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Real Estate market |
web2000
Senior Desi
Member since: May 06
Posts: 840
Location:
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Quote:
Originally posted by bhootnath
I don't know which area/what type of house you are talking about where you get an apartment for rent where it will just cost 100,000 for 10 years of rent.
Average2 bedroom condo costs $1400*12=16800 so for 10 years it will be 168000. Now even after speding that money what you have at the end of 10 years..ghanta..babaji ka. so for 10 years you are taking a loss of $168K.
If you buy a house now and corrects by 20% it becomes $400K. lets say it never appreciates. What will be the worst case scenario..?you will be paying around 90K for years in expenses including bank interest whereaas you would have paid $84K in the rent during those 5 years..your loss will be of $106K during initial 5 years..but as years pass by the loss on rental house will keep piling whereas the expenses on house will be lowering as interest charged will be less n less. At the end of 25 years you will have house fully paid...where as for 25 years you will be paying rent and nothing will be there for you.
Simple calculation if you buy the similar condo which you are currently renting for $1400 per month.
the total you will be paying if you buy a condo fo $300K that never appreciates: $450K
The total rent you will pay for 25 years: $420K
After 25 years for the same price you will have your own house if you buy. you will have a ghanta if you rent.
So for a 500K House you will put 20% say $100K. Now over the next 5 yearseven if house appreciates by 4% annually it becomes around $608 less annual expenses including mortgage interest $90K. Total gain of $18K+5 years of rental money for similar condo approx $1400 i.e. $84K so the total benefit of $102K. That too on the downpayment of $100K you doubled the investement. Just increase that number by 1 or 2 % and then see the difference. May be when I get time, will create a spredsheet that will show the benefits of owning a house even if correction occurs. (Not condo though)
To justify your opinion, you can pick 3 bedroom condo and it will cost even more (> $168,000). For one bedroom apartment u don't spend more than $100,000 in rent but for 3 bedroom house you will definitely waste more in property tax,insurance and other unexpected expenses of house.
I never said one has to keep paying rent for 25 years. Renting is the best way to save money and buy house at the right time.
Wait for the correction, it will definitely happen.
Above all renting brings you so many benefits like freedom to move, enjoy vacation.
If not then at the current interest rates everybody would have become home owners.
Quote:
After 25 years for the same price you will have your own house
Then you will realize that you spent your precious years working like a slave to build this useless material. Even after freeing that house you will be forced to pay property tax,insurance etc. The only expense which will go is the mortgage. Other expenses will remain 80% of the renting.
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Last edited by: web2000 on 23-02-12 11:14:12 |
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23-02-12 11:03:31 |
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bhootnath
Senior Desi
Member since: Mar 11
Posts: 737
Location:
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Quote:
Originally posted by web2000
Wait for the correction, it will definitely happen.
Are you freaking kidding ...Nothing is definite, except for death  . People who waited for correction to happen for last 2-5 years already doomed. Lets say 3 years back based on some of the forum here with charts and stats, you put off a decision to buy a house "waiting for THE correction". Houses already appreciated 30% or more. Now even if correction occurs lets say by 20%, you will still be paying 10% more for the same house (3yr older though) and then 3 years of rent, down the drain.....
Go ahead wait for THE correction..yeah someday it may happen..may be only for a day...
man...you can lead a horse to water, but you can't make it drink.
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Last edited by: bhootnath on 23-02-12 12:54:45 |
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23-02-12 12:37:39 |
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ashedfc
Senior Desi
Member since: Jun 10
Posts: 2156
Location: GTA
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Quote:
Originally posted by BlueLobster
Quote:
Originally posted by ashedfc
The current trend is 30years (from 1981 onwards) in the making.... you guys are all talking about couple of years here & there...... the big question is the 30year interest rate trend... once the trend reverses.... prepare for some nasty years (its getting closer by the day)..
This is the last 220 years graph (since 1790), & history is the best proof, history never repeats (but it rhymes)..
LINK
Nobody I know looks at a 220 yr. graph to make a home buying decision. And nobody I know can predict with any certainty when interest rates will rise again, even if they look at this graph. Can you?
What does "getting closer by the day" mean"? Is there any concrete timeframe? 1 yr., 2 yrs, 5 yrs, 5 centuries? In all cases, the statement is factually correct.
True nobody looks at 220 years (rather very few have access to this info). Its also true that you cant analyse a 30yrs trend looking at 5yr data. All mortgages are funded by the bond market, which is based on interest rates. This current long term trend of interest rates started in 1981 & is 30years in progress, & based on history it has to reverse some day in the future. Day by day we are getting close to the reversal of this trend, as its clearly visible from the previous reversals......
No there's no concrete time frame, & no one can claim to know the definite time; we all know the reversal will happen for sure. We only know that we are getting closer.. Once the trend reverses, I guess lot of us are unprepared (or will be caught unprepared)..
There are opportunities: Once the interest rate trend reverses, high inflation is a given, bond market taking a hit, & in Real Estate "farmland will become the investment of choice"...... Even today anyone buying farmland will make better profits going forward..
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23-02-12 15:12:23 |
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rahul_singh23
Senior Desi
Member since: Apr 05
Posts: 989
Location:
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"Meaning of negative equity".....
It seems there is not a single scenario when a person should not buy home and no-one in GTA (Canada?) has negative equity.
Quote:
Originally posted by bhootnath
Are you freaking kidding ...Nothing is definite, except for death . People who waited for correction to happen for last 2-5 years already doomed. Lets say 3 years back based on some of the forum here with charts and stats, you put off a decision to buy a house "waiting for THE correction". Houses already appreciated 30% or more. Now even if correction occurs lets say by 20%, you will still be paying 10% more for the same house (3yr older though) and then 3 years of rent, down the drain.....
Go ahead wait for THE correction..yeah someday it may happen..may be only for a day...
man...you can lead a horse to water, but you can't make it drink.
1. Why do Canadian Govt. and BOC feel so worried about Canadian personal debt (highest in western world) and CMHC future?
Bank of Canada issues fresh warning on debt (
LINK
2. Why did same logic did not work in US and EU countries? Remember very few US states allows walk away.
3. How do you see effect of Canadian sub-prime (0/40,5/35, super low interest rates, 5/30, 5% cash back) when majority of first time buyers are in sub-prime and barely saving anything?
4. What do you think after 5 years when bank figures out there are lot of sub-prime owners have mortgage more than home value and no saving for pay difference?
5. Do you think rent/own (mortgage interest, lost opportunity of down payment, taxes, fees, maintenance, insurance) ratio matters?
6. Does negative equity matter and affect on RE market? Home foreclosures skyrocket in Kelowna
LINK
"People weren't able to achieve their goals in doing this and so they quit making payments," he said.
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Last edited by: rahul_singh23 on 23-02-12 16:50:26 |
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23-02-12 15:45:21 |
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web2000
Senior Desi
Member since: May 06
Posts: 840
Location:
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Quote:
Originally posted by bhootnath
Quote:
Originally posted by web2000
Wait for the correction, it will definitely happen.
Are you freaking kidding ...Nothing is definite, except for death . People who waited for correction to happen for last 2-5 years already doomed. Lets say 3 years back based on some of the forum here with charts and stats, you put off a decision to buy a house "waiting for THE correction". Houses already appreciated 30% or more. Now even if correction occurs lets say by 20%, you will still be paying 10% more for the same house (3yr older though) and then 3 years of rent, down the drain.....
Go ahead wait for THE correction..yeah someday it may happen..may be only for a day...
man...you can lead a horse to water, but you can't make it drink.
Nothing is definite and no one can see the future. You are calculating by taking a small period(2-5 yrs). First of all you need to know that owning an overpriced house can also put you in debt. It is no more different from any other type of investment. Let us go by your example,
Case-1
If I buy a house today and it does not appreciate at all for next 5 years, then at the end I will be losing a significant amount.
Case-2
If I buy a house today and it keeps appreciating for next 5 years, then I will be a winner. It is almost a decade that property is appreciating but this trend will not last long. This case is going to be much risky.
Case-3
If I buy a house today and it depreciates in next 5 years, then I will be the biggest loser.
There are still 2 cases above where I can win if I wait.
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23-02-12 15:47:32 |
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bhootnath
Senior Desi
Member since: Mar 11
Posts: 737
Location:
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Good luck waiting web2000. Just curious since how long have been waiting for market to correct?
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23-02-12 18:12:37 |
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infocan
Senior Desi
Member since: Sep 03
Posts: 276
Location:
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i bought a house in England in 2007. I have to sell it in 2010 as was moving to canada. If I had decided to keep my self to be on rent in england for that period time on similar house . I would have 80,000 CAD more in my hand. So basically I make loss when calculating the total cost of less value house selling, laywer fee,house maintance . insurnce cost. So loss and gain happends when person make a exit
Then in dec 2010I book a new detach house in canada. The booking rate of same house is 70,000 CAD more at present . So I have some feel good factor. But people must know loss and gain happens when people try to make exit. And loss is very painful when it happens
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infocan
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23-02-12 20:47:18 |
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rahul_singh23
Senior Desi
Member since: Apr 05
Posts: 989
Location:
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Is Canada different?
Canada's housing bubble: This time is not different
LINK
Bubbles are hard to see in advance and even harder to know when they will burst. No matter how high prices go, there are always analysts who try to justify them by arguing that “this time things are different”. This was the case during the dot com bubble in late 1990s and this is what has been happening nowadays with the housing bubble in Canada.
I have heard many arguments of why this time it is different. Toronto, for example, is becoming New York or London and current prices are thus justified. Bank economists are also justifying current house prices with convoluted explanations arguing that this time things are different ignoring multiple signals of overvaluation that have worked very well historically and in other environments.
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Attack the logic:
1. Why do Canadian Govt. and BOC feel so worried about Canadian personal debt (highest in western world) and CMHC future?
Bank of Canada issues fresh warning on debt (
LINK
2. Why did same logic (we are different) did not work in US and EU countries? Remember very few US states allows walk away.
3. How do you see effect of Canadian sub-prime (0/40,5/35, super low interest rates, 5/30, 5% cash back) when majority of first time buyers are in sub-prime and barely saving anything?
4. What do you think after 5 years when bank figures out there are lot of sub-prime owners have mortgage more than home value and no saving for pay difference?
5. Do you think rent/own (mortgage interest, lost opportunity of down payment, taxes, fees, maintenance, insurance) ratio matters?
6. Does negative equity matter and affect on RE market ?
Kelowna seems Canadian RE FL. Our RE industry is selling people would pay honestly even in negative equity because they are looking long term. Here you go..
Home foreclosures skyrocket in Kelowna
LINK
"People weren't able to achieve their goals in doing this and so they quit making payments," he said.
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24-02-12 12:17:13 |
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BlueLobster
Admin :Moderator:
Member since: Oct 02
Posts: 3144
Location: Mississauga
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Weren't you posting articles like these 6-7 yrs. back claiming the bubble is going to burst? Have you been renting all along? When will this bubble burst?
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Are you there?
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25-02-12 16:41:03 |
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ashedfc
Senior Desi
Member since: Jun 10
Posts: 2156
Location: GTA
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Quote:
Originally posted by BlueLobster
Weren't you posting articles like these 6-7 yrs. back claiming the bubble is going to burst? Have you been renting all along? When will this bubble burst?
KEEP PATIENCE, these things take time. Its hard to predict a particular date..
Remember the late 1990's, everyone wanted tech stocks (it was either you are in or you are nowhere). & everyone knows, when anything reaches beyond proportion, it is unsustainable.
The current housing/debt boom is not supported by corresponding increase in income. Its similar to what was in US in 2006-2007, everyone said "this time its different"....... truth is - right from Tulip mania to other mania's, it is never different.
Its already happening in Kelowna (foreclosures are very high already). Smart money moves first & exits also first. Its the dumb ones which get caught holding the bag.
This is EPIC in nature, specially the debt load of homeowners.. Not everyone/household has a 6figure salary required to maintain a decent lifestyle.
If the mortgage industry does not practice fraudulent measures, this will burst right-away. Its the fradulent practice which is keeping it alive (much like what happened in other places, remember the LIAR/NINJA loans of US)..
I have no problem with home-owners making decent income; they have nothing to worry, their house even if it looses 10% value they have to live somewhere.......... its the investors where the problem is. And investors panic is the cause of worry.
The most worrying trend is "Several homeowners who have paid down substantial mortgage & built up equity; have borrowed against the equity as Home equity Line of Credit, & used it somewhere; or some have refinanced to the maximum & spent on whatever .. vacation/cruise/luxury/etc". This was not prevalent in the previous Canadian housing burst. This just makes those homeowners more vulnerable..
IMHO: What could trigger... a wild guess is a geopolitical issue causing higher oil price like $200/barrel or more, triggering the next recession; job losses; inability to carry large mortgage amount & a domino effect....
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Last edited by: ashedfc on 25-02-12 21:08:09 |
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25-02-12 21:07:35 |
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Contributors:
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