Canuckleheads are overpaid and have crap mortgages

[alfred russel]

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

See how I got this back on topic.

Not necessarily. Per the chart, the 60th percentile and up do better in the US. So if the guy is above average, he should be able to do better in the US.

[crazy canuck]

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.

One wonders why you were disagreeing earlier.

[Malthus]

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.

I agree with that. The factors that go into house buying are all, in my mind at least, about the suitability of the property for my needs - like, am I going to be living in the same place for a long time? What's the neighbourhood like? Close to schools for my kid, shopping, transportation? Is it "walkable" (very important to me)? Etc.

Fluctuations in the real estate maket don't matter to me very much, other than in three respects:

(1) if house prices go up continually, eventually my property taxes follow. Not good.

(2) if house prices crash, there is an opportunity for me to buy a bigger house (the decline in value of my property will be less than the total decline, on average, of a larger property, assuming the whole market is equally affected by the decline).

(3) When I'm old and withered, maybe I'll want to sell and buy a smaller retirement place somewhere, with a sweet young nurse to feed me my daily pap - like Ed.  In that case, I want my house to be worth a lot of cash, so I can pay the sweet young thing with the difference.

[Valmy]

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.

One wonders why you were disagreeing earlier.

I don't remember but I bet I had a good reason.

[Tamas]

From NYT:

Comparing after tax income is a bit flawed too. Other countries pay more taxes, and for that get more benefits.

Not to mention the countries which pay more taxes and for that get less benefits.

[Grey Fox]

My understanding is that, historically over the past 50 years or so, stocks outperform real estate on average as an investment by a goodly margin.

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".

Also, those worried about real estate bubbles really ought to be equally worried about stock market bubbles. At least if a real estate bubble pops, you still have a house to live in. If a stock market crashes, and you have invested every penny into it, you are fucked.

On the one hand I'll admit - for me a mortgage (together with a pension plan) acts as "forced savings".  I've never saved as much as I should be, but those forced savings have given me a pretty decent amount of equity over the last 10 years.

However, there's a pretty strong argument to be made that a housing bubble will be dramatically more devastating than a stock market bubble.  The reason is simple - margin.  Most people do not borrow the money they use to invest in the stock market, or if they do the margin is low.

When it comes to housing, however, a huge number of people have bought houses with very little money down, or if they did have a significant downpayment, they have obtained lines of credit leaving them with very little equity in their home.  As a result even a fairly modest decrease in house prices will leave a lot of people underwater.

Yes, allowing people to borrow too much with too little down is stupid, which is why I'm glad the Canadian gov't at least has put the kibosh on 40- and 30-year mortgages and such foolishness, and raised the maximum borrowing against house value to 80%, and forced a 20% down payment on million-dollar houses.

I have never really understood how being "underwater" on real estate is so very harmful to individuals, other than psychologically. You owe more than the property is worth to be sure, but seems to me the risk is to the lender. The real concern, I would have thought, is interest rates going up so you can't pay.

Those rules are only good when the mortage is insured. It's still pretty much anything for non-insured mortgages.

Also, next time your wife thinks your poor, quote her your post.

30 years & 40 years mortgages were a god send. Flaherty was wrong to remove them.

[crazy canuck]

Those rules are only good when the mortage is insured. It's still pretty much anything for non-insured mortgages.

The people who have the capital to obtain an uninsured mortgage also probably have ability to obtain mortgages that make good commercial sense.

[Malthus]

Those rules are only good when the mortage is insured. It's still pretty much anything for non-insured mortgages.

I think it's the other way around. If you don't meet the criteria in the rules, you have to buy mortgage insurance.

Also, next time your wife thinks your poor, quote her your post.

30 years & 40 years mortgages were a god send. Flaherty was wrong to remove them.

It was a "god send" for folks who could barely afford mortgage payments, yet who wanted to purchase real estate. However, these are exactly the same folks who, if interest rates go up a few percentage points, will no longer be able to afford mortgage payments at all.

Interest rates are, right now, at historic lows. No-one believes they will not go up eventually. This means that many of those people taking 30 or 40 year mortgages will almost certainly be screwed sooner or later (assuming they don't get any richer over the life of the mortgage). Lacking such mortgages means lots of those people have to rent until they get more money ... which is almost certainly a more financially prudent thing for them to do in the circumstances.

The effect on the economy of lots of poor folks suddenly being unable to afford their mortgage payments simultaneously - for example, if interest rates went up by a noticable percent, which is likely - would be very bad.

[Grey Fox]

Then to solution is to regulate interest rates.

We need more owners. It's the only way to raise the quality of life of society.

[Capetan Mihali]

We need more owners. It's the only way to raise the quality of life of society.

[Grey Fox]

Renters are bad.

[Valmy]

Renters are bad.

What about all those people who invested their money in rental properties?  What of them?

[Jacob]

Then to solution is to regulate interest rates.

We need more owners. It's the only way to raise the quality of life of society.

That's an odd point of view.

[Grey Fox]

Renters are bad.

What about all those people who invested their money in rental properties?  What of them?

Wolves preying on the weakest of society!

[alfred russel]

Grey Fox, I disagree with your idea like everyone else, but I get where you are coming from.