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Guy DeBorgore posted:
Yeah I image there's hope that the stricter leveraging ratios/better rainy day equity would lead to a slow deflation rather than a big crash but from things such as increasing debt ratios/Inflated home prices it looks like the US situation many ways. There's also the commodity market risk as well since the big energy exports are another big factor sustaining the bubble. etalian fucked around with this message at 18:08 on Jun 20, 2013 |
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Jun 20, 2013 18:05
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What's an example of an economic bubble deflating harmlessly?
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Jun 23, 2013 07:27
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A bit off-topic, but with mortgage brokers and their various representative bodies constantly bleating that we can all look forward to massive job haemorrhaging thanks to the Feds (in cutting down the worst excesses of CMHC etc), it raises a question in my mind: why, exactly, is 'mortgage broker' even a thing? A mortgage is, at least conceptually, an extremely simple instrument (I've never had one, and am in zero rush to, so correct me if I'm wrong). There are only a handful of institutions that one can enter into a mortgage with, and in each case these are parametrically simple (duration, rate, open/closed, variable/fixed, breakage fees). It seems like it should be a relatively simple matter to survey the offerings, rank by attractiveness, and apply down that list until you're accepted. Moreover, there are bank locations everywhere, and other than peddling overpriced mutual funds, I don't see why there wouldn't be ample capacity in their myriad locations to handle this work. What am I missing here? Why is there this [ostensibly well paid] layer of middle men in a market that, at least under casual analysis, ought not to need it? I'm genuinely curious. Hopefully the reason is actually interesting and not just "there's so much money, excess, and barriers-to-entry in finance land that no one's really bothered to question it)
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Jul 9, 2013 03:25
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Lexicon, you could broker your own mortgage however like all brokerage agreements, documentation and title due diligence must be conducted by a professional ( no matter how questionable those certifications are). Also, the conduct must be done at arms length and verified to be a legitimate 2-way transaction and simply not just pocket switching of assets for tax avoidance. Second, that broker arrangement and liability ontake done by the real estate corporation is necessary inorder to secure the lein on the property you want the mortgage on. Third, a mortgage while simple on the client end, (as a retail product it is designed to be stupidly simple to get into, borderlying on predatory; and in the case of Countrywide Financial was criminal) is a complex financial product to engineer and move off the balance sheet as a MBO or MBS security tranche. Your methodology of acquiring a mortgage is very simple, and most do that at the margin in both the US and Canada pre-2007. That is how marginal NINJA lenders generated fees. To satisfy your curiosity, and keep this brief: The property market in Canada is stupidly easy to launder money through, next to the UK, Vancouver and Toronto is one of the largest targets for hot money. This is often due to our fuzzy status with Russia/CIS, China and various tax-sandwich entities plus our ability to get cheap FIS US$ without significant capital controls due to NAFTA. Because of this, and limited checks on Anti-money-laundering when the money trace goes offshore, Canada has led to a CHMC firewall whereby every trace dollar put into the property market, and all asset classes is checked at the last point of sale.aka in housing: the bank doing the draft (and who will go after the broker should the money be dirty) or the bank doing the loan. Nobody wants a repeat of the 1960 Mafia invasion of Montreal, or the Russian invasion of Baker St. in The City. To respond to Cultural Imperial: - Irish biotech bubble of 1997-2004 - TSX Oilsands bubble of 2004-2010 - Shanghai stock exchange bubble of 2007-2012 - DAXX German reunification 1994-1997 If you catch a bubble fast enough, and like all things dirty; the bubble is identified, then the bubble usually self deflates. When bubbles get too big, then often times monetary easing is unable to slow down the speculation, that leads to a blowout (often an earnings miss that creates a resonance cascade like 1987 or 1999). For all other times, bubbles are pretty normal things, much like a pot of soup that just simmers along so long as the system is still liquid and there is still confidence in your experiment (soup or market structure, take your pick of analogy).
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Jul 9, 2013 03:54
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Hal_2005 posted:If you catch a bubble fast enough, and like all things dirty; the bubble is identified, then the bubble usually self deflates. When bubbles get too big, then often times monetary easing is unable to slow down the speculation, that leads to a blowout (often an earnings miss that creates a resonance cascade like 1987 or 1999). For all other times, bubbles are pretty normal things, much like a pot of soup that just simmers along so long as the system is still liquid and there is still confidence in your experiment (soup or market structure, take your pick of analogy). The big problem with real estate bubbles is the obvious cure of jacking up interest rates will bring on a decent recession bump and on the political side no one wants responsibility for wrecking something good. Especially since there are many parties happy in the bubble from real estate developers to the whole financial sector. Also for the Canadian housing bubble it's not just about nice interset rates and other things to encourage home ownership. A good amount of process is driven by big China bringing in hard cash through Canadian energy exports/big capital investments, it's similar to how Australia "survived" the 2009 crisis much better than many other places.
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Jul 9, 2013 04:05
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Hal, thanks for that explanation. Am I misreading what you said, or did you imply that a "broker" must be involved in *every* Canadian real estate transaction? I thought it was simply an alternative to sitting down with a few banks and picking the one with the best terms. I can understand the desire to avoid money laundering (spectacularly failed though it may be), but surely that's something that could be handled by an entire bank department pretty successfully?
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Jul 9, 2013 04:18
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etalian posted:The big problem with real estate bubbles is the obvious cure of jacking up interest rates will bring on a decent recession bump and on the political side no one wants responsibility for wrecking something good. Especially since there are many parties happy in the bubble from real estate developers to the whole financial sector. What ?. Not even going to touch on that. Wrong. Interest rate hikes are done to adjust asset allocation and curb inflation. Pre-Bernanake, interest rates are not remotely used as a primary tool for real estate. Real estate is a single sector that in a normal functioning economy like Canada is a marginal, retail grabbing headline industry like social media. Political class stakeholders play zero factor in setting, pricing or adjusting MBS yields, marking to market or setting mortgage issues. Even in China, where their 2008 indexed property returns have equaled 1,280% as of this Monday, interest rate policy has much bigger poo poo to deal with than retail homeloans. Ringfencing loans is the main (since Japan 1989) is the main method of adjusting or managing a balance sheet recession caused by home loan under performance. You may remember something called TALF or TARP ? or "bad bank" splits ? Real estate deals & REIT finance in general is the annoying brat, retail product de jour of finance; rarely a key concern to any Ibank or fed meeting, unless its the last & only growth industry standing... On Canada: No. Read this: http://www.theglobeandmail.com/globe-investor/inside-the-market/rosenberg-canadian-housing-is-okay/article612906/ http://vreaa.wordpress.com/2012/07/...ble-my-friends/ For disclosure, this Housing bubble thread is about 5-months old. Its an old trade, and the argument has pretty much been decided that Canadian REIT equities have downward corrected when the US 10y took off to 2.39; and we saw all TSX listed yield-lite equities take a 10% correction. You can argue against Dave R. if you really want to make hay about it. The simple elevator summary is that 1. Canadian home equity was not priced or packaged post ABCP into tranche products. Canadian MBS is done as A-rated, that is done on a fancy use of historical defaults in the area, not mean defaults nationwide as the Moody's MKV model calculates. 2. Canadian real estate as a share of the total GDP is beneign as both a part of personal savings & investment. 2a. If anything Canadian REITCO's are the key issue and concern, as seen by the inflated multiples being paid for spinouts (ie. Weston & Can Tire) 3. Australia's housing sector collapsed due to a collapse in Chinese mineral purchases. Canadian energy products are export and purchased for American demand. Different story, non-correlated causation. Canadian speculative money is primarily residing in Toronto, Montreal and Vancouver; mob or dirty money haven cities.
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Jul 9, 2013 04:28
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Lexicon posted:Hal, thanks for that explanation. Am I misreading what you said, or did you imply that a "broker" must be involved in *every* Canadian real estate transaction? I thought it was simply an alternative to sitting down with a few banks and picking the one with the best terms. There is a difference between a broker for your agency agreement to purchase a house and the investment associate at your local retail bank branch operating as a FDIC entity to issue, underwrite and originate a mortgage to you. In Canada, you need a broker or someone who is willing to identify that there is an asset, that can be purchased and a lein (the title can be held in escrow for the loan on the home equity). The bank then needs to independently identify that this thing does exist and it is possible to loan against it, and identify that you are the gaurantee party. The money laundering thing is sort of like one of those 0-rule firewalls. Canada's banking sector is literally only about 10,000 people big. Queen's University and Waterloo graduating classes each year are bigger than the whole thing. As such, the Bank of Canada and the department of Finance decided that since we only have 1 cheap router (to stick with this analogy) and have to packet filter the whole world, its best to just block everything except official screened data passing into the network behind the firewall. That is pretty much how AML & high-finance works in Canada; doesnt matter if its a 150,000 condo in Bloor St. or a Sino-JV with Athabasca Oil.
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Jul 9, 2013 04:35
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I just keep checking this thread for someone to give me permission to buy a condo in Victoria 
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Jul 9, 2013 04:44
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Baronjutter posted:I just keep checking this thread for someone to give me permission to buy a condo in Victoria If you want to know if your local property market is over/under inflated. There is a regional inflation index and real estate tracker StatCan publishes and BMO (and I think RBC?) Capital Markets publishes which will once a month go through the mean property prices, their index inflation and how over/under their transaction prices are for the area. As a rule, if you are paying more than 3x transaction value to tax assessed value, you are in a bubble. The average property should not go above 1.5x; when we were doing distressed due diligence in a large property MBS deal (that I was playing in), the average value paid for distressed Canadian property was about 0.75x. *(not a recommendation to buy/sell; just a friendly neighborhood goon) In english: - check your local MRLS, befriend or ask a local real state agent to pull the comparable transactions for you in the area you want ie. Victoria - check if the transaction price to tax base is greater or lower than the regional and national average - see if there is a mortgage arbitrage between the area you want to buy in, and somewhere else in canada; if there is, and you found it; chances are likely you are in a property bubble and or will be buying at the top. - if you cant be bothered to do #3, just check if last 6 years is a smooth local comps growth in price paid per square foot, or if it curves (either way) vs. the 10-y Fed adjusted to C$. if yes,hold off buying - if the local taxes have hiked at least 3 times in 3 years, you are in a hot area; and likely its overvalued. - if you are in an overvalued market, and you need to buy; be sure to finance at a rate-lock; so you are not screwed on the deflation and can rewrite or walk should the bubble collapse. stepping out of thread now, dont want to poo poo more. carry on.
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Jul 9, 2013 04:59
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I'm all for technology/network analogies, but that thing made zero sense to me. edit: also, FDIC has nothing to do with Canada so I'm not sure how that made its way in there. Lexicon fucked around with this message at 05:21 on Jul 9, 2013 |
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Jul 9, 2013 05:03
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Baronjutter posted:I just keep checking this thread for someone to give me permission to buy a condo in Victoria Jesus man. If you must own an illiquid, depreciating asset, why not buy a rare, old BMW or something?
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Jul 9, 2013 05:26
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Because I can't live in one of those or get any utility out of it
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Jul 9, 2013 05:30
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As far as newer condos go, you can't live in some of those, and soon won't be able to get much utility out of them either!
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Jul 9, 2013 10:15
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If you want a condo just buy one. Why do you need permission from anyone else. Once you and everyone else who wants a condo has bought one, then prices will come down. If you continue to hold out then you're part of the "problem", if you think high house prices are a problem to be solved.
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Jul 9, 2013 12:16
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hal_2005, you've just displaced fineable offence as my favorite poster.
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Jul 11, 2013 01:26
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Man I wish I understood half the words hal_2005 posted or could find this "regional inflation index" on statscan or bmo website. I can find lots of info on its methodology and sources but not the actual Victoria info. I guess time to befriend someone from the financial class to decode this poo poo and tell me to buy or keep waiting. I don't need "permission" but I need guidance. Just like I'm not trained or experienced in stock trading so I let a mutual fund manager take care of that stuff and advise, I'm also not trained or experienced in crazy-as-gently caress housing bubble economics and need someone to properly advise.
Baronjutter fucked around with this message at 05:24 on Jul 11, 2013 |
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Jul 11, 2013 05:21
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Baronjutter posted:Man I wish I understood half the words hal_2005 posted or could find this "regional inflation index" on statscan or bmo website. I can find lots of info on its methodology and sources but not the actual Victoria info. I guess time to befriend someone from the financial class to decode this poo poo and tell me to buy or keep waiting. I don't need "permission" but I need guidance. Just like I'm not trained or experienced in stock trading so I let a mutual fund manager take care of that stuff and advise, I'm also not trained or experienced in crazy-as-gently caress housing bubble economics and need someone to properly advise. Cansim II at CHASS should be available on google. Look for this data series, I dont have access to my bloomberg at home right now so as such I cant really pull the exact number but this is the public website with the "all of Canada" index published http://www.statcan.gc.ca/daily-quotidien/130613/dq130613b-eng.htm That gives a general outlook if you want to see the general overview on what all of canadian real estate is doing. All real estate brokers in Canada usually publish some sort of stats on it for retail consumption; I saw on the elevator this morning that ReMax put out a cross Canada book this week on home equity and regional trends. Just call up the regional remax guy and see if they have the study. To be honest I would call up a local Victoria Remax or Lepage guy, see if you can get them to do some basic overview work for you. A starving real estate agent will work and do wonders for you even before your first showing. After you have made best friends with a 20-something blonde girl who drives a car she cant afford, go to city hall and check out the local tax markups for your area you want to buy in. Check to see if the rate increase, and the home transactions are going up faster, and turning over in you area than the regional and global growth average. Hint: if its more than 2%/year increase in total home sales less new build sales, the area is likely experiencing alot of demand for houses and you may be buying at the top (given market conditions). The BMO Capital Markets pieces are available to retail investors (gotta open an account, or talk to a broker ---> you need to talk to a broker anyways to start up a home account, so midas well get chummy with one of the rubber stamp pumpers). Just ask them for either TD/BMO/RBC/Scotia (CIBC is meh, but thats CIBC for you <3.) home equity outlook. There is an analyst in Toronto who's sole life and worth of living is to track and monitor Victoria housing. Get that poo poo for free by just offering them your buiz. Then ask for the bank's economic forecasts for short term and long term interest rates. If the associate or business rep blank looks you, tell him to call over his branch manager and ask him. Finally, ask them for a outlook or if they have any information on local real estate non-performance loan data or reports. This is important because it actually tells you how many people are buying on leverage in your area, and how many are just bankrupting on their real estate gambling addictions. poo poo's kinda important, ask the Chinese right now why that shits important to know (or look at their stock market chart this month, whatev). As for how to help ? Read below: http://www.servicecanada.gc.ca/eng/lifeevents/buying_a_home.shtml That's like the basic poo poo of WTF do i do before I know to buy (you prob know that) Second, go to a bank and check out a 5 year, a 10 year, a 25 year and a 30 year mortgage rate. Compare that curve to the US 10-year. Remember to adjust for annual compounding interest (vs. the 2period quote) Now google 'bond curves'. Read for 10 min. WTF those curves mean to the world. You will thank me for that someday, likely when you are rate locking. If you see the curve have a tail, or a wiggle; chances are the main street bank will hike their rates: Which is exactly what RBC did 10 days ago in Alberta (I think ? -- Stampede hangover, sorry) when our housing numbers came out. Ask the advisor at a bank to run a credit and offer quote for you. They will do that for free most of the time. If the guy does not suck, should be quick to get you a quote and cost. Run spreadsheet to see if 1.) You believe rates will go up based upon looking at your fav. 5 local banks & credit union junkets. 2.) Look at the local reality reports, is everyone and their cousin buying a condo now ? Do you see a big yo-yo and whipsaw in the buying ? 2a) Is the area on a buying spree, is the local gov. building bridges to nowhere and are the tax assessments doing the 1.5-year adjustment to pay for their new poo poo ? 3.) How long is the average property in that area you want to buy been held for ? 4 months, a year ? 20 years ? 4.) Check the rates. Are the banks making alot of spread (the difference between their rates on mortgages and the US 10-year?) or a little ? If a little, why would they be so desperate to get in on the action ?? 5.) Take all that fancy data (it should honestly take you like maybe 2 weekends at most to do all this work; like its not rocket science) and give it a look at. If you think the market is being defined by local growth, and the prices do not move very much, example April 2011 and August 2008, then go for it. Else if: do not buy. Google: "Federal Reserve Tapering Impact on House Prices" The google is my "safe harbour" rear end covering advisory. (see comment above on that rate locking).
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Jul 11, 2013 08:32
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Or alternatively, spend half an hour studying the relevant price-to-rents ratio in the area, and very likely conclude it would be insanity to buy.
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Jul 11, 2013 12:28
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That's a very convincing Beautiful Mind impression Hal.
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Jul 11, 2013 15:43
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I've looked at the rent/buy figures for comparable rentals to units I want to buy and they're often quite a bit more expensive to rent, or at best about the same. I'm not wanting to number crunch like some D&D player coming up with the ultimate min/maxed character trying to see if I'll come out slightly ahead financially (and only financially) over the next 10 years. I more just want to avoid it suddenly losing half its value and being underwater. If it holds it value or only goes down a little I'd be fine with that. http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0 This calculator tells me buying is better after 6 years.
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Jul 11, 2013 15:51
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Baronjutter posted:I've looked at the rent/buy figures for comparable rentals to units I want to buy and they're often quite a bit more expensive to rent, or at best about the same. Can you post your parameters, out of curiosity? The only way I can imagine that's true is if you're ludicrously overpaying for rent right now, or you're buying something unfathomably cheap. For my own residence ($1600 rent, $500k price), it essentially never makes sense to buy rather than rent (and that's even assuming a 3.5% mortgage rate throughout!). This thread ain't called the Canadian Housing Bubble thread for nothing.
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Jul 11, 2013 16:19
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Lexicon posted:Or alternatively, spend half an hour studying the relevant price-to-rents ratio in the area, and very likely conclude it would be insanity to buy. It all seems very impressive and logical... if you predicate your departure point on the idea that banks and mortgage brokers know what the gently caress they're doing, and that it's not a GIGO information system they're using. Ask Lehman investors about that, if you can find one who didn't jump out of a building on 09/15/2008.
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Jul 11, 2013 16:45
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Fine-able Offense posted:It all seems very impressive and logical... if you predicate your departure point on the idea that banks and mortgage brokers know what the gently caress they're doing, and that it's not a GIGO information system they're using. It seems like this response makes more sense as applied to the dude above with his bond curves and so on?  edit: actually, yes, pretty sure that's what you were referring to. Indeed.
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Jul 11, 2013 17:03
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I find the NYTimes calculator to be a total crapshoot. The rent/buy threshold can be either 4-5 years or 20 inputting any number of realistic rent, home cost and interest rates for here in Victoria. Once you go into the 3 bedroom range though, it's hard to get away with buying not being worth it after 5-6 years, even using conservative rent numbers and generous home price and mortgage rates.
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Jul 11, 2013 17:37
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Looking for a 2br unit close to town in a not-poo poo neighbourhood in a solid building with in-suite laundry. A quiet building with no idiot partying 20-somethings or drunks leaving beer cans and cigaret butts all over the common spaces. Also looking for a unit with an enclosed or enclosable balcony to turn into a mini-office/sunroom sort of zone. Preferably in a building with % based rental restrictions (all the condos we looked at that didn't have rental restrictions ended up being poo poo-shows unless very high-end) and a good but not authoritarian council that's very on top of upkeep and contingency funds. I've found some good candidates in the 250k range while it's VERY hard to find rentals with in-suite laundry for under 1200-1500. Searching for rentals is pretty hard too since most of them don't participate in any sort of online listing/mapping system unlike MLS which seems to have everything. I'm also looking for something I can reno, flip some doors around, maybe even move some walls if need-be. I love doing projects so my dream condo is a really lovely dated unit that needs work in a nice building with good bones. Also my car died so we finally have to get a new one, there goes 20k and probably another year of saving up. Probably for the best though as this FORCES us to wait another year. At least I'm a hell of a lot more confident in the "investment" in a Honda Fit than a stupid condo. Baronjutter fucked around with this message at 18:11 on Jul 11, 2013 |
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Jul 11, 2013 18:03
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Those seem like pretty tall orders for a condo, but I'm not that up on the market.
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Jul 11, 2013 18:38
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rrrrrrrrrrrt posted:Those seem like pretty tall orders for a condo, but I'm not that up on the market. There isn't a market in Canada* where a price/rent analysis doesn't spit out a big fat fuckin' "no buy", so this is all angels on the head of a pin level stuff. Also, housing stock in Canada has been skewed towards the demands of our current massive speculative bubble for like 5-8 years, so naturally if you have actual normal human requirements for your housing, you won't find anything good that's a new build. Like, duh. 350 to 500 square foot condos are like half the stock coming online in Canada right now (thanks to Toronto and Vancouver largely, but no exclusively). If you really want to buy that condo, just loving do it already so the rest of us can piss down the well. Either you are financially literate enough to recognize what a terrible idea this is, and feel it in your gut (and are therefore not tempted to even CONSIDER it for another two years), or you're not. No amount of messageboard advice is going to change that. *I think Fort Mac might still be the exception to this rule, but if you want to buy property in a resource boomtown on that basis by all means go juggle those grenades.
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Jul 11, 2013 20:16
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Oh I've found and looked at quite a few, but we didn't pull the trigger because everyone says it's a bubble and I don't want to buy a 250k condo today that will be worth 150k tomorrow. I've got no problem finding acceptable units and over the last year have noticed a slight downward trend in the prices, but only very slight. I keep waiting for a "this is it, this is the bubble popping" moment rather than the constant "maybe we already had the soft landing" or "Victoria is different!" I keep hearing. But this new car thing is great as we'll no longer have the money to buy a condo so we'll HAVE to wait another year. Well great for me anyways. I love the current situation I'm in. Tiny but comfortable basement suite in a house in one of the nicest neighbourhoods in the city for like $300, which lets us put away a ton into savings every month. If we go rent, well there goes any ability to really save and we'll either have to pay a fortune to stay in the same area and good luck getting in-suite laundry and hobby space. Here's a question though: what's the big harm if say you buy a condo for 200k and after a few years it's worth 150k ? On paper you've lost 50k but doesn't that only come into play if you sell? If you don't really intend on selling and are looking for a "forever home" what's the harm in a price drop, other than the hindsight regret that you could have bought it cheaper if you waited? Or does the bank do something crazy like demand the difference ? If I rent somewhere for 10 years that's like 150,000 down the toilet (or way more if I want more than a crumbling poo poo box). If I buy for 250k and after ten years it's only worth 150k that's only 100k down the toilet. I'm not at all financially literate as I find most of the concepts surrounding these issues incredibly non-intuitive and always hope I can finally figure this poo poo out. Baronjutter fucked around with this message at 20:35 on Jul 11, 2013 |
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Jul 11, 2013 20:16
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Are you really going to call a 500 sqft condo a 'forever home'? I'm not trying to be a dick but if you're already this house horny, I bet you money you and your housefrau will be trying to upgrade in 5-10 years. That's why you don't buy at a market peak. edit: this is also an exercise in risk management. There's absolutely nothing wrong with buying a house for more than it will be worth in 10-20 years *IF* you think you're never going to be forced to sell due to extenuating circumstances. And therein lies the 'management' in risk management. If you or your wife find better jobs else where, or worse, can't stand the ones you work now, will you be trapped into selling your home at a loss in favour of better future career prospects? What if your condo building is hit with a massive assessment? Are you prepared to take out an extra 50k in loans to pay it? what if what if what if...that's the problem. How much do you want to weaken your current financial position for the sake of something utterly stupid like 'pride of ownership'? edit 2: currently with my salary and downpayment I qualify for something retarded like a 1.5 million mortgage. Such is my financial situation that technically I have the ability to buy gregor robertson's loving house. I work for an american tech company at an annual salary that I thank my lucky stars/god/allah/khaleesi for. By no means do I take this for granted because I know that I am not sufficiently well capitalized to mitigate any risk to my income *IF* I buy mayor moonbeam's loving house. My parents will not come running to bail my rear end out if I get laid off/injured/fired. I only wish that more idiot vancouverites could see beyond the tips of their greedy noses and cease to mortgage themselves to hell. On the other hand, gently caress em. Keep buying houses. It's just going to make the market that much sweeter when it collapses. namaste friends fucked around with this message at 21:15 on Jul 11, 2013 |
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Jul 11, 2013 21:04
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 So many faulty assumptions in one post (though you did have the good graces to admit you're not financially literate - that need not be a permanent state of affairs though).For one thing, you cannot simply cannot take the sticker price of $250k, muse on it selling for $150k down the line, and call that a $100k "loss". It doesn't work like that. For one thing, the dollars under discussion change due to inflation. And it is very far from free to have that financing for the period. Financing is one of several substantial carrying costs during the period that you own. There's also the opportunity cost of having your own capital tied up. Another thing: why is money spent on rent "down the toilet"? Why is it only wasteful in your eyes to rent space, but not to rent cash (as you'd be doing with a big mortgage)?
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Jul 11, 2013 21:18
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Baronjutter posted:Here's a question though: what's the big harm if say you buy a condo for 200k and after a few years it's worth 150k ? On paper you've lost 50k but doesn't that only come into play if you sell? If you don't really intend on selling and are looking for a "forever home" what's the harm in a price drop, other than the hindsight regret that you could have bought it cheaper if you waited? Or does the bank do something crazy like demand the difference ? There are a ton of problems with an underwater mortgage. It's not particularly dire if you can still make mortgage payments and aren't planning to sell, but even then it can be trouble. As far as I know you won't be able to remortgage or refinance the place (which you shouldn't be doing anyway, but it's an option if you're hit with, say, a huge assessment). There's also the distinct possibility that whatever market conditions caused the price of your house to drop 30-40% also impacts your earning power. Cultural Imperial posted:Are you really going to call a 500 sqft condo a 'forever home'? That's why I don't even look at condos these days. I know I want kids, most likely at least two, and I KNOW I don't want to raise them in a condo. What would be the point? Fine-able Offense posted:There isn't a market in Canada* where a price/rent analysis doesn't spit out a big fat fuckin' "no buy", so this is all angels on the head of a pin level stuff. Genuinely curious, is there a better rent vs. buy calculator than the NYT one? When I play around with it, even with very, very conservative numbers I can get the break-even point to be around 5 years.
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Jul 11, 2013 21:22
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rrrrrrrrrrrt posted:Genuinely curious, is there a better rent vs. buy calculator than the NYT one? When I play around with it, even with very, very conservative numbers I can get the break-even point to be around 5 years. The Rent vs. Buy equation assumes stable equity appreciation, pretty amusing to see people desperate to buy a overpriced condo even after seeing the USA real estate crash horror stories. From measurements such as home ownership and price inflation the bubble has even surpassed the US numbers.
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Jul 11, 2013 21:27
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rrrrrrrrrrrt posted:Genuinely curious, is there a better rent vs. buy calculator than the NYT one? When I play around with it, even with very, very conservative numbers I can get the break-even point to be around 5 years. That calculator doesn't take into account a lot of stuff, the biggest being that it auto-calculates mortgage deductability from the carrying costs, which drops the cost of ownership considerably. It also assumes a marginal tax rate of 20% and a "lost" RoI on the downpayment of only 4%. You're better off spreadsheeting it yourself in Excel and seeing how close the number is to the 15-20x sweet spot for price to rent. Edit: it also leaves out the PTT and GST, for instance. Seriously, do the costs yourself, it's flat out impossible to get them to meet. Franks Happy Place fucked around with this message at 21:33 on Jul 11, 2013 |
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Jul 11, 2013 21:31
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That's another problem I have, I have a ton of known unknowns, but also a lot of unknown unknowns. People say to run the numbers but even when I do I leave out huge important things because I don't even know what I don't know. Plus there's all the known unknowns I don't know, like I have no clue about insurance costs and closing fees and all the little surprises they spring on you just for the transaction of buying a place, let alone all the hidden ongoing costs of owning. I like to go into these sorts of situation fully aware, I'm the type of person that over-researches every purchase I make and I'm "frugal" as hell. But with real-estate it's so loving complex, and everyone who has the information you need also has a huge agenda. I'm terrified I'll do all my research, consult multiple experts, finally buy something and then "OH you gotta pay this extra 5,000 charge up front because *finance class double speak* you should have known that before buying, idiot." And I'm not looking for 500sqft, I'm looking for about 1000-1200. A 2br. 2br, in-suite laundry, decent building. Pretty simple criteria and I'd be more or less set for life after that. I'm a bit of a hobbit, I just want a simple little forever-home where I can stay worry-free that I'll ever have to move or go on a terrible "adventure". I know buying will end up being more expensive than renting, but it's also a lot nicer than renting. The question I have is how much more expensive/risky it will be so I can correctly gauge if it's worth it. I don't care so much about the "pride of ownership", it's about actual real quality issues that I just can't find in apartments without getting into crazy-luxury rentals for rich bastards's who's 80k a year job have brought them into town for a year. It's like if someone said you can either have a Ford or a Honda the answer is "depends on the price". Yes, I'll pay more for the quality of the Honda but only up to a point. If the Ford is 17k and the Honda is 20k it's no contest for the Honda. If the Ford is $10k and the Honda is 20k then I'd still probably want the honda but have to make sure this is something I really want because I hate the Ford so much and am willing to pay more for the Honda. If the Ford is 10k and the Honda is 100k, well then no matter how much I want the Honda that price is just stupid-inflated. Basically I need to figure out is how much, long term, the difference between renting and owning and if that difference is worth it for the advantages of ownership. I'm sure everyone here puts a different value on that, some people probably don't even care at all. Heck people have different definitions of long term. I've moved once in my entire life and if I only had to move 1-2 more times I'd be a happy man. Other people seem to be happy to move every few years for their career as they bounce around the country or world chasing the almighty dollar. And the other key question is: when is this bubble going to pop and by how much? I'm fine waiting but I wish I could see a light at the end of the tunnel. I know no one knows for sure, but even some rough estimates would be nice along with the reasons for those estimates. Yes I read the thread... I read it quite often and find my self going back to old posts when I try to research things. I'm just VERY financially illiterate and I usually don't even know what half the terms mean, let alone how to put it all together and understand the conclusions. Baronjutter fucked around with this message at 22:10 on Jul 11, 2013 |
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Jul 11, 2013 22:00
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If you knew when the bubble were going to pop, you'd be john motherfucking paulson.
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Jul 11, 2013 22:13
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iv46vi posted:That's a very convincing Beautiful Mind impression Hal. I feel that's a backhanded complement but I'll take it anyways. I didn't even charge him 2 & 20.
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Jul 12, 2013 04:18
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Lexicon posted:Can you post your parameters, out of curiosity? The only way I can imagine that's true is if you're ludicrously overpaying for rent right now, or you're buying something unfathomably cheap. For my own residence ($1600 rent, $500k price), it essentially never makes sense to buy rather than rent (and that's even assuming a 3.5% mortgage rate throughout!). The APR rates are quoted differently in the US and in Canada. You will need to adjust for that. My suggestion would be to check investopedia on how to adjust annuity rates or download one of the apps that can help you do rates. CHMA I think has a link on their homepage to a java app.
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Jul 12, 2013 04:20
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Hal_2005 posted:I feel that's a backhanded complement but I'll take it anyways. I didn't even charge him 2 & 20. It wasn't. Basically your posts look like this: 
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Jul 12, 2013 04:58
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Baronjutter posted:And the other key question is: when is this bubble going to pop and by how much? I'm fine waiting but I wish I could see a light at the end of the tunnel. I know no one knows for sure, but even some rough estimates would be nice along with the reasons for those estimates. Yes I read the thread... I read it quite often and find my self going back to old posts when I try to research things. I'm just VERY financially illiterate and I usually don't even know what half the terms mean, let alone how to put it all together and understand the conclusions. Soon-ish, maybe. Whatever is happening, it is happening like right now because even the most diehard beliebers are now acknowledging that prices have, at the very least, stagnated. Also inventory being record-high. All of this is quite recent, roughly speaking having started at the end of 2012 depending on who you believe and has only really been acknowledged uncontroversially in the past few months. You could wait, I dunno, another two years, maybe even just one? If nothing changes in that time I would maybe just maybe be inclined to believe all this overly optimistic talk of a smooth bubble deflation in the form of nominal price stagnation being slowly reduced by inflation. If. If the wheels come off the bus instead then, well, huzzah, we can all buy houses, assuming we still have jobs to do so with (we probably won't). The only reason you'd buy now is if you actually believe this is some sort of bear trap. If that doesn't strike you as immediately farcical, consider this: What the gently caress do you even lose walking into said "trap" and not buying? Not being able to afford an apartment worth living in vs really not being able to afford an apartment worth living in?
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Jul 12, 2013 05:11
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