Why you shouldn’t demand lower prices

I’ve been reading this site for a while and I see a lot of people that are hoping for lower house prices in Vancouver without fully thinking out the repercussions.

Its human nature to be greedy and want ‘something for nothing’ but we should draw a line at actively wishing ill on others so that we may benefit.

A drop in property prices would cause a lot of harm across the lower mainland, affecting not only home owners but a whole economy of construction workers, real estate agents, lawyers, lenders and architects.

Instead of selfishly wishing prices would drop, you should try to realize the benefits of home ownership:

1) A tangible solid investment that can help you retire
2) Homeowners have a lower crime rate creating safer neighborhoods
3) Pride of ownership creates more civic responsibility

Here’s a useful editorial in the Telegraph on how home ownership benefits everyone:
http://www.telegraph.co.uk/comment/3644666/Everyone-benefits-from-home-ownership.html

They make a very strong argument for why governments should come to the aid of homeowners who have suffered from a house price drop or interest rate increase and are unable to pay their bills.

But there is something more fundamental about the housing market that should inform policy. Housing markets are different from lots of other markets in that actions by individuals affect not only the actors, but neighbourhoods and even society as a whole.
Allow your personal appearance to deteriorate, and you pay the price in lost job opportunities and a reduction in the number of people willing to be seen with you. The cost is yours. Allow your house to deteriorate, and your neighbours pay the price. Innocent bystanders get hurt when things go wrong in the housing markets.
First, the value of all homes declines as the neighbourhood becomes dotted with vacant houses and takes on a less attractive appearance. Second, society pays a price.

IF you are someone who is hoping for a real estate decline I urge you to read the full article and rethink your position.

Even if you think you would be unaffected you should remember that a decline in house prices effects the whole economy:
http://www.vancouversun.com/business/Home+price+drop+could+mean+less+spending/6773895/story.html

And it doesn’t take too much of a drop to put buyers in a position where they owe more than a house is worth. With a normal 5% down a 15% drop like that predicted by TD would be a disaster.

Using the Real Estate Board of Greater Vancouver’s benchmark price – the price of a typical home – for all residential properties in Metro Vancouver of $625,000, and the minimum down payment of five per cent, a homeowner would need $43,850 including property transfer tax and legal fees to close the deal. The total mortgage amount would be $593,750 plus $17,515 for the high-ratio fee. If the market value dropped 15 per cent over three years, the value would be $531,250, while the outstanding mortgage after three years would be $574,805.64.

A decline in house and condo prices affects real people who care for the neighborhoods they live in, is it fair to wish them bad luck simply because you feel prices are too high?

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PCinWA
Member
PCinWA
“We should draw a line at actively wishing ill on others so that we may benefit…” By wishing that home prices stay at the current ridiculously inflated levels, you are effectively wishing ill on many, many parties. Such as those in their 20s and 30s, most of whom cannot afford a decent livable home for themselves, never mind any families they aspire to have. Such as corporations and other employers in Vancouver that are having a harder and harder time attracting talented employees to Vancouver because the cost of living is so out of line with what these employers are willing to pay. Such as current homeowners, who, drunk on the paper growth of their home equity, make the foolish mistake to load up on other consumer debt, which in the long-run negatively impacts many aspects of their lives, such… Read more »
haha
Guest
haha

hahahaha

renter
Guest
renter

1) A tangible solid investment that can help you retire
2) Homeowners have a lower crime rate creating safer neighborhoods
3) Pride of ownership creates more civic responsibility

These are the reasons why I wish the prices to drop… so I can become homeowner.

jumpin in
Guest
jumpin in

Is this a post made by a realtor? Sounds almost like an April Fool joke.
These last few months have been really fun, and full of surprises…

Next episodes: Why increasing the CMHC ceiling is good for the country, Why 200% debt is better than 150%, and why renting your basement and your bedroom while sleeping in the bathtub is good for your social skills.

bubbly
Member
bubbly

This is the biggest pile of crap I read in a very long time.

Bilbo Bloggins
Guest
Bilbo Bloggins

Hogwash. All inflated real estate prices do is encourage more and more debt.
Governments are subsidizing the housing and related industries at the expense of other sectors.
Canada might have the Dutch disease but Vancouver definitely has the Debt disease.

asalvari1
Guest
asalvari1

really? I meant really really?

Like if i wish or demand : Porsche, 2month vacation/year, gold at 300$, free beer IT WILL COME TRUE?

What I think or wish or demand has no impact on the housing market. There are other forces in play here, and the people wishes on this site matter zero, zlich, nada, doughnut… on re prices.

How about educating yourself what the problem is in first place?

Patiently Waiting
Member
Patiently Waiting

Why must you “spread the word” like religion? We have the highest home ownership rate ever. Is that not good enough for you?

Jealous religions are nervous about disbelievers even if they’re a tiny minority. This blog mainly exists for us to keep our sanity and maintain our resolve in the face of social pressure to own. Why can’t you accept that a minority choose to rent at this time? Why does it bother you?

What’s really weird is you seem to think our “wishes” will cause a crash. Obviously we aren’t that powerful. So don’t worry about us.

patriotz
Member

What this post is saying is that I should sacrifice my lifetime financial well being and buy a house at a ridiculous price to save the asses of the people who’ve already bought and the army of economic parasites who have been living on them.

Who’s being greedy fella?

patriotz
Member

Live at the G&M! The bubble debate starring you know who:

http://www.theglobeandmail.com/globe-investor/great-debate/ask-the-experts-is-canada-in-a-housing-bubble/article4238309/

9:00 Vancouver time Thursday, June 14

Patiently Waiting
Member
Patiently Waiting
Patiently Waiting
Member
Patiently Waiting
Patiently Waiting
Member
Patiently Waiting

Nice facility. It even has a water feature.

http://www.flickr.com/photos/mattausten/3922375277/

patriotz
Member

I should also have added that the title of this thread itself shows a fundamental ignorance of markets.

It’s not the buyer who demands a price, it’s the seller. That’s why it’s called the asking price. The buyer offers a price and it’s up to the seller to accept it. Nobody has any obligation to buy. A buyer is not asking the seller for a favour by making an offer at the price he’s willing to pay. The buyer is doing the seller a favour by making an offer.

Initia Nova
Member
Initia Nova

A drop in food prices would cause a lot of harm across the lower mainland, affecting not only growers but a whole economy of shippers, wholesalers, and supermarkets.

oo
Guest
oo

This is a terrible post.

My answer would be “fuck off”. All this article advocates is locking out the next generation.

registered
Member
registered
It’s no joke. The industry already demonstrated no low is too low to keep the party going. Race baiting, generational baiting, massaging fear, social status and greed all day for those commissions. This article is a simple tweaking of an old meme, one based on the notion non-home owners are resentful and inferior. Today the ante gets upped to morally inferior so give them credit for showing no fear in the face of common decency. The irony is the author assumes owners today are entitled to their homes. Without the involuntary assistance of my tax dollars backing those mortgages it couldn’t happen. Industry wages as well are backed by those tax guarantees. If these people really had the nation’s benefit at heart they would be actively seeking ways to reduce the nation’s reliance on housing, working on ways to reduce… Read more »
frank
Guest
frank

All this authors shows is the perils of unbridled speculation.

Yes, a RE bust will hurt everyone and will damage our economy, that’s why we need to reign in bubbles and not feed them. However when the bears were warning of the bubble, the pols and banks and realturds were ignoring them and pumping it up.

All bubbles eventually burst and when this one does, the blame can squarely be placed on the shoulders of those who perpetrated it.

patriotz
Member

@frank:
“Yes, a RE bust will hurt everyone”

No it won’t. Everyone who works outside the consumer and RE sectors and who isn’t counting on selling a property at an inflated price will benefit.

Granted the taxpayers will take a hit but that will be spread out over the whole country and all taxpayers, 70% of whom are homeowners of course.

The bust of the early 80’s was the best thing that could have happened for me and a lot of other people.

chumpie le chump
Guest
chumpie le chump

i thought that post was satire. People actually believe that crap?
Real estate does not and has never produced any benefit beyond short term income to a small section of the economy. It ties up capital in a non-productive asset.

If we took only 25% of the money that folks in vancouver were paying into their overpriced home each month and directed that towards others uses, we would see a dramatic increase in entrepreneurial activity.

Sadly though, the majority of jobs in BC are either in the public sector or the service sector. There are few good paying, stable jobs in emerging industries.

I was at a CIO conference yesterday (half Alberta and half BC). BC is considered a joke as a place to make one’s career.

AG Sage
Member
A lot of misconceptions here. SO many. Ignoring the sustainability of the delusion, which alone crushes this logic… The biggest misconceptions are: 1) that housing is a productive asset for the economy as a whole. It isn’t, and worse yet it draws investment away from areas that are productive. 2) that families should yearn to go deeply deeply into debt in order to do the “right” socially acceptable thing and own. This not only enriches the financial industry, developers who can jack new construction prices up, and the generation before at the expense of families and their children’s futures for absolutely no good reason,. Worse yet, the huge debt reduces mobility which is one of western societies’ biggest strengths. Putting skills where they are needed when they are needed by industry. Flip it around and you will get resounding support… Read more »
Anonymous
Guest
Anonymous

“is it fair to wish them bad luck simply because you feel prices are too high?”

Blaming bears for the consequences of a housing bust would be like blaming the FBI for causing the inventors of Bernie Madoff’s ponzie scheme hardship. Would you argue they should have let it keep going so inventors would not lose their money? Draw in more ‘inventors’ to pay off the current ones?

The problem is ponzi schemes and real estate bubbles cannot keep going forever. The longer they do the more people that get hurt. Hoping for a correction sooner rather than later will save people from financial ruin not the other way around.

vanpire
Guest
vanpire

I’m speechless, so I simply use two quotes from posters before me:
FUCK OFF!!!
as well as
HAHAHAHAHA!!!

Anonymous
Guest
Anonymous
Let’s see: Its human nature to be greedy and want ‘something for nothing’ but we should draw a line at actively wishing ill on others so that we may benefit. I couldn’t agree more But then you go and contradict yourself …governments should come to the aid of homeowners who have suffered from a house price drop or interest rate increase and are unable to pay their bills. And let’s see: 1) A tangible solid investment that can help you retire Normally I’d agree, but under the current circumstances there’s no money left at the end of the day to diversify. You can either save your money for retirement or buy a house, not both. 2) Homeowners have a lower crime rate creating safer neighborhoods Home ownership does not lower crime rates, but I’ll agree that people who can afford… Read more »
Anonymous
Guest
Anonymous

Some of the houses that are selling for millions were purchased for pennies decades ago. If those lose 15% in value, the prudent, hardworking owners will still be able to retire comfortably, do not worry about it.
Everyone else can go screw themselves, as they are the greedy parasites who deserve every bit of what’s coming to them.
And it is coming alright, getting closer and closer, in fact I can’t wait till it hits these shores!
And about time too!

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