“I have a friend in Vancouver who bought 2 houses, and he doesn’t have a stable income. He borrowed money from his properties (HELOC) to pay his mortgage and his daily expenses. What if the housing market drops?”
- ‘A in Vancouver’ at greaterfool.ca 1 Jun 2012 3:12am
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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?”
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- “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.”
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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.”
- “Two family members of hers are trapped, underwater, in condos on the East Side.”
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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.”
- “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.”
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- 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.”
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- “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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“What if the housing market drops?”
Hahaha. He could risk losing both homes. I don’t know why people over expose themselves to real estate. Too much of their net worth in real estate.
And this is a perfect example of how Helocs cannibalize real wealth. Times are not even tough and this guy is already behaving like a poverty case by borrowing from Peter to pay….Peter! The US middle class went down the same road and hundreds of thousands were bankrupted or disenfranchised of their properties in just the same way. Many drained away all thier savings trying to make ends meet, pay for their mortgage and keep their heads above water. They just kept going until the well ran dry and they lost everything in the process. Those without work went from home-ownership pride to basement dwellers in short order. Many moved into their cars. That is a depression scenario and yet it is exactly the movie that has been playing out before our very eyes. And it still is not over…..
It is always better to sell and take a small profit when the end is obvious.
[WARNING: Very graphic content that may offend many readers; may be advisable to skip the link. -ed.]
he could lose both? … well, a thousand apologies in advance for the following … please do not proceed if you do not share my sense of humor … http://tinyurl.com/86tk4bw
Worth noting link contains quite graphic content that deserves a warning prior to quickly scrolling down.
But is he a Realtor?
Cause I heard they will do anything to make a quick buck….
Oh boy, this guy is obviously a zombie.
NINJA
Probably used a liar’s loan. (private lender)
How about an unemployed chef with his unemployed wife and carrying 850k of debt over 2 un-sold properties. They are making payments with a line of credit. He sat down with my wife over coffee and she said he looked really depressed. He is wondering why the media still says the market is balanced when clearly it has collapsed.
That is a very depressing anecdote, Pat. Makes me wonder just how many others are close to the edge and making monthly ends meet by borrowing against an asset that we all know for certain is in decline. I think the days of incessant bragging over how much paper profit was earned on home purchases are soon coming to an end.
Lets not get wrapped up in the drama of others though and let’s not start feeling sorry for those who are about to default. They created this unfortunate circumstance out of their own greed and desire and so have earned the consequence that is coming.
I just don’t care how sad they look. Those people, through their pig headedness and arrogance (despite all the valid warnings) are going to still cost all of us through higher taxes, a slower economy and rising unemployment.
They were the problem before. They are the problem now. Let them fail.
The other question is why are the banks’ valuation processes not broader view? Why does OSFI have to step in and put a real number on the HELOC limit (65%) to avoid banks losing money from THEIR own greed.
We have a coddled banking community AG. It is like a nanny state for private financial interests and sheltered public companies that are backstopped by the taxpayers of this country. Some see it as a good thing. We have strong banks, pride of ownership for those who are shareholders and a multitude of accolades internationally. That makes this country a media winner in the age of defaulting Greeks and in exchange our banks are in a good position to expand abroad and take a greater share of the markets in other nations. Course, we also get those nice coloured stars and high AAA ratings for being such good boys and girls. So there might be some balance if the growing strength of our homegrown financial institutions and the revenue streams they produce contribute some kind of dividend for the public in the end. You know, if some of those profits get booked as tax revenues to pay back the public for all the support the banks were given in times of need. That is why we have invested in a strong financial sector we presume.
Agree this is a depressing anecdote.
We will headline it; it is unfortunately representative of a substantial minority of Vancouverites who have unwisely overextended themselves into more than one property.
—
Also, excellent point, Farmer, about the bankers’ enjoying one way bets, and the desirability of the taxpayer getting something back (albeit indirectly) for consistently backing those bets.
Thanks boss, remark is appreciated. I have been onside with corporate tax reductions in the past but am reconsidering the wisdom of granting too many tax considerations to our large corporations at a time when they are posting stellar profits and sitting on a veritable mountain of wealth. We are headed into a more troubling time and while we want our best companies to stay strong we also need to balance that against the gathering needs and demands that will be placed on governments at all levels. Fortunately there is some room to work with if the need arises.
“What if the housing market drops?”
Then he walks away from the properties. If something can’t continue, it won’t. If someone can’t keep making payments, they won’t.
Then these $1 million+ in bank “assets” (two mortgages plus HELOCs) are revalued drastically downward. That loss belongs to the bank or to CMHC. The HELOCs are a total write-off to the bank, worthless. The homes are real assets, but are probably already worth less than what the bank originally loaned, minus the cost of all the time, effort and legal process the bank must go through to repossess the home, evict tenants, and resell it. Plus, who knows if it will sell, so it might be on the bank’s books for a long time. Plus who knows if the bank will want to sell it, because they may prefer to not realize the loss, so they keep it on the books pretending that it is worth the old bubble valuation. And then this happens tens of thousands or hundreds of thousands of times across the country.
question to anyone who knows; When a bank reposesses a property, are they responsible for the municipal taxes?
Here’s a pertinent article I came across on someone’s personal blog:
http://thethirtiesgrind.com/2012/05/29/are-we-all-lying-to-each-other-how-the-fk-are-people-affording-to-live-in-vancouver/
Many thanks for link.
Will headline with comment.