Saturday, December 23, 2006

Are Today's Housing Prices Sustainable?

Here are some numbers to think about before you answer that question. Think of your own wage, what you take home after Tax's, Benefits, etc.. Take into account that the average household income, before Tax's, is around $55,000/year.

$200,000 Mortgage over 25 Years =

  • $1279/Month @ 6%

  • $1526/Month @ 8%

  • $1788/Month @ 10%

$300,000 Mortgage over 25 Years =

  • $1919/Month @ 6%

  • $2289/Month @ 8%

  • $2683/Month @10%

$400,000 Mortgage over 25 Years =

  • $2559/Month @ 6%

  • $3052/Month @ 8%

  • $3557/Month @ 10%

You can see how interest can make a huge impact on your payments. Interest rates can go up and the have in the past.

Who can afford these payments?? Based on 35% of Gross Monthly Income.

  • $50,000/Year should be paying around $1458/Month for total house hold expenses
  • $60,000/Year should be paying around $1750/Month for total house hold expenses.
  • $70,000/Year should be paying around $2041/Month for total house hold expenses.
  • $80,000/Year should be paying around $2333/Month for total house hold expenses
  • $100,000/Year should be paying around $2916/Month for total house hold expenses

Don't forget that these are included in you Total Monthly Housing Expenses:

  • Property Tax's, which increase as your property appreciates.
  • Gas and Electricity
  • Garbage and Sewer
  • Metered Water
  • Up Keep, Roof, Hot Water Tank, etc.

What about:

  • Saving for retirement?
  • Saving for Children's Education?
  • Job Loss?
  • Vacation?
  • Furniture for your home.?
  • Clothing, Food.?
  • Car Payments?

It's quite scary when you actually take the time to add it all up.

In Summary:

From what I can see here the only people that can afford to purchase at these prices will be those who are already in the market and have equity, those who have saved up a lot for a down payment, and those who are wealthy.

I don't know what percentage of the population is fortunate enough to be in this situation. But I am sure it isn't enough to sustain the market.

Considering the price of Condos, most "First Time Buyers" have been priced out.

If prices stay like they are all those "Baby Boomers", who want the younger generation to fund their retirement, are not going to be able to find enough qualified buyers.

Friday, December 22, 2006

US Downturn effects Canadian Market

Canadian Stocks Drop for a 2nd Week on U.S. Growth Concerns

" Canadian stocks had a second straight weekly decline, paring the Standard & Poor's/TSX Composite Index's gain for the year to 13 percent, on concern that a cooling U.S. economy will curb demand for Canadian exports. "

"Prospects for the Canadian market depend on how much the U.S. economy is dragged down as the housing market extends a slump, said Marc Lalonde, who oversees $1.1 billion at Louisbourg Investments Inc. in Moncton, New Brunswick. Prices of energy and other commodities will be another swing factor in the market. "

``We've had a good run this year,'' he said. ``You have to watch housing,'' though, because raw materials such as copper for construction ``account for almost 45 percent of the Canadian market.''

"Exports accounted for 38 percent of Canada's $1 trillion economy last year, and 84 percent of the country's merchandise exports went to the U.S., the trade department said in June. Commodities comprise more than half of the exports. "

Wednesday, December 20, 2006

Housing Market Drop Tops the Year's Business News - US

Housing Market Drop Tops the Year's Business News, Builders Nix Projects and Renters Stay Put

"The nation's house party ended with a thud in 2006, leaving everyone from condo flippers to Federal Reserve chairman Ben Bernanke waiting to see what would happen next."

"At the housing market's peak, buyers rushed to open houses, blank checks in hand. Lenders gave big-money mortgages to people who could barely afford their monthly payments. That ended in 2006, when home builders scuttled projects, walked away from land they'd hoped to develop and would-be buyers canceled orders."

"Speculators fled the market. Not only did they stop buying, they put properties they owned up for sale."

""Investors were a bigger part of the market than many thought, including ourselves," Ara K. Hovnanian, the president and chief executive officer of homebuilder Hovnanian Enterprises Inc. said in June."

Tuesday, December 19, 2006

6 strategies to survive the real estate bust - US

Last year the question was whether the housing boom would slow down. Now it's how bad it will get. Fortune's Ellen Florian Kratz helps you navigate the market.

  1. Strategy 1: Lower your expectations
  2. Strategy 2: Drive a hard bargain
  3. Strategy 3: Consider renting
  4. NEXT: Step away from the exotic mortgage
  5. Strategy 5: Shop for a rate drop
  6. Strategy 6: Keep an eye on your equity

External forces dampening Canadian economy in 2007: TD Economics

External forces dampening Canadian economy in 2007: TD Economics

" TORONTO, Dec. 19 /CNW/ - Canada's economic slowdown in 2007 will stemfrom external demand rather than domestic spending according to TD Economics.Its Chief Economist and Senior Vice President, Don Drummond, stated: "Theproblem will be with the American not Canadian consumer.""

"This is not to say that the Canadian economy is free of housing risks.For instance, residents in Vancouver dedicate an inordinate amount of pre-taxincome (+50%) to housing costs, while Alberta's double-digit price growthwon't be sustained. However, a boom-bust cycle can be avoided if price growthcools in the near-term, which seems quite possible given ongoing supportivefundamentals. Some hopeful signs for a potential soft landing have alreadyemerged. New listings are up substantially in Calgary (51% y/y), Edmonton(27% y/y) and Vancouver (19% y/y), which should help alleviate price pressuresin time."

"If a hard landing were to befall the western provinces, it wouldlikely be due to the ripple effect of an unexpected collapse in the U.S.economy, rather than a sharp reversal of domestic fundamentals."

Housing Bubble T-Shirts

"WASHINGTON (Reuters) — Striking a chord with uneasy U.S. property investors,'s latest design — "Mr. Housing Bubble" — has become its best seller in less than a week."

""Mr. Housing Bubble may get a lot of washings before it wears out," she said."

"Phipps' response: "If this thing does pop, a lot of people are going to need an affordable shirt to wear."

Now you can get yourself a Housing Bubble T-Shirt. Gotta love those Americans, they can make money off of anything.

If you're not into T-Shirts you can always get yourself a Housing Bubble Mug, so you can remind youself every morning while you drink your coffee.

Monday, December 18, 2006

Is this the future of Canadian Real Estate??

This is a Business Week article from the United States and it pretty much sums up what is going on there. Is this what we can expect in Canada in the near future?? It's to early to tell, but I wouldn't be surprised. A lot of people in Canada are still pretty positive about Real Estate, and others are a little pessimistic. It's really hard to gauge what is coming next.

"Home prices still have room to decline, and it may take 15
years or more to reach new inflation-adjusted highs "

"Housing prices were pushed up in part by get-rich-quick speculation. Now real estate has lost its grip on the public's imagination"

"Housing booms are short and exciting. Housing busts, on the other hand, are
long and painful. So don't put much faith in those oft-heard assertions that the
worst is already over. Prices are likely to fall further in many markets in

"A BusinessWeek analysis of the past three decades shows that if history repeats itself, it's likely to take 15 years or more for many parts of the country to get back to their inflation-adjusted peaks."

"For residential real estate, the outlook for 2007 ranges from mildly positive to awful. "

"Advice to homeowners: If you need to sell and you're not getting much interest, cut the price by an extreme amount. If you make halfhearted cuts, you'll remain overpriced and you'll follow the market all the way to the bottom."

"Advice to buyers: Bargain hard. Many sellers are still asking for too much. "As tough as our market's been, the toughest thing is to get sellers to understand that prices aren't going up 18% to 20% a year anymore," says Ned Redpath, head of Coldwell Banker Redpath & Co. Realtors in Hanover, N.H."

"THAT SAID, RIGHT NOW is not the ideal time to buy or move up, even with the recent price declines. The inventory of existing homes shot up 34% from October, 2005, to October, 2006, and now stands at nine months' worth of condos and seven months' worth of single-family houses at the current rate of sales. That backlog will take a long time, and a lot of price-cutting, to clear out."

Sunday, December 17, 2006

Time Magazine Person of the Year: You

"It's about the many wresting power from the few and helping one another for nothing and how that will not only change the world, but also change the way the world changes."

"And we are so ready for it. We're ready to balance our diet of predigested news with raw feeds from Baghdad and Boston and Beijing."

"You can learn more about how Americans live just by looking at the backgrounds of YouTube videos—those rumpled bedrooms and toy-strewn basement rec rooms—than you could from 1,000 hours of network television."

Dec. 25, 2006 Vol. 167 No. 51

Some of the "Housing Bubble" Blogs out there helped me make my decision not buy back into the Real Estate Market. They weren't the only reason for my decision, but they had a part in it.


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The Big Picture

Soot and Ashes: From Housing Panic

The Globe and Mail - Business News

The Best Real Estate Anywhere! - Vancouver Realtor Blog

The Housing Bubble - US

Alberta Bubble

Financial Planning and Personal Sanity

Housing Doom - US

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Vancouver Condo Info Real Estate

Housing PANIC - US - Real Estate

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