Financial advice for the condo trap

This on boggles the mind.

If you have an income that is dropping and you are in a negative equity position on a condo in one of the most overpriced cities in North America what should you do?

At least one financial planner says hold on tight!

She does have a way out. Lisa could sell the condo, pay off her loans, and walk away. She would be free to rent equivalent space and save perhaps $500 a month. She would be mobile, could easily take jobs in other cities and would be free of debt. However, she would have given up a good asset in valuable real estate. Moreover, unless she can get $350,000 or more for the condo, she would be in a deficit position after selling and moving costs.

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Son of Ponzi

# 137
here is an open eyes argument supporting the harmful effect of pollution on the planet:
Close the garage doors, turn on the ignition and voila.
No math required.


Vancouver teardown or *nine* French Châteaus?

Many Franks


What’s comical is the “open your eyes” arguments.

Yes yes yes yes yes. And likewise the suggestion that “making use of statistics” and “critical thinking” are somehow mutually exclusive. There has been a lot of valuable critiquing here of statistics over the years and those statistics remain valuable nonetheless. This conversation reminds me of Ross McKitrick on climate change: “Math is hard, so let’s all go home instead and have a beer.”


IMF says Ottawa should consider ending CMHC mortgage insurance
“The International Monetary Fund says Ottawa should consider phasing out insuring home mortgages through Canada Mortgage and Housing Corp.

The advice is contained in the IMF’s latest economic report card on Canada, which projects modest economic growth of 2.25 per cent for the country next year.

Such a recommendation, surprising from an international financial organization, appears to side with Finance Minister Jim Flaherty, who has recently questioned whether the federal government should be in the business of insuring higher-risk mortgages at all.”

(Full IMF report)


Ham Solo, I would not discount the possibility that a number of Conservatives believe debtors live and die by the sword. This view is that an economy teetering towards increasing indebtedness is a sign of moral weakness. We must, after all, “live within our means”, and we “can’t spend more than we earn”.

The concept of personal financial prudence is the cornerstone of how the Conservative government is operating; to have its hapless flock taking on debt is a moral hazard that is unlikely to stand.

Maybe. I don’t know much about it, but if the Conservatives are like other political parties I am more familiar with, their actions and beliefs are internally tortured.


“On the other hand, internet anecdotes may be the best information we have on a particular subject if quantitative data is unavailable” You have little in the way of confidence that the anecdotes you cite are accurately measuring what you are trying to measure. You have to make a whole bunch of assumptions to conclude much, which isn’t a problem so long as it’s acknowledged there is a significant chance of systematic errors. What’s comical is the “open your eyes” arguments. The same technique is used, more cagily, by certain MSM journalists like Yaffe, Mason, and Bula who predicate their articles with some anecdotal story — say of some Mandarin speaking Realtor who claims to cater to Mainland Chinese buyers, or some hard-done-by middle class professional couple priced out of their cushy neighbourhood of choice and have to commute from… Read more »

Many Franks

@HAM Solo: Thanks for a thoughtful post.

Speculating here: I can’t imagine Vancouver figures much in the Federal conservative plans. From Ottawa looking west the story is 90% Alberta. I suspect that the risk of a housing collapse is nearly synonymous with Toronto for them — so I wonder in particular about how anything they do will figure alongside the massive overconstruction of small units.

This puts Vancouver in an interesting spot because, volume of tower construction aside, everything bad there is worse here. A mild sedative for Toronto might be an overdose for us.

Furthermore — urban Canada has never been the focus of the Tory mouthpiece. They’re pretty much guaranteed to remain popular in Alberta and much of rural Canada, whatever they do — tanking the blue-collar economy notwithstanding.


@Son of Ponzi – #125 – that is so true…critical thinking is extremely lacking and way too many people just repeat what comes out of a computer / textbook without ever pause and think…

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So you think we have debt problems that will blow sky high?

Take a look at these idiots.

HAM Solo

I’m not sure the new mortgage restrictions will be as tough as people are forecasting. On the side of more restrictions is clearly OSFI, and probably the new leadership of CMHC, both of whom, after years of being absolutely sound asleep at the switch have woken up to the idea that Cdn housing is a huge gov’t subsidized debt bubble. The complication is that Harper, Flaherty and Poloz are really the three guys running economic policy for the Tories. These guys have not been asleep at the switch. They knew, or at least suspected they knew, what they were doing when they relaxed rules in 2006 and provided massive cash infusions into the mortgage market in 2009. They tried some macro-prudential tightening in 2012 in order to cool things down a little. It was the same sentiment that caused them… Read more »

Son of Ponzi

Interesting comment by caller on Bill Good’s show.
“he’s middle class, and needs the mortgage helper in the basement, just to exist”
Also, with the increase in Hydro, his electricity cost will increase by around 700.


@ Jesse #120 “Well that’s the rub. How many sets of anecdotes can pass that threshold? On the internet, it’s probably hovering around zero.” I don’t disagree with you that anecdotes on the internet are unreliable. When I speak of anecdotes collected in a systematic manner leading to the compilation of qualitative data, I am really talking about qualitative research studies that involve in-depth qualitative interviews, participant observation, ethnography, and/or content analysis–real social science conducted by qualified academics. Although I am reluctant to dismiss all internet anecdotes–we just have to realize they are highly suspect–they can be lies, rumours, misinterpreted hearsay. On the other hand, internet anecdotes may be the best information we have on a particular subject if quantitative data is unavailable (like it is on the issue of foreign ownership, for example) or if there have been few… Read more »

fixie guy

@3 Many Franks Says: “…like saying that the house is on fire but it’s OK because nobody’s gotten burnt yet.”

Heck no, fire is bad. Think sunny day, top down, stereo up, wind in your hair speeding towards a cliff. Everyone’s having a great time enjoying life in spite of flag waving from naysayers and contrarians.
‘Whocoodaknown’ and ‘we’re victims’ happen when the wheels catch air.

Son of Ponzi

# 124
Spoken like a warm and fuzzy Canadian.

Son of Ponzi

# 123
The fatal limitations of many indexes are that they are unreliable.
I’ve been in the financial industry for over 30 years, and you would not believe the crappy data that crossed my desk.
People think because it comes out of a computer, it must be right.
There will never be a substitute for critical thinking.


“if there isn’t that much of an effect then why is there so much hate on for HAM and everything Chinese if they don’t even affect the local marekt”

The simplest, and most likely explanation, says “because people are ignorant, easily manipulated dicks, who need a clear-cut ‘us vs them’ scenario to account for things out of their control”.


@Son of Ponzi “Exactly, that’s why we should ignore them and use our eyes and ears.”

No, we should understand what the indexes are showing, and what their limitations are.

Son of Ponzi

The best “anecdotal evidence” is usually given by people who have no financial interest in the outcomes.


“Actually, it is. Many anecdotes combined, if collected in a systemic manner”

Well that’s the rub. How many sets of anecdotes can pass that threshold? On the internet, it’s probably hovering around zero.

I don’t have the link but there is a good explanation why the BLS NFP data “manipulation” “scandal” is a whole lot of nothing. Something to do with statistical theory.


The quantitative data bias among some commenters is on full display in this thread oneangryslav2 said: “Are you really implying that people willfully manipulating data falsifies the mathematical foundation of statistical theory?” My response: No, it does not falsify statistical theory–but manipulating data does falsify the results for individual studies where that has occured. Many people believe (rightly or wrongly) that government agencies in Canada and the US are manipulating the statistical data so this gives us less confidence in government reports/statistics and we must read these with a very healthy dose of skepticism. Many Franks said: ““There’s no proof, but I’ll bet it’s the dang Chinese” is sociology, not economics.” Economics IS sociology. Economics is social science–that’s why it is so much harder than the natural sciences like physics and climatology. It is so much harder to model human… Read more »


@114: “But people keep buying because now most houses (in the Sunshine Coast) have a rental suite on the ground floor which brings $800.”

Seriously? Some retirement paradise.

“Question to all: does price-to-rent ratio need to be redefined when every owner is a landlord?”

Price-to-rent is simply the ratio of the price versus what the property would rent for. All of the property. It has nothing to do with whether the owner lives in the whole property or any part of it.


@114: “Other topic: I looked carefully at Skook’s numbers on the Sunshine Coast. A $400,000 house rents for $1400 to $1600. But people keep buying because now most houses have a rental suite on the ground floor which brings $800. Question to all: does price-to-rent ratio need to be redefined when every owner is a landlord?”

No. If a renter could rent the whole house for $1400 to $1600 then rent out the ground floor for $800 they have a net rent of $600 to $800. That is still much cheaper than buying a house for $400K and renting the ground floor.

Son of Ponzi

# 114,
Chinese buying expensive wine, that they can’t drink because of a generic disposition.
Same a rich Chinese buying European luxury cars that they can’t drive due to a generic disposition.