It sucks right now to sell a property with a Tenant. Yes it does. Uh huh, and here’s the proof.
In the past 30 days (as of this morning) There were a total of 619 sales in the Edmonton market. 416 of those were single family and 203 were condos.
Of the 416 single family sales in Edmonton on 11 of those were marked as "occupied by tenants" in the MLS database. Which amounts to about 2% of single family homes sold in Edmonton
Of the 203 condos sold in the past 30 days in the Edmonton market 7 were marked as tenant occupied. Or roughly 3.4% of all condos sold in Edmonton in the last 30 days were tenant occupied
Part of the reason that the sales are so low is, with the amount of choices that buyers have when they are looking at homes in Edmonton they don’t want to bother with making someone have to move when they have plenty to chose from. Then comes the REALTOR perspective of why deal with the headaches of showing a tenant occupied property and the possession issues unless that buyer is an investor or that property is exactly what the buyer wants.
So if time is of the essence then ixnay on the enantstay.
When shopping for rental properties, years ago, we were pretty amazed to see the disadvantage the sellers where at, when there were tenants in the property.
Some tenants were total slobs and did not bother clearing floor space for us to walk through the property.
Some were only too happy to show us everything that did not work in the home (plumbing, electrical, heat, etc)
Some tenants were sleeping at the time of the viewing, making it very awkward to tiptoe through those parts of the property that were not in use.
Some were somewhat threatening and refused to let us in, although they had received the appropriate notice.
Don’t forget that many of those tenants don’t want to move, or don’t want to risk a significant rent hike by the new owner.
And even if the tenants are happy to move out or are excellent housekeepers, a landlord really does not have a good opportunity to make cosmetic repairs and present the property in the best light possible.
In the end, we never bought a tenant-occupied property….
I can agree that an occupied property would likely appear less desirable to potential buyers.
However, the challenge is how else to you pay for the monthly costs of carrying your property without renters?
On one hand, you could get rid of your renters and hope that a sale occurs faster if at all. However, the only certainty to this scenario is that for every month unoccupied, you guarantee a monthly loss without rental income. It can add up.
On the other hand, if you keep those renters in your property and it takes the same amount of time or longer to sell the property; you keep that cash-flow and eliminate or reduce your monthly losses.
So I guess it becomes a function of how much your property will depreciate every month vs. how much rental income you will lose every month. That could be a gamble both ways.
A narrow perspective would be to get hung-up on the final sale price, and totally dismiss the monthly losses that can occur due to lack of rental income.
So like Sheldon says, “if time is of the essence then ixnay on the enantstay”, but I would like to add, “consider the sum of your monthly rental income losses vs. depreciation.”
If time is of the essence and you really need to dump your place, maybe you should try a combination of no renters and aggressive pricing.
Being a renter myself, I am aware of the inherent risks to this type of scenario where a renter could be evicted for a sale.
However, as a renter, risk of instability in my residence is highly rewarded with monthly depreciation of home prices. My down payment grows every month while prices drop; like two vehicles driving away from each-other, the gains for myself are two-fold.
Just look at the details of your situation. If more people would have analyzed rent vs. buy during the late stages of the housing boom, many may not have bought, and I think more will continue to wait.
I understand that making a sacrifice like renting isn’t always an option for everyone due to family needs. But long-term, it might be easier to make a short-term sacrifice with renting now and be further ahead down the road for it.
****Your assumption that they would take equally long to sell is incorrect. You have to take into consideration the depreciation of the property during the time it is on the market. Based on current absorption you are much worse of in my opinion as a rental. The rent just doesn’t cover the lost equity. You are right though some people can not afford to market without the tenant. They can make some other adjustments such as price and inducements to offset the renter issue.
Sheldon
Agreed Sheldon.
So we can also say that your statement implies that Renting a house or a Condo is better for net-worth than buying a House or a Condo in today’s market, since current depreciation is exceeding the principal-reducing portion of payments provided by current rental yields; cheaper to rent.
From experience of being a renter at this time…I can say that my rent would not cover the cost of owning my current residence…and when taking depreciation into account as well, it would be a disaster for my net worth for a long time.
The 2004, 3br townhouse w/tandem garage I am renting is costing me $1800/month all-in…while owning this unit would cost $3000/month. Take my $1200/month premium for ownership and add it to the falling equity on the principal of the loan…and it would become VERY expensive to own this place.
We simply cannot ignore these facts, and we have to admit that this is extremely bad for most RE markets in Canada. The sentiment towards RE has shifted…we are now past the peak and are heading downwards.
We need to return to a price where people can afford to have shelter and still consume modestly without having to borrow for this consumption. Otherwise we can fully expect our economy, and any economy to slow now that credit is rapidly contracting globally.
While you may be correct that selling a home with renters is more difficult than selling a house that doesn’t have renters, your examination of the “numbers” is a disaster of statistical analysis.
There are a few problems, but the most obvious is simply: perhaps people with renters are simply less likely to list their house.
If you had provided numbers of the PROPORTION of listed houses with and without renters that sold I would be a lot more convinced.
Ahhhh, never mind. I just reread your post and see that you did include those numbers. My apologies. More of a disaster of reading ability on my part.
***No problem. Thanks for re commenting.
Sheldon
Michael, we can adjust to higher RE prices as long as we have our income range high enough.
When I moved here to Edmonton in 1989, you could buy a good condo or townhouse for $40,000 or less.
And the city had just as many renters as it has now.
People earned $20,000-32,000 and did not find it attractive to buy a property, they decided to rent.
In the past few years, many of us got a nice raise in pay because of higher RE prices and fuel cost.
Should gasoline and RE prices retreat significantly in the future
so would our paycheque.
Do you think, you can hold on to your $80,000 job and have your townhouse devalued to $120,000 ??
I don’t think so.
In today’s world, I personally prefer high wages ( even higher, than now) and relatively high RE prices. I was really ashamed (amazed) when I read it in the Edmonton Journal, a while ago, that in Denmark, the meat packer workers make $43 per hour, I guess we have room to grow here( wagewise that is)
I like Sheldon’s advice. Everyone with investment properties should skid their renters and all panic, en masse, and sell their homes before they get any more of that negative equity thing going on.
Then, the already fragile market will get flooded with a herd of panicked sellers.
My take? Folks with investment properties – and there are probably more of them than we’re banking on – are renting in hopes this slump is just temporary and not a permanent correction. They’re “letting it ride” so to speak.
My advice? If you’re HELOC’d to death and your investment property is bleeding money, don’t be a fool and ride it into bankruptcy. Skid the renters, price it right and dump it – and learn from your experience. If you’re doing okay and had decent equity or cash down on the investment property and thus have decent renters because you can afford a more competitive rent (i.e. better than a $2000/mo rent=mortgage payment) then why be pushed into selling?
Sellers situations are all very very different. There is no “right answer” – but answers that best suit individual sellers.
Cheers,
E-town
***I didn’t say skid the tenants. My point was that sellers with tenants have to be realistic about the salability.
Of course you are correct that every seller’s situation is unique and all the factors have to be considered.
Sheldon
Karl,
Simply having our wages increase from $20,000 to lets say $80,000 while house prices increase is not a linear relationship of affordability. When townhouses in 1989 were worth $40,000 while people were making $20-32,000 year, it meant your home was between 1.25x to 2x your annual gross income. Having that same townhouse at $400,000 when your wage is at $80,000 would be a ratio of 5x annual income.
You also neglect to understand the effect that a higher percentage of your gross income for housing will have. This detail alone would put your 1989 mortgage at 24% of gross income vs. your 2007 mortgage at 38% of your gross income; $40,000 vs $400,000 over 35 years.
The cost of goods today is also quite higher than 1989, which has a further effect of reducing disposable income and lowering our standard of living; “luckily” we have been able to make up the difference by borrowing for consumption in this credit bubble which is now unwinding.
So Karl, for you to prefer your higher wages with relatively high RE prices with the misguided perception that you are better off for it is simply incorrect. Ignoring these details that ultimately determine your standard of living and disposable income demonstrates a common misunderstanding and unawareness of many people who do not understand the impact of higher RE prices and higher costs of living in general.
This type of thinking is why our Federal Government thinks that propping-up the prices of RE will be a good thing, when RE prices need to fall back in line with affordability. Any attempts to keep RE prices high WILL FAIL, just like all of the failed attempts in the US. Going forward, more and more people will simply be unable to make their mortgage payments, and even if you keep your job and your house here….we will all pay for the shady and misguided economic policy of our government in reaction to current and future difficulties in our economy.
Here’s something you are all neglecting to take into account:
Every developed country in the world is flooding the system with excess “liquidity”, which means pumping money. Putting the money printing presses onto TURBO.
This means that inflation, and possibly hyper-inflation, is just around the corner.
What does this mean for house owners? What does it mean for renters? Best to think hard about this one because it is going to affect you very directly.
Hyper-inflation could make the value of a house double within a year. Same with rent. And then double again in 6 months. In a case like this you will only be protected from poverty by owning your residence. The renters will be at the mercy of the value destruction of the currency.
Please read as much as you can about what the governments are doing to halt the threat of deflation. It’s going to get crazy in the next few years. Protect youself by holding something of enduring value.
This goes for you too, E-Town.
Whee! Three cheers for hyperinflation!
That would be the dream outcome for the middle class, at least everyone who owns real assets, especially those who are leveraged to the hilt. It would sure make me happy, I’d love to have my mortgage paid off in a year or two.
I don’t think it would make E-town very happy though. And honestly it wouldn’t be so great to reward all those idiots out there who way overextended themselves to buy houses they couldn’t afford.
Still, it could happen. But I’ve seen recent articles talking about the US credit bubble and how most recently, the US was creating about $8 in new credit for every additional $1 in GDP. Now that the credit bubble is deflating, it is having a very deflationary effect. Governments around the world are going to have to print A LOT of money to counter that effect, and so far, I don’t think they are close.
Still, the US government debt is getting mighty scary. If investment rating agencies ever wake up to that and decide to reduce the government’s triple-A bond rating, then watch out, all bets are off and hyperinflation here we come.
GM has an excellent point. There is a lot more uncertainty in the markets than they are letting on. Hyperinflation is far from a hypothetical at the moment. It will be interesting to see if the US and the rest of the world can turn this ship around in the next few months with new leadership or if we are indeed headed for some hairy times.
GM has an excellent point. There is a lot more uncertainty in the markets than they are letting on. Hyperinflation is far from a hypothetical at the moment. It will be interesting to see if the US and the rest of the world can turn this ship around in the next few months with new leadership or if we are indeed headed for some hairy times.
Be careful what you wish for. Hyperinflation will push interest rates through the ceiling. Try paying off your mortgage at 18%.
Re: Hyperinlfation
Gee I thought us bears were doomsayers.
You bulls are still praying for hyperinflation so you can ride the speculation wave to early retirement, and call overleveraged homeowners smart heros and working stiffs saving for retirement fools. Cash is trash. Use other people’s money to make money – not your own. Because you’re richer than you think. And real estate always goes up. And homes are investments now, so good in fact it’s the only one you need to make. In fact, with hyperinflation you will starve and die off if you don’t own a home.
So go out and buy one now – even if it means spending 75% of your net income on housing. Because when hyperinflation hits you’ll be thanking them for giving you the one piece of financial advice that you needed to survive the coming “hyperinflation age”.
Wow. You guys are amazing. And your agenda is clear. Keep people believing that home ownership is not only a good idea buy imperative – and must be done at all costs. Brilliant!
But I would not stop at stocking up on houses as commodities. I would also build a bomb shelter in the woods stocked up with food gas and ammo. Because when the 70% of the “working idiots” who foolishly tried to save for retirement are starving to death while the over-leveraged HELOC crowd become the nouveau rich of the “New World Financial Order” some folks might resort to kidnapping or perhaps even full blown civil unrest. The gun registry failed boys. Alberta has more guns than most small countries.
Yep. It’s going to be Post WWI Weimar republic all over again. People burning money in their stoves because it’s cheaper than burning oil.
Yeah, it could happen. So why do I get the impression some of you are almost cheerleading it?
If people stop being sheep, hyperinflation (and the following crashes) could be a thing of the past. But you guys are predicting “infinty and beyond” inflation hey? When everything costs infinity dollars and money is worth nothing and only people with hyperinflating assets can afford to exist?
Remember when some scientists said the new particle accelerator would create a mini black hole that would zip to the earths center and suck the earth, solar system and entire Milky Way galaxy into it?
Yeah – my money is on that happening first.
A lot of “Bull Fantasy Island” going on here. Fun to watch.
The end is near! Except for capitalists and overleveraged homeowners! Better PANIC and start a buying frenzy again because too many guys are eating Ramen noodles these days.
You guys are priceless. No, I mean literally: priceless.
Cheers,
E-town
I hear you about tenanted properties being a pain to sell. I have a listing right now (address withheld) that I am about 80% sure I could have sold in the first week had I been able to get access. BUT the tenant was not cooperative and it is still on the market. Very frustrating.
That said! I have sold tenanted properties where the tenants have been a dream to deal with.
Give the choice I always prefer an owner occupied or vacant furnished suite to sell.
E-town,
For everything else, there is Master Card!!
You are hurting people’s feeling!
I agree with GM.
I always wanted to be a millionare!
He-he -eh-eh
Hyper-inflation?
Every government in the world is fighting tooth and nail to prevent deflation.
Yes. And they’ll succeed eventually. The US has already thrown 7.7 trillion dollars at the problem and it hasn’t jump-started the economy enough yet. So they’ll throw even more at it until it works. Eventually it will work. Then the hyperinflation will be upon us. Then guys like E-Town, bitter that they didn’t buy when they had the chance, will be complaining about us homeowners, but from a different angle this time.
So go ahead E-Town. Stay in your mommy’s basement until all of this blows over. I really don’t care. As for me, I’m prepared for the future in my home.
Hei GM.. are you a homeowner? Did you pay your mortgage? After you pay it you can come here and say you are a homeowner.
Ah, yes. The “bitter renter” and “you live in your mother’s basement” arguments. Grade school level arguing style from someone with a grade school understanding of investing.
“I signed up for a mortgage. Yup. Uh huh. Now I can retire”.
And of course you’re daydreaming of hyperinflation and economic armaggedon. Well, duh. That’s the only way your home equity ponzi scheme is going to pan out.
But hey, those idiots down south who failed at this game are just dumb, right? Not like the smart savvy Canadian “home investor” all ‘edumacated’ from watching HGTV who is going to refinance their way to financial freedom while the entire planet’s housing ponzi scheme comes crashing down like a bad card house.
Diversification and dollar-cost-averaging is lost on the Canadian RE investor who, well, only understands the term “equity” as long as it means “free money”.
Good luck with your “eggs in one basket” and “realestate always goes up if you don’t count 2007 and 2008″ approach to investing though. If the world does end with a black hole of hyperinflation, you’ll need to spend your entire homes worth on tank of gas. Didn’t calcumalate that far ahead did ya? Right.
That’s right. “Homeowner” or not (I call us tenants of the bank) hyperinflation is only going to make about 0.5% of the population have about 99.5% of the wealth. And nobody – home equity or not – will be able to afford anything. Money (equity or cash) will be worthless.
So be very careful about what you’re praying for.
Cheers,
E-town
All this hyperinflation talk is insane. It’s kind of disgusting that people are cheerleading this sort of thing. Sounds kind of biblical. Anyway…Should’ve bought when I had a chance eh? Problem is I’m a young guy and I’ve never had a chance. When I got out of school the prices shot up, leaving me in the dust. I’m excited that prices are coming down and if they continue to do so I might be able to purchase a home. I started checking out this site hoping to read some good news (yes dropping prices is good news to me, sorry guys) but I keep coming back for E-town .That dude should have his own radio show.
Cheers, E-town
Lando
Hey GM,
Prepared for the future in your home…..lol. Sell your house and buy a farm. You can’t eat shingles when the s**t hits the fan. In the last depression (not saying we are going to have one for sure), many people could at least go back to their family homestead and have their basic needs met. Well not many of us have that option anymore. Enjoy your house and the wealth it will bring you GM. I don’t know if E Town has a house or not, but he seems to be as intelligent as anyone else on this blog. I have a house, but I certainly don’t see it as my ticket to wealth and future security. It is a box in south west Edmonton where I lay my head at night. I wouldn’t be too proud of your house and the sense of accomplishment it brings. Any relatively advanced primate could have qualified for a mortgage over the last few years. Not being in a house right now may be more a matter of common sense than a failure to qualify. I bought in June…..kind of wish I was in my mom’s basement right now.
One more thing,
Kudos to dawson for pointing out that most of us are not actually homeowners though we are proud to say so. Most of us don’t own our nice cars either (buying it with a HELOC doesn’t count). Let’s face it. Soon many homeowners will be more poor than the lower renting class. Easy come easy go. My hat goes off to those who resisted the HELOC temptation. I bought a new car in 2005…..it made me feel special for a few months. In the end I realized it wasn’t really mine and I let it go (at a loss of course). Man, life lessons don’t come cheep. Learn from me Lando.
Dawson:
Homeowner: a) One who owns their home outright, with no liens or loans against the title. (See: E-towns frugal old parents)
b) One who is about to spend 40 years with their banker as their landlord and pay triple for an appreciating asset that is really just a commodity that *might* triple in value over the course the annuity. (See GM and Karl) Also known as a “forced savings plan” for people who need to be threatened with homelessness before they will save a single dime.
Wow. If all my investments were *that* good I’d have to hang myself or just do Hara-Kiri and save some face.
Cheers,
E-town
Hey GM, I think it is definitely worth bringing up the threat of hyperinflation because it could happen. It would definitely hurt renters, but would also hurt heavily mortgaged homeowners. As ‘really’ pointed out, interest rates will chase inflation and paying 18% on a large mortgage would be disasterous. Lets face it, wages will drag behind everything else in the inflation race which will hurt everyone.
If anyone is acu
Lando:
You’re not alone man – there are a lot of people in your situation. Many didn’t buy and feel locked out. Some bought in 2003 or 2004 and are very happy people – their decision to buy was a good one, whether it was dumb luck or based on (very correct) predictions that Edmonton real estate was relatively undervalued and was bound to shoot up. Some decided to wait but folded under the pressure as prices kept surging and bought at or around the peak in 2007. Some of these folks, by their own admission, are not sure they did the right thing. Some got into investment properties and won – while others are carrying 2 or 3 properties using every ounce of credit available to them, are looking at serious negative equity, and are having trouble finding renters. Lando, go to works, do a good job, save some money, spend some money and enjoy your life. Think about where your money goes – do a budget. Think about alternative housing arrangements – getting a house with friends and doing an upstairs/downstairs thing. Or consider buying a house with renters in the basement and live upstairs for a few years. The days of 1st time buyers getting a middle-class bungalow for their first home could be well gone. My parents bought their bungalow for $23K in the late 60′s and paid it off in less than four years – on my father’s teacher salary alone. Try that now on a teacher’s salary. Try that NOW on just one salary!
There are a lot of people who think that affordability of housing for average Albertans will ultimately dictate prices, and where the market is headed. Others believe strongly in these prices, and that homeownership is simply only for those that can afford it. But who can afford it? We had guys on the forums that had combined incomes with spouses/partners in the $110-$120 range that claimed they could not afford a basic house! Some folks surely have lifestyle choice issues that would preclude them from paying a large mortgage. But others swear up and down they are living well within their means and still have too much living expense here to afford a basic house. Well, some have suggested that perhaps 1st time buyers may need to enter the market in a condo or townhouse. The good news there is that condos and townhouses seem to be correcting more than homes, and rightly so – a condo should not BE 90-95% the cost of an average home, but speculation caused price-runs on condos in this town were simply insane. Not to mention there are reports that MANY (likely a majority) of buyers for new condos were speculators – who are now facing a rather serious equity loss as soon as they put the key in the door. Some of these folks might have to sell if they can’t handle the carrying costs. Investors buying at today’s prices are going to provide some very stiff competition for rental rates, and this competition will be fierce if further layoffs come down the pipe and fewer well paid trades are available to handle higher rents on investment properties.
So my advice is stay objective, don’t panic, save money for a down payment, sacrifice electronic toys and lake toys and winter toys and bling vehicles in the short term for a shot at owning a home in the long term. In my opinion, folks looking to buy should ask themselves how much they value ANY of the following things MORE than having their own home:
1) Bling-bling status vehicles
Latest consumer electronic gizmos
2) Eating out (this can be HUGE)
3) Smoking
4) Drinking
5) Gambling
6) Exotic trips, vacations
7) Bling-Bling status fashions
I’ve done the math – eliminating just a few of these lifestyle choices can mean the difference between the cost of renting and the cost of owning. And with some of these, quitting them have very attractive mental and physical health benefits.
There is good news here Lando. There is still a boatload of work to be done around here and lots of jobs to be had. Don’t feel like you’re “missing out” on something – just live well and perhaps wait just a bit longer until the financial repercussions of the stock market crisis and global housing bubble make their way down the chain. If you can’t afford a home right now be happy that you’re not living in one. It’s better to be a renter living within your means than a house-poor “homeowner” stressed out and a paycheck away from bankruptcy and foreclosure.
Cheers,
E-town
Lando:
You’re not alone man – there are a lot of people in your situation. Many didn’t buy and feel locked out. Some bought in 2003 or 2004 and are very happy people – their decision to busy was a good one, whether it was dumb luck or based on (very correct) predictions that Edmonton real estate was relatively undervalued and was bound to shoot up. Some decided to wait but folded under the pressure as prices kept surging and bought at or around the peak in 2007. Some of these folks, by their own admission, are not sure they did the right thing. Some got into investment properties and won – while others are carrying 2 or 3 properties using every ounce of credit available to them, are looking at serious negative equity, and are having trouble finding renters. Lando, go to works, do a good job, save some money, spend some money and enjoy your life. Think about where your money goes – do a budget. Think about alternative housing arrangements – getting a house with friends and doing an upstairs/downstairs thing. Or consider buying a house with renters in the basement and live upstairs for a few years. The days of 1st time buyers getting a middle-class bungalow for their first home could be well gone. My parents bought their bungalow for $23K and paid it off in less than four years – on my father’s teacher salary alone. Try that now on a teacher’s salary. Try that NOW on just one salary!
There are a lot of people who think that affordability of housing for average Albertans will ultimately dictate prices, and where the market is headed. Others believe strongly in these prices, and that homeownership is simply only for those that can afford it. But who can afford it? We had guys on the forums that had combined incomes with spouses/partners in the $110-$120 range that claimed they could not afford a basic house! Some folks surely have lifestyle choice issues that would preclude them from paying a large mortgage. But others swear up and down they are living well within their means and still have too much living expense here to afford a basic house. Well, some have suggested that perhaps 1st time buyers may need to enter the market in a condo or townhouse. The good news there is that condos and townhouses seem to be correcting more than homes, and rightly so – a condo should not BE 90-95% the cost of an average home, but speculation caused price-runs on condos in this town were simply insane. Not to mention there are reports that MANY (likely a majority) of buyers for new condos were speculators – who are now facing a rather serious equity loss as soon as they put the key in the door. Some of these folks might have to sell if they can’t handle the carrying costs. Investors buying at today’s prices are going to provide some very stiff competition for rental rates, and this competition will be fierce if further layoffs come down the pipe and people with $2000/mo to spend on rent become fewer in number.
So my advice is stay objective, don’t panic, save money for a down payment, sacrifice electronic toys and lake toys and winter toys and bling vehicles in the short term for a shot at owning a home in the long term. In my opinion, folks looking to buy should ask themselves how much they value ANY of the following things MORE than having their own home:
1) Bling-bling status vehicles
Latest consumer electronic gizmos
2) Eating out (this can be HUGE)
3) Smoking
4) Drinking
5) Gambling
6) Exotic trips, vacations
7) Bling-Bling status fashions
There is good news here Lando. There is still a boatload of work to be done around here and lots of jobs to be had. Don’t feel like you’re “missing out” on something – just live well and perhaps wait just a bit longer until the financial repercussions of the stock market crisis and global housing bubble make their way down the chain. If you can’t afford a home right now be happy that you’re not living in one. It’s better to be a renter living within your means than a house-poor “homeowner” stressed out and a paycheck away from bankruptcy.
Cheers,
E-town
Spence:
You know, humility is a rare thing in Alberta these days – so many folks are adapting this movie star attitude especially the “nouveau rich home-equity crowd” and “nouveau realestate investors”. But to come on here and be humble and share your personal information with others so they can learn from your experinces, in my personal opinion, is a very respectable and humble thing to do.
Some folks around town here would do well by learning from your example.
With Respect,
E-town
hyper inflation ?
How in blue jeans did that topic get started?
I thought the world was worried about deflation?
Only in Alberta could someone think of that.
Brent,
Deflation now, hyper inflation later. Timing, unknown.
Thanks for the tips E-town. Eating out is definately a major vice of mine, as for the rest I think I’m doing okay. If prices drop just a teeny bit more I’ll be more than happy to eat noodles and canned beans in my new house. I suppose I could afford a condo right now, ( Well when my wife is done with nursing school anyway, Two weeks baby! )I am however a little scared of being stuck in a condo for the rest of our lives. It kinda seems like new houses are a better deal than pre-owned right now, but I’m leary of shoddy construction. Basically when it comes to buying a home I really don’t know my ass from a hole in the ground. I feel solid in my career ( I work for DND )even though the pay isn’t tarstruction good. I think that next year (unless What Sheldon and Sara say is true and prices climb again) I will take the plunge.
Scared Shitless:
Lando
I still see a ton of pickup trucks and baseball caps in Tarberta as I did before but I’m not seeing the Quads in the back anymore. Don’t know if it’s shoulder season between Quad and Snowmobile or if it’s a sign of the times where the toys are the first to go.
Lando, there’s no rush to buy. Believe me, buyers are going to get better deals in the coming year(s)
I don’t think hyper inflation is doing to save over leveraged homeowners…you may be able to sell your house for a billion dollars, but a loaf of bread could cost thousands…I believe a loaf of bread is a few billion in Zimbabwe which is currently hyper inflated (another example is post WWI Germany where wallets were replaced with shopping carts full of bills. So in terms of purchasing power hyper inflated prices will be of no benefit. SAvings would also be of limited benefit.
Having said that, unlike most of the G-7, Canada isn’t currently injecting massive amounts of liquidity into the economy, and hopefully avert the need to.
“you may be able to sell your house for a billion dollars, but a loaf of bread could cost thousands…”
Exactly.
But save your breath AF. You’re dealing with Oilberta Uber Capitalists who think that signing up for a mortgage makes them savvy investors that outsmarted the rest of the general population.
And now they daydream of financial apocalypse with a VERY specific outcome where they are the only survivors.
They do have a point though. Many scientists say that only the cockroaches will survive nuclear anhilation. Perhaps similar logic applies to financial anhilation.
Cheers,
E-town
Sorry: it’s “annihilation”
Can’t spell this morning.
Have you ever tried asking your tenant to clean up their unit in preparation for a showing? Especially a tenant that doesn’t want to move out?!
Tenanted units often show poorly. It’s hard to envision yourself living happily in a home with someone else’s dirty laundry, smelly garbage and day old dishes spread out around the place!
When we’ve opted to sell one of our properties, even in a hot market, we’ve found it’s much easier to boot the tenant out, fix up the unit a bit and then list at lower than market price for a quicker sale (rather than lose money every month on a vacant unit, we’ll take a hit on the sale price).
That said, right now, even a lower than market price might not sell your place, so unless it’s costing you a fortune each month, I’d hold onto it. Before you know it the skies will be blue again and it will sell.
Interesting stats!! It was my first time to your blog… I’ll be back!
E-town,
You bulls are praying for hyperinflation? I’m not sure who ‘you bulls’ are. Not me. I was just responding to GM’s comment.
In fact, if I were to make a bet on this, my guess would be that deflation is far more likely at this point than hyperinflation. But that doesn’t mean it won’t happen. You currently have almost all the governments in the developed world pumping massive amounts of cash into the financial system. Sure, there’s been a lot of credit getting destroyed out there, but if you create too much new money, pretty soon you’ll have a situation with far too much money chasing after far too few goods.
Now the US is in an interesting scenario. You’ve got a country that has for a long time been way overspending (both gov’t and individual households), and now that those problems come home to roost, their solution is to spend more.
Nobody can keep on that path forever. And if the US doesn’t smarten up soon, then one day, their creditors will smarten up and decide not to loan them any more money. Or take all their money out. Then the US gov’t will have no choice but to print more and more money, because they would not want to admit they are bankrupt. And anyone who previously believed that the rest of the world economy has decoupled from what happens in the US has already been proven wrong recently. We’d all be affected. As the world’s reserve currency, hyperinflation in the US dollar would almost surely be exported to all of us.
Now there was another comment here on how the gov’t would raise interest rates to combat such a scenario, and you would have 18% mortgages. First, that wouldn’t make much sense, since it would be the government’s own printing of money that’s causing the problem, and jacking up interest rates to solve the problem would do next to nothing. Second, it really wouldn’t make houses less affordable for existing homeowners, because you can jack up interest rates as high as you want, anyone on a fixed term fixed rate will be able to pay off the entire loan at the next renewal period for essentially pennies. With hyperinflation, both debt and cash assets go to zero very very fast.
Anyways, I’m not predicting this is going to happen, but it sure seems like this topic has frayed some nerves. Look at it this way, as long as you spend less than you earn, at the end of the day, you will have some extra money left to invest. You can invest it in real estate and buy shelter. You can invest it in the markets. You can be a hyperinflation freak and buy up gold and other precious metals. Or you can sit on a big pile of cash, either paper bills or some magical electronic number in a bank account.
Right now, it seems like everything is going down in price, and people sitting on a pile of money are doing ok. But they didn’t do so great a few years ago, when the relative value of their money fell compared to the price of real estate. And heaven forbid we have a hyperinflationary scenario, because then anyone holding just cash will find out how quickly a little piece of paper or electronic number can become worthless.
Anyways, let’s hope that neither deflation or hyperinflation is here to stay, perhaps things can settle down, we can go back to some nice modest real estate price growth that reflects actual increases in people’s earning power, and everyone can be happy. Even E-town.