Priced Out Forever Launches!
posted March 11th, 2007 @ 10:31 pm by Priced Out ForeverOn the eve of the spring real estate selling season comes a new resource for potential home buyers: Priced Out Forever. Here on the blog you’ll find the latest news about home price trends, lending, and just about anything related to the concept of being priced out forever.
March 13th, 2007 at 8:32 am
Best Wishes!
March 14th, 2007 at 3:52 am
I added a link to your site from my Bubble Meter Blog!
March 18th, 2007 at 8:05 pm
Hi,
Your reasoning at: “http://pricedoutforever.com/learn.html”, as to why being priced out forever is a falacy is possibly right, but for reasons that you have over looked – possibly because your expanation is over simplistic to maintain it understandable for the masses.
Here’s a few things on my mind regarding this subject:
Assuming current (Mar,2007) BC real estate market, a buyer buys a multi-tenant house (say a triplex), and lives in 1 suite and rents out two other ones, chances are that the buyer will be very anxious to raise rents so that he can pay off his insanely high mortgage faster and be able to survive potential increases in interest rates.
Seeing as so many people have bought “high” in the last 2 years, I can see rents going up very soon, or at least at the max 4 to 5% each year for month to month tenants. And landlords who bought in easy to rent areas (with near 0% vacancy rates – lots of those out there right now) will be really hoping their month to month tenants leave so that they can increase the rents something like 10 to 20%… you know, like their landlord collegues down the road already have done after they spent $500 in cheap improvements like paint jobs and minor fixes.
Higher rents, means Joe-trying-to-wait-it-out will have less money to save each month to buy a house when the market eventually comes down… you know, right around the time that interest rates will be much higher, which may still leave Mr. renter unable to buy a house (at least not w/ a 25% downpayment)… unless of course, he’s making 30% / yr on his unleveraged high risk stock market mutual funds… and will all that unlevereged investment still be enough to buy a house? Possibly, but very rarely with 25% down. I hope he remembers he has to pay his capital gains the year of selling mutual funds.
Then add in the fact that 2/3rds of all new canadians are immigrants, and I don’t know the real stats but I would bet a Mocha Grande Frappuchino that over 75% come from poorer countries than Canada (#1 immigrants now from India, #2 from China), unless they are the 1% exception in their home countries and are ubber rich, they too will have to rent for god knows how long before they can figure out how Canada works and work their way up the pay scales (because you know… Canada does not recognize the University degrees of just about any country out there). Alternatively, and this is very common, their entire 5 to 10 member family will all start working low paying jobs, but jointly will be able to afford to buy a house (further increasing house purchase stats).
So we have a scenario of current renters not being able to afford to buy at reasonable prices (as per the various “affordability errosions” posted on so many websites), Immigrants continually adding to the rental demand, or reducing housing for purchase availability, and new landlords very anxious to raise rents to help pay their huge mortgages.
I don’t believe anyone will be priced out forever because forever is a hella long time, but priced out for 5 years or so until incomes have a chance to catch up with housing affordability? Until the 2010 Olympics are over, or until interest rates start to climb… yep, I can see that.
So in the mean time, why not buy a home anyway (5% down), enjoy the 5 to 20% appreciation rates on your highly leveraged 5% down, rent out your suites to pay at least 1/2 your mortgage per month, and see your monthly mortgage payments decrease, not increase (like rent) over the long term? While you’re at it, why not after 3 years take out some of that appreciation equity and buy a second home with more suites & double or triple your gross income? Keep on doing that for 10 or 15 more years, and you might just be retired a multi-millionaire… after you sell 1 or 2 of the propreties of course.
For the renters out there, I hope you saved all your pennies and didn’t invest in too many volitile Chinese stocks, and either started your own business or did something other than just work at average wages all this time, because if that’s all you’re doing, yes you might be priced out for many years.
There’s a reason that 75% of all North American millionaires made their fortunes in real estate, the words “leverage” & “appreciation” being the top 2 reasons for their success. During my youth I used to look at rich old men and be stunned at how intellectually under developed some of them actually were, and it made me smile that in countries like North America, it doesn’t actually take brains to be rich… just a bit of good timing, and investing in the most stable leveraged market – real estate.
Last I checked, there weren’t many millionaires who rented.
Adeptus
PS. By the way it is official, God isn’t making any more land; however, he seems to keep on making more people… but who knows maybe things will even out for renters when:
a) North Korea flyes a Nuke into US territory thereby shrinking the population and making more (toxic) land available.
b) Or maybe, Global warming will cause all the artic ice to melt, thereby flooding all Coastal cities, and killing off a couple of hundred million, thereby making more (water submerssed) land available for renters.
c) Perhaps though, your best chances (assuming you too survive it), is to wait until the HN5 influenza virus wipes out 10% of the world’s population.
d) Lastly, you can hope to be abducted by Aliens willing to drop you off on Mars or some distant unihabited planet, where for sure you’ll be able to afford to buy countless acres!
March 18th, 2007 at 8:24 pm
Oh, I forgot to say thanks. It’s websites like this that keep renters, as renters for many long years… because you know, as a multi-tenant landlord, I’m going to need renters… and the more of them out there,(you know, supply/demand) the more I can raise my rents to pay off my mortgage faster so I can buy the next multi-suite house to fit all the renters I hope you keep bringing me.
March 18th, 2007 at 9:03 pm
Just between you and me, I do hope Vancouver follows Sydney with over priced housing… because you know, it will be a landlord’s rental market.
http://www.realestate.com.au/review/mar07/article3.html?from=review
I just hope for your sake that renters won’t be priced out of rental property in 2010!!
March 19th, 2007 at 6:13 pm
There is another deamon afoot, besides subprime mortgages, that is driving up housing prices. Namely, current homeowners pushing through laws to artificially restrict the availability of housing. This reduces supply, and the market’s only response can be to raise prices to reduce demand too. The notion that “They aren’t making any more land” may be false, but “Government is reducing the amount of buildable land” can (and IS) true.
These political and financial benefits go to current homeowners, at the expense of those who do not own yet. For more details on how homeowners border on almost RICO behavior, check out this article from Reason last summer.
http://www.reason.com/news/show/36930.html
While we can all continue to rent, and rent sometimes at favorable prices, the fact is being priced out forever is no joke. For those of us who didn’t buy before the housing restrictions were put in place (because, for example, we weren’t even born yet!) it’s very real.
September 18th, 2007 at 3:20 pm
A response to Wonder:
I live in Boston and housing has fallen dramatically. The media all predicted that rents would go up, but they haven’t. Quite the opposite! So many people can’t sell, and have to move or owned more than one house, that they’re reluctantly renting. Also, many people are leaving the state for a cheaper place (MA is losing population to less desirable places due to the cost of living).
Also, about the old saying that they aren’t making more land – was it Roy Rogers who first said that? That fact has yet to ever affect housing. There is not so little land that people are jockeying for a space to call their own in the world! They are in Tokyo and other congested areas, but it’s not really an issue in this country. Houses became huge due to the boom – us baby boomers grew up in what are considered tiny houses by today’s standards. People are also downsizing now, trying to get a smaller place that’s cheaper and easier to maintain, etc.
Also, in your calculations I don’t see much about taxes or maintenance costs. The more you own and rent, the higher these are. I have heard that being a landlord doesn’t really pay off unless you own a place with at least 5 units. I don’t know if that’s true or not, but renting a house may or may not just pay your mortgage and you may need to fork over more for maintenance.
September 18th, 2007 at 3:24 pm
Just want to clarify in my last post above, people who can’t see and have to move or owned more than one house are renting their houses out! Not becoming renters.
September 19th, 2007 at 3:57 pm
People who can’t sell that is!