“A Chinese family I know just sold their east van plot to a developer who is buying up the whole block. The extended family have lived under the same roof for 20 years, so the whole house was mostly paid up. They bus everywhere, haven’t owned a car… About a month ago they netted 1.2 Million clear from the sale. They have until January to move out.
Their 13 year old son has been BEGGING them to rent for a while, to buy a car, take a holiday, and enjoy not feeling poor for a change. The grandparents/parents/aunts say that 1) renting, you will get ripped off and 2) the home prices will keep appreciating; if they don’t buy back in immediately, they will be poor forever.
They are currently in negotiations for a $1.4 Million East Van house; they will mortgage the 200,000 difference. Poor kid. He is a smart young man. He says that it is impossible that prices will not go down significantly at some point in the near future, because they have gone up to such ridiculous levels.
Just thought this gives an idea about how people can afford the current prices, and how so many homes continue to sell.”
- TPFKAA at VREAA 24 Oct 2011 9:55pm
So, the $1.4M market is dependent on the $1.2M market.
“..and so on infinitum.”
House of cards.
Comments already made on the thread:
“Game theory says it’s almost impossible for this family to end up renting.
Door #1: By continuing to own, if prices go down, the worst that can happen is their peers lose the same as they, if prices go up everyone’s a winner.
Door #2: By renting they either lose if prices go up, or win while everyone else loses. Further it’s unlikely they will find somewhere desirable to rent given the family size.
This family will choose Door #1 every time to align with their peer group, and will likely ride the bubble all the way down for the same reasons.”
- jesse 24 Oct 2011 10:58pm
[Well put. And, BTW, mutual fund managers underperform the markets by choosing Door #1 every time. -vreaa]
“who is this kid? Manny from modern family?”
- matt 24 Oct 2011 10:19pm
“If these rates of appreciation continue your school age children will not earn enough money in their lifetimes in any job to ever buy real estate and you’ll want them to move out at some point. Buy condos for all your unborn descendants!”
- rp1 25 Oct 2011 12:04pm