One In Six New Buyers Struggling: Canada
Some first time home buyers in Canada may have taken on too much debt, according to an Ottawa Business Journal report.
"Survey results showed that 16 per cent of first-time homebuyers have difficulty managing their house payments and consider themselves to be 'house poor.' In addition, 77 per cent did not seek financial advice..'on the biggest investment they'll ever make, and that could be a big mistake.'"
9 Comments:
I'm an RE bear, but I'm wondering if there ever will be a bust. I just heard a radio report whereby the guest figures that if oil prices keep rising Greenspan is going to have to stay very accomodative and thus interest rates are going to stay low. Bond yields have been falling for the last 3 weeks. Asia keeps buying our dollar. Nobody seems concerned and I'm afraid it is going to take some sort of shock to make people realize there is a bubble.
Housing prices might not crash like stocks do. Prices might stay at their current levels or drift slightly lower. After 5 years of this and some inflation in everything else, they might be justifiable. Scary thought because I shouldn't be renting if that is the case.
I wouldn't worry about rushing out to buy anything right now. Renting is A LOT cheaper in most markets. Think about all the money you're saving renting. Some people say real estate will just keep going up, but the affordability index keeps dropping. In California, some areas are at 7% affordability with 36% investor speculation. This doesn't leave a lot of room for more upside. Could the bubble get even bigger? Of course. But probably not for much longer. And if it does it will just deflate that much faster.
I agree that renting is cheaper. I'm just worried that the prices aren't going to deflate. What if they just hold ?
Just wait... a world bank report just came out...
penelope-
When you look at the speculator numbers from mortgage applications it's closer to 10%. The 36% number is from a study done by the National Association of Realtors. I doubt the true number is much higher than that. Still, 36% is a huge number when historically it's probably closer to 8-10%.
Don't worry about holding out and renting.
Even if prices are flat:
1)Real prices decrease because of inflation.
2)Renting is cheaper: you can save piles of cash and invest that cash, just by renting.
Home equity isn't magic; it's just money. Renting beats buying in lots of markets because you can make money by saving the difference between rental and purchase payments and investing that money. In 5 years, if you do this religiously, you'll have a lot more cash than a buyer would have equity.
Then you can do whatever you want with your pile of money: buy a house, keep investing, whatever. With rental:purchase ratios so out of whack, it just makes no sense to buy.
Great posts!
(Prices might stay at their current levels or drift slightly lower)
I doubt this, as the return is terrible and wages don't appear to be moving up. As the foreclosure story indicates, even flat prices should eventually burst the bubble.
(In California, some areas are at 7% affordability with 36% investor speculation)
You would think the affordability numbers would be a screaming red flag, but they are reported almost as good news.
(people are COUNTING on appreciation)
That was the real sign that the tech stocks were in a bubble.
Hi Ms. P.
(They then instruct you to have all your bills sent to that house in your name for at least 6 months)
I have personally experienced this. That landlord went bankrupt, BTW.
(if you do this religiously, you'll have a lot more cash than a buyer would have equity)
Anyone familiar with amortization schedules knows this. Again, what we are seeing is a pure gamble on appreciation. Thanks for the info...Ben
I live in Vancouver. I have been renting for some time, now. There appears to have been a sales "uptick" for the first three months of this year. However, I think it may be a "sucker's rally"...The "industry" is still playing up the market of course. Personally, I believe the market peaked last May. Time will tell.
Hi Bill from Vancouver,
Yeah, I noticed the same uptick in the recent data. (You can see my commentary and charts of the recent Vancouver data at http://van-housing.blogspot.com)
It might be a 'sucker's rally', but it seems like there are still a lot of 'suckers' in Vancouver. I suspect it is not close to reversing yet. People are so used to increasing prices here it will take something big to update their psychology.
Vancouver Housing Blogger
penelope-
"10 percent is the number of investment homes purchased under "normal" market conditions...at least, again, this is what I've read.
I still think 36 percent is way too low."
Check out this link:
http://bwnt.businessweek.com/housing_boom/index.asp
These are numbers based on mortgages held as investments based on what the loan documents state. The only source for the "third" you cited is the National Association of Realtors' study. If you have another source I'd love to see it.
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