Why is the market going crazy?

[Bill Bumface]

Originally Posted by Johnny199r

Personally, it feels good to do the responsible thing and get rewarded for it in the long term. When trying to buy a house sensibly (large downpayment, low mortgage, not overextending yourself) and being driven to your wits end by people are financially irresponsible (when competing for the same interests as you) feels like just desserts when things return to common sense.

Yeah, but what about those of us that did the responsible thing and bought a modest place with a large down payment, low mortgage etc, but are still on the hook for a very large sum of money over the next few decades. It'll be really funny when people like us want to move and can't because our places go into negative equity when the bottom falls out? Ha ha?

[Winsor_Pilates]

Originally Posted by Johnny199r

Personally, it feels good to do the responsible thing and get rewarded for it in the long term. When trying to buy a house sensibly (large downpayment, low mortgage, not overextending yourself) and being driven to your wits end by people are financially irresponsible (when competing for the same interests as you) feels like just desserts when things return to common sense.

If the crash people talk of really happens, it will effect every responsible owner and the greater economy overall.
It's fiction to think just irresponsible buyers will be hurt and you'll get to scoop in on their property at a reduced price while everything else is status quo.

Here's a cool infographic on homeownership in Canada:
Mortgages in Canada

About 1/3rd of Canadians adults own a home and about a third of them have paid off that home.
If the crash happens, it's pretty naive to think our economy as a whole won't be huge trouble with large consequences to everyone. It likely won't be a situation where you'd even want to get into the housing market.
Why not go buy property in Detroit?
Sounds like just the situation you're wanting to get in on!

[Johnny199r]

Originally Posted by Winsor_Pilates

If the crash people talk of really happens, it will effect every responsible owner and the greater economy overall.
It's fiction to think just irresponsible buyers will be hurt and you'll get to scoop in on their property at a reduced price while everything else is status quo.

Here's a cool infographic on homeownership in Canada:
Mortgages in Canada

About 1/3rd of Canadians adults own a home and about a third of them have paid off that home.
If the crash happens, it's pretty naive to think our economy as a whole won't be huge trouble with large consequences to everyone. It likely won't be a situation where you'd even want to get into the housing market.
Why not go buy property in Detroit?
Sounds like just the situation you're wanting to get in on!

I have no doubt that in the future my taxes will be going to aid the many, many people who could have, but chose not to, prioritize saving for retirement, in addition to people who purchased houses that were really beyond their means.

I believe we'll have a mild correction at some point, which is when I'll jump in.

Some people are ok having a mortgage they're paying off into/until retirement with the risk of losing it all if there's big interest rate rise/job loss/long term illness. Fair enough. To each their own. I prefer a modest place that I can pay off in 5 years max (after saving a big down payment) which will allow me to retire very early or take a year off of work every few years to travel.

[Table 5]

Sounds like you've got everything figured out then.

[tvp2003]

Originally Posted by Johnny199r

Some people are ok having a mortgage they're paying off into/until retirement with the risk of losing it all if there's big interest rate rise/job loss/long term illness. Fair enough. To each their own. I prefer a modest place that I can pay off in 5 years max (after saving a big down payment) which will allow me to retire very early or take a year off of work every few years to travel.

I would bet that 99% of the general population will never have this option, even if they were "financially responsible". This does not make them financially irresponsible IMO. Not everyone out there can pull six figures.

[lorenavedon]

if you're 40 and you get a 30 year amortization it does not necessarily mean you'll be paying off the place until you're 70. Inflation wipes away debts and as governments around the world as the biggest debtors in history, you're in good company. The financial and economic conditions currently are completely different than the ones in the early 80s where they were able to jack up interest rates. It is currently impossible to raise interest rates and not risk the entire global economy. So low rates are here for the long haul as well as inflation. The days of high rates and low home prices which benefit savers are HISTORY. Maybe in another 100 years those days will come back but this is the new economy and those that don't adjust will get slaughtered.

[Johnny199r]

Originally Posted by tvp2003

I would bet that 99% of the general population will never have this option, even if they were "financially responsible". This does not make them financially irresponsible IMO. Not everyone out there can pull six figures.

I think many people making under 100k, along with a working spouse could have a huge downpayment ready (150k and up) by their mid 30s if they buy a modest place along with a history of other smart money decisions ie only owning one vehicle per family unit and taking public transportation, not eating out much, not having vices, taking modest vacations, learning about, and investing early, working up north in remote places to earn extra money to begin their careers etc

Unfortunately, not many people take these steps these days, so it's not the norm for the "average person"to pay off a mortgage quickly, when it could be.

[Johnny199r]

Originally Posted by lorenavedon

if you're 40 and you get a 30 year amortization it does not necessarily mean you'll be paying off the place until you're 70. Inflation wipes away debts and as governments around the world as the biggest debtors in history, you're in good company. The financial and economic conditions currently are completely different than the ones in the early 80s where they were able to jack up interest rates. It is currently impossible to raise interest rates and not risk the entire global economy. So low rates are here for the long haul as well as inflation. The days of high rates and low home prices which benefit savers are HISTORY. Maybe in another 100 years those days will come back but this is the new economy and those that don't adjust will get slaughtered.

If you're confident that you can predict 15-20 years down the road, power to you, that's quite a gift.

[lorenavedon]

Originally Posted by Johnny199r

If you're confident that you can predict 15-20 years down the road, power to you, that's quite a gift.

timing and specifics require a crystal ball, but trends are usually unavoidable outcomes. There is no doubt about a lot of things, the problem is timing. An complete global economic collapse is certain. The only problem is, will it be next year or in 20 years or 100 years. The Roman empire collapse but there were a lot of people that lived and died in it that knew nothing else and probably assumed it would last forever.

[darklord700]

Originally Posted by fotze

As an example of the crazy.

The property C3608500 sold last month for $745k, the person who bought it has done nothing and is trying to flip it now for $875k.

The buyers will know that he bought it for $745K and is now flipping it for $875K. It probably won't work but who knows.

Take a look at this blog about the Vancouver Flippers, pretty halarious stuff.

http://vancouverpricedrop.wordpress.com/

[lorenavedon]

Originally Posted by fotze

As an example of the crazy.

The property C3608500 sold last month for $745k, the person who bought it has done nothing and is trying to flip it now for $875k.

what a dump. This city is a joke. The second oil and gas goes down the tubes people will be scattering like cockroaches and this crack house will be back down to $150k where it belongs.

[Johnny199r]

Originally Posted by lorenavedon

what a dump. This city is a joke. The second oil and gas goes down the tubes people will be scattering like cockroaches and this crack house will be back down to $150k where it belongs.

I don't think that will happen, let alone anytime soon. It's just puzzling to me why the general population are all willing to spend so much money on a house these days. I can't comprehend it.

[2ArmBands]

Originally Posted by Johnny199r

I don't think that will happen, let alone anytime soon. It's just puzzling to me why the general population are all willing to spend so much money on a house these days. I can't comprehend it.

If you look at pretty much any point in time there are always people saying what you are here. People thought the same thing in early 2000's now look at them. I don't know that I understand much of your logic.

One one hand, you are recommending people wait until their mid 30s to purchase with large money down and low term. I can appreciate your financial responsibility but do you expect people to rent property for 15+ years? Are you aware of the large amount of equity lost in this scenario?

Think about people that bought homes in their early 20s and are now in their mid 30s... Do you think they regret it? No chance. In fact a lot of those people are sitting on an asset that they can build their entire retirement plan around. I'm aware that is a different market than some in the last decade (obviously) but across the country a lot of those same scenarios do exist.

Now to head slightly off topic...You talk about wanting to work a few years and take a year off on occasion and travel etc...Again I can appreciate and admire anyone's desire for personal happiness. However, have you considered the effects of taking a year off work on a cyclical basis? You are likely (not always) jeopardizing advancement opportunities etc. Are you planning on having children? A wife? Will she be working? Can you just leave for a year and travel?

If you're a young guy ( I don't know but I think you might be) I think you have an excellent head on your shoulders and your intent is in the right place. But just a heads up life comes at ya fast!!!!

[darklord700]

Originally Posted by Johnny199r

I don't think that will happen, let alone anytime soon. It's just puzzling to me why the general population are all willing to spend so much money on a house these days. I can't comprehend it.

I bought my first condo in 2000 for $120K, sold it in 2004 for $180K and bought a house for $250k just before the crazy run up. At that time my family income could afford a close to $400K house but I tried to be financially prudent and bought an adequate $250K house instead.

I'm still beating myself for not buying that $400K house in 2004 which would have been worth close to $800K today.

Anytime in history you'll have people wondering why people were paying so much for houses but most of the time people do pay a lot for houses.

[cam_wmh]

nm

[Johnny199r]

Originally Posted by 2ArmBands

If you look at pretty much any point in time there are always people saying what you are here. People thought the same thing in early 2000's now look at them. I don't know that I understand much of your logic.

One one hand, you are recommending people wait until their mid 30s to purchase with large money down and low term. I can appreciate your financial responsibility but do you expect people to rent property for 15+ years? Are you aware of the large amount of equity lost in this scenario?

Think about people that bought homes in their early 20s and are now in their mid 30s... Do you think they regret it? No chance. In fact a lot of those people are sitting on an asset that they can build their entire retirement plan around. I'm aware that is a different market than some in the last decade (obviously) but across the country a lot of those same scenarios do exist.

Now to head slightly off topic...You talk about wanting to work a few years and take a year off on occasion and travel etc...Again I can appreciate and admire anyone's desire for personal happiness. However, have you considered the effects of taking a year off work on a cyclical basis? You are likely (not always) jeopardizing advancement opportunities etc. Are you planning on having children? A wife? Will she be working? Can you just leave for a year and travel?

If you're a young guy ( I don't know but I think you might be) I think you have an excellent head on your shoulders and your intent is in the right place. But just a heads up life comes at ya fast!!!!

My spouse and I are both gov't lawyers. We can take a year off whenever we want to travel (one of the reasons I left private practice) without it hurting our careers. We can take a child oR 2 with us until they're school aged. Challenging, but done by more than a few people.

I think most people aren't in a position to buy before mid 20s at the earliest considering education commitments these days. Many rent until later 20s at least. I'm 31 and rented a $500 apartment for a number of years while making 6 figures. I don't feel that I lost much in the way of equity. I don't regret it, as I also relocated cities. Just about every young professional I know in their late 20s rents.

I get what you are saying. I just think it's nuts when you compare the average price of a home 10, 20, 30 years ago, relative to average wages to today, it's just exploded lately with no end in sight as people can't get enough when it comes to borrowing for mortgages. I just think that it's unfortunate as many people don't leave any breathing room in case there are money problems at any times.

[Wormius]

Originally Posted by Johnny199r

I get what you are saying. I just think it's nuts when you compare the average price of a home 10, 20, 30 years ago, relative to average wages to today, it's just exploded lately with no end in sight as people can't get enough when it comes to borrowing for mortgages. I just think that it's unfortunate as many people don't leave any breathing room in case there are money problems at any times.

Are there any examples of this happening in Canada? I was pretty sure that mortgage brokers factored in other living costs before doling out mortgages. I can't imagine anybody living paycheque to paycheque would be given a mortgage.

[JiriHrdina]

Originally Posted by Wormius

Are there any examples of this happening in Canada? I was pretty sure that mortgage brokers factored in other living costs before doling out mortgages. I can't imagine anybody living paycheque to paycheque would be given a mortgage.

Lenders will always give you more money than you can afford to borrow

[bizaro86]

Originally Posted by fotze

As an example of the crazy.

The property C3608500 sold last month for $745k, the person who bought it has done nothing and is trying to flip it now for $875k.

That might work, it still doesn't seem like terrible value, that's a great location.

I looked up the listing, and actually sort of wish I had gone to look at it when it was 745k, as that would be a sweet house to renovate and move downtown.

[TKB]

Originally Posted by Johnny199r

My spouse and I are both gov't lawyers. We can take a year off whenever we want to travel (one of the reasons I left private practice) without it hurting our careers. We can take a child oR 2 with us until they're school aged. Challenging, but done by more than a few people.

I think most people aren't in a position to buy before mid 20s at the earliest considering education commitments these days. Many rent until later 20s at least. I'm 31 and rented a $500 apartment for a number of years while making 6 figures. I don't feel that I lost much in the way of equity. I don't regret it, as I also relocated cities. Just about every young professional I know in their late 20s rents.

I get what you are saying. I just think it's nuts when you compare the average price of a home 10, 20, 30 years ago, relative to average wages to today, it's just exploded lately with no end in sight as people can't get enough when it comes to borrowing for mortgages. I just think that it's unfortunate as many people don't leave any breathing room in case there are money problems at any times.

I really cant agree with your points about renting. I'm not sure when renting is ever a good idea if you have the ability to own. I would of been so much further behind If I would of not bought my first home in my early 20's.