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COVID and the housing market
- Thread starter mimico_polak
- Start date
It seems that this is now a sign of the times.
My parents made the same earnings as I do now, yet bought their house for $185k in 1982. Their mortgage rates were high for a few years but they saved up their retirement fund easily once rates leveled off and they paid off that house in 20 years and still had money to buy a cottage and an investment condo. That same house I grew up in is now $2mil, but earnings haven’t kept pace. So it might be reasonably expected that someone buying a home like that is hoping to sell it in 15-20yrs and retire off any profits, because they don’t have as much money left over for building a retirement portfolio or even buying that cottage or investment condo.
Mad Mike
Well-known member
If I were in group b, I’d take my family to a place where I could find decent work and housing that fits my income.
There are places all over Ontario that need workers. Try Sudbury, Timmins, Sarnia , Kingston. The pics below are all under $299k with $60k down mortgages would be about $2200.
Those cities also have starter homes at $150k. 15k down and $1200/mo.
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With 20% down on the first house, we will be at close to 30 years total of mortgage payments before the mortgage on the second (and probably final upgrade) is clear. 10 years of mortgage payments invested in something else would be a huge number.
Mad Mike
Well-known member
You probably will have to.
I have 3 kids, 1 owns his house outright, two rent. They all make decent money. I couldn’t convince my older son to jump in when he could - 2 years ago $300k got a starter in Keswick or the Shwa. His investment adviser suggested waiting and pouring funds into the stock market. He did and returns have been off the chart. That decision cost about $250k so far.
#3 just entered the workforce, she’s planning to do some rough FIFO work to make bank for a couple of years.
They will all get there, it won’t be easy, it won’t be without sacrifice and maybe some help from dad. It will be done without whining that somebody did this to them.
Very true. When we did our reno we didn't touch the basement. Now we are thinking about doing it and that would mean either tacking it on to our current mortgage or drawing from our investments to cover it and then paying the investment back.
Valid point but how long has this been going on?
A friend got married 30 ish years ago and they were looking to buy a house. "Man it's crazy. $200K for a house. It's a rip off." They finally found something in that range but prices kept climbing and suddenly there was a smile on his face when his $200K turned into $225K then $250K.
$500 in 1972 is equivalent in purchasing power to about $3,249.95 today, an increase of $2,749.95 over 49 years. 6.5 times 1972 numbers
A $20,000 Toronto house in 1972 is, I'm guessing, about $900K. 45 times 1972 numbers. Choke!
What happens if you're nice?
I know a couple that has an investment condo as well as another one they live in. They've rented to the same lady for 20 years and since she has never given them any trouble they have never raised her rent. I'm pulling numbers out of the air but if the rent on a $200K condo was $1K a month 20 years ago and the building has rent controls that firmly lock the rent rate to the unit the condo isn't worth market value to another investor. Why pay $700K for a condo that doesn't get 2021 rental income?
Honestly it also does a disservice to the renter as she might not be prepared for reality should there be a change. IE the owner sells the unit to a buyer that will occupy the unit. Then she finds that another similar unit in the same building has double the rent.
Similarly, mom and pop buy a $30K house in 1972, raise the kids, pay off the mortgage and now in their late 70's the stairs are to much for them. They've had a good life so why not sell the house to a nice young couple for 6.5 X $30K = About $200K instead of a million?
Well, they don't have a lot of savings after helping the kids with tuitions, weddings and down payments. CPP and OAS covered the cost of running the house but a seniors home is expensive. They would have more if they didn't help the kids with the down payments but they did because no one else is accepting 1972 prices X 6.5. What goes around comes around and, like my about to be married buddy who was freaking out at prices, once you're in the door, the rules change. Inflation will make you rich.
If mom and pop did sell to that nice couple and five years down the road the couple wanted something else, would they sell to another nice couple for $200K plus COLA? Even if they wanted to they couldn't afford the house they now need due to the change in circumstances.
It's a long story but that's how the game works. Grab what you can. You get one vote. If the government has to screw someone the special interest group will have more than your one vote and you will be thrown under the bus.
There are lots of solutions but they don't fill the government coffers.
It is my understanding that a First Nations person can live on a reservation and own a house but not the land. The land is where the money is. If you could ever trust the thieves we elect, houses could be built on leased land*. An infinite lease that could be willed to heirs but the value of the land never goes to the resident.
The resident gets to live in a house as nice as they want to make it but they never get to cash in on the land rush. You get a nice house for a half a million and pay land lease. But you never see the mega bucks in capital gains. You can never move out of a leased land situation.
*It has been tried in Malvern. The house owners were later allowed to buy the land.
D
Deleted member 50930
Guest
* ranting
Students are coming back for the fall and I am getting outbid on rentals closer to work.
Not happy that there are bidding wars on rentals now
Students are coming back for the fall and I am getting outbid on rentals closer to work.
Not happy that there are bidding wars on rentals now
Mad Mike
Well-known member
Rental prices are getting stupid. A local rental agency found out we have a 1 bed guest house above our garage. It’s about 500sq’, they offered us $1500/mo, $2000 if we accept 2 gr 12 foreign high schoolers as tenants.* ranting
Students are coming back for the fall and I am getting outbid on rentals closer to work.
Not happy that there are bidding wars on rentals now
We never put in a kitchen or shower, just used it for guests (mostly my kids hosting sleepovers). We would have to do those upgrades, would cost $8k. - it’s got me thinking!
Yowza! Wish I had kept our building then! 6 units steps away from Humber College Lakeshore.
Mad Mike
Well-known member
We are a 300m walk to two of the most desirable high schools for Asian high schoolers, Markham High and Bro Andre.
some of these kids get $20,000/mo from their parents. Time to get on the gravy train.
Yup @Mad Mike my favourite tenants were the students that the parents would pay their rent. Kids just came and studied and I never had any issues with the students at all.
Good times having that place. I miss it and am sorry to this day we had to sell it. Just couldn’t make the financing work for a house, AND to keep the rental.
Good times having that place. I miss it and am sorry to this day we had to sell it. Just couldn’t make the financing work for a house, AND to keep the rental.
As painful as it is for me, that is easy. Add it to mortgage. Investments are returning far more than mortgage interest costs. (~14% vs ~3%). I am paying off my mortgage almost as slowly as possible at this point. It it comes to a time when interest is higher than investments, sell the investments to clear 20% of the mortgage each year (or a big lump at renewal) and you will be way ahead of selling investments at the beginning.
Mad Mike
Well-known member
With the low cost of money, and decent investment returns, you might be better off not paying down a mortgage. If your house going up 10% each year, you gain on the entire value, not just the principal.
if your house is worth 800 today and you owe 500k, you have $300 invested. If it goes up 10% in value, $80k, your return on equity is over 25% and tax free. You would need a 40% return on stocks to match that.
That's an argument for buying a more expensive house and/or improving the one you have. You made your 80K a year whether your mortgage was 500k or zero with the 500k invested elsewhere.
According to lore, J. F. Kennedy's father, Joseph Kennedy, made his big gains when he sold his holdings before the Great Depression due to a shoe shine boy giving him stock tips. He supposedly said that when a shoe shine boy is acting like a stock analyst it's time to get out. He re-invested after the crash buying in cheap and bending a lot of rules.
The temptation is to go for broke, leverage to the max and buy real estate. However the whacko swings of Covid and potentially, government policies, make it feel like a balloon launch in cactus country. Wisely @GreyGhost doesn't say do it but rather it's an argument for leveraging one's real estate.
IMO the most worrisome factor is government intervention. Income tax was introduced in Canada in 1917 to finance WWI. It was supposed to be temporary. The war on Covid is another excuse to levy a new tax and with all the people supposedly getting rich on real estate they are seen as a plump target. The home owner wannabees would see the tax as justified, stick it to the "rich". If the wannabees end up getting a house they might change their views. The budget will not balance itself.
D
Deleted member 50930
Guest
Will the LTB enforce the no drinking ???
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