Canada Housing/Debt: Trust me, I'm a landlord.

The Something Awful Forums > Discussion > Debate & Discussion > Canada Housing/Debt: Trust me, I'm a landlord.

Rime: Nov 2, 2011; by Games Forum

tagesschau posted:

Three posts later...

24% of Canadians see their homes as main source of retirement income

I can just imagine the shitstorm coming from 10 Million units hitting the market over the next 15 years. A lot of people are going to discover their parents were utterly retarded and are now completely impoverished, leaving the children with no inheritance and holding the bag for keeping their parents from living on the street. :allears:

# ? Feb 19, 2014 19:18

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# ? May 12, 2024 22:13

peter banana: Sep 2, 2008; Feminism is a socialist, anti-family, political movement that encourages women to leave their husbands, kill their children, practice witchcraft, destroy capitalism and become lesbians.

Yeah, speaking of which, can you get stuck with a relative's consumer debt if she dies?

# ? Feb 19, 2014 20:15

Baronjutter: Dec 31, 2007; "Tiny Trains"

Rime posted:

I can just imagine the shitstorm coming from 10 Million units hitting the market over the next 15 years. A lot of people are going to discover their parents were utterly retarded and are now completely impoverished, leaving the children with no inheritance and holding the bag for keeping their parents from living on the street.

My wife is absolutely terrified that our "inheritance" is going to be inheriting 2 old people with no retirement plan other than their house.

Baronjutter fucked around with this message at 20:17 on Feb 19, 2014

# ? Feb 19, 2014 20:15

Jadus: Sep 11, 2003

It was recommended I post this here instead of BFC:

I have a question about downpayment (in Canada if that matters).

I'm about to put an offer on a house. If I consider the scenarios between putting 20k down and 40k down on it, there isn't a very large difference in monthly cost and over 25 year amortization the lower downpayment comes with a total greater cost of $11k.

However if I invest the remaining 20k (instead of having the 40k downpayment) I would be relatively secure in earning more than 11k with that amount invested somewhere, and it gives me additional flexibility/liquidity if I ever needed it.

What part of this picture am I missing in that it seems better to have a smaller downpayment?

# ? Feb 19, 2014 21:13

namaste friends: Sep 18, 2004; by Smythe

I think the answer depends on how confident you are really going to see these hypothetical returns. If your projections are wrong, you lose money. If the housing market tanks, you lose money and you are underwater.

# ? Feb 19, 2014 21:18

JawKnee: Mar 24, 2007; You'll take the ride to leave this town along that yellow line

Rime posted:

I can just imagine the shitstorm coming from 10 Million units hitting the market over the next 15 years. A lot of people are going to discover their parents were utterly retarded and are now completely impoverished, leaving the children with no inheritance and holding the bag for keeping their parents from living on the street.

A very real worry for a lot of people, but apparently not for you?

# ? Feb 19, 2014 21:18

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

Jadus posted:

It was recommended I post this here instead of BFC:

I have a question about downpayment (in Canada if that matters).

I'm about to put an offer on a house. If I consider the scenarios between putting 20k down and 40k down on it, there isn't a very large difference in monthly cost and over 25 year amortization the lower downpayment comes with a total greater cost of $11k.

However if I invest the remaining 20k (instead of having the 40k downpayment) I would be relatively secure in earning more than 11k with that amount invested somewhere, and it gives me additional flexibility/liquidity if I ever needed it.

What part of this picture am I missing in that it seems better to have a smaller downpayment?

(There is a Canadian Finance] thread if you want to discuss this in detail)

Quite apart from the housing bubble implications, you're possibly losing out on some good tax shelter usage if you put as much cash as possible into the downpayment. How's your TFSA? And if you have a high marginal tax rate - how's your RRSP?

# ? Feb 19, 2014 21:27

Jadus: Sep 11, 2003

Lexicon posted:

(There is a Canadian Finance] thread if you want to discuss this in detail)

Quite apart from the housing bubble implications, you're possibly losing out on some good tax shelter usage if you put as much cash as possible into the downpayment. How's your TFSA? And if you have a high marginal tax rate - how's your RRSP?

I'm not too worried about the bubble/market as this is a house to live in for decades, not a stepping stone or investment. My TSFA is pretty close to maxxed but my wife has yet to start one so that is where we'd be looking at placing our cash rather than a down payment. My RRSP is collecting 6% of my wage (4% from employer) but has room for lump sum payments if necessary.

# ? Feb 19, 2014 21:38

blah_blah: Apr 15, 2006

Lexicon posted:

Quite apart from the housing bubble implications, you're possibly losing out on some good tax shelter usage if you put as much cash as possible into the downpayment.

Capital gains from the sale of a primary residence are not taxed, who needs a TFSA?

# ? Feb 19, 2014 21:38

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

blah_blah posted:

Capital gains from the sale of a primary residence are not taxed, who needs a TFSA?

dear god I hope you are saying this in jest

# ? Feb 19, 2014 22:03

Kalenn Istarion: Nov 2, 2012; Maybe Senpai will finally notice me now that I've dropped :fivebux: on this snazzy av

HipGnosis posted:

Yeah, speaking of which, can you get stuck with a relative's consumer debt if she dies?

This probably fits in the Canadian finance thread better, but unless you're somehow a co-creditor on the loans you aren't directly liable. If they have other assets in their estate then depending on the terms of the loan these could be seized and sold, potentially for well less than fair value, meaning you would be indirectly out of pocket.

Disclaimer: I am not an estate lawyer and if this is a real concern for you you should probably talk to one.

# ? Feb 19, 2014 22:40

Baronjutter: Dec 31, 2007; "Tiny Trains"

There was an E/N thread about that a while ago, some dude was flipping out over inheriting his parents underwater house and a bunch of debt. Basically if you don't want the debt you just say "no thanks" to the inheritance and the creditors get what ever assets are in debt for them to sell off like in a bankruptcy. Sometimes scummy companies and banks will try to push it on you or make you feel like you have to but you just tell them to gently caress off.

I seem to remember the bank or someone telling him something like "you have to take the house and pay it off to finish what your parents started otherwise it would dishonour their memory!"

Baronjutter fucked around with this message at 22:47 on Feb 19, 2014

# ? Feb 19, 2014 22:42

ocrumsprug: Sep 23, 2010; by LITERALLY AN ADMIN

JawKnee posted:

A very real worry for a lot of people, but apparently not for you?

This particular issue has such wide ranging social implications it is really hard to not be fatalistic about it. I have been putting off finding out how screwed my parents (and by extension myself) actually are. Partially because they are pretty private about their finances but also because there really isn't much I could realistically do for them anyways, if they were broke.

I don't blame anyone for blackly joking that their plan for looking after their parents in retirement is to find the nearest iceberg.

The real irony is that our parents also ensured that there will be no icebergs left to push them out to sea on.

# ? Feb 19, 2014 22:49

Kalenn Istarion: Nov 2, 2012; Maybe Senpai will finally notice me now that I've dropped :fivebux: on this snazzy av

There will however be lots of wood for raft-making once they have to tear down all the '60s-era wood-frame condos.

# ? Feb 19, 2014 23:39

namaste friends: Sep 18, 2004; by Smythe

Check out @recharts's Tweet: https://twitter.com/recharts/status/436266269328019456

Check out @recharts's Tweet: https://twitter.com/recharts/status/436270802296528896

A gently caress load of condos listed today in Toronto.

# ? Feb 19, 2014 23:56

namaste friends: Sep 18, 2004; by Smythe

The term for people counting on their inheritance is 'waiter'.

http://www.thefamilywar.com/media/orangecounty_register_021027.htm

# ? Feb 20, 2014 00:00

blah_blah: Apr 15, 2006

Lexicon posted:

dear god I hope you are saying this in jest

Is it possible to distinguish between trolling and realtor propaganda at this point?

# ? Feb 20, 2014 04:41

Lexicon: Jul 29, 2003; I had a beer with Stephen Harper once and now I like him.

blah_blah posted:

Is it possible to distinguish between trolling and realtor propaganda at this point?

Gets harder with every passing day

It doesn't help that the realtors basically are trolling now.

# ? Feb 20, 2014 05:04

Null Pointer: May 20, 2004; Oh no!

Cultural Imperial posted:

The term for people counting on their inheritance is 'waiter'.

Conveniently, if you pronounce it with an alveolar flap it becomes the term for people counting on real estate appreciation.

# ? Feb 20, 2014 07:15

tagesschau: Sep 1, 2006; Guten Abend, meine Damen und Herren.

JawKnee posted:

A very real worry for a lot of people, but apparently not for you?

I'm pretty sure my in-laws aren't relying on their house to fund their retirement. My parents don't live in Canada. There will be major macroeconomic implications, of course, but I don't see how I will be directly screwed by anyone near me counting on a million dollars that never really existed to begin with.

# ? Feb 20, 2014 07:20

JawKnee: Mar 24, 2007; You'll take the ride to leave this town along that yellow line

tagesschau posted:

I'm pretty sure my in-laws aren't relying on their house to fund their retirement. My parents don't live in Canada. There will be major macroeconomic implications, of course, but I don't see how I will be directly screwed by anyone near me counting on a million dollars that never really existed to begin with.

Not everyone's house is worth 1 million. Some folks who've owned their homes for years and planned to sell shortly before or after retirement and live on whatever they got are going to be severely impacted by this, quite aside from other implications of a potential crash. Assuming that no equity in your home ever existed to begin with is foolish, though I do think that planning for the future based on what housing prices are now is also foolish, but to say that the wealth present in your home never really existed is silly.

# ? Feb 20, 2014 07:24

tagesschau: Sep 1, 2006; Guten Abend, meine Damen und Herren.

JawKnee posted:

Not everyone's house is worth 1 million. Some folks who've owned their homes for years and planned to sell shortly before or after retirement and live on whatever they got are going to be severely impacted by this, quite aside from other implications of a potential crash. Assuming that no equity in your home ever existed to begin with is foolish, though I do think that planning for the future based on what housing prices are now is also foolish, but to say that the wealth present in your home never really existed is silly.

I guess it would be better to phrase it as $300,000 that never existed if the house is nominally worth $1 million, but it's not silly to say that the extra padding in the retirement fund will not be there, and the value never was there, if these people go en masse to sell their homes upon retirement. Everyone's home is worth something, but it's totally fair to say that eye-popping, bubble-induced valuations are not representative of any real value that was ever present in these homes.

# ? Feb 20, 2014 08:01

namaste friends: Sep 18, 2004; by Smythe

quote:

Here is a summary of PIMCO’s case against the Canadian housing market:

Valuations are stretched;
Mortgage credit tightening is helping to cool activity; and
The cost of capital for Canadian banks will increase this year, and these costs will be passed along to consumers.
PIMCO sees three necessary preconditions for a crash (a much more severe and abrupt correction) in the housing market:

A spike in interest rates;
An increase in unemployment; and
A reduction in the supply of mortgage credit.
Devlin does not think any of these conditions will be met, at least not in 2014.

https://businessincanada.com/2014/01/29/pimco-canada-housing-market-correction-no-crash-2014/

# ? Feb 20, 2014 11:01

namaste friends: Sep 18, 2004; by Smythe

http://m.theglobeandmail.com/globe-investor/personal-finance/mortgages/in-2024-all-homes-will-be-dream-homes/article16246770/?service=mobile

quote:

How Canada’s housing market will look in 2024: If you’re wealthy, it’s healthy.

If house prices rise from current levels by an average annual rate of 2.5 per cent over the next 10 years, the average Canadian home will cost half a million dollars. By my rough estimate, that would be a realistic purchase only for families with pretax income of at least $125,000 or so. Just for context, the most recent Statistics Canada numbers put the median total family income at $72,240 in 2011.

The “housing market is fine” people talk about immigration, low inventories and the fact they’re not building any more houses in some urban downtowns. But questions about basic affordability undermine all of these supports for the market.

Current affordability levels are a problem documented in a previous column that you can read here. Another way to look at this issue is to imagine what might happen if prices keep rising at recent levels.

House prices have risen in the area of 5.5 per cent annually on average over the past 17 years, almost exactly what the Canadian Real Estate Association has estimated for 2013. Looking ahead to the end of this year, CREA sees a gain of 2.5 per cent on a Canada-wide basis. Let’s apply that number on an average annual basis to sketch out what the housing market might look like 10 years from now across Canada and in five major markets from coast to coast.

The average price across Canada would rise to $500,622, which means the minimum 5-per-cent down payment would cost you $25,031. Now, for your mortgage costs. If you were to buy that average Canadian house in 10 years’ time, your mortgage rate would almost certainly be somewhat higher than it is today. Let’s conservatively project a discounted five-year fixed rate of 4.5 per cent, which compares to 3.5 per cent today, and would produce monthly payments of $2,709 on the average-priced Canadian house.

To qualify for a mortgage, the total of your mortgage, property tax and heating costs must be no more than 32 per cent of your gross household income. If we estimate costs of $4,000 for property taxes and $1,800 for heating today and increase them by 2.5 per cent annually over the next 10 years, we can project that a household income of $124,775 would be needed to support the average-priced Canadian house. That’s up from $89,713 today.

Might annual wage increases bridge us from today’s income levels to where we need to be a decade from now if we want to maintain affordability at current levels? To get from the most recent median total family income figure of $72,240 to $125,000 over 10 years, you’d need annual pay hikes of 5.6 per cent. Dream on.

The national estimate of where prices might go mixes lower-cost markets like Halifax and Montreal with high-cost cities like Vancouver and Toronto. Vancouver – no surprise – is where the most gruesome numbers are. The average house price there jumps to $991,978 over the next 10 years, which would mean a minimum 5-per-cent down payment of $49,599.

It’s usually estimated that buyers will need 2 to 4 per cent of the price of their home for closing costs like legal bills, moving and, in some locales, a land-transfer tax. If we take 2 per cent of $991,978 and add it to the down payment, we end up with people in Vancouver needing almost $69,450 in cash to buy an average home.

In Toronto, the average price rises to $689,813 in 10 years and requires a minimum down payment of $34,491. On that basis, your mortgage payment would be a massive $3,727 per month with a five-year fixed rate of 4.5 per cent. The household income needed to carry this home would be $162,950, which compares to Toronto’s 2011 median total family income of $69,740. Something like $55,000 in cash would be required for the down payment and closing costs that, as of today, include a city and provincial layer of land-transfer taxes.

And what if average home price increases maintain a 5-per-cent clip for 10 more years? The average Canadian home would then run you about $637,000, Vancouver would be at $1.3-million, Calgary at about $725,000 and Toronto at almost $878,000. These are fantasy numbers, of course. Even if prices keep rising at half the average rate of the past 17 years, they’ll be utterly unaffordable for everyday people. We’re not far from that now.

If you don't read any of the bear posts in this thread, then this Rob carrick article sums it all up.

# ? Feb 20, 2014 11:09

namaste friends: Sep 18, 2004; by Smythe

http://ftalphaville.ft.com/2014/02/19/1776182/affordability-backwards/

Interesting question : our parents got rich buying houses in the 70s because inflation was high but salary growth outpaced inflation. Regardless of high mortgage payments, our parents made out like bandits.

Inflation is now low and salary growth is nil. On the other hand mortgage payments are low. Will we end up paying more over the long term?

Ftalphaville is the best serious financial blog or there. It's free to read, just register an account.

# ? Feb 20, 2014 11:38

Rime: Nov 2, 2011; by Games Forum

JawKnee posted:

A very real worry for a lot of people, but apparently not for you?

I was lucky enough to be born into poverty, so my only concern is that the housing market collapses soon enough that rent prices return to sanity. My mother doesn't even have a credit card. :3:

# ? Feb 20, 2014 18:16

Rick Rickshaw: Feb 21, 2007; I am not disappointed I lost the PGA Championship. Nope, I am not.

Rime posted:

I was lucky enough to be born into poverty, so my only concern is that the housing market collapses soon enough that rent prices return to sanity. My mother doesn't even have a credit card.

Hey, same here, kinda! Divorced parents, both rent. They have no grand plans for retirement. Fortunately my old man has an indexed pension (but he didn't have a high salary when he retired) so he's fine, but my mom will probably have to work herself to death. She keeps her credit card in her sock drawer because she's scared of it.

But at least there's no delusions about travelling the world off of equity that may or may not be able to be turned liquid when they want it to.

# ? Feb 20, 2014 18:54

pacerhimself: Dec 30, 2008; by Fluffdaddy

http://www.winnipegfreepress.com/business/building-homes-on-spec-246286141.html?device=mobile

Some news from one builder in Winnipeg who is building homes based on speculation.

# ? Feb 20, 2014 19:00

enbot: Jun 7, 2013

Lexicon posted:

Gets harder with every passing day It doesn't help that the realtors basically are trolling now.

If they are anything like their US counterparts- a vast majority of them really do believe what they are saying.

Rime posted:

I was lucky enough to be born into poverty, so my only concern is that the housing market collapses soon enough that rent prices return to sanity. My mother doesn't even have a credit card.

Unfortunately the poor are always the hardest hit (as always) by a crash- the downturn in spending destroys the jobs they work and rent doesn't really get much cheaper either. At least in the US it didn't change much at all. Prices aren't based on the actual cost of a thing- it's all supply and demand. And when a crash happens guess what happens to the demand for rent (can't buy because of terrible credit), and often the supply of rentals is low because they were converted to condos.

enbot fucked around with this message at 19:49 on Feb 20, 2014

# ? Feb 20, 2014 19:43

etalian: Mar 20, 2006

enbot posted:

If they are anything like their US counterparts- a vast majority of them really do believe what they are saying.

Unfortunately the poor are always the hardest hit (as always) by a crash- the downturn in spending destroys the jobs they work and rent doesn't really get much cheaper either. At least in the US it didn't change much at all. Prices aren't based on the actual cost of a thing- it's all supply and demand. And when a crash happens guess what happens to the demand for rent (can't buy because of terrible credit), and often the supply of rentals is low because they were converted to condos.

Ironically during the US bubble I noticed apartments offering piles of sweeteners for new leases such as free months or reduced deposit since everyone was jumping on the home ownership bandwagon.

The extra perks pretty much went away after the bubble since renting became much more attractive to many people or they were forced to rent due to losing their home.

# ? Feb 21, 2014 01:02

namaste friends: Sep 18, 2004; by Smythe

A Realtor compares Ottawa to NYC in the Ottawa citizen.

http://www.ottawacitizen.com/homes/Condo+Scene+tale+cities/9530293/story.html

# ? Feb 21, 2014 07:11

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

pacerhimself posted:

... builder ... Winnipeg ... speculation.

Oh dear god.

# ? Feb 21, 2014 07:57

FrozenVent: May 1, 2009; The Boeing 737-200QC is the undisputed workhorse of the skies.

Pixelboy posted:

Oh dear god.

I love how they managed to put a positive spin on "we're building as many houses as we used to, except now no one is buying them!" Very smoothly done, it's almost like the article is paid reporting,

And comparing Ottawa to NYC :psyduck:

# ? Feb 21, 2014 13:43

EvilJoven: Mar 18, 2005; NOBODY,IN THE HISTORY OF EVER, HAS ASKED OR CARED WHAT CANADA THINKS. YOU ARE NOT A COUNTRY. YOUR MONEY HAS THE QUEEN OF ENGLAND ON IT. IF YOU DIG AROUND IN YOUR BACKYARD, NATIVE SKELETONS WOULD EXPLODE OUT OF YOUR LAWN LIKE THE END OF POLTERGEIST. CANADA IS SO POLITE, EH?; Fun Shoe

In that Winnipeg contractors defense, Winnipeg is basically the last place in the country where you can find both affordable housing and a job that pays a living wage.

So of course it's the perfect time to gently caress up the local housing market.

# ? Feb 21, 2014 14:27

Kalenn Istarion: Nov 2, 2012; Maybe Senpai will finally notice me now that I've dropped :fivebux: on this snazzy av

On the downside, it then requires you to live in Winterpeg.

# ? Feb 21, 2014 14:45

Geoid: Oct 18, 2005; Just Add Water

Kalenn Istarion posted:

On the downside, it then requires you to live in Winterpeg.

It's really not so bad. Lots of great areas and culture. There's lots of areas that will probably gentrify in the next decade (which of course has positives and negatives). Really if you stay near downtown you can avoid suburban jerks pretty well.

# ? Feb 21, 2014 15:28

sitchensis: Mar 4, 2009

etalian posted:

Ironically during the US bubble I noticed apartments offering piles of sweeteners for new leases such as free months or reduced deposit since everyone was jumping on the home ownership bandwagon.

The extra perks pretty much went away after the bubble since renting became much more attractive to many people or they were forced to rent due to losing their home.

God I wish that would happen here. We are in a bubble and renting is still ridiculously expensive. I have the great pleasure of searching for a bachelor/1 bedroom in Calgary and nothing I've seen has been under $1,100.

# ? Feb 21, 2014 18:18

Bilirubin: Feb 16, 2014; The sanctioned action is to CHUG

sitchensis posted:

God I wish that would happen here. We are in a bubble and renting is still ridiculously expensive. I have the great pleasure of searching for a bachelor/1 bedroom in Calgary and nothing I've seen has been under $1,100.

Well the flood swept away a lot of affordable rentals, and put a lot of pressure on an already low supply market

# ? Feb 21, 2014 18:50

etalian: Mar 20, 2006

Geoid posted:

It's really not so bad. Lots of great areas and culture. There's lots of areas that will probably gentrify in the next decade (which of course has positives and negatives). Really if you stay near downtown you can avoid suburban jerks pretty well.

Please move to Winnipeg, don't make the mosquitos starve.

# ? Feb 22, 2014 01:24

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# ? May 12, 2024 22:13

Pixelboy: Sep 13, 2005; Now, I know what you're thinking...

etalian posted:

Please move to Winnipeg, don't make the mosquitos starve.

I think mosquito-feeding is the only industry there.

# ? Feb 22, 2014 04:35

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