Mountains of Debt? Ignorance is Bliss.

There’s an interesting Newsweek article on about the growing debt problem in the USA. In 1952 the average debt to income ratio was under 40%. Now its 126%. In BC we spend an average of $1.07 for every dollar earned.

So is this really a problem?

I don’t know because I have discovered the power of ignorance. Though I am occasionally bothered by doubts, I am embracing my inner ignoramus and plowing head-first into the future. What’s my secret? I have fashioned a sturdy hat out of these shoe boxes.

I highly recommend it.

Vancouver Real Estate: Now is the best time to buy.

So maybe you’ve seen the news on TV or in the newspapers – The numbers are out and this July saw a big drop in home sales – it was lower number of homes sold in vancouver than in any july in the last five years. This can be a troubling sign for those thinking of buying into the vancouver market, particularly in the condo market where some ‘experts’ claim that townhomes and condos are overpriced and due for a ‘correction’, or that vancouver real estate is in a bubble and we’ve reached the top of the market.

But look at it this way:

There has never been a better time to buy real estate in vancouver.

How can I say that? Does that mean I think that prices will keep going up and up after this pause? Do I have some inside information indicating that july is an abberation and the market will recover and prices will start rising again? No. By all indications it looks like current valuations are at their peak for some time and rising interest rates or any other economic hickups could result in price drops, particularly in the condo market. So how can I say that its a good time to buy?

Simple. It’s all about value. Condo’s in Vancouver have never drawn a higher price than they do right now, and as anyone with even the most rudimentery economics education knows things with the highest prices have the highest value.

What does this mean for you? If you buy now, you are likely to find a 800 sq ft condo in vancouver for around $500k. This same condo may have been priced as low as half that price just 3 or 4 years ago. If prices drop in the future, that means the value of the condo has dropped, and which would you rather have: a $500k condo or a $250k condo? A home is not just an investment- it’s a statement on who you are and if you’re the kind of person that wants a highly-valued condo then NOW is the absolute best time to buy real estate in the lower mainland!

The PROVINCE has turned on us!

If you live in Vancouver then you know about the Province newspaper. Thats the handy small tabloid-sized daily paper with headlines like ‘DEADLY KILLER KILLS MAN DEAD’ and ‘WET T-SHIRT CONTEST ENDS BADLY’ as opposed to the other local canwest paper (the Vancouver Sun) that uses more multi-sylabic words, i.e. ‘CATASTROPHE SEEN AS DISASTER LOOMS’.

Anyways, my point is that the Province has always been there for us simple folk. It was the paper to turn to when you wanted to find out what Jessica Simpson is wearing and whats on tv tonight. You could also often find heart-warming stories about 23 year old real-estate investors and which new condo developement they are lining up to buy in.

The one thing you would never find in the Province newspaper was articles like this:

Canada Mortgage and Housing Corp. recently announced moves that critics say will drive many homebuyers to the poor house, as it were, and could leave Canadian taxpayers on the hook.

CMHC is offering mortgage insurance for interest-only loans and on amortizations of up to 35 years, while also scrapping the typical $165 application fee on high-ratio loan products for people with a down payment of less than 25 per cent.

With an interest-only loan, a borrower can pay interest only for the first 10 years, then pay both interest and principal.

Payments are initially low, but since the loan must still be paid off within the original amortization period, payments balloon as the principal starts being paid down, even more if interest rates rise.

That’s right, ladies and gentlemen – I am very sad to report that the Province newspaper has joined the dark side of real-estate negativity, and it gets worse. Much worse:

If a person spends 10 years paying down only interest, he or she saves nothing if the value of the house doesn’t appreciate during that period.

In fact, many people are now buying at the top of a housing boom, particularly in Western Canada, and face the likelihood of selling after the market has cooled off.

Said the Edmonton firm Hendrickson Financial in a recent commentary: “When home prices begin declining, homeowners who have recently purchased with 100-per-cent financing will have to come to terms with owing more than their home is worth.”

That’s when you get people walking away from their homes — when they have no equity to lose and can start all over with a cheaper house that will require smaller payments.

Can you BELIEVE it?!? The TOP of a housing boom?!? Walking away from their homes?!? What is with these people?!? What makes them so cranky that they feel the need to ruin our party? Is it jealousy? Some sort of new-found intellectual ellitism?

I don’t know about you, but I intend to write a strongly worded letter of complaint to the editor. It will be brief. It will contain my own ‘facts’ and ‘figures’, but one thing that it will NOT have is words with more than two syllables.

Vancouver’s Real Estate Market: learning to read the signs.

A lot of people want to know whats going to happen with Vancouvers red-hot real estate market. Will it keep going up, up and away? Will it level off? Or will demand dry up sending prices plummeting?

Well, before you pick up that phone to dial the psychic friends hotline, you may want to save your $3.95 per minute and just read the signs.

The signs I’m starting to see around vancouver say ‘price reduced‘.

And I just have to ask.. WHAT ARE THEY THINKING?!? Has no one told these people that this is a red-hot market? There is no need for ‘price reduced’ signs. If you are having a problem attracting buyers you need to RAISE your asking price not lower it! This is basic psychology. Higher priced things are more VALUABLE than lower priced things. And besides, how else are we supposed to convince someone that they need to BUY NOW or be forever PRICED OUT of the market?