She’s your wife

Hi Garth,
My wife and I have been wrestling (not literally) about what direction to take in this current market. We own a home in the suburbs outside Toronto. We bought about 6 years ago, and therefore got in the market at a relatively good time. In light of everything I have heard and read, we are wondering whether we should sell and take the equity, pay off debt, and sit tight for a bit to see how the market rises, falls, or flatlines (as you say). We are thinking about purchasing a cheaper place with a good downpayment, while still putting aside some cash (just in case). This would ideally be used as rental property in a few years from now. The only alternative if we sell our home would be to rent (which my wife despises) or live with family for a little while.

So with that said, does it make sense to sell now considering we have decent equity in our home now? Do we sell and wipe out debt? Do we sit tight in the house and ride out the storm knowing that our house will only decline 10-15%? I’ll be honest, the thought of being debt free excites me, and if only for that, we are seriously thinking about it. However, will getting back in the market ever be more reasonable? Will leaving the market now only set us back in the long run? I’m confused and would appreciate some advice.

Thanks for reading this, and I’d love to hear your perspective on our situation.

Justin

Relax. Unless you are in financial stress, there is no compelling reason to take action. Yes, your home value will stagnate and could fall – and not just by 15%. Of course, that could establish a new value from which it might take three or five years to recover, although in the last Toronto housing bust, prices did not regain lost ground for almost 15 years. So, if you think you might have to sell within the next five years then clearly the time to do so would be now – if crystallizing your recent capital gains in order to pay down debt is the highest goal. If you don’t sell now, the odds of losing that equity, or at least a portion of it, are quite real.

She’s your wife, but selling, becoming debt-free, growing your financial assets and renting someone else’s mistake for a few years could be a brilliant move.

Garth ..

Trying  to gather  as  much  info as  I can  now  that  I sold  my  house a nd  looking  to  rent  for  the  next  2 yrs.  Here’s an  article recently pulished  by Craig Alexander Td bank

http://www.td.com/economics/special/ca0408_housing.pdf

It  amazes  me  how  they are  able  to justify  everything  and  now  say  there  will be  a cooling  into  2009 but  they  can’t  see a  bubble. And  burst  scenario..  yet  no  one s talks  about  after  that  not  in sales  or  building  projections   everything  seems  to  foggy  after  that. Also  checking  other  information  I’ve  been   able  to  find ..

http://www.profutures.com/article.php/538

as  well  as Harry dent  Jr… who  claims  2010  will be  the end  of  this  bull cycle  in stock, real estate  and  commodties .. he  taking  about  Depression..

Is   what  I’m getting  is  that  the  Bank  of  Canada   will try  to  delate  the  Real estate  bubble  as slowly  as he  can   similar  to  what  was  done  with  the  dot  com  bubble . over  a few  years..  or  are  they  just  trying  to stretch  it  out  as  long  a  possible..

Any  thoughts  if  the deflatating  will  be  limited  in eastern  Canada  as  price  did  not  rise  as  much  as  in  western  Canada   and  will immigration  have  an effect on   baby  boomers  when  they  retire  as  most  likely  they  won’t  be  retiring  at  65 yrs  probably  latter   wasn’t  it  changed  to  70yrs  just a few  yrs  back..  Wondering  when    will  be  a good  time  to    purchase  again 2011  or latter..

Thanks  again  for  your  hard work  in  getting  the  message  out  there

Andrew

Nobody’s crystal ball is clear, but you should be able to see trends for yourself. The US is in recession, and there’s no wall around the Canadian market to protect it from real estate contagion. The population is aging and 32% of all Canadians are Boomers gearing up for retirement, who are house-rich and cash-poor. And climate change is the story of the decades to come, which will drive people into an entirely different mindset about where they want to live.

Obviously the bank economists and real estate lobbyists want us to believe the status quo now will shape the future, but that is pure myth and self-dealing. Ironically, it’s always a good time to either buy or sell real estate, so long as you understand what kind represents present tastes and past desires, as opposed to the wishes of future buyers.

7 comments ↓

#1 Andrew on 05.08.08 at 11:19 am

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(Money Magazine) — The housing implosion is nowhere near over. In 75 of the 100 top U.S. cities, prices are expected to fall in the next 12 months according to Fiserv Lending Solutions.

The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That’s the biggest fall since the index began tracking prices in 2000.

Meanwhile, foreclosure filings more than doubled in the first three months of 2008, spiking 112%. So far this year 156,463 families have lost their homes to repossessions. Many markets won’t hit bottom till late 2009 or even 2010.

Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value. But if you happen to live in Texas, congratulations: The housing tornado passed you by.

#2 Future Expatriate on 05.08.08 at 1:43 pm

Andrew, the link you posted lists 20 articles, none of which I can identify as the one you’re talking about. What’s the title of the article please?

Thanks!

#3 Andrew on 05.08.08 at 2:41 pm

Sorry try this one ..

#4 Dawn on 05.08.08 at 3:04 pm

At least some of the info is coming out here in Cowtown.

http://www.canada.com/calgaryherald/news/story.html?id=243b20f1-e680-4715-81e4-bdb3525f95f5

Makes my decision to rent when we moved here in 2006 rather prophetic — when I saw the kind of houses and the prices they were demanding, I said ‘NO WAY’. When it costs $1,200 more to purchase than to rent, it is a no brainer for me.

I honestly can’t see ever purchasing again, and I’m 37. Better to sock the difference away.

40 year mortgage – no down payment? I don’t think so.

#5 Andrew on 05.08.08 at 3:28 pm

tried posting it did not go through got it grom cnn money section …

#6 Rob on 05.08.08 at 10:30 pm

lol at the juxtaposition on this post

She’s your wife

For Rent

— bought a house you couldn’t afford and now struggling to pay your bills?

#7 redshirt on 05.09.08 at 1:34 pm

I’d be interested to know why his wife “despises” renting, and even if she does, doesn’t mean that he can’t put his foot down and do it. Taking out a mortgage is renting money.