Friday Free-for-all!

It’s that time of the week again! Let’s wrap up the work week with our regular news round-up and open topic discussion thread.  Here are a few links to kick off the chat:

Inventory inches up
Canada’s housing crash begins
BC slowdown signals wider slump
No Cam, thats not what happened
Mommy, can I borrow the car?
Vancouvers economic well-being
No more land, lots more condos
Tiny little boxes
25% drop in Vancouver?
Come back to BC!
Why rent?


So what are you seeing out there?  Post your news links, thoughts and anecdotes here and have an excellent weekend!

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[…] that its nice to have your own place (i didn’t really know what else to say).” – SunBlaster at VCI 21 Sep 2012 6:22pm Share: This entry was posted in 11. Regrets about Investing in RE, 14. Social Effects of the […]

[…] “Update on the friend I spent the day trying to talk out of buying a house for $238k, with 5% down, on a 33k/year salary. Must be something working in the system these days, she didn’t get the financing required for the house (big surprise). They said she needs a cosigner to get that amount of mortgage. The relative she hit up said “No go”. And the CMHC owned house they bid on? Got an offer higher than asking, so they lost the bid. Another greater fool averted.” – pricedoutfornow at VCI 21 Sep 2012 8:53pm […]

[…] on? Got an offer higher than asking, so they lost the bid. Another greater fool averted.” – pricedoutfornow at VCI 21 Sep 2012 8:53pm Share: This entry was posted in 05. Where do Buyers get the money?, 08. Overextended Buyers, 14. […]

[…] 4785 Capilano Rd. Was $1.15M, then $1.025M, now $888K (lucky 8s!). Assessed at $969K.” – Sidelines at VCI 21 Sep 2012 at 10:52am Share: This entry was posted in 09. Delaying Buying and tagged Anecdotes, British Columbia, […]


@news junky: Yes.

dire straits

thanx patriotz
yes, true. i have found rates that were higher in 90;s (scroll down at bottom)


@dire straits:
“What should be good counter argument?”

Did prices crash in the past when rates were that high (or higher)? No.

The rates in 2006 weren’t historically unusual. The prices were.

dire straits

I am listening to a friend about US RE crash and he is blaming it on high rates in 2006.
Conventional, 15-yr. 6.13%
Conventional, 30-yr. 6.47%

What should be good counter argument?

news junky

“Delegates’ resolutions include using development cost charges to fund projects such as recreation centres, fire halls and flood mitigation.”

It seems that local governments are becoming increasingly dependent on Development Cost Charges. It seems like a bad way to pay for essential services like fire halls. How are we going to pay for these things after all the real estate development stops/slows because of a real estate crash??? Are city councils going to approve real estate development projects that are bad for the community simply because city finances are addicted to Development Cost Charges just to keep the fire halls functioning???

news junky

Forgot to post link to article about Union of BC Municipalities I just posted about

news junky

Our local governments are under severe financial stress: “Spending has gone up for local governments over the past 10 years but predominantly because the province and federal governments are asking more of local governments through policies or regulations,” Moore said. “It affects everything from core utilities to police services.” The convention comes on the heels of a business taxation report that suggests provincial and federal government decisions have had negative financial implications for local government. … Dikes in B.C. has traditionally been a provincial responsibility but, over the past few years, the province has downloaded this to municipalities, with no additional funding. New standards to deal with sea-level rise and storm surge, as well as seismic stability, are expected to substantially increase the costs.” I did not know that the BC govt had shifted financial responsibility for dikes to the… Read more »


The Province headline that says “more Canadians are putting money aside in case of emergency” is quite misleading when you read the details of the Canadian Payroll Association survey from another source: “Responses from 3,500 employees across Canada found that fewer are now living pay cheque to pay cheque. Although 47% are still reporting that they would be in financial difficulty if their pay was delayed by even a week, it is still a significant improvement over the 57% last year who were just making ends meet.” 47% can’t handle even a one week delay in pay and this is being spun as a sign of economic health because it’s down from 57% last year!!! “Two out of every five Canadian employees are spending at, or in excess of, their net pay” Sounds like a real country of savers… Read more »



Contrast that article about high Canadian debt loads, with this article that appeared the The Province yesterday:

The Province website is being annoying right now so all I can get from the article online right now is this line: “A survey by the Canadian Payroll Association found that more Canadians are putting money aside in case of a financial emergency.”

The way these survey results are being spun in the media seems to suggest that Canada is a country of savers. It seems like a media effort to push back against all the news we’ve been hearing about record debt levels in Canada.


Majority of Canadians remain ‘blasé’ about debt loads: survey The poll by Harris/Decima asked respondents how confident they were about being able to raise $2,000 within a month if an unexpected need arose. While 55 per cent said they were extremely or very confident they could raise the cash, 92 per cent said they’d consider borrowing to come up with some of the cash. Does that mean that just 8% of Canadian households have $2,000 in the bank? “It’s frightening to see that Canadians have become totally blasé about debt – it’s becoming their new ‘normal’ and they’re numb to this dangerous trend,” says Douglas Hoyes, a bankruptcy trustee with Hoyes, Michalos & Associates Inc. “For many, the use of debt to not only pay for big ticket items like cars, but also to cover day-to-day living expenses, has become… Read more »


” The total paid is actually more for the rental case…”

You are not taking present value, so your argument is meaningless.


@Troll 237

Gotcha. It makes sense now that I follow your post trail.


@oh oh:

Guy is optimist, only 25%, right…


@T: I’m not sure where this went so off track, but I was orginally responding to your comment that “loan payment goes up with with inflation, it’s called interest rates”. Which is not exactly correct, since loan payment will likely only go up with increasing inflation. But regardless, the point I was trying to make was that talking about inflation rates and interest rates are two different animals and a doubling of rates from 2% to 4% for a loan payment may be less impactful than a steady 2% inflation of rents. It’s somewhat subtle and not immediately intuitive or obvious. Of course your point is valid that you should always do a few rent/buy analysis including all the costs to determine which is favourable.


@Troll 234

I’ll bite. So with compounding rates as per your example: The rent will be at (1.02)^20=149% or $2980 a month in year 20.

I’m just using a pure interest calculation as I’m too lazy to look for the amortization formula and to keep comparing apples to apples (rent from landlord vs rent from bank). So let’s 470000 * .02 /12 = $783 a month paid to interest in year one. In year 20, assuming no principal is paid, 470000 * .06 / 12 = $2350 a month to interest. So that’s an increase of 300%.

Now this is just going off on pure interest alone. We’re not calculating property taxes, maintenance, and all those other ownership goodies.

Compounding Rates. Really?

@Troll: Compound return vs. step rates. Show your work. What I know is this: Principal plus service payments on the mortgage can otherwise be freely be allocated/reallocated to future high yield investments which would offset higher future rent. Does your analysis subtract from rent the earning power of the unavoidable sunk costs of the house? Every time I see one of these arguments against rent in this environment it all comes back to sunk costs. If you can find an iron clad legal way to get “your” money out of the house when the shit hits the fan I am SO INTERESTED! I say “your” in quotes because it isn’t really yours after you sign the mortgage papers. There are some interesting illegal ways to get “your” money back though: (1) Buy property by copper content and then rip out… Read more »


@Compounding Rates. Really?: I was mystified by the statement that 25 years at 2% trumps anything from central bank or bond market. Well, that’s not exactly what I said is it. I think you’re looking at it incorrectly, remember that in terms of interest rates we’re talking about step functions, not compound interest. Look at these two examples, $2000 rent increasing by 2% every year vs. $2000 a month mortgage (say $470K at 2%) increasing to 4% in year 5 and 6% in year 20, ie a tripling of rates. The total paid is actually more for the rental case. Of course you can pick a different rate scenario and come up with a different result, but the point is that it’s not always obvious that an interest rate that triples over 25 years may have less effect than something… Read more »


Maybe you want to start a campaign for the CRA will let me inflation adjust my average buy price when selling investments

What you describe would be a fairer system but it will never happen sadly as it would amount to a tax cut. The counter point would be you would have to pay income tax on the income earned by inflation grinding down your mortgage. Actually a really interesting thought but it will never happen.

Patiently Waiting

@Anonymous: First of all, the one rental disadvantage I agree with you is moving costs. Although this can be reduced by seeking out landlords who want long-term tenants. Maintenance costs almost always favor renters. I’m not sure how the type of home can change this. Any home owner should be putting aside money for future repairs, and this is something renters don’t worry about. I agree owners in new buildings have few maintenance costs, but they may experience great headaches in getting the developer to live up to its obligations. Landlord are forced to fix many things in a timely manner according to tenancy laws. No landlord can claim a damage deposit without proper opening and closing inspections. If you move into a place and the landlord doesn’t bother with an inspection, you know you will win no matter what.… Read more »

Compounding Rates. Really?

@Troll: Nonsensical chart. Could you explain your original statement then? I was mystified by the statement that 25 years at 2% trumps anything from central bank or bond market. I just used 10 years at 4% and 10 years at 6% to see what you would have at the end assuming you started with 1.00. rate years price 0.02 25 1.64 0.04 10 1.48 0.06 10 1.79 Did you have a different number of years in mind for higher rates. I can see your point if maybe rates go higher for say 5 years and then go back down to nothing. My point is the rate is the exponential factor, not the years. Here’s another “nonsensical” chart. 25 years at 4% assuming you start with 1.00: rate years price 0.04 25 2.67 Rates are powerful. Central banks that keep honest… Read more »