Quote:
Originally posted by birentoronto
Hi,
I went to TD's Mortage Payment Calculator.
http://www.tdcanadatrust.com/docs/mortCalc/MortgageCalculator.jsp
Say I want to borrow $200,000, with Bi-Weekly payment frequency, Amorization of 25 years.
The challenge is that I have a quoted variable interest of P - 0.6, but in the "Select Term" option - the only options I see are:
6 Month Covertible
1 Year Open
1 Year Closed
2 Year Closed
3 Year Closed
4 Year Closed
5 Year Closed
6 Year Closed
7 Year Closed
10 Year Closed
whereas, I have a variable closed for 5 year (rate been P-0.6)
Any ideas?
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Intreseting article in globe and mail
http://www.theglobeandmail.com/report-on-business/economy/vancouver-home-sales-drop-sharply/article1629806/
Thanks hopesrforever27. Do we expect US style multi-year slow melt?
http://www.greaterfool.ca/
Last month, down 30% in Vancouver, off 23% in the GTA, weaker by 42% in Calgary and fading 37% in Edmonton. Right on sked. The agenda I laid out some months ago: Listings pop first (late Spring), followed by Maalox-gulping sales reductions (summer), then by the din of tumbling prices (frost) and finally the growing spectre of a US-style, multi-year slow melt.
Look, cowpoke, you screwed up. You drank the real estate Kool-Aid. You read the Journal Homes Section. Microscopic Phil Sopers got into your blood stream. It’s time for a purge.
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This pattern is quite similar to how things cascaded in the US once the top was in.
Housing Collapse Cascade Pattern
Volume drops precipitously
Prices soften a bit
Inventory levels rise slowly
High-end home prices remain relatively steady for a brief while longer
The real estate industry tries to convince everyone it’s “business as usual” and homes are affordable because rates are low
Bubble denial kicks in with media articles everywhere touting the “fundamentals”
Stubborn sellers hold out for last year’s prices as volume continues to shrink
Inventory levels reach new highs
Builders start offering huge incentives to clear inventory
Some sellers finally realize (too late) what is happening
Price declines hit the high-end
Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc
Gimmicks do not work
Price declines escalate sharply at all price levels
The Central Bank issues statements that housing is fundamentally sound
Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt
Some of those may happen simultaneously or in a different order, but the whole mess starts with a huge plunge in volume.
I am now confident the peak in Canadian housing insanity is finally in.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com/2010/07/vancouver-home-sales-drop-30-percent.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29
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My take: RE is socialist asset in North America and completely supported by govt. back securities (CMHC, Freddie/Fannie) and subsidies (0/40, 5/35, still low interest rates, tax credits). Now all the western govt are out of bullets and some are moving away from over-spending so RE will go only one direction and we will see bigger RE crash here and USA when interest rates will go up.
Sheep create the bubble and bust. Canadian sheep start feeling bad about RE investment.
Quote:
Originally posted by hopesrforever27
Intreseting article in globe and mail
http://www.theglobeandmail.com/report-on-business/economy/vancouver-home-sales-drop-sharply/article1629806/</font>
Kelowna
http://www.edmontonjournal.com/business/Condo+King+slashes+Kelowna+highrise+prices/3148288/story.html
Unit 707 at Invue-- a 1,011-sq.-ft., two-bedroom condo on the seventh floor with nice views -- is now for sale for $298,000, down from $440,000.
Unit 1406-- a 1,231-sq.-ft., two-bedroom on the 14th floor with stunning views -- has been reduced from $625,000 to $419,000.
The penthouse, a 2,400-sq.-ft., three-bedroom with loft beauty, is now $1.2 million, down from $1.8 million.
There's also a studio condo for $179,000.
It may seem like more fun when housing was booming, but it’s really more like a cancerous tumor… and if we want a sustainable and healthy market, we need some kemo. Which doesn’t sound like any fun, but it is necessary, because the longer we go without it, the worse the disease gets… and that can be applied beyond just out housing bubble, to our even greater issue with credit in general.
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http://edmontonhousingbust.com/2010/07/doom-and-gloom-why-prices-going-down-is-a-good-thing/#comments
There seems to be this naive prevailing wisdom that somehow high real estate prices are preferable and/or inherently good. I’ll agree that too a point they can be, insofar as it’s typically a sign of rising incomes, consumer confidence, and a healthy economy… but what happens when they go waaaaay beyond levels supported by fundamentals?
At that point high prices actually become a significant drag on the economy. Disposable income is suddenly getting eaten up paying for a house and servicing the debt. Say you’re the median Edmonton family, pulling in $70,000 a year and you finance a house for $350,000 rather than the $250,000 for that same house that such income levels would typically support. Assuming traditional 25 year amortization, and 6% interest… on $250,000 you’d be paying about $19,000 a year… if you finance $350,000 you pay about $27,000 a year (even if you stretch the amortization to 35, you still pay $24,000, and that $3,000 you save comes entirely from what would have been equity).
You’re basically spending $8,000 a year you could be spending on other things if the market wasn’t overvalued. That’s over 10% of your gross income, and probably around 15% of what your take home. Obviously you’d spend some of that frivolously, but even if you only saved/invested half of that the spin offs and potential earnings from putting that money too work for you would start multiplying quickly. And even what you’d be frivolous spending would be lost to the local economy, and rather than circulate there it’s benefiting the bank and not you.
There may be something of a short term “wealth effect”… but that doesn’t last forever, and it’s credit fueled too, so those chicken will come home to roost too. So, with overvalues homes, a lot of money is lost to the economy as a whole, and instead funneled though a select few. Banks love high prices, the more people borrow, the more they make… builders love it, gives them a nice fat profit margin… and agents and mortgage brokers work on commission based on the amount paid or borrowed, so obviously they love ‘em. But while a minority certainly benefit from overvalued homes, it comes at a heavy expense to the economy as a whole.
One more news article in globeandmail
http://www.theglobeandmail.com/report-on-business/economy/housing-sales-fall-sharply-in-june/article1640760/
Do you still trust new and used house salesman? Do your city sales man give same logic?
http://www.sunnyislesmiamirealestate.com/Preconstruction_Miami_Beach.htm
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Q Your companies own more apartments and offices than anyone. And you've been nicknamed "the Gravedancer" for your ability to correctly read the boom-and-bust cycles in real estate. So if anyone knows the answer to this question, it's you: Is the bubble about to burst?
A I'm 63. I've been in the business 40 years. I've heard about all kinds of "housing bubbles", and I ain't seen one yet. There've been short periods when single-family-housing prices fell, but the number of examples of that are really small. A bubble by definition goes poof - the way so many tech stocks did in 2000 - and there's no value left. Housing prices, though, are always connected to fundamentals, like the amount of buildable land. A house has intrinsic value.
Q But U.S. home prices are up about 40% in three years. How can this not be a bubble?
A Econ 1001: Prices have gone up because the demand has been much greater than the supply. The country is producing all it can in terms of supply, but what you see is more demand. Over the next 10 years we're going to add a million new household, much of that's due to immigration. There are lifestyle influences on demand too. Over the past 25 years, for example, marriage has been delayed eight to 10 years. It used to be Harry and Sally would graduate college and get married. Now everybody gets married late. Instead of Harry and Sally owning one house in exurbia, you now have two people buying. b And think about the longevity of the boomers, they continue to buy.
Q Is there anything you're worried a about?
A I do think we're likely to see the growth of housing prices slow in the next five years, compared with the past five. We've had a significant uptick in prices, fueled by low interest rates. But it looks like we'll see higher rates over the next five years, so demand will go down and you'll see slower growth in pricing.
Q How bad could it get?
A Worst-case scenario? A flat housing market. Look, all I can tell you is we're the largest owner of apartments in the U.S. and among the largest converters of apartments to condos. If there was a danger of a bubble, would we be in this business? I've never been accused of being a Pollyanna, I'm the Gravedancer. Americans don't understand that we have the cheapest housing in the world. London and Tokyo are more expensive than New York. Why do you think everyone is going to South Florida from Europe? It's because prices here are cheap compared with there.
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