Brice Richard brought up the rent vs buying a house topic again, and since I've been battling the issue with my wife lately, I figured it might be nice to start a new topic on it.



So, here's his argument:

>>Under these new rules of Capitalistic engagement, does it make any amount of reasonable sense to throw oneself into a 30 year mortgage????

>>To me, such a move is sheer insanity. Purchasing a home today not only ensures future anxiety beyond anything one has ever experienced, but, now, in light of the economic dynamics that have and are occuring, a home is now a questionable investment.

>>Granted, you have to pay someone somewhere rent to live, but it doesn't have to be 3 times the amount of a traditional rent payment for a mortgage payment.

>>In addition, living in an apartment accentuates a SIMPLISTIC lifestyle from maintenance to cleaning.

Since Kenny is making my counter-response to home buying the theme for this thread, let me QUALIFY the circumstance under which I MIGHT consider the purchase of a home in today's economic climate:::

I think one could consider a home a good risk invesment for puchase under the FOLLOWING rules ONLY:::::

*You have a SAVINGS nest egg of $100K or more

*Your mortgage payment DOES NOT EXCEED 30% of your MONTHLY NET income.

ONLY under these qualified circumstances would I consider the purchase of a home....

Brice, what if the $100k was in the house in the form of a down payment?

NOPE....unacceptable.....

Then you would, by my suggestion, need $200K in the bank....the 100K is liquid and offers a strong economic cushion against any future negative events that may occur such as 3-6 month job loss, health care issues, etc.

Ya gotta have a 6 figure liquid nest egg available IN ADDITION to any downpayment made on a home.

An additional benefit from this approach is that if EQUITY lines of credit ever come back into vogue in home ownership, your downpayment (say 10% or more of the home price) just made your "cushion" significantly softer.

People that write and CAPITALISE are aboslute fucking tools

Have you crunched the numbers? Renting vs. Buying.
Show us.

Depending on where you live, a renter who is also a consistent saver and investor can be ahead (financially) of the buyer over the long term. In fact, the owner may never catch up to the renter even over an infinite period of time, and under a very realistic scenario.

Of course there is a lot more to renting/buying than plain economics. It is also a lifestyle decision.

>> a renter who is also a consistent saver and investor can be ahead (financially) of the buyer over the long term. <<

indeed

a big reason why people take out mortgages is they are incapable of saving on their own.  the house note becomes a forced savings technique.

if you are the type of person that can live below your means long-term, the case for homebuying becomes much less compelling.

>> Of course there is a lot more to renting/buying than plain economics. It is also a lifestyle decision. <<

yup.

I think people in their thirties feel they have to buy a home to fit in socially.

also in a lot of metros, its hard to find adequate rental housing if you have kids.  Here in LA, 2brs are rare, 3+ brs are even rarer, and landlords discriminate against families.

There is no straightforward answer.

Renters may save more, but the living quality sucks. And average people won't get good investment return from their money. They will likely lose a great portion of it at bad times like last year.

Now the government is determined to prop the real estate markets as the life saver. As Canada government dominates the economy, the high price may stay a while.

One questions the merit of accepting life and financial advice from Brice Richard, or only marginally better, a Brice Richard impersonator.

IT's not financial advice muppet show, it's my OPINION........who said anything about dispensing Financial advice?

Don't hate....appreciate

"Renters may save more, but the living quality sucks."

Not necessarily. Houses or condo-style apartments can be rented, for example.

"And average people won't get good investment return from their money."

This is because people never take the time to educate themselves about investing. It is not hard to get decent returns on your investments over the long term, simply by being average - i.e. stick to low-cost index funds and don't pretend that you can beat the market.

I will also point out that a lot of people got a crappy return on their real estate investments recently.

A lot of home buyers are, by definition, HOUSE POOR....if, their mortgage payments exceed their monthly net income over 30%...

Call me crazy but if your mortgage is say, 48% of your monthly net income, I have a hard time understanding where "lifestyle" in that sense is a comfortable one.

---------------------
<<<also in a lot of metros, its hard to find adequate rental housing if you have kids.  Here in LA, 2brs are rare, 3+ brs are even rarer, and landlords discriminate against families.>>>

Ya should have thought about that BEFORE you decided to have kids....

If housing is not adequate where you live.....then MOVE to find the kind of rental property that suits your family size.....

I don't think Brice is married, has kids, or is contemplating marriage or kids.

So naturally, being "tied down" has a huge negative for him.  Take it for what it's worth.

I'm pretty sure in large part the housing price bubble has burst at this point.  So this might be a good time to buy -- especially if you can get credit.  As soon as the economy is on its feet (6 to 9 months or longer) the Fed will to its horror wake up and realize they've deficit spent 2 trillion dollars in the last two years.  They'll then start raising interest rates to stop inflation.  But, they won't want to raise interest rates too fast, so there'll be a period there of respectable inflation.

Now, if you buy your house now for say $200,000, with 10% down ($20,000), and there's say 8% inflation, after one year your $200,000 house will be worth $216,000, and you'll have $20K + $16K equity in it.  After two years it'll be worth 233,280, and you'll have $20K + $33,280 equity in it.  After three years, it'll be worth $251,942.40, and you'll have $20K + $51,942 equity in it.  And all this time of 8% inflation, your mortgage payments will go up not at all (assumeing you purchase a fixed-rate mortgage, which I STRONGLY recommend, unless you can get a 30-year ARM at like 3% which can only go up 2% over its lifetime).

The point is, once you get on "the elevator" you can roll your equity from house to house.  If you never GET on the elevator, because you're renting all the time, you'll always be at the mercy of inflation and you'll never build up equity.

One more thought about kids.....typical expenses for raising a child from birth to 18 years of age according to 2007 is estimated to cost $250,000!!!! - that's PER child...

umm....I think your earning capacity had better support being able to purchase a home plus some if you are going to be spending a quarter of a million dollars child expenses....

That's one hell of a decision to make....and, the ROI may not even live up to your expectations!

Don't complain if you are raising kids in today's shit economy.....you spread your legs or got on top to make 'em now ya gotta pay for 'em.....

Because raising kids is a purely financial decision.  Right.

Don't argue with Brice, it makes him cross.

Sorry, I said that badly.

Please don't argue with Brice, it makes him cross.

<<<The point is, once you get on "the elevator" you can roll your equity from house to house.  If you never GET on the elevator, because you're renting all the time, you'll always be at the mercy of inflation and you'll never build up equity.>>>

You are NOT taking into consideration ANY kind of financial setback that most EVERY famil at some point experiences during their mortgage payment periods.....oh I don't know,.....lost jobs, health issues, sick kids, divorce, none of these things effects one's ability to make that fucking mortgage payment every 30 days right?

To me, it's common sense.....buy a house if you are so inclined if it meets the recommendations I've provided earlier...otherwise, take the major risk of buying a home and subsequently losing it because ya can't make the payments.....

Brice, you take the same risk renting - if you can't make rent, you're out on your ass.

Oh, yes, one thing I forgot to mention:

You get back 1/3 of your mortgage payment on your taxes, which you'd otherwise give to Uncle Sam, because Uncle Sam wants to encourage home purchasing.

You don't get back 1/3 of your rent from Uncle Sam.

So, not only do you get the inflation-driven rise in your home equity, Uncle Sam is helping you pay for it.

And yes, divorce or job loss can blow this entire equation into the air.

<<<Because raising kids is a purely financial decision.  Right.>>>

For many, it wasn't purely a financial decision in that they were in the sexual fog of the moment that led to their unfortunate current child-possessed situations....

What was the aphorism I read the other day.....it goes something like this....

"It could be that the ONLY purpose of YOUR life is to serve as a warning to others."

...works for me....

Ah, it's all or nothing.  Got it.

Given all the pros and cons to HOME OWNERSHIP, I am of the belief that renting EXCEPT under the circumstances I offered at the beginning of this post, is preferable to home ownership....

It's a matter or personal opinion.....

...Works for me....

>>"Works For Me" [(TM)]

Should I imagine a little shooting star and a jingle whenever I read that?

"Works for me"

http://www.youtube.com/watch?v=G7YiwTpQdT8

In Canada, only rich people can deduct mortgage interest. Government manages economy, and is determined to prop the house price as long as possible.

With high tax and high MER, it is difficult to make a decent return in Canada at all.

Renting sucks. Many people pay $2500 for a small condo in the city, because they believe in the "living in the city" BS from the government. With the same amount money you can get a decent detached house in suburb.

The only problem is that the bubble may soon burst.

Here's the shooting star part...

http://www.youtube.com/watch?v=dgEbi5KFMKU

What a chimp.

Brice is right about the large cushion.

There is a greater than 100% chance that all of you will be out of work for 6 months during the next 30 years. Greater that 100% because for many, it will happen more than once or happen for multiple stints of 6 months, say 10 years.

Given these odds, you have to be prepared to make payments on everything you are committed to for these periods, regardless of your employment status. Unemployment doesn't pay enough for gas and groceries, much less rent, and only lasts 6 months.

The bank doesn't give a shit that you lost your job. They want their payments, or they WILL foreclose and your 'investment' will be gone.

"a big reason why people take out mortgages is they are incapable of saving on their own.  the house note becomes a forced savings technique."

No.

For most people, even if they are disciplined savers, it takes a long time to save enough money to buy a house.

Of course, while they are doing that, housing prices (historically) are going up, requiring them to save even more. Plus, they are also paying rent.

==========

If you can purchase a house for about the amount you'd pay for rent AND you stay in the house for a relatively long time, then the mortgage starts looking more like a rent payment over time. And the mortgage doesn't increase over time like rent does. Plus, there are tax advantages to paying a mortgage that don't exist for renters.

Note that typically people buy a better (ie, much more expensive) place than they rent. It's really this that makes buying worse than renting.

The effect of rising housing prices is mitigated for people who already own property (and are looking to buy another house) because the rising prices gives them more equity. Put another way, rising prices hurt new home buyers more.

"With high tax and high MER, it is difficult to make a decent return in Canada at all."

Again, most people don't take the time to educate themselves about investing. I invest in low cost index funds, and my highest MER is 0.48%. It is higher than what you will get from Vanguard in the US, but still decent. There was nothing difficult about finding these funds and investing in them. There is also no shortage of fund managers in Canada who will manage your money for a fee - no MER.

"Renting sucks. Many people pay $2500 for a small condo in the city, because they believe in the "living in the city" BS from the government."

They are idiots, and you shouldn't use idiots to make a generalization. You can rent a house for the same amount - or less, in a good neighbourhood.

Kenny is thinking of buying in Toronto. The elevator he is getting on is going down, not up. When it's time to renew the mortgage in 5 years he will have zero equity. (Unless he has a huge down payment.)  There is a very good chance he will have negative equity at that time.  You don't pay dick off the principal in the first 5 years so if prices drop even a little he will be in shit.

Generally speaking, Canada is about 2 years behind the U.S. in terms of real estate.  Our bubble hasn't popped.

Yet.

"you take the same risk renting - if you can't make rent, you're out on your ass."

No, first renters are harder to evict that homeowners being foreclosed. A savvy renter in a renter friendly state can stop paying rent and still be in there snug as a bug a year later.

Second, a foreclosure evaporates your equity that you said was the reason for the "investment".

"<<<The point is, once you get on "the elevator" you can roll your equity from house to house.  If you never GET on the elevator, because you're renting all the time, you'll always be at the mercy of inflation and you'll never build up equity.>>>

You are NOT taking into consideration ANY kind of financial setback that most EVERY famil at some point experiences during their mortgage payment periods.....oh I don't know,.....lost jobs, health issues, sick kids, divorce, none of these things effects one's ability to make that fucking mortgage payment every 30 days right?"

There is risk in everything. It's quite possible that your particular situation is so full of risk that purchasing won't make sense.

Of course, the "elevator" (if it happens) gives you more money to respond to problems because you can sell the house and go back to renting.

Clearly, things are complicated in a market where housing prices are declining (or have dropped). But you could be run over by a bus too. Renting won't prevent that from occuring.

<<<Clearly, things are complicated in a market where housing prices are declining (or have dropped). But you could be run over by a bus too. Renting won't prevent that from occuring.>>>

No one can predict the future but if you have a decent LIFE INSURANCE policy and you get run over and killed by a bus, the mortgage STILL gets paid!

"Kenny is thinking of buying in Toronto. The elevator he is getting on is going down, not up. When it's time to renew the mortgage in 5 years he will have zero equity. (Unless he has a huge down payment.)  There is a very good chance he will have negative equity at that time.  You don't pay dick off the principal in the first 5 years so if prices drop even a little he will be in shit."

If he rents, his equity is negative fairly-quickly too. Even with what you say, he might be better off buying if his mortgage is about what he would spend on rent (and if he stayed in the house for a while).

"No one can predict the future but if you have a decent LIFE INSURANCE policy and you get run over and killed by a bus, the mortgage STILL gets paid!"

This is an argument for buying.

If you are paying for a life insurance policy when you single, you are wasting money.

========

Why the BLOODY CAPS?

Where I live, you get a lot more usable space per dollar if you buy.

No, if he rents he has no equity.

"Why the BLOODY CAPS?"

You're new here, aren't you?  This is Brice RICHARD, man.

"If you are paying for a life insurance policy when you single, you are wasting money."

Unless you're a single parent.

"For many, it wasn't purely a financial decision in that they were in the sexual fog of the moment that led to their unfortunate current child-possessed situations.... "

ROTFL.  I have no personal experience with sex leading to a baby.

"Unless you're a single parent."

Yes (that's obvious).

I don't think Brice has children (that thought is too scary to entertain!).

Of course he has no kids.

Only Mary could pull that one off.

"ROTFL.  I have no personal experience with sex leading to a baby."

Wa ha ha.

Ha.

For 2 calculators that can help you make a decision whether buying is better/worse than renting:

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html#
http://realestate.yahoo.com/calculators/rent_vs_own.html

In the case of the graphical calculator from the NY Times, you can get an idea of the economics here in Denver. I'm paying $650/month in rent. Houses start at $200k. Take a look at the curve and see if it *ever* becomes economical to purchase a house.

That being said, your best bet is to use one of the many online calculators to determine whether renting or buying is better for you.

From a quick google search, here's one: http://www.move.com/home-finance/financial-calculators/rent-vs-buy-calculator.aspx

>>Granted, you have to pay someone somewhere rent to live, but it doesn't have to be 3 times the amount of a traditional rent payment for a mortgage payment.

Obviously, there is some magic factor that causes a mortgage to be undeniably worse than renting.

>>In addition, living in an apartment accentuates a SIMPLISTIC lifestyle from maintenance to cleaning.

There are these things called "condos"...

>>I'm pretty sure in large part the housing price bubble has burst at this point.

Not in Canada.

don't buy if the price bubble hasn't burst yet.  it will.

Ah, I was not aware Kenny was buying in Toronto.

In which case, all my estimates based on the American housing bubble are probably off-the-mark.  That's one reason they say in Real-estate, what matters is Location, location, location.

I lived in a very nice house in Maryland that I rented for 5 years, because I didn't like the local school district, I didn't trust housing values in that area, and I expected to move every year during those 5 years.

So there are good times NOT to buy a house, and this may be one of those times for you, Kenny.

I looked at the prices of houses adjusted for inflation, and if you bought in 1989 and sold in 2009, the amount that your house appreciated was a whopping 10% over the entire 20 year span.

What I'm most concerned about right now is that we may have a 1989 situation in Canada because of the artificially low Bank of Canada rate.

Mind you, what destroyed the American Mortgage market was not "artifically low state rates", what did it to us was the horribly lax approval process being used by CDO-driven loans.

If the Bank Of Canada has low rates, but a good approval process, now may still be a good time to buy.

But as I said, I don't know Canadian conditions.

And Brice is certainly right about one thing -- if your marriage situation is at all rocky, or your job situation at all unstable (over the next 3 years) then renting can turn out much better than buying.

>>If the Bank Of Canada has low rates, but a good approval process, now may still be a good time to buy.

The problem might be with the CMHC (Canada Mortgage and Housing Corporation) which insures the mortgages for the banks. 

http://network.nationalpost.com/np/blogs/francis/archive/2009/10/21/cmhc-canada-s-freddie-and-fannie.aspx

Exactly.  Thanks to the CMHC the Canadian approval process is even laxer.  If you make 70 grand a year and are breathing you can get approved for half a million.

There is *no* risk to the bank doing the lending.  The taxpayer is on the hook for it.

"you take the same risk renting - if you can't make rent, you're out on your ass."

My gf said this. But the missing part here is that in my situation I have X nest egg where a large portion of it would go into the house as a down payment.

Right now, I could get fired, quit, or whatever and I could still survive at current levels for over a year. If I actually trimmed back and moved for cheaper rent (no sense living close to a job I don't have) I could stretch that to two years.

It's all about control for me. My job now is really nice. But if that changed, I could find myself doing work I hate for people I hate more than the work. I don't like the idea of someone having that sort of control over me because I've become some sort of modern day indentured servant.

>>> They are idiots, and you shouldn't use idiots to make a generalization. You can rent a house for the same amount - or less, in a good neighbourhood.

Not in Vancouver, you can't.  Well, it depends on your definition of "good neighborhood," I hear there are some nice places in the Langley/Whonnock area...

>Exactly.  Thanks to the CMHC the Canadian approval process is even laxer.
Wha....

The CMHC

>If you make 70 grand a year and are breathing you can get approved for half a million.

This is complete and utter shite, and continuous your desperate desire to portray Canada's housing market as overvalued.

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm

http://www.cmhc-schl.gc.ca/en/co/buho/hostst/hostst_002.cfm#CP_JUMP_28119

Go ahead, fill your claim in there and see what you come up with. $70,000 -- let's say with no debt or expenses (completely unrealistic, but whatever) -- looking for a $500,000 mortgage. How does that work out for

The National Post article is *SHIT*, and you know, I worked for our largest bank and am pretty in tune with this. Banks are *burdened* by CMHC requirement for high-ratio borrowers, which is why they sometimes try to get you to engage in financial games to get outside of CMHC restrictions.

>There is *no* risk to the bank doing the lending.  The taxpayer is on the hook for it.

Another pile of nonsense.

As an aside, you realize that the CMHC imposes insurance premiums on borrowers, right? That they've made North of a billion every year for years and years and years.

You also realize that everyone else (ergo: not taxpayers) have been getting into the game. GE Capital is a big mortgage insurer now.

This all relates to how the banks have to book the mortgage. CMHC/GE isn't actually government mandated, but they need to do it for high yield borrowers unless they want to categorize the debt in an unsavoury way.

Perhaps he meant $70,000 per person = $500,000 for the couple to move into?

The usual rule is 1/3 your gross income can go to mortgage.  To keep the #s simple, say $2000/mo available for payments and 25yr mortgage, you can borrow about $350,000 if it's 5%. 

Anyway, as df said, the article is BS.  You're _required_ to get mortgage insurance if you pay less that 25% down (or maybe they lowered it to 20%?).  If you only have 10% down, you'll pay 2% of the loan value for insurance. I see they have higher premiums if your income is more tenuous.

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

>>In addition, living in an apartment accentuates a SIMPLISTIC lifestyle from maintenance to cleaning.

<<<There are these things called "condos"...>>>

Are you fucking kidding me? Condos have a monthly abortion payment called a "CONDO FEE."

That kind of real property purchase is the WORST investment of all....not to mention that CONDO FEES for most condo purchases INCREASE exponentially each year.

The exact numbers don't matter Kenny.
Just be aware that a bank will approve you for an amount that you would be nuts to actually borrow.

df thinks that entire article is shit.  I disagree(I've worked for a bank or two myself), but it really doesn't matter in your buy or rent decision and there is no sense debating the details of the CMHC in this thread.

Rising housing prices in the midst of a brutal recession and high unemployment?  Does that seem OK to you?  Something smells funny in the Canadian real estate market right now.  There is not much risk in renting for a couple more years to see how this plays out.

"brutal recession"

I don't see that, but perhaps it's because I live in Ottawa, where we have a large stable employer (teh gubment!!).

Restaurants are still full, stores are always full, people have their own cars, etc... So no recession here to speak of.

>Rising housing prices in the midst of a brutal recession and high unemployment?  Does that seem OK to you?  Something smells funny in the Canadian real estate market right now.

When you have more and more and more people desiring to be in the same area, prices appreciate, recession or not. We have a very high level or proportional immigration in Canada, leading to a lot of pressure on urban centers. We're a bit more immune to housing fluctuations because once settled people in Canada tend not to move much.

Compare that to San Francisco which saw a massive flood of new residents during the .COM boom, and then a mass exodus (as did all of California) after the bust. It's surprising that housing didn't tank far worse during that. We don't have those sorts of movements outside of maybe suburbs of Calgary.

>The exact numbers don't matter Kenny.

If you want to get insane mortgages, you have to put a down payment of more than 25%, freeing the banks from the fairly tight regulations of the CMHC (which is completely the opposite of what you said).

People who are a strong risk generally don't have 25% to put down, much less on a $500,000 house.

"Are you fucking kidding me? Condos have a monthly abortion payment called a "CONDO FEE."

That kind of real property purchase is the WORST investment of all....not to mention that CONDO FEES for most condo purchases INCREASE exponentially each year."

YOU KNOW THE CONDO FEE. YOU TAKE THAT FEE INTO ACCOUNT TO WORK OUT THE REASONABLENESS OF THE DEAL.

AND THEY DO NOT INCREASE EXPONENTIALLY.

"That kind of real property purchase is the WORST investment of all"

PLEASE EXPLAIN WHY THEY ARE THE WORST INVESTMENT OF ALL. AND THEY ONLY NEED TO BE A BETTER INVESTMENT THAN RENTING.

SINCE MY POSTS ARE NOW ALL CAPS, I CLEARLY WIN THE ARGUMENT!

OK, OK!! You win!!!

Now please stop.

The Canadian government (i.e us taxpayers) have *already* given the banks $75 billion to buy up toxic mortgages.  (The insane zero down 40 year ones.)

"Fairly tight" regulations, my ass.

"The usual rule is 1/3 your gross income can go to mortgage.  To keep the #s simple, say $2000/mo available for payments and 25yr mortgage, you can borrow about $350,000 if it's 5%."

That number indicates the upper limit that banks are willing to risk. It's not really related to whether it makes financial sense to the one paying the mortgage.

Toxic? Jesus, you should stay away from ridiculous "We're just like the US!" bullshit sites.

The government bought of mortgages during the credit freeze because the banks were basically out of money to lend, presenting a dramatic risk to the economy far worse than what would have happened. These aren't "toxic", and anyone who says that is a dunce.

Canadian banks will loan you six times yearly income. Say your family income is 100K, you can ask a loan of 600K.

Do not worry, house prices will always go up and up.

>Canadian banks will loan you six times yearly income. Say your family income is 100K, you can ask a loan of 600K.

More correctly 4x, moron. And that's if you have $0 debt (which is never the case).

>>Do not worry, house prices will always go up and up.

So will my money if I put it into savings account at 0.05% interest.  What's your point?

I suspect he was being sarcastic.

Government mouthpiece has no credibility. The 6X is what the branch manager told me. The published number is indeed 4X although.

Government is determined to prop the house price by maintaining the interest low. BoC does whatever the government wants.

I predict that the high price will stay for a while because BoC is not willing to allow CAD go up. Money will keep flowing into Canada under the anticipation that CAD will eventually appreciate against USD.

Next spring will be very interesting to see all events fold.

Ha ha ha. You never fail to disappoint. What a dink.

>>> CONDO FEES for most condo purchases INCREASE exponentially each year

In case it wasn't clear before, this is confirmation that pseudo-Brice is trolling.

Depends on who is on the association board.  If it's full of people who want perfect landscaping and color-matching awnings and holiday parties, then yes, your costs will always be increasing.

But exponentially?

Okay okay.....exponentially in its connotational context not its denotational context.

The point was that in addition to a mortgage fee with a condo, you also have to be a condo fee which is increased each year.....I don't know how any kind of condo can be an investment when, even after it's paid off, there's still a fee of some sort attached to it either monthly or quarterly.

That seems like a rip off to me.

If you're the type of person to outsource all your maintenance (lawnmowing, snow removal, etc) and don't ever DIY, the condo fee is typically not much more than what it costs to have a lawn service, snow removal service, etc.  You also don't ever have to pay up front for big ticket maintenance items like a new roof - that's paid for out of the condo association's funds.  So you are compensated for the fees you pay.  It can be a good idea for the right kind of person.

Yes, that describes my condo fee.
It's reasonable and covers stuff I'd have to pay for anyway.
(And it's gone up only 2% a year.)

I think where people get ripped off is when it covers stuff like health clubs, party rooms and fancy landscaping that you probably wouldn't decide to pay for if you had a house.

"The point was that in addition to a mortgage fee with a condo, you also have to be a condo fee which is increased each year.....I don't know how any kind of condo can be an investment when, even after it's paid off, there's still a fee of some sort attached to it either monthly or quarterly."

You are clueless.

Houses have maintanence costs too.

It's possible that sometimes the fees are too high. Note, too, that often there are also assessed fees in addition to the monthly fees.

Of course, you never pay-off rent and the rent is typically much, much larger than the condo maintanence fee. And the cost of the fee is offset (more or less) by the (typically) rising value of the property.

The problem with condo fees is that you get one year where something unpredictable drives the maintenance costs over budget, so they gotta raise the fees.  Then, when they've recovered the excess, they don't bring the fees back down because they're a god damned committee.

As always, depends on where you live, how condos are covered by legislation.

Here, your fees go to ongoing expenses and each strata is required to have some minimum contingency fund.  If your fund is low, then part of your ongoing expense is a contribution to the contingency fund.

If something exceptional needs fixing and the contingency fund can cover it, then that's what's typically done, then the strata fees build it up over the next few years.

If there's not enough in the contingency fund, a special levy has to be passed which is a one-time payment to cover specific repairs.  In some cases, if there's money in the contingency fund but not enough, or it would leave it at $0, stratas will do a special assessment for some of the cost and take from the contingency fund for some.

The strata property act here puts pretty strict requirements on what can be done.  Sure, if the council wants to do dumb stuff and a bunch of the owners go along with it, your fees can go to stupid stuff, but it doesn't happen too often.

What happened when I bought my townhouse in Raleigh was the builder started the association, and in order to attract buyers, under-specced the monthly fees. 

So it was $94 a month for a year or so, until the builder turned control over to the homeowners.  We then found a management company, who did an analysis (cost to replace all the roofs, repaint, cut the grass, insurance, etc) and found the builder-estimated fee was woefully inadequate. 

The real cost of doing all that was about 50% higher, so fees had to be increased over a couple of years to $149/month.  Since then the fees have increased in line with the cost of labor & materials (which were being driven by the US construction boom and the Chinese demand for concrete & steel)

Perhaps this is what Brice saw - the huge jump during the transition from attractive-but-artificially-low to market rates?

>>> under-specced the monthly fees.

That's pretty standard here, the developer sets the initial fees on the low side.

WOW!  A long thread on CoT!  Fuck YEA!  Finally!

fucking hell. is this what you cunts do while I'm sleeping?

No wonder america is so fucked.

Come on, it is almost at 100 posts.

if you want a long thread, start something supporting creationism or intelligent design.

So the latest reports are in for the first half of November.

Prices here in Toronto are 10% higher than last year.

http://www.thestar.com/printarticle/727465

Of course, they don't say that it isn't 10% higher than 2007, nor do the discern whether more higher value homes are being sold, but still...

Religion, politics, money.  That's what people are both interested in, and have some strong opinions about.

This makes a nice mix for long debates.  Sound and fury, signifying nothing mostly, but long.

How did I ever leave out sex?  I must be slipping.

Sex, politics, money, religion.  There.

"The problem with condo fees is that you get one year where something unpredictable drives the maintenance costs over budget, so they gotta raise the fees.  Then, when they've recovered the excess, they don't bring the fees back down because they're a god damned committee."

The committee members have to pay the fee also. That means there is some brake on increases.

The builder low-balling the fee is one problem. And, actually, the fee can be low-balled in established (ie, old) condominiums too.

The fee issue might not be optimal or without problems, but that doesn't mean it's worse (universally/absolutely) than renting.

Note that, typically, the way to avoid the fee is to buy a house, which tend to be much more expensive than condos. (And houses often have higher taxes too.)

Put another way, if the purchase price of a condo is about the price of a house, it probably would make more sense to go with the house. Not because the maintanence costs are less but because you control the cash flow.

Bankruptcies in Canada went up by 43%.

http://www.cbc.ca/canada/nova-scotia/story/2009/11/20/bankruptcy-statistics-september.html

WTF.  How are housing prices still going up?

House price goes up because government wants it.

Nobody can stop the government. Remember this is Canada.

As much as you apparently hate the US, Rick, I'd think you'd be a little more careful about Canada.

Maybe you just hate every place, that would explain it.

STB, where did you get the impression?

I love Canada government. My house has appreciated 50% since I bought it. Very nice. Beat every investment I ever had.

Oh!  Sorry about that.

"Remember, nobody can stop the government, this is Canada" -- sounded like one of those "V For Vendetta" paranoid "the people need to take back their government" comments.

But if you LURVE Canada, and want to raise its babies, I guess you meant something else.

>>> House price goes up because government wants it.

Wow, you've said some amazingly stupid things over the years, this is a contender for the stupidest.

Canada government wants an asset bubble to grow the economy.

Just like what US government did in 2002.

In 2002, US has nothing to sell to the world. How can it grow its economy? By creating a house bubble it achieved amazing growth between 2003 and 2006.

Now in 2009, US is not buying Canadian goods. How can Canada grow its economy? Yes, repeat what US did in 2002.

I think your lurve is blinding you.

">>> House price goes up because government wants it.

Wow, you've said some amazingly stupid things over the years, this is a contender for the stupidest."

Ok. Once again this "Rick Tsang" is not the "Rick Tang" who vistied Off since the beginning.

Sigh.

Wow, what an amazing coincidence: two gay Chinese guys named Rick Tsang with identically bad English skills post on the same obscure forum.