I love Real Estate. Fixed mortgages are the only way to go. People who signed up for ARMs are idiots and deserve to lose their home. Then we have the renters, Dumb Money. If you can't afford your dream home, just buy whatever you can afford that's reasonable priced. Albeit there are some markets in California, New York City, and South Florida that are completely out of whack. But I'm gonna love when those markets pop and Smart Money will swoop in and pick up all the properties defaulted on by people with ARMs. It's gonna be sweet. Free $$$. All this talk of a housing slowdown? Comprable sales for my properies, 90% of which I bought for under 140k, are still seeing double digit appreciation. Properties priced 300k and above are having trouble selling and it looks like negative appreciation has finally kicked in. Interest rates are rising, less can afford homes so more will be renting. I swear I'm getting a hardon just thinking of the future.
So, Wet Dream, you think having fewer buyers and more renters is going to enhance the value of your properties? Well, that's certainly an interesting perspective.
Not always there Tonto! Every now and again renting can make a ton of sense. And when it does, you do it. I love my two rental units. I live in Chicago and Dallas, about equal time in each monthly. And the extra capital that I have from not maintaining a property has made the personal extras happen. And that has really been appreciated.
Plus, you are not subject to victimization by incompetent governments or homeowners associations. My brother's property tax and condo association payments are more then his mortgage payments are on his condo in Panama City Florida. In the old days the idea was to buy a house, pay it off and live for free. Forget that. These cities have to pay for there silly swat teams and sensitivity training for their police departments somehow. John
I agree that fixed rate mortgages currently make much more sense than variable rate mortgages, at least in Canada. 2-3 years ago, variable rate mortgages had rates that were significantly below fixed rates (I'm at home so I don't have access to rate history, but let's say about 2% difference). Now we've reached the point where variable rates are quite close to fixed rates, and the spread between short-term and long-term fixed rates is very low, so it makes much more sense to choose a fixed interest rate for your mortgage. The above said, the problem is not amortizing mortgages, the problem is all of these interest only products. As for renters being "dumb money", I personally think that the "dumb money" is buying residential real estate right now (though this varies depending on which region you live in). I'm currently faced with the buy vs. rent decision, and I personally intend to rent for a few years, while saving up as much money as possible (plus paying down some debt). I don't view right now as being a good time to buy in my hometown.
Chagi, What are the interest rates in Canada right now? I am thinking of moving there, maybe Ontario in the next couple of years. From what I have heard and read the bubble isn't as bad in Canada as in America, generally speaking. Am I right or wrong? Living in Denver, I believe most of this area is correctly priced, unlike So Cal, S Florida, and the New England Coast. Homes here avg around 300k. I think renting is the smarter way to go unless you know you are getting a deal, otherwise you will be sorry if you have to sell in a few years. You add up the monthly payment, the taxes and maintenance, insurance, HOA's, it's not cheap. Yeah I get a write off, but it's 30 cents on the dollar, big deal.
Personally speaking, 5 and 7 years ARM's are good, anything less is most likely gambling at the casino. I wish I would have taken a 7year ARM, the rate was the same as the 15 year buy down we did. Statistics show people move every 5 years approx, until they get older, say 45 plus. Some lenders have been offering 30 year interest only! You would have to be freakin stupid to do that.
Fixed mortgage rates are around 4.9% thru 5.6% for 1yr thru 10 yr terms respectively, the spread between short-term and long-term rates is very low right now. There are probably many areas of Canada that are cheaper than some areas of the US, but I would not say that our residential real estate markets are correctly priced. Try taking a look through www.mls.ca if you want to get a sense of prices. I'll also forewarn you that property taxes in Ontario can be quite high relative to the rest of Canada; population density is also significantly higher there. I would really suggest considering Western Canada over Eastern Canada, though some of the Western markets are overpriced (Vancouver for example). I'm from Alberta myself, and I don't think I ever want to move east.
Thank you Chagi. I will take a look at the website. I wouldn't want to move west because that would require getting up ealier to trade. My mentor lives in Ontario and so do some relatives. I will ask him about property taxes. For example, our 360k house has $3,200 in property taxes so I am not sure if that would be viewed as more or less than parts of Canada? It must be nice living in province flush with oil proftis, good for you.
That sounds about right to me for Ontario property taxes. I can't really quote numbers/percentages to you for property taxes, I just have a general sense of amounts from having dealt with customers from various parts of Canada. Regarding the trading hours issue, I view that as both a positive and a negative. I'm not much of a morning person, so the two hour difference (MST vs. EST) is a pain. The difference also benefits me though, because I will have the ability to do some trading while working full-time to build up capital (and live life while I'm at it hehe). In other words, it is possible to find jobs here that would allow me to trade for a few hours during the morning, then head off to work. Aside from the crappy winters, Alberta is a pretty decent place to live. Commutes to work are very short relative to other regions (20-30 minutes is typical). And yes, our economy is booming due to the oilpatch, and unemployment rates are extremely low right now. I believe Canada's national average is somewhere around 6%, and Alberta's is around 3%. Try looking at differences between provinces when you are going through that MLS website. For example, you would see that the provinces of Saskatchewan and Manitoba have far lower housing prices than the rest of the country (though I have no desire to live in either province). Alberta is starting to become unreasonable, and housing prices on the west coast of Canada are in full bubble mode. Lots of old houses going for $400-$500K+ in Vancouver for example.