Federal Reserve Chairman Ben Bernanke, who turned 58 this week, refinanced his mortgage in September, less than two years after the last time he refinanced, according to a report in the Wall Street Journal, citing sources and public records.
Bernanke owes $672,000 on his house, about 80 percent of its appraised value. The mortgage has a 30-year term, implying that repayments are fixed and that it likely carries an interest rate of about 4 percent.
…
What we have here is a man who was approaching 58 saddling himself with a debt that will have to be paid down over 30 years, at the end of which time he will be a hopefully sturdy 87-year-old.
That is not the way in which mortgages were originally intended to be used. In the now quaint days of the 1950s and 60s, people actually took out mortgages with the idea that some day they would retire them as opposed to using them as a sort of permanent source of leverage. Typically borrowers would time their mortgages so that it would be retired shortly before they did, thus leaving them better able to cope with reduced retirement income.
In fact the Chairman is not too far off the age at which you’d expect him to be taking out a reverse mortgage, one which pays out monthly in exchange for a lump sum repayment on death.
- excerpted from ‘Bernanke’s 30-year mortgage a sign of the times’, Financial Post, 16 Dec 2011
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- ‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version
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- “Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”
- “They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours.”
- Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets
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- “He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”
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- Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]
- “She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”
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- “A beautiful Belfast home, in the equivalent of 1st Shaughnessy, bought at their RE peak in 2007 for £3.5 million, has now sold for £800K, almost 80%-off. The market didn’t suffer any significant economic shocks. Rates & unemployment didn’t skyrocket. They didn’t build more land. Sentiment just changed and the prices fell and fell.”
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- “My buddy was looking to upgrade to a house in the Coquitlam area. With 200k extra for a home, that’s half of lifetime saving between him and his wife.”
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- “Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”
- I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”
- The Vacant Lot of Versailles, Richmond.
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- “The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”
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The US is different in that respect. Their 30 year rates are crazy low. Even with prepayment penalties I think Bernanke has likely done the maths. He also likely has multiple DB pensions, so “retirement” only applies to output, not to revenue.
Bernanke is a tenured Princeton economics professor. His Princeton salary is almost certainly north of $300k. For a comparable data point, look at the 2010 salary for Emmanuel Saez at UC Berkeley:
http://www.sacbee.com/statepay/?name=Saez&agency=UC+BERKELEY&salarylevel=
A reliable source tells me that economics professors usually take a salary cut to take a governmental position in D.C., but I’m sure they make up for it in political capital.
Bernanke could easily pay off his mortgage in about 3 years after he returns to Princeton. I’m sure Bernanke just realizes that it makes sense to borrow money at negative real interest rates.
Another for the “shark jumping” category:
http://www.theprovince.com/news/Living+small+West+Hastings/5881000/story.html
One might think Vancouver is, once again and ad nauseum, interpolating an extrapolation.
$850 is way too expensive for those units.
Thanks, jesse.
$850 per month rent for 250 sqft.
Will headline.
“It’s for folks who need to work in Vancouver but can’t afford to live here.” – Dr. Kerry Jang, Vancouver City Councillor [NoteToEd: it's funnier if you transpose 'work' and 'live']
see also:
“So, once you’re inside the unit, you won’t know its a container[!]” – James Weldon, ProjectSupervisor
[CBC] – Shipping containers to be Vancouver housing
http://tinyurl.com/3gnct3c
For the record, Dr. Jang’s personal choice ‘o DezRez is a detached EastSide MockTudor…
Yeah, we recall the shipping containers.
All this would be okay if the prices truly were “affordable”.
“Dr. Jang’s personal choice ‘o DezRez is a detached EastSide MockTudor”
Ideally one would lead by example, but there have to be practical limits. Say what you want about Sam Sullivan, his practice involved the option of not needing to own.
Oh dear God, we need a satirist — Nem? Go for it!
what are we doing in vancouver???
importing workers to build the burj dubai??
or making turkey bacon clubs at timmy ho’s??
“One might think Vancouver is, once again and ad nauseum, interpolating an extrapolation.”
love this, thx
Vreaa, you probably got that one already, but in case you missed it:
Merrill: ‘classic bubble’ signs in Canadian housing market
“Canada’s housing market shows the “classic signs of over valuation, speculation and over supply,” but Bank of America Merrill Lynch says that’s no reason to think that there will be an epic crash of American proportions.”
““Canadian home prices set new highs in 2011 and are now showing many of the signs of a classic bubble,” they wrote. “We estimate the housing market nationwide is about 10 per cent over valued. Even so, the only way these valuations can be explained is by the record low mortgage rates. Under more normalized interest rates, home prices would actually look 25 per cent overvalued based on current prices.””
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/merrill-classic-bubble-signs-in-canadian-housing-market/article2276241/
A “bubble” is way more than “10 per cent over valued”.
For Vancouver, 10% is just the “noise”… But at least, the bubble message is hitting the MSM, which is in itself a good news.
So to afford those places at the 1/3 “affordable” principle, income should be $2550 p/mo. I’m not sure how the service industry folks the resort of Vancouver needs are going to afford even the micro loft and God forbid they have a spouse, child, or elderly parent to care for. This is housing designed for young, beautiful, able-bodied people who serve the rich, just like the dorms actual resorts build. I’m actually a big fan of smaller living but it needs to be affordable which this isn’t IMHO.
why didn’t he just give himself one of those secret low interest loans?
American economist, and the current Chairman of the Federal Reserve, the central bank of the United States, Ben Bernanke has an estimated net worth of $1.15 million with an annual salary of $180,000.
The Federal Reserve Chairman’s personal assets rose by as much as 31 percent in 2009 as US stocks rebounded. The central bank chief and his family’s financial assets valued at $1.15 million to $2.48 million in 2009, a higher range than the $852,000 to $1.9 million in 2008, according to an annual financial disclosure.
Bernanke’s two largest assets are retirement accounts, listed as TIAA Traditional and CREF Stock Large Cap Blend. Both were valued in a range of $500,001 and $1 million. In 2010, his CREF fund holding was listed in a range of $250,001 and $500,000.
Bernanke, 56, who succeeded Alan Greenspan as chairman in 2006 and began a second four-year term in February, got a $196,700 salary in 2009, an amount set by Congress.
A former Princeton professor, Bernanke earned between $200,002 and $2 million in royalties from textbooks in 2009, more than his compensation as central bank chief.
Read more: http://www.therichest.org/celebnetworth/politician/republican/ben-bernanke-net-worth/#ixzz1h1b5h5Ax
Thanks for the detailed data!
“estimated net worth of $1.15 million with an annual salary of $180,000″
Is it fair to say that, if Bernanke lived in Vancouver and wanted an SFH, he could only really afford a teardown?
@Jeff -> lol!
This is just one additional anecdote to show how ridiculous the valuation of Vancouver properties is…
@Jeff — ha, ha! Good point. Now THAT’s “rich.”
If Gentle Ben lived in Vancouver he’d have more NW than $1.15MM. I might even opine the fellow might be worth less now than before; it’s on record he never saw it coming.
so true! or maybe he could afford a crack shack.
In the US you can lock down a really good rate for 30 years. No prepayment penalties and no adjustment of the interest rates every 5 year term. As a result, this is a pretty low risk proposition for somebody like helicopter Ben.
C’mon man. Bernanke will get a $5million advance for his memoirs the second he steps down or is replaced. He’ll also get $50,000 – $100,000 per outing on the speaker circuit after that.
He’s exactly the kind of person who should take the mortgage like this when rates are low and he’s locked into a public servant salary.
Find a better example
He will pay off the while amount in a couple of speaking engagements. It is sally worries.
Which also tells us, big Ben is living in a house around a million. If Ben were to relocate to Vancouver. He will need to buy in Port Co. with basement suits. His secretary will call you if you are late on rent. Wouldn’t it be fun?