## Rent VS. Buy Mortgage Calculator

There are a lot of Mortgage calculators already out there, but the problem is they don’t necessarily take into consideration all the details that affect the Rent vs. Buy decision. Most of them are overly simplified, or worse – they’re US based and make assumptions on tax write-offs that aren’t available to the Canadian buyer.

With that in mind Joycer has a created a more detailed mortgage calculator that lets you try out a number of situations and variables to factor into your rent vs. buy decision, particularly here in Vancouver. We’ve put the calculator on it’s own page, with all the details.

Go to http://VancouverCondo.info/rentvsbuy to check it out.

### 116 Responses to “Rent VS. Buy Mortgage Calculator”

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Anonymous Says:
1

Looks nice! But I don't see anywhere to specify appreciation (or depreciation) of your property.

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@Anonymous: If you need appreciation to make the rent vs buy calculation favour owning u r doing it rong.

For condos and suburban detached anyways.

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I decided not to speculate about the value of the home, but instead at the very end I give the implied housing return in order to make the two scenarios equal. For example, the data that loads with the calculator shows that the owner would be behind by \$59218.54 at the end of the 4 years. For the \$500,000 home that means the owner would need an 11.84% or more increase in price to come out ahead of the renter (implied return).

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But I don’t see anywhere to specify appreciation (or depreciation) of your property.

When real investors decide what return they'd get from buying a stock at the current price, they don't assume future appreciation or depreciation. That would be a circular valuation – buying something simply because you think someone will pay you more for it. That's also known as the "greater fool" theory.

The exception Jessie is talking about is not really assumption of appreciation per se but assumption of increased earnings (rental value) due to future densification of present non-dense properties, which is analogous to assuming earnings growth for a stock.

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For the last hundred years home prices paced with inflation.

I don't see any kind of appreciation for the next 3 to 5 years.

Want to be optimistic, stick in 2%.

If the owner is going that route, then the renter's scenario

would be renting a main floor suite only, not an entire house.

Most owners of detached houses that do this still don't realize

all they are doing is renting a main floor suite from the bank

for 35 years.

Haven't looked at the calculator yet but does it factor in

opportunity cost of the downpayment?

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@kansai92:

does it factor in opportunity cost of the downpayment?

Yes, the downpayment is subtracted from the savings so it is not invested for the owner.

Example:

Savings 100,000

Down payment 50,000

Closing costs 10,000

Rate of return 0.05

Years to rent 1 (keeps the math simple)

The renter would make \$5000 in interest while the owner only has \$40,000 left over (Savings – down payment – closing costs) to invest at 5% so they would make only \$2000. The owner is now behind by \$3000.

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@joycer: This is a cool utility. I think it's great for those who want to do the math properly though it won't help people who think real estate only goes up or feel the overwhelming need to own even if it's more expensive.

Your tool can't hope to compete with an asset forecast to perpetually increase in value that's leveraged 20:1, nor can it compete with nagging spouses and parents!

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I hope we don't have to apologize in the future like this guy:

"I'm sorry that I didn't send an e-mail or work a little harder to get that fixed so the calculator can allow for the possibility of reality," Kosoff says — the reality that housing prices sometimes decline.

Like or Dislike: 0  0

NY Times has a graphical calculator that can account for rise and fall of RE value.

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For the last hundred years home prices paced with inflation.

I don’t see any kind of appreciation for the next 3 to 5 years.

Want to be optimistic, stick in 2%.

Let's call a spade a spade. Want to be optimistic? Stick in 0% per year for the next 5 years. Now if you want to be realistic, that's a different story.

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For a lark I plugged in the numbers for this place that just sold for \$800K in east van.

Price \$800K

Equivalent rent: \$2250/mo

Mortgage rate: 4%

Basement suite rented for \$900/mo

Return on cash: 3%

This scenario breaks even. I really want to buy so I made the numbers work to have rent vs buy in the current environment come out a wash

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Don't look now, but the 5-yr is up about 12 bps today. link.

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curious lurker Says:
13

@jesse:

If the basement suite is rented out for \$900, doesn't that mean the rent should be lower too?

2250 – 900 = \$1350 should be the rent cuz if the owner can rent out the basement, so can the renter?

Is it really breakeven with such a scenario?

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Best place on meth Says:
14

@VHB:

Up, up and AWAY!!

Like or Dislike: 0  0

Hey, where is the calculator? It seems only a description.

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lowermainlander Says:
16

Clicked on "Launch Mortgage Calculator"; nothing happens. Tried at home and work. Both Safari and Firefox. Using Macs. Anyone have any ideas?

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To be equivalent it would mean that the owner is getting the top floor only so the rent should reflect the cost to rent the top floor of the same home. Otherwise the scenarios are not equivalent (the renter is renting more space than the owner).

I wanted a way to show how the two scenarios would unfold. In one situation I could buy a house and rent the basement out, in the other I could rent the main floor of the same house. In this way the standard of living is the same, but the calculator will tell you who will have more assets at the end of it. I'm not sure if \$2250 is reasonable for a main floor only in East Van (I'm guessing not?).

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You could try this:
http://javatester.org/version.html

I will tell you if java is working on your browser, you may need to update/install a more recent version (there are links to Oracle's site on the site above).

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Anonymous Says:
19

Sorry for an OT post, but this was interesting: A story about Rudy Nielsen, real estate mogul from here in BC, being a bit bearish. If you look at the 'Related Gallery: How to time the market' at the bottom of the story, the last frame indicates Mr. Nielsen believes the market will bottom out in 2012.

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Anonymous Says:
20

@blur2:

"NY Times has a graphical calculator that can account for rise and fall of RE value."

But only deals with US-style 30yr mortgages.

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kansai92 Says:
21

@jesse:

Ha, love to see a \$800K house where the rent for the main is \$2250.

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@curious lurker: "Is it really breakeven with such a scenario?"

Upstairs is rented for \$2250, downstairs is rented for \$900. To compare directly, a renter family would only rent the upstairs. I accounted for the \$900 by putting in a negative value in the maintenance column. The scenarios we are comparing are:

1) Rent upstairs, and have tenant downstairs who pays rent to landlord separately. The suite does not factor at all into the rent side of the calculations.

2) Buy and live upstairs, have tenant(s) downstairs who pays rent to me. The suite rent therefore factors into the own side of the calculations.

I think the two scenarios are roughly comparable in terms of utility.

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@kansai92: The point I'm making is a that a value investor aka patriotz and someone else with rose-coloured glasses will use joycer's calculator with wildly different scenarios. The one I presented may be unrealistic but that doesn't prevent someone typing in any values they want. They will make the numbers work; garbage in garbage out.

A lot of what goes on in bubbles is people convincing themselves what their greed wants them to believe.

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curious lurker Says:
24

@jesse:

I can't open your original posting on ret, it's giving me database errors.

But \$2250 for a main floor in east van doesn't sound right.

http://vancouver.en.craigslist.ca/van/apa/2032776
that's a full house at 49th and victoria for \$1800.

I'm seeing craigslist ads for main floors in east vancouver aplenty in the 12-1300 range.

I don't think your numbers work.

\$2500 gets you a full house at 25th and Cambie on Craiglist. for your total of 3100 you can rent houses in north and west van.

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Best place on meth Says:
25

@joycer:

>>>I’m not sure if \$2250 is reasonable for a main floor only in East Van (I’m guessing not?).<<<

No, not for an average place.

\$1700 is more realistic.

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@curious lurker: "But \$2250 for a main floor in east van doesn’t sound right."

I agree. I just want to own soooooo badly…

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@curious lurker: Oops Try this. Preview's not working for me.

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vancouverseniorsecon Says:
28

VHB is right to look at the 5yr.

The US treasury is probably in the early stages of a bubble burst itself. When they talk about rising yields, it means people are paying less than face value for the bonds. Bonds are traded- i think the avg holding time for 30yr treasuries is about 21 days. It is by no means a long term investment for most investors.

Vancouver mortgages are traded now too- in the form of mortgage backed securities. They have a relatively low yield, and as interest rates rise the market value of these mortgages will plummet. (as interest rates increase, bond prices go down, as people dump currently held bonds in favor of bonds with higher stated rates of interest)

This means that the value of the sub prime mortgages that are being held on the books of the bank of canada are going to plummet in value.

All of this action in the bond market is going to dry up funds for mortgages in Canada- if you have capital, why would you settle for a 3% return guaranteed by the GOC when you can get a guaranteed 5% down south? Especially when rising mortgage rates would severely crush the credit quality of the people supplying the cash flow of the bonds? Even if you dont lose principal after defaults on GOC backed securitized mortgages, rising inflation fueled by QE2 guarantees a negative rate of return on this investment. (zero minus the rate of inflation)

The only way to raise yields now for canadian mortgage bonds is to pay much less than the face value of the bonds, which means less money in the aggregate available for mortgages.

Any way you slice it, a drop in prices and a deflationary spiral in Vancouver real estate is a mathematical certainty. The high prices have come about BECAUSE of a decoupling of fundamentals from prices paid, made possible by the securitization of mortgages and the desperate guarantee from the Government of Canada.

Because we now fund mortgages in Canada through securitization, we cannot ignore the international bond markets. This is the playground we wanted to play in, and we are about to get crushed.

December 7th, 2010- A day that will live in infamy for Vancouver Real Estate. Oh, sweet irony.

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real_professional Says:
29

There is a generation and a half that only knows low interest rates. And, I believe that the lowest interest rates that we saw took place this last October…

The XLB.TO, Canadian Long Bond ETF, has broken down(see the chart below) – the flight into bonds that we saw this summer was the last gasp in the bond rally… http://stockcharts.com/h-sc/ui?s=xlb.to

In other words, interest rates are rising and that is during a rate pause from the Bank of Canada. Just wait until the inflation numbers start to roll in. If inflation becomes an issue, it doesn't matter if our economy is slow or what the jobless number are – the Bank of Canada will raise rates and will do so without mercy.

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vancouverseniorsecon Says:
30

@real_professional

"If inflation becomes an issue, it doesn’t matter if our economy is slow or what the jobless number are – the Bank of Canada will raise rates and will do so without mercy."

yes, our milkshake will be fully drunk.

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@real_professional: OK, first ask yourself, what would happen to the economy if rates rise without mercy? Then ask yourself, what would happen to rates after this change in the economy? This is all you need to know about rates.

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Anonymous Says:
32

The rent for a main floor in East Van really depends on location. The link to the house in question is not working for me, so hard to tell where it is for comparative purposes. Where I am, the main floor of a Vancouver special is going to be 1700-2000 (ie. 3bd+).

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vancouverseniorsecon Says:
33

@troll "OK, first ask yourself, what would happen to the economy if rates rise without mercy"

Ok, someone hasn't been listening. Question: What would happen to the economy if rates rise without mercy. Answer: It will crush the vancouver housing market.

Why will interest rates be raised?

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@vancouverseniorsecondarymarket: OK, someone hasn't been thinking. Let's try a little thought experiment. IF the rates rise mercilessly, what would happen to the Vancouver RE market? What would that do to the wider economy? Hint: Look at the US. What kind of pressure would that put on rates? Think it through man, it aint as complicated as your 5000 word diatribe.

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Best place on meth Says:
35

@Troll:

The BOC rate was in double digits during the late 70's and early 80's when the economy was thoroughly in the crapper.

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@Best place on meth: the economy of the 70's and 80's is nothing like today. So much for your lame comparison.

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If anyone thinks that, confronted with rising inflation, the BoC would relent even one bps because some overdebted homeowner in Port Moody might feel some pain, then there is serious misunderstanding of the mindset of central bankers.

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Anonymous Says:
38

"that’s a full house at 49th and victoria for \$1800."

.. and it's so good that it doesn't even have photos.

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@VHB: And besides, the BoC only controls the short rate. The bond market, which sets the 5-yr rate, cares even less for any poor suffering lower mainlanders.

But, this scenario only happens with rising inflation.

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vancouverseniorsecon Says:
40

@troll

Alright, you win. I'm stupid. You're smart. I was wrong. You were right. You're the best. I'm the worst. You're very good-looking. I'm not attractive.

You are not going to lose an ass ton of money in real estate over the next five years.

That should come as considerable relief to you. Crisis averted!

VHB: please discontinue this site, post haste. The Troll has spoken.

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@VHB: If anyone thinks that we'll be confronted with rising inflation if the housing market and by extension the wider economy is decimated hasn't been paying attention. Connect the dots bears.

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@Troll: a) a Vancouver housing bust is likely not a macro-Canada-wide event. b) if I'm wrong about (a), then consider the fact that we have a flexible exchange rate.

If Canada pulled an Ireland, we would adjust through a much-lower exchange rate, not deflation.

Moreover, the expectation of lower exchange rates would push long bond yields higher in order to compensate for expected f/x losses.

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Best place on meth Says:
43

@Troll:

You're implying rates can't rise in a bad economy and you've been proven wrong.

They did before and they will again.

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fixie guy Says:
44

41 Troll Says: "… a string of mangled English …"

Vancouver isn't Canada. Just thought it's worth reiterating. The fed probably won't tailor national policy to keep the local market lit.

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vancouverseniorsecon Says:
45

@troll

"Connect the dots bears."

Yes, we have clearly been bested on the field of intellectual battle by you.

Gentleman, he is obviously correct.

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vancouverseniorsecon Says:
46

@troll

"If anyone thinks that we’ll be confronted with rising inflation if the housing market and by extension the wider economy is decimated hasn’t been paying attention. Connect the dots bears."

Hold on a second, you think housing is used to calculate the consumer price index, don't you?

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blueskies Says:
47

dear troll:

you come across as desperate

there is no way the bond market will crap on your parade

the rest of canada will not allow your re dreams to founder

the lower mainland is immune from reality

i'm willing to bet you weren't around when John Lennon was singing

caveat emptor

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BearProblems Says:
48

@Best place on meth: The 80s rate hikes were put in place to cool an overheating economy with wild inflation. So we had a booming economy followed by a bust brought about on purpose by raising rates.

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Best place on meth Says:
49

In 1982 the unemployment rate was 13% and the BOC rate was 15%.

Overheating economy, my ass.

At least you got the inflation part right.

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This "troll" fellow is clearly not very buys in his RE job. No wonder with sell/lists on track for the worst december in a decate.

Why buy a place when you can rent it for 50% less? Prices stopped going up 6 months ago. Not even speculators are dumb enough to buy now.

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@Troll:

Think it through man

Maybe due a little research on bond rates and what the BOC can control. You make a fool of youself by posting on topics you know nothing about. The BOC ONLY controls short rates. The 5 year bond is set by the bond market. The 5 year mortgage is based on the 5 year bond.

Why do you think the US Fed is doing QE2? It is to manipulate the bond market by buying bonds in order to create artificial demand which in turn keeps the bond rates low.

Since this is not sustainable and nothing more than a ponzi scheme the bond rates can not stay low forever. Once the Fed stops or is forced to stop buying bonds the rates will spike in the US and the bond market will demand the same in Canada. The BOC has NO CONTROL over this. The short rates will not matter in Canada nor the US. Mortgage rates will rise with the bonds.

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So why are bond yields increasing? Is it necessarily a sign of upcoming inflation? We saw prices fall in the spring too.

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Vancouverseniorsecondary,

Thanks for the long post at #28. Excellent. The relationship between the bond market and interest rates is a complete unknown to most people and as we have seen all Re Bulls.

Forget the Troll. He is only convincing himself.

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#51 Renting,

Didn't you know? Troll thinks the Bond market is just for British spies who like is shaken not stirred? On financial realities they remain blissfully ignorant.

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real_professional Says:
55

I have yet to hear something intelligent out of Troll. He simply makes statements that have the intellectual equivalent of, "See snow is white, and therefore housing will go up". Or, "2010 is not 1970, therefore Vancouver condos are cheap".

Statements of fact followed by nonsensical reasoning aren't a sound argument. He must have been trained in the Sarah Palin School of Business.

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Best place on meth Says:
56

@jesse:

My guess is that with the astronomical amount of debt being issued, bond buyers are starting to demand a higher rate of return to compensate them for the increased risk of default.

In all likelihood, interest rates will keep going up.

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BearProblems Says:
57

@Renting: WAIT A MINUTE HERE BEAR. You and your bear buddies go on claiming that most people use variable rate products and now you say fixed rates matter? Which one is it bear?

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Which one is it bear?

1. You have to qualify for the 5 year rate to get a mortgage even if you choose a variable.

2. Most people would not buy if the 5 year was higher even if they could qualify as their payment could spike with no notice. If the long rate is high the short rate will soon follow.

3. Look at Japan. Low short rates declining real estate for 20 years.

Next dumb question.

Like or Dislike: 0  0

lowermainlander Says:
59

joycer Says:

December 8th, 2010 at 10:00 am

@lowermainlander: You could try this:
http://javatester.org/version.html

It will tell you if java is working on your browser, you may need to update/install a more recent version (there are links to Oracle’s site on the site above).

Thank you Joycer. I tried the page. Says Java is working. Updated to latest Java to make sure. Still can't launch the calculator.

Anybody else having problems? Sounds like a Mac thing.

Like or Dislike: 0  0

real_professional Says:
60

Recently I was on a tour bus in another part of the world and overheard a conversation of a nearby real estate agent (also from Vancouver). He was engaging in guerrilla marketing by striking up a seemingly innocent conversation with a fellow passenger who was yet another Vancouver resident. Well, the realtor went on to talk about his “profession” and how there are a number of realtors in Vancouver, however, many of them have no more than a high-school education. Of course, he was different because he studied Marketing and Economics at UBC. And he stated that the “lower educated” realtors are weeded out because they aren’t trusted to handle the single largest financial transaction that most individuals make.

..

I found it funny how realtors will quickly attack the weaker elements of their profession to grant themselves higher status. Yet, it is more likely that realtors don’t require an education to become a realtor simply because their role doesn’t require any advanced skill set.

On a side note, I personally don’t believe I will ever use a realtor – after all, why would I trust a UBC grad that doesn’t do anything with his or her degree other than become a realtor.

More importantly, however, during the course of the realtor’s pontificating he went on to state, “some people say that a 15% or 20% correction could happen because of the lack of affordability but Vancouver is a beautiful place and there is a line up of people looking to move here.”

Again this is a classic example of someone being aware of the facts by being exposed to the debate, however, they are choosing to ignore it with frivolous justification. There is no line up, Vancouver has been growing at a steady rate, actually slightly slower, over the last decade than it has in the past. I wonder if his UBC education provided his sound reasoning skills.

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Haha…judging by the angry attacks I clearly identified an unpleasant possibility for bears that they don't want to consider. You have to come to terms with the fact that rates may not rise significantly for a loooooonng time…if ever in your home buying lifetime. Last year, everyone including Garth was saying the same things you are now, rates are going up, BOC is powerless to stop it, blah blah blah. And look where we are today. Fact is, there is little inflation on the horizon. Also there is a lot of money looking for a safe home, a LOT of it is pouring into bonds helping to keep yields low. Also we have QE, QE2 and look for to QE3+. If you are only considering a rapid rate rise starting December 7, 2010 (according to that long winded and long named goof) then you will most likely set yourself up for disappointment. I just don't want to see you disappointed again bears, you've had enough already.

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@Best place on meth: "with the astronomical amount of debt being issued, bond buyers are starting to demand a higher rate of return to compensate them for the increased risk of default."

I think "default" is probably better described as "debasement." They amount to the same thing though. It could also be private investment is starting to pick up. If that's what "inflation" means, so be it.

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Anonymous Says:
63

Is it just me or does Troll and ETB from RET make the same nonsensical arguments?

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real_professional Says:
64

@ Troll you are behind the times – in financial markets two week old data is old news. You are two months behind the times.

The truth of the matter is that there is no upside left in Vancouver real estate because:

1) Incomes are stretched to upward limits.

2) Interest rates have gone as low as they can go – if they go lower there are worse problems at play for real estate.

3a) If the world economy stays as it is, real estate stays flat

3b) If the world turns deflationary – real estate is crushed

3c) If the world turns inflationary – real estate is crushed

The run to bonds that you talked about has already occurred and is correcting itself. As soon as the velocity of money picks up, the liquidity injected into the market will have without-a-doubt an inflationary impact. To say that we won't experience higher rates is just foolish, inflationary pressure will take place – the question is, can the BoC and the Fed fight it in a timely manner.

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@Troll: Speaking for myself, I was just confronting ignorance, not reacting in anger.

Anyway, I do agree with you that big jumps in inflation are unlikely to be on the horizon over the next couple of years. So no one except for weird randallbardian goldbugs should be worried about double digit interest rates. It's just that even a return to anything approaching historical normal interest rates (e.g. a 4 percent 5-year yield) would bust this market to pieces.

Your bet is that yields over the next five years stay several sigma below historical norms. Mine is that they move back in the direction of historical norms. I like my bet.

Anyway. Go buy another condo, dude.

Like or Dislike: 0  0

Ok, here's something different to talk about. In your most bearish dream, what surprise is most likely to hit the Vancouver market in 2011? Which of these would have the biggest impact? How will that impact happen? How fast?

- Chinese bubble bursting

- interest rates 'spiking' (ha!) up to say 4% on the 5yr

- Flaherty tightens CMHC lending standards

- Sudden spike in unemployment / recession.

- Stock market / financial crash that causes Canadian banks to tighten lending.

The best case scenario that even the bulls can come up with is flat prices. Even they can't see any more rabbits to pull out of the hat.

All it would take is one of the above–let alone more than one!–and the flat scenario falls apart.

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Boombust Says:
67

"1) Incomes are stretched to upward limits.

2) Interest rates have gone as low as they can go – if they go lower there are worse problems at play for real estate.

3a) If the world economy stays as it is, real estate stays flat

3b) If the world turns deflationary – real estate is crushed

3c) If the world turns inflationary – real estate is crushed"

Maybe you should pass this on to Larry and his friends.

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Boombust Says:
68

"You have to come to terms with the fact that rates may not rise significantly for a loooooonng time…"

Yeah? So?

They have been at ZERO in Japan for a looooong time.

Look at their market.

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/dev/null Says:
69

@VHB: I have been expecting the stock market to have another drop but they're keeping up the shenanigans a lot longer than I expected they could. Maybe I just have a cognitive bias of some sort – the same one that keeps me from jumping into Vancouver RE (now that I can actually afford to).

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patriotz Says:
70

@VHB:

- Stock market / financial crash that causes Canadian banks to tighten lending.

That in itself would be bullish for RE, as we have already seen 2008-2009, because banks would move away from risky lending to lending guaranteed by the taxpayer which is you know what.

However I think such an event would most likely be accompanied by a TU in China (therefore commodities bust) and/or a big spike in local unemployment, so the net effect for RE would be bearish.

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#66 VHB,

I got with interest rate spikes forced by the bond market. I think the market will have had it with the Eurozone and the US by the Spring. I see this as more imminent due to the soverign debt contagion in the Eurozone.

China bursting is my second pick. Then Aus and Canada really get hammered. Summer to Fall 2011.

Like or Dislike: 0  0

They have been at ZERO in Japan for a looooong time.

Look at their market.

@@@@

Okay bears, stop bringing up Japan.

Their market is insulated and protected from foreign buyers, so the Japan to Vancouver comparisons are disengenious (and bears know it).

Low interest rates will attract foreign buyers, as even the CMHC doles out mortgages to non-residents with as little as 10% down.

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Anonymous Says:
73

@Boombust:

"Yeah? So? They have been at ZERO in Japan for a looooong time. Look at their market."

Indeed, just look at this beauty which is only \$540,000 :

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patriotz Says:
74

@Dogpile:

Low interest rates will attract foreign buyers, as even the CMHC doles out mortgages to non-residents with as little as 10% down.

That's for non-permanent residents who are currently living in Canada and want to buy an owner-occupied residence. Offshore buyers are not eligible for CMHC insurance.

Anyway neither offshore purchases nor purchases by temporary residents are significant to the market. This bubble is the result of locals who are able and willing to pay too much.

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patriotz Says:
75

Indeed, just look at this beauty which is only \$540,000 :

What would it rent for? Oh I forgot, we're only supposed to compare RE prices to Vancouver and not compare rents, wages, general cost of living, etc.

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real_professional Says:
76

— It goes without saying that RE/Max has become the official cheerleader of the real estate market (read below) – while the Vancouver Sun has become her whooped and grossly emasculated boy friend:

— This report says Housing prices should rise 12% this year and another 5% next year? Is that insane?

— They go as far as to say that 40,000 new immigrants will lead the rally… Correct me if I am wrong, but 40k/2mm = 2%, where is the 5% figure coming from given that they haven't provided any further justification?

– And again, population growth of around 1.5% per year has been the regional norm and is already factored into the price of homes. The surprise should be the only upside factor. Furthermore, interest rates should remain low and consumer confidence should continue to strengthen???? I haven't seen this much wishful and bad analysis ever before!

House prices in Greater Vancouver should rise 12 per cent this year and five per cent in 2011, Re/Max said in a report released Tuesday.

The region's average home price will end 2010 at \$665,000, rising to \$698,250 next year, the real-estate firm predicted.

The real estate market in 2011 will be "vibrant" as an estimated 40,000 people — mainly from the Asia Pacific region — are expected to settle in the region, Re/Max said.

"Historically low interest rates will remain a significant factor supporting real estate demand across the board in 2011," Re/Max said.

"Overall, a restoration of consumer confidence will translate into solid market activity, bringing sales in 2011 to 33,000 units."

Greater Vancouver should post 30,000 house sales in 2010, down 17 per cent from last year, the firm said.

Across the nation, home prices should continue to rise next year, despite sales levels flattening in most major markets, Re/Max said.

Home prices should, on average, rise three per cent to \$350,000 by the end of 2011, while existing-home sales will remain flat, it said.

It forecast that home sales this year would be down five per cent to 441,000, with prices growing seven per cent to \$340,000.

The Re/Max report said fewer homes on the market have offset the diminished demand this year, helping to keep prices rising.

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Best place on meth Says:
77

@Dogpile:

>>>Okay bears, stop bringing up Japan.

Their market is insulated and protected from foreign buyers, so the Japan to Vancouver comparisons are disengenious (and bears know it).<<<

๋Nonsense, the Chinese are buying property in Japan as well.

I would appreciate it if the cheerleaders would stop lying/playing dumb.

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Nice work Joycer. It seems to work well.

- I think 35 year amortization is too long. I think 25 years is better.

- I think the 4 year comparison period is too short. Buyers should be looking at a longer period than that.

- I think the return on investment of 6% is too high. Not many people have gotten that in the last 10 years.

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79

All this talk about unemployement and inflation….put them together and you have Canada's "misery index"!

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5 Vancouver BC Says:
80

I believe that people who use calculators to calculate buying vs renting their hairs fall like mls listings exceed than the growth of hairs,They most likely get bald quickly than an owners can think of any tenants.

While buying and renting is an choice instead of comparison the main advantage of buying a place to live is to lock in our money flow,This way we can keep our budget in discipline.On the other side,tenants money flow is cashable right away,their savings are available in the exact amount.they can't hide or use excuse to their Spouses and to themselves.I think majority of the tenants goes broke in the first check of month and they often request their employers to pay them in advance for the work they may never perform in realty and the rent may not going to pay on time.

To avoid buying i phone 4 for \$700 before tax an owner can say it's time to think about mortgage payment and it is good to use work phone,it is free of cost.

Thanks!

but

No Thanks!

(¯`v´¯)

`•.¸.•´

¸.•´¸.•´¨) ¸.•*¨)

(¸.•´ (¸.•´ (¸.•´¯`•–> 5 Vancouver BC # 1 x o x o ♥ ☼ ♥

**♥☆**♥☆**♥☆**♥☆**

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New Listings 80

Price Changes 58

Sold Listings 92

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@VHB:

Ok, here’s something different to talk about. In your most bearish dream, what surprise is most likely to hit the Vancouver market in 2011? Which of these would have the biggest impact? How will that impact happen? How fast?

When's the next election? A change in the guard could see some very unpredictable policy changes. If Libs were in power, what would our market look like today? Would a Lib appointed central banker do things differently? Would a Lib finance minister loosen the strings, instead of tightening?

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fixie guy Says:
83

#7t Best place on meth Says:"I would appreciate it if the cheerleaders would stop lying/playing dumb."

Good luck, they're too fucking thick to understand Tokyo metro has the population of Canada.

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@patriotz:

What would it rent for? Oh I forgot, we’re only supposed to compare RE prices to Vancouver and not compare rents, wages, general cost of living, etc.

You're always supposed to compare a world class city like Vancouver to other world class cities like Tokyo.

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@Dave:

Nice work Joycer. It seems to work well.

Thanks Dave

- I think 35 year amortization is too long. I think 25 years is better.

- I think the 4 year comparison period is too short. Buyers should be looking at a longer period than that.

- I think the return on investment of 6% is too high. Not many people have gotten that in the last 10 years.

Don't mean to sound rude but that's the whole point of the calculator, change it as you see fit to help make your own decision.

As far as buyers looking at a longer period than 4 years, that's fine. There is no calculator that I've seen though that lets you take a short term point of view. In the example that loads, after 4 years the renter could assume the same mortgage outstanding (purchase price – down payment – principle paid off) with a 31 year ammortization (same time remaining) and have \$59k extra in their pocket. Why would you ignore the short term?

The short term was the most interesting for the UK, US, Spain, Ireland… it only took a few years to make a major change. Those people that are vulting there now can take a long term view. You'd be crazy to say that to someone in Florida/Vegas/California/Pheonix… in early 2006.

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Best place on meth Says:
86

You're right, Tokyo may even have a larger population than Canada.

It's also in the 2nd tier of world class cities.

Vancouver is in the 8th tier with such powerhouses as Montreal, Nairobi, Bratislava, Panama City, Chennai, Brisbane, Casablanca, Denver, Quito, Stuttgart, Zagreb, Manama, Guatemala City, Cape Town, San José, Minneapolis, Santo Domingo, Seattle.

I'll bet the idiotic cheerleaders don't even know where 1/2 of those other cities are located.

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@joycer: @joycer:

I think the period of time for comparison should match a reasonable period of ownership. I think 4 years is too short.

Timing the market (or a short term view) is a different question altogether.

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@Dave: Dave, you do understand that the entire point of a calculator is that you can put in WHATEVER values you like. The ones that are in there originally are the default values. OMG.

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Best place on meth Says:
89

@Dave:

Hello? *tap* *tap*

Is this thing on?

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@VHB:

Default values matter because most users won't change them.

I bet most of you kept one or more of those three as the default when you played with it.

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@Dave: If you don't change the defaults at all there is no point in playing around with the calculator, it's likely too complicated for you.

Sure, you might check out results and default values, but if you're really going to use it right you're trying out some variables to get results for different scenarios.

That's not really so complicated is it?

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@VHB:

The Bank of Canada isn't moving interest rates for a minimum of six months. Trust me on this.

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@The Ant:

Yes, it's probably too complicated for me. Thanks for the feedback Captain O.

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CashedOut Says:
94

@Dave: Thanks Dave. That's -1 for you.

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@Dave: "The Bank of Canada isn’t moving interest rates for a minimum of six months."

Still need to qualify at the 5 year rate and 5 year rates are "moving."

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@Dave: I didn't mean it was too complicated for you personally Mr. Grumpy. I meant it was too complicated for the hypothetical person that you seemed concerned would leave default values as is and be misled in some fundamental way.

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What, you think the overnight rate is going up in the next six months? It's not. Trust me on this.

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CRASH JPMorgan-Chase Says:
98

You are so close to the real heart of the scandal.

Bernanke wasn't just accepting junk collateral for the bailout money, Bernanke was buying back the fraudulent mortgage-backed securities Wall Street has been selling for years. This is why even the pretense of profitability has been abandoned. The FED already knows these equities are worthless.

As detailed in "Bankers Gone Wild", mortgages were cranked out by unscrupulous mortgage brokers, then bundled together into mortgage securities, which were in turn re-sold to investors as triple-A investments, even though the bundles included sub-prime mortgages already defaulting as US jobs were shipped overseas.

These mortgage-backed securities are a Wall Street invention! And at first they appeared to be immensely profitable, so not only were US financial corporations, investment houses, and pension funds buying them, but so too were non financial corporations and major foreign banks including Deutsche Bank and Credit Suisse.

But those early profits were a fiction, and we now know that many of the sellers of mortgage backed securities were engaging in Ponzi scheme activity, using proceeds from sales of mortgage backed securities to pay "earnings" to earlier investors, while the same SEC that had turned a blind eye to Bernie Madoff's \$65 billion swindle looked the other way!

Worse, we now know that individual mortgages were pledged as collateral to multiple security bundles, which is illegal! This is briefly mentioned at 3:48 in the next video.

The criminal fraud even went further than that! In the case of Countrywide (now part of Bank of America) the actual titles were never really transferred, leaving the investment bundles entirely unsecured!

What appears to have happened is that the European banks realized that the American investment firms selling those mortgage-backed securities were engaging in fraud! Greenspan has admitted to such.

As the banks of Europe began to feel the major losses from the fraud, they turned to their local governments for financial assistance. In turn, those governments were forced to apply for loans from the International Monetary Fund, plunging their people deeper into debt, and the governments under the control of the private bankers! Indeed one must wonder if this multinational financial fraud had as its ultimate objective the forcing of the entire western world under the control of a giant private bank!.

Obviously, the people of Europe are refusing to be chained to a global bank and seem far more worried about their freedoms than their American counterparts. Yet a quick Google search shows the media encouraging the nations hit with this massive financial fraud to apply to the IMF for more loans, never mentioning that in their indebtedness lies the end of their national sovereignty!

Ultimately the European banks are never going to sit still for fraud, even from Wall Street, and even from the USA! In order to reduce their losses and avoid more IMF entanglements, the European banks demanded a refund on those fraudulent investment packages. No doubt the Wall Street mortgage fraudsters refused, suggesting that the bankers of Europe dump their losses on their populations just as the American banks were being forced to do. That some European banks did so explains why so many European nations are in financial trouble. However, the larger European banks may have decided to "get tough" with the Americans, and this may explain the mysterious electronic run on the US financial system in February 2009, which almost crashed the US economy. Strangely, the American people were never informed who had initiated the financial transfers, even though obviously this information is recorded in the transactions on the computer systems.

This "attack" may have been a warning from the European main banks to the US to make good on the bad investments, or risk full public exposure for the mortgage backed securities fraud!

Soon after, we learned that the Federal Reserve was handing out trillions and trillions of dollars, loans which the American people are expected to repay, only the Federal Reserve refused to say who was getting the money, and even implied that exposure of the recipients of these trillions of dollars might pose a threat to the US economy. Now, nearly two years later, we find out that the Federal Reserve was buying back the mortgage-backed securities from European banks including Deutsche Bank and Credit Suiss. The reason this was kept secret was that the American people were being told that all these "bailouts" would be repaid, yet common sense tells us that profit cannot be made from an exposed fraud! The Fed could not admit too owning all those mortgage-backed securities without being forced to answer the question of just exactly why they were not producing any earnings, with the usual "it was all the borrowers' fault" excuses wearing thin even then! As cash left the nations financial system to cover the repurchase of the fraudulent mortgage backed securities, banks found their balance sheets slipping into the red. The banks were being driven into insolvency making good on the bad paper and this is what triggered the epidemic of fraudulent foreclosures. Banks needed real assets on their balance sheets as quickly as they could to get their balance in the black and their banks out of insolvency. So shortcuts were taken which became known as "foreclosuregate". For some banks, it was too late. Hundreds of banks either dragged down by the fraudulent mortgage securities or made insolvent buying back the bad paper, have been shut down. For other major banks and financial institutions, the tactic worked and they stayed afloat, for which making millions of Americans homeless seemed a small price to pay! Indeed one might explain the hitherto unexplained reluctance by the Federal Government to stem the offshoring of American jobs as a deliberate policy of setting up Americans to lose their homes in order to preserve the capital structure of the banks!

In other words, the American people were looted to make good on the fraud perpetrated by Wall Street not only against American financial institutions, but bankers in the Eurozone as well.

The Wall Street Fraudsters should have gone to jail. But they walk free and clear, saved from the FDIC and prison, heading into a wonderful holiday with record-setting bonuses to spend while ordinary Americans have been made jobless, homeless, and hungry to keep the criminals out of prison.

The Mortgage Backed Securities fraud is the biggest fraud in the history of the United States, and as today's revelations make clear, we still do not know the full scale of the financial rape this nation has suffered.

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@jesse:

Yes, but the spread can only get so big. The five year rate should level off when the bond market sees flat overnight rates. The overnight rate will be at 1.00 for most or all of 2011.

IF you believe real estate is driven by affordability as I do, and IF you believe rates are going to be flat for 2011, THEN, it's probably a steady as she goes year.

Interesting to see that VHB now admits that the market will be flat, barring a "surprise". Capitulation?

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Drachen Says:
100

@Dave:

"IF you believe real estate is driven by affordability as I do, and IF you believe rates are going to be flat for 2011, THEN, it’s probably a steady as she goes year."

So, in other words the whole history of economic theory, value, return on investment, all those things, none of them are as important as your economic genius. You have a what in economics exactly? PhD? MA? BA? What's that? You took a couple of classes once? And you're the world's greatest authority now?

Hubris, thy name is Dave.

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@Dave: "Yes, but the spread can only get so big."

Before what… people figure out that it's silly to loan money at higher interest rates? Sounds to me like the snake is slowly starting to digest the deflationary rabbit and rates have a long trek ahead to return to the historical average.

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@patriotz: I would guess about \$1200, maybe \$1500.

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@jesse:

Easy fix to that. Quantitative Easing.

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anonymous Says:
104

Dave,

you're right about maintaining tight spreads, but it's the BoC that's forced to follow. The bond market leads the BoC, not the other way around. The chart in the following link is a good example.

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Anonymous Says:
105

@Devore:

"You’re always supposed to compare a world class city like Vancouver to other world class cities like Tokyo."

It was Best Place on Meth who initiated the comparison. I found a 1 bedroom apartment in Tokyo, roughly the size of a Yaletown shoebox, for almost \$550K. Average wages in Tokyo aren't too dissimilar to here (look it up). So what's the explanation?

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The thing is, they really don't have much land there. That apartment would be considered a handsome spread for a couple with one child.

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@Anonymous: Rents, my friend, rents. rent vs own price. That's what it is about.

rent/income will reflect local amenities, income, land shortage, etc.

No one ever claimed that rent/income is some universal constant. It isn't. It is rent/price that must make sense compared to the yield on other assets.

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scullboy Says:
108

Greetings from San Francisco again!

That world city Wikipedia entry was interesting. It seems pretty accurate. I'd say that Toronto is a third tier city, having lived there for years. Montreal and Vancouver also seem to be about eighth tier cities. They're nice and have their own flavour, but world class? Hardly, especially if you've travelled. It certainly put the whole "everyone wants to live here" thing in perspective, doesn't it? I mean at the end of the day, what's Vancouver got that Helsinki doesn't?

It's been an amazing day. Bill Clinton was late for the Dreamforce keynote address, so Stevie Wonder came out and had a chat with the Salesforce CEO. His talk was really moving. I don't mind telling you I got a little teary.

And Clinton! Except for maybe Nelson Mandela and Desmond Tutu, I really don't think there's a living world leader of his calibre. He has the most amazing ability to recall ideas and facts and figures. He can string completely different ideas together into a totally coherent narrative. He set my brain on fire.

And to top off an amazing day, somehow my boss managed to snag 2 \$500 tickets to a charity gala at the Masonic Center. You guys should have seen the architecture…. fucking BRILLIANT, as was the food and wine. The keynote speaker at the Gala was Colin Powell, but we gave that a miss because the food and wine were just too good.

Best of all, the highlight of the evening was a charity concert by Neil Young. If you haven't heard the guy in concert, he's a revelation, even better then Stevie Wonder. I'm not even a fan but I'm not ashamed to admit, that concert and his music really opened my eyes. Now I get why he's so popular.

Lest any of you think I'm bullshitting a la Supra's pretentious twaddle, you can check it all out at dreamforce.com.

After a day like this in a city like San Fran I really do have to say Vancouver is not a world class city. Sorry to anyone who thinks it is. This idea that people are lining up to live there or that it's some great world nexus is just laughable.

Look, I live in a pokey little backwater city myself. It's not like there's any shame in living in a non-world-class city. There's lots of wonderful local things about any city really. It's just when people get these silly ideas that things get embarassing.

It's going to take a while for Vancouver to get over itself, I think. Homeowners especially are just completely blind to the reality and they're not going to let go until all of their savings and investments are toast. It's going to be a really long and painful lesson, I think. I'm glad I won't be around to see it.

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Former Halgonian Says:
109

Dude,

You are preaching to the converted on this blog with your "backwater comments."

But you constant "any other place is better than Vancouver because I got cheap lobster and saw Stevie Wonder" is getting to be pretty pathetic.

Just be happy that you moved. We will let you know when the market turns – in maybe a one year or two. By that time, you might be ready to come back.

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patriotz Says:
110

@Dave:

- I think the return on investment of 6% is too high. Not many people have gotten that in the last 10 years.

Well someone who simply bought the TSX index would have done better. TSX total return over the 10 years ending Nov 30 was 6.3%. And that's tax advantaged as it consists of dividends and capital gains.

Oh I forgot, we're not supposed to compare RE to the stock market because stocks are risky and RE isn't. We can only compare RE to GIC's.

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You are misreading what the author means by 'lead'. Yes, the bond market moves in advance of the BOC. This doesn't mean that the bond market dictates the overnight rate. It means that the market moves quickly and is good at predicting the actions of the bank.

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@patriotz:

Your investment return should match a realistic risk-return for the period in question. If you are planning to buy a house within 4 years, I am not sure the TSX is the best investment for your plans. Why would you put your downpayment at that much risk? On a 4 year scale, bonds are probably the best to use. On a 10 year scale, maybe the TSX.

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Anonymous Says:
113

@Dave: The TSX may be a better place to put your downpayment that into real estate in Vancouver right now.

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Sure, but nobody really knows. All I am suggesting is that risk should be matched on both sides of the evaluation.

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Anonymous Says:
115

@scullboy:

"That world city Wikipedia entry was interesting. It seems pretty accurate. I’d say that Toronto is a third tier city, having lived there for years. Montreal and Vancouver also seem to be about eighth tier cities. They’re nice and have their own flavour, but world class? Hardly, especially if you’ve travelled. It certainly put the whole “everyone wants to live here” thing in perspective, doesn’t it? I mean at the end of the day, what’s Vancouver got that Helsinki doesn’t?"

Wikipedia says "This roster generally denotes cities in which there are offices of certain multinational corporations providing financial and consulting services rather than denoting other cultural, political, and economic centres.", so it's basically a ranking that uses only one metric. It's nothing to do with whether or not people want to live in those places, or whether they're even pleasant places in which to live. I'm not surprised that Vancouver ranks fairly low on this list, but I'd rather live here than in Warsaw, Beijing, or Jakarta (which rank above Vancouver on this list).

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5 Vancouver BC Says:
116

#80 between 79 and 81 is always right!

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