“We sold the damned condo!,” Jen told me yesterday. “Listed April 6th, accepted an offer July 6th, money showed up July 26th! Yeesh. Hair raising to have it out there for 3 months — some friends managed to squeak out with big profits earlier than us, and other friends are still on the market!”
Just to be clear, this is not a CityPlace shoebox made of rebar and cement hulking in a downtown Toronto condo forest with an intimate view of the building next door. No, this is luxury West Coast, metrosexual urbanity, as close to California as we get, in a building gazing over English Bay, where mermaids and narwhals frolic.
And still, tough sledding. Almost makes Jen wonder what happened to that massive real estate bubble everybody’s been yakking about. The buying in 2006 was easy ($640,500), but the sell in 2012 ($699,000) wasn’t. What with real estate fees, repairs and sale-related expenses, Jen figures they walked away pocketing about $20,000 – after owning a choice property during five years of the frothiest market on record.
How come?
Probably because they sold too late. The Van market is sucking air, and growing weaker daily. There are enough houses for sale in once-blistering Richmond to last the next two years. The tony Westside is devoid of both HAM and hope. Condos have croaked. Jen had horseshoes just closing the deal.
She blogged about it. “Renting vs. Buying, in our particular situation, had no clear winner,” she says. “I did love our condo and really enjoyed both the space and the location. It was a great place for us to live, so I’m happy the numbers didn’t show it was a financially terrible idea to have done so. But, considering renting isn’t bankrupting us either, I’m really enjoying the freedom and flexibility of non-ownership, and am in no hurry to buy property again anytime soon.”
The conclusion might have been different, if she’d bailed out a year ago. And it would certainly be changed if the condo wasn’t going to market until this autumn. What was a seller’s market in 2011 has turned into one where buyers have the power to force prices lower. But it pales in comparison with what’s coming.
It’s a lesson the smug ‘hey, it’s different here’ crowd in Calgary and Toronto better learn. The fundamentals are not changing for either city, nor for the ingénues in Skatch or The Peg. The tumbling Vancouver market provides a useful template of what others should expect in the months to come. Nature always wins.
First sales weaken. Then listings start to swell. Bidding wars are extinguished. Soon price increases are erased. Sales declines gain momentum, and the media starts to notice. Realtors sweat a little, say the market’s balanced. Listings mushroom even as prices stay sticky. New condo projects are cancelled. Sales fall further. Realtors declare a buyer’s market – hurry! Now prices tumble lower, often crashing first in those hoods where they exploded higher just months earlier.
Here’s an example. 2785 Chelsea CS, in West Van. Listed in March for $2.448 million. Relisted in April for $2.28 million. Reduced in June to $1.998 million. Sold two days ago for $1.61 million. That’s a 34% drop after 116 days on the market
By the way, this sale price is a half million less than the appraised value.
Like I said, the mighty fall first.
Now, ready for the Letter of the Day? Just to be clear, I do not make these letters up. I do not pay people to write me. I do not drug them. As much as they beg, I do not dispense sexual favours. Not even to sweet, young Angela, who has a problem…
Hi Garth, I would love to get your input on my situation if you could spare the time.
I am 29 and single. I bought my downtown Toronto Condo in 2009 for $240,000 with a 35 year mortgage (accelerated biweekly) with a 3.69% 5 year fixed rate. I had an interest free loan from family for the down payment. As I recall this was the literal bottom out period before prices started to rise again. It is right on the outskirts of downtown bordering Liberty Village very close to where I work and play. I cycle everywhere to reduce costs. Right now my monthly housing costs are around $1,300 which includes hydro, mortgage and maintenance fees (which have gone up $100 in thee years with one hike and the new HST). I have recently placed my Condo on the market and originally priced it at $324,900 but have since reduced it to $299,999 due to lack of attention. It’s now getting a lot of views but no real offers yet and I am almost a month on the market now. My building seems to have a lot of competing units.
I work for a bank and I have a small amount of savings (less than $1500) and I make $1,317.83 bi-weekly. I do ok but large unexpected purchases can throw me off and require me to budget myself. I live pay check to pay check right with decent job security. But IT is never 100%.
After the price reduction and no real offers yet, my feet have been getting a bit cold… and I have been wondering if possibly renting my unit and finding a cheap $800 rental for myself would be a comparable plan to selling. My place could probably get $1500 a month at this time if I rented it out. Combining this with reduced living costs if I were to find a rental for myself I could start to save again. Also there is the potential loss in rental income to consider when rates finally start to go up.
I think I should still sell and move my money to another vessel but I am wavering a bit. Your advice on this would be much appreciated.
Angela, figure it out. After commission you’ll be lucky to walk away with enough to repay your family. Reality is, you’ll get closer to $260,000 and end up with less than ten grand. Renting it out is no option – you’ll net a paltry $200 a month while the condo sinks. A year from now you’ll owe more than it’s worth.
Three years of home ownership, and look where it’s put you. Savings of $1,500. No real equity. The potential of a big loss. Looking for an $800 pad. Still single. Writing to a pathetic blog.
Angie, bail!
170 comments ↓
Get ready for FED tomorrow.
Repay the family???!!!!! HAHAHAHAHAHAHAHAHAHAHA
Regarding “When should we consider buying?” — In the US, in some regions, most properties now sell for less than their assessed value:
http://goo.gl/w0UkO
So I figure out that I might consider jumping back in when the average house sells for not much more than its assessed value. Right now it is not uncommon to see houses selling for (or owners asking for) 30% more than the AV.
The following condo is assessed at 371k, although the agent decided not to include that information on his listing:
http://goo.gl/O8XYM
It first went on the market over a year ago. It was initially listed at 585k, meaning the owner has already accepted to get 15% less than what he felt entitled to in 2011.
Wow – working for a bank, have only $1300 in monthly housing costs (unless she didn’t include property taxes?), and only saving approximately $40/month ($1500/36 months) over the past 3 years.
And, let me guess… is that $1500 in a 0% chequing account, where you pay $50/month in service fees? Or, in a “high interest” bank TFSA making maybe 1% (less than inflation)?
Let’s all pray that she isn’t an investment advisor with the bank — that might make me cry.
Where I come from counting $1,500 in the bank is not classified as having “savings”……..$15,000 maybe……..but then again, maybe not. This woman is technically insolvent, literally, one purse shopping trip away from bankruptcy.
And she owns $350K of real estate ???
The question is, why are we the taxpayers backstopping the stupidity of the “banksters” who underwrote this crap loan in the first place ??
Yikes!! Angela… Sell it !
Presumably, people are reading this on Tuesday.
#1 I think The FED will disappoint tomorrow (the market that is) and do nothing, maybe announce that low interest rates are here to stay till 2015, who care? :)
http://bits.blogs.nytimes.com/2012/07/30/bots-raise-their-heads-again-on-facebook/
“If we’re going to spend money on advertising, we want to make sure people are looking at us,” he said. “If a bot visits us through a Facebook ad, that costs us money. That ends up being not worth it to us.”
cost per click becoming tainted? A screaming buy for facebook!………………
http://www.telegraph.co.uk/finance/economics/houseprices/9437532/House-prices-fall-for-first-time-in-seven-months.html
“Prices fell by 0.1pc in July after being flat in the previous month, with activity slowing down notably in London and the South East, which have been supporting the market and keeping average prices up.
Meanwhile, price falls in the northern regions, which have been bigger than those in the South, could be “bottoming out”, the study suggested.
London was the only region to register a price increase in July, with a rise of 0.1pc, but the rate of growth has slowed, according to the findings. The North East saw the biggest price fall, with a 0.5pc drop. ”
Slowing down and losing traction cannot be good……
Nature wins out eventually. Who knows, deflation could take hold and highly liquid assets such as cash could hold their value far better than those that are relatively illiquid.
Yup… Vancouver’s done like dinner…
This is my new favourite RE Bear website for the Lower Mainland…
http://vancouverpricedrop.wordpress.com/
No tweet ahead of the post tonight Garth? Is the universe unfolding correctly?
Ah! There it is. Some of us really do need a life.
http://www.vancouversun.com/sports/website+forces+realtors+compete+your+listing/7009434/story.html
New website forces realtors to compete for your listing.
Angela, meet Jessica, from yesterday. And the lesson not learned by all-YET……..”Debt, is not wealth”.
Garth.It has been heartening though, this year, to read the comments from the people(House Horny abstainers) who write you to thank you from having pulled you back from the abyss of the Canadian Housing Crash. Just to clarify, for some of the newbies on site, Garth is not, and never was anti-real estate. From everything I read by him, his sole purpose is to save the financially illiterate house horny, from their own financial screwing. Diversify…….read his past blogs, and he goes into great detail. And, from what I remember, to the gold/silver bugs, he never said don’t own them, just keep them to a small % of your portfolio……
Angie you have to bail. You are paying half your earnings into housing. Your electricity, condo fees and personal taxes are all going to go up while the condo value falls. This is going to be tough to manage unless wages really go up. You sound like you are leveraged to the max. Sell now before you get into trouble.
Best of luck
has anyboy else clued in to how inhumane/ absurd this system of winners and lossers is. the fatboys at the top dictate the supply of money and we are all left to scramble what to do? oh, let me see what are my options? go into debt for at least half my life and call myself an owner or refuse to be a debtslave dumbass and watch those f$%ks that did play the game make money at least in the short term and see my rent go up every year while I try to play with the fatboys in the equity markets at their game again. and then if i get it wrong in a rigged game , f*&k me. right?
West Vancouver selling $500,000 below assessment?Stop you are making me house horny!
today on radio (in TO) I heard an ad saying something like “if your house is on the market and you only got showings but no offers, it may be overpriced. call us for an appraisal blah-blah-blah”.
I smell a change in the air…
The humour content of this brilliant blog must be increased. With today’s “Letter of the Day” depression is gaining ground.
“By the way, this sale price is a half million less than the appraised value.”
~ which tells us that realistic “appraisals” and meaningful “value” don’t exist…
Housing is a speculation, not an investment. Any house is “worth” exactly what you got for it – and only on the day of the deal…
OMG Angie, your condo is eating up HALF of your take-home pay (I hope the 1317 amount is after tax).
Please tell me what bank you work for, so I short the hell out of it lol
Angie – definitely bail! You don’t need the stress of being a landlord and it’s highly unlikely condos will ever regain their current value (in real terms) in Toronto. Just look at how many are being built, and it’s really not that hard to build more. Then take a look at some of the busts that occurred around the world and see how that would stress you out if it happened while you were still an owner (which it could). Here in Auckland we had our inner city condo boom and bust about a decade ago and now the conventional wisdom is that condos don’t appreciate (a self fulfilling prophesy) but land is where the action is – we have our own housing boom going but it’s almost entirely in single family housing. So lower the price until it sells, and then work on saving 10% of your income a year – you’ll find yourself ahead of the game pretty quickly. Good luck!
Hey Garth – it IS different in Toronto – TO Life says so (June 2012 cover story – and for the punchline, see July 2012)
Almost makes you want to fast forward to next summer. What a mess this market will be.
My wife hates this website because she says I spend too much time reading it. She’s hot too.
Funny burlesque type video….Parody of the Tom Jones tune…’Sex Bomb’….This one is called ‘Debt Bomb’…..
http://www.youtube.com/watch?v=JMklQLekg6E
first……its been a long time for me since i said this…
Second!
The Princess Margaret grand prize home which was advertised as worth $3.7 million was listed a few weeks ago on the mls for $3.5 million. Quickly the price was dropped to $2.9 million. Still unsold. And it is in a great spot in Thornhill.
Well she still made over $3k a year tax free owning that Vancouver condo….
Whoa, a house in west Van with ocean views sold for 1.6? East Van is screwed!! Houses in my hood were listed for as much as a million recently. Pffffft….
Will there be any winners out there? How about them trailer parks, with places for $80K?
How can Angie work for a bank and ask such a stupid question? How did she get a job in the financial sector.
She should be embarrassed!
Listen to your gut Angie, get ahead of the market.
Its a cheap lesson …….right now.
All over Canada prices are crashing hard in very little time like Garth example of west Vancouver which is seeing an almost 35% crash in under four months . The GTA is following Vancouver. The housing crash is only getting started.
Richmond is on pace to have a record low number of sales. Just 54 sales this month so far.
http://vancouvercondo.info/2012/07/the-incredible-sinking-richmond.html
#30 Jimmypage.
The princess margarat home is way to close to Yonge st. for a home worth 3mill. (I live nearby, I know).
No way that thing was ever worth 3.7mill. Take a drive further down the street and around the bend on the street just North. Basically Thornhill golf and country club. Now we are talking 3mill for some of those…maybe.
Angie, sell the condo and get mobile. As someone who is also in IT you are way underpaid. You either need to put your IT skills to work somewhere else or you need to upgrade your skills to earn higher pay. Whatever the case, use your mobility to move where the better jobs are or better schools are. I jumped six jobs and upgraded my skills along the way until I finally settled into a sweet IT management position. Lots of stress but no shortage of $$$. I balance it out with mountain bike toys and trips to Cabo. Dump that condo, get mobile.
I think the Vancouver condo market has been flat for a lot longer than we realize and have been manipulated by skewed numbers from realtors. I bought my Vancouver condo in 2008 for 400,000 and was finally able to sell it June 2012 for 427,000 after 3 months on the market. Between special assessments and realtor fees, I certainly took a bath, but am very greatful to be out of market. An identical unit recently sold for 375,000 in May after being bought for 436,000 in 2009.
#27 Randy – was that bait & switch deliberate or did you supply a link to the wrong video?
should have bought in Liberty Village and you wouldn’t have this problem. The outskirts = ghetto!
Ha ha ha sucker! A condo in Toronto for $300K must be 300 sq sucker no one is going to buy that!
Oh well it could be worse you could have invested in RIM or another stock…..
“Where Real Estate Is Still Hot”
http://online.wsj.com/article/SB10001424052970203278404574420942782020938.html
TURNER NATION
there is no QE3 coming
just the twist
It is definitely different in Calgary. Its all good to talk daily about TO and Van/Vic but Calgary can’t be compared. People still borrowing up a storm. CREB still cooking up fake stats putting lipstick on a pig, banks keep on trucking with the lending.
Do you think it’s a good thing the world is noticing our debt levels and real estate exposure? S&P, irrelevant or not, downgrading outlook’s for CDN banks is just the start. So you say “who cares about S&P?, they got it wrong in the US crash” right? or did they??
Doesn’t matter. Now they’re writing about us and investment dollars will take notice. The target is on our backs now and someone wants to target practice.
Anyway, it is different in Calgary for sure. People are still stupid. Banks are still lending, finding loopholes along with realtors. Prices are stil lmuch too high and there’s lots of Kool aid going around.
The train cannot be stopped.
http://www.cnbc.com/id/48409263
Profits at China’s steel mills fell by 96 percent in the first half of 2012 compared with the year before, the China Iron and Steel Association, which represents the country’s largest mills, said on Wednesday.
Spending must be really robust with this news…….
http://biz.thestar.com.my/news/story.asp?file=/2012/7/31/business/11761151&sec=business
Economic growth is on a much weaker trend than what the government and the Bank of Japan are telling us to believe,” said Satoshi Osanai, economist at Daiwa Institute of Research in Tokyo.
Surprised that your being told what you want to believe?….
#5 Keith in Calgary
Dude! Bankers aren’t stupid.
Diabolical. But not stupid.
The passive Canadian public is stupid.
DEBT! DEBT! DEBT! DEBT! DEBT! DEBT! DEBT!
http://www.bruceonpolitics.com/wp-content/uploads/2011/03/Debt-cartoon.jpg
Up $20,000 AND 5-6 YEARS RENT SAVED!
am I missing something?
Angie,
sell the condo. If you work for IT for one of the banks, the job is not 100% secure it is more like 50% secure.
I was in the same boat as you, and it is a relief to not have that debt hanging over my head.
Sell.
#44 martin9999
“there is no QE3 coming, just the twist”
There isn’t much short-term bonds left to twist as the Fed is now buying faster then the government can spend. The next round of QE would have to be other asset purchases such as mortgage backed securities, ETFs, REITS, etc. Same monetary policy as The Bank of Japan did and The Bank of England is now proposing.
If they want to keep printing, so be it.
Angie’s picture? missing, worth 1000 words?
Angela, if you can come out of this thing and break even after costs, do it, and quick, and consider yourself lucky. When this market dries up it will happen very quickly. Some years ago I too purchased a new townhome but as an investment. It was 1992. I was lucky to have had it rented to the same people for a bit over 7 years therefore no loss of rental income. This was the period when real estate went into a slump as it is going into now. Because developers had overbuilt, condos were in abundance and as a result we could not raise the rent in that entire 7 year period. In the end, the unit sold after several months on the market for the same price we paid for it. We took a loss of $15,000 and most of that was a result of the GST that we had to pay when it was purchased. This does not include the loss of income on the money invested to buy the unit. The only person who made any money on it was the fellow I had collecting the cheques and taking the calls from the tenants. He was paid $60 per month. Don’t let the same thing happen to you. Don’t put yourself in a situation where you are subsidizing a tenant.
you all are too funny with your apparent shock at Angie’s lack of financial acumen, given that she works for a…dun dun dun…… BANK!!
News flash for you folks…. I have worked in finance in over a dozen industries, and currently work for one of Canada’s major banks in their finance dept….. hands down, my co-workers are the least intelligent/talented and able to apply basic common sense than anywhere else I have ever worked. It really is mind boggling….
Of course, when anyone tries to act intelligent, talented or apply common sense, they invariably get beaten down….. :-o
Angie,
You should consider selling. It’s a big decision but you’re still very young so you can buy something when the market cools/crashes in a few years. You’ll be there before you know it…actually, all of us will be.
Angie – you know those clothes we keep because they cost too much to just toss and admit we made a mistake, even though they don’t really fit and we never wear them? This is your condo. It’s sucking the wealth out of you. Yes, it sucks to see basically no gain, but cut your losses and run. If ‘large unexpected losses’ throw you off, try being a landlord with a bad tenant who doesn’t pay up, or moves out mid-month and leaves you paying for 2 apartments until you can find another tenant. Or trashes the place, or brings in cockroaches and begbugs, or you’re handed a special assessment. You don’t have the cash flow to handle these problems, and you don’t really need to learn this lesson any harder than it’s going to be.
In other news, 297 Carlton St. is a grand lady of a home, originally listed at $4,250,000 in May 2011. Now relisted for $3,399,000. Prices at this level are always a bit random, but that’s a 20% drop in 13 months. Not enough to sell it though, it seems.
[…] As published in The Greater Fool […]
So listings are way up in Vancouver now. That’s like locking the gate after the cattle get out. Why wasn’t there a flood of listings last year (including Jen, of course) when prices were at their peak? Are there no greedy people out there who would try to maximize their gains?
People really thought that this madness would last forever …. The slide is real, this is just the beginning….
HOLD ON: This girl was in this situation all along, why is her earnings, etc a problem now that she is thinking of selling???
She earns $2635 a month
Her payments total $1500 on accelerated payments, she can easily reduce this. So has 50% in expenses of her total income on her home, that is not bad. She is not going to find that same home for $800 a month???????
She doesn’t have an income or real estate problem, she has A SPENDING problem. THINK PEOPLE.
does no one read??? She also has no transportation costs as she lives close to her work/play.
My advice is don’t sell the condo. Stay in and ride it out. Stop shopping.
still no price drop in gta … looks same ole too me
Here is a little humor to go along with your MARKET CRASH worries:
“One day a girl brings home her boyfriend and tells her father she wants to marry him. After talking to him for while, he tells his daughter she can’t do it because he’s her half brother. The same problem happens again four more times! The girl starts to get pissed off. She goes to her mom and says, “Mom… What have you been doing all your life? Dad’s been going around laying every maiden in the town and now I can’t marry any of the five guys I like because they have turned out to be my half brothers!!!”
Her mom replies, “Don’t worry darling, you can marry any one of them you want, he isn’t really your dad.”
Here is one for you Garth:
13799 20th Ave in South Surrey as of March 9 it was listed for $1,165,000 according the Vancouver Price Drop Blog. It was off the market, on the market, on the market and then sold for $849,000 in two days later. I think the realtor had a deal but didn’t want to look like a complete loser. This area is called Elgin/Chantrell. A year ago the prices went up 50% because of Mainland Chinese buyers going crazy. Why? The HAM love good schools. The schools are not so good anymore with all the ESL students. Plus, the area has become flooded with renters like me. The smart money, sorry smart folks are moving to the US. Huge mortgage vs no mortgage….what makes financial sense to you?
Apparently “Angela” is actually right in line with (U.S.) averages:
http://www.moneyville.ca/blog/post/1230840–i-m-almost-30-and-worth-75-000
In fact, if she somehow got say $10k out of the condo sale, she could be well above the age 25-34 average net worth of $8,525.
No wonder so many 20-somethings are hopping on the RE bandwagon – they are incapable of saving in any other way.
Just checked on speedtest.net and I got 90 Mb/s download and 41.5 Mb/s upload and I have not even upgraded to the 1 Gb/s connection, I am still on my old plan of 100 Mb/s . Crystal clear Skype video conference (at least until Microsoft bought Skype a few weeks ago, now there are more than a few hiccups. I think I am going to fire up my own video conference server, any suggestions)
Here is another article about GOOGLE ACCESS the new broad band service by GOOGLE that is creating 1 Gb/s internet service in a pilot project in Kansas City.
http://gigaom.com/broadband/google-fiber-medin/
#23 Frustrated Kiwi
Condo prices rocket up purely on speculation. The increase in housing prices is almost entirely in the land. A condo already represents the highest level of utility; there is no more significant land appreciation left, until we figure out how to build 100+ floor towers cost effectively. Structures are depreciating assets. Their price only goes down. Only capital improvements (repairs, maintenance, renovations) will maintain or increase their value.
–
“. . . where mermaids and narwhals frolic.” — With crackheads and dickwads in crackshack McMansions. Where, oh where are BPOE and Mikey the Realtor these days?
“Still single. Writing to a pathetic blog. I do not drug them. As much as they beg, I do not dispense sexual favours. Like I said, the mighty fall first. Nature always wins.” — Admittedly, this blog is not for the timid or faint of heart, but it is a helluva lotta fun, even if it doesn’t make sense all the time!
#17 al — “the fatboys at the top dictate the supply of money and we are all left to scramble what to do?” — Well pointed out. The withdrawal of money, primarily from the west to place it in other areas of the world, is what is currently happening, but hardly anyone notices.
That’s the way TPTB like it, with bankruptcies / wars / social upheavals happening at the same time, most sheeple don’t even notice their so-called wealth is gradually being frittered away. And then they wonder why their govts. have little left in their social programs to help them out — they’re broke.
*
Liviing in Cars US families, in record numbers, Red Handed Corruption at the highest levels, and 2:54 clip Banks ‘clusterbombing’ customers? Failure to Achieve But get rewarded anyway; Govt. inaction Don’t laugh, it’s true; HSBC Nice amount for doing business, but Illegal business? Plus and Terrorist Finance? US’s fiscal cliff = global risks; Johnn Mauldin Joan sees red; 9:53 audio clip The tight stuff; Govt. and bank debt Differences; Consolidation Is it feasible? We Missed by a bloody mile; Borrowing Yield collapse.
Soros – Obomba This may have been Soros’ plan all along; Mortgage Bond Investors Housing slump continues; Tax Hikes In California? Who will pay? Oz – US Shades of 2006, and EZone retail sales down; Electrical Grid down in India, and 370 mln. people without anything; Fall in mtge. lending Sheeple are waking up; ECB Does it control the world’s economy?
*
Costa Rica Not a tree house, a tree village; Ladies Only Real man or metrosexual? Ex-minister questioning why Israel wants to attack Iran; Russia’s new nuke navy, and China keeps buying Iran’s oil; 6:50 clip Evidence brewing that Aurora, Colo. shooting was staged, to bring in gun control and to do away with the 2nd Amendment, and 2:09 clip James Holmes on Temporal Illusions; Satellites Good for spying and other things; Pix in Black Sea has become the Red Sea; 2:10 clip Santa Monica bans smoking in homes. Invasion of privacy? Ahhhh! You have Beautiful Thighs!
Hi Angie,
I was in a different but ,once the 30% correction happens, in a similar situation.
If you believe condo prices are going down, like many people and economists believe, I’d recommend a strategy.
1. Do not be greedy.
2. List your place at cost you bought the place + commission fees for the realtor.
3. If this does not sell fast .. then Garth is sooooo right and dump the place since it will lose a lot more soon.
I am 29 and single. I bought my downtown Toronto Condo in 2009 for $240,000 with a 35 year mortgage (accelerated biweekly) with a 3.69% 5 year fixed rate. I had an interest free loan from family for the down payment.
Look at these comments, so many people are seriously advising instead of joking about her. It shows that this website is becoming very successful by attracting no-so intelligent people.
She even should not rent but find some roommates and move in with them like max $500/month as a roommate.
She makes $2600 a month, she is doing one of those gov’t sponsored jobs where citizen is hired and paid so that she does not sleep on streets or apply for welfare. She also feels happy and loves her job and gov’t and rest of the deal is done by bank and gov’t as form of incentives, tax breaks based on how many citizens are paid by bank.
Waiting for natural selection moment to come and this will teach a lot for many.
Vancouver better than ever. America done like dinner. Tsur still the genius of the land
http://moneymorning.com/ob/warning-the-economic-collapse-could-begin-on-aug-1st-3/
First Nation lands soon to be developed in Vancouver , North Van , Maple Ridge , and Tsawwassen
http://www.surreyleader.com/news/138868449.html
#11 Bo Xilai
That blog for Vancouver is great !!!
Can anybody here point us to some recent stats about Montreal? Any sign of prices dropping in Montreal ?
Garth, don’t you get letters from Montreal?
Predictions:
Done (crash)- Nanaimo, Duncan, Abbotsford/Chilliwack, Red Deer, Lethbridge, Saskatoon, Regina, Winnipeg, Halifax.
Lower, but still unaffordable (25% at most) – Vancouver and immediate attached environs.
Lower, but affordable (15%) – Calgary, Edmonton, London, Kitchener-Waterloo/Cambridge/Guelph, Toronto (all GTA), Kingston, Ottawa, Victoria, maybe St. John’s.
No perceptible change: Whitehorse, Yellowknife, Moose Jaw, Neepawa, Thunder Bay, Windsor, Montreal, Quebec City, Labrador.
However, Milton, Ont is slated to go up and up forever because of the big Target warehouse, the new university, and the mayor and one particular builder planned it that way 15 years ago.
#11 Bo Xilai – Thanks for the great website, i now have it book marked.
Most of these properties even after significant price drops and even being under assessed value are still fundamentally way overpriced.
Guess it goes to show what “Worth” is using bank or other peoples money.
Value happens when you use your own money and with real income prospects declining rapidly (except for government employee types and other vested interests – as too in the last depression of the dirty ’30’s) it seems like this is only the beginning.
Most of the properties on that site i wouldn’t bid half for if i even wanted one. Owner/ occupancy costs of the bigger ones are things that make albatrosses out of seagulls in a hurry, especially since those costs use up after tax incomes and savings to maintain.
Did anyone take a screenshot of the place that sold for 1.6 million with an initial asking price of 2.48 million. The link doesn’t work anymore
http://mlslink.mlxchange.com/DotNet/Pub/EmailView.aspx?r=1187604411&s=BRC&t=BRC
Some of the realtors hawking the higher priced stuff with flowery descriptions could have another career at the end of the day – writing for the tourist bureau. They’ve got the bs lines down to a science. Makes you want to buy RE now and when the bottom comes, will make the tourists want to visit the disaster. All in a career’s work.
Some win….
Public anger over the financial crisis is wrong and must not lead Britain to “hang bankers at the end of the street,” Tony Blair says today.
http://www.telegraph.co.uk/news/politics/tony-blair/9422096/Tony-Blair-hanging-bankers-wont-help.html
Some Lose…
Of the thirty-nine people tried for the fraud – the biggest in the Islamic Republic’s history – four were sentenced to hang, the IRNA state news agency reported.
http://www.huffingtonpost.com/2012/07/30/iran-bank-fraud_n_1720906.html?utm_hp_ref=world
Its only natural…..
Garth,
Sounds to me like neither one of these people should have purchased in the first place, market prices aside.
If Jen loved her condo and it was perfect for them then I am at a loss as to why they sold it. Did they buy it to live in or as an investment ? If they sold simply because of your blog then wow are they ever stupid so I certainly hope not. If it is because of a true reason to move, such as a new job or need for relocation, then I don’t see what the problem is. They did not lose any money and, in her calculation, she needs to factor in the rent they would have paid for such a place during the time that they had it. If it is because they need the money then this purchase should never have happened in the first place.
A house is something you buy when all of your other affairs are in order, including the ability to put something aside for retirement and being able to afford to take a regular vacation. It is also not something you should count on profiting from. With repairs and upkeep, you are lucky to break even much less come out with a profit. Jen should have nothing to complain about and in most other saner markets other than hers or Calgary’s or Toronto’s, she most definitely wouldn’t have a problem. Around my neck of the woods, things don’t sell nearly so quickly and prices are nowhere near the insanity of these big cities. People around here take a lot of time buying a house (as they should) and they don’t move every few years after doing so.
As for Angela, shame on her family for being stupid enough to lend her the money to get into such a situation. What the heck is wrong with families these days that they think they are doing their offspring a favour by buying them a place (that’s what I call “lending” a downpayment). A 35 year mortgage ?! Are you serious ? That’s enough interest to pay for the house two times over !
I still remember when my own sister wanted me to co-sign a loan at the bank so that she could buy a home computer. I told her that I did not think it was a wise decision and that she should save up for that computer and buy it cash. I think she did not like me for a while but she went ahead and saved her money because she was forced to do so. We are still very close and had I co-signed that loan I am not so sure we would have been. The role of family is to help and support when there is true need and sometimes helping is not necessarily shelling out cash but rather the opposite. When are parents going to truly get that ? I’m afraid that my generation of parents has completely screwed up the next (thankfully I am not an accomplice as I chose not to have children).
I still think that buying a property is not strictly a financial decision and that many other things enter into the equation, HOWEVER, I do think that the financial aspect of buying a home is inescapable and without having your affairs in order first, you simply have to keep window shopping and keep renting in the meantime. Banks and parents used to help out in the grounding process of buying a home but quite obviously one can count on neither party to do so these days.
HHHW
Dear Garth,
We sold our duplex in Ottawa for a very good price in the summer of 2011. It was a tough decision because we raised our kids in that house. However I am going to retire, our kids are grown up and we had the chance to move out of the country for a couple years. On top of that I just couldn’t believe prices could stay double or triple those in the USA even in stable old Ottawa. Moreover the projected cuts in the federal government plus all the condo projects on the books scared me about rental prospects going forward.
Nevertheless I still agonize over the decision. Your blog together with comments from the knowledgeable people who post provide some reassurance that it was the right financial decision.
Thanks for the good work!
HHW #66
I’m the Jen who sold in Vancouver – we relocated to the UK and didn’t want to be absentee landlords. We had talked about selling our condo in late 2011 to get out of the crazy market, but ultimately decided to stay because we liked it. And we do believe a home should be shelter, not an investment strategy.
We are happy we didn’t lose money, but three months on the market, ultimately selling for $40,000 under assessed value (and even then, we only had two offers the whole time), isn’t exactly something to jump and cheer about.
“I have been wondering if possibly renting my unit and finding a cheap $800 rental for myself would be a comparable plan to selling. My place could probably get $1500 a month at this time if I rented it out.”
Hang on, wouldn’t Angela be down $600/month plus the income tax she’d have to pay on the $1500/month?
Her current cost of housing (which she’d still be responsible for) is $1,300/month, plus ‘cheap’ $800 rent (if she can get it) = $2,100/month, which would then be partly offset by the $1,500/month rental income (which would be further reduced by her marginal tax rate) = a net loss of $600/month plus the income tax on the $1,500 (let’s say, for the sake of argument, $300, though likely a bit more — I haven’t bothered to do the math).
All in all, wouldn’t her plan to save money and hang on to the condo cost her at least $900/month more than she’s paying currently?
Sell Angela!
80 comments showing as I write this, and only #60 picked up on this so far?
“I do ok but large unexpected purchases can throw me off and require me to budget myself.”
Angela, clearly spending is your major financial problem. You have no savings, but not much in the way of expenses after the condo (unless you are hiding a Beemer from us?).
Definitely take Garth’s direction on the condo and dump it as fast as you can, before you have to give the family apologies and an IOU instead of their money back. That is not enough. You need to stop the “unexpected” purchases. If you continue impulse buying, you will be poor forever, and so will whomever you spend your life with.
Take charge, starting now! Simplify your life and avoid a loss – SELL! Pay yourself first from every paycheque – SAVE! But most of all, STOP BUYING STUFF!
Good Luck!
If we all listen to Garth, we all have to sell now.
If we all sell our homes from who the hell are we suppose to rent from?
See one huge crack in Garth reasonning…
Then learn to read. Real estate is fine, if it comprises a reasonable amount of your net worth. Above that, unacceptable risk. — Garth
#33 Trader
“Will there be any winners out there? How about them trailer parks, with places for $80K?”
$80k? You could buy half our park for $80k. Try $25k and you will get a gem right next to Julian, Ricky and Bubbles. Except for the occasional shoot out between the aforementioned residents and Cyrus, Sunnyvale is a lovely place to live. Let the real estate SHITHAWKS start their swooping over this fair land because in Sunnyvale it really is different!
By all accounts Liberty Village condo-hell concentration area (in Toronto) is filled with
un-smiling, self-absorbed Gen Xers with their tiny annoying dogs, scooters, and Minis, who are obsessed with their hairdos, makeup and working out. And that’s just the guys….
Welcome to hell.
You can’t go one day without at least one or more articles appearing in the newspapers on how financial advisors are all crooks, thieves and at the very least, very bad at their jobs.
http://www.theglobeandmail.com/globe-investor/investment-ideas/tired-of-fees-teacher-becomes-her-own-money-manager/article4445937/
Read the comments section in particular. I find it hard to believe that they are all bad and even harder to believe that all these “do it yourselfers” are doing as well as they say.
Case in point. Statistically 98% of all direct trading accounts lose money. In addition, if all these do it yourselfers are doing so great, who was doing all the selling back during the financial crisis and at the lows of March 2009 ? Answer: retail investors.
As always so easy to bash, criticize and point fingers.
#81 Jen – your story is something people should always remember when buying a house – that for everyone who thinks they have a plan, life changes things. No matter how good or bad the market, people sometimes have to sell because of relocation (in your case), divorce, death, illness, job loss, surprise pregnancies…
This fact is often forgotten by flippers, speculators and sheer optimists who think they can time the market, make a profit on short-term occupancy or, alternately, take out a 35 year mortgage that consumes a high portion of their income. The illiquid nature of real estate is a risk and short-term occupancies often end badly. I think you were wise to decide to cash out when you did and, yes, considering the location and timing of your sale, it’s a pretty thin profit to take for all the stress in a market that’s supposed to be red hot.
Yorkville power of sale sold for 12% off. http://postimage.org/image/79sdagp7v/
Banks are liquidating at whatever prices.
#45 Cory
Take a look at page C5 of today’s (Tuesday) Calgary Herald. Suncor is reevaluating it’s growth plans and may cancel 3 expensive capital projects. Obviously, if the oilsands producers stop their expansions then there will be much less EPC work in Calgary.
I have the same problem as Angela. Price cuts to get more showings. Bag a buyer finally and then have them not get finanacing. I’m 60 days right now with 2 deals that came apart. Got a 3rd and will now by Wed. Credit has tightened big time! Good luck Angela!
http://www.cnbc.com/id/48413981
“The Commerce Department said Tuesday that consumer spending was flat in June after declining 0.1 percent in May.
Income rose 0.5 percent. And wages, the largest component of income, also increased 0.5 percent, the biggest gain since March.”
It get’s better……
http://ca.reuters.com/article/businessNews/idCABRE86U0P920120731
“U.S. single-family home prices rose for the fourth month in a row in May on a seasonally adjusted basis, suggesting the recovery in the housing market continued to gain traction, a closely watched survey showed on Tuesday.”
Very good news that the US is avoiding a recession…..
Can someone tell me if there is HST payable on CONDO MAINTENANCE FEES? I have been reading this very informative blog for a while but I am not totally aware of all the fees when one owns a condo in Ontario? Again muchas gracias Senior Turner.
No HST. — Garth
Ok I give up: why take out a 35 year mortgage and then accelerate the payments to biweekly? Wouldn’t a monthly 30 year mortgage result in pretty much the same payments but overall less interest cost in the long run?
Just came across a 2009 video of John McAfee (creator of McAfee antivirus software). His fortune went down from $100M to $4M (wikipedia stat) due mostly to real estate investment losses.
He now has an interesting perspective on real estate… http://www.youtube.com/watch?v=KNWqtrxZJIc
@ #94 Lawboy
Ok I give up: why take out a 35 year mortgage and then accelerate the payments to biweekly? Wouldn’t a monthly 30 year mortgage result in pretty much the same payments but overall less interest cost in the long run?
********************************
Actually, if someone is financially responsible and can afford a much larger monthly payment, this was a great choice (unfortunately, very few are that responsible).
For life’s ups and downs moments (life happens), you have a minimized monthly payment when you need it. When things are going well, you can double down, and also do the 1 or 2 time a year lump sum payment. There is the effect that every extra payment goes on the principle, thus greatly lowering your debt load and compounded interest. This is especially important in the earlier stages of mortgage.
The one that gets me is when interest rates are very low, like right now, people binge on debt, racking it up to the max, when they should be taking the opportunity to pay down the debts as quickly as possible as it is currently very cheap to do so, or at least having funds available to pay off this debt when the rates go back up to normal levels (eg savings/investments earning more interest then the debt cost, which can be used to wipe out the debt when the debt starts costing more then what is being made).
There will be no major drop in house prices until that IDIOT Carney increases rates.
He knows this and he knows the Armegeddon he will unleash when he does thus he will wait until forced.
Wait wait wait….
Aussie Headlines
When credit doesn’t grow neither do house prices
Housing credit plumbs record lows
The Reserve Bank of Australia (RBA) has just released the private sector credit aggregates, which registered a small increase in total credit in the month of June, but the second lowest monthly housing credit growth in the series’ 35-year history and the lowest annual mortgage growth ever recorded.
http://www.macrobusiness.com.au/2012/07/housing-credit-plumbs-record-lows-2/
Where did the lust go?
IT is a home owner’s worst nightmare. What if you put your house up for auction but nobody turned up? Not even the neighbours for a stickybeak?
Well, that happened at the weekend, with agents from Hocking Stuart and Buxton real estate left standing alone in the pouring rain
http://theage.domain.com.au/real-estate-news/empty-auctions-op-shop-listings-20120730-23agy.html
Shades of 2006: That’s What Australia Housing Bubble Looks Like From US Perspective
The Australia housing market did not bust when it should of and the delay is going to be painful. The bigger the bubble, the bigger the crash, and the Australia bubble is bigger than we saw in the US.
On a timeline basis, Australia is about where the US was in 2006, essentially a state of denial.
Developers are offering massive incentives such as cars, furniture, and vacations to move homes while chanting the ever-popular “now is a great time to buy a house” mantra.
http://globaleconomicanalysis.blogspot.com.au/2012/07/shades-of-2006-thats-what-australia.html
Clinton and Kelley are the property industry’s worst nightmare.
Sitting on sizeable savings, with a growing family and a good income, the generation X couple should be the archetypical eager first home buyers.
But despite interest rate cuts, price falls and government incentives, they simply refuse to the take the plunge – not yet.
”We’re absolutely for home ownership, don’t get me wrong. But we want to pay a reasonable value, not the prices people are still paying now,” said Clinton, who asked to have their surname withheld.
http://theage.domain.com.au/blogs/domain-investor-centre-blog/buyers-who-refuse-to-buy-20120730-2393y.html
Just another day in “Bubbledise”
Congratulations Angela, you sound entirely normal! Unlike the previous thread. Continue on the course of selling the condo. Do not consider the alternative. You really have no other safe option.
Angela you are 29 and the bad news is when you sell (even if you have to reduce it further) you will not have much in the way of savings to show for your working life over the past decade. The good news is you will have NO DEBT, which means you are already ahead of the pack! You will not have to fret over the things you are now. You will have a rock solid foundation to build on.
Then make it a goal to learn some financial smarts at age 30. Never get into debt again. Make it a goal to have certain financial assets by age 35. By age 40 your will be in great shape. You might even decide to get married by then. Hopefully your new-found financial savvy will help you attract a mate with similar financial skills. The alternative is to be a slave to debt and attract a partner who plays the XBOX and doesn’t file tax returns. The choice is really in your hands.
Wishing you a speedy sale of the condo.
Ok I give up: why take out a 35 year mortgage and then accelerate the payments to biweekly? Wouldn’t a monthly 30 year mortgage result in pretty much the same payments but overall less interest cost in the long run?
No. That would take too much of thinking on the part of the borrower.
Garth, what are your thoughts about people who cannot sell using a HELOC to protect some of their house price. (ie. take out 80% heloc, dump in an ETF and let it pay itself off) People borrow all the time to buy RRSPs, this is no different is it?
#94 lawboy on 07.31.12 at 9:59 am
If your payments are the same, then your interest paid is the same. Amortization being less just increases your commitment to pay, in your example.
You blog dogs are kind of lucky here. You get breaking news from disciple… You’ve seen her every time you break a twenty… and you’ve also seen her for what seems like an eternity in both Hollywood and Buckingham Palace. Yes, The Queen is played by Betty White… I don’t know how my Mom is going to take this…
Canadian Watchdog on 07.31.12 at 9:15 am Yorkville power of sale sold for 12% off. http://postimage.org/image/79sdagp7v/
Banks are liquidating at whatever prices.
———————————————————-
Wow…where do you find this information that the RE industry don’t want you to know? 12% of the power of sale price speaks volumes of the current 416 housing crash thta’s well underway. Prices in 416 down 15% in just two months into the housing crash. It’s going to be a nasty crash realtors a nasty crash.
If Angela didn’t include property tax in her list of costs her actual monthly payable is more like $1450+ instead of $1300 (+ $240,000 x 0.0077).
It looks like she may not have included property tax, because all the other numbers fit for the kind of condo we are talking about:
Mortgage of $228,000 @ 3.69% = $964/month
+ Condo fees around $336/month = $13000/month
There are some condos on MLS at that price in her area that have condo fees in that range. For example:
http://www.realtor.ca/propertyDetails.aspx?propertyId=12242165
Al wrote:
“while I try to play with the fatboys in the equity markets at their game again. and then if i get it wrong in a rigged game , f*&k me. right?”
———
This only makes sense if there’s a value problem. Imagine if you don’t get it, play the rigged game and try to look for security there. You’re screwed. Whatever woman you “build a family” with KNOWS your screwed value system ( which is YOUR responsibility exclusively). When push comes to shove you WILL capitulate and play the game as an attempt to provide “worth” and “security”. By now hopefully you would have taken advantage of your internet connection and know the truth about what a muppet is ( a la Goldman Sachs).
Bottom line? You are the problem…and you’re blaming “fat boys?”. Take a look at the fat boys…which would you rather have? Fat boys are screwed with zero masculinity and human community.
But you still want to play a rigged game…or worse…have a “fair” or “upper” hand in it? No idea what your values are. That’s why Canada has such a challenge with identity. Your comments sound like a huge loss of gratitude and humility is going on there.
Good thing women are able to read the real deal. That’ll never change, and requires no analysis or discussion.
#84 Why me – As Garth wrote ” learn to read”.
July inventory price change data from Guava.com http://postimage.org/image/7038ac475/
Three years of home ownership, and look where it’s put you. Savings of $1,500. No real equity. The potential of a big loss. Looking for an $800 pad. Still single. Writing to a pathetic blog.
___________________________________________
She had no savings before she bought. Parents floated her the down payment on the property which, given her stated income she had no right in being able to purchase and she did and continues to live above her means.
This person and her parents have been the drivers of the RE boom and this letter isn’t incredibly stupid, it’s just a snapshot of your average everyday idiots. See them all the time in the real world.
I’ve no idea what cataclysmic event it’s going to take for things to revert to the norm which will force people to get their heads out of their asses. Maybe there isn’t one. Unfortunately in the ‘Great Recession of 08’ not enough people got creamed. I mean smoked, crushed and shocked into reality.
It’s more likely many many people are going to die a financial death of a thousand small cuts. This person is the norm, so let em bleed.
Angie, the exact benefits of selling or hanging on are a matter of math that only you can determine since only you have the details for the calculation, such as your property taxes, and the split between mortgage interest (deductible from income) and principal (not). You might wind up ahead a couple of hundred either way.
The tie-breaker to me is where you expect to be in five years. The TO condo market will decline annually. There should be no argument about that. So, if there is a chance that you might sell in the mid-term (marriage, job-loss or relocation), get out now, taking the minor lumps you might collect now to avoid the big ones lurking ahead.
If you ignore that tie-breaker, my wife thinks you might as well stay put: selling and moving will cost you a bundle (i.e. RE commission, legal fees, mortgage termination, and moving expenses.) And where in TO do you expect to find reasonable accommodation for $800/month within free commuting range from work?
On a trip back to the Vandump from Pheonix I met a flouncy bimbo whose husband ‘had purcheased several spec houses in West Vancouver’. Based on past experiance this would be about right….the leverage the money crowd uses is far and above what is generally reported in the mainstreet stats. My theory is that when the prices are obviously in the bucket and the first demand loans start to pinch then the prices will tumble down fast…a lot faster than the ‘average’ price in the burbs will fall. It has always been this way in Vancouver. By the numbers the most expensive properties always lose the most in the shortest period of time.
And why do we allow the scum of earth to continue to use Canada as a dumping ground for criminals and money laundering?
http://news.nationalpost.com/2012/07/31/lien-placed-on-saadi-gaddafis-luxury-toronto-condo-for-unpaid-fees/
Tom from Mississauga wrote:
“Bag a buyer finally and then have them not get finanacing. I’m 60 days right now with 2 deals that came apart.”
WTF are you baggin’ Tom? I think we need to start over.
What the hell happened man. Does anyone see the Canadian identity problem? A-N-Y-O-N-E? No men. No women. No community. No value offering.
Just playing games and bagging buyers…..only to get gamed and bagged in another part of the ponzi.
If we’re all forced into doing that without a thought, what else are we doing….or do we even care anymore. What exactly is the message of the Canadian real estate bubble…really.
Ok I give up: why take out a 35 year mortgage and then accelerate the payments to biweekly?
Simple MATH
12 monthly payments per year – paid monthly (12 payments
or
13 monthly payments per year – paid biweekly (26 payments)
It’s like magic – LOL
@ #110 Herb
Excellent advice. There is a cost to moving and I doubt she’ll find somewhere adequate to live at $800 per month. The five year rule is always a good one.
@ #106 John
Your words are all in English and I understand what each of them mean, but put together, I really have no clue what you are trying to say.
I suspect that Angela’s real problem is that she is overweight. That must really suck.
Like you. — Garth
Is this the eventual fate of RE in many Canadian cities?
http://phoenixflippers.blogspot.ca/
Makes one pause and reflect, in the least.
@ #87 bigrider
“Case in point. Statistically 98% of all direct trading accounts lose money.”
————
Link please?
@ #49 TRT,
Up $20,000 AND 5-6 YEARS RENT SAVED!
am I missing something?
—————-
Yeah, this blog always skips the “rent saved” part.
Actually I have built a rent equivalent into every calc I’ve done on rent-vs-own. — Garth
@Bigrider, post #87 who said: Statistically 98% of all direct trading accounts lose money. In addition, if all these do it yourselfers are doing so great, who was doing all the selling back during the financial crisis and at the lows of March 2009 ? Answer: retail investors.
The idea that 98% of trading accounts losing money makes no sense whatsoever. If you exclude dividends, then it should be a bell curve where half of investors make money and half lose money. When you take into account dividends, the amount losing money will be smaller. As for the idea that retail investors lost money in the crisis of 2008-09, more nonsense. In May and early June of 2008 when the economy looked shaky I redeemed some of my equity funds into money market funds, and made some good capital gains. In late 2008 and early 2009 when prices dropped I bought those equity funds back at cheaper prices. As I described in previous postings, it’s like the engine with a governor that closes the throttle (less power)when speed increases and opens it (for more power) when speed drops. Even an idiot like me with no formal education in economics can figure that out.
John #112
I agree.
It seems we have lost our civility to a large degree. Everyone is trying to make a buck off of someone else in any way possible. It is tiring and uninspiring to witness. But it seems like it is the name of the game these days. My hope is that with the inevitable collapse of this long drawn out housing bubble we could hopefully return to a time when people add value and care enough about other people as to not try and make money off another person’s ignorance or economic situation.
That would be worth the pain of this regrettable situation we are in.
#101: Not 1st
You aren’t being serious, are you?
You really don’t think that it would be a good idea to use a HELOC for investment purposes to guard against lower house prices?
I would love to see a one bedroom apartment in Toronto at $800 a month that is not a dump; makes no sense unless it is at Jane and Finch, so sit back and just laugh about it all.
“Like you. — Garth”
Hahaha, so I hit my real target.
Not at all. The total interest costs will be the same on a 35 or 30 year amortization as long as you pay both off in 30 years.
You can also make pre-payments and save even more in interest. Most banks allow 15% of the original amount to be paid off every year with no penalties. Huge money saver right there.
Further, the more you accelerate your payments the more you save in interest as the principal part increases and the interest part decreases over time.
#49 TRT
That’s best case scenario, assuming she gets her asking, which is doubtful after the many showings and no offers.
Ownership costs add up fast. When I sold my condo after several years, I basically broke even on the price. Oh, living for free for 3 years? Sounds like a great deal, no? But once you start subtracting away the ownership costs, transaction costs, financing costs, I barely broke even with renting, and could rent for even less if I went for a less fancy place instead (like one usually does when renting, the whole goal being to save money after all). Add in the stress of selling and moving twice, was it worth it? For me sure as heck it wasn’t.
Also sounds like our protagonist was 5% down, so she would have had to add CMHC insurance premium to her transaction costs.
It doesn’t always go up, Virginia.
Keep in mind, this is all during the hottest condo market in history. $20,000 over 5 years after buying at recent market bottom? Sounds like an extremely risky money maker to me. Risk adjusted, no one sane would touch it with a barge pole.
#34 Dan7.
You think the bank wants smart people working their front lines?
Smart people ask questions and expect good pay.
#45 Cory,
Calgary is not different. The timing may be different, but the result will be the same. Yes there are high incomes here and high immigration, but we also have some of the highest debt levels in Canada (on account of so many new people moving here and purchasing inflated real estate). What this means is that one good blip in the oil and gas industry (that never happens right?) and the house of cards will fall. So while oil prices may save us in the near term they are also an added degree of risk. As a friend of mine once put it – Both the price of you house AND you job security both depend on the price of oil?
Interesting times wrote:
“Your words are all in English and I understand what each of them mean, but put together, I really have no clue what you are trying to say.”
—-
If this is a confession, there may be room for increased awareness.
#60 thinker
It was always a problem. But we didn’t know her until now that she’s thinking of selling.
She has a spending problem alright, spending too much money on housing. More than 50% of take-home? She clearly cannot afford the lifestyle she is living. She cannot afford to live where she lives, owning OR renting.
Think thinker, think!
#117 Dont call me shirley-
Garths own quote.
Im sure he will delete or respond if I am wrong.
#121 Say it ain’t so on 07.31.12 at 1:21 pm
You aren’t being serious, are you?
You really don’t think that it would be a good idea to use a HELOC for investment purposes to guard against lower house prices?
_____
Why not. A HELOC goes for prime about 3.50% these days, lots of ETFs paying 5.5 to 6%. Put it in and let her rip for 10 years. Its going to be that long or more before housing recovers. Whats riskier, sitting in your house and letting the declines happen or investing your gains right now before it happens.
Coming to Toronto ,circa 2013 I think!
http://theage.domain.com.au/real-estate-news/gifts-galore-boost-flagging-unit-sales-20120730-2395v.html
#119 Doug In London-“… half of investors make money half lose..bell curve ,dividends etc” on the issue of most trading accounts losing money.
You forget trading costs which all pay which affects total return and you forget that when markets drop, equities as a whole decline which creates a drag on your half win half lose scenario. If market goes down 40% I gaurantee you your beel curve will be irrelevant as most will suffer a loss( not all) but most.
128 John on 07.31.12 at 2:14 pm
Interesting times wrote:
“Your words are all in English and I understand what each of them mean, but put together, I really have no clue what you are trying to say.”
—-
If this is a confession, there may be room for increased awareness.
——————————————-
John,
Get over yourself. Your condescending tone is truly sickening.
I know.
Your reply to this post will probably be around the lines of: HD, you are so dumb and I am so smart…blah blah blah.
I do not wish to highjack this blog with a useless feud so I will not comment further on whatever remark you might feel necessary to make.
The blog dogs will decide if you are worth reading or not.
Best,
HD
#112 John
Good post and well worth consideration. I think when we’re younger we are more driven and self absorbed and give less thought to the bigger picture of how are actions effect others. As we age and experience hardships/loses I think our compassion grows, we are more respectful of life and those around us.
You know, these kind of letters are of AVERAGE people, not the .02% people letters we see, I am 28yrs old, I make 140,000$ and have saved 280k because I’m so frugal and smart, tell me Garth if I should buy a house or invest my 280k in Perferreds? to which Garth answers of course, investments are better. But the reality is that most people don’t make that much money (as we read the Avg income all the time on this site) have little savings (food, utilities, Rent, car payment outrageously expensive) maybe take a vacation and go out to dinner here and there (you know, to make life worth living, sitting in a basement for 5yrs spending nothing is a great way to save money, but not great for life)
lots are like this, which highlights of course the ludicrous nature of buying massivly expensive real estate. Everyone has NO idea, I was talking to the accountants at the real-estate law firm. The 45yr old accountant just bought a new investment condo in Auburn bay, the newest hellhole suburban rathole, 60km from city center in Calgary. My eyes bulged out of head when he told me this. He mentioned Spain, I said “reminds me of a place we know well” he looked confused “south of the border you mean?” ” no man, here, canada…” looks at me like I’m insane.
We’re in deep crap, I keep hoping to believe we’re going to be semi ok, but its gonna crash hard, its gonna be a lot of rough years to come.
Its not different here, alas.
Screw the realtors..
http://www.cbc.ca/news/yourcommunity/2012/07/would-you-make-realtors-compete-for-your-property-listing.html
#45 Cory
You say that it is different in Calgary.
Where is your proof (stats) to back that up?
How will the new mortgage rules affect house prices in Calgary? These are the same new rules that the housing industry (realtors, brokers, etc.) are kicking and screaming about.
#127 Josh in Calgary
Fundamentals (employment, etc.) were not what pushed Calgary house prices into bubble territory.
These same fundamentals (or lack of) will not be the reason that prices drop back to their long term mean.
It was easy and cheap credit that caused prices to move higher over the past decade (the same as in other Canadian cities).
Calgary house prices dropped 20% in about a year back in 2008-2009. Much of that drop took place while the price of oil was over $100.
The only thing that stopped the price crash was the massive intervention that was put in place through CMHC. Back in 2009, CMHC was mandated to insure more high risk mortgages, taking the total on its books from $300 B that year to almost $600 B now.
The tightening of the mortgage rules will result in fewer mortgages and less money per mortgage ( = lower prices).
jesslyn @# 120
Wow! You may take the monthly nieve prize… the strong, smart and ambitious have been preying on the weak, stupid and nieve since the beginning and it will always be so – it’s baked in the DNA – it’s natures way and in the end mother nature always has her way…
HD 134 —
No, I agree with you. He comes off as the type who has to be the loudest and most right in the room. And probably poorly educated, thus the need for the condescending tone. No one is as smart or ‘gets it’ like he does.
Insecurity at the core. Ignore it.
What is the outlook for Montreal SFH? Surely the condos are overbuilt just like TO.
westernman @ 140
I would expect that from you-lame and boring.
Your thinking needs some ‘evolving’.
(and it’s ‘naive’)
#132 Kothar
“While many industry players say the offers are good news for buyers, others worry that the discounting could fuel a ”race to the bottom” that could harm property values.”
It goes without saying the ‘others’ are those who bought previously. Lots of friends in OZ (as they seem to refer to it) glad they are getting a better deal.
Angela’s case is a good example of how unaware of the true ‘cost’ of housing people really are.
People like TRT and “thinker” on this blog. No offense, but I don’t think that you have thought things through.
The deductions from her final sale price to determine actual out-of-pocket cost of occupancy for the time period owned should include ANY monies spent on the place, including;
1 mortgage payment
2 condo common fees (strata fees)
3 realty taxes
4 shortfalls / special assessments in the condo corp’s expenditures that have been paid or are owing
5 two moving costs (in and out)
6 property insurance
7 CMHC Insce Fees ( 2 to 3.25% of purchae price)
8 any improvement costs (paint, decoration)
9 title insce fees (if applicable)
10 selling costs (paint, staging)
11 RE commission on sale of unit
12 legal fees / disbursements on sale
14 surveys / opinions / documents if required for sale / rent or occupancy
15 the ‘opportunity cost’ of the downpayment (or what it could have earned if invested instead)
16 mortgage termination fees / charges as applicable
and any other miscellaneous costs.
My guess is she breaks even AT BEST if she sells now and counts in all of the above, not sure she’ll be able to repay her family in full.
If she were to wait another year to think about it before selling, I truly believe that she will be facing a large (for her) loss that, given her meagre savings and low income, will impact her financial life for years.
What are you waiting for Angela?
To ruin your nascent financial life so you can move back in with the folks?
If that doesn’t scare you at 29, after living on your own for years, then you are beyond help!
Sell the damn condo!
Now!
#49 Tortel
“Up $20,000 AND 5-6 YEARS RENT SAVED!
am I missing something?
——————————————————-
Did you miss Nortel as well?
If so, enough said.
jesslyn @ # 143,
Lame and boring … and 100% true.
at any price absolutely!
Spain’s BBVA bank plans fire sale of toxic housing
Giles Tremlett in Madrid
guardian.co.uk, Tuesday 31 July 2012 18.27 BST
=====
maybe the olympic sites/seats will become tear down shows like the circus…
http://www.theglobeandmail.com/sports/olympics/beijings-deserted-olympic-sites/article4106854/
http://www.oobject.com/category/12-examples-of-decayed-olympic-sites/
http://www.thestar.com/sports/london2012/article/1234313–london-2012-rows-of-empty-seats-are-causing-red-faces-for-olympic-organizers
#62 ANONYMOUS – that’s from an old song “Shame and Scandal“. Here’s one version from 1965: http://tinyurl.com/cppgxu5
#97 Crashing Yuppy on 07.31.12 at 10:34 am
There will be no major drop in house prices until that IDIOT Carney increases rates.
He knows this and he knows the Armegeddon he will unleash when he does thus he will wait until forced.
Wait wait wait….
…………………………………………………………..
Rates are irrelevant at this point. THE BUBBLE HAS TOPPED. NOW IS NOT THE TIME TO BUY A HOUSE. SALES AND PRICES ARE FALLING ACROSS CANADA. BUYER BEWARE.
Genworth MI Canada’s profit falls on lower net premiums earned http://www.reuters.com/article/2012/07/31/genworthmicanada-results-idUSL4E8IU4XX20120731
Details from their second quarter report: Year to date 2012 compared to year to date 2011
-Net premiums earned decreased by $12 million, or 4%, to $295 million in the six months ended June 30, 2012 partially due to the lower 2012 earnings curve adjustments of $11 million as compared to $21 million in 2011.
-New insurance written on high loan-to-value mortgages decreased by $1.3 billion, or 12%, to $9.3 billion in the six months ended June 30, 2012
-The Company believes, as compared to the prior year’s period, new insurance written was impacted by a smaller high loan-to-value mortgage origination market, particularly for refinance transactions.
***Premiums from low loan-to-value new insurance written were $50 million in the six months ended June 30, 2012 as compared to $11 million [+354%] in the prior year’s period as a result of new low loan-to-value mortgage insurance opportunities in which the Company selectively participated.***
Read more here http://investor.genworthmicanada.ca/phoenix.zhtml?c=230629&p=irol-reportsother
From TO SOLDS:
– Somebody was hungry for rental yield. 133% of list.
1497 Dundas St W Sold: $665,000
Toronto, Ontario M6K1T6 Toronto C01 Little Portugal List: $500,000
Orig Price: $500,000 Taxes: $3,555/2012 133 % List
SPIS: N Little Portugal 119-15-R DOM: 7 Contract: 7/23/2012 Sold: 7/30/2012
3rd Floor Same Size As 2nd, Property Currently Used As 3 Residential Units Plus Unfinished Basement, Zoning Is Mixed Use, Commercial And Residential. Main Floor Owner Occupied, 2nd Floor Tenant Pays $750.00 Per Month Plus Hydro, 3rd Floor $800.00 Plus Hydro Both Are Month To Month, Roof Repaired In 2011, Furnace (Boiler) 1991, 3/4 Inches Supply Water Pipe, 3 Separate Hydro Metters, Potential Parking Space For Small Car At The Rear.
3 Stoves, 3 Fridges As Is Condition, Additional Electric Furnace For Main Floor Front Room.
Jesslyn @143
Love those words of wisdom from Westernman …. based on his spelling prowess, I think he gave away which camp he belongs in.
The scariest thing about this last post was Angela’s letter. Based on her stated income she does not even come close to debt servicing for her condo at 40% TDSR like most major banks. This is another major problem with our credit situation, banks and loan officers lying on consumer applications to push loans through, of course they get proof of income waived and everyone is happy….. or so they think.
This happens everyday at every bank/mortgage broker/car dealership, and trust me, I know because I’ve seen and done it myself.
That kind of stuff is gonna come back to bight all of us in the ass.
#136 Alex N Calgary on 07.31.12 at 3:29 pm
Classic. I love the part about Spain. It’s pure gold.
Devore from yesterday, sorry I was so short at the end of my message yesterday. I get short tempered and impatient when arguing with Garth about what money is.
I think he’s coming around. But rest assured, if I don’t sway him mother nature and the market will.
–
A haphazardly, boring and extraordinary day today, so much so that I reverted back to this classic to give me some inspiration. Not sure it worked, ‘tho.
*
In The Clouds A US$100 mln. flat; China Outsourcing the US, and 14:45 clip “Start listening at 8:40. The EU is saying exactly what I have been saying; by design the debt cannot ever be paid off.” wrh.com; Reasons why the US Fed fears a complete audit, which is why Ron Paul’s bill will never pass; The Smoking Gun on gold manipulation; Investing in Silver States support it; Oz – US Dad (Nostradamus Jr.) was right — the US is taking the west down with it, by letting the US$ sink; USPS about to default on payment; Mark Zuckerberg Easy come, easy go, and latest FB scandal; 9:21 clip Bernanke was advised to not bail out AIG, but did so anyway; 9:01 clip War — What Is It Good For? The arms mfgs.; EZone Warnings, or ‘owzaboud anudder WW to keep sheeple’s attention away? Insider Trading lawsuit Heads will roll; Collective Destruction.
*
The Global Elite Interesting who serves whom; Kaspersky “Good reason to use his products right there!” wrh.com; India With over half the country being blacked by the failure of the power grid, comes this; Expose Police corruption and be handsomely rewarded; Mitt Romney No one can screw up quite like he can,, and Ritt Momney “I don’t have to understand the Palestinians. I just have to bomb them and Israel will let me be President!” — Mitt for Brains (wrh.com); Things Go Better With Coke Not so; but Healthy Beer? Sacramento bids adieu to the TSA; Poland Welcoming Romney with a Ron Paul banner; Fracking Awful Scientists like it, ‘tho.
Turner nation #152
OUCH..who ever bought that is cash flow negative. With the amount of empty product of rentals and decrease in rental prices that person is looking at taking a bath. Plus prices in the GTA are falling. 15% drop in just two months alone. Funny how realtors like to cherry pick sales.
HD wrote:
““Your words are all in English and I understand what each of them mean, but put together, I really have no clue what you are trying to say.”
—-
If this is a confession, there may be room for increased awareness.
——————————————-
John,
Get over yourself. Your condescending tone is truly sickening.”
————-
Maybe you’re losing the thread…somebody posts “I have no clue what your saying”…and I wrote something funny responding to it. That’s it. Normally those kinds of things aren’t responded to….if a good debate is the focus.
What’s more interesting is the topic itself. “Blog dogs” is a fun thing in my opinion. A community. Not for the context you’re suggesting.
The Government of Canada launches online consultations on immigrant investment: http://tinyurl.com/c3jsbmz
Say bye bye to the Canada you once knew. Canada V2.0 is coming.
#158 John,
us blog dogs need more fun, so tell us again how the Harper Government had nothing to do with the creation or expansion of the RE bubble.
While much of the high costs of property in Vancouver is due to federal policy it’s particularly bad because the city doesn’t have enough housing within it’s borders making the suburbs the main living space for those under 50.
However, trying to be all “green” they have all kinds of ideas of how to stick another house in here or there through an architects competition. On global they were interviewing one of the young competitors that had a shortlisted idea (a rather foolish one to make the street even thinner and put in another single family house) that they were dialing in.
But the best part was at the end when they asked if he would live in a place like that. He responded approximately….
“Well, I am an architect, and my wife’s a teacher. Growing up getting those kinds of careers was the path to success. Nowadays it’s a path to living in Surrey.”
#140 Westernman on 07.31.12 at 4:36 pm jesslyn @# 120
Wow! You may take the monthly nieve prize… the strong, smart and ambitious have been preying on the weak, stupid and nieve since the beginning and it will always be so – it’s baked in the DNA – it’s natures way and in the end mother nature always has her way…
Like a pack of wolves to a cariboo calf that strays from the herd? A boar pig that eats his own young? That kind of mother’s nature? Or is this human beings we are talking about here… because, Westernman, it IS humans we are talking about here. Its a financial blog, not “natures way” and in this realistic context, I fail to see how preying on weak, stupid and naive people makes one “strong, smart and ambitious”. In the real world Westernman, it simply makes them corrupt (or mentally disordered).
(honestly, when I read this, I thought this person was capable of eating his own young presumably, to make himself “stronger”)
#112 John on 07.31.12 at 12:25 pm Tom from Mississauga wrote:
“Bag a buyer finally and then have them not get finanacing. I’m 60 days right now with 2 deals that came apart.”
WTF are you baggin’ Tom? I think we need to start over.
What the hell happened man. Does anyone see the Canadian identity problem? A-N-Y-O-N-E? No men. No women. No community. No value offering.
Just playing games and bagging buyers…..only to get gamed and bagged in another part of the ponzi.
If we’re all forced into doing that without a thought, what else are we doing….or do we even care anymore. What exactly is the message of the Canadian real estate bubble…really.
#120 jesslyn on 07.31.12 at 1:17 pm John #112
I agree.
It seems we have lost our civility to a large degree. Everyone is trying to make a buck off of someone else in any way possible. It is tiring and uninspiring to witness. But it seems like it is the name of the game these days. My hope is that with the inevitable collapse of this long drawn out housing bubble we could hopefully return to a time when people add value and care enough about other people as to not try and make money off another person’s ignorance or economic situation.
That would be worth the pain of this regrettable situation we are in.
#140 Westernman on 07.31.12 at 4:36 pm
Wow! You may take the monthly nieve prize… the strong, smart and ambitious have been preying on the weak, stupid and nieve since the beginning and it will always be so – it’s baked in the DNA – it’s natures way and in the end mother nature always has her way… – Westernman
Bo Xilai (#11): I notice none of the collapsing listings are anywhere near central Vancouver. They all fail my #1 Criterion: “The Bagel Factor”, i.e. how far do I have to walk for a decent bagel and a cup of real coffee?
@bigrider, post #133:
You’re forgetting something important. If equities drop 40%, like what happened in 2009, you only lose if you sell. If you hold on and don’t sell equities will come back up (like they did later in 2009) and you will break even and all the while still get dividends. Better yet, if you have some cash you BUY MORE equities when they are on sale as I did in late 2008 and early 2009. In November 2008 I saw something that summed it up quite well. A car went by on Adelaide Street in London towing a trailer with a big sign on it saying: Mutual funds 50 percent off! Call 519-(7 digit number). Oh, and about those trading costs, if you didn’t sell when equities were cheap you not only avoided a loss but actually saved on trading costs! just what is it about buy low, sell high that you don’t understand?
Another excellent post as always, Garth.
Deflation implies you pay more for the things you (really) NEED, and less for all the crap you always WANT. Toys and gizmos become cheaper by the dozen; food, energy, and everything essential kills you.
Your asset allocation and investment advice is right on! Love those hi div REITS!
Here in Missouri, we watch the unraveling of the Canadian Real Estate boom with a sad sense of deja vu. It seems that not only are we slow to learn from our own mistakes: we have even greater difficulty learning from the mistakes of others.
I hope Canada can recover from this faster than we are…
Re: #60 thinker on 07.30.12 at 11:29 pm
Nice advice!! She’ll likely lose about 75 grand in the next 2 to 3 years by not selling it today.
#111 truth hammer asks: why do we allow the scum of the earth to continue to use Canada as a dumping ground for criminals and money laundering? The answer is we are weak-willed wimps who allow a laxity in just about every government department, particularly .justice and immigration.
I’m not bright like Garth … never got my PhD in economics so, frankly, I’m a bit too dull to see clearly the brilliance of banks and governments BORROWING TRILLIONS MORE to extract themselves from a situation where accumulated debt has risen to dangerous levels.
SPENDING is THE problem for governments and derivatives are THE death knell for the banks and insurance companies but some of the comments made me laugh. Some of you just don’t get it yet. The TRILLIONS borrowed on top of TRILLION already owed simply delayed the inevitable. You refer to the recession of 2008 like it is over and we are in “recovery” mode. Any math genius who understands the concept of 2+2 SHOULD be able to figure the rest out. The FULL rec(Depr)ession was never ALLOWED to happen but as sure as water runs downhill (ie.nature wins) it will – not matter how many more trillions the smart folk running things add to the problem.
Garth, I thought taxpayers were on the hook for teachers pension plan shortfalls.
Am I wrong in this?
I hope I am.
Angie, Toronto is the capital of the world. Instead of searching for advise on the internets you should be focusing on getting a second condo for investment purposes. There are millions of immigrants coming to Toronto. Toronto is the new New York for shit sakes! And why in the world would you sell yours? Aren’t you scared of becoming a renter? That would totally suck. Like, you don’t see the toronto star’s Life section talking about renters or giving tips on how to decorate your rental pad. Who cares about a crash, or a bubble, or whatever it is that the media talks about. Do as everybody else is doing (duh!) and stay loyal to real estate. You’re doing great Angie, keep it up !! Never forget that you’re richer than you think… never.ever.
Daystar @ # 162
Despite your bleeding heart display of moral one upsmanship the facts remain – this is how it works in the real world as people operate under the same laws as the rest of the natural world – no matter how much you liberal crybabies weep and moan that it isn’t so – that is a fact, chump…