Chinese Homebuyers Spreading Wealth Make Vancouver Pricier Than Manhattan

10 posts

Broseph
Let's go to school for economics, find out that Keynesian econ is wrong in reality, give an austrian-like explination for boom and bust, then denounce austrian economics.

The government, the banks, people in finance or good with finance and armchair economists know that the top is in, and the ride only goes down from here.

The only groups of people that don't know the housing market is crashing are two groups of people:

1) people heavily invested in housing - they aren't willing to believe the repercussions of it due to the logic demonstrated in the quote above
2) the media - they might very well know, but the news outlets don't make money telling people news. they make money telling people what they want to hear. What they want to hear is that their house is the best investment vehicle and that canadian banks are prudent.
Broseph

More from Garth about the GTA/416 region:

This can't be happening. We're not stupid like Americans. Right?

http://www.greaterfool.ca/2011/08/23/surprise-3/
Team Zissou

Josip - what are average incomes in these areas?

People are just crazy. If you've got a $500k mortgage you will buy the house three times, then there's taxes, maintenance, depreciation. Also, it is dangerous to assume your income will always rise. These folks have one bad year and they are in a hole they will never get out of. They always assume they can unload the house if they have to.

President Camacho
You'd buy the house three times if you've got a 30 year mortgage at 9.5%. Still, even at a good 30 year interest rate you'll basically wind up paying for it twice over the life of the loan. Even considering time value of money with REAL inflation rates (which are higher than gov't advertises) that's still a lot of money wasted.

A 15 year mortgage has a much more reasonable interest repayment (not to mention lower rates)... as a rule of thumb you should not be taking out a $500,000 mortgage unless you can make the payments on a 15 year term. But most of these people with $500k mortgages cannot, and that is part of the problem.
Broseph
Team Zissou
Broseph
http://www.news1130.com/news/local/article/276897--canadian-debt-levels-continue-to-rise

and this from january: http://www.theglobeandmail.com/repo...ld-debt-weighs-on-us-recovery/article1877854/
WE'RE #1!!!! CANADA! CANADA!
Broseph

Excellent post by Garth today along with some bad news and good news.

http://www.greaterfool.ca/2011/09/15/the-news-4/

First he speaks of the falling prices and the surge of listings in the GTA and other areas, along with anecdotes.

He then talks about the disconnect between the media and what most people in or interested in real estate know.

Then something (IMO) VERY encouraging:

This is very good. As Canada goes through the mess that the United states was dealing with 4-5 years ago, we will already be talking about the role of central banking and fiscal policy in the housing boom and subsequent bust. This is going to be the focus, as the consensus already is that "Canada doesn't do subprime" and "Our regulations are better than American regulations". This leaves little or nothing left to blame but the actual culprits, being monetary and fiscal policies. Imagine if the bankers and politicians here start to realize that messing with interest rates leads to business cycles? That would be a neat turn of events. Of course, that's too Austrian for Toronto and Quebec, so such views will never get broad support in central Canada.
Team Zissou
Global Squash Champion

That is a good thread. What the upbeat ones don't realize is how much the structure of production gets distorted by rising prices. Margins are always thin as the factors of production get bid up along with the first order goods. So when a $1.5M house gets marked down by 'only' $200K, then $400K, somebody is losing their shirt.
Broseph
Right, like the producers and providers of those goods. Notably, real estate agents, land developers, construction workers and those who provide materials.