tag:blogger.com,1999:blog-7123542260692860177.post3822391128189634169..comments2023-12-02T00:38:46.467-08:00Comments on House Hunt Victoria: August wrap upHouseHuntVictoriahttp://www.blogger.com/profile/07456914359088891317noreply@blogger.comBlogger121125tag:blogger.com,1999:blog-7123542260692860177.post-86528281413358416982013-09-09T14:46:51.378-07:002013-09-09T14:46:51.378-07:00"A house doesn't have an intrinsic value....<i>"A house doesn't have an intrinsic value."</i><br /><br />Please. The intrinsic value of a house is the earnings which it can bring to its owner as a business, i.e. a rental.<br /><br />It has nothing with what it cost the builder or owner. I think we can all agree on at least that.<br /><br />If any of you are interested in learning about the basic concepts of stock or other asset valuation (which are not based on what you think the next buyer or buyer of a similar asset is going to pay), try googling "fundamental value". Judging from the conversation to this point, I doubt it.<br /><br />"Price is what you pay, value is what you get." - Warren Buffett.patriotzhttps://www.blogger.com/profile/11154064267408955762noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-73685838606752049022013-09-09T14:26:10.646-07:002013-09-09T14:26:10.646-07:00I'd prefer say it exists, but stop there. If ...I'd prefer say it exists, but stop there. If you were saying "does not exist" to imply a number small enough to ignore, then I don't have nearly as much of a problem with that. I'm not saying I agree, it just resolves the issue I was having understanding what you were saying.Fiduciaryhttps://www.blogger.com/profile/10657843466561214005noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-5961966779463284462013-09-09T13:53:01.411-07:002013-09-09T13:53:01.411-07:00Here’s another example of a home with zero intrins...<i>Here’s another example of a home with zero intrinsic value</i><br /><br />Hey, that looks like a classic Boler. If you know anyone else giving one away lemme know!CShttps://www.blogger.com/profile/03399620869685840906noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-26277818871287396732013-09-09T13:13:29.397-07:002013-09-09T13:13:29.397-07:00Would it be your argument that intrinsic value exi...Would it be your argument that intrinsic value exists - but no one can measure it or tell you what it is?<br /><br />...Real Estate Dark MatterJohnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-75634127720553883602013-09-09T13:00:11.543-07:002013-09-09T13:00:11.543-07:00Here’s another example of a home with zero intrins...<a href="http://3.bp.blogspot.com/-Qe5OP6Lc6Tg/TwOkefgVjaI/AAAAAAAABrw/yfP9tMnhcOY/s320/DSC_0616_4976.JPG" rel="nofollow">Here’s another example of a home with zero intrinsic value</a> I know because a friend was just given one that looks identical. He did have to have a beer with the guy.Philhttps://www.blogger.com/profile/00550264432110709714noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-15530919076950578102013-09-09T12:51:50.525-07:002013-09-09T12:51:50.525-07:00If everyone or close to that already own a home - ...If everyone or close to that already own a home - what value is it to them to own another and another and another.<br /><br />Someone crossing the desert may pay a hundred dollars for that first glass of water to quench their thirst. But will not pay a lot for the second or third glass.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-4872032493488429952013-09-09T12:49:16.322-07:002013-09-09T12:49:16.322-07:00That would make sense - if the argument is that th...That would make sense - if the argument is that the intrinsic value exists, but is near zero, that's a fine argument to make. Maybe I'm just being pedantic.Fiduciaryhttps://www.blogger.com/profile/10657843466561214005noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-72012219726601711412013-09-09T12:46:40.542-07:002013-09-09T12:46:40.542-07:00I think what Jack was saying is the intrinsic (act...I think what Jack was saying is the intrinsic (actual) value of a house can go to zero same as a tulip can. Detroit is an example.Philhttps://www.blogger.com/profile/00550264432110709714noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-9552098142131150302013-09-09T12:45:33.709-07:002013-09-09T12:45:33.709-07:00CS, you agree that it exists then. I wasn't a...CS, you agree that it exists then. I wasn't arguing anything about what that value should be, just that it exists, which is contrary to what JJ was saying.Fiduciaryhttps://www.blogger.com/profile/10657843466561214005noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-64109419305940089992013-09-09T12:45:24.293-07:002013-09-09T12:45:24.293-07:00Ireland is not Victoria and Victoria is not Irelan...Ireland is not Victoria and Victoria is not Ireland.<br /><br />We don't have their problems. Yet when Ireland was faced with a glut of housing it couldn't solve its housing problem because it couldn't grasp that properties had no intrinsic or tangible value. The politicians and the people believing that those 2,000 and 3,000 square foot empty homes will one day again sell for tons of cash.<br /><br />So they hired the big national building companies that built them to maintain them until the market returns. <br /><br />But if you believe the way I do, then it makes economic sense to demolish these empty homes. The have no intrinsic value anyway. Instead pay people to demoslish them then later pay people to rebuild them in order to create an economy.<br /><br />Thereby reducing the supply of homes, and encouraging new construction and new jobs in the future. Because what the people need in Ireland is jobs before they can buy houses.<br /><br />So will it be in our future to pay Len Barrie to demolish Bear Mountain and CITA to crush half of Sooke?<br /><br />At least CMHC when it buys out the bank mortgages should have a program to demolish some of the poorly maintained homes. Possibly allowing the use of them as garden city lots.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-20146850308645730502013-09-09T12:35:36.188-07:002013-09-09T12:35:36.188-07:00Surely a house has an intrinsic value of, at the v...<i>Surely a house has an intrinsic value of, at the very least, the resale value materials used to build the house.</i><br /><br />Yeah, about fifty bucks in the case of most houses in Oak Bay. CShttps://www.blogger.com/profile/03399620869685840906noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-59864837360425500312013-09-09T12:34:38.688-07:002013-09-09T12:34:38.688-07:00"A house doesn't have an intrinsic value...."A house doesn't have an intrinsic value."<br /><br />Agreed. Therefore, the only generally understood meaning that can be placed on the term value, with reference to a house, is the price at which it sells. <br /><br />That being the case, it seems meaningless to assert that "housing prices are overvalued," which is why Mark Carney is unlikely to have said that they were. <br /><br />But housing prices can be "overvaluated," to coin a term, where valuations are estimates of market prices. <br /><br />Equally, an investment analyst might think market prices exceed some intrinsic value, but that's the sort of rubbish an investment analyst would use to befuddle the gullible, for as JJ says, houses have no intrinsic value.<br /><br />CShttps://www.blogger.com/profile/03399620869685840906noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-43220207031758949702013-09-09T12:33:19.571-07:002013-09-09T12:33:19.571-07:00>> Some of those dotcom companies were liter...>> Some of those dotcom companies were literally an empty shell.<br /><br />But you only know that in retrospect. All current multibillion dollar companies were at a point where they were bringing in no revenue and were 100% only potential. The people buying .com companies were buying potential. It didn't work out, but that doesn't mean it's not a valid strategy.Leo Shttps://www.blogger.com/profile/02951281972056927807noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-85109619484012066472013-09-09T12:25:24.920-07:002013-09-09T12:25:24.920-07:00A house doesn't have an intrinsic value.
To u...<i>A house doesn't have an intrinsic value.</i><br /><br />To use internet parlance: uh...wut?<br /><br />Surely a house has an intrinsic value of, at the very least, the resale value materials used to build the house. I don't understand how a material good with both physical presence and a usefulness to the vast majority of the population could <i>not</i> have an intrinsic value.Fiduciaryhttps://www.blogger.com/profile/10657843466561214005noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-81497117337426566632013-09-09T12:24:53.449-07:002013-09-09T12:24:53.449-07:00Real Estate was a tangible asset until lenders tur...Real Estate was a tangible asset until lenders turned it into an investment vehicle and an ATM machine. That's when it changed from providing shelter to a way of financing, businesses, recreation homes, boats, cars, etc.<br /><br />There isn't much "real" left in real estate anymore. <br /><br />What's the intrinsic value of a car? The scrap value. How much would you get for a new home if you sold it for scrap today. I suppose Nickel Brothers might buy it. That is until their storage space is full. Otherwise how much copper is in the walls? What's the value of used granite or used fibreboard siding these days?<br /><br />I think the small country of Ireland has some 350,000 new or near new homes that are empty, not rented, not sold. Builders and home owners that at one time believed that real estate had an intrinsic value.<br /><br />And don't rely on lot value either. That's subject to market variation too.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-61712922660511799912013-09-09T12:03:32.215-07:002013-09-09T12:03:32.215-07:00A house doesn't have an intrinsic value.
Your...A house doesn't have an intrinsic value.<br /><br />Your assumption that you can always rent the home isn't very helpful when the monthly mortgage payment is significantly more than its rental value.<br /><br />Then you have a house you can't sell and you can't rent without taking a big loss.<br /><br />Nor does it guarantee that rents will not decrease and vacancy rates increase as market prices decline.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-3164302652886192022013-09-09T11:43:46.381-07:002013-09-09T11:43:46.381-07:00Actual as used by BC Assessment is mostly the same...Actual as used by BC Assessment is mostly the same as Market Value. Exept Actual Value can be legislated for example land within the Agricultural Land Reserve. The Market Value for the land maybe $200,000 but the Actual Value used for tax purposes is reported at $20,000.<br /><br />There are many definitions for Market Value. But only a couple are accepted by Canadian Courts. Meriam's Dictionary isn't one of them.<br /><br />I suppose it depends if when you're buying your home you placed any reliance on EMILI in formulating your offer to purchase. Since the EMILI valuation is after you have made an offer and it has been accepted - it would be unlikely that you would suceed in a court case.<br /><br /><br />But what if EMILI was used for your line of credit to buy another home??<br /><br />An issue that we have in Canada is that no one besides CMHC knows the accuracy of the EMILI program. However, if you look at other programs like Zillow or Zoocasa the valuations can be extremely off.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-12818101479525374082013-09-09T11:06:12.915-07:002013-09-09T11:06:12.915-07:00The dotcom bubble has more in common with the tuli...The dotcom bubble has more in common with the tulip bubble than any housing bubble. A house had intrinsic value. It is shelter we NEED. It is physical and exists and can generate income etc. Some of those dotcom companies were literally an empty shell. I marveled at the time people were dumping so much money into digital brochures! I put my money into Apple.... Anecdotally, I have a friend that was working at a stratup back then seeking angel money. They were working on a combo of Facebook, tumblr, and YouTube, but in the late 90,s. they were told at times "what are you doing with programmers, engineers and furniture? You need a key management team and prospectus." Pretty much sums up why the house of cards collapsed....dasmohttps://www.blogger.com/profile/14638226799679794103noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-18751991630776897372013-09-09T10:55:07.955-07:002013-09-09T10:55:07.955-07:00I'm wondering if those people who bought a hom...<i>I'm wondering if those people who bought a home from a lender who used the EMILI program would be successful in court to argue that the EMILI program was flawed and provided an overvaluation of the property.</i><br /><br />I don't think so for the reasons indicated in my comment above. EMILI, whatever that is, was by definition providing appraisals, which are merely estimates of market values and must be judged as such, i.e., susceptible to error. CShttps://www.blogger.com/profile/03399620869685840906noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-402648145731148332013-09-09T10:51:40.989-07:002013-09-09T10:51:40.989-07:00You're confusing the meaning of "overvalu...<i>You're confusing the meaning of "overvaluation" used in appraisals or assessments with that used in investing. They are different.</i><br /><br />It is you who are confused. You are confusing a market price with an appraisal. An property appraisal may overvalue a property, but the sale price, i.e., the market value, equals the actual value and cannot be an overvaluation. If you doubt that, check Merriam Webster's dictionary.<br /><br />In the investment world, the term overvaluation is used differently and confusingly in reference to an actual price that is deemed to be above the real value, the real value being whatever an investment analysts wishes it to be, neither more nor less. (Clearly the real estate industry has more integrity than the financial services industry.) <br /><br />Thus in the investment world "overvaluation" is a basically meaningless term, a fact not refuted by the example of Pets.com, the price of which might have continued upward if the PR and a few other factors had been working in its favor. <br /><br />Which is to say only in hindsight can an investment be judged with certainty to have been overvalued. Thus talk of current overvaluation is, if not vacuous, entirely speculative. <br /><br />For example, is Tesla overvalued today at $160? I thought it was overvalued when I sold it at $80! If anyone can convince me it is truly overvalued today, I'll short it! CShttps://www.blogger.com/profile/03399620869685840906noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-9940908322835298562013-09-09T10:08:11.310-07:002013-09-09T10:08:11.310-07:00I'm wondering if those people who bought a hom...I'm wondering if those people who bought a home from a lender who used the EMILI program would be successful in court to argue that the EMILI program was flawed and provided an overvaluation of the property. And had the purchaser known about the overvaluation they would have never bought the home. The bank and CMHC therefore had a contributory negligence and can not sue for any loss on a EMILI approved mortgage that is in default. ????<br /><br />I know that CMHC will not discuss any specifics on how their software program works. They don't want to be called into court to explain the software. A court case that could lead to that software not being used. Big money loss on their side.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-29144917416968352062013-09-09T09:47:32.905-07:002013-09-09T09:47:32.905-07:00I remember listening to an underwriter on how they...I remember listening to an underwriter on how they estimated the stock value. They determined their best estimate of what the company's sales would be and then capitalized the sales at 10%. Close to complete guess work for Dot.Com companies - in my opinion.<br /><br />Silly me, I asked why 10%. There was no reason at all. They used 10% for all companies. New or established. They never adjusted the cap rate by the riskiness of the venture. In this scenario the underwriters were over estimating the company's sales and under estimating the risk of the venture. The underwriters were guilty of overvaluation not the stock buyers. The stock buyers just believed what they were told.<br /><br />Back to real estate.<br /><br />Buyers and sellers are not guilty of overvaluation. And neither are real estate agents when they are working as sales people - they are just being paid to get the best price for their client. When they cross over to providing a valuation for a divorce or an estate, then a real estate agent should make sure they have developed the skill set necessary and that they have enough insurance. <br /><br />Appraisers can be guilty of overvaluation and undervaluation. That's why appraisers are sued - when people lose money because they relied on the appraiser's estimate of market value.<br /><br />I also think CMHC's software program EMILI and some of the Bank's risk assessment software tools were used to circumvent the need of a physical inspection and appraisal and were easily "gamed" by lenders and brokers to get deals made had a significant effect.<br /><br />I suppose it was a case of the Fox guarding the hen house. You shouldn't give the tools to those whose income was derived from how that data is initially input.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-27803093939124141152013-09-09T08:51:27.423-07:002013-09-09T08:51:27.423-07:00Just Jack,
Pets.com was the cautionary example th...Just Jack,<br /><br />Pets.com was the cautionary example that emerged out of the dot.com crash. Lots of new dot.com companies had been created, investors were super excited about them, stock prices soared... but there was nothing backing them up, causing the crash-and-burn of the late 90s.<br /><br /><a href="http://en.wikipedia.org/wiki/Pets.com" rel="nofollow">Pets.com</a><br /><br /><a href="http://en.wikipedia.org/wiki/Dot-com_bubble" rel="nofollow">Dot.com bubble</a><br />Renterhttps://www.blogger.com/profile/01147315895351599236noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-86502226239603810582013-09-09T08:51:12.244-07:002013-09-09T08:51:12.244-07:00Just Jack,
Pets.com was the cautionary example th...Just Jack,<br /><br />Pets.com was the cautionary example that emerged out of the dot.com crash. Lots of new dot.com companies had been created, investors were super excited about them, stock prices soared... but there was nothing backing them up, causing the crash-and-burn of the late 90s.<br /><br /><a href="http://en.wikipedia.org/wiki/Pets.com" rel="nofollow">Pets.com</a><br /><br /><a href="http://en.wikipedia.org/wiki/Dot-com_bubble" rel="nofollow">Dot.com bubble</a><br />Renterhttps://www.blogger.com/profile/01147315895351599236noreply@blogger.comtag:blogger.com,1999:blog-7123542260692860177.post-92126365384939720772013-09-09T08:12:09.986-07:002013-09-09T08:12:09.986-07:00I'm, not familiar with Pets.Com. But in Real ...I'm, not familiar with Pets.Com. But in Real Estate termionology this is how I would describe the transaction<br /><br /><br />First, I would have to know if other similar companies to Pets.Com were trading at around the same price in 2000 as Pets.com. If they were, then I would say that the "market price" paid for Pets.com was at market value.<br /><br />Otherwise, the purchasers of Pets.com would have "overbought". If they had gotten a deal then the sellers would have "undersold." <br /><br />The terms overvaluation and undervaluation are not used in real estate sales.<br /><br />What a property sells for - is market price. Someone can overbuy or someone can undersell a property. While every property has a market price (assuming some other conditions too) not all sell at market value.Johnny-Dollarhttps://www.blogger.com/profile/12950799399842707067noreply@blogger.com