Carney on Interest Rates – Let it be.
Citing ‘threats to global rebound’ the Bank of Canada has announced that they will leave the benchmark interest rate at 1%.
In explaining its decision to stand pat, which was expected by investors and economists, the central bank said private demand in the United States is “picking up slowly,” growth in emerging markets has started to cool to a more sustainable pace, and sovereign debt problems in several European countries “could trigger renewed strains” in global markets.
While the central bank anticipated a slow and grinding U.S. rebound, and though growth in developing nations such as China remains “robust,” policy makers noted that Canadian exports, which are needed to drive the recovery as debt-burdened consumers pull back and government stimulus spending runs out, have been disappointing in recent months.
Indeed, third-quarter growth data released last week indicated that the sales abroad that will be so crucial in the months ahead remain a weak spot, holding the economy to its worst performance in a year.
Read the full article in the Globe and Mail. Will you buy now with rock bottom interest rates or wait for those global economic risks that inspire them to have an effect on local house prices? The ‘how much a month’ crowd can get some pretty decent deals as long as they don’t look at the big number, but that doesn’t leave a lot of wiggle room for future interest rate increases or negative equity refinancing.
December 8th, 2010 at 1:00 am
63 scullboy Says: "Bear in mind I didn’t say ALL American cities are awesome, and I’d argue Detriot *was* awesome at one time."
It was, and once phenomenally affluent. In their prime some of the most dire Detroit crack houses would be national heritage structures in Point Grey. It too is a valuable lesson in civics for anyone who wants to look.
December 7th, 2010 at 5:10 pm
@scullboy
"What’s sad is that this is a woman who obviously has a good grasp on finances. You have to give her credit, it looks like she makes informed judgement in her other investments.'
I am going to go ahead and call shenanigans. This girl is a financial disaster waiting to happen. (well, over leveraging on a mortgage she cannot afford has set that disaster ball in motion)
Vancouver has some of the most financially illiterate people I have ever met, and the worst are the ones who think they know more than they do. The hubris of writing a blog and offering almost next to no information about the capital markets that you could not find in a sales brochure or a myriad of other amateur sites is typical of our generation.
This person clearly has no idea what they are doing, and should not be offering advice to anyone. I laughed when I read her book review of the Intelligent Investor and one thing that stood out to me was her description of REIT's and "treasury protected securities" (she meant TIPS) which did not exist when Benjamin Graham wrote his book. The version she has contains supplement chapters from Jason Zweig, easier to read, modern commentary on Grahams work. Graham has a dry, particular vernacular that can be hard to get through. I would bet dollars to donuts that our financial wiz kid did not read the Graham chapters. My point? You can't give financial advice referencing a book you have not read, but have only read the commentary. That is fraudulent.
Anyway, I read several comments commending this person, and I was a little shocked.
Understanding finance is hard work, and you have some of the brightest minds (I am not exaggerating) working in the capital markets trying to separate you from your money. Please don't give any credence to a blog written by a person who is barely financially literate.
December 7th, 2010 at 4:27 pm
Wow, i just read one of RealPaul's posts over on Greater Fool. Boy has he toned down the frothing and raving! Nicest man i ever met now.
December 7th, 2010 at 4:11 pm
@boombust and Patriotz:
Bear in mind I didn't say ALL American cities are awesome, and I'd argue Detriot *was* awesome at one time.
I don't bear Y&T any ill will but I don't see how getting a giant mortgage is being "thrifty" to be frank. I learned a lot of lessons the hard way, and the hardest lesson I learned was that we're all a death, divorce, or disease away from disaster.
The problem with basing a mortgage on 2 incomes rather then one is that the couple is actually taking on TWICE as much risk, as BOTH people (rather then one or the other) must stay employed to keep paying the bills. If either member of the couple can not make the payments then the couple is in financial trouble.
I don't know that much and frankly I'm not remotely interested in a GenY finance blog, but I find it hard to believe taking on that kind of mortgage for that amount of time is a smart move. These are two people who haven't committed to a marriage yet. What happens if housing stays flat or drops in 10 years?
I did notice this in the post:
BF and I each are paying 50% of the costs of the house to make in nice and even in case we split up.
Given that she's even written that there's an excellent probability they aren't going to make it past the 5 year point. Given that Vancouver is at or close to a peak it's unlikely she'll be seeing large gains in the value of the house. This doesn't sound thrifty to me.
What's sad is that this is a woman who obviously has a good grasp on finances. You have to give her credit, it looks like she makes informed judgement in her other investments. Given that she's actually recording her experiences it should be extremely interesting to follow the saga. Will the investment in a Vancouver house wipe out her gains? I don't wish that, but I am very curious to see how the story plays out.
I myself have come to an interesting milestone. My own bf and I are moving in together in a few months. I'm going to move into his place, since mine's infested with a psycho lesbian… you know the kind. if she were a man… well you still wouldn't call her "handsome", but you could get away with "manly".
Anyway I'm moving to a Victorian flat, original hardwood floors 3,000 sq. feet, 2 bdrm, HUGE kitchen South End of Halifax (that's like Point Grey in Van). Rent, heart, lights, hot water, cable and Internet are… get this…. $1275 total. My monthly expenses will be about $650.
Not THAT my friends is thrifty!!
December 7th, 2010 at 2:13 pm
@McLovin:
As the saying goes, "There's a sucker born every minute, and most of them will probably move to Vancouver and buy real estate."
December 7th, 2010 at 1:49 pm
"(Cooling prices) will require an increase in real interest rates….
China, HK should rein in property prices: IMF
I wonder if the IMF should get a memo from struggling families in Vancouver and Toronto?
December 7th, 2010 at 1:04 pm
@TakeFive
They are probably doing pretty good, given their age and focus on savings.
However, if they make a combined $120K as assumed, why take on a mortgage that's 5X income.
They are probably good savers, better off waiting rather than overpaying as it has a huge impact:
1) Lower monthly payments, leads to
2) More monthly savings left to pay down mortgage, leads to
3) Faster payment of the mortgage
Unfortunately, higher payments lead to the reverse…
December 7th, 2010 at 12:40 pm
Serf,
They do not make 250k a year.
Given her age and employment and pension contribution, she and her boyfriend each make around 60k at most. Combined 120 – as she posted previously that her boyfriend makes the same as her.
120k income and 600k debt is not bad for Vancouver, as Vancouverites have paid a premium for 25 years, with five times income.
She is actually doing pretty good. Just bought at the wrong time.
December 7th, 2010 at 12:11 pm
I was looking at rentals on Cl and came across this:
http://vancouver.en.craigslist.ca/van/apa/2020235…
$5,800 for a 5 br 4000 sq/ft on Angus Dr. (The good area the Chinese are buying LOL) There is no picture but we can assume it isn't a tear down and at that size in that area I would imagine it would be $2.5 mil -$3.0 mil give or take.
This shows the absolute absurdity of the price to rent ratio in Vancouver. Seriously, why would someone buy when they can rent for 30% of the cost?
Mortgage on 2.75 mil 5 yr. 3.65% = $14K
Taxes (no idea) but assuming $1K per month
Upkeep 2K per month (this is low but lets assume it doesn't need a new roof or driveway)
= approx. $17K per month
Or rent it for $5.8K per month and walk away with 30 days notice.
The numbers are very rough but you get the point. Anyone buying right now is CRAZY!
When faced with raw numbers I really can't understand how people can't see Vancouver RE is beyond bubble!
December 7th, 2010 at 11:04 am
Young&Thrifty is probably more responsible than 99% of the people her age. However, taking on $600K of mortgage debt sounds a bit crazy, considering her down payment was in the range of $200K.
Unless they make a combined $250K a year I think it's stupid.
And if they did make that much, why not save 10K a month for another year and have a bigger down payment.
But as long as they can stomach the risk (and stomach a lot of Kraft Dinner and instant noodles as that's all they'll be eating for a while)…it's ok
December 7th, 2010 at 10:56 am
Citing threats to the "global rebound"……???
Errrrrr…….just exactly what "global rebound" are they talking about anyways ? Can some one tell me where it is ?
All I see everywhere I look is the MSM printing blatant lies whilst governments panic and print as much funny money as they can, in an effort to keep their stock markets, bond markets and currencies propped up in the vain hope that consumers will begin to spend wildly again. Well, as many of these said consumers are already mired in collosal mortgage debt, line of credit debt, car loan debt, credit card debt and student loan debt I don't see this "global rebound" happening anytime soon, since most folks are worried about losing their jobs if they haven't already done so.
December 7th, 2010 at 10:49 am
Paul,
What do you make of things?
Low rates keepin' em coming?
I'm surprised, but everwhere I look I see pressure on prices.
Hope Westside starts to show some cracks. Perhaps China will need a period of meltdown/retrenchment first, time will tell.
I suspect big price drops will not happen until BoC raises rates OR the bond market forces the banks to increase prime (could happen).
VD
December 7th, 2010 at 10:15 am
December Projections for month totals
Days elapsed so far 5
Days remaining 16
Average Sales this month 107
Average Listings this month 125
Projected sell/list 85.6%
SALES
Projected month end total 2239 +/- 467
95% Conf Interval lower bound 1772
95% Conf Interval upper bound 2705
NEW LISTINGS
Projected month end total 2617 +/- 424
95% Conf Interval lower bound 2193
95% Conf Interval upper bound 3041
MONTHS OF INVENTORY
Inventory as of November 30th 12384
MoI at this sales pace 5.53
Note: This is a simple linear projection of month end totals.
This provides the answer to the question
"What will month end totals be, if things continue
on the same pace we've seen so far this month?"
December 7th, 2010 at 10:02 am
New Listings 136
Price Changes 37
Sold Listings 124
December 7th, 2010 at 9:35 am
I think @youngandthrifty sounds more responsible than 90% of current first time home buyers.
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Tend to agree. If you can get gen Y to move beyond their current focus on instant gratification, and get them to understand the value of a dollar, this country might weather future economic storms a little better.
Don't agree with her decisions, but at least she is trying to educate others.
December 7th, 2010 at 9:21 am
I think @youngandthrifty sounds more responsible than 90% of current first time home buyers. Still not a decision I would have made, but whatever, thanks for sharing, it is always interesting to see case studies of how others manage their money.