Franks Happy Place posted:

He's the Toronto Bob Rennie. Very very successful at his bullshit craft

ocrumsprug posted:

The other day Global had another segment polishing our housing situation in Vancouver.

http://globalnews.ca/news/1242635/vancouver-first-time-home-buyers-hoping-to-win-the-lottery-to-afford-first-home/

It is pretty amusing for a bunch of reasons, however something caught my notice at ~58s. Vancity is saying that they are now offering interest free loans for half of the amazingly onerous 5% down payment.

How is that legal? I thought that they changed that last summer so that the 5% couldn't be a loan.

Cultural Imperial posted:

The condo King just flipped his poo poo. Time to show the little priest what carcosa looks like huh?

http://new.bradjlamb.ca/2014/04/rob-carrick-wrong/

Brad J. Lamb posted:

I will tell you of a very smart young graduate, one of my nephews...He became a shift manager during those years of high school. He managed to save $40,000 over 6 years of part-time work...My brother co-signed the mortgage...When he graduates after 4 years, he will have paid off $30,000 of the mortgage and this house will be worth $40,000 more than he paid for it. He will graduate at 24 years old with a degree and $105,000 in his pocket, and he lived rent free! That is a smart kid.

eXXon posted:

I'm not good with math, should I buy a house because it sounds like you only have to pay a 5% down payment and the rest is free??

etalian posted:

Things like the light rail plan fell apart since the GOP actively sabotaged it such as diverting funds originally intended for mass transit into building more highways around the city.

Cultural Imperial posted:

quote:

Even Rob’s own newspaper publishes a Saturday segment in the Report on Business section about a couple looking to retire. Every single one of these couples has 60-70% of their worth in their home. Why? It is because it’s the best place for the money to be and the best place for them to make money TAX FREE.

Lexicon posted:

Austin is a place which I'm very bullish about over the next decade or two. And with American price:rent and price:income ratios generally sane

LemonDrizzle posted:

FrozenVent posted:

quote:

Having 60-70% of your net worth tied up in a single not especially liquid asset is the very epitome of sound financial planning and wealth management IMO.

I'm also not sure how ROI on housing is tax free...

PC LOAD LETTER posted:

Wuut? Household income is only like $53k while houses are around $300k. That is over 5 and half times the local income! The mediocre to crap infrastructure means that the cost of living will continue to go up quite a bit making it a significantly more expensive place to live in the future too. Where is the income + job growth going to come from to make those numbers even out?

Peaceful Anarchy posted:

If you don't count the taxes it's tax-free. Sure you pay property taxes every year and in most places a land transfer tax and also a realtor's commission, but you're not paying income tax on the "profit" if its your primary residence, so that's sort of tax-free, I guess.

Lexicon posted:

stupidly low locked-in interest rate for 25 years and mortgage interest deductibility puts it vastly, vastly ahead of the calculus in any Canadian city. And that's without even factoring in the stupidly lower cost of living in the USA.

PC LOAD LETTER posted:

Stupid low rates on a far too high principal still leave you with a too expensive mortgage payment that results in foreclosure. The mortgage interest deduction is peanuts even at the start of the mortgage and it only goes down from there as interest is paid down. Are you sure you factored in the cost of healthcare into the CoL vs US? IIRC they pay around a little more than half of what we do for healthcare with way less hassle involved.

FWIW I think the Canadian bubble sounds worse than the US bubble does right now. Maybe even back in the US circa 2006-7. But the situation is pretty bad all around. Glasshouses and all of that.

Kraftwerk posted:

If property isnt the safe way to invest in your retirement, what is? I don't trust the equity markets. Obviously investing in chartered banks isnt a good idea either because of all that bad debt theyre taking on. Im sitting on a lot of liquidity and Im too scared to touch it.

Kraftwerk posted:

If property isnt the safe way to invest in your retirement, what is? I don't trust the equity markets. Obviously investing in chartered banks isnt a good idea either because of all that bad debt theyre taking on. Im sitting on a lot of liquidity and Im too scared to touch it.

Mexplosivo posted:

Sitting on liquidity is doing something and is an option, imo.

Franks Happy Place posted:

As long as it's in a "high"-interest savings account or a short-term bond of some kind, sure.

Lexicon posted:

Not if you want to maintain your purchasing power with respect to inflation.

Franks Happy Place posted:

Well my point is that if you want to stay 100% liquid because you are irrationally afraid of equities, you are better off getting 1% than 0%.

Lexicon posted:

True. But keep in mind 'liquid' does not imply 'solely cash'. It means easily convertible to cash. You can have all your wealth in equities and still be liquid.

Kraftwerk posted:

I don't trust the equity markets.

PC LOAD LETTER posted:

Wuut? Household income is only like $53k while houses are around $300k. That is over 5 and half times the local income! The mediocre to crap infrastructure means that the cost of living will continue to go up quite a bit making it a significantly more expensive place to live in the future too. Where is the income + job growth going to come from to make those numbers even out?

Nothing to be bullish about that area at all. Or anywhere really in the US IMO. Yea its the Canadian Housing Bubble thread but I keep seeing comments along the lines of 'wow sucks to be Canada right now but the US is fine!' and the latter part of that statement just isn't true.

Unfortunately right now US housing on average is more expensive on a monthly payment basis than it was during the peak of the US bubble.


IMO the US bubble never had a chance to finish popping and has been largely reinflated though I expect it start popping again soon if it hasn't already.

Kraftwerk posted:

If property isnt the safe way to invest in your retirement, what is? I don't trust the equity markets. Obviously investing in chartered banks isnt a good idea either because of all that bad debt theyre taking on. Im sitting on a lot of liquidity and Im too scared to touch it.

Kraftwerk posted:

If property isnt the safe way to invest in your retirement, what is? I don't trust the equity markets. Obviously investing in chartered banks isnt a good idea either because of all that bad debt theyre taking on. Im sitting on a lot of liquidity and Im too scared to touch it.

Cultural Imperial posted:

bitcoin

etalian posted:

There's no such such as safe investment but using tricks such as diversification makes investing in other things much better than the all eggs in one basket real estate approach.

Also due to the popularity of something called ETFs you don't even need to agonize over stock picking, just create a investment portfolio that matches your needs.

If you want to really "inves" real estate just buy a ETF stock like Vanguards VNQ which covers lots of different US REITs and pays a 4% dividend yield.

Lexicon posted:

I really have a hard time comprehending the position of risk averse people who are somehow okay with real estate. I mean, Jesus, all it takes is one bad neighbour or spectacularly bad city council to seriously impact your wealth. And that's without getting into the issues of indivisibility, illiquidity, and you know - the thread's premise - a massive, loving housing bubble.

Lexicon posted:

I really have a hard time comprehending the position of risk averse people who are somehow okay with real estate. I mean, Jesus, all it takes is one bad neighbour or spectacularly bad city council to seriously impact your wealth. And that's without getting into the issues of indivisibility, illiquidity, and you know - the thread's premise - a massive, loving housing bubble.

Cultural Imperial posted:

Hey all you rentailures. Check out this spreadsheet from real life failure Rob Carrick on housing affordability.

http://www.theglobeandmail.com/glob...hboard/follows/

Brad J Lamb sez u r a failure because u rent lol

quote:

S TW Ottawa 27 days ago
Rob ask yourself how the Banks in Canada continue to lead on the international stage. Why loan loss provisions have been declining even through one dandy of a downturn.

The Banks and their clients (an Ivory Snow ratio of 99.9%) have managed to solve the mortgage conundrum for decades without your spreadsheet or sage advice. They can continue to do so.

I would also suggest it's not the bankers who recommend home buyers they need to go shopping for a home with hardwood floors, granite counter tops, top of the line stainless steel appliances, and a four bed five bathroom home!

quote:

Elwood_B 27 days ago
I frequently wonder the same thing about Rob Carrick. As far as I can tell, Rob has no financial credentials whatsoever and the vast majority of his columns provide advice that is questionable at best.
Please, Globe & Mail, find Rob Carrick job writing about something that doesn't matter. Allowing him to provide financial advice and information to Canadians is dangerous to people who don't know better.

etalian posted:

this is the investment mix I use right now:

blah_blah posted:

Wealthfront? Actually that's not even a question, because I also use Wealthfront, and have almost an identical allocation (mine is a bit more risk-averse).

quote:

Rob Carrick’s “Five things to know about Canada’s mortgage market right now” contains one tidbit that many potential homebuyers might find a bit confusing.

See if you can pick it out:

Mr. Gaetano said late last week that he had a 2.84-per-cent rate on five-year fixed mortgages, but it only applied to clients who had down payments of less than 20 per cent and thus required mortgage default insurance.

The issue here is differential pricing, as lenders are selling the same product (a five-year fixed rate mortgage) at a different price (or in this case, rate). If the Canadian mortgage market were a perfectly free one, you would expect borrowers who have more equity in their homes (as a result of a down payment of 20 percent or more) to receive preferential treatment from lenders, as they are less likely to default (in aggregate) than borrowers who have had to pinch pennies to scrape together a down payment of five percent.

However, “perfectly free” is not an apt characterization of the Canadian mortgage market, and this helps explain why borrowers with higher loan-to-value ratios are offered lower interest rates from non-bank (or “monoline”) lenders.

In fact, the proximate cause of this counterintuitive phenomenon can be found within the excerpt from Mr. Carrick’s article.

Thanks in no small part to the existence of a backstop from the Canada Mortgage and Housing Corporation (CMHC), the risk structure in the mortgage market is inverted. While a borrower who has is able to pay more up front might be considered less risky, ceteris paribus, that’s not the case once you take mortgage default insurance into account.

And according to the CMHC, “At the end of the day, for the vast majority of borrowers, the cost of CMHC Mortgage Loan Insurance is more than fully offset by the savings achieved.”

That’s debatable. But if we assume this statement to be true, it certainly raises questions about the prudence of a program that may incentivize individuals to become more levered than they otherwise would; to keep cash in their pockets today and spend more down the road.

RELATED: Two Tweets From Ben Rabidoux Show How Canadian Housing Policy Is Absolutely Bonkers

CMHC insurance covers about two-thirds of all mortgage loans in Canada (according to the IMF), and as a result, the agency’s pervasive influence on the market suppresses mortgage rates across the board. Simply, a government-backed loan is less risky than one backed by a private insurer (like Genworth or Canada Guaranty), and Ottawa is considerably more creditworthy than an individual. For lenders, this raises the spectre of moral hazard, as mistakes they make may not come back to haunt them since CMHC has made the risk pool less risky.

Monoline lenders, rather than big banks, are typically the ones who engage in differential pricing. Since banks are much larger financial institutions and have the ability to absorb conventional mortgages on their balance sheet, you won’t really see this type of two-tiered pricing from them.

Non-bank lenders, on the other hand, securitize their mortgages to raise new funds to loan out rather than hold them on their balance sheets. In order to do this, the mortgages need to be insured. For conventional mortgages in which the homebuyer has elected to forego using CMHC’s backstop, lenders pass the cost of insurance along to the borrower in the form of a higher rate.

“With high-ratio mortgages – those with less than 20 percent equity – the consumer pays the insurance premium,” said Rob McLister, editor of Canadian Mortgage Trends and founder of RateSpy. “With low-ratio mortgages the lender must often pay the premium, and that extra cost forces many lenders to charge higher rates on low-ratio mortgages, even though the borrower is putting more money down.”

Vince Gaetano, the broker from Monster Mortgage quoted in Carrick’s post, made reference to the absurdity of this inverted risk structure in a recent article in the Financial Post.

And it’s hard to argue that Canadian housing policy, which results in artificially lower mortgage rates and benefits borrowers with less equity in their homes the most, is quite puzzling at the very least and irresponsible at worst – especially when one considers that borrowers with high loan-to-value ratios ultimately have the taxpayers to thank for insuring their mortgages and providing these savings.

Cultural Imperial posted:

https://businessincanada.com/2014/04/02/cmhc-insurance-monoline-lenders-canada-housing-bubble/



e: FUUUUUUUUCK YOOOOOOOUUUU CONSERVATIVE PAARTY

etalian posted:

So pretty much due to public backing of private debt via the CHMC the riskier loan is actually cheaper for the foolish borrower?

etalian posted:

So pretty much due to public backing of private debt via the CHMC the riskier loan is actually cheaper for the foolish borrower?

Franks Happy Place posted:

This is something I addressed way back when this thread first started (and even earlier in a previous Canada megathread), and has been the case for years and years now. Banks know these mortgages are garbage and their own risk model won't let them originate 'em on their own internal terms, but if you can hold a crayon long enough to sign a CMHC mortgage then it's all systems go.

etalian posted:

Yup, there are lots of decent services out there which offer reasonably priced investment management like Wealthfront or even Betterment if you want more bit more freedom in asset selection.

Which goes to back to Robert Shiller's point about homes being a bad "investment" vs. a well diversified investment portfolio.

Here's a somewhat more recent interview with him on housing:
http://live.wsj.com/video/robert-sh...EA-2413646E0CC6

Lexicon posted:

Are you not based in Canada? How does one use Wealthfront if so?

I've always wanted to try it - didn't realize it was possible though.