So Daryn and I have a few things in common. We both married in university. Barely into our twenties. Moved into a flat to start life with a new wife. But there it ends.
Back in the linear age, renting itself was a financial accomplishment. We lived on love and KD. No car, no dog, not even a whimsical daydream about owning a house. After all, downpayments were 25%, mortgage rates north of 10%, and my income stream came from parking cars for the customers of hookers at the Carriage House Hotel on Jarvis Street in downtown Toronto.
But this is now. Everybody deserves real estate.
“The main reason for contacting you,” says the boy, ”is almost every time we visit her family for dinner her parents always want to know why we haven’t bought a house yet as if we’re some kind of naive retards. I try to explain the reasoning in the most polite way possible but what I’m saying isn’t getting through to them. Their main argument is that it’s stupid to “throw your money away on rent” when we could be putting that money “towards our own equity” if we bought a house. Now I’m pretty sure I know the logic in renting right now, but I’m wondering if you could shed some more light on the benefits of renting, or at least refer me to a specific post where you have addressed this topic.”
Sure. Home ownership enslaves and renting frees. Why a 20-something couple would want not want total flexibility in their careers and the mobility to chase opportunity, experience and adventure is beyond this Harley-riding outlaw’s grizzled comprehension. Doesn’t anyone follow their damn heart any more?
But beyond that, Daryn, renting does the reverse of what her nob parents are telling you. It builds net worth at a time when so many are mindlessly walking into a wealth trap. Take the average house in Calgary, for example – $454,000. To buy with 5% down requires almost $43,000 with closing costs and mortgage insurance. The monthly at 4% is about $2,100, and with insurance and property tax closer to $2,500. After three years you’d have spent $52,000 on mortgage interest, and retired only $23,000 of debt while making $75,156 in monthly payments.
So, the three-year cost of owning the house would be $133,000, and you’d still owe $408,000. To just break even, you’d need to sell for $568,000, factoring in the cost of selling. So to simply avoid loss, Calgary real estate would have to swell in value by 25% over three years.
But wait, Calgary houses have lost $64,500, or about 13% of their value, in the last three years. And during that time we’ve had the lowest interest rates since ever (now rising), the greatest housing bubble in history (now ending), and state-backed 35-year mortgages (dying next month). Where do your idiot inlaws get off calling you a naive retard? How can anyone expect house values to advance by 25% when affordability is falling, people are more in debt than ever and the economy’s sliding sideways?
So, you can buy with the faint hope of maybe selling and breaking even, with a monthly cost of $2,500, or you can rent the same house for $1,600. (“Luxury Estate features throughout home, over 2100 square feet with designer finishes, 2 storey 3 bedrooms with, 3 bathrooms, formal dining room & living on main floor, bonus/family room on 2nd floor, double garage, granite countertops, upgraded ceramic/hardwood flooring, designer colors/finishes, maple cabinets, upgraded appliances, master bedroom ensuite with walk-in closet, soaker tub, fireplace, professional landscaped, etc. — $1,595.” Craigslist Calgary).
Over three years as a renter you’d be more than $30,000 ahead, plus still have your deposit money of $43,000. If the forty grand had been invested at 8%, it would be $54,000 in 36 months, so you’d have $84,000 in liquid assets – enabling you to double your down payment on a house which would be worth less than in 2011.
Most importantly, Daryn, you’d have lived in an identical (maybe better) house while you built your net worth and took no risk on a seriously wobbly housing market. You’d have zero debt. Total liquidity. Unfettered mobility. Your net worth would be greater, not less. Your options enhanced. Your virility augmented. Your man aroma radiant. Your wife smitten, satisfied and resplendent.
And her parents awed, silenced, bowed.
Print out this post, dude. Nail it to their front door.
Then revel in the fact you will never eat there again.
234 comments ↓
Now that’s a funny pic.
I’m first to the blog the house fairies forgot.
Yupper. I’m living waterfront, watching the great blue herons and enjoying a glass of wine. How? Sold my house a year ago and like Garth says, invested my dough. My rent is less than my mtg payments were and….whoops, sorry,…gotta go. My neighbours just pulled up in their kayak, time to hit the water. A cool breeze out there tonight, better bundle up under the stars.
Finally first!
Good post Garth. Putting it into numbers clarifies.
Looks like Canada has a “strong housing market”
http://www.leaderpost.com/business/Sask+poised+Canada+leading+beneficiaries+commodities+boom+economist/4246728/story.html
I probably wasn’t the first, but great post Garth. You nailed this one. Investing the money saved from renting instead paying mortgage and other costs could go a long way if invested in this day and age.
BTW, what kind of animal did GI Joe and Company slay? Are you planning on having squirrel stew again this weekend?
Okay, as usual your math and logic are indisputable…but here’s my pick with this whole “rent the house, don’t buy it” schtick. I would almost guarantee that that house is also for sale. That’s the real problem with renting…the reality of dealing with an agenda not of your choosing. Maybe they won’t get their price and you won’t have to move but you will have to pick up the empties and your skivvies each and every morning before viewings. Living like that sucks. I know, I’m too entitled…or is it just, too poor?
I rarely post but never miss a new entry.
Great advice.
Although I can easily afford it but WILL not buy an overpriced ragged house for a false sense of security.
“A fool and his money are easily parted”
Yes, but without a monster mortgage, what motivates people to go to work every day?
Seriously though, these numbers don’t lie, and this is with historically low interest rates. Renting will only look more attractive as rates go up
A house is dead money now, at best.
So, Garth! What’s your opinion of the current rise in mortgage rates? I currently have a VRM at 3.30% (Prime+0.3%) and am thinking that I should convert to a fixed rate for the balance of the term (about 3 years). A friend, who has his eye on the market, suggested strongly that I hold off for a while, believing that the market is going to get worse. Do you think the banks rates will drop again?
No. — Garth
librarykaren every hear of a three to five year lease?
Great post Garth! That is exactly how I feel every time I go out with anyone who owns a house (friends, family, coworkers, etc) in TO…my friends ask me every time why I’m not buying, my parents ask me the same question every Friday (at dinner), and my bosses ask me every month (gee, I wonder why) if I am looking to buy a house…it’s like that friggin movie Groundhog day with Bill Murray…society is absolutely nuts…my wife and I just look at ourselves in disgust. I don’t understand why it’s anybody’s business what the hell I do with my life. My wife and I are still young, and we are in no rush to get to the finish line…I rent an entire house in the city and it’s costing me half of what I would be paying if I owned it…please ppl tell me exactly how real estate is a good investment at these prices…only an idiot (plenty of those around) would buy a house today. Oh and my all time favourite is paying down your mortgage is a guaranteed return unlike ivesting in stocks and bonds…of course…except if you over paid for the asset (like most ppl), then it’s a nasty loss…unfortunately ppl are only looking at the liability side…go figure…
what is with the obsession with being first – and then they are third or fifth????
http://www.cbc.ca/money/story/2011/02/08/crea-forecast-2011.html
CREA revises 2011 housing forecast higher
Where are you going to get 8%?
Last year I did 14%. You just arrive? — Garth
WHEN are the idiots out there who keep posting “First” finally gonna realize garth is purposely posting your announcement anywhere BUT first…..?
Anyway, Global TV 6pm news tonight has announced The OWE-Limp-ICK Village was approached by the Aquilini Family to buy the Whole kit and kaboodle for 200 milllion LESS then the city owes creditors. The city said Nooooooooo !
Speaking of creditors, apparently the Owe-Limp-Ick legacy lives on… over 100 companies are owed more than $65 million in unpid bills. For Millenium village.
The city’s answer. Talk to Ernst and Young the Recievers.
AND they’re rebranding the “Owe-Limp-Ick” Village name from Millenium Village to ?????????
Please fellow bloggers help the City Of Vancouver with a new name for a White Elephant
Numbers matter.
Great post, Garth! And, yet again, my co-workers and I were in a heated debate over this topic today!
I get the same response time and time again. Used to own a condo in downtown toronto. Sold it in 08 for a nice gain. Not because the world was ending but because personal circumstance dictated i sell.
I was lucky, brought at the right time with a good downpayment. These people just dont understand the way mortgage payment works and how the ammort chart looks like after 5 years.
What dumbfounds me is Canadians moved approx every 5 years. Yet, 70% own their homes, whats the point? With rising rates, the IRD is going to be a killer in itself, never mind land transfer/maint/realtor/legal/moving costs etc…
“Then revel in the fact you will never eat there again.”
lol – That is awesome Garth. Terrific post.
“Doesn’t anyone follow their damn heart any more?”
There’s a lot I don’t agree with you on but,
the above is truly the most profound comment I’ve
heard you ever make Garth.
Well done.
@librarykaren
I currently rent and the home I lease is for sale… I have 14 months left on the lease so either I get paid to leave or eventually I have a new landlord… That said, there is no law that says I have to clean up after myself for my landlords viewings or that I even need to leave the home. Even Alberta’s notoriously landlord friendly laws do not make that distinction. In fact, the lease and the law state the contrary…
That said, if my landlord was more monetarily cooperative, I would of course clean up and leave, but with no incentive, why bother? Calgary is a money driven place after all, he just needs to play ball…
The house also has leaky faucets and toilets so I regularly remind my landlord to fix (he does it himself)… Usually during the weekend when he has time… Nothing like a Sunday morning putting his hands down the toilet, and all for the joys of home ownership… I don’t even shovel the sidewalk, not my responsibility…
The joys of being a renter… It just requires a renter to embrace their place on the socioeconomic totem pole… There are advantages to not owning real assets after all, and one is less responsibility.
It does require you to suspend the habitual “Prairie Nice” Passive Aggressive tendencies that is our national personality characteristic (some say be an a**hole) but thats the fun part!
Ask me about my ETFs and REITs though! I’m doing much better than the schmuck amateur landlords out there.
By the way, has anyone ever tried squirrel or racoons? What they taste like? I heard in some US state, they have racoon eating fests, they even eat rattle snake, crocodile over there. And we are a boring bunch.
>#8 librarykaren on 02.08.11 at 10:26 pm
Okay, as usual your math and logic are indisputable…
>but here’s my pick with this whole “rent the house, don’t buy it” schtick. I would almost guarantee that that house is also for sale. That’s the real problem with
>renting…the reality of dealing with an agenda not of
>your choosing. Maybe they won’t get their price and you won’t have to move but you will have to pick up the
>empties and your skivvies each and every morning before viewings. Living like that sucks. I know, I’m too
>entitled…or is it just, too poor?
I am pretty sure you can prepare for such unfortunate event though. Like get rid of all those junks that will never be used. Ever seen some people garage or basement sometimes? I bet if you can just keep to the bare minimum and rent whatever you only occassionally use e.g. miter saw, table saws etc. You will have so little bagage that you can move out with a moment’s notice.
Who are these douches who always post “first”. Get a friggin life would ya?
So what I gather from you numerous posts Garth is that real estate IS a good investment but it just has to be at the right price at the right time. Do I capture your sentiments in this regard? Oh – and provided it is not over 35% of your total investments right?
In 17 months “owning” our own home, we haven’t even built up any equity–we’ve paid down the CMHC insurance by about 75%. (we put 8% down, 32 yr am.)
So it’ll be about 2 years before we even get into equity building. That alone is ammo to rent for 2 years to see if the storm clouds are going to pass (and in those 2 years you could probably save enough to avoid the CMHC fee and therefore you won’t even lose ground to the real estate market–as long as house prices don’t go up)
Did anyone see MacKay on that show Make A Politician Work? Did you see his shifty eyes kinda mad about having to work and the fear coming off him re afraid of being shamed on t.v. – kinda make me sick to my stomach.
snip snip: There is no love lost between Peter MacKay and Marc Garneau.
Mr. MacKay made fun of Mr. Garneau – Canada’s first astronaut and a retired military officer – by invoking Star Trek. Mr. Garneau later referred to the Defence Minister as a “space cadet in training.”
On Wednesday, Mr. Garneau asked Mr. MacKay about the cost of having to modify the new stealth fighters to enable them to refuel in the air.
The deal for to purchase 65 F-35 jets is to cost more than $16-billion.
The Defence Minister didn’t like the question, lashing out and accusing him of “working against those men and women he used to serve with.”
“I had hoped, given his background, that he would boldly go where no Liberal has gone before – that he would support the men and women in uniform. But alas, he has fallen back on that old Liberal position of playing politics on the backs of the men and women in uniform.”
“The Minister of National Defence is quick to question my patriotism. I will go up against him any day on patriotism.
I do not just dress up like a soldier.
I actually serve my country,” Mr. Garneau charged. “The minister also likes his little Star Trek analogies so let me take him where no Conservative has gone before, to fiscal competence and balanced budgets.
Let me ask him why he will not hold an open competition, get the best aircraft for our needs, guarantee industrial benefits and save Canadians billions of dollars?”
♥
♥
♥
.#17 Cellar Dwellar on 02.08.11 at 10:52 pm
WHEN are the idiots out there who keep posting “First” finally gonna realize garth is purposely posting your announcement anywhere BUT first…..?
******
Maybe some people do it to piss off people like yourself, others do it as a status symbol, others because they might have a huge but unnoticed ego, etc.
Me, today, I was just glad to post first (I thought) while I composed my thoughts.
Do I care if I posted first? No! I was just trying to piss off the others who always write that they posted first. Kind of like sending them a message that their posting firsts are a bit irritating and I beat them to it this time.
Didn’t work though, I didn’t get a rise out to them, only you.
Tomorrow, I will try to post second!
24 Jeff Smith on 02.08.11 at 11:26 pm
“I heard in some US state, they have racoon eating fests, they even eat rattle snake, crocodile”
This is because they have shot up all the deer, caribou, moose, goats, rabbits and ducks…. nothing left to shoot and eat, unless you include “RE sheeple”
Elizabeth May and the Green Party call out Harper and Flaherty for their counterintuitive management of the country’s finances:
http://www.straight.com/article-373665/vancouver/elizabeth-may-emperor-stephen-harper-wearing-no-clothes
She throws out a number of $125B of “risky mortgages” on CMHC books, which would be about 1/4 of the $500B+ in insurance… anyone know where that number comes from???
I think I may never buy a house. It used to be an exciting thought, but its just become boring. There was almost a hipness to it, kind of a :
“All the cool kids are doing it.”
Almost all of my buddies have purchased houses in the last three years, and I’ve seen that euphoria change. A realization that four walls can be a prison, and a 35yr mortgage on a deflating asset a life sentence.
Why a 20-something couple would not want total flexibility in their careers and the mobility to chase opportunity, experience and adventure is beyond this Harley-riding outlaw’s grizzled comprehension. Doesn’t anyone follow their damn heart any more?
================================
This statement really resonated with me tonight.
When I was in my 20’s and just getting started with my career, I hated the idea of buying a house for that same reason. What if I needed to pack up and pursue an opportunity somewhere else? I felt that owning would chain me down.
My boyfriend at the time, now partner of 16-years, said, “You can just sell when you need to”. I bought into the idea and several properties later (that’s a long story), I’m now renting and asking myself the same question. But the next time around (if there is a next time around), I KNOW it won’t be easy to sell.
I will begin graduate studies in September in a field that is very much in demand, and I know I will do well. Who knows where the opportunities will be. For the first time in a long time, I feel like the world will become my oyster again. Why would I tie myself down to another place?
Thanks for this post, Garth.
One of your best today, especially the punchline.
Grow a set and tell your in-laws to butt the F out. They live their lives; they should let you live yours. You’re adults and probably a helluva lot more informed about the future of housing then they are. They need to respect your guys’ intelligence and decisions or the relationship between you and them is going south. Stupid parents.
On another note – We’re different because lending standards are stricter here! lol!
http://www.usedregina.com/classified-ad/WHY-PAY-RENT-WHEN-YOU-CAN-PAY-YOUR-MORTGAGE_14137018
Here’s his hook:
“Do you have:
*Low credit score?
*3 months employment?
*5% down payment from you or family?
You could join the millions of people who are home OWNERS!!!”
Unreal.
Oh, and blog dawgs, quit making inane comments about being “first” and if I hear one more old fart drooling over a PG 13 picture of the feminine form I’m going to…. I don’t know…. break some Beach Boys records or something.
“…from Millenium Village to ?????????”
that would actually be the “Millenium Water”, and the new name can’t possibly be anything else other than “Millenium Underwater”, or maybe “Underwater for a Millenium”
Really glad that my ex-wife does not read your blog. (Just bought an ugly and overpriced house. More like tying a mill-stone around the neck)
I do :)
Get Real
Vancouver, BC
“#6 Superluss on 02.08.11 at 10:20 pm
Looks like Canada has a “strong housing market”
=====================================
Let me remind you about something that you probably are unaware of. Do you know when Alberta’s housing prices peaked? They peaked at a time when our economy was beyond blistering hot. The economy was absolutely going stratospheric, employers could not fill jobs and employees could pick and choose as many jobs as they wanted but still………..housing peaked and than began to come back to earth. So if you think that a market that is already saturated with 70% home ownership, looming interest rate hikes and a flood of baby boomers soon to be downsizing and heading to warmer climes, if you still think commodities will push the bubble higher all I can say is good luck with that!
Nice post Garth. I’m renting in style right now for a cap rate of about 2.3% based on what the landlord paid. I could maybe get a VRM for that, but why? As you said, that’s sure to go up. Plus then I have to fix everything. Instead, I played Rock band with my son tonight. OK, maybe not a great use of the free time but hey! The drums are fun, and he’s learning to sing, which is something I could never do.
One thing I can never figure is how people think they make money on their primary residence unless they downsize. Sure, there is equity there, but what does it do? Unless you borrow the equity out, which saddles you with higher monthly payments, there is no profit in cash until you downsize or exit the market. The money is as dead as when it is in gold, except gold is liquid.
But back to today’s letter. The one thing you missed in your post, Garth, is family dynamics. The fact is if Daryn wants to screw their daughter, he’s going to have to buy her a house. That is just the way the deal works. Then, if the marriage breaks down, she keeps it. That’s just the screwing you get for the screwing you got.
#8 librarykaren
Check out the landlord tenant act where you live (maybe a good subject for a future post). Where I live it overrules any contract you may have signed. So if you have a lease, you get to stay put until it expires. Also, where I (Calgary), the landlord cannot kick you out unless he can prove he intends to occupy the house, and that includes the new buyer. If it does sell while occupied, the same terms apply so you might simply end up with a new landlord. That said you might still be subject to eviction at the end of the lease or unreasonable rent increases. But people move on average every 5 years whether they own or not so what’s the big deal?
>#28 Soylent Green is People on 02.08.11 at 11:42 pm
[stuffs deleted]
>On Wednesday, Mr. Garneau asked Mr. MacKay about
>the cost of having to modify the new stealth fighters
>to enable them to refuel in the air.
oh my god! I thought all modern fighter jets can refuel in the air. Or are they supposed to be shipped via UPS over to Iraq where they can then be fueled up for a sortie? I heard there are lots of mistake made on the design of the F-35
Great post!!
I live in Ottawa and am asked daily why we are renters and not owners. Our occupancy costs are half of what they would otherwise be this way. I don’t have headaches with home repairs and spend more time with my kids or drinking beer. I am also not as prone as my friends and neighbors to boring the $hit out of everybody in earshot as I talk about the renovations we are planning or how big the TV will be in our basement rec room. I feel sometimes like the only survivor in a Zombie movie, but reading this blog reminds me that we are the sane ones. Thanks Garth!!
“#32 phinny on 02.08.11 at 11:54 pm
I think I may never buy a house. It used to be an exciting thought, but its just become boring. There was almost a hipness to it, kind of a :”
=====================================
I used to own until a job change required a move. Trust me, the novelty of home ownership soon wears off. It is all very new and exciting at the beginning but than just as quickly, familiarity takes the initial excitement away. You are than stuck with the stark reality of high mortgage payments, high property tax payments, much higher than renting utilities and maintenance, cutting the lawn every week, shoveling the walks, etc, etc. If home ownership was all it took to be happy, why are there so many depressed and stressed people in this world? HGTV sells a lifestyle but like everything on TV, it is all a facade.
“With rising rates, the IRD is going to be a killer in itself”
In a rising rate environment, IRD = 0. In fact, banks will encourage pre-payment (or CMHC default) as they’d much rather re-invest at higher rates.
#32 phinny on 02.08.11 at 11:54 pm
>Almost all of my buddies have purchased houses in the last three years, and I’ve seen that euphoria change. A realization that four walls can be a prison, and a 35yr mortgage on a deflating asset a life sentence.
I’m waiting to hear hip young Canadians complain that they thought they could walk away, like Americans do. Because it would be hysterical if they had “learned” only one thing from the U.S. housing crash and it was that.
Brynn (from previous post),
I have no problem with realtors. Let’s not forget that you said for weeks that you were not a realtor and then expressed a pumper opinion. It is not realtors that bother me but liars. Again, there seems to be a lot of overlap there.
Good luck on the call on the benchmark. Not looking so good so far.
Robert Schiller, the man who very correctly called the US housing meltdown before it was obvious to everyone else is now saying “The Canadian housing market looks due for a U.S.-style drop”
“If the historical statistics serve as a guide, Canada looks to be headed for a big drop in home prices..”
“Calgary and Vancouver appear to be the biggest possible housing bubbles in Canada, he said”
http://www.financialpost.com/news/Canada+random+success+story+Shiller/4246526/story.html#ixzz1DQG7Tnzh
Amen!!! – to today’s post.
It should be nailed to the front doors of Calgary Realtor offices like Luther’s thesis. The lemmings walking in just might read it (if indeed they can actually read) and realize that they are being “had.”
And, that saying, “throwing your money away on rent,” should be made a capital offence.
#31 T.O. Bubble Boy – looks like you missed the underhanded creation of Canada’s new “Insured Mortgage Purchase Program” (IMPP) in 2008.
F. took $125B of high-risk mortgages off the hands of the banks and purchased them outright under this program to increase the credit availability in the banking system. His argument was that the government owned the risk through the CMHC anyway.
VERY few Canadians caught this move – even fewer understood what it meant. Yes, the Canadian government directly owns $125B of mortgages that were deemed too risky to leave on the banks’ books.
When Flaherty first announced the IMPP in October 2008, the “program envelope” was $25 billion. In November, it was $75 billion. By the time the 2009 Federal Budget was tabled, the funding envelope had ballooned to $125 billion and the program was expanded until March 31, 2010.
April will be the first year on year compare where this program isn’t working to propel the housing sector. Hmm, no IMPP, higher interest rates, tighter mortgage regulations – should make for an interesting spring market.
While it makes sense for many people not to own a house, we seem to get many posters who do not want to
ever own a house, and are quite happy just Pi–in off
their landlord. Hey, not everybody is cut out to be an
owner.
I would like to hear (read?) from anybody who actually
bought, and has since moved for work or other reason,
but elected to keep their house/condo, rent it out while
they themselves are renting in another part of the
country (or world) for an extended time. I think a person
such as this could give an excellent perspective from
both viewpoints.
Nice Grizzly Squirrel.
I just catch and release, more sporting.
http://www.youtube.com/watch?v=c8wwceaN4n8
Hey “Daryn” when your inlaws listen / read what Garth just wrote and they tell you “Oh Garth and those whack jobs on that blog are idiots.”
Have this printed off and ready to whip out.
Its from Patrick Killiea, a more in depth write up on the same subject.
Well worth a read anyhow.
http://patrick.net/housing/market.html
#126 Devore
Talk about the issue if you are well informed. Otherwise pissoff
So you say buying a house is not good, renting is good, just because you sold you want everybody to sell, you blame the media of encouraging people to buy, and this site is also a media thats encouraging the people to sell or not to buy, you want the real estate to fall and millions of people to suffer so that you can buy low….still nothing is going your way after all these years of predictions, you need to change your crystal ball, its getting old, nobody predicting what happened in the world, and nobody gonna predict when its gonna end! people dont listen to those who claims they can predict anymore….
That was convincing. — Garth
I’ve been renting for two years now and my landlord would be happy to keep me here for many more. My rent is about 60% of what I used to pay for the mortgage. And I live in a bigger house than I used to; so renting works for me and as a result I work half the time I used to in my slavery days.
In regards to an older post – ‘Don’t bet against America’. My niece lives in NYC where she has run a wedding cake business successfully for about 12 years. In conversation with her she said America has become a second world nation, everything is going downhill faster than an avalanche in the Rockies. A friend’s well qualified girlfriend has not been able to find a job for two years in San Francisco. Her mother has not had a raise as a teacher in California since 2001 after the Enron debacle.
The American recovery is a mirage, ain’t no doubt about that…
And gold ain’t overvalued, no not by a long shot. when 70% or even 50% or even 10% of the population
owns gold in some form then it may begin to enter bubble territory. When you hear housewives in checkout lines speak of how many ounces of gold they just bought then gold may be in a bubble. But then Garth has been telling us that it was in a bubble when it was under $800 / oz. Let’s check in another 3 months and see how much more overvalued it will be..
#17 Cellar Dwellar
Good scoop re: Olympic Village
As the screw turns…
I guess one would think the City would be honourable in paying its bills…but I see that it is engaged in abusing the Local Gov’t Act by taking on a private sector persona. Thus it can hide behind such a disguise and deflect the matter.
Of course, all those contractors and suppliers that acted in good faith to make BC proud and get a 2 week free hotel for Olympic athletes ready should also be expected to eat the loss, even if they go bankrupt.
RE: CREA’s “higher forecast”
Didn’t these clowns predict slightly lower prices for this year just a few weeks ago? Between them and the banks, I don’t think I’ve ever seen a more schizophrenic string of predictions. One week they’re predicting up, the next down, the next a “balanced” market.
They list a slew of factual reasons why housing sales and prices will DROP, then one guess as to why they’ll go higher (lower unemployment rate later in the year) and based on that they jump to the conclusion that prices will rise.
If I submitted a research paper with this kind of uneducated nonsense when I was in University, I would have received a failing grade.
The fact that so many people fall for this misleading, manipulating, propaganda is sickening. In respectable industries like Engineering there is a code of ethics that actually gets adhered to and enforced because the majority of its members are honest and ethical. The same cannot be said of the RE industry. It’s just a constant barrage of scheming half-truths, double-speak, false conclusions, and outright lies in a simplistic attempt to part fools from their money while at the same time brainwashing even bigger fools to assist in promoting the cult and berating those who will not join. The media being complicit in this racket makes them just as deplorable.
This has been going on for so long and exposed for the deception that it is in other countries numerous times that I have no idea why people here still fall for it. This is also why I will have absolutely zero compassion for these people when the housing market completely collapses and bankrupts hundreds of thousands.
In this day and age where everybody is coddled and shielded from any sort of pain, they are also shielded from learning any valuable lessons. If the only way for people to learn is the hard way, then so be it.
Seems to me the only one that made money on the oilyimpics was John Furlong and now he’s written a book that is being pumped on all the channels . Who the hell is going to read it ? Next oilyimpic they should have a new sport, back stabbing. Or fill your pockets 1000 . Who says there’s no free lunch. millenium village = gordo’s fawlty towers.
I own a few houses in Toronto (more than 10,000 sq ft combined, not incl basements), south of Dupont, and between Yonge and Bathurst. They carry very nicely, 6% net + 50% leverage @ <3%, for a almost 10% pre-tax ROE.
Sure it's low compared to stock market returns lately, but these are (in theory) inflation-protected assets in the long term (arguably so are equities).
Where do I live personally? I RENT. No stigma at all!
When is brampton going to post updated real estate statistics? What are they hiding?
Great post Garth…!
Thanks for choosing Calgary as an example. I endorses my position and tells to hold off…
Could you please suggest me where can I invest ~50K that I have? My conclusion after reading your blog is to invest in bank preferreds. Or do you suggest energy ETF? I would love seeing 8% growth. I know it is too little to diversify… Thanks in advance…
BTW, can you please license Devil’s Advocate with a special name, that why he wont get pissed off? He needs more energy to save Okanagon from falling…
Cheers…
Garth, do you own or rent? Or both (like me)!?
Thanks for cheering on this chap Garth. I know how he feels.
http://www.cp24.com/servlet/an/local/CTVNews/20110208/110208_housing/20110208/?hub=CP24Home
First!
;-)
Prof. Shiller said he owns a house near Yale in New Haven, Conn., and a summer home, both for nostalgic reasons, not as investments, and he believes it makes more sense for most people to rent and put the savings in a diversified portfolio.
http://www.financialpost.com/news/Canada+random+success+story+Shiller/4246526/story.html
++++++++++++++++++++++++++++++
Garth, sure looks like you’re in good company with your most recent post with respect to benefits of renting/investing vs home ownership. Great post today!
#48 Dark Sad Monster Bunny
My next door neighbour bought for $435K two years ago and about a month later had a job transfer so she rented out the house. Now her tenants are leaving Calgary and moving back east and she wants to sell. Original list price $440 (over market value), one month later now she’s down to $425. Still no offers. Instant “equity” gone. I wonder if she’ll be buying again. I wish her luck.
My wife and I are in our early 30s. We have to constantly justify our decision to rent in perpetuity. Our family thinks we’re nuts! Home ownership simply isn’t on our radar and never will be again.
Even if the housing bubble doesn’t burst like an overstuffed diaper, owning another house isn’t for us. We bought our first house in 2003 right after we got married and sold a few years later to pursue a new job in a new city. We were lucky that we sold in a hot market, but the realization hit us shortly after that we dodged a major bullet. Our house sat on the market for about three months, but what if the market had turned? We’d have been stuck, underwater, and unable to follow a new path.
With all the uncertainty in the world, flexibility means everything to us. We can’t understand why people our age are in such a rush to nail their feet to a specific local economy, no matter how pretty the lawns are.
“Our houses are such unwieldy property that we are often imprisoned rather than housed by them.” — Henry David Thoreau
@EJ: The people who work for CREA have trouble filling in pre-printed forms correctly. Research papers are way beyond their means!
Ya see, the trouble with the “no stability in renting a home because the landlord can kick you out” argument is that ignores the fact that you have a legal right to leave and sublet your place to a suitable tenant any time YOU wish as well. And if you keep the place nice, don’t cause problems and pay your rent on time, most landlords WANT you to stay, especially since as time goes by, their wonderful investment property will become harder and harder to sell.
You know, I live in a decent apartment in a wonderful area just 25 minutes by bus (10 by car) from downtown Montreal. So any nice summer evening, I can get in my car and meet friends at a trendy club in the heart of party city in under 20 minutes. I’m mere seconds away from complimentary tennis courts, a municipal library, several grocery stores, pools and restaurants, and it takes me all of 3 minutes to get my bike out of my apartment door and be on a beautiful bike path running along the St Lawrence river to downtown Montreal. Such a great lifestyle.
I have the time to do these things because I don’t have to shovel, cut grass, rake, trim hedges, refinish my deck, or take time off work because the roofing company is coming over to check out the leak in my roof, which will no doubt coast me at least $1K to fix. See — I’ve owned a home in suburban Montreal and have been through the whole “pride of ownership” mind-set as I drive 90 minutes plus EACH WAY to my job in downtown Montreal.
When something goes wrong, I call the landlord. I don’t worry about wondering what my housing expenses will be next year because I’m in a province with rent control and process to take advantage of if the landlord gets a bit unrealistic with the rent increase. In total, including parking, insurance, hydro and yes, even including internet, cable and phone, my housing costs are pegged at less than 23% of my NET (not gross) income. Once the rent and utilities are paid, over 75% of NET pay is discretionary expenditure. AND I don’t have to set aside about 2-4% of the value of my home annually for maintenance — and maintenance always “happens”.
For the past two years, houses were “affordable” (well, the mortgages were) and people marveled at the fact I refused to buy. See for me, it’s a lifestyle choice beyond being a wise financial choice. If something happens to my job, or the Parti Quebecois gets in power and gets “silly”, no big deal. Either I sublet and flee to Anglo freedom, or I just wait until the lease ends and bid adieu to this wonderful life (and I do love it here) in La Belle Province.
And I can’t help but think of all of those boomers who are a bit older than I, who bought big homes because it would afford them financial freedom. Fact is, almost 50% of them still hold heavy mortgages and with the market declining, their “nest egg” is a bit hard boiled at this point. I think when the boomers realize that the industry sold them a bucket of lies and they can’t retire on the proceeds of the sale of their home because half of them owe big mortgages at this point in their life, they’ll be marching in the streets.
So I think the best decision I made in the past decade was to sell my home and “throw my money away on rent”.
No Garth, 20-somethings are supposed to be mature adults, the main indication of which is throwing out an anchor taking on a lifetime of crushing debt.
I’ve rented the same house for over 3 years. 2 years ago I negotiated a $200 reduction in the monthly rent. Right now I am in the process of negotiating an additional $350 reduction. If the second reduction goes through, it will mean I’ve been able to reduce my rent almost 25% without packing a box.
You can’t renegotiate a mortgage when the market changes, but when rental prices drop you can renegotiate or worse case move.
So Daryn and I have a few things in common. We both married in university. Barely into our twenties. Moved into a flat to start life with a new wife. But there it ends.
Back in the linear age, renting itself was a financial accomplishment. We lived on love and KD. No car, no dog, not even a whimsical daydream about owning a house. After all, downpayments were 25%, mortgage rates north of 10%, and my income stream came from parking cars for the customers of hookers at the Carriage House Hotel on Jarvis Street in downtown Toronto. – Garth
1966 -1967 – Got married, 22, finishing Ryerson. Wife in nursing. Basement flat for $25/wk. Entertainment – walking up and down Yonge on a Sat. night. Left T.O. in Brother-in-Law’s borrowed 1964 Valiant with everything we owned, including a new baby boy. Bought a 1958 Austin for $225.00 (had red leather seats!) Looked for a job. Eventually rented a house for $60 a month with sloping floors, no foundation and heated by an oil fed space heater with stove pipes winding up through son’s room and a big grate at top of the stairs. Winds blowing across the road pushed the plastic we had nailed over front windows inside to billow like a sail. This was in a small Southwestern Ontario city and house owned by the company I got a position with. Watched our 19″ B&W t.v with rabbit ears on a small side patio in the summer when it was very hot. We stayed 3 years. Saved up $1500 and went into business.
Built our existing house in 1973, a 2 story on a 3/4 acre lot in a small hamlet for $28,000 plus $5000 for the lot. Builder offered to put on a family room and 1-1/2 car garage for an additional $1000. I told him no way……..was already afraid of the $223/ mth mortgage payments and a payroll to meet, which often got met before my pay.
Still in the house, retired, 2 sons, 5 grandchildren – 2 beautiful gals and 3 handsome guys, 10 – 14 ….all hockey players.
Now looking at buying a live-aboard 45 ft. boat and living in Costa Rica to follow our hearts desire! One son maybe going to rent the house.
Some of the best times?……..Living in that $60 a month house with the dinky toys able to roll down the floor from the living room into the kitchen to the huge electric stove we bought for $25 used and past the holes I drilled in the floor to let the spring water run out when it flooded and sitting on the old side patio in the summer listening to the frogs and crickets.
So Garth, my wife and I can relate to your opening paragraphs and only wish in a good sort of way the 20 year olds could experience some of what we did……. a lot of toughening it out, but the good memories are still with us – even the laugh we get about not going for the family room and garage and a half….. 45 years and falling our hearts!!
I was listening to the radio and they were talking about the violence against protesters, concentration in the media and the rising disparity between the rich and poor. I thought great and interesting program on Canada. It turns out they were talking about Egypt!!
“She throws out a number of $125B of “risky mortgages” on CMHC books, which would be about 1/4 of the $500B+ in insurance… anyone know where that number comes from???”
Depends on her definition of risk. CMHC’s is listed below followed by a link to their 2009 financials – pay particular attention to the difference between HTM and HFT classifications. HFT is where all the trouble is going to begin. If the contagian from any unhedged derivatives exposure in the HFT category can’t be contained and makes its way onto the street, I don’t think CMHC’s value at risk model has taken into account what that would mean for the economy and the cash flow on all those HTM MBS.
“Value at Risk: Market risk for AFS financial assets is evaluated through the use of a Value at Risk (VaR) model. VaR is a statistical estimation that measures the maximum potential market loss of a portfolio over a specified holding period with a given level of confidence. The calculation of VaR is based on the Delta-normal method which may underestimate the occurrence of large losses because of its reliance on a normal distribution.
Interest Rate Sensitivity: The financial instruments Designated at Fair Value and classified as HFT in the Lending Activity portfolio are exposed to interest rate movements. For Loans – Designated at Fair Value, the impacts of interest rate shifts on the portfolio are not symmetrical. A -200 bps interest rate shift would result in an increase in value of $418 million (2008 – $486 million) whereas a +200 bps interest rate shift would result in a decrease in value of $381 million (2008 – $441 million). For all remaining loans, a -200 bps interest rate shift would result in an increase in value of $818 million (2008 – $953 million) whereas a +200 bps interest rate shift would result in a decrease in value of $655 million (2008 – $756 million). The following table shows the maximum exposure of the Lending Activity portfolio’s net interest margin to interest rate movements with a 95% confidence over a one year period as at 31 December. The maximum exposure is limited by CMHC policy to $1.5 million.”
http://www.cmhc-schl.gc.ca/en/corp/about/anrecopl/upload/CMHC_AR2009_ConsolidatedFinancialStatements.pdf
47 Genxer – apparently the program topped out at just under $70B. The mortgages were purchased by way of “reverse auction” where a premium was charged.
http://www.actionplan.gc.ca/initiatives/eng/index.asp?initiativeID=39&mode=7
Not that it matters, taxpayers still on the hook.
“I would like to hear (read?) from anybody who actually
bought, and has since moved for work or other reason,
but elected to keep their house/condo, rent it out while
they themselves are renting in another part of the
country (or world) for an extended time. I think a person
such as this could give an excellent perspective from
both viewpoints.”
Not exactly a purely Canadian thing, but my wife and I bought a condo in Warsaw in 1999 and, after living there for 3 years, decided to move back to Canada. We now rent a townhouse in a pleasant Mississauga neighbourhood.
We paid about 115k for a 670 sq ft. 1 bedroom in a great location in Warsaw (right on the metro line and near a huge forest). It was extremely difficult to get a mortgage in Poland at that time, basically the minimum downpayment was 40%. We had some financial help from family back in Canada and came up with the cash. By 2003 we had paid off the whole thing (i.e. four years).
Instead of renting it out on the open market, we decided to allow my sister-in-law to live there “at cost”, which means just maintenance and utilities which amounts to only about $200 a month.
In Mississauga our rent is about 1400 including utilities for a 3-bedroom townhouse. We have a small garden and loads of storage space in the basement. The worst thing is that the heating is electric and the bills can get up there in winter time if you’re not careful.
Several months ago, we looked at buying a townhouse in Mississauga, but gave up after what we thought was inflated prices (310k and up for anything decent).
The differences in RE in Poland and Canada are instructive. In Poland the cost of renting on the open market is very high in relation to the average salary, and the operating costs of owning a condo (SFH in the big cities are only for the very rich) are very low. This means that if you’ve got enough cash to buy, it makes sense to do so (also there is no property tax).
In Canada, with property taxes being what they are, and rents being relatively low relative to income, renting makes more sense.
#45 Jsan — great article, thx for posting.
Great post, this is the sociology of home ownership. The attitude – You are middle class if you own, otherwise you must be poor.
Just tell everyone that you own, and toiling away at a mortgage, it’s what they want to hear!
Maybe just tell people you did buy. So what if you are lying. They should mind their own business.
Thanks Garth for this post. I get asked the same question all the time. Why are you renting? We sold our condo over 3 years ago after a $30000 special assessment, glass bottles being thrown over a balcony 15 floors above us, plumbing nightmares and a person nicknamed “Dennis the Menace” living in our lovely strata building. We sold in a week and pocketed a nice profit at that time and have been renting since. Less stress and more flexibility in these volatile times of economic uncertainty and occasional layoffs. Yes…layoffs are known to happen in Vancouver, a city of unhappy indebted people. It is so overinflated here.
our landlady sent the plumber by again last saturday: stubborn leaky faucet. i told her that the gutters need cleaning and the yard will need a spring clean-up; she said she was re-negotiating the landscaping contract.
no sweat, i said.
we’re looking forward to six weeks in tahoe this summer, then a few months in australia/new zealand next winter. we’ve decided to sublet the rental to a family member while we’re away.
interest rates? what interest rates?
Jsan (#45)
Good article. Tho both Calgary and Edmonton have already corrected by 10% or so since summer of 07.
Those two are no lingering and look to be going flat
or lower over the long run.
Toronto, Vancouver, Saskatoon on the other hand seem to be as high as ever. Watch out below!
I’ve rented and I’ve owned multiple homes in my day.
Positives for the renting side:
– You can easily move cities/areas as you mature in your career.
– No property tax, no maintenance, no wasted weekly trips to home depot/Rona/Revy/Totem to buy stuff.
– No worries about what your home is worth, what the RE market is doing.
– You can negotiate a maid and/or gardener in the rent (I do).
– More freedom overall.
Garth is quite right in saying owning a home isn’t all roses. If the market is falling, that is the last thing you want to be financially and physically traped in.
I have been reading this blog for a while now, and share the same views as Garth on the housing market. My boyfriend and I rent a gorgeous condo in False Creek (Downtown Vancouver), paying only 27% of our combined net income in rent. We are constantly having these rent vs buy arguments with our “house horny” friends. What’s interesting is that all of our friends who are economists or accountants rent. However, our not-so-financially-intelligent friends have all decided to take on mortgages 7-8 times their annual income because “House Prices Will Always Go Up”. I swear to God, if I hear one more Vancouverite say “House prices will always go up….Asians will never stop coming…Mortgage rates will never be higher than 6%” I am going to punch them in the face. As much as I know how detrimental a full-blown housing market crash will be to our economy, I just want it to crash. Not because I can’t afford to buy right now or because I’m bitter that Mandarin is the new English in Richmond. No. I want the market to crash so I can say : I told you so. Because these idiotic Vancouverites need to learn their lesson.
#51 John.
So you want prices to keep going up so “millions will suffer” for a different reasons? Which ever way it goes some people are going to get hurt financially.
Just back from vacation and I see Kevin O’Leary in aggreement with CREA that prices will drop 2% instead of the originally stated 11% for 2011 and” RE will do well” in 2011. What’s his agenda????
Living here in the land Down Under, this could be written for me.
I cop this from the Father in Law at every visit.
I have a healthy deposit (when I’m so inclined) in the bank, a foreign holiday every year (europe is a long way from here) & rent a cheap, though truth be told, worn out house a quick bike ride from work & the CBD.
Yet I’m lazy, stupid & unable to see that a ‘house MAKES you $. May be it can, but not right now. Not for a long while…
Astounding piece today Garth. When describing the rental when did you take time for a breath?
#50 Hoof – Hearted
My, aren’t you a pleasant fellow. Remember where you are.
If you are as well informed as you claim to be, why don’t you explain this to us, without the ugly innuendos this time?
At #24 Jeff Smith:
“By the way, has anyone ever tried squirrel or racoons? What they taste like? I heard in some US state, they have racoon eating fests, they even eat rattle snake, crocodile over there. And we are a boring bunch.”
Squirrel stew (in Quebec) tastes somewhat a like a cross between chicken and rabbit but you have to be careful that you don’t bite down on splintered tiny bones.
It’s also like frog’s legs or squab (pigeon)…I find they all have a similar taste in my personal opinion, but maybe that’s because they all had a lot of red wine in the gravy :)
Rattlesnake is like tender, flakey chicken (white meat), whereas Alligator is like stringy, dry chicken (it might have been overcooked).
Beaver is very dark and greasy, and bear meat is quite gamey and fatty too.
Caribou is like venison except gamier. I’ve eaten enough Caribou to last me a lifetime (Labrador).
I like Canada goose (the meat is slightly darker and stronger than duck) but you have to watch that you don’t bite down on a piece of buckshot.
Ptarmigon I really like…it’s like pheasant. I’ve had some native friends refer to it as their fast-food version of KFC because the birds are so dumb you can easily snare them with a noose for lunch.
Bat meat tastes like dried out chicken (there isn’t much meat or fat on their bodies).
Whale blubber, which was offered to me as a delicacy, just tasted like greasy oil to me, but I had to admit, I was a child and just discreetly spit it out into a kleenex. Maybe it would have tasted differently if I had chewed it.
I haven’t tried Raccoon or Seal yet but I did try dog meat I’m afraid (China).
Believe it or not, I’m a vegetarian now :) You can also eat bracket fungus, puffballs (those big round mushrooms), fiddleheads, cat-tails (the roots are like tiny corn on the cobs, plus you can make a flour out of the ground up heads) and a variety of other plants and berries.
…and Soylent Green tastes like chicken :)
Dear Librarykaren: Be prepared to move many times in the future or to renegotiate. As house prices fall so will rents and we should all be together in rewarding lower rents. Just as the real estate industry has rolled up their sleeves over the last ten years to maximise senseless profits we must roll up ours and speed up the decline which is coming anyway.
Dear Jsan: There is a Shiller, a Schiller and a Shilling ( who is quite expensive). Shiller is who you meant but he did not point out what will happen if things get worse in the States. Houses will probably drop more than fifty percent. We can prevent this by having a house strike demanding a 50% drop before we will buy, therebye putting a floor limit to the inevitable drop.
Garth: You say follow your heart. Mine says a house strike to start in the spring. I am asking everyone to join in and wear a name sticker that says ‘house prices to fall 50% or I’m not buying.'(but don’t wear it to work).
Garth: I have been hearing about annuities and how some could pay you $8,000 per month for life after age 65 for the price of $100,000. What do you think? Will you write it in your book or in future? I really would like to know. I bet others would too. If I live past 78 or so I would have done well. I expect to live to 110, give or take a year.
Don’t believe all you hear. Annuities are a bad idea. — Garth
Last!
#28 Soy Green,
What does your post have to do with real estate or the economy?
Excellent post (for the readers in their 20-30s)
I rent, and moved multiple times for work (out of country and province). it took a little effort to convince my gf of the maths behind renting, but now she understands.
I stopped trying to convince others that renting is better (I rent at 1:22 the selling price). I’m now at the point where I don’t care… They can sink in their debt hole all they want. As long as it’s not me.
My friends cancelled buying a $90k chalet after inspection, well they just bought a $220k one on the same lake. It’s like they just had to buy one whatever the price. It’s sad for them.
“How can anyone expect house values to advance by 25% when affordability is falling, people are more in debt than ever and the economy’s sliding sideways?”
almost everyone expects values to advance that much. In Quebec I’m told endlessly “look at real estate in the last 10 years”, “if I had bought 3 years ago I would’ve made xxx$”, “it’s different here”, “RE only goes up”, “whatever year you buy, in the long term it’s worth it”, etc.
“Doesn’t anyone follow their damn heart any more?”
———-
They do. It’s called hedonism.
FIRST!!!!! :o)
The post makes some sound arguments.
However, the post omits the one key point that life-long renters need a heck of a bigger nest egg at the end of your working years than non renters.
20 retirement years x 12 = 240 months
240 months x ~$2000 a month = $480,000 spent on rent in retirement years.
(Plus of course inflation, which makes the math more complicated).
You’ll have to have a pile of money saved which throws off $24,000 in appreciation every year in your retirement years to cover your housing.
Renting can indeed free up some money in one’s monthly budget.
Principle + Interest + Maintenance + Property tax etc, is indeed more expensive than renting.
But the question is really, is that monthly savings – if dilligently invested every month – sufficient to create that big pile of money which covers your rent in those twenty+ non-earning years post age ~65.
Perhaps it is. Perhaps not.
A lof of that comes down to personal financial choices, and having the diligence to save the surplus every paycheque.
That argument just evaporated for the US middle class. Have we learned nothing? — Garth
THIS IS THE BEST BLOG POST I CAN REMEMBER READING ON GREATERFOOL.CA IN A LONG TIME.
LOVE THE STORIES FROM RENTERS IN THE COMMENTS TODAY!!! #68 ADAM, I’VE OFTEN THOUGHT OF MOVING MY FAMILY TO MONTREAL WHEN WE RETURN TO CANADA FROM KOREA IN 4-5 YEARS. YOUR POST HAS EDGED ME THAT DIRECTION AT LEAST 15% MORE.
THANKS TO ALL THE GREAT POSTERS TODAY!
BLASE (ABOUT BUYING IN CANADA) IN KOREA
AND I don’t have to set aside about 2-4% of the value of my home annually for maintenance — and maintenance always “happens”.
——–
I’ve had some people contest me on the 1% cost of maintenance.
It just goes to show that a lot of people expect to make money out of real estate without putting a penny in. We can see it by the state of the housing stock. CMHC even has a report on it. CMHC is optimistic in the future of renos and construction because our housing stock is in dire need of maintenance. LOL.
Anyone who has taken care of a house properly know that it can be a money pit. Housing goes up with inflation, period. If you’ve made more you should count your lucky stars, sell and run.
When it comes to both finance and health, people are just out to lunch.
No pun intended.
Way to get rich – do what everyone else is doing. Why? because everyone else doing it.
You know the crowd!
Just jump on the house of cards and never consider the risks. Nortel comes to mind…
It always ends the same way- at least sooner or later. Usually much later- so anyone who suggests that you go against the grain is perceived as being crazy. Someone like Garth perhaps.
Here is the kicker – when all is said and done – people like Garth are right.
The same thing happened with Peter Schiff in the U.S. They all laughed at him but he was right. ==>http://www.youtube.com/watch?v=2I0QN-FYkpw
Take the time to watch the video – pay attention to the people laughing at him.
By the way the crowd at the end of the day is never left holding the bag full of money. Oh they are definitely left holding a bag – but it isn’t money.
With regards to health – only eat one Big Mac lunch instead of two and then spend the rest of the afternoon wondering why the weight isn’t dropping off.
Garth: I have been hearing about annuities and how some could pay you $8,000 per month for life after age 65 for the price of $100,000
———-
I you can get 8,000$ per month on 100K that comes to 96K in income. The insurance company won’t be around to pay you by the time you are 66.
@ #47 GenXer:
I had initially thought that the article was referring to IMPP mortgages, but it spefically said “CMHC-insured” — which made me believe that it was talking about the insurance side of CMHC’s holdings.
So, with $500B+ Insurance In Force, a $125B loss would be the equivalent of all insured mortgages defaulting and those homes falling 25% in value — or something like 50% of those mortgages defaulting and falling 50% in value!
Either way – a LOSS of $125B would be very unlikely… defaulting of 25% ($125B) of mortgages is definitely possible, but you would recover say 50%-80% on each home, so the actual loss is smaller — “only” say $25B-$65B.
However, the post omits the one key point that life-long renters need a heck of a bigger nest egg at the end of your working years than non renters.
—————-
You need to live somewhere the argument goes.
The problem seems to be in determining the cost of that somewhere. Here is a rule of thumb…
Buying makes sense if you can pay off your house in a reasonable amount of time, save at least 10K per year and still have a life.
If you can’t do this because your payments would eat up a huge chunk fo your income, then it only makes sense to buy if the market has tanked and no one wants to touch real estate with a ten foot pole, plus rates are about to drop.
If you go against this rule of thumb, chances are you are taking a risk you could easily regret.
I agree with the renting idea but it is hard to find a nice detached home in the GTA for $1600/month.
Then you’re not looking too hard. — Garth
Another story from the US:
Foreclosures ramp up as 30% of mortgages are underwater
http://finance.yahoo.com/news/Foreclosures-ramp-up-as-30-of-cnnm-327319367.html;_ylt=AvDp3aerQIRVODlDhiJcMs.7YWsA;_ylu=X3oDMTE2MXJsMTRwBHBvcwMxMgRzZWMDdG9wU3RvcmllcwRzbGsDZm9yZWNsb3N1cmVz?x=0&sec=topStories&pos=9&asset=&ccode=
#12…no owner is going to give a 3 or 5 yr lease at that low rate. BTW, i agree, that house has to be for sale, its not representative of the rental market here in calgary.
Good post however. What ppl look at is not what has happened in the last 3 yrs but what has happened in the last 10. Prices in Calgary went from an average of $200K to $550. Most of that occurring in about a 3 yr period. That unfortunately is what people remember and propagates the myth of buying because its a good investment.
While watching the collapse of the housing market in Kelowna, some thoughts have occurred to me. The idea of a real estate market supported by immigrating retirees appears to have some problems. Turns out over 90% of folks who retire don’t go anywhere. Of those who do move upon retirement, how long will they be in the market ? Probably less than 10 years based on what I have observed. Since the retiree immigrants are not having children, and will likely die or move to a nursing home after a few years, there needs to be a much larger influx just to maintain the status quo than for a younger market ( such as Vancouver ). This might help explain the problems in other retirement markets such as Arizona and Florida. I am interested what others think of this
RENTAL TIPS FOR THE RENTER
Some people are just not cut out to be landlords. It’s a tricky business with the laws generally appearing in favour of the tenant. As is the rest of life it’s a bit of a game. Learn the rules and learn how to get around them. Ya gotta “play” the game. Sounds like you have learned how to play the game better than your current landlady.
A most profitable renter will hold few possessions and move frequently choosing homes which are for sale rather than those which offer stability. Why? Because, well in this Province of British Columbia anyway, when a tenant is given notice to move because the new owner intends to occupy the tenant must be given two clear months notice the last of which is rent free. Do that enough times in a year and you might, in theory, have reduced your annual rent by up to 50%. ;-)
RENTAL TIPS FOR THE LANDLORD
Some people are just not cut out to be landlords.
#71 Into the Sunset:
Great Post! It gets to the heart of the matter. A house is just bricks and mortar. A home is where you and your family are. Loved it!
#84 april
Brad Lamb is O’Leary’s squash buddy; part of being the ultra elite is not to disturb the peons from their slumber.
RENTAL TIPS FOR THE RENTER
Wow… so you started out paying $2,200.00 per month in rent, are currently down to $2,000.00 and now shooting for $1,650.00. If your most recent request for a rent reduction is accepted.
A most profitable renter will always seek to reduce their rent by negotiating with the landlord or giving notice to move to a better rental for less rent. But to be successful in negotiating the rent down so you don’t have to go through the inconvenience of a move, which does cost money, a savvy renter will be such a model tenant that the landlord strives to retain them and is willing to make concessions to do so. But if not such a model tenant be ready to have your bluff called by actually having such alternate accommodation. No you can’t be evicted for asking for a rent reduction, but understand that it does not generally improve relations between you and your landlord. A savvy landlord has a few tricks of their own.
RENTAL TIPS FOR THE LANDLORD
Rentals for which you must charge more than $1,500.00 per month are a risky venture. Better to be a profitable slum lord than take too much pride in another person’s home that it buries you in a sea or red ink.
#8 librarykaren
True story.
About 20 years ago I was a young man flush with money and looking for a nicer apartment to rent. I went to many look-sees, but there is one I will remember forever.
The landlord took me to the top floor of her duplex in a gentrified part of the old city. As we walked in, the tenant was just leaving, with a silly smile on his face. As we entered the apartment we were hit with the unbelieveable smell of a fresh bowel movement. I was gagging so much I had to leave the apartment immediately without seeing past the entranceway.
Afterwards I recalled the self-satisfied (soon-to-be-ex tenant’s) smile as he left.
So I believe that a tenant can pretty much do as s/he pleases during viewings (for which in Ontario I believe s/he still has the right to 24hrs. advance notice).
For those who wondered hoew thin my skin actually is, I gave you all quite a show on yesrday’s thread…I squirmed and was totally offended that someone would impersonate me….on an ANONYMOUS message board! So help me, I’ll get one of my lawyer pals to sue you for defamation. I will!
Ironically enough, this outrage exists despite my all-too-frequent posts baiting other posters to tell me what they do for a living, where they live, etc.
I really AM an idiot.
Ok at what point is it a good investment to own RE. I own a house, two rental properties near a University that brings in a total of $4200.00 per month, and I have a business and own the building where it is located. I am not better off owning?
#116 Joethebruce “Ok at what point is it a good investment to own RE.”
Like any investment…When prices are going up, not down or stagnant. The problem with RE is you have constant outgoing income you can’t control (income tax, property tax, fixes, etc).
You own 2 rentals, if you could make 10 years of rental income selling vs renting and holding why would you hold it?
There will be a time to buy RE, it’s just not now. Now is the time to sell.
Impersonator at #115
I don’t have time for it. You win… I’m out.
Housebuster #106:
“I agree with the renting idea but it is hard to find a nice detached home in the GTA for $1600/month.”
Garth is right … it is possible (but not likely in the city)
especially in the burbs ….
On another point, I wanted to comment on all the condo building in the GTA. Has anybody else noticed that every week there is yet another announcement of a new tower going up? Despite warnings of a condo glut, developers continue to build. Is it hubris, or do they know something we don’t?
I am not better off owning?
——–
If you are asking us the question, it’s not a good sign.
Good luck finding a nice house let alone an apartment to rent in Winnipeg.
Renting does have it’s advantages but nothing is better than having your very own speck of land. Yes, this is the emotional side to owning but that is what it’s all about. A person gets what you pay for and the better experiences cost extra. You would be hard pressed to find a home owner, even Garth, who would go back to renting.
Devil’s Advocate :
“Rentals for which you must charge more than $1,500.00 per month are a risky venture. Better to be a profitable slum lord than take too much pride in another person’s home that it buries you in a sea or red ink.”
Hey! That’s what my landlord always says! Nobody likes to spend too much on rent, so a good deal is highly coveted (especially in a large city).
Another great post! Daryn, I feel your pain.
I have found over time that you are better off telling people what they wanna hear, most of the time they can’t handle it. So, for co-workers and the like, just tell them you’ve bought, or better yet…ask the In-laws to buy a home for you since they think it’s such a great idea. Then you can tell your friends and co-workers that your inlaws bought you a house. It ought to stop everyone from telling you what you should and shouldn’t do.
To: #48 Dark Sad Monster Bunny
My spouse and I have recently had to move from T.O. due to a work relocation offer. So we figured, why not.
In T.O. we have a condo (Yonge/Bloor area) where we initally lived when we moved to TO from Mtl. This condo has been rented to good tenants for about a year and a half. We decided not to sell it at this time since the rental is going well.
We do however own a small bungalow in a nice neighbourhood. We had a good 65% of assets in real-estate, and I believe fully what Garth says about bringing the amount of RE holdings down. This was an opportunity to get rid of some of it, bringing us to about 40%. Probably still not ideal, but better.
Very tough decision to sell though, because of my emotional attachment to the place. I really really liked the house, the garden, the neighbourhood was awesome in my opinion.
Pressure from our families telling us not to sell and to hold onto it. My husband’s boss saying don’t sell, you’ll never be able to get back into the market after.
But all this is just emotional. The numbers are what the numbers are.
Everyone said: Why don’t you rent? Well, renting sounds like a good idea, and to many people it doesn’t stress them out. But, reality is; most renters will not take care of the place like we would. Anytime something goes wrong, they won’t try to fix it but rather will call the landlord, and in turn we call in whoever can fix it. In a condo you are exposed to somewhat less trouble than in a house. The condo fees are no picnic, but not as much can go wrong in a new building as in a 60 year old house.
In the house, who knows what could go wrong. The furnace is old, the heating isn’t great cause the house is old, the eavestroughs need cleaning, grass needs cutting, snow to be removed, taxes to be paid, mortgage plus interest to be paid, pipes could freeze, plumbing could back up, neighbours could complain about tenants, the hardwood could get all scratched up and need replacing later, the carpet would easily get destroyed, the washer/dryer are old-what if they leak? Oh, and the potential extra tenant squirrels living in the attic! the list is never ending… the headache of renting didn’t make any sense in this case, the extra potential income wouldn’t be worth the trouble.
We value sanity too much.
We ran the numbers, and to keep the place empty for 2 years till we come back would have cost at least $1300 per month. That doesn’t include money towards the principal on the loan…. plus there’s rent to pay in the apartment overseas, some extra taxes to CRA for the rental income on the condo. Any way you slice it, around $80000 over 2 years. Ouch! in our example, more and more cash disappearing, while the value of the bungalow could keep going lower and lower.
So we put it up for sale last fall, and it didn’t happen. One lowball, and one builder wanting it for nothing. Oh and heaven help you if you’re on MLS for more than 3 weeks-you must have the Loser house in the neighbourhood.
Just before we headed out, we hired a new RE guy from the neighbourhood to keep an eye on the place, and get the word out the old fashioned way through contacts in the area. (no MLS counter ticking away during winter)
All the while, we kept checking the stats from the TO Real Estate board. Not good. Listings in the area, barely any. Buyers, some but not that many yet.
Well the sign went up a couple of weeks ago not long after these new amortization changes got announced.
3 days, and an offer just 2k shy of what we asked for. We sold for $80k more than when we bought less than 2 years ago.
Perhaps it could have sold for more if the Spring market peaks, as the snow melts. But perhaps there would have been way more listings, you just never know. It was on MLS for 3 months in the fall and didn’t sell.
Houses are a dime a dozen, drive 10 more km and sometimes they’re 100k less.
They just cost way to much for what they are, size, age etc. It makes no sense. The condo is proof of that, and so was the bungalow.
It has to come down sometime and I believe it will.
I am glad I followed Garth’s suggestion a few posts back when he said ‘Put it up for sale now, you’ll thank me in June.’
We are happy to rent in Europe. Makes it so much simpler when we have to leave again.
The apartment is bigger than the house or the condo, and the heating works better. The rent is comparable to a small 2 bedroom condo downtown T.O.
When we head back to T.O. we will rent, that is certain. We’ll be able to find a house, with a garden, and the sunshine is still free last I checked. Hopefully we’ll be able to stay there for a while, if it gets sold while we’re in it…. well we’ll cross that bridge when we get there. One thing I am pretty sure of, in 2 years a lot more of them will be for rent.
@114 D from London Ont
….As we entered the apartment we were hit with the unbelieveable smell of a fresh bowel movement. I was gagging so much I had to leave the apartment immediately without seeing past the entranceway.
Afterwards I recalled the self-satisfied (soon-to-be-ex tenant’s) smile as he left.
Was that you ?:)
Yet another US economist is now saying Canada will face a housing freefall. See this article with quotes by Robert Shiller. He made these comments at an international conference in New York. http://www.cbc.ca/fp/story/2011/02/08/4246526.html
What is funny about the article is that it says Peter Van Loan opened the conference gloating about the wonderful regulatory environment in Canada.
Perhaps Van Loan was purchasing a cocktail to notice the comments made by Shiller later.
It’s interesting how perception changes. In the mid 1990’s, after the last real estate correction, I read the quote somewhere: A mans home is his hassle. I also remember people who study demographics saying that prices will stay flat or drop because all the baby boomers have bought their houses. Now the opposite mentality exists where if you don’t buy a house there’s something wrong with you even if it is more economical to rent even if house prices stay steady. A psychologist would have a good time with all this stuff.
121 Kevin
Me.
#3 Painted Toenails
Hmmm…Sounds like you bought at the wrong time and sold at the right time.
At least you didn’t go upside-down…like some are about to go.
#71 Into the Sunset
Love the story of your life. Seems that a 13inch b&w tv on the porch didn’t scar you for life. It was the experience of having everything you needed, just maybe not what you wanted.
That’s a lesson that this generation will have to learn.
I see so many who try to be FIRST!!! but maybe I’ll one day be the last to comment. He who laughs last, ….
OMG The best post ever Master Turner.
I disagree with this post. My wife and I bought a T.O. condo in 2007 for $265k with $50k down at 4.94%. Our monthly payments, including maint., is $1850. If we had listened to your warnings last year or in 2009 we could have sold for much less than what we can get now. If we sold today (the same unit on a lower floor just went for $330k and our mortgage is now $190k), we’d be in a much better position than if we’d listened to you and sold last year or the year before.
The truth is, even if people rent cheaper, they don’t end up saving the difference. A mortgage does restrict you but it can sometimes be in a good way – forcing you to put your money away.
If we cash out now we’ve:
Had a nice place to live for the last 4 years
Turned our initial $50k investment into $110-120k after fees.
Sounds good to me.
You have turned it into nothing until closing day. Come back and report then. BTW, what does your unit rent for? — Garth
CMHC this morning says the two worst housing markets in Canada right now are Newfoundland and Kelowna…………but the realtors told me everyone wants to live in Kelowna………
#121 Kevin in Winnipeg
“You would be hard pressed to find a home owner, even Garth, who would go back to renting”
Do you not read the comments? This forum is full of owners who have become renters, myself included.
Just for sh*ts and giggles I went back up to the top of the comments to see how many comments I needed to read before I came across one that said “I sold my house and rented” I made it as far as comment number 3.
Calgary Shane,
You are late for your 7/11 shift (again).
The Manager
Yes, given all the jubilant revelry a quote like that garners from the ranks of this blog it is most apparent that my willingness to participate here has met its demise.
Utopia, Mr. Plow and too few others it has been a pleasure but our words are falling on deaf ears or preaching to the already converted (ourselves). Time to move on.
Daryn listen to your old uncle garth .
he knows whats going on.
there is plenty of ammo here provided by our fearless leader and his faithful blog dogs.
personally speaking I have used the timeline from the usa to great advantage.
you know when the sales sputtered out ,when the few house still selling hit their price peak and then the hill billy mortgages collapsed …..by this time they are usually kind of thoughtful .asking them about their mutual funds returns is often the way to finish this off.
Jeff smith #24
we have moose. as in ”moose and squirrel have left building boris dollink”
Read it and weep DA and miley. Shiller is now calling for the big dump and now BC’ers are clearly maxed out with nowhere to go but down the pipe.
B.C. households most vulnerable to debt shocks
http://www.theglobeandmail.com/report-on-business/economy/bc-households-most-vulnerable-to-debt-shocks/article1900170/
#75 Robert Dudek
Which are do you rent in Miss. Onn for 1400 including. I definitely need to look in that area.
Please help
Excellent post Garth!I am definitely going to print this post and distribute it to my friends who believe that owning a house is the door to get rich soon schemes.
BTW, there was a news update about the university condos project in the brentwood/university area of calgary. Apparently the builder does not even have the bulding permit to begin construction yet 90% of phase 1 is sold out. Already the news is that the buildings will be senior unfriendly and will have small sized apartments better suited for university students. But hey, what is going to happen to the existing dwellings around the campus? are they just going to disappear? the rent for these new condos better be competitive in order for them to compete with the existing buildings and basements around the campus.
A good read from TD:
http://www.td.com/economics/special/db0211_householddebt.pdf
About $1500-1550 rent — 2 bed (really a 1+1/2bath yonge st.) Back to your point, saying it’s nothing until closing day deflects from the real point. Compared to your example of what the renter should do, my scenario ended up way, way better during a similar period of time. He has $84k liquid after 3 years, I have minimum $110k after 4 — plus we’ve enjoyed a great place to live! Even if prices drop, I still have $25-30k to lose on a sale before I end up with the assets of the guy who rented. And even with $84,000 I’d still be happy.
(Ball returned to Garth’s court)
#118 DA Impersonator
You don’t have TIME for it? Really?!
Well, whoever you are, that sure proves you aren’t DA. The real DA has all the time in the world for nonsense, games, and all sorts of useless antics.
So who are you, and what did you do to Mr. Super Realtor? Hunh?
“You would be hard pressed to find a home owner, even Garth, who would go back to renting.”
I’ve been both, and renting is FAR easier on the psyche. I think you have that statement backwards.
Here you go. Garth is right.
#106 HouseBuster on 02.09.11 at 9:49 am
I agree with the renting idea but it is hard to find a nice detached home in the GTA for $1600/month.
Then you’re not looking too hard. — Garth
http://www.realtor.ca/PropertyResults.aspx?&vs=Residential&ret=300&curPage=PropertySearch.aspx&sts=1-0&beds=2-0&baths=0-0&ci=toronto&pro=2&mp=0-0-0&mrt=1400-1600-4&trt=3&of=1&ps=10&o=A
http://watch.bnn.ca/#clip415071
Almost everyone interviewed says that prices go up.
Well, Garth has been saying this all along, and now the Globe and Mail is saying it too…
http://www.theglobeandmail.com/report-on-business/economy/bc-households-most-at-risk-to-debt-shocks/article1900170/
I’ve been reading with great interest the debate among the rent vs. own folks. Myself, I’ve no strong opinions either way. I own my house — well, I own about 30% of it — have a stupid low variable rate mortgage. When I bought the place, the rate was 5.2%. It’s now below 3%. I know rates are fixing to rise, and I also know I could afford the mortgage payments when they were at 5.2%.
I do find home ownership a pain in the maintenance and support area, being a single lady who is not that handy, but so far I’ve been able to keep on top of things. I pay a company to look after my lawn and plow my driveway in the wintertime, which takes a huge stress off the table.
I was just calculating my monthly living costs to see how my numbers compared to some I’ve seen on the blog. Right now, I can live in my house for less than $1200/month. I have investments that are approximately equal to the value of my house, so I know I have to work on that to get it down to the 35% range, but, on the whole, I’d have to say I’m fairly content with where I am.
I bought my house so I would have a place to live after a relationship breakdown. The thought of speculation really never crossed my mind.
Anyway, not to bore you all. I just thought a post by someone of no strong opinion might be of some interest :)
Did you factor in the lost opportunity cost of the money you have sitting in your equity? Most people unwisely ignore that reality. It changes the numbers considerably. — Garth
Wow. Awesome post Garth. Gets right to the point too (at least for those can add) and the ending was prophetic.
Daryn is going to have to learn to be a man and tell the in-laws to shove-it and talk those platitudes to the other real estate addicts their own age.
He will have to stand up and tell them frankly that times have changed while those old dino’s eat their own out-of-date ideas as they vainly claw through retirement debt and plead mercy for the kids to bail them out in later life. As if.
Times have changed as your post points out.
The trend turned awhile back. Most here on this site already know that although some still decry the lack of a full scale Titanic style sinking even while all the emergency bells are ringing off the hook.
Hello? Is an emergency not enough yet? What the hell does it take to wake some of you people up? A few here continue to argue about the profits they lost by having sold out early. Sold out near the top even.
Are you folks just greedy or do you not understand that once the ship goes down there is near total losses for many and only heartbreak for those who do survive?
It appears we may have hit an iceburg Captain, reports the first mate. The band meanwhile is still playing of course. Now they hike up the volume and pitch to deafen us to the sounds of drowning as the kitchen continues to make hourdeurves and is busy warming tea cozies.
We are going down just as surely as a few hundred tons of broken steel meeting the jaws of a cold dark ocean can be a metaphor for our sinking real estate dream as it was for those lost souls on the Titanic who glibly faced reality while the bands kept playing on.
And down it went. And so we follow. Just a little now so as not to cause too much alarm. A little more later. And then in a whoosh and with a loud crack, all at once. Life jackets will not help those who did not invest in life-boats or tickets on safer ships.
See, this is different. It is kind of like the old saying of being just a little bit pregnant which we know is impossible. There are no half measures in this kind of environment. Ask the Americans. They will tell you how safe it was in the end. Few got out in good financial shape once the sinking got underway.
You either got out or you didn’t.
Smoke for the road buddy? Here, Let me offer a light.
“Time to move on.”
So says the drama queen — 20 more postings the rest of the week should prove THAT to be a lie.
Garth, your article this week is exactly what I’m teaching my kids. We’ve moved a number of times (for jobs, cross country, even). A couple of the opportunities that came my way would have been impeded had I needed to sell. We have owned — both good houses and money pits. We’ve endured flooded basements, burst pipes, ice dams, all on our own dime. I’d much rather call the landlord when the hot water tank leaks than a plumber — particularly on a Sunday.
I *do* sock away the difference renting/buying every month. Can’t imagine giving that up on a depreciating asset, right now.
#23 Shane
I own some rentals, and you are lucky to be dealing with a novice.
Last!
(at least I will be right at some point in time.)
Garth. I have been a daily reader for a few years now and your humor still slays me, love it.
My question: I have been pouring over money road and plucking out some gems re building a balanced portfolio. I eventually want to manage my own portfolio, but we have 70K in cash that I have to do something with. So, until im ready to self manage, I need some help. Can you please recommend a competent financial advisor in the Victoria area. I good friend of mine asked you via email about 5 months ago with no anser yet. You have quite the following here in Vic. Im sure there are many here that would appreciate the same information.
Hope you used that squirrel to make some of your famous stew.
So I’m doing some / a lot of work around the house right now.
I posted last year how a couple of guys came by and gave me a price to do do some work.
I told them they were waaaay out of line, they got back in the truck and told me “That was the price” take it or leave it old man.
Same guys heard I was starting the work, showed up in a small truck (hey wheres the big diesel) can we give you a quote?
Sure.
Price was 35% less than last year.
Oh and we can start in 3 days……
I’ll think about it.
#41 Jsan on 02.09.11 at 12:11 am“#32 phinny on 02.08.11 at 11:54 pm
I think I may never buy a house. It used to be an exciting thought, but its just become boring. There was almost a hipness to it, kind of a :”
=====================================
I used to own until a job change required a move. Trust me, the novelty of home ownership soon wears off. It is all very new and exciting at the beginning but than just as quickly, familiarity takes the initial excitement away. You are than stuck with the stark reality of high mortgage payments, high property tax payments, much higher than renting utilities and maintenance, cutting the lawn every week, shoveling the walks, etc, etc. If home ownership was all it took to be happy, why are there so many depressed and stressed people in this world? HGTV sells a lifestyle but like everything on TV, it is all a facade.
———————————————————-
Nicely said. The novelty will wear off.
#96 Montrealer on 02.09.11 at 8:29 am
“How can anyone expect house values to advance by 25% when affordability is falling, people are more in debt than ever and the economy’s sliding sideways?”
almost everyone expects values to advance that much. In Quebec I’m told endlessly “look at real estate in the last 10 years”, “if I had bought 3 years ago I would’ve made xxx$”, “it’s different here”, “RE only goes up”, “whatever year you buy, in the long term it’s worth it”, etc.
…………
I have a sis & BIL who sold their home in Atlanta 10 yrs ago and moved back to their old ‘hood in Otterburn (sp?) Park. They sold last yr. as they had to – both now living on CPP, ran through almost $100K of inheritance, etc. Made about $100K on their house. Last fall they bought a nice condo across the river in McMasterville (not sure what their condo fees are) which they plan on selling in 3 yrs. Another sis & I tried to convince them to rent, but her husband said no, RE will only go up. Wonder whether they considered all the additional costs of moving twice & then costs to resell their condo, etc. Only good thing is they no longer have to pay to have their lawn mowed, swimming pool cleaned and driveway cleared of snow, etc., etc. as he is too lazy to learn how to put in a screw !!
Renting doesn’t always provide flexibility if you have signed a 1 year lease and want to leave town. At least if you own you can rent out the place a lot easier. Owning allows you to have a pet and to knock down walls and shop for granite!
News from good old CTV on real estate in Vancouver last night ( was this a pay to play news item) saying that real estate has only gone up 7.8% in Vancouver since 2000. If this is true must be in line with historic averages.
New Report – * Hello Vancouver!!!!
B.C. households are among those most vulnerable and with the greatest risks to negative economic events, says a new report released this morning by TD Economics.
Blame our high housing costs, which have made British Columbians more sensitive to interest rate hikes and other possible financial shocks. B.C. is also the only province where the average savings rate is negative.
The first index to rank the financial vulnerability of households by province said Alberta, Ontario and Saskatchewan households are also at greatest risk to economic downturns such as “a substantial correction in housing prices, a major disruption in incomes or an unexpected large increase in borrowing rates.”
But TD Economics said the probability of one or more of these negative events occurring in the coming years is relatively low.
“Higher interest rates over the next few years threaten to leave as many as one in ten households in B.C. in a position of financial stress,” the report states. “On the plus side, rapidly-appreciating home prices in the province has left the debt-to-asset ratio – a metric of household leverage – below the Canadian average.”
The Household Vulnerability Index said risks related to household finances have been rising broadly across all regions over the past few years, and with higher interest rates on the horizon set to boost the cost of servicing debt, this upward trend in vulnerability is almost certain to continue.
“The focus nationally on household debt has raised questions about which regions face the most significant challenge,” said Craig Alexander, TD’s chief economist and co-author of the report. “This new index does not predict events, but it does shed light on those provinces that are most susceptible to downside risks.”
B.C. has the highest debt-to-income ratio in the country, at 160.5 per cent. Alberta is second at 143.2 per cent, while the Canadian average is 127 per cent.
Read more: http://tinyurl.com/4fcm8vc
#48 Dark Sad Monster Bunny
I rent out a home I bought in Edmonton in 2007, but I bought it with 25% down. It produces about $200 a month positive cash flow (yes after taxes, insurance etc…) $2400 a year is a good return on the $56,000 I have invested. And obviously when the house is paid off, assuming I am still renting it for what I am now (not likely but for arguments sake) $17,400 a year on a $56,000 investment seems pretty good to me, and that doesn’t even take into account the fact that the home is now paid off and there is ‘X’ amount of equity in the house. We also reinvest the positive cash flow, giving it a better overall “return”.
The key is to develop a good relationship with your renter, so it is a win – win. Not everyone is comfortable owning, we have had the same renters for 4 years, we have never upped their rent, even though for years it was about $150 a month below market (no there is not a lease anymore) they have literally never phoned me for anything other than to tell us thank you for the Xmas gift and to tell us when they are gone on holidays. Cheques come in the mail every six months, grass is always cut, walks are shoveled they love where they live and it costs them very little to live in something that would cost them much more to own. It also works for me as I have shown above.
Life changes and maybe they won’t be there forever but the key is renting to the right people, making it a win-win for both and staying away from people like poster #23 Shane.
#62 bridgepigeon
Nice!
Would have been funnier without the emoticon though.
#68 – To each their own, When I was younger I spent alot of time travelling from place to place with my job.
I have an incorporated company, and go from contract to contract. At that time it made no sense to buy. Although I had 2 house at the time, I was just happy to have keep my tenants, because its hell trying to get good ones with a stable job, keep things neat, don’t complain and cause problems.
Because my lifestyle was so rogue, I kept my home address at my parents, but I basically rented month from hotels which cost about 6 to 8 hundred per month, including some room service and small kitchen.
The beauty of this was, it was a complete write off-
– rent
– per diem (cost expenditure ) about 45 to 110 per day, including some weekends
– You can locate yourself close to your job site , reducing travel time and saving on lunch and etc because you were 5 minutes away
– and tons more
Overall, my cost of living would be very little. And all the per diem cost went straight into my savings.
Whereas, if I bought the accounting would of been nuts, and would only be a fraction of my total cost savings.
“Read it and weep DA and miley. Shiller is now calling for the big dump and now BC’ers are clearly maxed out with nowhere to go but down the pipe”
Shiller has been trying hard to get into our clientele circle; this man is a closet house porn addict. After getting it wrong in the fall of 08 we decided that we didn’t want to represent him, Ozzie is now fuelling his addiction. Dont be fooled.
This is the best post I’ve read on the internet in quite some time. The truth is, most people don’t do the math, or they trust the misleading math of a banker.
The KEY is to save the difference between your rent and carrying costs on a similar purchase.
Bravo.
#141 Terry D. on 02.09.11 at 1:05 pm
I’ll pick up the ball and tell you the reality.
in reality you sell today for $330,000, your net profit is $61k. i have a spread sheet that accounts for everything from the legal fees in and out, prepayment penalties to land transfer tax to mortgage paydown. i’ve left absolutely nothing out short of cost of repairs which on a condo should be minimal.
if you take into account that you could have invested that $50k downpayment at a measly 3%, and also the fact that you are paying $350/month more to own than to rent, your net profit drops to $41k.
so to the truth is, you were still better off owning during this 4 yr period. but you are sorely mistaken if you think you made $100k plus. sorry to burst you bubble. if you’re interested, i’d be happy to send you the spreadsheet. no bullshit here, just the hard numbers.
Almost every decent rental now requires the tenant to pay electricity, gas, and in some cases, water as well. So the only real savings comes from property tax and maintenance.
Most large scale landlords, but even small landlords are starting to as well, (in Ontario anyways) pass on all capital expenditures to tenants via applications to the Landlord & Tenant Board for a “Above Guideline Rent Increase”, which is in addition to the allowable amount every year which is set by the Province and indexed to inflation.
I notice many advocates of renting here tell stories of how they sold, and now rent. Most made gains on previous owned properties, and now have the gains from that to invest in.
And what about being creative in ownership…if you’re willing to forego ownership for renting and share a building, why would you be hesitant own and rent out a basement apartment? Landlording ain’t rocket science (believe me, I know). You can end up, even in ‘normalized’ interest-rate environment, saving much more than renting this way. I wouldn’t worry about the legality of basement apartments either. The municipal authority (IF its illegal in your city – in many it is perfectly legal) doesn’t have the manpower to deal with the issue, the provincial gov’t Landlord Tenant Board says its not their problem (that it’s a municipal issue), so they don’t consider it as an issue in any of their cases.
Buying isn’t as evil, useless, or money-losing as many here are making it out to be.
And not everyone is running around the province or the country chasing down every opportunity that may come their way.
B.C. households most vulnerable to debt risk
According to TD’s findings, British Columbia recorded the highest vulnerability, as its residents, on average, registered the highest debt-to-income ratio, debt-servicing costs and greatest sensitivity to interest rates. Plus, B.C. was the only province where the average savings rate was negative, the study said.
Based on accumulating data over a nearly 10-year period, the study said British Columbia recorded the second-fastest rate of increase in vulnerability among the provinces over the past half decade, which reflects the “lofty cost” of homeownership in the province.
http://www.financialpost.com/news/households+most+vulnerable+debt+risk/4250843/story.html
+++++++++++++++++++++++++++++++
This will not end well.
#135 Devil’s Advocate
Hmmm too bad. Appreciated your perspective.
You could just not respond to the person, they would likely stop as I am sure they get little warm fuzzy’s when their fake posts illicit some response.
You could also just change your screen name if it really gets to you.
I was too busy at work yesterday to read up on what was happening, but will have to check it out…
#141 Junius on 02.08.11 at 7:03 pm
Hey Junius…
Sorry couldn’t respond yesterday too busy. Yes I agree with what you are saying, I was speaking more to those who were cheering on a crash due to a small interest rate hike.
If we see an influx of people who MUST sell vs those who WANT to sell it will be a slippery slope. My point is, that will not be an overnight occurrence. It could be months before something like that happens.
You and I do have different perspectives though, I live in Edmonton, you I think are in Vancouver. You are dealing with some serious craziness out there. We have been pretty flatlined price was since 2008. There was a small uptick last spring which disappeared by fall but all in all prices have not fallen much since 2008.
#141 Terry D. on 02.09.11 at 1:05 pm
i reread your comment and you stated you’ll have $110k in liquid assets. i just want to apologize and point out that you are correct. my numbers confirm that.
$61k net profit plus $50k original downpayment equals $110k in liquid assets if sold now.
so to reiterate, net profit of $41k, i’d take it and run.
Those red squirrels can be nasty. I know of a 3500 sq. ft. house close to the Pinery that was effectively destroyed in 3 months while the owners were in Fla.
#121 Kevin in Winnipeg
The majority of people who bought in the past five years are renters not owners; the owner is the bank. The majority of these people will reach retirement without building much equity in the property, much less have it paid off. I know too many people with 2nd mortgages, and HELOCs to believe that they will ever pay it off like my parents did. A fancy house demands a fancy lifestyle and incomes that can barely afford the mortgage cannot pay for the lifestyle too. Thus the 2nd, 3rd mortgages and HELOCs. In this century Canadians have suddenly started fancying themselves as European royalty, and started living like it…
In the final analysis current income levels can never pay off these mortgages especially as the cost of living rises, so I would recommend all owners to go all out and live it up. I know Bay Street bankers who didn’t blink an eye ordering $4000 bottles of wine in Toronto and elsewhere, if they can live it up at your expense, why not give them the shaft and live it up at theirs? I know the Bay street boys never pay the tab, the buck just gets passed to the taxpayers, but the system is screwed anyway, let’s stop pretending that it can be fixed! Let everyone screw everyone else – the big boys do it, and I believe the little guys are beginning to wise up. If Ireland defaults under a new government, then this message will be heard loud and clear throughout the world.
#88 Michelle on 02.09.11 at 6:42 am
In the last 2 months we’ve eaten ‘wild’ rabbit, moose steaks, deer hamburger and quails. Deer was too finely done, moose steaks were great, quails not so much & wild rabbit so so for me. We cook with lots of red wine/shrooms/garlic, etc. Haven’t tasted squirrels – ours are little red ones here – the most territorial little buggers who chase all all the birds away. But, we are actually feeding the last remaining one outside of the patio doors. We feel so
sorry for him. He’s 3 ft. from where I’m typing – looking in at me. We’ve had various wild ‘edible’ birds suddenly appear on our property. Beautiful to see, but we could never shoot any.
Thank you for letting us know how so many wild animals taste. Hubby has ate many of those that you mentioned from his travels.
@ librarykaren:
As a tenant, you have a right to quiet enjoyment of the premises. That means viewings most certainly will not occur daily and you get 24 hours notice from your LANDLORD (NOT a realtor – my landlord (who is also a realtor) tried to argue that 24 hr notice from the buyers agent is all that is necessary and she was shut down by the Residential Tenancy Board).
And who cares about picking up empties etc? YOU are not selling the house – the LANDLORD is. If he/she expects you to provide daily housekeeping duties I’d be asking for a reduction in rent.
I’ve owned, rented and been a landlord. Each has it’s own plusses/minuses. Like picking stocks you need to be honest with yourself about what type of risk you are comfortable with and what level of stress you are ok with. Good renters are a blessing and bad renters will keep a landlord up at night. Being an owner gives you a sense of pride but I found I was always looking to improve the house somehow..bedding plants, painting, new carpets and that means $$$. As a renter I was able to live for 5 years on Okanagan Lake for $1500/month year round. I had a dock, my boat and life was good. I could never have afforded to buy there let alone pay the 15k a year in property tax. My experience is that renting can afford you the opportunity to live “higher on the hog” without taking on the risk of huge debt. So for now we are renting, investing our money and waiting to see how this all pans out. Yes, renting means enduring endless comments and ridiculous assumptions but we learned a long time ago that living the road less travelled offers it own benefits and rewards.
On the DA thing – its interesting how someone who always talks about things being a game doesn’t seem to be enjoying the one that someone is playing with him right now !
@ 111 Vancouver is a great town …. to be from
“a house is just bricks and mortar…”
Not a very accurate definition.
A house is just wood chips glued and pressed together, boardwalls, some insulation material between the walls, plastic, bitumen shingles, and just a little mortar to hold all this crap. Bricks on the outside to decorate the outside, but of no real value/help.
This whole thing will be rotten and cracked in 40 years after the house is built and will need to be replaced, etc.
So yes, it’s bricks and mortar, but veeeery little ;)
#154 Bill Grable
From article:
Oh, hello there! Elsewhere I read the “savings” rate is -4.6%. Yeah, this will totally end well.
@153 Ricardo
With all due respect, you obviously have never been a landlord..signed leases mean nothing. Tenants walk away from them all the time. What’s required to chase someone down and try to get $$ from them is ridiculous. What if they move to a new province ? Cut your losses, put out a new ad and move on.
–
“. . . people are more in debt than ever and the economy’s sliding sideways?”
Umm, slightly disagree. The economies of the west are sliding, but the politicos and m$m don’t report it or tell us, which is why we must do our own due diligence via the ‘net.
Wonder if that is a reason why TPTB want to put controls on the ‘net?
*
#93 dissin — “Last!” / and / #98 Munch — “FIRST!!!!! :-D)
I vow never to be first or last as it’s too komplikayted for me to figure out!
#147 Utopia — Good post. FWIW, I would just as soon turn our home over to someone who actually needs it, rather than wants it. Although ours is quite a nice home, it is not a trophy house.
There are several ways to increase one’s wealth via TFSAs, RSPs and non-registered investments, and getting rid of a rope tied around one’s neck is an excellent beginning.
#148 Dawn in Calgary — “I *do* sock away the difference renting/buying every month.”
See response to #147 Utopia’s post above; you are both right. Just enough to live on is all that is needed.
*
Official “I don’t recall the G-20 declaring gold a new currency. Yet JP Morgan Chase and a couple of financial market exchanges have effectively declared that gold is an alternative currency.” Is the dollar hot-buttered toast, or is JPM the new govt.?
China buying gold like there’s no tomorrow. Also — Buying Africa.
Apprenticeships Far more useful than any university can give.
AGW — Epic fall, just like RE.
Currency Tumbles There’s more to life than RE. The ME may be changing faster than thought.
Supersonic Missile Iran tests new ones but, they’re not nukes.
Europe One and Europe Two. Debt bombs with the fuse lit.
What happens in a rising interest rate environment. One needs only to study history. A look back at the late 70′ and early 80’s will reveal allot . Up until now the Fed along with their little lap dog, The BoC have been saying inflation is in check. They have held interest rates artificially low to make borrowing money and debt payments easier to accomplish. In reality, food, energy and commodity prices in general have been screaming that inflation is getting out of control. Clearly the Fed and The BoC along with all other nations are way behind the inflation curve when it comes to interest rates. As they try and play catch up and raise rates, inflation will also rise too, keeping them behind the curve. This puts pressure on bond prices as yields rise in the market. This forces money out of bonds as investors seek a safe haven from inflation. The money that was previously invested in bonds rushes into tangible assets aka inflation hedges. Since real estate is inflation sensitive and depends on borrowed money being cheap to come by, rising rates will pressure prices down . So money will not seek real estate as an inflation hedge.
Since the interest paid on cash will be trailing inflation, anyone holding interest accounts will be receiving a negative return. Therefore the cost of holding assets that pay no dividends such as commodities, gold, silver,platinum , oil etc is positive. The bond market is over 10x the size of the stock market so the amount of cash that will rush into the tangible asset arena will be like trying to shoot a fire hose through the eye of a needle. Like I said before, getting out of paper assets now and into the above mentioned real assets will give you the opportunity to drink upstream from the herd and protect yourself from the debasement of national currencies globally.
#148 Dawn in Calgary: “20 more postings the rest of the week should prove THAT to be a lie.”
That’s where you’re wrong. I’m totally out.
I’m gone. Down the road. Hasta la vista, baby. [Insert cliche here.]
I’ll just leave a video reminder of me:
http://www.youtube.com/watch?v=bWLAaCz0fQk
That’s it, I’m done like a 5/35 mortgage. Over and out.
Total silence. See how you like it.
#168 Live Within Your Means-
“Thank you for letting us know how so many wild animals taste. Hubby has ate many of those that you mentioned from his travels.”
My pleasure. I’ve also eaten a lot of blackflies but that was more by accident (they’re really bitter).
Oh, and dog meat tastes like beef but with less flavour.
And FYI…”head cheese” is not made out of Canadian Cheddar :)
#148 Dawn You are exactly right on that…he’s already posted that he’s gone THREE TIMES today! He’s as easy to get rid of as an STD. And besides looking like a tool, his inability to carry through with such an inconsequential bit of business as that reveals how much one can depend on his ‘professionalism’.
What a joke.
Don’t know if any of you have seen this. It’s a good piece on the state of the market in Kelowna. First of all, it comes straight out and says the bubble burst there a long time ago. Secondly, it features several quotes from a mortgage broker who’s TRUTHFUL. He even has the nuts to dispute the typical cheerleading BS of the local real estate board president.
http://www.bclocalnews.com/okanagan_similkameen/kelownacapitalnews/news/115336089.html
Is now a good time to buy into a bond fund ?
US Housing Affordability Report
“Nationally, at the end of September (the latest data available), the ratio of home prices to annual household income had fallen to 1.6, well below the historical average of 1.9 between 1989 and 2003 – the year that lax lending and heavy speculation helped the housing boom take off. Certainly this is a positive development, laying the foundation for a housing recovery.”
http://finance.fortune.cnn.com/2011/02/09/homes-more-affordable-but-dont-expect-a-rebound/
Here’s my story. Note the revised nickname.
Had a 60’s bungalow that i used to live in in Edmonton and rented the in-law suite out. Only reason i bought it. Got in in August 2006. Put it up for sale in January 2011. Interviewed 10 realtors and received their “free” evaluations. Priced my property fairly and listed on that commission free website. Sold my home in 7 days for 98.4% of the listing price. My commission was technically $950 instead of paying the overworked realtors (and their companies) $12850. The new owner takes posession at the end of this month.
Live in Sherwood Park in a 1400 sq ft 1990’s (so newer with finished basement) 4 bedroom, 3 bathroom bungalow. The house would be listed around the $500,000 mark and maybe sell between $480,000 and $500,000 i’m guessing. Remember people say living in Sherwood Park is better as it doesn’t have all the “trash” Edmonton has. It’s different here.
Anyways, the mortgage of this say $500,000 home would be $2373 per month (at 3.99% you can imagine what it would be at 6.5%) + $250 per month property taxes = $2623 per month. This doesn’t even include maintenance and tax increases. The “throwaway” costs are $1566 bank interest per month (averaged over 5 years) + $250 per month of property taxes = $1816 per month of “throwing your money away”.
My rent is $1650 per month. I have liquidity, a great home, no worries about maintenance ($550 so far in the 6 months we’ve lived in it), investments and freedom and savings of at least $166 per month.
No contest. At this point for me, renting beats owning hands down. And it might win til the bitter end.
@ 163 mr. plow …. wouldn’t just be simpler for DA to just register his handle? that way no one but he could use it.
If we’re all to sell now and not buy at all because rent is better…. Will someone tell me who am I gonna rent from?
The government?
Your typical idiot comment. At last you are consistent. — Garth
A cheerup article for BC mortgage owners….poor souls, we are not sorry for ya stupidity and financial illiteracy…..we are glad that you will go kaput pretty soon ;-)
http://www.cbc.ca/money/story/2011/02/09/bc-td-bank-debt.html
miley the realtor, the only ones in the closet are you and your sidekick DA and your time to be outed has come.
Even the business editor of the Vancouver Sun sees the dangers everywhere on the massive debt bomb you helped create.
———————————————————
I was curious about what kinds of debt British Columbians held believing generally that mortgages are good debt provided borrowers don’t borrow more than they can afford.
So TD provided the numbers. And I didn’t like what I saw.
While 77 per cent of debt held was in mortgages , about the same as it was 10 years ago, the amount of debt held in lines of credit jumped from five per cent in 2000 to 12 per cent in 2010. And while the average balance 10 years ago was around $16,000 now it is $32,000.
Lines of credit, in my opinion, are bad debt usually used to buy things that don’t grow in value, like cars or trips. And lines of credit have variable interest rates so will go up when the Bank of Canada raises its overnight rate, which it will inevitably do at least once, and perhaps more, this year.
This reliance on lines of credit isn’t just a BC phenomenon. Canadians on average now hold balances on their lines of credit of $27,000.
As expected, British Columbians do hold higher mortgages, $187,574 compared to $147,425 nationally.
http://communities.canada.com/vancouversun/blogs/businesseditor/archive/2011/02/09/lines-of-credit-grow-as-debt-woes-mount-in-bc.aspx
Look at the dumps you can buy for under $400,000 in Surrey. Better to save your money.
http://www.theprovince.com/business/Photos+cheapest+houses+sale+Surrey/4246261/story.html
For what it’s worth, we sold a 675sf condo a year ago and moved into a 1175sf rental in a much nicer part of town. Cost to own? 1300mo mortgage, 248mo strata, 40mo elec.40mo taxes. Cost to rent: 1200mo. Elec 50mo. 8p strata, not even gas for the fireplace, that we use to heat the house.
The balance is invested, TFSAs first, then diversified, managed portfolio.
In the year since the move, we’ve made more than the equity we’d built in two years in the condo, all of which was consumed by the sale.
AS much as the Mrs. Thinks our equity investments are the house fund, I’m in no hurry to own a home again.
I’m interested in ETF’s as you recommend, however, my investment adviser is stand-offish about them and has referred me to this article which suggests their potential to collapse due to underfunding:
http://boganassociates.com/whitepapers.html
Is this more valid or more bias?
Thanks for your blog.
I bet your advisor sells mutual funds. Right? — Garth
Just an observation:
On Royal Oak Avenue in South Burnaby there are three recent condo developments of about 50 units each (between Imperial Avenue and Marine Drive). One is nearing completion after about a year of construction, one is nearly half finished and the other (which was an empty lot for the last few years) is now in full excavation mode.
There are lots of busy little construction bees in this one little stretch alone. No one seems the slightest bit worried about the financial future of real estate or anything else, for that matter. The scene in Burnaby is being repeated over and over throughout the entire greater Vancouver region and all the way up the Fraser Valley.
You’d think someone or something might be starting to pull back sometime soon… but then again. Anyway, I find this absolutely fascinating. Perhaps this will become the stuff of legends. Or perhaps it’s just another ordinary year here in la la land.
#185 Debtfree
You can register a handler? I didn’t know that.
The whole thing seems childish and silly but I guess you gotta do what you gotta do.
#153 Ricardo
Or you just walk away from your damage deposit.
#133 Bailing in BC
It’s not very hard find renters on a site that promotes renting. I rent and think of a house as sanctuary. The only reason why I do not buy is I am not paying the prices investors are asking.
Honestly, you would rather rent than buy your own home?? I think not.
#167 The Apocalyptic One formerly Old is Gold
and what is your point?
Grasping at straws, until your mortgage is paid, you are renting money the same at year one or 34 1/2.
Mister Obvious,
I was thinking the same thing – in Victoria. Condos going up all over the place. You would think ….
According to Market Watch, more people in the USA are renting rather than buying: http://www.marketwatch.com/story/more-people-choosing-to-rent-not-buy-their-home-2011-02-08
Here are the latest Fraser Valley home sales stats posted on homebuyandsell.com . Looks like to date, February sales are 16% lower than previous February. I was surprised that they are lower as I thought there would be more of a rush by buyers to grab the 5/35 mortgages before March 18th. I am curious to know if any other dogs have data from other parts of Canada? If so please post.
Fraser Valley Home Sales STATS – as of FEB 9, 2011 (6 of 20 Working Days)
FEB 2011 Listings 813 Sales 293
JAN 2011 Listings 764 Sales 187
FEB 2010 Listings 904 Sales 349
Hamilton-Burlington RE Board numbers just in for Jan. 2011, $317,011 freehold avarage, up 9.4% YOY. Yippeeeeeeeee!
Hold the champagne and caviar folks. They neglected to mention the Dec. 2010 number which was at $347,163. (+16.2% YOY)
Prices are still positive YOY in percentage terms but I am still losing value to the tune of a nice $30,000 drop in one month. Looks like this family will have to switch to domestic champagne and caviar. Pizza and beer next month?
RE Board lies, damn lies, and statistics!
http://www.rahb.ca/news.php#148
#196 Kevin in Winnipeg,
You asked, “Honestly, you would rather rent than buy your own home?? I think not.”
You are missing the entire point. It should be a value neutral decision based entirely upon financial considerations. Most people assume it is inherently better at all times and do not stop to properly do the math. This assumption is based on the past decade and the attitudes of previous generations.
Sometimes it is better, sometimes it is not. It depends on many things and that is what the conversation is about. Moreover in the current climate the economic trends bode poorly for home ownership over other forms of capital investment. This many change in a decade or even two but sentiment has not clued into this reality.
#154
“Owning allows you to have a pet ”
So does renting — pet insurance (something all responsible owners should have) carries a rental property clause. Our dog is 3 now, and we’ve never had issue with it.
Well things are starting to happen as Garth predicted from day 1..”H” “F”and “C” are now issuing the same warnings Garth made a couple of years ago…hmmmmmmm but that is totally opposite to what they were proclaiming for the last couple of years..in fact they spent millions of our tax dollars spreading the idea “things were different here”…………well one thing for sure is if “H” can find a way (and he will) we are heading for an election…..after all one can only “cook the books” for so long and reckoning day is closing in…..curiously enough his day of accountability is fast approaching :-)
#165 Mr. Plow,
You said, “You and I do have different perspectives though, I live in Edmonton, you I think are in Vancouver. You are dealing with some serious craziness out there.”
Indeed. It is quite different in Vancouver. As the TD report today pointed out this is most vulnerable spot in the country with the highest debt-to-income ratio.
The strange thing here is people wear this like a badge of honour. They crow about having such high housing prices but don’t stop for a second to consider the downside for the overall economy.
I do believe things are going to unwind in BC first. I strongly believe that the pre-Olympic stimulus of $10B was the sole reason B.C. missed the last recession. Meanwhile the Halo Effect of the games left people feeling good about Vancouver and B.C. for months afterwards. However reality is now setting in.
We are going into this market and buying a condo in the next 3 months or so. 100K down and finance the rest – 200k or so.
In bidding we are going to factor in the rise in mrtg rates and the oversupply of condos in today’s market… and we are going to find a deal… of this there is no doubt.
There is a right time to buy and the wrong time to sell. We have all seen this cycle.
In the mid 70’s we bought a house with a small amount of quick cash that i had made between graduation and starting graduate school. I lied about my job (had none, a friend had me on his “payroll”), income and everything else i had to do to get the mortgage. we – wife and i – managed to keep afloat during the 3 yrs of grad school. then i locked in for the next five years. Missed the horror of 18% mortgage rate. I am not going to say what my house is worth now as i have no interest in meaningless house valuations. I just need a place to live. And i hope that house prices do fall by 25% or so. not sure if they will ever go lower than that. Oither than Ireland and Spain, Europe has no housing melt-downs. (BUT those that “invest” in houses or condos should be fleeced dry AFAIMC.) . USA is a different story. And hopefully Canada is not going as far along down that road.
BUT it was one of my better decisions. No doubt it is better to have a place of your own if at all possible.
At the right price … buy my friends. buy.
ps even F. Aqulini is looking to sweep in and buy Olympic Village at fire sale prices.
Garth I have a little problem and need some advice.
I have been trying to sell my home for past 6 months.
High end luxry home I puchased for $800K . I had it listed for 1.4MM but reduced to 1.1MM Best offer was 900K.
Problem is I have mortage and line of credit of $600K
Original equitiy i put in was 300K. If i take 900K i break even or should i wait. If i get negative equity im screwed.
Help in Oakville…………….
Sell now or wait for an offer of $750K. Hard choice. — Garth
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#204 john m — “1..”H” “F”and “C” are now issuing the same warnings Garth made a couple of years ago…”
Kannaduhh is as strong as the southern fried chicken! We (C-H-F) will never have a deficit, but Kannaduhh will! The CPC is a trusted and troo hell-raising party!
You get my drift . . . the CPC are a bunch of liars.
*
4:49 clip US wants this and that. US is not a part of the ME, so have no right to dictate to others what to do. US$ 2 Bln. / Yr. “How much does the U.S. spend on Egypt?” It costs to keep a dictator in power!
4:18 clip Mubarak’s western donors.
Sarah Palin has shut her website down and is endorsing Ron Paul for 2012. Isn’t she the kiss of death?
Decadence “And I only had to defraud five cities to pay for this!” wrh.com.
Iran has no WMD at all. Y’all know the rest.
GW? “There is no reason for these rolling blackouts.” Plus Evil Oceans “Maybe we can tax the oceans?”
Web Surfing Causes Cancer. You heard it here first. April Fools!
Soros and Obama are doing a magnificent job of screwing up folks. “Which means businesses will have to let more people go to pay for the increase in tax, thereby accelerating the problem.” wrh.com.
Food Prices “You know how the mortgage bubble made the bankers rich and you homeless? Well, there is a new bubble, a food bubble, that is making the bankers richer and you starve. Understand how the world works now? Understand why the Icelanders fired their government and jailed the bankers and Egyptians are trying to do the same?” wrh.com.
1:55 clip Montana wants US out of the UN. Secession time?
Just what the planet needs — the Icelandic volcano may raise the roof again.
2:45 clip Bankrupt nations bailing out bankrupt nations. What is the definition of insanity again? Doing the same thing over and over, but expecting different results.
Saudi oil reserves overstates by 40%. Guess that makes Fort BigMac a little more interesting.
#154
“Owning allows you to have a pet ”
So does renting — pet insurance (something all responsible owners should have) carries a rental property clause. Our dog is 3 now, and we’ve never had issue with it.
=================================
Pet Insurance
No such thing, at least in BC
Upon inquiry……NO insurance company provides coverage for damage etc. that is found to be as a result of a tenants pet……
#193 Mr Obvious
#198 Victoria
remember pre-sales–i would imagine if a developer had sufficient pre-sales they would have to start construction by a certain date–contracts–
several developments had “fire sales” when they were almost complete and couldn’t sell them at original prices –during the downturn in 08/09– some condos went for 80 to 100 k less than the pre-sales sold for
i’ve noticed one in poco that has dropped prices by 5 to 20k and they’ve only got the foundation in (4 stories)
Pearl city homes
yup, buy now or be priced out forever
#183 ken on 02.09.11 at 5:10 pm
Is now a good time to buy into a bond fund ?
++++++++++++++++++++++++
I did some buying and picked up a bond fund this week.
Check out this chart and you’ll see how there’s a sale on right now (as Garth says, buy when others are selling; and sell when others are buying).
http://finance.yahoo.com/q/bc?s=XRB.TO&t=6m&l=on&z=l&q=l&c=
.#211 Victor on 02.09.11 at 9:44 pm
#183 ken on 02.09.11 at 5:10 pm
Is now a good time to buy into a bond fund ?
In general this is the top of the markets for bonds. Bonds have been in a bull market since the 1980’s. Worst timing EVER!
Listen all you investors…
Goldman Sachs (ie head office for CIA, US Gov’t et al) has the best and most sophisticated technology ) can be 10 moves ahead while you think you are safe…..just be careful ya don’t get herded to the slaughterhouse.
Regarding pets in apartments: my landlord, a very large coporation, allows pets. In fact, the various courtyards that surround the buildings here have poopy-bag containers for you to toss the mess into. I was surprised to learn this when I was looking. They responded that tenants who can own pets feel more “permanent” in their units and stay longer. When I asked about the possible noise and damage, they reminded me that tenants can make noise or damage with or without pets and there are ways to deal with it. They also clearly told me that they get no damage or complaints about pets/dogs. They have bigger issues with human tenants who do damage.
In my lifetime, I have lived in apartments and own 5 homes. I can tell you that getting out of my apartment before the lease finishes is infinitely easier and less expensive than selling a home.
#185 Renting in Sherwood Park (sold in Edmonton) on 02.09.11 at 5:14 pm
Live in Sherwood Park in a 1400 sq ft 1990′s (so newer with finished basement) 4 bedroom, 3 bathroom bungalow. The house would be listed around the $500,000 mark and maybe sell between $480,000 and $500,000 i’m guessing.
Why is that you can value
DELETED. Email me to find out why. [email protected]. — Garth
Greaterfool blog minus devils advocate = excellent blog once again.
Great post. Wish that I had a better “head for numbers”!
I consider myself fortunate that the house we purchased several years ago, was purchased to be a home, not an investment. We looked for one that was affordable, no granite, no stainless, basic landscaping, minimal upkeep. Was the cheapest one listed at the time. Has turned out to be a great home. I struggle to understand all the nuances of finance.
Thanks, Garth. I really enjoy the info., and the way that it gets presented. Love your sense of humour, just ‘twisted’ enough, and accurate.
Daryn, I can relate. If only people would just let us lowly renters rent in peace!
Not sure who gets more grief from “concerned” friends and family – those like you, in their twenties whose parents think that they are teaching their yet-to-be-initiated-to-the-real-world kids the only “smart” way to live is buying property. Or those like my husband and I who are already grown up (forty-somethings), have owned property, sold and decided to rent, and in doing so, displaying to the masses the early onset of dementia.
So many people think we are completely nuts and it has become difficult to try to explain why we have made this choice in an educated way. Often I find myself just hoping the subject doesn’t come up. The fact is that there is still a huge prejudice against renting – even though the numbers do not lie. It is a social stigma that you just have to develop a thick skin to deal with. I believe at the end of the day, you have to do what is right for you and I know that this is right for us.
On the other side of the coin, one of our neighbours (who owns) is panicking because they see an identical property here go for 100K less than what they paid. It took a year to sell. They see their nest egg dropping in value while we watch ours grow.
Sure, we have no guarantee that our landlord will want to keep us as tenants, but we have been stellar occupiers of this space, take good care of the property and ensure we pay our bills on time. If we have to move after all is said and done, it would be a nuisance but still worth it to continue our equity growth.
Love it Garth, I remember those days but had a car, ate KD so I could make my RRSP monthly contributions!
I’d move the stapled post print out to the parents forehead rather than the door!
#209 Hoof hearted
Wrong. Your research skills leave much to be desired. It’s not covered via ‘renter’s insurance’ It’s a specific PET INSURANCE policy.
The clause is called a “3rd Party Property Damage Liability ”
http://www.vetinsurance.com
Sorry to be OT Garth.
The good thing about this real estate market, where amateur landlords all think real estate prices will go up forever is that landlords are desperate for tenants… That’s the reality in Calgary, or until recent immigrants wise up and realize Canada doesn’t end at Barrie and start moving here…
What that means is that it is pretty easy to find an “agreeable” landlord with a brand new property to live in.
It’s a renters market nowadays and they shovel snow around my car while I sit next to the gas fireplace (they pay gas bill too!) and make money hand over fist in the equities markets.
#135 Devil’s Advocate
Is it true? Are you really going to spare us the benefit of your wisdom?
I thought the day would never come.
123 YULYYZ and 156 Mr PLow – thanks for your posts.
Sounds like you both have things working just fine. I
agree about Shane @23.
“miley the realtor, the only ones in the closet are you and your sidekick DA and your time to be outed has come.
Even the business editor of the Vancouver Sun sees the dangers everywhere on the massive debt bomb you helped create.”
LOL, realtors created no debt bomb, irresponsible, naive and ignorant buyers did. Of course it’s the typical citizen who is always blaming someone else for their own stupidity.
As for the Sun, I believe that star; they say that RE is going up as does remax. Who is right?
First! First! First! Hahahahahahaha!
#175 Nostradamus.
Thanks. much appreciated as always.
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#135 Devils Advocate.
Take a few aspirin pal. Maybe buy a 40 pounder of Drambui. Get a solid weeks rest and spend more time with your gal and hopefully we will see you again next Wednesday (if not sooner).
@#207 ted Gilford
You paid 800K. You are being offered 900k. You are selling for a reason!. Rates are going up! WTF are you waiting for? March 18? Out Now and Out fast.
You can also offer a landlord a half-month’s rent as a pet deposit to guarantee against potential damage (and stating that you’ll happily do so, because you know your pets will cause absolutely no damage).
Personally, I had no trouble finding a place with a large dog and two cats. I even called ads that said “No pets” and–after introducing myself and my wife and mentioning our professions (white collar), asked if they would consider allowing pets, given that they would be gaining excellent long-term tenants in return. Most said yes, despite saying “No pets” in the ad.
#106 HouseBuster on 02.09.11 at 9:49 am
I agree with the renting idea but it is hard to find a nice detached home in the GTA for $1600/month.
Try $975 or $1100. We were offered bungalow for $975+hydro couple of years ago, when we searched (Dufferin /St.Clair). We rent for $1100 1st and 2nd floors of house in High Park area.
@ #100 Danforth
The US is no-where near the bottom – probably about 2015 – 2018. Most areas are just finishing a ‘suckers’ rally’ with significant downside to go (overall about 40% done). Still in the denial stage – fear is next and the despair stage still a few years out. Canada has not even started to the downside.
I rent and I own. I rent in Toronto, about $900 / month. It was about $ 400/month when I first moved in about 18 years ago. That includes: property tax (4 times higher than a house), heat, maintenance, property upkeep & insurance, parking, locker, on-site staff, grounds-keep (snowplowing, salt, grass-cutting..) and so on. I just added Netflix, internet, hydro and the phone (soon to axed due to internet).
It’s a very nice, safe, quiet area – I can easily walk to the Bridle Path or the Granite club from here. Great access to everything. The office takes care of things when I head to Asia as well.
The place is small (1 bedroom) – my only grievance is constantly hearing everyone to tell me to buy a house in Toronto like I am some kind of ‘loser’. Of course they forget I have over 800 acres in Asia and several houses with the money I saved renting (all bought ca$h). Where my house is, summer is sunny 32 C and ‘winter’ is sunny 28 C. I can’t stand winters in Canada! They on the other hand, are still paying off mortgages for older houses mostly built of cheap chip-rack (mine are all custom built concrete & steel). My brother, for example, pays $ 600 – $ 700/month in property tax for a 1960s type house in the dying steel town of Hamilton (I pay under $ 10 / year overseas). I guess it’s delightful winter wonderland that inspires him to keep paying.
So the money saved renting – invested properly – can set one up for retirement. Oh, and as I own the water rights and produce my own food (cattle, fish, fruits, vegetables, rice..) and energy (ethanol) about my only expenses are health-care, drinks (its about 25 cents for a good beer, $1.25 for a liter of gin), and clothes. Oh and women too, just don’t tell the wife.
DW
DW, have you not heard of buy low?
You have zero evidence that U.S. house prices will go down another 40%.
Canadians looking for a winter house in the U.S. have an opportunity of a lifetime in from of them right now. U.S. houses are cheap and our dollar is high.
Now is the time to buy, (if you wnat a winter house there). To the bold go the bargains.
The DW’s of the world missed out buying stocks at the lows in early 2009 and will miss out on the US. house bargains.
Who cares if they might frop a bit more? Grab bargains when they are in front of you.
NEW credit card delinquency figures just out.
You would think that with all the young people who took on gargantuan mortgages that we would be seeing higher credit card delinquencies. (And other loan defaults)
And if so, that might soon be followed by deparation and bankruptcy related house sales.
In fact, no, the delinquencies are now trending lower.
See
http://www.cba.ca/contents/files/statistics/stat_creditcarddelinquency_en.pdf
and
http://www.cba.ca/contents/files/statistics/stat_cc_db038_en.pdf
This is fresh data just posted today and the bankers only post this once per year (not wanting over exert themselves).
My only explanation is that people are contuning to borrow more and more to pay their loans. It’s all good until they lose a job then they are toast.
Okay, reading a little further DW is doing very well. (Sorry DW I posted based just on your first paragraph… a case of premature evaluation I guess)
I just don’t know why anyone would be convinced U.S. house prices will fall more yet, or why such a prediction would prevent anyone (who wants a winter house) from buying now in the U.S.
The bargains are there now. That is fact. The future is conjecture.
READ BETWEEN THE LINES.
This is a HUGE BUY signal for offshore money. Some Candians who are overextended will feel some pressure if interest rates rise. Canadians are known as the weak bids. And we all know what happens to the weak bids they get snapped up and put into stronger hands. This is actually great news for investors. The overhang (Canadians who have too much debt) is going to be mopped up. Upward channel is intact. Higher interest rates? Bring em on!!
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Now, trust me, federal finance ministers never talk about this stuff. They don’t hint at the future direction of rates because (a) that’s the turf of the Bank of Canada, which is supposed to be divorced from government and (b) chatter like that moves markets and the dollar. So the fact F is doing this just a couple of weeks after he murdered 35-year mortgages speaks for itself. It’s the political equivalent of a screaming air raid siren in Kabul.