Tag Archives: selfish

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?