159 replies to this topic

[msj]

But Im still renting... bank takes a thousand each month, city takes another 300 or so, insurance company piles on for another 100 bux.

Very true - owning really is "owning."

I forgot to factor in the cost of insurance - my landlord is probably paying quite a bit for that too.

Another difference which explains why I prefer my landlord to pay through the nose for the oceanfront condo while I rent it.

Now, if the price were to drop down to the $400,000 range I would consider buying it - it would meet my requirements for price (less than 3 times income, less than 22 times annual rent).

[fellowtraveller]

We have less cash

Meaningless. Overall, we have far more wealth than any previous generation. Many middle class people have far, far more equity and assets than previous generations- house equity and pensions that grandma and grandpa did not. And cash or cash equivalents. I agree that some also have debt, but in general we have far more money or equivalents than ever before.

It is one of the reasons there are stupid runups in the financial fad-of-the-day(precious metals, dotcoms, stocks, real estae): there are mountains of cash available for investment and few safe places to put it.

[fellowtraveller]

Let me do the math for my situation:

Aren't you the guy who told us you were paying about half the market rent for your home?

[msj]

Aren't you the guy who told us you were paying about half the market rent for your home?

Not sure what you mean by that.

The market rent is the amount that two parties agree to pay.

Given that I pay about half of what my landlord costs are I suppose you could come to that conclusion.

But what about a profit margin for the poor sucker landlord? Or is he only to get a profit from a capital gain rather than actual net rental income?

And that's the point - market rent is often well below landlords costs.

Especially in a property bubble because so many people are buying R/E as an "investment" with an eye on the potential capital gain, swooning over the low interest rates they are paying, while ignoring the true costs (cash flow and income) of their "investment."

That's the thing about R/E - pretty much anyone can get into it when the system is pumping people to buy.

That's why close to 70% of Canadians "own" their home with a large number "owning" secondary "investment" properties.

Too bad prices are falling.

Let's hope they continue to fall so I can buy at a reasonable price.

[dre]

Meaningless. Overall, we have far more wealth than any previous generation. Many middle class people have far, far more equity and assets than previous generations- house equity and pensions that grandma and grandpa did not. And cash or cash equivalents. I agree that some also have debt, but in general we have far more money or equivalents than ever before.

No its not meaningless at all. We have a lot of things because foreigners lent us money to buy them, but I would hardly call that wealth, and its a real stretch to call home equity wealth as well.

It is one of the reasons there are stupid runups in the financial fad-of-the-day(precious metals, dotcoms, stocks, real estae): there are mountains of cash available for investment and few safe places to put it.It is one of the reasons there are stupid runups in the financial fad-of-the-day(precious metals, dotcoms, stocks, real estae): there are mountains of cash available for investment and few safe places to put it.

Wrong, its not a mountain of CASH that was available it was a mountain of easy credit. Fresh new monetary expansion. It happened not because we had any "cash". A quick look at personal savings rates shows we had almost none. It happened because we had super easy access to credit.

Credit and wealth are not the same thing. And home equity is not a "money equivalent", as a whole bunch of people learned the hard way over the last few years.

[fellowtraveller]

Not sure what you mean by that.

The market rent is the amount that two parties agree to pay.

Given that I pay about half of what my landlord costs are I suppose you could come to that conclusion

I mean you told us that for some reason you were paying well under market rent for your area, I have forgotten why he charged so little.

I raise the issue because you use that personal anecdote to explain away any reason to own a home.

[msj]

I mean you told us that for some reason you were paying well under market rent for your area, I have forgotten why he charged so little.

I raise the issue because you use that personal anecdote to explain away any reason to own a home.

I don't recall ever stating that I pay well under market rent in my area.

I am paying the going rate for a downtown ocean view condo (which has the added bonus of saving the wife and I from needing a second car).

As for my personal anecdote - I have pointed you to a link showing a chart which shows that real rents have been generally falling for decades.

If you were to look at the other charts in that link you would find that house prices, over the past decade or more, have been generally rising.

It's not my fault you are unable to relate a personal anecdote and compare it to statistic evidence to come to a conclusion.

There are times in people's lives to buy certain assets.

For me, that time meant buying a business.

Why not? Interest rates are cheap, the interest is tax deductible, and the ROI has been over 20%.

If I bought a home all I could say is that the interest rates are cheap.

No, I can buy a house in another year when the business debt is retired, I have my 20% down payment, and house prices are in my price range (3 times gross income, no more than 22 times rent).

They have been moving in the right direction in recent months so we will see if the trend becomes my friend.

If not, I'm not going to lose any sleep over it.

I've done the math and I will know when the time is right to buy a house - and a second vehicle.

Unlike many people, I understand and actually price out the entire cost of any major purchase.

You should see my spreadsheet for when I bought into the business.

[CPCFTW]

You can also get much higher leverage, if you want, using various investment instruments, such as leveraged ETFs and options. You can have an essentially unlimited amount of leverage buying options. It's all a matter of your risk tolerance, of course.

That is true but I was trying to compare assets with reasonably similar risk profiles... that's why I mentioned a diversified portfolio.

[GostHacked]

I am in a good position now... and looking to acquire some land a little outside of town. Then eventually build a house on that land and slowly develop a small portion of the overall land.

Anyone have experience in just buying land? What is the market like on that?

[msj]

Oh look! subprime car loans.

Who said this kind of stuff doesn't happen in Canada?

Of course it does - I have been seeing it for years (in housing) and one of these days it's going to bite us all on the @ss.

[August1991]

I hardly follow this market but I liked the quote at the end of this news report:

New listings for detached, attached and apartment properties in the Greater Vancouver region totalled 5,617 in June, down from 6,927 new listings in May and from 5,793 new properties a year ago.

The total number of residential property listings on the board's MLS service was 18,493, up 3.27 per cent from May and up 22 per cent from this time last year.

Despite the drop in the number of sales, the housing price index for residential properties in Vancouver was still up 1.7 per cent from a year ago.

CTV

Edited by August1991, 04 July 2012 - 02:37 PM.

[msj]

I hardly follow this market but I liked the quote at the end of this news report:CTV

If you followed the market then you would know that the "housing price index" created by the marketing team at the Multiple Listing Services is new.

It's a wonderful way to muddy the waters and the Real Estate boards will use it across Canada to make people believe that the coming "buyers market" is either a "receding sellers market" (as the G&M would have one believe this morning) or even a "buyers market."

Of course, what is important right now, is to watch over the next many months as inventory levels rise.

Once this kicks in for good (which can take many many months, if not years) then the price declines truly begin.

One just has had to pay attention to the US market when things looked fine in and early to mid 2006 but not so much by late 2007 (and the writing was on the wall my mid-2008).

While Canada is unlikely to see a 35% decline from peak to trough like the US market it looks like some markets like Vancouver and Toronto will see a decline in that range.

This shows just how truly stupid humans can be: to not learn from the neighbours and to do almost exactly what they have done but 6 years later.

History doesn't repeat but it does rhyme.

[August1991]

Of course, what is important right now, is to watch over the next many months as inventory levels rise.

Once this kicks in for good (which can take many many months, if not years) then the price declines truly begin.

One just has had to pay attention to the US market when things looked fine in and early to mid 2006 but not so much by late 2007 (and the writing was on the wall my mid-2008).

While Canada is unlikely to see a 35% decline from peak to trough like the US market it looks like some markets like Vancouver and Toronto will see a decline in that range.

So, you're trying to time the market.

And you're using three year old US market price changes as a model.

----

Who wouldda thunk?

But hey, if it works, more power to you!

Edited by August1991, 05 July 2012 - 04:25 PM.

[msj]

So, you're trying to time the market.

If by timing the market you mean buying a business (rather than a house) to earn 2.5+ times my previous income and paying off the debt on that investment within 5 years, then, sure, I've timed the market.

Oh, and I also have liquid assets too.

Pretty soon I will be buying a house and maybe I will end up buying it for cash (my local market has turned down).

And you're using three year old US market price changes as a model.

No, I have posted in this thread, and others like it, statistics showing Canadians becoming as indebted as Americans, house prices rising faster than income growth, prices rising faster than rent income, and other metrics showing unsustainable bubbly like conditions.

You and others prefer to say "it's different" or come up for some other excuse to justify our Canadian bubble.

One day this bubble is going to end and it ain't going to be pretty.

That's the problem with debt - it still hangs over peoples heads while the good feeling that one gets from the asset evaporates once prices stop rising and then start falling.

[bush_cheney2004]

....No, I have posted in this thread, and others like it, statistics showing Canadians becoming as indebted as Americans, house prices rising faster than income growth, prices rising faster than rent income, and other metrics showing unsustainable bubbly like conditions.

This is not the first time that Canada has surpassed U.S. consumer debt to income ratios...it happened 12 years ago as well. Somehow Canadians managed to survive....