Housing prices dropping to 1996 levels

[hornyitalian06]

How high can the price of housing afford to go ? Sooner or later the prices will fall and hard . That's when everyone walks away .

 

[LonelyGhost]

Still don't know who she is

me neither ... but i posted another pic to make it a funny response and that
pic has suddenly disappeared!

 

[gravitas]

me neither

gotcha....the blond looked a little like megan so was curious if the brunette was a local SP

 

[Smother]

I have earned my living buying, selling and financing Vancouver real estate for the last 15 years and if one thing is for sure.... NOBODY can predict where the market will go.

If you are flipping properties, roll in your tent. The winds are changing. If you are a true investor (i.e. buy and hold long term with positive cash flow)

Who give a shit where prices go, you are still making money and you know prices will come back (if they drop) within 5 to7 years.

Thanks DDawGG for the chart....
I myself have been a private financial market investor for the past 11 years...
And like any stock chart graph that reaches new highs.....it's a matter time to when it comes back down to earth........to make new highs....you have to SEE higher lows or a healthy correction......NOTHING GOES UP IN A STRAIGHT LINE!!!!

WHAT GOES UP.....COMES DOWN!!!

 

[Sonny]

There's a real error in taking a statement and applying it to all real estate markets. Only the truly overpriced markets are the bubbles, and most of those are in the USA. Showcase properties may be hurting. It is an analysis of demand and supply combined with the ability to sustain debt, and then also there is that irrational element called emotion. Of course, particular properties that are overpriced will suffer decreases, and interest rates may discourage a number of buyers from entering or from moving up and especially from flip-speculating. As for BC, IMO the steady influx of new immigrants will continue to buoy the Lower Mainland market. The Greater Vancouver Area is fairly small geography and my guess is that prices will be stable and then rise again.

 

[DDawGG]

Now THAT is worth investing in......

 

[gravitas]

Now THAT is worth investing in......

The brunette has an AMAZING back.....so much so she's inspired me to go and work off a batch of swimmerless spunk

 

[sdw]

There's a real error in taking a statement and applying it to all real estate markets. Only the truly overpriced markets are the bubbles, and most of those are in the USA. Showcase properties may be hurting. It is an analysis of demand and supply combined with the ability to sustain debt, and then also there is that irrational element called emotion. Of course, particular properties that are overpriced will suffer decreases, and interest rates may discourage a number of buyers from entering or from moving up and especially from flip-speculating. As for BC, IMO the steady influx of new immigrants will continue to buoy the Lower Mainland market. The Greater Vancouver Area is fairly small geography and my guess is that prices will be stable and then rise again.

The interesting thing about the CNN story on housing prices is that is not the high priced properties on the coasts that are dropping right now. There are so many jobs in New York, Los Angles, etc that it takes a major economic downturn to make it so that someone isn't willing to buy a property for sale.

Where the housing price drops are happening is in the "fly over" country.

 

[DDawGG]

The brunette has an AMAZING back.....so much so she's inspired me to go and work off a batch of swimmerless spunk

Just the right amount of muscle with a nice smooth finish
I think I might be able to give her a cream rinse from the ddawgg position

 

[David in Van]

Your graph

I have earned my living buying, selling and financing Vancouver real estate for the last 15 years and if one thing is for sure.... NOBODY can predict where the market will go.

If you are flipping properties, roll in your tent. The winds are changing. If you are a true investor (i.e. buy and hold long term with positive cash flow)

Who give a shit where prices go, you are still making money and you know prices will come back (if they drop) within 5 to7 years.

Can you not find a better graph to support your arguement. Your graph actually argues "against" owning real estate.

Consider the original value of $325k invested in a well diversified portfolio of stocks, such as a decent index fund. Would have earned at least 5% per annum since 1982. That $325k would be worth $1,100 k now, double the house.

Even if we move ahead a year or so to the absolute bottom of the market, the $180k is worth $609k, still more than the house.

Now this is a fairly simplistic arguement. For one it does not consider that the index fund is taxable and the property is not (provided that it is a principal residence, if you are investing in more than one you will pay a lot of tax).

However, the 5% on the index fund would be after all expenses. If you borrowed all the money to pay for that houses property taxes and maintenance fees, how much would that debt be, reducing the value of the real estate.

Not too mention the fact that the last part of the line makes the house prices look like a bubble. They are going up in an awefull hurry. Reminds me of tulips in Holland in about 300 years ago - I lost a fortune.

Thought provoking?

 

[DDawGG]

Can you not find a better graph to support your arguement. Your graph actually argues "against" owning real estate.

Consider the original value of $325k invested in a well diversified portfolio of stocks, such as a decent index fund. Would have earned at least 5% per annum since 1982. That $325k would be worth $1,100 k now, double the house.

Thought provoking?

True, if I would have put in $352k cash.

In reality, I would have put in $32,500 (10%) and bought a property that cash flowed (tenants covering all expenses) and turned (I'm too tired & full of turkey to do the math) 10,000% on my money.

Now THAT is thought provoking......

 

[xUxJr311fr3P]

Housing slump will be long and deep...

Can you not find a better graph to support your arguement. Your graph actually argues "against" owning real estate.

....

Thought provoking?

David in Van,

I completely agree with you, the housing slump will be long and deep. Consider the following:

- U.S. median housing prices have fallen on a year over year basis for the first time in 11 years;
- The adjustment is brutal and there is way more to go given that inventories are piling up;
- Consumption in the US will get hit hard in the next six months and the economy will slow down;
- Retail sector employment is already getting hit;
- Canada's economy will suffer too;
- Regions where prices when up the most and fast will get hit the hardest;
- Don't buy condos - they are the worst investment;
- Rent for the next five to ten years!

The only thing I do not know is whether we are heading towards a slow grinding slowdown where real estate prices fall 5% every year for the next five to ten years or whether they will fall 20% to 30% in the next three years.

Either way, STAY OUT OF REAL ESTATE!!!

GG

 

[dirtydan]

Communism failed. Venezuala is becoming a shithole. I find it weary that people don't seem to learn from the numerous errors of Socialism. India and China have.

Gee, I certainly hope you're not one of those right-wingers that paints everything not right-wing with the same brush.

 

[David in Van]

Really!?!?!

True, if I would have put in $352k cash.

In reality, I would have put in $32,500 (10%) and bought a property that cash flowed (tenants covering all expenses) and turned (I'm too tired & full of turkey to do the math) 10,000% on my money.

Now THAT is thought provoking......

You should have another look at the graph. How do you get 10,000%. That is a hundred times, meaning that the $325k would be worth $32million.

It is also very seldom that the tenants cover all the expenses. I talk to lots of people who say that their tenants cover their expenses and upon closer questioning, they usually only cover the full mortgage (assuming 100% financed) at best, not the maintenance fees or property taxes. Usually, only a partially financed mortgage is covered.

The only real exception is the bottom of the market where rents and ownership costs are in line.

At the top of the market, well consider that a million dollar condo will cost about $70,000 a year in interest, maintenance fees and property taxes (before any principal is paid). You will be lucky to generate $50,000 a year in revenue, and probably less.

 

[David in Van]

My political views

Gee, I certainly hope you're not one of those right-wingers that paints everything not right-wing with the same brush.

If you really want to know my political views, note the following quote:

Political tags -- such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth -- are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism. But they are more comfortable neighbors than the other sort.

Basically I am a limited government libertarian. Yes to issues such prosititution and drug legalization. Yes to capitalism. No to socialism and all its variations, like the public school system and public health care.

Also no to government interference in business, such as protectionism and the health system in the US (many of the issues in the US health system are "due to government manipulation", not private enterprise per se.

Capitalism is poorly understood. Capitalism is the respect for ones property and person. In a truly Capitalist system, pollution would be illegal or difficult. If any spilled over to your neighbour, he would be able to obtain a court injunction to force you to stop and sue you for damages.

 

[Guardian Angel]

Housing Prices

You're referring to housing prices in some markets in the United States at 1996 levels. So what?

Housing prices in Victoria and Vancouver are at record high levels.

I wonder the same as you L.H. In Vanc the market should continue to strengthen as the Olympics get closer (maybe drop after). Alberta has an incredible increase in home prices & shortage in housing and predictions say that will not change for years.
Billions are going into oil and the infastructure cannot support it now. You can rent a couch in Ft Mc Murray for $500 with use of a washroom in the renters home I hear.

Maybe I am not thinking outside of the box (Globally), but I don't hear any of my friends in T.O. talking about prices on homes declining.

Certainly we all hope the market flattens out to a degree, if nothing more than to help our youth get a start on what will likely be their biggest financial challenge through life.

G.A.

 

[DDawGG]

You should have another look at the graph. How do you get 10,000%. That is a hundred times, meaning that the $325k would be worth $32million.

(I'm too tired & full of turkey to do the math).

I yanked that number out of my ass. I was too tired and full of turkey. If you look closely, I couldn't even figure out how much 10% was... LOL

It is also very seldom that the tenants cover all the expenses.

Then I wouldn't buy it. It has to cashflow or it doesn't work. I don't want to own them all, just the seldom ones that cover expenses.

well consider that a million dollar condo

NEVER buy condos, single family with suites or a an apartment building.

-------------------------------------------------------------------
Sorry, I am not going to give a seminar here on how to make money in Real Estate. It will work if you want it to.

If you say that you can or If you say that you can't... you ARE right.....

 

[necko]

My kid bought a 4plex last year, it will be paid off in 10 yrs and will be a good retirement income, but until then its costing him a fortune that he knew going in . Him and his SO are both working day and night to payoff, at current propery values it's basically a teardown, but until payed off they are house poor ,this and the mortgage on the house they live in, I don't know how they live I advised against it but he has more I want to be rich blood in him than I do

 

[dirtydan]

If you really want to know my political views, note the following quote:

Political tags -- such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth -- are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire. The former are idealists acting from highest motives for the greatest good of the greatest number. The latter are surly curmudgeons, suspicious and lacking in altruism. But they are more comfortable neighbors than the other sort.

Basically I am a limited government libertarian. Yes to issues such prosititution and drug legalization. Yes to capitalism. No to socialism and all its variations, like the public school system and public health care.

Also no to government interference in business, such as protectionism and the health system in the US (many of the issues in the US health system are "due to government manipulation", not private enterprise per se.

Capitalism is poorly understood. Capitalism is the respect for ones property and person. In a truly Capitalist system, pollution would be illegal or difficult. If any spilled over to your neighbour, he would be able to obtain a court injunction to force you to stop and sue you for damages.

So you want to go forwards while going backwards.

Capitalism is not poorly understood in the manner you suggest. It is poorly understood because too many people forget or do not realize that greed for money and being controlled by money are the REAL foundations of capitalism.

I gave up on capitalism a long time ago and see that a mixed system is the best way to go, at least for now. We are a long, long, way off from seeing a socialist system the way it was meant to be. I seriously doubt I will ever see in my life time and probably for a good long time after I'm dead. Nevertheless as terrific as capitalism has been in generating wealth (always for a few) it does contain the means for its own destruction. And like every system prior to that it is inevitable capitalism will be destroyed.

 

[sdw]

Just a little realisim

The Bank of Canada Bank Rate
September 30, 2005 to October 17, 2005 was 3.00
October 18, 2005 to December 5, 2005 was 3.25
December 6, 2005 to January 23, 2006 was 3.50
January 24, 2006 to March 6, 2006 was 3.75
March 7, 2006 to April 24, 2006 was 4.00
April 25, 2006 to May 23, 2006 was 4.25
May 24, 2006 to October 2, 2006 was 4.50

Since Interest = Principle X Rate X Time

400,000 on September 30, 2005 at 3% for 1 Year cost 12,000 or 1,000 per month
400,000 on September 30, 2005 at 5% for 1 Year cost 20,000 or 1,667 per month

400,000 on October 18, 2005 at 3.25% for 1 Year cost 13,000 or 1,083 per month
400,000 on October 18, 2005 at 5.25% for 1 Year cost 21,000 or 1,750 per month

400,000 on December 6, 2005 at 3.50% for 1 Year cost 14,000 or 1,167 per month
400,000 on December 6, 2005 at 5.50% for 1 Year cost 22,000 or 1,833 per month

400,000 on January 24, 2006 at 3.75% for 1 Year cost 15,000 or 1,250 per month
400,000 on January 24, 2006 at 5.75% for 1 Year cost 23,000 or 1,917 per month

400,000 on March 7, 2006 at 4% for 1 Year cost 16,000 or 1,333 per month
400,000 on March 7, 2006 at 6% for 1 Year cost 24,000 or 2,000 per month

400,000 on April 25, 2006 at 4.25% for 1 Year cost 17,000 or 1,417 per month
400,000 on April 25, 2006 at 6.25% for 1 Year cost 25,000 or 2,083 per month

400,000 on May 24, 2006 at 4.50% for 1 Year cost 18,000 or 1,500 per month
400,000 on May 24, 2006 at 6.50% for 1 Year cost 26,000 or 2,167 per month

That’s what a 420,000 property would cost on an interest only loan if we ignore taxes, utilities and amortization of principle. (a 5% down payment is assumed)

If we add the amortization of principle over 25 years on a 1 year term loan we get an additional 1,333 per month with 384,000 to be refinanced at the end of the term.

If we assume that taxes and utilities on our 420,000 property are 6,000 per year, we get 500 per month.

That means
September 30, 2005 house needs 1,667 plus 1,333, plus 500 = 3,500 per month
October 18, 2005 house needs 1,750 plus 1,333, plus 500 = 3,583 per month
December 6, 2005 house needs 1,833 plus 1,333, plus 500 = 3,666 per month
January 24, 2006 house needs 1,917 plus 1,333, plus 500 = 3,750 per month
March 7, 2006 house needs 2,000 plus 1,333, plus 500 = 3,833 per month
April 25, 2006 house needs 2,083 plus 1,333, plus 500 = 3,916 per month
May 24, 2006 house needs 2,167 plus 1,333, plus 500 = 4,000 per month

This is why it makes no sense to purchase a Condo or Townhouse for investment.
If you buy a house and convert the Basement into a suite it might just be possible to not lose too much. However, if you bought in 2005 and now have to renew the mortgage, you are going to lose 500 per month if you can’t raise the rent.