Is anyone really surprised?

More here, and here. Don't forget to vote below.

What would it look like if we bought in 5 years; Redux

Condo time. Yes, you did just hear me swallow. I've made no pretenses about my apprehension with condos. To me, you're much better off being a renter than an owner of these types of dwellings. I won't get into those details, rather, I'll get into the analysis.

For this one, we had to go waaaaay back. Check out MLS# 225591. It's an older unit (pre-leaky), it hadn't seen a stitch of work in about 25 years. It was downtown, but not "Central Park" or other less than sunny sides of downtown. We'd only consider a downtown condo. In our hunting experience, they don't hang around long, so we'd look at this as a more liquid purchase than a lot of others we could make in this market.

Original ask was $229,900. It sold for $225K. We'd put 5% down and pay cash for closing costs. We'd also have $10-$15K for "updating" which this particular unit needed in order for us to feel good about the purchase. For full disclosure, we actually made the call to put in an offer on this unit after watching it for 3 weeks, but it had a conditional offer accepted that day. That was March 2007. And we're relieved.

Here's what it looks like for us:

We'd pay bi-weekly rapid. Even with taxes, monthly assessment, and bills, we'd fall well under the recommended 30% of gross income (we'd actually be 30% or less of net) which is just fine. On this purchase, we'd even likely go 5-year closed variable which would save us 0.1%. Not much, but it adds up and we can easily handle a 1%-2% interest rate hike.

So what does this look like 5 years from now? Again, we'll make some assumptions similar to yesterday.

Here's the 6% growth side:

Present value (actual): $225,000.
Future value (assumed): $301,100.
Difference: $76,100.
Mortgage principle paydown: $23,500

Total equity: about $100K.

Wow. I am honestly surprised. My risk is roughly half of what it was yesterday. My equity is only $60K less. That's like a kilometer to a mile really. OK. No it's not. But for barely being a blip on the risk factor side for us, I'd say a $100K equity in 5 years is a pretty good return. Too bad I know people who have hit that mark, with less risk, in less time, in better condos, over the past 3 years, and therefore tainting my expectations and those of everyone around us. But I digress.

Let's look at the downside now. There was some reasonable debate about my assumptions on the period 1994-1999 in town. I'm OK with that. Condo's on VREB aren't counted until 1995. So I have to shift my 5 year period ahead by a year. So we'll use downtown units from 1995-2001.

1995: $152,000.
2001: $145,000.
Difference: $7K or a whopping 5%.

This basically means you lost money. But not that much. You'd even come out ahead with equity on the principle pay down to the tune of almost $16K. If we did the upgrades of $10-$15K we figure we'd get 50 cents on the dollar come sale time (conservative) so we'd probably even break even.

I won't be commentating for a while, we're out condo shopping.

OK. No we're not.

What would happen if the condo market dropped 6% annually?

Present value: $225,000.
Future value: $149,000.
Difference less principle paydown: $52,600.

If it was only a 3% drop over 5 years?

Present value: $225K.
Future value: $186,500.
Difference less principle paydown: $15K.

Maybe we'll wait till we sell the place to do renos? Then we'd be even. Or maybe not.

Again, I've left out the taxes, MA and other expenses. This isn't a who wins the wealth war post. Just a little math playing around analysis for you folks to rip to shreds.

Geoff Young For Mayor!

We've found our new Mayor. Someone email him and convince him to run.

From the TC today:

Services for street people grow, but so do problems
By Geoff Young

I have lived and worked in the city of Victoria for 30 years. My wife and I have chosen to raise our family in the city and to send our children to public schools here. The impact of what is happening in our downtown -- open drug use, infected needles, panhandling and urban camping -- is very real to us and I am as frustrated as many others that nothing we try seems to help.

More and more services are being offered to support the homeless and mentally ill -- shelter beds, hot meals, drop-in centres. Yet the problem grows. We can blame other levels of government, but perhaps it is time to look at what we as a city are doing. By trying to bring care and comfort to the less fortunate are we in fact enabling and attracting the very behaviours we are trying to change?

As an economist I know that incentives are powerful in shaping people's behaviour. Should we ask whether the unconditional food and shelter and support we offer, combined with our warm weather, might be drawing the vulnerable here? Are we sometimes doing too much, rather than too little?

Of course it is difficult to enforce laws against drug use, aggressive panhandling and street camping when there is no adequate treatment for mental illness or addiction and no solution to poverty. When we see people in distress it is a natural reaction to try and help.

But will enough resources ever be made available as long as we paper over problems by providing unconditional day-to-day maintenance and services, "warehousing" those with true needs in the parks, streets, squares, back alleys and church halls of the city? Are we simply reducing the pressure for the provincial government to accept its health-care, treatment and housing responsibilities?

Are we also allowing the federal government to postpone writing realistic and publicly supported drug laws? We have given up enforcing drug-possession laws downtown (neither the needle exchange nor the proposed safe injection site could exist if we did). As a result I have watched an addict injecting herself on the same steps of a downtown office building where she would be fined for smoking a cigarette. We accept that laws restricting smoking can work to change behaviour -- why are unwilling to restrict use of drugs that may be much more harmful?

And every needle drug user must find hundreds of dollars a day. It is a mathematical certainty that much of that comes from panhandling and petty crime. As a result, the social problems and growing dangers of our downtown are beginning to dominate how visitors view our city, whether they are tourists from Toronto or shoppers from Central Saanich.

As businesses and shoppers leave the downtown fewer of us are left to carry these social burdens, and our political influence diminishes. Suburban voters can avoid exposure to unpleasant reality by shopping in new malls that re-create the urban experience on private land. No one disputes that the problems of the downtown are complex, or that the upper levels of government bear much of the responsibility for conditions that appear in other cities too.

But the downtown is troubled and the trouble is spreading. Simply blaming others or letting the "experts" tell us to do more of what clearly has not been working is no solution. We must at least debate the question of whether the policies that we advocate as a city council and the way we spend our money are helping or hurting all of us.

Geoff Young is a Victoria city councillor.

This is exactly what I want a city councillor to be saying in these very difficult and paralyzed times.

On a completely different topic, someone tell me why the TSX climbs 200 points on a day when the US Fed embarks on the same stupid policy that got us into this mess in the first place? Look out, come October, the BoC will be raising rates. I won't be surprised to see a 50 basis point (0.5%) hike.