HawthorneVillager.com

Rare... you're either looking at Old Milton, or a very small semi detached rented by a rookie landlord that doesn't know market rates.

Why would you do numbers for 25 years when on average people live to be 80+ that still leaves 30 years left for most people

Funny when i put in my actual situation buying is better after 4 years. 2 if i consider short term values

hey dabills. lets presume you sold your house 1.5 yrs ago, you probally lost at least 75k, since thats what they have gone up. average house, im being conservative. so tell me again the great benefit of renting? next 10 yrs suckers game? looks like ill be a sucker with escalating equity, or at least paying down MY house, not my landlords. no investment will yield that kind of return. whos the sucker?

Dabills - you first quote Milton as the place for your quiz and then you say that $370K is the average price in the GTA. A family of 4 could easily live in a decent size townhouse or semi for well under that. In addition, when in the last 10 years has the interest rate been 6%.

I moved into my first house back in 2001 and my mortgate has not been anywhere near 6% in that time.

Who cares about your irish relatives and how you feel sorry for them. quit with your 'Nah' and I dont agree with anyone who posts their belief over yours. You can back all your ideas up with articles and other financial wizards posts, however, for every article stating one thing, there is also an article on another opposing the negativity.

I dont feel like paying off someone else's mortgage when in another 10 years, I will be mortgage free and will have disposable income that I can spend where I want and on my family. Why, for the life of me, would I want to continue to pay someone else's mortgage (and this is my opinion).

I've got a 370K mortgage and my monthly rate is around $1450.

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Here you go:

Notable Canadian Interest Rate Observations for the Last 10 Years
Average Prime Rate in Canada: 4.29%
Highest Prime Rate observed: 6.25% on Wednesday, July 11th 2007.
Lowest Prime Rate observed: 2.25% on Wednesday, April 22nd 2009.


370K is variable depending on what the individual is looking for. If it's a town, then $300-325 is probably average, if it's a semi - $310-$340, and if it is a single (small single) then you are easily between $375-425K

As for being mad at you....I'm not dude....it comes down to you always having to be right. You are the kid who always raises his hand in public school and has to show that you are right about everything, when, everyone has their own ideas of what is right and where they should spend their money.

People have different priorities in life, some will sell and rent for a period of time, hoping that we are in a housing bubble and can purchase another home for much less at a later date. Then there are people who bought a few years ago and their values have increased 25% and dont care if the market drops 10%, then there are people who are buying homes today that may/may not loose value (will they...probably but no one can predict that) I agree that houses are overpriced today, however, who are you to judge whether or not someone can or can not afford their home and that they have taken too much on a HELOC.....

What worked for you, in most cases wont work for the next family.....I for one can just imagine the conversation with my wife:

Me: Dear.....listen, we are living in a housing bubble, I think we should cash out, rent for a few years, and tehn buy a home in a few years when the market goes the way of the US where we can purchase a home for $0.50 cents on the dollar.

Wife: Are you F*&^#d? Are you having a midlife crisis? Do we need to go to marriage counciling?

Me: No, I have just been wasting all of my free time surfing the web looking for inforamtion on Home Ownership and how the Canadian economy is fairing and where we are going.

Wife: Dont talk to me about this again, spend some time on a real hobby. I like our home, it's a great place for our kids to grow up and I am not moving.

Me: But dear, we can buy a larger and much nicer home in a few years when the market tanks.

Wife: And where are we going to live? I'm not moving back into a small apartment, been there, done that in our 20's and not going going back to the past.

Me: It's funny that you mention that....I have alerady found this great little 50 year old home that we can move into where we will only be paying 1400/month in rent, then we can continue to save and have more to put down on our new home when the market tanks....

Wife: You want me to move out of our 'New' home, where I have new carpet, a new kitchen, new appliances and move into a 50 year home? nah, not going to happen....

Again....different strokes for different folks, not everyone sees things the way you do.

Here are some differing opinions.. Although they are wrong, Shiller is right. Even when he makes statements like this:



http://www.businessinsider.com/is-your- ... ent-2011-6

http://www.smartmoneydaily.com/investin ... tment.aspx

Some highlights:

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The reality is, all your rent-vs-own calculations are based on two different properties without taking inflation into consideration.

Yes, you keep saying "oh my rent will never go up, i'm a good tenant" but the reality is in the real world rent goes up with at least inflation (except when we had rent control like the last several years) and the "cost" of paying your mortgage actually gets cheaper in real world dollars as inflation takes hold.

i.e.

renting gets more expensive every year in real world dollar value
owning gets cheaper every year in real world dollar value (as long as you aren't selling and upgrading or HELOC'ing)

Most rent-vs-own calculators fall off around 4-7 years e.g. it becomes better to own if you are planning on staying in the house 4-7 years. If you plan to rent 4-7 years, you will come out worse.

To say investing in stocks, bonds, etc. is fool proof is just as crazy. Most of your investments are not guaranteed to increase in value either and they can and will go up and down with the market, just like a house.

When you mention rising interest rates -- that will affect everything, including rent. Landlords don't rent houses they own outright -- they rent houses that have mortgages -- because its better to write off the interest. When their mortgage rate goes up, so will your rent.

We also have a buffer because historically the spread between BOC rate and Prime rate was not as much as it is now.. when the BOC lowered rates to these levels, the banks refused to go that low... that means there will be room to keep rates low even as the BOC raises them. You will see them initially all come up but then competition in the mortgage market will see some banks starting to get competitive again.

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all you guys are forgetting dabills sold his house in anticipation of doom, i would lie to myself as well if i did that. there is no reasoning with him or older skool.

Count on Dabills to always try to have the last word and try to be the authority on what's going to happen. As for rental rates in the GTA over the last 20 years, not sure why you are saying they have been flat:

Toronto
Area Oct-93 Oct-98 First 5 YR Change Oct-03 Second 5 YR Change TOTAL 10 YR Change
1 Bedroom $627 $729 16.27% $884 21.26% 40.99%
2 Bedroom $773 $881 13.97% $1,040 18.05% 34.54%


As you can see, they have increased 40.99% over the last 10 years.....not flat at all.

nobody likes the truth.

So have we agreed renting for 4-7 years and up is a bad investment? At least lets all agree to that.

http://www.ltb.gov.on.ca/stdprodconsume ... 067671.pdf

Actually, low interest rates are not only keeping mortgage payments affordable but also rent affordable. You see, the two or in and of the same. When interest rates go up, you will see rent go up too. If you are on a 5 year fixed, you have some time to weather the storm -- if you are renting, you will likely feel the increase right away.

In the 80s and 90s, rent increases were around 4-6% PER YEAR. In the 70s it was more like 8%.

The allowed increase in 2011 is 0.7%. This is likely due to the low interest rates.

If it gets more expensive to hold a rental property (mortgage payments), they will raise your rent. If they are not allowed to raise rent because of the Ontario rent control guidelines, they will evict the tenant and sell off the property.



To say rent won't increase with inflation is just plain crazy talk. This is where home ownership excels -- you are hedging against inflation. You buy in 2010 dollars and you pay down the debt all the way through 2035 dollars which are likely worth 2% x 25 years less.

The difference is, your rent is 2% x 25 years more.

When my parents were in the final year of their mortgage payment, they were well over $125k a year in earnings (end of their careers) and their mortgage payment was in the $300 range.

25 years earlier, that payment represented a large portion of their earnings. Around the 30% mark. As the years went on, the actual value of that mortgage payment decreased to the point it was pocket change. This was a few years ago, but I can tell you, at that time, renting a similar house would run you $1,500 easily.

Even with a modest 2% annual increase (to match inflation) you will see your salary increase by 50%. Your house price stays the saaaaame!

What people don't take into consideration is that MOST people don't work the same job, accepting 2% increases every year. Especially the young professionals buying homes now... they are at the start of their careers and will likely see several promotions and movements up the corporate ladder over the course of those 25 years. In my mothers case, from secretary to Sr. Marketing Manager.

If you resist the urge to upsize the house, you are laughing!

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They rent in metro areas like London (just like Manhattan) because even a professional can not afford to own. Land in those areas is at a premium and real estate is not within reach for an average person in those areas. Only the rich can afford property now.. those that bought after the war and those that now make 6 figure salaries.

This is what happens when the population continues to grow in the same region year over year and there isn't anywhere for them to live.

We are lucky that Toronto isn't as populous right now -- in fact I think the London/New York have the population of all of Canada.. but one day, it will be -- and those that own property will be the "rich ones" and those that don't will rent (Or live further away)

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