Canuckleheads are overpaid and have crap mortgages

[alfred russel]

BB--I posted this idea before, but what of the concept that there wasn't ever a stock market, or even housing market, bubble?

The S&P 500 is an all time high. Someone dollar cost averaging since 2000 or the last 10 years has done very well. What we call a bubble when you step back looks more like volitility.

The housing market is a bit different. There seems to be a real loss in in parts of the country (my condo for instance). But still, there are parts of the country that have fared well. If you aren't talking about specific places--Atlanta condos, South Florida, Las Vegas, etc--the story isn't awful. Even in those places, there are usually bright spots.

[Jacob]

The problem is that, purely as a practical matter, few actually have the financial discipline to invest in equities with the same sort of fanaticism that the banks have in insisting on being repaid ... in short, that for the average idiot, a mortgage acts as "forced savings".

Yeah, that most definitely applies to me.

EDIT: and most of the people I've known who were heavily into stocks had more of a gambling approach than a disciplined investor one, it appeared to me.

[Malthus]

I would suggest that the bank is unable to issue you a new mortgage when the value of the mortgage is greater than the value of the home.

This isn't my area - but really? A bank is literally unable to make any sort of compromise, even if it was in its best interests?

[Jacob]

I would suggest that the bank is unable to issue you a new mortgage when the value of the mortgage is greater than the value of the home.

This isn't my area - but really? A bank is literally unable to make any sort of compromise, even if it was in its best interests?

I expect there is a number of important risk-management policies in place, some of which may very well be grounded in various regulations and laws, that would make it non-trivial for a bank to enact such a compromise, especially on a case-by-case basis.

[alfred russel]

The bank may not own the mortgage. It may be securitized and sold to a bunch of faceless passive investors. In that case, the mortgage comes due, and the bank can't talk to ultimate holders of the mortgage note to negotiate, and the homeowner is underwater so can't get new financing, so the whole thing blows up.

[Barrister]

BB--I posted this idea before, but what of the concept that there wasn't ever a stock market, or even housing market, bubble?

The S&P 500 is an all time high. Someone dollar cost averaging since 2000 or the last 10 years has done very well. What we call a bubble when you step back looks more like volitility.

The housing market is a bit different. There seems to be a real loss in in parts of the country (my condo for instance). But still, there are parts of the country that have fared well. If you aren't talking about specific places--Atlanta condos, South Florida, Las Vegas, etc--the story isn't awful. Even in those places, there are usually bright spots.

There very obviously was a bubble in the late 90s.  It wasn't so much a "stock market" bubble, as it was a tech and dotcom bubble.

The NASDAQ index has still not returned to its 1999 highs (though I see 15 years later it is getting close).

https://ca.finance.yahoo.com/echarts?s=%5EIXIC#symbol=%5EIXIC;range=my

Which perhaps ties into your point that there is variation in these things.  Certain areas will do better than others, much as certain stocks will do better than others.

[crazy canuck]

If he'd been investing the extra money that would have gone towards his mortgage it wouldn't have to be very significant at all.  WHile obviously 1999 is a bad year to start a comparison, if he'd been "dollar averaging" his investments over the last 15 years he'd have made a very handsome return.

Maybe he has been, I don't know.

But yeah, '98-'99 was funny like that. My office was full of guys trading stocks all the time online, passing hot tips back and forth, bragging about their smart bets, and reading stock websites like crazy. They all had some sort of system, and they were all convinced they were super smart and ahead of the curve. Then that stopped.

A few years later, it seemed like most of those guys got into poker. Again, reading the sites, talking big about how smart they were, having systems, reading books and websites, and being convinced they were super smart, making money, and were ahead of the curve. That has about petered out now too.

I knew some guys who quit their day jobs, went into day-trading full time in the late 90s. I sorta lost track of them, as I knew them through work - I wonder how that worked out for them.

I got out of the market just about right time.  The danger signal for me was hearing people on the bus trading stock tips.

I invested those gains in another property. 

[Valmy]

If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash.  My net worth would also be significantly less.

Sometimes it pays not to listen to your accountant.

Um I am pretty sure DGuller was not saying nobody should ever buy property.  I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue.  You were not exposing yourself to be concerned about something like that.  So I guess I do not see the big slam on DGuller here.

[DGuller]

If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash.  My net worth would also be significantly less.

Sometimes it pays not to listen to your accountant.

Um I am pretty sure DGuller was not saying nobody should ever buy property.  I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue.  You were not exposing yourself to be concerned about something like that.  So I guess I do not see the big slam on DGuller here.

Exactly.  Buying a house is a personal decision with personal circumstances.  The expected appreciation/depreciation is just one of factors, which may or may not be important to you, or may or may not be a significant factor among all factors in your decision.  What's important is to rationally evaluate that factor.

Our family moved out of the apartment we rented in 2005 because the landlord sold the house, and my parents were looking for a coop to buy.  I knew there was a huge bubble waiting to pop, but their circumstances were such that they didn't really have much of a choice, and they were more insulated than most if property values took a dip.  Therefore I didn't really object to their decision, because it was still the right one.

[Malthus]

If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash.  My net worth would also be significantly less.

Sometimes it pays not to listen to your accountant.

Um I am pretty sure DGuller was not saying nobody should ever buy property.  I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue.  You were not exposing yourself to be concerned about something like that.  So I guess I do not see the big slam on DGuller here.

The issue, though, is that if you are one of those folks who just want a house to live in, whether you should buy or wait because of this "huge bubble waiting to pop". If you really thought a huge bubble was waiting to pop, then you would be better off waiting for it to do so, because your money would get you more house, or a house in a nicer area - nothing to do with flipping or anything, necessarily.

Of course, as CC points out, those who listened to the Dguller equivalents duly predicting a "bubble waiting to pop" in the 1990s in Vancouver and looking forward to buying a nicer house or one in a better area, would still be waiting. Ditto in Toronto. I had tons of people tell me I was a fool to buy when I did, and I assume CC had the same experience.

This is why continually predicting bubbles popping is sub-optimal, even though bubbles do exist and they do pop.

[alfred russel]

There very obviously was a bubble in the late 90s.  It wasn't so much a "stock market" bubble, as it was a tech and dotcom bubble.

The NASDAQ index has still not returned to its 1999 highs (though I see 15 years later it is getting close).

https://ca.finance.yahoo.com/echarts?s=%5EIXIC#symbol=%5EIXIC;range=my

Which perhaps ties into your point that there is variation in these things.  Certain areas will do better than others, much as certain stocks will do better than others.

The NASDAQ is a bizarre metric to track. It isn't really an index, it is a collection of companies on an exchange. Which tilted heavily toward tech stocks in the 1990s.

The late 1990s were an odd time. I'm not saying there was no tech bubble--there are some stories that make clear there was bubblish stuff going on. But the internet as a major business proposition was fairly new. A lot of people felt it was going to transform basically everything--and those people were right. How do you value the companies with the first mover advantage in that type of environment?

[Caliga]

I interviewed a Canadian today.

No, in all seriousness, he was actually pretty good.

[crazy canuck]

If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash.  My net worth would also be significantly less.

Sometimes it pays not to listen to your accountant.

Um I am pretty sure DGuller was not saying nobody should ever buy property.  I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue.  You were not exposing yourself to be concerned about something like that.  So I guess I do not see the big slam on DGuller here.

The issue, though, is that if you are one of those folks who just want a house to live in, whether you should buy or wait because of this "huge bubble waiting to pop". If you really thought a huge bubble was waiting to pop, then you would be better off waiting for it to do so, because your money would get you more house, or a house in a nicer area - nothing to do with flipping or anything, necessarily.

Of course, as CC points out, those who listened to the Dguller equivalents duly predicting a "bubble waiting to pop" in the 1990s in Vancouver and looking forward to buying a nicer house or one in a better area, would still be waiting. Ditto in Toronto. I had tons of people tell me I was a fool to buy when I did, and I assume CC had the same experience.

This is why continually predicting bubbles popping is sub-optimal, even though bubbles do exist and they do pop.

[crazy canuck]

I interviewed a Canadian today.

No, in all seriousness, he was actually pretty good.

You have to keep in mind that he could have been earning more in Canada.

See how I got this back on topic.

[Valmy]

The issue, though, is that if you are one of those folks who just want a house to live in, whether you should buy or wait because of this "huge bubble waiting to pop".

You should buy when it is reasonable to buy.  You are going to have this house for a long time so a dip in the market, even a crash, is not really your concern.  Buy the time the place gets sold off the market will have recovered enough that you will not be eating a huge loss....I guess unless you bought your place in Detroit in the 1970s or something.

The bubble is only a factor if you are going to be really sensitive and exposed to price fluctuations for some reason, like this is a short term investment.