Any guesses as to what the townhouse market will do in a falling market? The obvious answer is that townhouse prices will fall, but will they fall as badly as, say, condos prices are likely to fall? Given the high cost of houses in Victoria, I'm always surprised that townhouses haven't become a more popular option here. You can buy a three bedroom townhouse that's built post-1980, for instance, for far cheaper than you can buy a comparable house. But are townhouses especially volatile?
On the topic of town homes, what is people’s opinion of strata town home (council, fees, contingency found) versus strata duplex that does not comply with the strata property act? (No contingency, no fees, etc?)
As far as town home prices I see strong demand in the core. Most young families cannot afford a SFH and combine that with 5-year fixed rates as low as 3.29% to 3.39% sales will continue to occur. Just a question of whether there will be enough inventory to put downward pressure on prices, or vice versa?
I know that many people (myself included) balk at paying strata fees - however home ownership has even greater "hidden" expenses. For my house, the annual property taxes ($2350 after homeowner discount), insurance ($750), and contingency fund for repairs ($2000) works out to $425/month ($5100/12 months). Modest grounds maintenance would cost another $175/month. In order to cover expenses with my house that are covered by a typical strata townhouse, I need about $600/month.
It is no wonder that homeowners who are finding their finances "stretched" by their mortgage payments are having a hard time making ends meet ... and may opt to sell.
I also estimate that after my mortgage is paid off, I'll need about $1000/month to cover the above expenses and minor upgrades.
Marko, I think a strata is better than a duplex. I think owners are a little more protected with a strata due to protective legislation. With a duplex, you have a lot less control and have more risk. If a person was concerned about fees, then they can always find a unit with a low cost structure.
I think there is a big gap in Victoria for the Townhome market. Compared to Vancouver, it seems the supply in Victoria is low. The reason is that housing has historically been more affordable in Victoria so that market wasn't needed. But now, it's much harder to jump into a SFH.
I also think there is a lifestyle factor as well. Some people just don't want a big home and would rather spend their weekend doing things than working on their yard or home. But for some of those people, a condo isn't big or private enough.
Historically, condos and townhomes have faired better in downturns than SFH's, or at least in Vancouver. Condos really haven't really faced a substantive downturn in Victoria in the past.
Robert, what's your interest in such a building? Want to buy? Develop? Or purchase part of? Is that the new building just across from the Shell that is being built? Or is it the one further west that was recently for sale?
Having heard my mom, brother and a couple friends talk about strata politics over the years, I have no interest in ever dealing with that myself. One of them went from two cats to one cat to talking about banning pets all together. Another voted to reduce the number of visitor parking spaces, so now I have to park on the street when I visit.
If they hire a management company you have no idea whether they are actually keeping up on the maintenance, and if they don't hire a management company you can pretty much guarantee that they aren't. Special assessments for things like roof and fence repair are pretty much expected, and there's always the possibility of a leaky condo scenario wiping you out completely.
The absolute worst would be a bare land strata. All the hassle and expense of maintaining your own house with all the aggravation and some of the expense of a strata. No thanks, I'd rather rent. At least then the person telling me what I can't do also has to replace my appliances when they break.
Woh! Condos faired better than SFHs in Vancouver during a downturn? On which planet are we talking about?
I used to own a condo in Vancouver, and sold it just in time. Condos got absolutely hammered in Vancouver in the 90s. I have lots of friends who lost quite a bit of money in those years. One friend lost his job and had to move back home. He got another job at a slightly lower wage, but couldn't sell the condo. He had to subsidize the condo for 5 years until it went back up in value enough to sell it.
It sucked living in a condo; you are better off to rent an apartment. If you get a nut for a neighbor you can get them kicked out, if they own you can "fine" them. Try to get blood from a stone.
Townhouses faired much better than condos, but not as well as houses. It isn't a bad way to live in Vancouver and I have friends that enjoy it. I would by far prefer a townhouse to a suited house and would avoid a duplex at all costs.
Leo, people get paid in constant dollars and pay their mortgage in constant dollars. Real dollars are great for academics but not the real world. All the inflation means is that houses became more affordable over that period. Better to buy at the start of inflation than the end.
IMO... The point still stands. It was hardly a correction.
My recollection is that there was a substantial correction to Victoria house prices between 1982 and 1986, with some houses at the upper end dropping in price by 40% or more. Does anyone have stats for that period?
Dave your graphs don't mean squat...I can tell you that I know several people in the mid 90's that took a bath on their condos. That was assuming they could even sell them....leaky condos!!!!! remember that?
condos that sold for close to 200k a few years earlier were going for 130 - 140k and like I said they were AUCTIONING units off during this time. The condos at Johnson and Quadra come to mind.
That is the reality not some stupid graph. I was there, were you? if you were you wouldn't be talking out your A$$.
Ya, ya... leaky condos. A lot of people did take a major hit, but it wasn't the whole market. If it was, it would obviously show up in the data.
So basically you have one anecdote and I have a graph that averages out thousands of data points, and yet somehow I am the fool?
I already addressed Leo's point... who cares about real dollars? Do you buy groceries in real dollars? Do you pull out a $1 bill at Safeway and tell them it used to buy you a gallon of milk? We all live and die in constant dollars. Real dollars are great if you are writing an academic paper, but don't work well for people in the real world.
You make it sounds like the guy who bought at the start of inflation lost out. Hardly. His income went up during that period, he built equity and by the end of it, his payments were that much more affordable. He lost nothing. He's better off than the guy who buys at the same price 7 years later.
Leo, people get paid in constant dollars and pay their mortgage in constant dollars. Real dollars are great for academics but not the real world.
Uhh.. We're talking about the magnitude of a correction to condos. The _most_ important thing there is affordability and it's really the only sane way to define a correction. If you're not dealing with inflation adjusted values you're totally out to lunch and detached from the real world.
The average condo value corrected by about a quarter from 1994 to 2001. You can argue semantics but ignoring inflation is certainly not a valid argument to explain away a correction.
Better to buy at the start of inflation than the end.
Odd words to use w.r.t inflation, but the last time inflation "started" was after the depression. It hasn't "ended" since.
Leo, with all due respect, you are grasping at straws. Nobody and I mean nobody thinks about real dollars. If you ask somebody what they paid for a house in 1985, do they say $75,000, or do they say $500,000 in present dollars corrected for inflation?
When people buy real estate (or anything), they remember constant dollars. I do and I know you do.
If I showed that graph to 100 people, 99 would say prices were flat during the 90's.
You make it sounds like the guy who bought at the start of inflation lost out. Hardly. His income went up during that period, he built equity and by the end of it, his payments were that much more affordable. He lost nothing. He's better off than the guy who buys at the same price 7 years later.
Haha. Talk about simplistic thinking. What has that other guy been doing for 7 years? If they are both FTBs at the same age, then the guy in 7 years is certainly better off. In fact he's 25% better off as I said.
If the other guy was renting during that time, it is a tricky calculation that depends on a hundred variables. What was the rent, what was his investment return, what were the condo fees, were there any special assessments for leaky condos, etc etc.
Also, even discounting inflation that first guy lost on average 20k of equity. Hardly as black and white as you say. I'd say it is pretty damn unlikely that first guy is better off during that period.
Leo, you're digging. This isn't complicated. You're trying to rationale an inane point. Both our points are correct. In constant dollars, prices did not substantially correct. In real dollars (whatever that means), prices moderately corrected.
If you are stuck on real dollars, then feel free to wait out flat pricing for a few more years. Go ahead and gloat to your friends that you bought at the 'real bottom'. Show them graphs and pull out the calculator. Show them how you invested your extra $50/month in a 3 month T-Bill and how you are better off (rounded to the nearest penny) for having done it.
As to your point, he is not 25% better off. He gets to pay in constant dollars, not depreciated real dollars. Is his affordability better relative to what it was for his friend 7 years prior? Ya, but who cares? His friend still made the mortgage payments and is 7 years ahead of the nerd.
In constant dollars, prices did not substantially correct.
Fine, I agree that when using an incorrect measure of value you are correct there was not a large correction in condo values.
Go ahead and gloat to your friends that you bought at the 'real bottom'.
You seem to be under some sort of illusion that real estate is a competition. I really don't give two rats whether the reality of what constitutes a correction is lost on you or anyone else. All I care about is what makes sense for us, both financially and from a lifestyle perspective.
As to your point, he is not 25% better off.
Nowhere did I say that. Feel free to keep building that strawman though.
LeoS, "Nowhere did I say [that he was 25% better off.]" LeoS, " In fact he's 25% better off as I said."
Ya, you did.
I agree, it's not a competition. That's kinda my point. You should buy when you can afford it. If the guy who bought 'early' could afford it at that point in time, he is that much better off (25%) 7 years later.
The point isn't lost on me. It's lost on you. I understand real and constant dollars quite well (there isn't much too understand). You are trying to apply it to something that doesn't occur. Did the 'early buyer's' mortgage go up by 25% because he paid 25% too much in real dollars? Did his pay stay flat while the other guys went up? Think it through and you should see my point.
Dave the Real-Estate Guru back to making up his own economic theories...ha-ha!
I guess if I bought gold and it held at oh, I dunno, $1350 an ounce for the next 10 years while inflation burned away at 4-5% a year then Ol' Dave would say I was still ahead of the game...
Fail! Gold would only hedge me against inflation if it matched or beat inflation during the period for which I held it - minus any extraneous costs such as storage, of course....
You have to calculate things in inflation-adjusted dollars in order to realize if value has been lost or gained. Just basic economics 101....
LeoS, "Nowhere did I say [that he was 25% better off.]" LeoS, " In fact he's 25% better off as I said."
Sorry, I forgot I wrote that line. My main point was that there are many factors to consider and you didn't consider any of them before making a blanket statement about someone being better off.
If the guy who bought 'early' could afford it at that point in time, he is that much better off (25%) 7 years later.
Now you are really confused.
Did the 'early buyer's' mortgage go up by 25% because he paid 25% too much in real dollars? Did his pay stay flat while the other guys went up?
You claim to understand inflation, but I really don't think you do. You're fixated on dollar amounts, when all that matters is affordability.
Dave, inflation does matter. To say it only matters for academics is, with all due respect, naive.
In particular it matters if a downturn drags out over years. A lot of real estate pumpers will actually tell you that you will be fine since your salary will go up. If your salary would not go up, You'd be in trouble after some period of time.
So, it's shortsighted to say that inflation does not matter for an asset class that take most people a couple decades to pay off.
Leo S wrote: When I was a kid a can of coke was 75 cents from the machine.
When I was a kid, I could buy a bottle of pop for a dime ... I feel old! :-(
I know two men who purchased houses in 1969. The first man bought a newly constructed home in Royal Oak for 14K, twice his annual income. The second man bought a ten year old home on Ten Mile Point for 32K, 2.5 times his annual income. Both houses were affordable. Both houses were paid off in 25 years.
To paraphrase Just Jack, were these mortgages paid in real or constant dollars?
If the unexpected happens and you have to sell your condo in that 10 year period, inflation does matter. That you can't even get the same amount of money for it that you paid 10 years earlier, and then have to pay the realtors and taxes. A pretty poor investment.
The other thing is special assessments. I don't know anyone who has owned a condo that hasn't paid at least one. When I was in construction multi residential was what you feared the most; BORING. Highly repetitive. You always ended up with a tradesman working as a working foreman with monkeys working under him. A recipe for poor quality, and this hasn't changed. There will be many more special assessments to be paid by the newest batch of owners.
I can honestly say that I have never known a single person who has had a positive experience owning a condo. Most seem to last only 2 years before selling.
Ryan: re. condo politics: You are absolutely right. My husband and I sold our condo 9 years ago and have been renting since, the has since appreciated 100% but we still have no regrets. No more condo nazis for us, ever.
So now, you can in theory just get a realtor to charge you for posting your place on MLS... but without paying him extra for his 'expert' knowledge on how to price it correctly, how will you know what the price should be set at? Well it turns out that most people can figure it out for themselves if only they had access to the same MLS stats & info that the realtors have.
People here are talking seriously about price trends over decades in real dollars? Yeesh.
So I guess that deflation and inflation don't matter then? Someone should have told Germany that after the war, or the Japanese for the last decade.
If inflation isn't important, I wonder why every governing body in the world watches it like a hawk and sweats every move it makes?
Leo, please stick to best practices when you are pulling numbers as I know I appreciate it.
Anyways, on a side note, the reason I thought I would jump on is that I just tripped across a housing article on MSN that is surprisingly negative in general tone. The media is so powerful these days in supporting or changing beliefs I find it as relevant as monthly sales/prices.
850 PENDENE PL sold recently for 430k, 50k under assessment.. 1400 sq feet, cul de sac on the Galloping Goose near swan lake. I'm sure it needed some significant work, but that's starting to look pretty good. Keep those kinds of places coming!
In what seems like a desperate political move to save his butt from the HST fiasco, Campbell came on TV a couple of days ago(at a cost of $240,000) to announce that he is giving out "free" money to 1.9 Million BC residents come 2011 - that means YOU.
Here's some quick numbers: "For someone earning $50,000, the cut Campbell announced today will reduce income taxes by $354. For someone earning roughly $72,000 or above, the difference will be $616. A person earning $20,000 will keep an extra $68 a year."
The NDP had this to say about it: "The 15 per cent tax reduction announced by Premier Campbell in his TV address is NOT a cut restricted to those making less than $72,000 per year; it is a tax cut for everyone on the first $72,000 of their income. That means that the 20 per cent of taxpayers who make over $72,000 a year will get 50 per cent of the total benefits. The total lost revenue is estimated by the Campbell government to be $568 million; those making over $72,000 a year will collectively reap $284 million per year in tax cuts. Once again Campbell has tried to make it look like he is helping the middle class, when the truth is he is helping higher income earners."
While I would normally appreciate the extra few hundred bucks like anybody else, I seriously do NOT appreciate it being derived by adding another 586 MILLION to our provincial deficit! I don't need this "loan", nor does this help those who do long term. You can't help those in debt, by further giving them (indirect) loans!
End 'extend & pretend' and fix our fiscal deficits, deal with unemployment and further tighten housing & mortgage rules such people stop using their houses as ATMs or speculate about housing like as if it was some kind of no brainer hot stock.
39 comments:
Any guesses as to what the townhouse market will do in a falling market? The obvious answer is that townhouse prices will fall, but will they fall as badly as, say, condos prices are likely to fall? Given the high cost of houses in Victoria, I'm always surprised that townhouses haven't become a more popular option here. You can buy a three bedroom townhouse that's built post-1980, for instance, for far cheaper than you can buy a comparable house. But are townhouses especially volatile?
On the topic of town homes, what is people’s opinion of strata town home (council, fees, contingency found) versus strata duplex that does not comply with the strata property act? (No contingency, no fees, etc?)
As far as town home prices I see strong demand in the core. Most young families cannot afford a SFH and combine that with 5-year fixed rates as low as 3.29% to 3.39% sales will continue to occur. Just a question of whether there will be enough inventory to put downward pressure on prices, or vice versa?
Marko
There is a mixed use commercial/residential building on oak bay ave that just sold. can you find out what it was listed for and sold for.
I have an interest in this type of property.
I know that many people (myself included) balk at paying strata fees - however home ownership has even greater "hidden" expenses. For my house, the annual property taxes ($2350 after homeowner discount), insurance ($750), and contingency fund for repairs ($2000) works out to $425/month ($5100/12 months). Modest grounds maintenance would cost another $175/month. In order to cover expenses with my house that are covered by a typical strata townhouse, I need about $600/month.
It is no wonder that homeowners who are finding their finances "stretched" by their mortgage payments are having a hard time making ends meet ... and may opt to sell.
I also estimate that after my mortgage is paid off, I'll need about $1000/month to cover the above expenses and minor upgrades.
Marko, I think a strata is better than a duplex. I think owners are a little more protected with a strata due to protective legislation. With a duplex, you have a lot less control and have more risk. If a person was concerned about fees, then they can always find a unit with a low cost structure.
I think there is a big gap in Victoria for the Townhome market. Compared to Vancouver, it seems the supply in Victoria is low. The reason is that housing has historically been more affordable in Victoria so that market wasn't needed. But now, it's much harder to jump into a SFH.
I also think there is a lifestyle factor as well. Some people just don't want a big home and would rather spend their weekend doing things than working on their yard or home. But for some of those people, a condo isn't big or private enough.
Historically, condos and townhomes have faired better in downturns than SFH's, or at least in Vancouver. Condos really haven't really faced a substantive downturn in Victoria in the past.
Robert, what's your interest in such a building? Want to buy? Develop? Or purchase part of? Is that the new building just across from the Shell that is being built? Or is it the one further west that was recently for sale?
Dave said...Condos really haven't really faced a substantive downturn in Victoria in the past.
Huh? Can you say leaky condos??? They sure as hell faced a significant downturn AND condos were overbuilt in the early 90's IN VICTORIA.
I remember a few developments being auctioned off and the market going down and then sideways for a looooong time.
Condos are going to get hammered in this correction....stay tuned.
Having heard my mom, brother and a couple friends talk about strata politics over the years, I have no interest in ever dealing with that myself. One of them went from two cats to one cat to talking about banning pets all together. Another voted to reduce the number of visitor parking spaces, so now I have to park on the street when I visit.
If they hire a management company you have no idea whether they are actually keeping up on the maintenance, and if they don't hire a management company you can pretty much guarantee that they aren't. Special assessments for things like roof and fence repair are pretty much expected, and there's always the possibility of a leaky condo scenario wiping you out completely.
The absolute worst would be a bare land strata. All the hassle and expense of maintaining your own house with all the aggravation and some of the expense of a strata. No thanks, I'd rather rent. At least then the person telling me what I can't do also has to replace my appliances when they break.
Mark, I hardly call this a major downturn:
http://vreb.org/pdf/historical_statistics/GRAA2009.pdf
Dave: Remember those graphs are not inflation adjusted. What is flat is actually down.
So back of the envelope calculation, condos dropped ~25% between 1994 and 2001. That's pretty significant.
Woh! Condos faired better than SFHs in Vancouver during a downturn? On which planet are we talking about?
I used to own a condo in Vancouver, and sold it just in time. Condos got absolutely hammered in Vancouver in the 90s. I have lots of friends who lost quite a bit of money in those years. One friend lost his job and had to move back home. He got another job at a slightly lower wage, but couldn't sell the condo. He had to subsidize the condo for 5 years until it went back up in value enough to sell it.
It sucked living in a condo; you are better off to rent an apartment. If you get a nut for a neighbor you can get them kicked out, if they own you can "fine" them. Try to get blood from a stone.
Townhouses faired much better than condos, but not as well as houses. It isn't a bad way to live in Vancouver and I have friends that enjoy it. I would by far prefer a townhouse to a suited house and would avoid a duplex at all costs.
Those are averages, and we all know how little that tells us.
Leo, people get paid in constant dollars and pay their mortgage in constant dollars. Real dollars are great for academics but not the real world. All the inflation means is that houses became more affordable over that period. Better to buy at the start of inflation than the end.
IMO... The point still stands. It was hardly a correction.
My recollection is that there was a substantial correction to Victoria house prices between 1982 and 1986, with some houses at the upper end dropping in price by 40% or more. Does anyone have stats for that period?
CanSpeccy, look no further than the link provided six posts above. No such correction occurred.
OMC, the planet known as reality. Check it:
http://vancouverreflections.com/tag/vancouver-real-estate-news/
Through the 90's, houses corrected in price. Condos and townhomes did not.
Dave your graphs don't mean squat...I can tell you that I know several people in the mid 90's that took a bath on their condos. That was assuming they could even sell them....leaky condos!!!!! remember that?
condos that sold for close to 200k a few years earlier were going for 130 - 140k and like I said they were AUCTIONING units off during this time. The condos at Johnson and Quadra come to mind.
That is the reality not some stupid graph. I was there, were you? if you were you wouldn't be talking out your A$$.
As Leo S said, 25% ain't a correction?
Mark, chill out...it's Friday.
Ya, ya... leaky condos. A lot of people did take a major hit, but it wasn't the whole market. If it was, it would obviously show up in the data.
So basically you have one anecdote and I have a graph that averages out thousands of data points, and yet somehow I am the fool?
I already addressed Leo's point... who cares about real dollars? Do you buy groceries in real dollars? Do you pull out a $1 bill at Safeway and tell them it used to buy you a gallon of milk? We all live and die in constant dollars. Real dollars are great if you are writing an academic paper, but don't work well for people in the real world.
You make it sounds like the guy who bought at the start of inflation lost out. Hardly. His income went up during that period, he built equity and by the end of it, his payments were that much more affordable. He lost nothing. He's better off than the guy who buys at the same price 7 years later.
Leo, people get paid in constant dollars and pay their mortgage in constant dollars. Real dollars are great for academics but not the real world.
Uhh.. We're talking about the magnitude of a correction to condos. The _most_ important thing there is affordability and it's really the only sane way to define a correction. If you're not dealing with inflation adjusted values you're totally out to lunch and detached from the real world.
The average condo value corrected by about a quarter from 1994 to 2001. You can argue semantics but ignoring inflation is certainly not a valid argument to explain away a correction.
Better to buy at the start of inflation than the end.
Odd words to use w.r.t inflation, but the last time inflation "started" was after the depression. It hasn't "ended" since.
Leo, with all due respect, you are grasping at straws. Nobody and I mean nobody thinks about real dollars. If you ask somebody what they paid for a house in 1985, do they say $75,000, or do they say $500,000 in present dollars corrected for inflation?
When people buy real estate (or anything), they remember constant dollars. I do and I know you do.
If I showed that graph to 100 people, 99 would say prices were flat during the 90's.
Is your point technically right? Ya sure.
You make it sounds like the guy who bought at the start of inflation lost out. Hardly. His income went up during that period, he built equity and by the end of it, his payments were that much more affordable. He lost nothing. He's better off than the guy who buys at the same price 7 years later.
Haha. Talk about simplistic thinking. What has that other guy been doing for 7 years? If they are both FTBs at the same age, then the guy in 7 years is certainly better off. In fact he's 25% better off as I said.
If the other guy was renting during that time, it is a tricky calculation that depends on a hundred variables. What was the rent, what was his investment return, what were the condo fees, were there any special assessments for leaky condos, etc etc.
Also, even discounting inflation that first guy lost on average 20k of equity. Hardly as black and white as you say. I'd say it is pretty damn unlikely that first guy is better off during that period.
If you ask somebody what they paid for a house in 1985, do they say $75,000, or do they say $500,000 in present dollars corrected for inflation?
When I was a kid a can of coke was 75 cents from the machine. Now it's $1.25. That doesn't mean that we've had a radical appreciation in Coke value.
We're talking about a correction in the value of condos. Not their constant dollar amount, which is totally meaningless.
Leo, you're digging. This isn't complicated. You're trying to rationale an inane point. Both our points are correct. In constant dollars, prices did not substantially correct. In real dollars (whatever that means), prices moderately corrected.
If you are stuck on real dollars, then feel free to wait out flat pricing for a few more years. Go ahead and gloat to your friends that you bought at the 'real bottom'. Show them graphs and pull out the calculator. Show them how you invested your extra $50/month in a 3 month T-Bill and how you are better off (rounded to the nearest penny) for having done it.
As to your point, he is not 25% better off. He gets to pay in constant dollars, not depreciated real dollars. Is his affordability better relative to what it was for his friend 7 years prior? Ya, but who cares? His friend still made the mortgage payments and is 7 years ahead of the nerd.
In constant dollars, prices did not substantially correct.
Fine, I agree that when using an incorrect measure of value you are correct there was not a large correction in condo values.
Go ahead and gloat to your friends that you bought at the 'real bottom'.
You seem to be under some sort of illusion that real estate is a competition. I really don't give two rats whether the reality of what constitutes a correction is lost on you or anyone else.
All I care about is what makes sense for us, both financially and from a lifestyle perspective.
As to your point, he is not 25% better off.
Nowhere did I say that. Feel free to keep building that strawman though.
LeoS, "Nowhere did I say [that he was 25% better off.]"
LeoS, " In fact he's 25% better off as I said."
Ya, you did.
I agree, it's not a competition. That's kinda my point. You should buy when you can afford it. If the guy who bought 'early' could afford it at that point in time, he is that much better off (25%) 7 years later.
The point isn't lost on me. It's lost on you. I understand real and constant dollars quite well (there isn't much too understand). You are trying to apply it to something that doesn't occur. Did the 'early buyer's' mortgage go up by 25% because he paid 25% too much in real dollars? Did his pay stay flat while the other guys went up? Think it through and you should see my point.
Once, I had a student loan and I thought that if I stretched the payments out for five years then I would be paying less in real dollars at the end.
However, my salary did not increase in those five years. So did I pay the loan back in real dollars or constant dollars?
Dave the Real-Estate Guru back to making up his own economic theories...ha-ha!
I guess if I bought gold and it held at oh, I dunno, $1350 an ounce for the next 10 years while inflation burned away at 4-5% a year then Ol' Dave would say I was still ahead of the game...
Fail! Gold would only hedge me against inflation if it matched or beat inflation during the period for which I held it - minus any extraneous costs such as storage, of course....
You have to calculate things in inflation-adjusted dollars in order to realize if value has been lost or gained. Just basic economics 101....
LeoS, "Nowhere did I say [that he was 25% better off.]"
LeoS, " In fact he's 25% better off as I said."
Sorry, I forgot I wrote that line. My main point was that there are many factors to consider and you didn't consider any of them before making a blanket statement about someone being better off.
If the guy who bought 'early' could afford it at that point in time, he is that much better off (25%) 7 years later.
Now you are really confused.
Did the 'early buyer's' mortgage go up by 25% because he paid 25% too much in real dollars? Did his pay stay flat while the other guys went up?
You claim to understand inflation, but I really don't think you do. You're fixated on dollar amounts, when all that matters is affordability.
Dave, inflation does matter. To say it only matters for academics is, with all due respect, naive.
In particular it matters if a downturn drags out over years. A lot of real estate pumpers will actually tell you that you will be fine since your salary will go up. If your salary would not go up, You'd be in trouble after some period of time.
So, it's shortsighted to say that inflation does not matter for an asset class that take most people a couple decades to pay off.
Ah the old constant dollar saw. Never gets old, never gets correct either.
Leo S wrote: When I was a kid a can of coke was 75 cents from the machine.
When I was a kid, I could buy a bottle of pop for a dime ... I feel old! :-(
I know two men who purchased houses in 1969. The first man bought a newly constructed home in Royal Oak for 14K, twice his annual income. The second man bought a ten year old home on Ten Mile Point for 32K, 2.5 times his annual income. Both houses were affordable. Both houses were paid off in 25 years.
To paraphrase Just Jack, were these mortgages paid in real or constant dollars?
If the unexpected happens and you have to sell your condo in that 10 year period, inflation does matter. That you can't even get the same amount of money for it that you paid 10 years earlier, and then have to pay the realtors and taxes. A pretty poor investment.
The other thing is special assessments. I don't know anyone who has owned a condo that hasn't paid at least one. When I was in construction multi residential was what you feared the most; BORING. Highly repetitive. You always ended up with a tradesman working as a working foreman with monkeys working under him. A recipe for poor quality, and this hasn't changed. There will be many more special assessments to be paid by the newest batch of owners.
I can honestly say that I have never known a single person who has had a positive experience owning a condo. Most seem to last only 2 years before selling.
Ryan: re. condo politics: You are absolutely right. My husband and I sold our condo 9 years ago and have been renting since, the has since appreciated 100% but we still have no regrets. No more condo nazis for us, ever.
The MLS fight? It ain't over yet!
So now, you can in theory just get a realtor to charge you for posting your place on MLS... but without paying him extra for his 'expert' knowledge on how to price it correctly, how will you know what the price should be set at? Well it turns out that most people can figure it out for themselves if only they had access to the same MLS stats & info that the realtors have.
Mr.4AM
Robert Reynolds - GBA.....
most commerical properties are not listed on any databases I have access to...
People here are talking seriously about price trends over decades in real dollars? Yeesh.
So I guess that deflation and inflation don't matter then? Someone should have told Germany that after the war, or the Japanese for the last decade.
If inflation isn't important, I wonder why every governing body in the world watches it like a hawk and sweats every move it makes?
Leo, please stick to best practices when you are pulling numbers as I know I appreciate it.
Anyways, on a side note, the reason I thought I would jump on is that I just tripped across a housing article on MSN that is surprisingly negative in general tone. The media is so powerful these days in supporting or changing beliefs I find it as relevant as monthly sales/prices.
http://money.ca.msn.com/banking/homebuyersguide/article.aspx?cp-documentid=26127042
850 PENDENE PL sold recently for 430k, 50k under assessment.. 1400 sq feet, cul de sac on the Galloping Goose near swan lake. I'm sure it needed some significant work, but that's starting to look pretty good.
Keep those kinds of places coming!
Campbell announces surprise tax cuts.
In what seems like a desperate political move to save his butt from the HST fiasco, Campbell came on TV a couple of days ago(at a cost of $240,000) to announce that he is giving out "free" money to 1.9 Million BC residents come 2011 - that means YOU.
Here's some quick numbers:
"For someone earning $50,000, the cut Campbell announced today will reduce income taxes by $354. For someone earning roughly $72,000 or above, the difference will be $616. A person earning $20,000 will keep an extra $68 a year."
The NDP had this to say about it:
"The 15 per cent tax reduction announced by Premier Campbell in his TV address is NOT a cut restricted to those making less than $72,000 per year; it is a tax cut for everyone on the first $72,000 of their income. That means that the 20 per cent of taxpayers who make over $72,000 a year will get 50 per cent of the total benefits. The total lost revenue is estimated by the Campbell government to be $568 million; those making over $72,000 a year will collectively reap $284 million per year in tax cuts. Once again Campbell has tried to make it look like he is helping the middle class, when the truth is he is helping higher income earners."
While I would normally appreciate the extra few hundred bucks like anybody else, I seriously do NOT appreciate it being derived by adding another 586 MILLION to our provincial deficit! I don't need this "loan", nor does this help those who do long term. You can't help those in debt, by further giving them (indirect) loans!
End 'extend & pretend' and fix our fiscal deficits, deal with unemployment and further tighten housing & mortgage rules such people stop using their houses as ATMs or speculate about housing like as if it was some kind of no brainer hot stock.
Mr.4AM
Post a Comment