“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.”

“My buddy was looking to upgrade to a house in the Coquitlam area. Currently they own a apartment. Not sure if they even have than 10% down payment for a “used” single family home. The other day we were chatting and he mentioned how he wants to upgrade to all new appliances and do a bunch of renos when he buys a place. He said that I bought a house without a mortgage so I could upgrade all the fancy appliances at my place. Here is my thought: my place is in Surrey, which is 500k, for a single house. He wants to buy a house for 700k. His household income is not more than mine. If he is not overextending himself, he could easily do the upgrades. With 200k extra for a home, that’s half of lifetime saving between him and his wife. I guess no more trips and fancy toys.”
– from klin1022 at VREAA 18 Mar 2013 9:41am

Remember the good ol’ days when people used to think about an amount of money in terms of how long it would take to earn or save it?
– vreaa

22 responses to ““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.”

  1. “Remember the good ol’ days when people used to think about an amount of money in terms of how long it would take to earn or save it?”

    1. First world problem (kidding!)
    2. Not a problem unique to Vancouver in this expansive monetary environment.
    3. Better to have people carry ‘manageable’ debt and buy appliances than to have everyone extra prudent like many of your readers. Otherwise we would end up in deflation like Japan where at points even negative rates (deduction in savings accounts) couldn’t get it’s citizens with savings to spend!

    • Extra prudent?!?!

      A wise person once told me “It’s not how much you make, it’s how much you save”.
      I’m all for depreciating assets that offer little to no return on investment, provided they bring equal amounts of joy and happiness.
      Debt stress would bring a joy deficit.

    • Loon: don’t get me wrong. Debt is not good from a personal perspective. Paradoxically, it is a necessary ingredient for a growing economy. No debt = a sputtering economy = job cuts. I’m saying a reasonable amount of debt is good for the greater economy but I agree on a personal level it can be bad if not carefully managed as kryptonite.

    • Cyril Tourneur

      Consumer debt can be a drag on the economy too…

      “So, these various charts suggest that the increase in leverage associated with the decline in home prices had an important depressing effect on the consumption of some households that goes beyond any wealth effects associated with the decline.”

      http://www.brookings.edu/research/speeches/2012/10/25-household-debt-dynan

      • Cyril: yes of course too much consumer debt can work against the economy too. But the link below refers to the US and their problem is jobs, jobs, jobs. Canada’s job market is rocking along just fine.

        I’ve also been saying on this blog that consumer debt have been rising partly due to increasing student loans and 0% car loans (which makes sense for even those with the money to buy to take the loan).

        Snippets from data I probably should not be sharing as it is industry subscription data:

        “Unemployment rates have declined for three consecutive months to 7.0% in January 2013, which compares to 7.5% during January 2012. The decline in unemployment rates has been largely attributable to the addition of 227.2 thousand new permanent jobs in the economy”

        “The decline in the unemployment rate, along with stable growth in overall job tenure (17.31 million in January 2013 compared to 17.00 million during the previous year) suggests huge optimism in the Canadian economy, despite pessimistic signs projected by the global economy.”

    • BLM, you have absolutely no clue about economics.

      • Again, it’s fine to have a go at me but make your argument so we can have an intelligent discussion.

        What don’t you agree?

      • Nemmy (I trust I can call you that): I admit it, I’m a Keynesian.

      • BLM, I don’t believe that you are interested in intelligent discussion.

      • I’m sorry you feel that way but I don’t apologize for not holding a conforming view you see as the ultimate truth.

      • I also don’t apologize for not holding a conforming view you (and most realtors) see as the ultimate truth. :p

      • Well, that’s some common ground between us – we can agree I am not a realtor.

      • bubbly: “BLM, I don’t believe that you are interested in intelligent discussion.”
        BLM: “I’m sorry you feel that way but I don’t apologize for not holding a conforming view you see as the ultimate truth.”

        BLM, this is the kind of exchange that leads many of us to believe that you are not discussing in good faith.
        bubbly didn’t say anything about having a problem with you not agreeing with him, he said he didn’t believe that you are interested in intelligent discussion. You created a straw man and came back with a comment about that.

        (And, BTW, your views ARE ‘conforming’.)

      • Vreaa: pls scroll up and you’ll see the initial exchange.

        Bubbly: “BLM, you have absolutely no clue about economics.”

        Hence the subsequent exchanges.

      • Vreaa: to which I responded:

        “Again, it’s fine to have a go at me but make your argument so we can have an intelligent discussion.

        What don’t you agree?”

        All this preceded to what you’ve highlighted.

    • The average BC citizen’s non-mortgage consumer debt is $38,000, higher than any other province.
      At what point does debt become ‘unmanageable’?

      • Vreaa: 38k is just a tiny tad bit higher than Alberta if you recall the stats I linked to last week.

        We ultimately need to see the asset side of the consumer to make a judgement (ie the balance sheet).

        We can’t jump to conclusions just because 38k seems an unreasonable sum to one’s self situation.

        And if you take the average of anything you’ll see that averages are a poor indicator of reality. You could have a very small segment of very highly indebted individuals who skews the average.

        What is much more telling is delinquencies. I would start to worry if that ticked up month-over-month.

  2. Investments is what drives an economy forward, technological progress, simplifying manual time consuming tasks so people can do more “productive/higher valued” tasks, better use of resources, new resources, etc, etc. Where does investments come from? It’s from savings!!! It might take the form of debt or equity but the source of all that is savings. If there are no savings then there will be no investment for the future. Increasing consumer debt means more and more savings are diverted to consumption rather than investments and that’s a detriment, even if the current GDP numbers are going up.

    The fact that we have such an infrastructure deficit where a lot of our power/water/sewery/other infrastructures are all decades old using decades old techonlogy and on verge of falling apart with no ready reserve funds to replace them shows just how much lack of savings we have. Remember building a power plant with 40 years expected operating life doesn’t mean we can just spend the $50M to build it and then forget about it. No, we should have been saving at least $1.25M just to account for deprecation and maybe even more for inflation and more expensive technology. Currently we have a lack of savings and that could explain why Canadian productivity is always lagging other countries.

    The paradox of thrift is only really valid if people are saving cash money under mattress and not recycling it into the economy in forms of equity and debt. I don’t think that’s a problem right now in Canada.

    • Spacr889: if consumers do not drive demand, the entire economy would collapse. What good would money to for investments if no one is buy and manufacturing is not needed?

      Just know this, for every dollar printed it is worth about $8 to the real economy.

      Example:
      Banks lend $1 (which means debt for someone), the borrower spends it. The person who earns it, puts it back into the bank. The bank can then re-lend 80c of this dollar to a new borrower. And it goes on.

      So, banks are like amplifiers to the economy. Without borrowers (debt) the economy stalls. Debt is not evil in all its forms.

  3. BLM: I just wanted to mention that it looks like you got a bit of an unfair rap towards the beginning of these comments. My opinions are in-line with those you have expressed here. Cheers!

    • I’d actually agree, if we base things this thread alone.
      For a more comprehensive understanding of the exchanges on this thread, however, it’d be necessary to see them in light of BLM’s last 280+ posts.

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