It appears the world’s economies are being kept artificially alive on life support while final preparations are being made. Yesterday a link said the downturn could happen sooner than expected, much faster and way more severe — New link “The sudden intensification of the global systemic crisis will be characterised by the acceleration and/or strengthening of five fundamental negative trends . . .”
“While the mainstream media puts on the recovery song and dance, the fundamental problems of the collapse remain the same, and in some cases are growing ever more precarious. Subsections of the public, unaware of the real issues at hand, are holding a misguided jubilee in the tranquil eye of a hurricane, wrongly assuming that the storm has passed.” (wrh.com).
Check this 46 sec. clip out. This is a Pakistani missile; Iran has thousands of them.
Lotsa exc. links.
Questions — Is China bankrupt? Is the US broke? Do C-H-F appear on Men In Tights?
New foreclosure virgins? Following on from prior link.
CC + financial terrorist = we’re in deep in the dung pile!
CSIS is probably helping with this.
First para. is good.
Things are heating up. Have someone blow up Israel’s not-so top-secret nuclear weapons facility at Dimona. Ask Mordechai Vanunu, who took 60 pix of the inside.
FLASHBACK – “Sept. 11 was good for Israel.” — Netanyahu
Alex
By any stretch of even the most liberal imagination, the best that can be said about PURCHASING any residential real estate without a substantial downpayment (minimum 30%) currently, is that it is really a rental with debt or a highly leveraged speculation at this point.
Market prices may go up, they may go down, they may stay the same. What does not change with the prices however, is the total debt and the risks of leverage, so you want it at manageable levels so that you are NEVER at risk of losing control of that asset, no matter what happens. In the event of some extreme misfortune, with that amount of equity, you have options. Storms do happen in life – choose your residence and its costs carefully!
Patience and savings dude and lots of both and you’ll be good. Best of luck with whatever you decide.
I’m undecided what to do, some input from the group and Garth would be helpful. I sold my condo 2 weeks ago. It took two days, it was well priced, I didn’t get greedy. and it showed well. i did it because I want to rent and decide what I want to do in my retirement which is a little more than 2 years away. I have been looking at apartments and condos for rent. For the quality I want I will pay about $1100.00 all inclusive a month. (SW Ontario, small town)So the question is that I saw a condo for sale that if I had a 3.79% five year rate and included the condo fees it works out to about the same amount I would pay to rent. Mind you I would be putting the proceeds of the sale of my condo in investments but I would have a small mortgage (just under $100,000) and could easily carry the remainder in retirement. It’s confusing dogs, any advice?
#100 Vancouver Rocks
I never tire of the “it’s different here”
the more you hear it
euphoria’s end nears.
As I drift off and wonder
how many times
the last few years,
your same 3 point denial
in Madrid, Dublin, Miami and Algiers.
somedays, i really crack myself up! Have a weekend y’all…and no i haven’t been drinking yet
#109 Grannysweet on 03.12.10 at 7:46 pm
For the quality I want I will pay about $1100.00 all inclusive a month. (SW Ontario, small town)So the question is that I saw a condo for sale that if I had a 3.79% five year rate and included the condo fees it works out to about the same amount I would pay to rent
****************************************
Your price comparisons-only calculate for today–
Both buy and rent prices float–
They can go opposite directions at the same time-or they can both go in the same direction at the same time-
I suspect rents and prices-to go the same direction soon-
Both down–
I use the US as a guide–because–i think we will follow them-in a very similar pattern–
House prices fell and as the defaults came onto the market–so did the supply of homes for sale and there were very few bullish buyers-which added to the downward price plunge–
Unemployment started increasing/job losses–
People/family’s-starting moving in with each other–
Kids moving into spare rooms/basements with parents
and vise-versa–
This opened up even more vacancy supply and had a downward drag on rent fees–
http://2.bp.blogspot.com/_pMscxxELHEg/SmnIdYAB23I/AAAAAAAAF44/LafnQrY5yvs/s1600-h/Q2HomeownerVacancy.jpg
Rent prices started to fall and are “still” falling and as long as house prices continue to fall and i think they will–
Then–rent prices will follow–as–
Unemployment increases and less purchasing power by the unemployed-hits–not only buyers–but also renters-
Forcing rents lower–
So you need to look ahead–when deciding and realize that prices directions are directed-by market dynamics–
I would personally not-lock today’s rent prices in–
By that-i mean–
No long term contracts—
Here’s a few examples of US rental prices–since their housing bust–
http://4.bp.blogspot.com/_nSTO-vZpSgc/SsmAJ4lhy6I/AAAAAAAAHAg/Q40FVupaEmw/s1600-h/puget+sound+rents.png
http://www.bloomberg.com/apps/news?pid=20601206&sid=aQofXjNr0FWI
This is a great chart-of renter/buyer psychology that shows Japan through its 18 tear cycle of deflation based on rents and house prices–
http://2.bp.blogspot.com/_nSTO-vZpSgc/R7UR_6MbZpI/AAAAAAAACJM/xU6Nt4fkx5k/s1600-h/japan-land-prices-update-2008-02-rgb-176-10-10.png
re # 111 bullbear
…..maybe you should start now
its the weekend!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
have a good one everybody!!!!!!!
16 mork/21 wookie. A link for you:
http://www12.statcan.gc.ca/census-recensement/2006/dp-pd/tbt/Rp-eng.cfm?LANG=E&APATH=3&DETAIL=0&DIM=0&FL=A&FREE=0&GC=0&GID=0&GK=0&GRP=1&PID=96272&PRID=0&PTYPE=88971,97154&S=0&SHOWALL=0&SUB=0&Temporal=2006&THEME=81&VID=0&VNAMEE=&VNAMEF=
Hope it all gets captured in the blog window. Ive often puzzled over the “historical” norm of 3X income, and the
guildine of 32% of income to housing costs. If we look at TO stats for 2005 (latest available from statscan) the median income was 64K, but the median for owners with mortgages was 85K. If the owners decided to use most/all of that additional disposable income for housing, they could pay almost double the mortgage of the “average” income earner.
Vancouver Rocks – I have the study that shows the percentage of foreign born in TO and Van along with other cities. “Alpha immigration cities” seem to correlate
with “unaffordable” housing costs. Miami is a glaring
exception. I think it was kc who linked another study showing how few “foreigners” were buying in Van. Please
realize “foreign born” and “foreigners” are not the same.
#112 JR, thanks, food for thought and I will consider those points. I had a plan when I put my condo up for sale and i think I need to stick to it which was to rent. I don’t know for how long but I think it is a good plan. Thanks for the input.
Post #109 Grannysweet. Simple common denominator.
How much debt will you have in 5 years if you buy now.
How much debt will you have in 5 years if you don’t buy.
I always start by asking myself, “Is it good for me” if yes, carry on, if no don’t carry on.
What if? What if? What if? Thats the wild card.
Post #111 Bullbear,#113 Peter, hey I’ve got some extra beer, I’ll share. Someone left a couple dozen on my porch this afternoon.
I wonder what thats going to cost me? LOL.
#114 Taxpayer,
Exactly. Kids living with their parents to build up more equity for longer is an effect of high real estate prices – not the cause. VR gets it backwards.
#68 Gregor Samsa — awesome joke -Coffee Break
I’m a gov’t worker and can tell you that the people I work with actually believe that their jobs are important and that they work hard. They’re nice folks, but they are none-the-less delusional.
Yeah, it’s tough working for the gov’t: flex days, jumbo pay, jumbo benefits, pension — and to think — most of us didn’t have to even finish high school to get this free ride!!
When I got my job with the gov’t years back after slogging it out in the private sector, I felt like I had won the 6/49. I knew I never had to worry about working a real job again. And to this day, I pinch myself … it’s a dream come true.
To all of you folks in the private sector — thank you so much and please continue to pay your tax dollars so that I can continue to enjoy my dream-job. If you start to feel sorry for yourself or start to resent us gov’t workers — stop. Instead send out your resume to the gov’t and you might just luck out and win the lottery like I did. Last month 46,000 new lottery winners/gov’t workers joined the workforce. Ain’t it great to be Canadian?
Sincerely,
Useless feeder/gov’t worker
PS Gimme, gimme, gimme
Four times income should make houses in my area (Windsor-Essex) a bargain? Should I then buy now?
“#119 Useless Feeder (aka gov’t worker) on 03.13.10 at 12:15 am ”
Ha ha! nice try. Gotta luv the internet. :0
#31 Badkitty:
You lost $300k because you acted without thinking. Now you’re posting unfounded assertions and insults in the same manner… It’s time to accept responsibility for your own actions…
#22 pjwlk and #100 Vancouver rocks
Hey pjwlk, ahh what a scolding daddy! If my ranting didnt impart it, i take full responsibility for my mistake, 1000 pardons if I have offended the mighty bears…
As I said, I saw my house as an investment which is the dumbest mistake a person can make -then, because I saw the house as an investment, I acted out of fear and greed when i sold it.(the second dumbest mistake a person can make)
So, I alone have knocked myself out of the ability to ever own again in Vancouver because, like Vancouver rocks has said, there are cultural factors here in play that do not exist in the rest of the country. ( and I am not fortunate enough to be of a collectivist culture that is far more financially astute that I will ever be.)
meow….
I went out to about a half dozen open houses today most at about $600000.00 which put us at the furthest outskirts of Vancouver City proper.
It was pretty sad because if my partner and I kept our full time jobs indefinitely – one at 55000, the other at 68000 we could almost realistically afford the mortgage and have no hope of responsibly having a family.
I got to see first hand the tension and frenzy at one house that was “under priced” (on a busy road, with an undersized lot and what looked like 7′ ceilings) and asked another realtor about how much people were typically over bidding at the Burnaby border (20000-50000!)
The most daunting feeling I left with today is that each and every house was either old, run down, poorly built, or a combination of the above and we could not afford it (responsibly).
That said at every single house we visited there were at least 2 other couples / families…