tag:blogger.com,1999:blog-31427364.post6245823520905058343..comments2024-03-26T03:52:23.395-07:00Comments on Housing Analysis: Generous financing and plenty of choice keeps housing market movingmohicanhttp://www.blogger.com/profile/06094213357140749289noreply@blogger.comBlogger30125tag:blogger.com,1999:blog-31427364.post-66004623370967083542007-10-05T21:41:00.000-07:002007-10-05T21:41:00.000-07:00a student will spend 8 years learning something us...<I>a student will spend 8 years learning something useless like French and not a month studying the most important subject he/she will have to deal with in life.</I><BR/><BR/>Financial responsibility is a life skill, and like other life skills it used to be taught by people called "parents". In our grandparents' time they didn't teach financial skills at school either. They didn't have to - life did.patriotzhttps://www.blogger.com/profile/11154064267408955762noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-68597225957122111242007-10-05T16:31:00.000-07:002007-10-05T16:31:00.000-07:00Frankly, the process of learning a second language...Frankly, the process of learning a second language, ANY LANGUAGE, is a good one with many positive benefits. Mandarin, Japanese, German, Cree, and, yep, even French. So very far from useless, regardless of apparent overseas epiphanies. <BR/><BR/>Don't much care for the thinly disguised, knee-jerk, why-is-that-language-on-my-cereal-box, anti-French sentiment. In contrast to worldly travels, it seems awfully small-minded.<BR/><BR/>By the way, craigpbbrett, how many languages are you fluent in?sidelineshttps://www.blogger.com/profile/07948065201979482296noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-16970011408556088312007-10-05T13:01:00.000-07:002007-10-05T13:01:00.000-07:00"I'd have to disagree with the gratuitous statemen..."I'd have to disagree with the gratuitous statement that French is useless (sounds like someone who rarely leaves North America speaking)"<BR/><BR/>I was born in Europe, lived in Canada for 13 years and then spent the next 15 years working throughout Europe and Asia. It is BECAUSE I left North America that I understand how unimportant French is. <BR/><BR/>My own children are studying Mandarin. Any bets on who will better prepared for the world 20 years hence: my kids or the thousands of young Canadians in French immersion?Craighttps://www.blogger.com/profile/06687365669171143056noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-76476886514908354122007-10-05T12:16:00.000-07:002007-10-05T12:16:00.000-07:00"A bit cynical. The government bureaucracy has an ..."A bit cynical. The government bureaucracy has an interest in improving productivity and quality of life for constituents...."<BR/><BR/>Generally, governments have an interest in staying in power, and bureacracies have an interest in keeping themselves in place. A well informed and politically active citizenry can interfere with the above.<BR/><BR/>Technically, the object is to maintain peace, order and good government, with the aim of improving people's lives. However, there are lots of different interpretations on how this is best accomplished. <BR/><BR/>Interestingly, Education and economic productivity have not been big election issues in a while.Clarkehttps://www.blogger.com/profile/01598503256501613406noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-85182534128135211892007-10-05T12:14:00.000-07:002007-10-05T12:14:00.000-07:00"The government bureaucracy has an interest in imp..."The government bureaucracy has an interest in improving productivity and quality of life for constituents, in the long run."<BR/><BR/>I'd rephrase the above to say "certain, intelligent individuals in government" have the good judgement to see that it would be to their advantage to improve productivity and quality of life for constituents in the long term. Most people anywhere, including government and the civil service, are too focused on short-term self-interest to bother thinking about this.<BR/><BR/>I'd have to disagree with the gratuitous statement that French is useless (sounds like someone who rarely leaves North America speaking), but agree with the inadequacy of teaching economics and finance to students. The main reason, IMHO? The teachers themselves are not intelligent enough to teach it. Most people in education I know, bless their hearts, couldn't hack regular university courses and defaulted to education.<BR/><BR/>In short, I don't even think it takes "interested parties" or any kind of conspiracy to keep the masses stupid. They do it voluntarily, in large part by spending most of their leisure time watching TV.Mangohttps://www.blogger.com/profile/12783357836567969061noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-35051853737786137422007-10-05T09:14:00.000-07:002007-10-05T09:14:00.000-07:00"So, there are a lot of interested parties in keep...<I>"So, there are a lot of interested parties in keeping people stupid."</I><BR/><BR/>A bit cynical. The government bureaucracy has an interest in improving productivity and quality of life for constituents, in the long run. One way to do this is with a highly adaptive and educated workforce that, when faced with job loss, can find another job quickly and pay taxes again.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-18223393537179833012007-10-05T08:16:00.000-07:002007-10-05T08:16:00.000-07:00"Well, the educational system does not devote much..."Well, the educational system does not devote much time to financial matters, even at the post secondary level."<BR/><BR/>Shocking, isn't it?<BR/><BR/>The economy is usually the top issue at election time, everyone pays taxes, business is the engine of modern development; yet a student will spend 8 years learning something useless like French and not a month studying the most important subject he/she will have to deal with in life.Craighttps://www.blogger.com/profile/06687365669171143056noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-90308337583022608832007-10-05T07:33:00.000-07:002007-10-05T07:33:00.000-07:00"People are too stupid for their own good sometime..."People are too stupid for their own good sometimes. In Canada, I think our government's general philosophy is to protect people from themselves (think gun control) vs. the US where it is more everyone for themselves."<BR/><BR/>Well, the educational system does not devote much time to financial matters, even at the post secondary level, and the media has operated as shills for the RE industry, who are the ones who buy the ad space after all, and the bulk of one's peers likely are convinced that "RE only goes up."<BR/><BR/>So, there are a lot of interested parties in keeping people stupid.<BR/><BR/>As far as the US goes, while in theory, everyone is on their own, in reality the government tends to help those who already have the means to help themselves. Interestingly, when Robert Schiller was recently in front of a senate committee on the sub prime mess, he made the argument that the situation underscored the need for more government regulation and more consumer protection in the financial sector.Clarkehttps://www.blogger.com/profile/01598503256501613406noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-84922397627988803032007-10-05T06:38:00.000-07:002007-10-05T06:38:00.000-07:00September stats are out, published in full at real...September stats are out, published in full at realtylink, earlier than usual.<BR/><BR/>The madness continues. Nutting futs I tell you. As I posted on RETalks,<BR/><BR/>1. The rate of appreciation for the GV median benchmark detached is 12%+ on an annualized basis. <BR/><BR/>2. The downpayment with 20% down is $147,585.40 <BR/><BR/>3. The monthly payments with 5 year fixed (ING), 25 year terms is $3,703.67 before taxes, repairs or maintenance. That is a nice and round $44,444 smackaroos of after tax dollars annually. <BR/><BR/>4. Does anybody know the plain vanilla median? We are heading straight towards most expensive in North America if not already there. If San Fran/Oakland/San Jose has reversed at all, I think we hold the title. With our incomes and mediocre population growth, that is simply incomprehensible.<BR/><BR/>Too bad that REsteven left town, because I was really looking forward to tracking FV and GV inventory over the next few months. Somebody step up!freakohttps://www.blogger.com/profile/06236681769619303395noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-56929467110757782152007-10-05T03:38:00.000-07:002007-10-05T03:38:00.000-07:00I don't know what precipitated the drop in sales (...<I>I don't know what precipitated the drop in sales (in the US) -- it could have easily been a random walk that added enough competition to cause bidding wars to stop</I><BR/><BR/>It's a lot simpler than that. They just ran out of buyers. Everyone who had the will and means to buy, and plenty more who didn't have the latter, had already bought. All greater fool games end this way.patriotzhttps://www.blogger.com/profile/11154064267408955762noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-72366957273820727362007-10-04T20:54:00.000-07:002007-10-04T20:54:00.000-07:00Not when you're 25. Sorry to say it but wage gains...<B>Not when you're 25. Sorry to say it but wage gains are steeper at the beginning of a career and taper off after that. </B><BR/><BR/>Sorry, I was referring to general wage gains across the spectrum.<BR/><BR/>You were referring to increase in earnings power that comes with experience. Yes, a younger person would likely bank on those type of wage increases. But in the aggregate is a bit of a wash. For every young whippersnapper moving up in the ranks, another older person peaks or retires.freakohttps://www.blogger.com/profile/06236681769619303395noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-5917828298359876112007-10-04T14:30:00.000-07:002007-10-04T14:30:00.000-07:00Not when you're 25. Sorry to say it but wage gains...<I>Not when you're 25. Sorry to say it but wage gains are steeper at the beginning of a career and taper off after that. 10% in the first year after uni is not uncommon even in a bad job environment. That said, wage gains are pretty negative if you're unemployed.</I><BR/><BR/>Being 30 I have to agree with you regarding the last 5 years of my employment, or even the last 9 going back to my first and only RE purchase.<BR/><BR/>I tend to think of unemployment as more personal. The rate of 5% or 10% doesn't seem to make a whole lot of difference to the average person. Its more like 0% or 100% if you're the one who's unemployed.Warrenhttps://www.blogger.com/profile/00586650821846362670noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-59351305669759313382007-10-04T14:28:00.000-07:002007-10-04T14:28:00.000-07:00"Gross oversimplification IMHO. Appreciation above...<I>"Gross oversimplification IMHO. Appreciation above borrowing costs come with risk. Risk and leverage can be a bad combination. No free lunch there."</I><BR/><BR/>Yes but risk is imaginary until it happens. The past 7+ years and looking at the long-term price appreciation graphs make real estate look like it will always go up in the long term. People will underestimate carrying costs and risks which is part of the problem. No free lunch for defo: in this case you start eating before you pay.<BR/><BR/><I>"Prices went up far far in excess of anything justifed by improvements in these, so they can easily go down in absence of a deteriation."</I><BR/><BR/>Yes you and beta are right. Lagging indicators.<BR/><BR/><I>"Real wages haven't gone up much the last few decades."</I><BR/><BR/>Not when you're 25. Sorry to say it but wage gains are steeper at the beginning of a career and taper off after that. 10% in the first year after uni is not uncommon even in a bad job environment. That said, wage gains are pretty negative if you're unemployed.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-36887226964989191422007-10-04T14:19:00.000-07:002007-10-04T14:19:00.000-07:00People have no financial "street smarts" or common...People have no financial "street smarts" or common sense. Its as simple as that. The people buying these small places for ridiculous prices are the same ones that max out their credit cards and have no real concept of the crushing interest they are paying.<BR/><BR/>Who's to blame? The government? The media? The education system? I think they all share the blame. People are too stupid for their own good sometimes. In Canada, I think our government's general philosophy is to protect people from themselves (think gun control) vs. the US where it is more everyone for themselves. You can see how that is working out on a number of issues, housing being only one of them.Warrenhttps://www.blogger.com/profile/00586650821846362670noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-29552961777210408082007-10-04T14:18:00.000-07:002007-10-04T14:18:00.000-07:00"the market had already turned before mass foreclo...<I>"the market had already turned before mass foreclosures began."</I><BR/><BR/>The market in the US turned when sales started significantly lagging inventory buildup. I don't know what precipitated the drop in sales -- it could have easily been a random walk that added enough competition to cause bidding wars to stop. The same will happen here somehow, though looking at the numbers I don't see it happening yet.<BR/><BR/>I agree with you that the market can turn (marked by slower sales and rising inventory) absent of any massive shock. <BR/><BR/>Unemployment is a lagging indicator as to some degree are mortgage rates and how easy it is to get approved (banks can and will raise standards with a single keystroke if they smell poo in the wind).jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-12852602403287649902007-10-04T14:11:00.000-07:002007-10-04T14:11:00.000-07:00But in the end you can never do better than levera...<B>But in the end you can never do better than leveraging to the gills an asset that is continually appreciating in value. </B><BR/><BR/>Gross oversimplification IMHO. Appreciation above borrowing costs come with risk. Risk and leverage can be a bad combination. No free lunch there.<BR/><BR/><BR/><B>I think it's the expectation of future wage gains that keeps people buying along with the expectation of flat to rising house prices over the long run (not necessarily rising house prices). <BR/><BR/><B>I argue this is partly due to the encouragement of the older generation who, using their own experiences as evidence, will show how a seemingly disastrous mortgage payment will become easier and easier as you start getting raises.</B><BR/><BR/>No doubt this advice is based on 1970's style inflation. We don't have it, and if we did, you wouldn't see the rates that we currently have. Extremely poor affordability in a low rate, low inflation environment can only end one way: Badly.<BR/><BR/><B>In my mind, triggers are the usual suspects: rising unemployment, rising inventory, rising mortgage rates, etc. </B><BR/><BR/>Prices went up far far in excess of anything justifed by improvements in these, so they can easily go down in absence of a deteriation.<BR/><BR/><BR/><BR/></B><BR/><BR/>Wage gains come with a catch. Nominal wage gains generally come with inflation, which will raise rates. Real wages haven't gone up much the last few decades.freakohttps://www.blogger.com/profile/06236681769619303395noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-91520552189427430092007-10-04T12:48:00.000-07:002007-10-04T12:48:00.000-07:00You'll see the same thing here soon enough, as eve...You'll see the same thing here soon enough, as even 100% 40-yr mortgages are increasingly insufficient to put average FTB's into condos.Unknownhttps://www.blogger.com/profile/15910317878726017663noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-57633001799890267372007-10-04T12:44:00.000-07:002007-10-04T12:44:00.000-07:00Interest rates had risen, and on top of that you h...<I>Interest rates had risen, and on top of that you had teaser-rate "resets"</I><BR/><BR/>Interest rates are still historically low, and rate resets were only a problem because already stagnant markets precluded a quick sale, resulting in defaults and eventually foreclosures. <BR/><BR/>Houses had become unaffordable even *with* teaser loans, and the market had already turned before mass foreclosures began.Unknownhttps://www.blogger.com/profile/15910317878726017663noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-20850117017012836882007-10-04T12:04:00.000-07:002007-10-04T12:04:00.000-07:00"The crash in the US began without any of those tr..."<I>The crash in the US began without any of those triggers, so no need to expect them here, either. Affordability limits are sufficient.</I>"<BR/><BR/>Interest rates had risen, and on top of that you had teaser-rate "resets" which compounded the problem. Some people saw their monthly payments double. It may not have been the sole trigger, but I think it was a big part. Affordability wasn't much of a factor, I don't think, since houses were already unaffordable when people were buying houses that they could only make the reduced teaser payments.Ryanhttps://www.blogger.com/profile/10104704096049638272noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-18134633180770997022007-10-04T10:03:00.000-07:002007-10-04T10:03:00.000-07:0025 year old dude is looking into the future and se...<I>25 year old dude is looking into the future and sees much better than 3% wage gains as he climbs the corporate ladder.</I><BR/><BR/>Ideally, but life is often less than ideal.Unknownhttps://www.blogger.com/profile/15910317878726017663noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-33593403094577483072007-10-04T09:51:00.000-07:002007-10-04T09:51:00.000-07:00In my mind, triggers are the usual suspects: risin...<I>In my mind, triggers are the usual suspects: rising unemployment, rising inventory, rising mortgage rates, etc. None have significantly materialized yet.</I><BR/><BR/>The crash in the US began without any of those triggers, so no need to expect them here, either. Affordability limits are sufficient.Unknownhttps://www.blogger.com/profile/15910317878726017663noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-33462108547413539412007-10-04T09:24:00.000-07:002007-10-04T09:24:00.000-07:00"please send me some data that clearly shows how B...<I>"please send me some data that clearly shows how BC residents have gotten 50% raises over the last 4 years? I'd really appreciate it, thanks"</I><BR/><BR/>I agree prices have risen faster than wages and in the long term this is impossible. But right now people generally don't think like that when trying to decide whether to buy or rent. I think it's the expectation of future wage gains that keeps people buying along with the expectation of flat to rising house prices over the long run (not <I>necessarily</I> rising house prices). <BR/><BR/>I argue this is partly due to the encouragement of the older generation who, using their own experiences as evidence, will show how a seemingly disastrous mortgage payment will become easier and easier as you start getting raises.<BR/><BR/><I>"REAL ESTATE ALWAYS GOES UP!!"</I><BR/><BR/>You mis-interpret. If someone thinks an asset always goes up in value, they will leverage as this is by far the best return around (ignoring risk!). Right now there is not much stopping people from leveraging themselves like crazy. I think there will need to be some risks that come to fruition, like has happened in the US, for people to change their minds.<BR/><BR/>In my mind, triggers are the usual suspects: rising unemployment, rising inventory, rising mortgage rates, etc. None have significantly materialized yet.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-45774991365964994872007-10-04T05:26:00.000-07:002007-10-04T05:26:00.000-07:00I sure do love a good rant, great work. This whole...I sure do love a good rant, great work. This whole thing is one of the most perplexing and interesting things that I have ever watched, sheer madness. It has also been a great exercise in patience.streelhttps://www.blogger.com/profile/01941620026154987199noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-46851359670146858672007-10-04T03:04:00.000-07:002007-10-04T03:04:00.000-07:00"Over time his wage gains (that will likely beat i..."Over time his wage gains (that will likely beat inflation) make the $200K burden more tenable."<BR/><BR/>Hrmm... I don't know too many people whose wage gains in the past 3 years have beat inflation combined with the increased cost of living in this city. As mohican said...<BR/><BR/>"please send me some data that clearly shows how BC residents have gotten 50% raises over the last 4 years? I'd really appreciate it, thanks."<BR/><BR/>Onto point #2...<BR/><BR/>"But in the end you can never do better than leveraging to the gills an asset that is continually appreciating in value."<BR/><BR/>REAL ESTATE ALWAYS GOES UP!! Tell that to people who bought in Edmonton in the past year.J.Sonhttps://www.blogger.com/profile/03736098911020648495noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-39974458562330613072007-10-03T20:39:00.000-07:002007-10-03T20:39:00.000-07:00I really like the "gloves off" version of Mohican....I really like the "gloves off" version of Mohican. <BR/><BR/>I would love to do a satire of people like Cameron, but it would be hard to do satire, because he already is satire incarnate.<BR/><BR/>"an asset that is continually appreciating in value"<BR/><BR/>That's right, just keep sipping the Kool Aid.....Clarkehttps://www.blogger.com/profile/01598503256501613406noreply@blogger.com