“I know people in my own neighborhood that funded a 3 week trip to Europe for four people through a HELOC this spring. Can you imagine how long it would have taken to *save* for that trip with all the other expenses they have going with a family of four? It would have taken them YEARS. In this instance, though, the HELOC money was akin to winning the lottery, and yes, they were far less prudent with the spending. I doubt that it occurs to them that they are just amortizing that trip to Europe over the next couple of decades or so.
People tend to be much, much more cautious with money they’ve actually earned, rather than have fall into their lapsfrom the HELOC gods, so to speak.”
- Told-you-so at VREAA 11 Jun 2012 8:47am
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- Ralph Cramdown on “The bank encouraged her to take the equity in her home to purchase another home. She bought a 2nd home at the peak.”
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- dumpster diver on “The bank encouraged her to take the equity in her home to purchase another home. She bought a 2nd home at the peak.”
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Latest Anecdotes:
- ‘Doomed’? – “Home prices in Canada are now double what they were in the 1970s in real terms. Historically, over the very long term, real home prices tend to be flat.”
- “The bank encouraged her to take the equity in her home to purchase another home. She bought a 2nd home at the peak.”
- “Let’s remember how we got here” – Looser and Looser CMHC Limits
- Don’t Worry, I’m Sure Somebody Will Sort This All Out – “Policymakers now know better and will be a lot more proactive in preventing a collapse.”
- “Things have changed, we are not doing that type of mortgage. We are not interested at all.”
- “We are noticing our target type of housing in price decline, albeit slow, as our money increases in value, slowly as well but outpacing housing.”
- Renter Buys In West Van – “For a few hundred more per month, you could own the place. Which is what I will be doing as my offer for a place down the street has been accepted. There is some value in staying in one place.”
- A Bed in the Bathroom, Why Not? [Let Us Count The Reasons...]
- “My husband and kids are pretty happy in our rental house within cycling distance of work that we could never have afforded otherwise. We’re doin’ pretty dang well, thank you, for median income earners in this expensive city.”
- “I Wish Them Bad Luck.” – Jim Flaherty, on those who wish to profit from Canadian RE price drops
- “We asked why he doesn’t just rent the whole house. He said he can’t, it wouldn’t cover his mortgage – he’ll get more to rent it out as two suites. These new landlords are hilarious, thinking that rent will cover their mortgage!”
- “My neighbours, in their late 60s, just put their house on the market. They had said they would die in that house, but now they are worried that with the housing market going south they may be losing a lot of equity and they better sell now before it gets worse.”
- Chat Thread
- Taking A Break
- “My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”
- Man Loses $745,000 Vancouver Condo Deposit
- Graphic – Degrees of Housing Overvaluation in Canada
- The Rare Individual With A Negative Ownership Premium
- 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.”
- Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets
- Mom and Pop Get It Wrong In All Markets, Time And Again
- The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
- “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.”
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I read an article recently that talked about credit card debt decline in Canada. I wonder if financial advisers around the country are urging people to pay down their credit card debt with HELOCs.
Using a HELOC to pay for a vacation is foolish. Instead, you could go to RBC and borrow up to $40k for six months, INTEREST FREE and unsecured. Why pay interest if you don’t have to?
It’s official, Carney has picked his scapegoat for
“…Already debt-burdened households would begin defaulting on their mortgages, banks would start tightening their lending, jobs would be lost and the hot housing market would go into the deep freeze — as fewer people would be able to buy.”
http://business.financialpost.com/2012/06/14/canadians-be-warned-your-finances-could-soon-get-a-big-shock/
The article says interest rates here would rise if the European crisis deepened. I thought the crisis meant they would stay low. Can anyone explain?
interest rates = overnight rate + term premium + credit premium
For example, most variable rates are prime +/- discount. The discount can (and has) become a “prime +”. Even the definition of prime is fluid. It used to be Bank of Canada plus 1.75 until December 2008 when the banks decided to change it to BOC + 2.00. That can happen any time.
The same basic idea works in 5yr mortgages.
Interest rates are the net, customers are the fish. Drop the net, fish swim in. Guess what happens next?
I think that as profitability slips at Canadian banks, they will respond by raising interest rates. They’ll have nothing to lose. When lending dries up, so does the competition to lend. This is par for the course. It happened in the early ’90′s, and it’s happening in Australia right now.
EUROPE! (hit post too early)
I funded a Europe trip for 6 people this spring and didn’t need any loaned money for that. Just the money saved from the difference between renting and “owning”.
awww snap!
My last trip was funded by “property”, just not the Vancouver kind.
“Just the money saved…”
Uh? Money saved ? what’s that? what do you mean by saving money? I’ve never heard my friends, coworkers, or family talk about saving money. Must be a thing of the past or something like that.
And this is the type of thing that mortgage brokers and banks won’t let happen going forward. You can trust them; HELOCs are for investment purposes only, not for mindless spending, they said as much themselves.
This is so similar to our experience in California that it’s not even funny.
In 2005 we knew of some folks who used their house ATM to fund some landscaping. Total bill? $100,000. Yes, $100k!
In normal times, without HELOCs, very few people would be able to do that. And fewer still would want to do that.
In normal times, “some landscaping” would not cost $100k.
True enough. Not even in California.
HELOCs cloud people’s minds. They think that because it is supposedly their “equity”, that it isn’t the same as putting it on a credit card. A HELOC is still borrowing, with interest. Unless you have very concrete plans to sell the home soon, realize that equity (which is hopefully really there) and pay off the HELOC, it is just borrowing money from a bank to pay for a vacation. The interest rate is better than a credit card, but that’s about it.
vreaa, maybe you could headline this one: http://vancouvercondo.info/2012/06/why-you-shouldnt-demand-lower-prices.html#comment-160893
The weather has been brutal this year (and last year too). June, the coldest on record so far, has been renamed to Junuary.
I am hearing more and more people complaining about the cold and making plans to move to warmer climates.
Terrible weather + overpriced real estate = BPOE??? No way!
hmmm, the link doesn’t work. It was a comment by gordholio:
(emphasis mine)
One comment still awaiting moderation after 7 hours. Is it that one link in the post?
Considering the energy the solar system is moving into alignment to receive. Going into extreme debt to live it up a little (or a lot), turns out to be a reasonable decision.
haha, the best part of VREAA lately is watching your posts get absolutely no replies whatsoever as people continually wonder, what the hell you are posting about. (except this reply!
HELOCs are a horrible idea.
There ought to be a cap of 50K for any residence, regardless of the amount of equity.
Who hacked your account?
HELOCs are a great idea if you are nearing the end of your life on this Earth.
HELOCs are a fabulous idea for extracting funds before the equity atm goes bust.
HELOCs are a great idea for keeping up with the Jones’s
HELOCs are a terrific idea.
h-g-f-g-t … hmm … meanwhile on shrinkage_watch … the race is on – nobel prize vs van median sfh …
STOCKHOLM—The Nobel Foundation, under pressure to cut costs following sluggish returns on capital in recent years, is slashing the value of its prestigious prizes for the first time in 63 years while also looking to trim in other areas, such as expenses related to its annual banquet. …
Winners of the 2012 Nobel Prizes will be paid 8 million Swedish kronor, or about $1.1 million, representing a 20% decline from the 10 million, or $1.4 million, paid out last year. …
In addition to cutting prize money, organizers—who currently operate on about a $17 million annual budget–will target other expenses, including administration and festivity costs. Mr. Heikensten said negotiations with suppliers to the Nobel banquet, held in Stockholm in December each year, in order to lower costs are under way. …
Mr. Heikensten said the Nobel Foundation expects to see a modest return on capital in coming years, and is tweaking its investment strategy so that 50% of the capital is invested in equity, 20% in fixed-income securities and 30% in alternatives, such as real estate.
http://tinyurl.com/7984cw6
@jesse,
You’re referring to definition #3, I take it? I’ll take my European vacation without decades of interest payments any day, thank you.
@formula1
You sound unusually cogent today. What’s up?
I funded my trip to Europe last year with proceeds of my 2011 house sale.