They Did It To Make More Money – No Longer A Good Idea
A report from Global News on Canada. “When we visited Ellisa Atherton’s living room in Ajax, Ont., in early March, it was crammed – wall to wall to wall to wall – with boxes. In the middle of the room, walled in by boxes, was the family’s Christmas tree – Atherton had put it up so it could be a ‘real Christmas’ for her youngest child, despite everything that was going on. But the room was too tightly packed for her to take it down again, so as winter turned into spring outside, there it stood. Faced with losing the house that she had only moved into in the fall, she didn’t feel she could open the boxes and really move in.”
“Atherton bought the house for $655,000 with a $55,000 down payment. Monthly payments of $6,000 with a mortgage rate of 11.99 per cent weren’t sustainable, but she was hoping to cut that sharply by refinancing after she moved in. But it didn’t work out that way, and her dream of homeownership is mired in a lawsuit and a series of what she calls inflated and unexpected fees that she can’t afford. Without a lower rate, she says, she’ll lose the house to foreclosure.”
“She calls the situation. ‘ … Hell, hell, hell. Depression, tears – it’s an ordeal that no one should have to go through.’”
“The census revealed that just under half a million Canadian households with mortgages spend over 50 per cent of their household incomes on shelter costs – taxes and utilities, but also mortgage payments. If households are that stressed, how will they cope when interest rates push their mortgage payments higher? It’s not surprising where homeowners are spending more than 50 per cent of their pre-tax income on shelter costs. Stressed households are concentrated in cities where real estate is most expensive – Toronto and Vancouver, but also noticeably in Barrie, Hamilton and Victoria.”
“‘The old guideline was about 30 per cent. Even if you make that 35 or 40, you’re seeing people with 10 or 20 per cent more than that,’ Toronto-based insolvency administrator Scott Terrio says of his clients. ‘It’s pretty scary.’”
“In Toronto, mortgage broker Ron Alphonso thinks the trouble could come from homeowners who invested heavily in their properties – often tearing down modest houses to build big ones – because they counted on values continuing to rise. ‘When house prices are flat, knocking down a little house and putting up a mansion is not a good idea. They primarily did it to invest and make more money – no longer a good idea.’”
From Macleans. “Not everybody is going to have sympathy for the group of homebuyers in Oakville, Ont., who say they are facing financial ruin on new homes thanks to attempts by the Ontario government to cool the housing market. These weren’t housing speculators trying to score quick bucks, according to the Toronto Star story published in early April. The cost of their new homes, which ranged between $1 million and $1.6 million, were entirely in line with average market prices. The buyers talk of scrimping and saving; of living with extended family to make ends meet.”
“Claudia and Darren Evans, for example, purchased their home for roughly $800,000 in 2013, according to Mattamy; in that time, the property’s value appeared to make extraordinary gains, prompting the couple to purchase a comparable home with a better floor plan for their young child—now valued at close to $1.6 million. After agreeing to buy the new home, the Evans’ put their old home on the market, but received only low ball offers.”
“‘We haven’t put our house on the market again and we need to close in seven weeks. There is no point. We are watching the market so closely with our realtor and we can’t afford to take the amount of money that we will get offered right now. If we got a delay in closing then it would be fine. I’m sure the market will recover in time,’ Darren Evans told the Star.”
“Buyers of this generation have been told that it’s impossible to lose money on real estate; that this is the safest investment on the books. So ingrained is this idea that generating real estate wealth has become an industry in and of itself, with entire cable channels devoted to flipping and equity building, and get-rich-quick experts offering classes, workshops and conferences.”
“Brad Carr, Canadian president of Mattamy Homes, said that housing is still a good long-term investment in the GTA—but agrees that prices are down and the days of massive housing profits were ‘unsustainable’ and probably over. Of course, beyond asking for a pre-approval and the deposit, the homebuilder doesn’t do much to double-check the state of a buyer’s finances. If he or she can afford to drop a few hundred thousand dollars, ‘We deem you to be a sophisticated buyer,’ Carr said.”
“Carr added, the market swings both ways. ‘When prices are going up dramatically, I very seldom—in fact, I have never seen—someone who has said ‘we are making substantial money by closing. I would like to give you more money,’ he said. ‘When the market is going in the other direction, we also don’t expect to be responsible for those potential price downturns.’”
From Better Dwelling. “Canadian real estate prices are acting a little skittish. The Teranet–National Bank House Price Index, shows real estate prices stalled across the country. In addition, the index is making moves we haven’t seen outside of a recession. Funny thing to note is experts, including some bank executives, are saying the correction is over. Technically speaking, a correction hasn’t even begun according to this index. A correction is when prices fall more than 10% from peak, in less than a year, which we haven’t seen yet. If I didn’t know any better, it would appear that (mortgage sellers) bank executives are misinformed. How strange.”
“Mattamy, and homebuilders like it, assume that the sort of people dropping $1.6 million on a home are ’sophisticated buyers.’ An alarming consideration: What if they aren’t?”
From CBC News. “Some investors are questioning whether the tallest building in Winnipeg will ever get off the ground after the RCMP raided the headquarters of the company behind SkyCity Centre last week. RCMP executed a search warrant at six properties in the Greater Toronto Area, including Fortress Real Developments’ headquarters in Richmond Hill, Ont., last Friday as part of an ongoing investigation into syndicated mortgage fraud.”
“Fortress is the developer of the SkyCity Centre 45-storey mixed-use condo project on Graham Avenue in Winnipeg. Winnipegger Debbie Stone bought a suite in the SkyCity development the minute it hit the market in 2015, but now she’s questioning whether it will even be built. ‘I’m actually not surprised from all the things I’ve read over the last couple of years,’ said Stone. ‘I’m just wondering how it affects the SkyCity building and whether they will be cancelling the project and refunding everybody’s deposit. I’d like to just get my money back.’”
From Stockhouse. “Media revisionists are now saying that the Toronto housing bubble burst in the spring of 2017. However, when Stockhouse wrote on June 30, 2017 ‘Toronto Housing Bubble Teetering Dangerously,’ we were one of the very first media outlets to take an unequivocal stand on this subject.”
“Even on into the summer, as Stockhouse published follow-up articles on this subject, this was still no consensus in the mainstream media. By 2018, however, apologists for Toronto’s housing bubble have had to throw in the towel. Recent media reports highlight the carnage from this burst bubble – in its very early stages. Yet the same article shows the pathetically delusional nature of media pundits and ‘market experts.’ The clear message is that the worst is over.”
“‘The future looks far less volatile for buyers and sellers in the GTA, with the condo market being the final meaningful pocket of risk, according to Pasalis. In the near term, he’s calling for neither a continued correction, nor a return to the break-neck price increases that defined so much of 2017. ‘We’ve kind of pricked this bubble,’ Pasalis told CTVNews.ca. ‘For this year, it looks like things are going to be pretty stable. It’s possible you might see price declines going forward in the future, but something else has to happen.’”
“‘The final meaningful pocket of risk’? Such messages are infantile and reflect profound ignorance concerning economics in general, and housing bubbles in particular. Why is the Toronto real estate market – and the Vancouver real estate market – an obvious asset bubble, along with hundreds of other cities across the Western world?”
“As has been explained to readers in previous articles on this subject, the real estate equation is a simple one. Over the long term, housing prices must remain parallel to income levels. Period. No exceptions, ever.”
“Wages have been flat. House prices (especially in recent years) have gone straight up in Toronto and Vancouver. Balance must be restored. Wages will never go up. This means real estate prices will go lower – and lower and lower. Housing bubbles built up over decades don’t evaporate in months. They implode over a span of years, and the real carnage has not even begun in Toronto’s housing market.”
“Stockhouse readers need to be wary of the media Revisionism to which we are now constantly exposed: 1. Pretend that no Toronto housing bubble existed, even when nothing could be more obvious. 2. Pretend that the bubble hadn’t started to collapse, even when the evidence of such a collapse was undeniable. 3. Pretend that these same market cheerleaders had acknowledged the bubble and the collapse all along, when nothing could be further from the truth. 4. Pretend that the collapse is over when it has barely even begun.”
“Some would have an even uglier term for such media Revisionism: propaganda machine.”
“The Toronto housing bubble and the Vancouver housing bubble and all the other housing bubbles across the Western world will implode because they must implode. Media cheerleading and the forecasts of intellectually bankrupt ‘experts’ cannot alter the simple arithmetic that is involved here – and undo the monetary crimes of Western central banks.”
‘Stockhouse readers need to be wary of the media Revisionism to which we are now constantly exposed: 1. Pretend that no Toronto housing bubble existed, even when nothing could be more obvious. 2. Pretend that the bubble hadn’t started to collapse, even when the evidence of such a collapse was undeniable. 3. Pretend that these same market cheerleaders had acknowledged the bubble and the collapse all along, when nothing could be further from the truth. 4. Pretend that the collapse is over when it has barely even begun.’
Much like how the bubbles have popped in NYC and Miami. These are huge markets and the media hasn’t even acknowledged there was a bubble in the first place.
[I was just in the Toronto area last week - working from my parent's home in Oakville (well to do suburb) west of Toronto.]
It is not just the media/papers. Everyone knows a few people in the industry - agents, construction, handymen, renovation, mortgage brokers. That is the (unintentional) insidious part of this. It is hard to think differently. Parents are pushing their late 20’s early 30’s kids to buy (with their help to get started). Middle aged families feel the need to move from their highly appreciated townhouses to 4 bedroom 3000 ft2 final homes. Most are stretching to get there.
Greed.
Absolutely agree
“Greed”
Coupled with stupidity, expressed as no sense of history.
another issue.
People that have had homes for 10-20 years, were taking out ‘equity’ to purchase vacation homes. I.e. so called cottage country N of Toronto, a condo in FL etc.
If the vacation property market goes down … these guys are not even going to enjoy these places.
‘taking out ‘equity’ to purchase vacation homes’
I think I read about that before. Come to think of it, almost all of this stuff seems like a movie I saw once.
No, no, … It’s a “b” movie re.make! Just with different names of the $ame bad actor$, mostly. There are still some cameo appearance$ from the “original” if one cares to remember them.
I am not talking theoretically. The amount of neighbors and friends that have done this in the Toronto area is staggering.
I am confused why there is not life lessons being passed down.
Is it not easier to just rent a vacation condo, or cottage for 2 weeks
In either 2014 or 2015, the number of second shacks bought in the US went higher than any year since the UHS have been counting it.
Doing a cash out refi(no doc, no appraisal of course) to buy a 2nd or third house and claiming to be cash buyers. These aren’t cash buyers. And it’s why we see housing going ballistic in pockets of various states…. especially ID, OR and WA.
dumb.borrowed.money.
Is it not easier to just rent a vacation condo, or cottage…
I spend a lot of time in Ontario.
They aren’t making any more lakefront!
Real Estate has never gone down as long as we’ve lived here!
The Ontario economy is in trouble (from an old timer).
RW says we’re not building enough houses. It must be worse in Toronto.
Canucks were the biggest foreign buyers of Manhattan and Hawaii RE in 2015. I’m guessing it also applies to the southwest US - ex California, where the chinese were probably “numba won”.
So yeah, as they get hosed lots of the US will be under pressure. I’m guessing the same thing will happen in thailand/se asia as the aussie market circles the drain since plenty of aussies probably bought second homes outside of the “lucky country”
Re: pretend$ pretend$ pretent$ …
“Absolute faith corrupts as absolutely as absolute power.”
“Far more crucial than what we know or do not know is what we do not want to know.”
“Disappointment is a sort of bankruptcy - the bankruptcy of a soul that expends too much in hope and expectation.”
― Eric Hoffer … ( goes good with a cup.of.joe & HBB blog titles!)
One more comment - in the last 30 years people have changed.
When i went to high school (mid 80’s) in the well to do Toronto burbs — folks were very even keeled. Even the rich bankers did not show off. They live behind hedges but lived in average looking houses with nice but not garish furnishings). My parents were in the working class neighborhoods (7 blocks away) but were not made to inferior.
In fact, they played bridge with the super wealthy from the church groups — and nobody made them feel uncomfortable.
Their kids would drive to school in a ford, not a Jag, even though they could easily afford.
They were very old school. In the supermarket or at parties, they did not show off or seem pretentious. I am not sure what has happened in the last 18 years.
I am not sure what has happened in the last 18 years.
My assumption is that those people still exist but we don’t notice them with all the borrowed money being thrown around.
Cheap and Easy money/debt is like school in the summer.
No Class…
“I am not sure what has happened in the last 18 years.”
What happened? A good many of those old school people are dead.
That’s what happened.
Taking their place are Boomers. The Grand Poobahs today.
It’s not enough for greed to be good. Greed has to be God. I also am critical of American Baby Boomers, but in fairness, any generation in any country far enough along on the timeline from suffering can be proselytized. China replaced famine with a doctrine that says, more or less, that to get rich is glorious. And any voices of pragmatism can be overwhelmed by a large enough marketing budget.
Also from the last link:
‘Extended low interest rates always cause housing/real estate bubbles, and every central banker knows this. In 2008; these rapacious money-printers took Western interest rates to the lowest level in history – and just left them there, permanently. These housing bubbles were deliberately manufactured by Western central banks. Meanwhile, Western governments have done nothing but watch, until it was already too late to prevent the damage.’
‘No other government in the history of any Western nation has engaged in such monetary recklessness, even briefly. The only other regime to have ever embarked upon such monetary insanity is Japan. You remember Japan? This is the once-prosperous economic power that has been mired in a 30+ year depression.’
‘For 20 of those years; the mantra from Western central banks was universal and unequivocal: “we would never copy Japan.” Then they did precisely that – except to an even more insane degree with their “quantitative easing”.
‘The Western economic depression is now 10 years old, partially concealed by the housing bubbles created by Western central banks. Those are the facts, yet readers would be hard-pressed to find any such reporting of reality from any mainstream media outlet.’
Pretty much what you could have read here for years from multiple commenters.
The problem is that it’s by design, intentional. They knew exactly what they were doing. Follow the money and you will find that the special interests became wealthier than they ever could have without blowing these bubbles. There’s no accountability whatsoever, and when everything collapses they just say “nobody could have seen it coming,” despite the fact that it’s documented to the contrary all over the place, just like your site.
Oh, it’s by design all right.
If you get around and listen carefully, there are already big players whispering about being ready to capitalize on the next crash…
Related to this post is a post I posted on yesterday’s postings …
http://gnseconomics.com/en_US/2018/04/18/zombies-and-the-end-of-the-global-synchronized-recovery/
Tank$! (Irish twang)
No other government in the history of any Western nation…
I guess nobody remembers the Ottoman Empire.
Golden, CO Housing Prices Crater 5% YOY On Flood Of Vacant Housing
https://www.movoto.com/golden-co/market-trends/
‘Atherton bought the house for $655,000 with a $55,000 down payment. Monthly payments of $6,000 with a mortgage rate of 11.99 per cent weren’t sustainable, but she was hoping to cut that sharply by refinancing after she moved in. But it didn’t work out that way, and her dream of homeownership is mired in a lawsuit and a series of what she calls inflated and unexpected fees that she can’t afford. Without a lower rate, she says, she’ll lose the house to foreclosure.’
‘The census revealed that just under half a million Canadian households with mortgages spend over 50 per cent of their household incomes on shelter costs – taxes and utilities, but also mortgage payments…It’s not surprising where homeowners are spending more than 50 per cent of their pre-tax income on shelter costs. Stressed households are concentrated in cities where real estate is most expensive’
Well lookies here rental watch, all of a sudden the tide goes out and we see - shenanigans! And you know what? The most highest shack cost to incomes ratio in the US is, the most expensive towns and cities, with the highest being Mercer Island! Surprise surprise!
‘Winnipegger Debbie Stone bought a suite in the SkyCity development the minute it hit the market in 2015, but now she’s questioning whether it will even be built. ‘I’d like to just get my money back.’
Now there’s fraud even? Golly, funny how that didn’t show up until the SHTF. Could that be the case elsewhere?
‘She calls the situation. ‘ … Hell, hell, hell. Depression, tears – it’s an ordeal that no one should have to go through.’
Jingle, you want to chime in here and tell us again what a great investment shacks are?
“Atherton bought the house for $655,000 with a $55,000 down payment.”
😁
“Monthly payments of $6,000 with a mortgage rate of 11.99 per cent weren’t sustainable, but she was hoping to cut that sharply by refinancing after she moved in.”
😁
“But it didn’t work out that way, and her dream of homeownership is mired in a lawsuit and a series of what she calls inflated and unexpected fees that she can’t afford.”
😁
“Without a lower rate, she says, she’ll lose the house to foreclosure.”
😁
“She calls the situation. ‘ … Hell, hell, hell. Depression, tears – it’s an ordeal that no one should have to go through.’”
A true learning experience that will stay with her until … until the next time.
Bahahahahahahahahahahahahahahahahahahahahahahahaha.
shacks are great investments until the fall in value. Thats when u consider letting the bank have their collateral.
The banks have a huge incentive to keep prices rising so they dont get a bunch of shacks dumped in their laps.
When prices fall people stop buying.
If banks weren’t sheltered from repayment risk, Mr. Banker wouldn’t be grinning from ear to ear anymore.
THREE things to remember about CANADA and Bankers:
1. Canadian banks already have TARP built in
2. Canada is a recourse loan nation
3. Most Canadian loans are adjustable and most can be adjusted in the 2/3 years
“Monthly payments of $6,000…”
Now that’s gotta take the fun out of life.
“These weren’t housing speculators trying to score quick bucks…”
does economic recovery basically mean rising stock and home prices these days?
does economic recovery basically mean rising stock and home prices these days?”
haha yea for the 1% - not jobs or wage gains for the rest. Global economy and all that.
It looks to me like the middle class in America was a fluke in time. Now the middle class has to gamble at the 1% game, good luck with that the 1% change the rules when they lose.
It looks to me like the middle class in America was a fluke in time.
Our post WWII definition of middle class I think was a fluke due to being the only one left after the war with all the ingredients for a good economy intact. So even the average Joe could do almost as well as the educated class without taking any extreme measures. Maybe (probably) that can’t last forever.
But the American tradition of the blue collar class being able to take care of themselves in freedom is much older. My concern is that we’ve even lost that.
Freedom used to be defined in terms of political rights, but it has been re-defined in Western societies as the freedom to make consumer choices. And that’s not much of a freedom when 50% of your income goes to housing.
Depends on what you mean by “taking care of themselves,” freedom or no. Before WWI or WWII, the blue collar class took care of themselves by living in tenements, begging in the street, sleeping in penny-hangs, taking in elderly parents who drank away the pain of the diseases of age, working 70-hour weeks in the mines, watching their 10-year old children lose life and limb (literally) in the factory machines, and eating food right out of Sinclair Lewis’ The Jungle.
And it wasn’t uniquely American. Things in other countries were even worse.
Hmmm. I’m from Wyoming. Other than the mines, none of that seems to apply for my family after they left the old country. Maybe that’s why they were so biased against the city. They kept warm and ate fairly well even if they were otherwise poor.
My family back then were frugal. They didn’t sleep in a “penny-hang”. They didn’t borrow to live beyond their means.
My grandparents (both sides) came to US (legally) to America between WWI and WWII.
About as blue collar as you could get. Worked hard every day.
They never did ANY of that. I think you have been drinking way too much liberal/progressive kool-aid.
They ALL did live beneath their means and avoided debt.
FYI - they had stories of Ellis Island. About 10% of the ship’s passengers were sent back home for various reasons. And the ship line company had to PAY for it.
They never did ANY of that. I think you have been drinking way too much liberal/progressive kool-aid.
She’s pretty much downed the whole thing. In these folks’ minds, all of life was nasty, brutish, and short until the government came along and saved us.
Do we happen to find ourselves inside the largest global credit bubble in the history of finance? Enjoy it while it lasts!
The Financial Times
Global Economy
IMF sounds alarm on excessive global borrowing
With $164tn owed, the world is deeper in debt than at the height of the financial crisis
2 hours ago
…
DEBT=MONEY
How else could people afford $75,000 pickup trucks?
Last summer I bought a new Camry. Given that my block is kinda po’, I wondered if a Camry would make me stick out. Heh, not hardly. There are “murdered-out” Beemers and Mercedes and macho trucks up and down the block, interspersed with cheap Nissan Altimas. About 40% of the cars are outright beaters, 15+years ~150k+ miles all dented up. Not to mention the beat-up white vans.
I think to myself: something must be wrong with me. I’m ashamed that I have a car payment again, and thought that the Camry was the most I could afford. And yet here are people with cars that cost 2x 3x. I’m pretty sure they aren’t making 2x my salary.
Ironically enough, the last time I thought “something must be wrong with me,” was in 2002-2003 when everyone around me was buying a house and I couldn’t figure out where they got the 20% (!) down payment. That’s what led me here to HBB. I wonder what people’s retirement is going to look like.
I purchased a new 2017 Tahoe and received 17% of MSRP. I’d like to point out that I paid “CASH” and would not have purchased if I didn’t have the means without obtaining a loan. I’ll also be taking advantage of the IRS section 179 and can write off the entire expense this tax year!! Just part of the game you need to play when the market tanks and EVERYTHING goes on sale.
http://www.section179.org/section_179_vehicle_deductions/
17% is kinda low. 20% is standard for big 3 trucks/suv. Wait until year end and 30% is not unheard of.
17% is kinda low. 20% is standard for big 3 trucks/suv. Wait until year end and 30% is not unheard of.
Since 1996 I have purchased (all brand new) 2 Tahoes, 1 Suburban, and 5 Expeditions, all top of the line and all for and by my engineering and construction business. I have also purchased 2 Expeditions personally (brand new).
20%-30% at any time of the year is dreaming.
Suburban Maryland is an illegal alien ghetto.
Which explains this…
Washington DC 20010 Housing Prices Crater 12% YOY
https://www.zillow.com/washington-dc-20010/home-values/
https://snag.gy/m5EzRB.jpg
I wonder what people’s retirement is going to look like.”
Broke like this Country.
I’ve come to the conclusion that a significant percentage of the high-end vehicles I see are leased.
No leases. They’re all home equity financed.
Got HELOC?
U go girl
The Camry looks bad but feels good 😁😁😁😁
My next car will be the 2018 Camry to be purchased in 2021-22
“I am not sure what has happened in the last 18 years.”
Horrendous. It may be that 2/3 of the elderly circa 2030 and beyond won’t have a penny to their name. Then what?
Then what?
Then the people at the top (whether it’s the Fed or the 0.01% or there’s no difference at that point) own everything. The question is what everybody else does…so far they seem to be taking it…other than voting with their middle finger.
$ounds like the WAR drum$ are tuning up in the far distance knot.to.far.away$ future$
Quit scarring the lil’ children of homemoaner$ Mr. Bear!
$ounds like the WAR drum$ are tuning up in the far distance knot.to.far.away$ future$ ??
The ultimate distraction…You don’t impeach presidents during time of war do you…So, would Trump sell out the country to save himself ?
Abraham Lincoln Quotes. Nearly all men can stand adversity, but if you want to test a man’s character, give him power.
Until I see headlines of Trump being accused of rape, sexual assault and forcing interns to give him BJs and THEN bomb poor defenseless countries to get that out of the headlines…
I will take you liberal tears talk as progressive hypocrisy.
Haha… good thing Trump doesn’t smoke cigars.
You own it 2-fruit. all of it.
I’m old enough to remember libs saying sex lives of preisdents are private matters. Good times.
Never underestimate what a desperate con man is capable of doing.
Hillary will never be president. Learn to accept this fact scdave.
To be fair to Clinton, that bombing raid in Sudan(?) was probably not a distraction, but a legit try against Osama bin Laden… and OBL was a legit target, as we found out later.
And I thought we *have* seen headlines of Trump being accused of all those things. Anyway, the Dems need to get away from the identity politics. People are losing their jobs, and if it takes a boor to get those jobs back, they’ll tolerate the boor.
It should be interesting to see how Gen Z (now in high school) will turn out. They don’t seem as susceptible to the propaganda on either side.
From the article:
“Vitor Gaspar, director of fiscal affairs at the IMF, singled out the U$ for criticism, saying it was the only advanced country that was not planning to reduce its debt$ pile$ with tax cuts keeping public borrowing$ high.
The fund urged policymaker$ to stop providing “unnece$$ary stimulu$ when economic activity is already pacing up” and called on the US to “recalibrate” its fi$cal policy and increase taxe$ to start cutting its debt$.”
[$ added for emphasi$ bye Hwy50]
To quote the the HBB quote that is frequently used here.within:
“Bahahahahahahahahahahahahahahahahahahahahahahahaha”
has Mr Gaspar even noticed the amount of indebtiness the EU has or the stack of cards the minus “0″ interest rates is generating??? Deflection at its finest…………..
” …noticed the amount of indebtiness the EU has …”
The approximate figure was 650,000 US soldiers returning to USA Terra firma PER MONTH x 16 months … post 1945 …
(Knot sure how many EU soldiers went the other way …)
Funny how the IMF didn’t care when obama had $1 Trillion/year deficits and added more to the national debt than ALL other administrations COMBINED and accounting for inflation.
But he was pretty good at killing people and did win the Noel Peace Prize.
‘In Toronto, mortgage broker Ron Alphonso thinks the trouble could come from homeowners who invested heavily in their properties – often tearing down modest houses to build big ones – because they counted on values continuing to rise. ‘When house prices are flat, knocking down a little house and putting up a mansion is not a good idea. They primarily did it to invest and make more money – no longer a good idea.’
Here’s the thing Ron: we should never look at shacks as an investment. This was the big takeaway from the early 2000’s that the REIC quickly dispensed with. Shack prices should never go up more than inflation/wages, much less do so year after compounding year. There shouldn’t be a global, multi-billion peso industry of flipping reality shows. It’s absurd. To say “no longer a good idea” kinda misses the point.
It is such an odd saying…
No one, I mean no one, said these things before the era of cheap and easy money on the RESIDENTIAL HOME THEY LIVED IN.
++++++
“homeowners who invested heavily in their properties”
Ellisa Atherton’s mortgage rate is 11.99%. How is that cheap and easy money?
Imagine$ iffin’ it where 15.5%, … !
I can imagine 17.5% very clearly.
In the bad old days when men had to pee and shower in men’s bathrooms…
He would have laughed out of the bank’s office.
Ellisa STILL got the money at less than you pay for a credit card.
+++++
“Ellisa Atherton’s mortgage rate is 11.99%. How is that cheap and easy money?”
2banana - it would be interesting if there was detailed data on the numbers of detached / single family homes bought to live in vs to generate income / as an investment, going back over the last 40 years, as well as when homes got converted to rentals, etc.
I don’t think such data exists, but if it did I suspect it would fascinating to overlay it with other trends in this country. I think we’d see some interesting correlations.
detailed data…
What would you personally do if your shack’s “value” dropped by 60% and your beau fleuve income stream was disrupted?
A few weeks ago on a Friday, a “novice” poster here posted something toward this end. If I find it, I will repost.
I think that ratio is a significant player this time around.
MGSpiffy:
Here you go. Not quite what you are looking for, but it’s a start. From the St Louis Fed. Perhaps there’s more to be found…
Comment by Tempe Beach Bum
2018-03-30 12:54:32
Good Report on Housing Prices without Homeowners.
https://fredblog.stlouisfed.org/2018/03/a-housing-recovery-without-homeowners/
Realtors are liars.
without new loans (DEBT) being created the money supply remains stagnant.
You need more loans to get more money in the system.
How else do you get more money in the system? The system is designed for perpetual debt.
one persons loan is anothers windfall!
How else do you get more money in the system?”
Helicopters ?
It’s worse than that. The system depends on ever expanding debt. Grow or die.
Californians should be rejoicing and be so glad to pay more in taxes.
The big progressive billionaires/millionaires have been begging for more “taxes” and wanting to pay more than their “fair share” for years now.
+++++
Trump’s tax cut not for everyone: 1 million Californians will owe $12 billion more next year
Sacramento Bee - 4.17.2018
President Donald Trump’s tax cuts will be anything but for about 1 million California taxpayers who will owe Uncle Sam more money a year from now.
They’re the Californians who will lose a collective $12 billion because the new law caps a deduction they have been able to take for paying their state and local taxes, according to a new analysis by the Franchise Tax Board.
Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion.
…
Overall, most Californians should see a tax cut. The new federal law doubles the standard deduction available to all taxpayers, and it increases a child tax credit. It also slashes corporate tax rates.
I ran the numbers on how the Trump tax law would affect my taxes: Likely my tax return will be $1000 less, but my take-home pay will be $1750 spread over the year. Net tax cut of ~$750. This appears to be typical, and in line with the results from the WashingtonPost calculator.
Now you know what it’s like for many others, every time DC decides to raise OUR taxes.
Under Trump’s tax cut, I definitely come out ahead.
Neighbors sold their home here in SoUtah. They left yesterday in the U-Haul on the way back to their old stomping grounds in Northern Cal.
The rate for the 26 foot truck was under $200.00. U-Haul also offered them an extra trailer to use for free.
They told me that the rental rate in the opposite direction was around $2,600.00 for the same truck.
They left yesterday in the U-Haul on the way back to their old stomping grounds in Northern Cal.
I hope they still have their old house.
“U-Haul also offered them an extra trailer to use for free.”
Meaning: If U-haul can get these pukes to take the trailer to California for nuthin’ then U-Haul wouldn’t have to pay someone to do it.
Liberals love high taxes, as long as it’s someone else paying them.
2banana’s Rule.
Conservatives are more than happy to live under the same taxes and laws they want for everyone else.
Liberals/Progressives expect to exempted from the same taxes and laws they want for everyone else.
Ventura, CA 93003 Housing Prices Crater 7% YOY As Mortgage Fraud Envelopes Southern California
https://www.zillow.com/ventura-ca-93003/home-values/
*Select price from dropdown menu on first chart
I love it when they say “low ball offers”. It really means a bid made by someone who is not on drugs or should be on drugs. Essentially, a rational bid under the circumstances.
not on drugs or should be on drugs
Thats an exceptionally small percentage of the population and even that small number is vanishing before our eyes.
You can’t expect them to “give it away!”
‘As has been explained to readers in previous articles on this subject, the real estate equation is a simple one. Over the long term, housing prices must remain parallel to income levels. Period. No exceptions, ever.’
‘Perhaps most ominous was this (US) statistic: Average incomes rose 15 percent between 2011 and 2017, but housing prices increased 48 percent during that period, Wingert said. ‘There has got to be a tipping point,’ he said. ‘This is not sustainable.’
http://thehousingbubbleblog.com/?p=10404
Here’s a laugh-a-minute article from WaPo:
Here’s how researchers think the Washington-Baltimore region could look in 20 years
By Katherine Shaver April 18 at 11:26 AM
Where — and how much — traffic congestion will grow is part of new research into what the D.C.-Baltimore region will look like in 20 years… Researchers at the University of Maryland say they’ve found a new way to predict how much traffic congestion will worsen, where people will live, and what they’ll pay for housing.
The future, they say, lies in how quickly — and how much — residents begin using autonomous vehicles, whether gas prices rise or fall, and where governments allow growth to occur.
————–
The article goes on to describe four scenarios. I am amused that they considered some new possibilities: self-driving cars, tolled outer Beltways for each DC and Baltimore (new bridges over the Potomac), a second bridge across Chesapeake Bay (opens up a lot more land), and development of what is now Agricultural Preserve land.
(I guess they conducted the study before Amazon gave DC serious consideration.)
People familiar with DC know that these massive projects are highly unlikely, not to mention the heavy reliance on autonomous cars. Amusing quote: “However, because roads can carry more driverless vehicles traveling closer together, traffic congestion actually improves dramatically.” I don’t know how autonomous cars are going to get any closer together than they already are. At least where I live, if you keep a “safe distance” from the car in front of, other drivers interpret that as an invitation to cut you off.
I have been in 42 states and 16 of the 20 largest metropolitan areas in the U.S. I have never heard traffic dominate discussions and daily decision-making like I did in the D.C. area. Not even close. But I was entertained by the “slugging” phenomenon.
I saw the same mentality when visiting Houston 15 years ago.
Potomac Falls, VA Housing Prices Crater 13% YOY As DC/NoVA Foreclosure Rate Skyrockets
https://www.movoto.com/potomac-falls-va/market-trends/
Chinese housing:
http://www.xinhuanet.com/english/2018-04/18/c_137120139.htm
Despite what the government says or does, housing “investment” seems to exceed GDP growth. Speculators got to speculate.
“Nearly One-Third Of U.S. Lottery Winners Declare Bankruptcy”
(snore) … so what else is New?
Oh, lookie here …
“Another study says that lottery winnings raises the risk of bankruptcy even among the winners’ neighbors by roughly 2.4 percent.”
The neighbors?
“Researchers say that lottery winner lifestyle upgrades then tempt their neighbors to boost their own spending on visible markers of prosperity, even though they haven’t had a sudden run of financial luck.”
It is truly amazing just how incredibly stupid some people are.
Link …
https://safehaven.com/article/45289/Nearly-One-Third-Of-US-Lottery-Winners-Declare-Bankruptcy
Being poor isn’t about money.
*Double post and a day delayed (was fighting the flu for the last two weeks…) Normal weekly summaries should, hopefully, resume on Tuesdays.
–
Weekly Summary: HBB-Reported Purchase Price Declines
Posted every Tuesday. Key and quarterly summary posted the last day of the quarter.
–
April 4 - 17
> -65.5% Maui - Hana (yoy -Mar18)
> -44.5% Australia - Gladstone / AVG SP SFR (2013-17)
> -39.9% Australia - Gladstone and Biloela / AVG CND (2013-18)
> -39.5% [Chicago - Hinsdale / SP] (2006-18)
> -37% Medicine Hat, Canada / LND (Apr18)
> -35.4% Maui - Maui Meadows (yoy -Mar18)
> -33% Vancouver - West / AVG CND (Feb18-Apr18)
> -30% [Vancouver / PCS LUX SFR] (Q4.17-Q1.18)
> -28.7% Australia - Gladstone and Biloela / AVG SFR (2013-18)
> -27% Toronto - Richmond Hill (yoy -Apr18)
> -25% Toronto - Newmarket (yoy -Apr18)
> -20% to -25% Vancouver - Kitsilano / LUX SFR (2016-18)
> -20% Manhattan - Financial District and Battery Park / MED (yoy-Q1.18)
> -22% Toronto - Marham (yoy -Apr18)
> -21% Toronto - Newmarket / AVG PCS RLP (Apr18)
> -20% Toronto sub - King City / AVG (yoy - Mar18)
> -19% Manhattan - Financial District and Battery Park / AVG (yoy-Q1.18)
> -18.7% Toronto / AVG SFR DEV (yoy-Feb18)
> -18.7% Australia - Central Queensland / AVG CND (2013-18)
> -18.6% Manhattan / AVG PSF (yoy -Apr18)
> -15% to -18% Vancouver / LUX SFR (yoy -2018)
> -17.5% Australia - Central Queensland / AVG SFR (2013-18)
> -17% Toronto / AVG SP SFR (yoy -Apr18)
> -16.8% [Vancouver / PCS LUX SFR] (Oct17-Feb18)
> -15.5% Toronto exb - Hamilton and Burlington / AVG SP SFR (yoy-Mar18)
> -15% Manhattan / AVG LUX CND+COP (yoy-Q1.18)
> -14% Toronto / AVG SP (yoy -Apr18)
> -13.8% Toronto exb - Hamilton and Burlington / AVG SP (yoy-Mar18)
> -12% to -13% Toronto / AVG PCS RLP (APR18)
> -12.2% Sydney - Baulkham Hills and Hawkesbury / CND (yoy -Mar18)
> -11.6% Vancouver- Downtown / AVG CND (Feb18-Apr18)
> -10.9% [New Dehli exb / UPS] (2011-18)
> -10.4% Canada / AVG (yoy -Apr18)
> -10.4% Australia - Gladstone and Biloela / AVG CND (yoy -Apr18)
> -10.1% Maui / MED SFR (yoy -Mar18)
> -10% Manhattan / AVG PCS LUX CND DEV (2016)
> -10% Santa Barbara, California / AVG LP (Apr18)
> -10.1% Sydney - City and Inner South (yoy -Mar18)
> -9.2% Sydney - Inner West (yoy -Mar18)
> -8.3% Manhattan / AVG CND+COP (yoy-Q1.18)
> -8% Manhattan - Upper West Side / MED (yoy-Apr18)
> -7.7% [Mumbai / PCA] (2013-18)
> -7.3% Australia - Gladstone and Biloela / AVG SFR (yoy -Apr18)
> -7% Manhattan / MED LUX DEV (yoy-Q4.17)
> -7% Toronto - Brampton / AVG PCS RLP (Apr18)
> -6% Manhattan / AVG PSF (yoy-Q1.18)
> -6.5% Vancouver - West / PIX SFR (yoy-Q1.18)
> -5.29% Brooklyn / AVG PSF (yoy -Apr18)
> -4.6 Sydney / MED SFR (yoy -Apr18)
> -3.7% [Manhattan / UPL LUX CND DEV (2016-Dec17)
> -3.3% [Manhattan / UPL LUX CND DEV (2015-18)
> -2.9% Sydney - Baulkham Hills and Hawkesbury / SFR (yoy -Mar18)
> -2% Manhattan / MED SP (yoy -Apr18)
> -1.4% Sydney / MED CND (yoy -Apr18)
> -1.3% Manhattan / MED CND+COP (yoy-Q1.18)
> -0.3% Sydney / MED (mom -Apr18)
Dedham, MA Housing Prices Crater 9% YOY As Housing Correction Ravages Boston Area
https://www.zillow.com/dedham-ma/home-values/
*Select price from dropdown menu on first chart
Friend of mine finally won a house today. He had been outbid 4 times. Lucky number 5.
He knows we are in a bubble but his mortgage will be just about what he is paying for rent, and so doesnt care if prices correct short term. With MID he may even be paying less than rent for a better place.
Now on to actually getting that mortgage….
Cost of owning a home = mortgage + insurance + taxes + HOA fees (if applicable) + upkeep + maintenance
Cost of renting = the rent
HOA ’round here runs $150 to $200 a year, so $15 a month.
When I said mortgage I meant PITI. And renting still has some maintenance like yard and snow, which is paid for by tenants. This is a house rental, not an apartment.
In some cases, this being one of them, it makes no sense to rent.
I keep reading about cost of maintenance….I’ve owned a house for the past 20 years on and off. I cant remember a year when I spent more than $500 on maintenance. Unless you own an estate of some sort, tjere really isnt that much to maintain. Change hvac filters, some caulking when needed, a/c tune every couple of years,, maybe pest control. Stuff like that runs a few hundred a year. And repairs….buy newer houses and those are kept to a minimum too. Only major repairs I had to do was roof damage which was covered by insurance after a storm, less deductible, and one year the heat pump needed a major overhaul which was $1000. No big deal over that time horizon.
‘I cant remember a year when I spent more than $500 on maintenance’
This is why there’s so many worn out shacks out there. Don’t ever become a landlord. You’ll be surprised.
20 years?
$500 a year in maintenance per year?
No furnace?
No heat pump?
No hot water tank?
No a/c?
No roof?
No gutters?
30 year old kitchen with 30 year old appliances?
30 year old bathrooms?
No landscaping?
No driveway?
No chimney?
No windows?
Etc.
There may be the slight chance you are telling the truth if you purchased a completely new house 20 years ago built with higher end options.
But now EVERYTHING is at the end or well past the end of the designed life.
He got lucky. You have to save money to keep from getting blindsided. Every day is one day closer to the end of the AC, roof, water heater, dishwasher. Gutters don’t last forever. And most of this stuff will last longer with diligent maintenance that almost no one does.
With the AC, the government is mandating much more efficient systems that cost a bunch more. They are basically making old style systems obsolete. Sure you can find one and put it in but good luck sourcing the old freon in a few years. The new ones are great and pricey. The high quality roofs last longer than ever and cost more. New efficient windows? Get ready to write some zeros on that check.
Flush your water heater once a year (just a few gallons, no need to drain the whole thing), keep water away from the foundation. And for jeebus sake don’t put egg shells and potato peels down the disposal. It’s not a shredder, put it in the trash.
“With the AC, the government is mandating much more efficient systems that cost a bunch more. They are basically making old style systems obsolete. Sure you can find one and put it in but good luck sourcing the old freon in a few years. The new ones are great and pricey.”
Indeed. I had to replace our heat pump system entirely, $10k lighter, but the new setup is variable speed and very quiet.
He says he’s owned houses for the last 20 years “on and off”. So he’s a speculator. Passes all the maintenance issues on to the next sucker. Sells before he really has to fix anything.
Thats right.
Now stack on $3/sq ft depreciation along with the taxes, insurance and other losses and you’re right back to double rental rates.
“Friend of mine finally won a house today.”
Your friend may have found the absolute top of the market. Hence, prices and rents will likely fall going forward.
Overpaid=won?
“Friend of mine finally won…Lucky…He knows we are in a bubble but…doesnt care if prices correct short term…he may even be paying less than rent.”
This is a brilliant strategy for losing half a million dollars in the blink of an eye!
Just back of the envelope. Let’s say you make $3 million in your short career, total. You take home $1.5 million and spend that on your life. A momentary long math error like above and your life suddenly is 2/3 of what it might have been in a manner of style. Let’s say you only get one life.
Big Pine Key, FL Housing Prices Crater 5% YOY As Coastal Property Demand Collapses
https://www.movoto.com/big-pine-key-fl/market-trends/
Ben
Have you ever heard of this guy?
https://www.youtube.com/watch?v=n-Lc6k_MXjs
And Fannie and Freddie now securitize “conforming” loans with 50 percent of pre-tax income going to debt service.
For older generations of sellers, the banks, etc. to get everything they have promised themselves, they have to take a higher and higher share of all the future income of everyone to follow. Individually — through housing bubble prices — and collectively — through public debt.
“They primarily did it to invest and make more money – no longer a good idea.”
By the time the next recession rolls around, there will be so many bitter underwater debt donkeys, the Democrats will have a field day offering bailouts in exchange for votes.
Unless Republicans still happen to be in power, AND they decide to follow traditional free market principles, instead of mimicking Democrat free-sh!t-for-votes practices.
Here’s an oldie, but it’s a goodie.
February 26 2008
US Fed must put floor under home prices
“Housing prices in the US must not be permitted to continue falling, says the chief investment officer of a fund with $US750 billion of fixed-income assets under management.”
http://www.canberratimes.com.au/business/us-fed-must-put-floor-under-home-prices-20080225-1uru.html