HawthorneVillager.com

I'm actually certain we agree about 95% of this discussion. the only part that's different is our approach, our reaction to what may happen, and the chance and extent to which we think it might happen. ok fine so maybe a little les than 95%

The truth of the matter is that downturns are possible in ANY market, with ANY asset / commodity, at ANY time - that's the nature of investing. There's no such thing as a guaranteed return in Real Estate, so anybody that has bought a 500k home with a 475k mortgage is of course at risk, but at the same time, they could very well be laughing in 2 yrs if they sell for even $550k. they would have turned their 25k downpayment into 75k less borrowing costs in only 2 yrs - it's a simple risk/reward calculation, and everybody has their own personal limits.

Go back and read my tirades on the 0/40 products from a couple of yrs ago, and you'll see that we agree.

exaaaaaaaaaaactly.
That part is left out of the "You're richer than you think" brochure.
as is the fact that you're actually not richer than you think. None of us are.

Before I comment, this report is coming from the same bank that just introduced the 125% collateral loan, as we know

http://www.canadianmortgageprofessional ... gram/65521

i just read that report and that is not only absurd but should be illegal. most people are skewed when their houses go up 70K. as pointed out there are fees such as real estate, lawyers and never mind if you get stuck with interest differential,

Am I alone in thinking that you won’t see the Housing bubble pop? I think you’ll probably see something approaching a 10% decline in 2011 (although I have a hard time believing it will be that much with further rate hikes on hold). But that will be the max.

The Fed is clearly going to begin printing money this year and next with the aim of driving inflation up, and devaluing the dollar. They are already talking up the ‘benefits’ of inflation, and getting people to buy in. Canada is going to have no choice but to play ball, or see our exports dry up. You may see price increases, only because of inflation. In real terms, housing prices may decline, but you won’t realize it.

It’s looking more and more like Peter Schiff was right, again. He already predicted the housing bubble, but it was looking doubtful we would see inflation return. Now it’s looking more likely. I remember seeing an interview with him, and he was asked if people should be trying to pay off their mortgage as quickly as possible. His answer was no. You should borrow as much money as possible against your house, and pay back as little as you can. Get any money you have invested outside of the US. Simply wait for inflation to erode the true value of that debt, while your money sits protected in another currency. Eventually, you can convert your money back to US dollars and pay off your now worthless debt.

It's a sticky situation for sure. If you listen to his words, he is basically saying if you're over extended or can't afford it, STOP BORROWING. If you can afford it, PLEASE BORROW! Unfortunately, not everyone is smart enough to listen to what he is saying. Personally, I look at the low rates as a perfect opportunity to lock in on that new home I've always wanted BUT I've always made sure I'm under the 3x income range (not 11x). If I was a parent with a paid off house, I'd be borrowing to pay for my kids education. If I was a business owner, I'd be borrowing to grow my business or hire more people. That's the reason for the low rates -- not for housing.. unfortunately, you can't have one without the other.

I think they should have kept cracking away at the housing rules in addition to the low rates such as ensuring 10% minimum down on anything over 25 year. Maybe get rid of the 35 year.

As for the issues in Europe, it's not related to household debt. It has no bearing on this situation we are discussing. Those countries are broke. They've been overspending and the amount of sheer social assistance provided by the government to their people was unsustainable. Once the world economy tanked, they got caught with their pants down. I believe in Greece for example one can retire with a full pension after 35 years of labor (start at 18, retire 53) with 80% of salary provided in 14 payments per year. The minimum payment was set at about $1000 CDN, the maximum just over $5000 CDN. Other countries like Germany and France have similar situations.

The problem in the United States was that the population was broke. They hadn't seen average wage increases in 30 years (after inflation) and they continued to borrow and borrow against their homes which fueled this housing market. All of their savings was in their homes.

The problems in Europe are that the governments are broke.

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I have to say that I'm with Bremer. Bubbles pop, they don't slow down. It's easy for me to not be concerned, though, because I don't own investment property, I own a home, like ol skool said. A 10% decrease doesn't scare me, just like a 10% increase doesn't get me excited since I don't run to the bank to HELOC the increase. If the market tanks even 20%, and I decide to sell, I'll be buying a house that's also discounted 20%. On top of that, my next move will be up-sizing. Up-sizing, to me, is way better when the market is sucking. For example, if you are moving from a $400,000 dollar house to a $500,000 house, your 25% upgrade costs you 100,000 dollars, but if the market tanks and your house is now only selling for $200,000, your 25% upgrade only costs you a $50,000 injection. Sure interest rates will probably be higher, and the real value of that 50,000 will be more, but there is still a silver lining.
For the same reason, down sizing is better when the market is hot. Your return is relatively higher than your other (constant) debts. So while all the boomers are going to be f-ed if the market bites it, I couldn't care less for another 30 years.

It is quite amazing the amount of effort and thought that has gone into this argument from both points of view. At the end of the day, we are still all born of privilege and if this amount of thought and effort went into issues like 3rd world poverty, hunger, AIDS research, and climate change (just to name a few) maybe we would make some headway with those issues and the world would be a better place as a whole. Look at the death and despair first from the earthquake and now the cholera outbreak in Haiti and hopefully it will put things into better perspective.

Maybe this is a little kumbaya but I think it is time people gave their heads a shake....

at this point of the thread all opinions have been heard, who really devotes all this time and most important "worry" of household debt, house prices falling, sky is falling, 2012 etc. there is something else called life, go live it. negative people really annoy the hell out of me,

More of these reports are appearing....

http://money.ca.msn.com/banking/homebuy ... d=26127042

Another recent one...
I think people are taking this guy more seriously now after his U.S. prediction was correct.

http://www.cbc.ca/canada/story/2010/11/ ... #storyhead

Such hostility. I know nothing about circle jerks but you seem to have detailed experience or maybe just unfond memories. I don't like eating cold beans either.

Actually if prices where going up I'd post it too.

I didn't believe prices would fall but we watched our house value go down about 35K in a few months this year.
Not too big a deal for us since we had a big down payment and it appreciated a tidy sum since we first bought.
We ended up selling anyhow and it feels good to be debt free.

The predicitions for the bubble came as early as 2002 and a lot of people reacted like you fillerguy.
Do you think all those people who have lost their jobs, life savings and struggling because they didn't heed the warnings are wishing they listened?
Doesn't hurt to be prudent especially ones with families.

My folks went through this in the late 80's early 90's. I've been on the down side of things and it's not fun at all.

So take it for what it is and for those who this might affect I hope you can get through it.

Why not just ignore this thread if you find it so objectionable?

how would you loose your life savings, and your job, if prices went down 10 or 15%?? funny as prices just went up, for the glass is half full kind of people there is ample literature in the paper this week of stable housing and balanced market in the gta.

I was referencing more the U.S. situation in terms of losing everything.
You can pretend that didn't happen but I have a relative in the states who has been affected.
Imagine buying a house and finding out two months later it's worth 100K less and plummeting even more.
It's not fun for them.
If you're a half full kind of person then all those empty houses in the states just have owners who went on long vacations.
Those bank foreclosure/for sale signs are just lawn ornaments.

Even for people here who have put 10% down on a 400K house would not a 10% to 15% loss in a year be significant?
First time home buyers that use up to 25K in RRSP for downpayment because they didn't have enough cash...is that a significant amount to lose?
In terms of refinancing a mortgage, how does one gain back that value if the bank will only finance for less than what is actually owed on the house?
These are not hypothetical situations. It's happened in the states and it can happen here.

You're fortunate if you can endure a 50K to 100K loss.
It's not doom and gloom if people are prepared.

Just for you 'f'...there's nothing wrong with Canadian real estate.
I hear Vancouver has a bunch of condos for sale. Snatch them up while you can since they'll only go up in price.