Tag Archives: loss

How much lost on a 2009 condo purchase?

Previously we highlighted b5baxters comment on the 19 months that have elapsed since Vancouver home prices have peaked (according to the REBGV home price index)

Of course there are a lot of variables in the housing market, so lets look just at condos, which Crabman has ever so helpfully run the numbers on:

I calculated the bottom line if someone bought a benchmark condo 4 years ago with a 10% DP and a 4% 30-yr mortgage. I took into account all carrying costs, rent savings and principal pay down. I also assumed rent, prop tax and condo fees increased 4%/year.

Oct 2009:
Benchmark price: $380,975
Mortgage balance: $342,878
Equity: $38,098 (10%)
Est. Rent: $1,100
Mortgage: $1,637
Condo Fees: $200
Prop tax: $89
Monthly loss: $826 (extra costs of owning vs. renting)

Oct 2013:
Benchmark price: $365,600
Mortgage balance: $317,253
Equity: $48,347 (13.2%)
Est. Rent: $1,287
Mortgage: $1,637
Condo Fees: $234
Prop tax: $104
Monthly loss: $688

Over those 4 years, equity only increased $10,249. But the extra monthly costs of ownership over that same period were $45,498, so the owner would have saved $35,249 by renting.

So it looks like the current ‘ownership premium’ for someone who bought a Vancouver condo in 2009 is just over $35k.  Anybody see any problems with those numbers?

Happy buyers don’t have regrets

Are we having fun yet?

If you’re ‘in the game’ you know that the real estate market in Vancouver has been a frothy pond of fun for years.  If you don’t count transaction and renovation costs it’s easy to get rich flipping condos.

Or if you want to get more meta just resell presales contracts.

That’s right, we have people here who will buy the right to buy a building that doesn’t exist yet!

The funny thing about easy money is that it seems so unreal. This city is filled with people who could easily cash out even at current post peak prices and have a big chunk of real money, but will the majority do that?

Nope. The majority will stay put, renovate, buy back into the same market or turn their home equity into more debt via a HELOC.

In fact the majority couldn’t all cash out even if they wanted, we simply don’t have the buyers to enable that. Even when we had bidding wars we didn’t have enough buyers for a majority to cash out and now that sales have plummeted we really don’t have enough buyers.

A few lucky sellers will cash out and make money off this bubble. Likely because life changes caused them to move on. The majority will keep on paying their mortgages or get foreclosed on. Recent buyers will be paying more to keep their homes and may start to feel a bit trapped.

You saw this here just a couple years ago when buyers were complaining that developers were selling condos in their building for less than they paid and developers were suing presales buyers for money to cover the difference between their deposit and the lower resales value.

But you know what? They’ll be fine, they payed the price they felt their home was worth to them. A market decline doesn’t hurt someone that is happy with the price they payed and can keep paying their bills.

And if rates go up or job losses occur? Well someone without a financial buffer and emergency savings to deal with such a scenario really wasn’t ready to buy a house in the first place.

No sale on overpriced condo

Local rockstar realtor Ian Watt speaks truth to power in his most recent youtube episode.

Sounds like he’s getting a little frustrated with sellers who think their condo is special.

Pink carpet in the bathroom adds an easy $20k right?

Nope.  As Mr. Watt says, there may be all sorts of reasons nobody is interested in your Vancouver Condo, but the number one reason is that it’s overpriced:

Meanwhile his evil twin Ten Volt still claims to be the worlds busiest real estate agent in the world:

Business Confidence dips again, now at 3 year low

It’s not just Vancouver house sales that are heading down.

Business confidence in Canada dipped for a fourth month in a row and is now at a 3 year low.

This according to a survey from the Canadian Federation of Independent Business.

The last time it was lower was in July of 2009, when it stood at 58.6.

CFIB chief economist Ted Mallett says the index’s current position in relation to gross domestic product puts it very close to the zero-growth mark, suggesting Canada’s economy is nearing a standstill.

On Tuesday, Statistics Canada reported the economy had grown a disappointing 0.1 per cent in May, leaving the pace of the recovery at slightly below two per cent on an annualized basis.

The CFIB says confidence declined in July even in resource-rich provinces like Alberta, which saw a drop of three points to 70.3.

So taking out a home equity loan to fund your underperforming small business?  Maybe not such a good idea unless the revenue is there.

Friday Free-for-all! New Rules Edition

Welcome to the summer of 25 year amortizations!

You’ve made it to the end of another weekend and that means it’s time for our regular end of the week news round up and open topic discussion thread.

Lots of ink spilled over the new mortgage regulations released yesterday.

Here are a few links to kick off the chat:

New rules in effect July 9th
How rules effect mortgage numbers
How new rules will sink houses prices
Final OSFI guidlines released
Brokers not so happy
Inventory growth takes a breather
Be very afraid of the Canadian bubble
Falling prices, no more home ATMs
Moody’s downgrades RBC 2 notches
USA 2006 “I’m not giving it away”

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