“I just overheard a startling conversation while I was waiting for the bus at Broadway & Cambie (apropos “subprime”) – a 35ish couple just on their way home from an open house/discussion with mortgage broker. The female half of the couple was exalting over the fact that the interest on the “huge” amount of money they could borrow was only $1400 a month. She was quite excited over the fact that they would only have to pay the interest if they had money challenges at any time (aka – all the time). Neither of them seemed to think that interest rates would ever change from where they are now and that if they did experience “challenges” they could just pay the interest until they could sell for a profit. I am always amazed by how many of these delusional individuals there are, it really does not bode well for the future.”
- Observer at VREAA 6 May 2012 5:03pm
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- “My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”
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- Advice Regarding Renting In Vancouver, Please – “Unfortunately, the Vancouver rental stock is absolutely atrocious. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income.”
- “I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island. Compare to Vancouver. It simply doesn’t compute.”
- Ben Rabidoux In Vancouver Next Week
- “The mortgage company told me they were calling in my 40-year, 0-down mortgage. I have paid nearly sixty thousand dollars towards it, but, nearly five years in, I have yet to touch the principal.”
- ‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version
- “My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”
- “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.”
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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.”
- “One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”
- “I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.”
- 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.”
- Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”
- “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.”
- “Two family members of hers are trapped, underwater, in condos on the East Side.”
- “Interprovincial migration is not saying good things about BC’s economy.”
- Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”
- More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”
- Rumor that some OV units will be reduced by 20%.
- Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”
- “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.”
- “I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers. I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood.”
- “Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”
- “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.
- “I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”
- “The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”
- For A City To Have That Kind Of Vacancy, It’s Like Cancer – “Downtown, the vacant unit rate is so high that it’s as though there were 35 towers at 20 storeys apiece – all empty.”
- “What’s the worst that can happen? You can’t pay your mortgage, so sell your house! No fear.”
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35 is the new 25
I remember when 35 was the average lifespan.
omg, you must be ancient
Depends what country you’re from
but v said when not where … sort of roughs it …
http://en.wikipedia.org/wiki/Life_expectancy
a further refinement?
Harlem. 1970s.
…
Only kiddin’, on both counts.
I was pretending to be a crusty old curmudgeon, for the sport.
actually, i think there are like 5 of you and you’re all Visitors
An interesting theory, …. Mr. Bond!
My math says $1400 is the interest on a $445K mortgage, 30Y @ 3.8%.
A while ago I saw a building in Richmond with a condo to buy for $430K. The same floorplan a few floors lower rented for $1600/mo. Renting money, indeed.
At 5.5% the interest jumps up by $600/mo to $2000 — about the size of their entire current payment at 3.8%.
Hope they’ve got a generous emergency fund.
I find it incredible that people don’t plan to ever really own their house anymore. Weird paradigm shift that seems to have happened over the past decade or so.
It will swing back. But some people are going to be hurting when it does.
Yeah, interesting to recall that families would have ‘Mortgage Burning Parties’ to celebrate paying off the house.
Here’s an intriguing image from such a party in 1974, for a church in Arkansas.
Nowadays the only mortgage burning going on in the US is as acts of defiance.
gen y -> eyes bulging with student debt … no good jobs … sky high housing, even after 50% off … it’s a practical adaptation often that defines culture … things won’t begin swinging back until some combo of the 3 above change enough … appears to be gaining momentum pretty fast in the southern territories … rabidoux points out the demo shift will have big consequences for boomer wave cashing out to fund their retirements, especially after they get beat on in the equity and bond markets – the fundamentals on the demand side looks pretty weak … i was feeling better earlier
That is the concern. We are coming to the end of a consumption based paradigm started in the seventies using inflation as a tactic. We can fall back on other resource and service sectors, but a lot of air will have to leave the system.
Credit has been around for eons, but it used to be a wink and a nod. Debt slavery has entered like a quiet parasite. People should sue the city tax assessor’s office for jacking appraisals instead of just raising taxes and calling it what it is.
“At 5.5% the interest jumps up by $600/mo to $2000 — about the size of their entire current payment at 3.8%”
why do renters assume a variable mortgage? The overwhelming majority of first time buyers lock in a 5yr fixed rate
fixed is when lock is good for entire amort period
Irrelevant. If interest rates go up to 5.5% tomorrow, some owners will pay more immediately and some will pay more later — maybe even in five years. The question is not how long you get the current rate for, it’s what happens to the market when rates go up.
Know anyone locking in for 25 or 30 years in Canada? Think that’s a good choice? They don’t have to worry about their payments increasing, but it’s a hell of a long bet.
10 year fixed at 4% is what is available now. Most owners will ditch their variable well before it reaches 5.5%
You’re focusing on monthly costs as if they’re the only thing that will change with increasing rates, and as if they’re the only measure of whether purchasing a home is a good financial decision.
Locking in at 4% for 10 years doesn’t do anything to protect the value of the property. An increase of rates to 5.5% knocks out 25% of the future buyer’s maximum budget.
That’s just one way that the dominoes can start falling. The point is, it’s overwhelmingly likely that the referenced couple and others like them will find themselves a lot poorer a few years from now than they would have if they’d rented, or if they’d bought what they can afford. (Quite possibly nothing at all in Vancouver.)
Fixed vs variable rates have nothing to do with it, and is a straw man argument at best.
If they’re buying a home, not an investment, then their net worth in a few years doesn’t matter as much, and if they’re planning to live in their house until they die even an enormous paper loss might not be a big deal.
But either way, they sound like they’re stretching it now and they’ll have higher rates to contend with in the future. Like I said, I hope they have a generous emergency fund to absorb that blow. (Alternately, a 30% salary increase might cover it.)
“Locking in at 4% for 10 years doesn’t do anything to protect the value of the property.”
it will keep owners in their home and hedge against rising mortgage costs during the short term blips in the market. 10 years worth of stability is probably worth at least two corrections in this market.
Anyone on variable or renewing a mortgage should consider the 4% 10 year fixed by the end of this year.
Sorry in advance for breaking the quote up so granularly.
> it will keep owners in their home
Perhaps. Indeed there are numerous people in the US that are still in their homes, but that doesn’t mean their original choice was the best course of action available given the information at the time.
> and hedge against rising mortgage costs
Another strategy is to buy later at a lower price.
> during the short term blips in the market
People in various other countries wouldn’t define their current situation as a “blip.” It’s one thing to bet that Canada will avoid a US-style correction, but to deny the possibility would be foolish.
> Anyone on variable or renewing a mortgage should consider the 4% 10 year fixed by the end of this year.
I agree somewhat. Certainly true for people whose properties are first and foremost their homes, who have substantial equity, and who aren’t relying on their equity as a future source of capital.
Only in the past year has fixed become more popular than floating for first time buyers given that it’s pretty easy to get fixed at 3% or less. Two years ago, most first time buyers went for floating.
Regardless, mortgages are very cheap and the recent wave of re-financing is managing to buy more time for a lot of folks that are just hanging on.
It also appears that bond rates could be pressured yet lower again this year and Canadian households continue to gorge on more debt. It no longer makes any sense to use your own money to buy real estate as other investment classes pay considerably higher returns than mortgage rates. Interesting times if you can take advantage of it.
Lock in for 10 years?
Penalty for breaking the Mortgage is not funny.
In US, they don’t have to worry about IRD, so it is common for them to lock in for 25 years and sleep sound.
“Bank Robbery” in reversed.
depends on the mortgage details Chris. If the 4% 10 yr fixed is transferrrable it could be worth it’s print in gold for the home seller if rates are far higher. No way I sign off on 10 year fixed unless it had some ability to transfer.
Unless I misunderstand IRD, it’s is only a factor when breaking a mortgage when current rates are lower than the locked-in rate. (Not the only source of penalty, mind you.)