On the other hand, yes, tax is an issue that still requires accounting.

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4% return is risk free. 8% isn’t

the equity in your home is not risk free. the roof over your head is (if it’s clear title)

apples to apples.

i wouldn’t compare opportunity cost of a clear title home to an 8% return on mutual funds, especially if i were giving advice to a friend. and we haven’t even factored in taxes on that 8% return.

my only point was that re-diculous tried to compare equity to opportunity cost without providing an alternative (comparible) bed to sleep in.

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Seattle townhouse prices were down from the prior year in six of the first 10 months of 2007, with October’s median townhouse price of $358,594 down 13.6 percent from October 2006,

“What we are seeing is these huge price reductions, where a guy’s asking $600,000 one week, then $550,000 the next week and $500,000 the week after that,” said Ryan Thompson, an agent with John L. Scott Real Estate.

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from above article

BTW GOLD IS THE ONLY ANSWER

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Crappy neighbourhood or crappy condition but not modest. When Vancouver prices absolutely blow away SF BUBBLE prices it’s time to sell (as if there’s anyone here with any sense who hasn’t sold already)

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There you go:

November 24, 2007
Today’s Housing Bubble Post – Marked Down From $725K To $495K, Still Not Selling
A for-sale house around the corner from us (SF Bay peninsula) has gone through all the stages, and now even the “price reduced” sign is gone. The house is empty. The flyers are still there, however. Walking the dog the other day I picked one up to see what they’re offering.

The house, a modest three-bedroom in a modest neighborhood, was originally listed at $725,000. Now that is crossed off by hand on every flyer and $495,000 is written in.

So, marked down from $725,000 to $495,000 it still isn’t selling. No one is looking at it. It is still priced higher than the average person can or will pay for a house like this to live in this neighborhood. House prices around here still have a long way to fall, but you can’t expect other houses around here to sell for a lot more than $495,000 now – not with that one sitting there. But most of them are still priced in the $600-700,000 range.

That leaves a long way left to fall

http://www.seeingtheforest.com.....ng_137.htm

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Yeah but 4% is a shockingly low rate of return for any proper investment, 8% is pretty realistic to expect. If it’s 80,000 per year you’re squandering $50,000 per year in your example. That’s a LOT and there is no way that home appreciation can match it. This is part of the reason why the market can’t just stall and return to normal appreciation levels. Anyone with a lick of sense knows that they’re better off investing the money in a good mutual fund rather than letting it stagnate in a house that’s bound to depreciate.

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No,you did not miss anything and top of that on given appreciation that house will cost 2 million in 13 year.

That’s mean after 13 year when you will look back you will smile that you were paying nothing and making every thing.

Pavel bure sold his unit for 3m he should have keept cow,dogs,and cats in his unit to make 18m in 3 year.

Solipsist,
taste the yogourt ho oh ho.
taste the yogourt oho ho ho.
taste they yogourt yeah eh hey.
taste the yogourt
thums up taste the yogourt.
and after that put your empty cup here

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i’m not following your opportunity cost argument.

using your numbers, your friend with a clear title million dollar home is squandering approx 40k/yr in opportunity cost while he ‘consumes’ his housing.
the problem with your example is that it over exaggerates the cost as you haven’t given him alternative housing. clearly you must live somewhere.

renting a family home on the westside will easily set you back at least 2500/month.

so in your first example the opportunity cost is $800/month that can easily be argued away as a premium for home ownership.

every person will have a different ‘premium’ placed on ownership.

i know personally mine would be quite high as i have a family to house, incl a dog, making the task of renting very difficult.

am i missing something?

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Ok, whatever. It’s not terribly relevant to a RE conversation how much they seized.

However I think you’re mistaken about the proceeds of crime driving the market here. Organized crime LAUNDERS their money. That means that even though the money comes from illegal sources it is put through a legit business so that at the end of the day the money is still recorded as a part of the economy as a whole, it’s not like there’s billions of dollars floating around the market that is unknown to statscan.

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If you’re going to accuse people of not reading the story correctly you should try and read it yourself. Here’s what it said:

“The act came into force in May 2006. Since then, some $2 million in assets have been seized including houses, cars and boats, with the funds used to compensate victims AND IN CRIME FIGHTING.”

So it’s not as you claim that the amount is defined as what can be handed back to victims. The assets not handed back are plowed into police budgets. And that grand total is $2 million since May 2006.

And let me just repeat what I said earlier about the RCMP division responsible for money laundering, counterfeiting, fraud etc, because it’s just too amazing to say once. With a staff of some 75 people and annual budget of $8 million a year they have managed to jail only 17 criminals in the last 5 years.

Anyway you slice it there is a mammoth pool of wealth generated by organized crime in this city, and it’s effect on property prices has to be significant. How significant? We’ll probably ever know because there are so few data points and because the police clearly are in no position to provide that data.

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I can’t believe that they didn’t go for the asbestos insulated home. People really need to get rid of this sense of entitlement.

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Ugh.

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Tick Tock, Tick Tock,

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The next shoe to drop in the mortgage and credit crunch saga will be commercial real estate,” Mr. Roubini ominously predicted last week in his popular blog. “The bubble in commercial real estate construction, like the bubble in residential construction will soon turn into a painful bust.”

“Early reassurances from the likes of U.S. Federal Reserve Board chief Ben Bernanke and countless Wall Street luminaries have proven pretty unreliable So maybe it’s time to pay attention to some of the darker voices out there”

And they there is this nice story:

Any economist worth their salt could see the wreck coming, and boy it was a doozy. The insurance carrier for this contrived carnage was, who else, America’s Middle Class.

Alan “Cash” Greenspan and “Bronco Ben” Bernanke predicted a soft landing for housing. They also assured us that the housing sector was not large enough to bring down the economy. So much for requiring our FED Chief to have a handle on economics 101. But, the massive housing failure wasn’t their fault, the banks “done it,”

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That’s not what it said at all.

“$2 million in assets have been seized including houses, cars and boats, with the funds used to compensate victims and in crime fighting.”

I highly doubt that ALL of the assets they’ve seized have been turned over to victims. In many cases how would the police identify a ‘victim’, are they just going to turn the money over to drug addicts? You appear to be reading something into the article other than what it literally says. I think the reporter worded it badly, I am not 100% certain of what he means either but since it can be taken both ways I am inclined to give the benefit of the doubt until proven otherwise.

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Seventeen people jailed by the RCMP for commercial crimes in five years.

This stuff is jawdropping.

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Let me recount a recent exchange I had with a friend of mine regarding my favorite topic: “Opportunity Cost”. This friend owns a $1million+ home on the west side.

The conversation went like this: “Let’s assume that your home is paid off, then you’re opportunity cost of living there (current value = $1million) is at minimum $3,300/month (i.e. 4%). And If you’re a reasonable investor able to achieve (modest) 7-8% returns, it’s over $6,000/month – or – $72,000/year!

I was shocked that my friend – an intelligent guy – had not even considered this – in fact when we got together the following week, he declared that this conversation had “haunted” him.

The reason I tell this story is that I think my firend is not alone – i.e. current Vancouver owner’s have been solely focussed on their growing capital gain and neglected the concept of opportunity cost – easy to do I suppose.

As the price increases subside, as they must. and we reach peak – even if prices only move sideways thereafter, Opportunity Cost, I believe, will become the “800 pound elephant overhanging this market”

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“In essence, he wants us to believe that housing skyrocketed 10-plus years after the fall of the Soviet Union in some sort of delayed reaction, and that it was just by coincidence that this happened after the Fed slashed rates to 1%. Clearly, Greenspan is attempting to absolve himself of his role in the housing bubble.”

But all that aside,and regardless what caused this world wide housing bubble; we must remember that Vancouver’s prices are supported by fundamentals.

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You have to realize that assets seized and given to the victims cannot include drugs or ANY asset that the police cannot prove came from ill gotten gains. That’s a very tough thing to do and it probably takes a while, in fact the lag may be as much as a year or two on average.

The actual amount seized is probably 10-100x the number you give.

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“The act came into force in May 2006. Since then, some $2 million in assets have been seized including houses, cars and boats, with the funds used to compensate victims and in crime fighting.”

Two million in assets seized in almost two years from an industry worth up to $7 billion a year.

Consider this along with the grand total of 17 people jailed by the RCMP’s fraud, laundering and counterfeiting division in the last 5 years and you start to get a good idea how wonderful this country is for criminal activity.

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