Re: Cracks Becoming Clearly Visible Now
Just when one thinks it can't get any crazier, it does. Such is the behaviour that epic bubbles are created from:
"...Plasterer says they were prepared for the hot market with a budget that was "a bit ridiculous."..." [The Vancouver home shopper's equivalent of Draghi's "whatever it takes"?]
She had to invest "a lot of money" and take out a large mortgage to do so, but five of the homes are now being rented and she expects that the income will become part of her pension.
"I'm hoping that as it goes along, it will start to pay in instead of me paying out," King says..." [Used to be a time when a banker would act as a source of sober second thought to prevent one from becoming overindebted. Now putting a grandmother in over her head leads to a bigger bonus. Hope is rarely a good investment strategy. Neither is concentration in one asset class highly dependent on excessive leverage and cheap credit - but then, Vancouver "is different" so what do I know ]
"...Chi recently purchased a pre-sale condo in one of the dozens of new developments being built around Metro Vancouver.
Like many first-time home buyers, he had some help with the down payment from his parents and grandparents.
A recent survey by the Society of Notaries Public of B.C. showed that 57 per cent of first-time purchasers got a hand with their down payment, and that most of those received the money as a gift from their parents.
Chi's two-bedroom unit is scheduled to be completed in spring 2017. In the meantime, he has moved back in with his parents to save some cash.
He says he's happy to spend some time with his folks but misses his independence..." [Difficult to be "independent" when one is dependent on the Bank of Mom and Dad - I expect there are few parents indeed, especially in an Asian family, that will be able to resist the urge to use this financial obligation to exert influence over their adult children.]
And here's another story of Canadians doin' it to themselves to add to the collection. From the Greater Fool blog:
Originally posted by santafe2
View Post
Just when one thinks it can't get any crazier, it does. Such is the behaviour that epic bubbles are created from:
"...Plasterer says they were prepared for the hot market with a budget that was "a bit ridiculous."..." [The Vancouver home shopper's equivalent of Draghi's "whatever it takes"?]
"...Instead of looking for the perfect home, they have been looking to spend around $1.3 million on a lot and then another $500,000 to build a house..." [Unless it's a large farm or ranch I have never heard of anybody paying almost 3x for the land as the building improvement they plan to put on it; that alone should be a warning sign.]
"...King purchased all the townhouses in July for nearly three times her original budget.
She had to invest "a lot of money" and take out a large mortgage to do so, but five of the homes are now being rented and she expects that the income will become part of her pension.
"I'm hoping that as it goes along, it will start to pay in instead of me paying out," King says..." [Used to be a time when a banker would act as a source of sober second thought to prevent one from becoming overindebted. Now putting a grandmother in over her head leads to a bigger bonus. Hope is rarely a good investment strategy. Neither is concentration in one asset class highly dependent on excessive leverage and cheap credit - but then, Vancouver "is different" so what do I know ]
"...Chi recently purchased a pre-sale condo in one of the dozens of new developments being built around Metro Vancouver.
Like many first-time home buyers, he had some help with the down payment from his parents and grandparents.
A recent survey by the Society of Notaries Public of B.C. showed that 57 per cent of first-time purchasers got a hand with their down payment, and that most of those received the money as a gift from their parents.
Chi's two-bedroom unit is scheduled to be completed in spring 2017. In the meantime, he has moved back in with his parents to save some cash.
He says he's happy to spend some time with his folks but misses his independence..." [Difficult to be "independent" when one is dependent on the Bank of Mom and Dad - I expect there are few parents indeed, especially in an Asian family, that will be able to resist the urge to use this financial obligation to exert influence over their adult children.]
And here's another story of Canadians doin' it to themselves to add to the collection. From the Greater Fool blog:
She had a little trouble fitting under the edge of the table. So, when are you due, I asked? And Tracy said, “early March.” Beside her Alvin looked proud, but there was a soupcon of terror when she added this would be the second of “at least three.”
Then I learn they bought a townhouse seven months ago, paying a little less than six – cheap, but expected for a ‘developing’ part of town. It’s small, though, no yard, tough hood. Now they want a detached on a better street for a growing family, and have no illusions what that’ll cost. A mill. Alvin makes one-ten, Tracy makes babies. They have $125,000 equity in their current home. And, I probe, what else do you have?
That turns out to be five thousand dollars, in a savings account. So, in their mid-thirties, I judge them to be financial illiterates. You must realize, I say, you’re going over a cliff?
They don’t. The reason they’re talking to a financial guy the day before Christmas is so I can make it all work for them. Like Jesus. Loaves and fishes. Besides, TNL@TB told them that with Alvin’s salary they can borrow at least $600,000. Add in the existing equity, and maybe a loan from the Bank of Mom, and how hard can it be to get what they really want? In fact, that’s all they want. Three babies who will need college degrees and no pension plans between them, be damned. That house, it’s an obsession.
As you might imagine, T&A left disappointed. They probably hate me. And all I did was call them myopic, irresponsible fools who need to get real, budget and live within their means. Imagine.
But these two aren’t unusual. It looks like 2016 has the potential to make everyone understand how many couples around us are on the verge of blowing up. The overwhelming reason is cheap money. As reported days ago, the number of households with debt levels equal to 500% of what they earn has increased from just 3% in 1999 to 11% in 2012, and likely 15% today. That means between 500,000 and almost a million more people are on the edge.
A study by CD Howe tells us more about who they are: they generally earn less that the average; they’re younger; and they live in Vancouver or Toronto. Oh yeah, and never forget that in Canada 20% of all folks with mortgages have less than $5,000 in financial assets to deal with any curves life might throw at them. One in ten, unbelievably, have only about a thousand bucks – even though they may “own” a house worth hundreds of thousands, and a fat mortgage...
Then I learn they bought a townhouse seven months ago, paying a little less than six – cheap, but expected for a ‘developing’ part of town. It’s small, though, no yard, tough hood. Now they want a detached on a better street for a growing family, and have no illusions what that’ll cost. A mill. Alvin makes one-ten, Tracy makes babies. They have $125,000 equity in their current home. And, I probe, what else do you have?
That turns out to be five thousand dollars, in a savings account. So, in their mid-thirties, I judge them to be financial illiterates. You must realize, I say, you’re going over a cliff?
They don’t. The reason they’re talking to a financial guy the day before Christmas is so I can make it all work for them. Like Jesus. Loaves and fishes. Besides, TNL@TB told them that with Alvin’s salary they can borrow at least $600,000. Add in the existing equity, and maybe a loan from the Bank of Mom, and how hard can it be to get what they really want? In fact, that’s all they want. Three babies who will need college degrees and no pension plans between them, be damned. That house, it’s an obsession.
As you might imagine, T&A left disappointed. They probably hate me. And all I did was call them myopic, irresponsible fools who need to get real, budget and live within their means. Imagine.
But these two aren’t unusual. It looks like 2016 has the potential to make everyone understand how many couples around us are on the verge of blowing up. The overwhelming reason is cheap money. As reported days ago, the number of households with debt levels equal to 500% of what they earn has increased from just 3% in 1999 to 11% in 2012, and likely 15% today. That means between 500,000 and almost a million more people are on the edge.
A study by CD Howe tells us more about who they are: they generally earn less that the average; they’re younger; and they live in Vancouver or Toronto. Oh yeah, and never forget that in Canada 20% of all folks with mortgages have less than $5,000 in financial assets to deal with any curves life might throw at them. One in ten, unbelievably, have only about a thousand bucks – even though they may “own” a house worth hundreds of thousands, and a fat mortgage...
Comment