House prices 20% overvalued in Canada, Fitch warns

[Panzer130]

Did you get your property assessment yet like a few people I know who are still in shock over it? You are looking at at least $3000 a year right? Not a huge deal but hardly "free and clear" either. No problem, just delay replacing the furnace or fixing the roof for another year....maybe get some meth head renter in your basement.

I got nothing against owning vs renting. Not when it's over valued by at least 40% though. Up to you it's your money.

Do you actually think your rent is not paying that property tax? Anyone with half a brain knows what the cost of keeping that home is and charges rent accordingly.
As you happily pay rent you are paying off my mortgage and my taxes. When that is done, I boot your butt out the door and capitalize: or I let you stay and live off your rent on my paid for home.

At the end of 20 years of renting, what do you have? Nothing.
At the end of 20 years of a mortgage, I will have a home that I can keep for roughly 3K a year, or sell and cash out.

[atenbacon]

Did you get your property assessment yet like a few people I know who are still in shock over it? You are looking at at least $3000 a year right? Not a huge deal but hardly "free and clear" either. No problem, just delay replacing the furnace or fixing the roof for another year....maybe get some meth head renter in your basement.

I got nothing against owning vs renting. Not when it's over valued by at least 40% though. Up to you it's your money.

Wow, your understanding of taxes is poor **I refer to a previous post of yours** (You pay rent, the cash you pay for that rent goes to your landlord who, **drumroll please** pays taxes on the house he rents to you.) Your line of thinking is quite strange, you have somehow explained that having a house fully paid off and mortgage free is a bad thing? You also give the impression that you think that you pay no taxes by paying rent? Maybe you are living at your parents house? I just cannot see any other way that you would draw such an odd conclusion. If that is the case then I will concede that living at mom and dads house in the basement certainly is financially better than owning a home that is mortgage free. But please, feel free to explain what ever it is you are trying to say here and enlighten me to the perks of renting a home (Please don't insult everyone's intelligence by comparing the rental of a 300 sq ft picker shack at $450.00 a month to a 3000 sq foot detached home) If you want to show any form of comparison please cite identical examples.

Not that you will read or even comprehend what is about to be said but what the heck, I'll split my answers up into each question you asked, you can then rip them apart using some messed up logic and made up scenarios. Please throw in examples of interest rates climbing and poor trends in real estate in other countries. Maybe you can tell me that I should have invested in dividend yielding stocks or that I can live comfortably by living with twenty seven room mates...Blah Blah Blah..

I did get my assessment, why would it shock me? It goes up some years and goes down others, but like I said previously, it really doesn't matter what it says, I am not selling any time soon.

No, $2350.00 for the year, that works out to roughly $195.84 a month I have to pay for roads etc. as you touched on earlier.

You got me there on the free and clear, you look at $195.84 as a huge monthly expense, but please allow me to show you how I see it. 15 years ago I paid $950.00 a month for a two bedroom apartment in an apartment block, I now pay $195.84 per month for a single family detached home. The way I see it, I pay $750.00 less per month. If I was to rent this home at todays rates I would be paying $2700.00 a month. Free and clear? No, but then again, my RRSP's and investments make more than that as well.

Delay replacing the roof and furnace? Why? Like most, I budget for these expenses and save up over the long term. It's really quite easy to do. I also budget for upgrades, landscaping and other repairs.

I have a renter, gladly a wonderful lady that has rented here for 10 years now, last time I checked she did not do meth. What she does do is pay her rent on time and the $750.00 per month covers my property taxes and socks away the cash to pay for that furnace and roof you are so worried about to the tune of about $6500.00 per year. My work income goes towards RRSP's and investments, when I retire in 25 years I'm sure I'll feel really dumb for buying a house.

So yes, you are correct, I am not free and clear, what I am is the guy that is actually being paid to live in my home. So as I said, sure glad I didn't listen to people like you way back then.

[OgopogoO]

Imagine what all that money they saved over 20-40 years could do when properly invested. Dividend stocks have historically outperformed real estate. You never have to deal with anyone, never have to fix the roof or replace the furnace, don't pay property taxes and can liquidate in a day.

Maybe a basic math lesson will help. If 10 years rent does not pay for the house you are probably better off renting. That used to be a very common calculation but now a days you never hear it because it's just not possible anymore. Realtors would make the mere mention of it illegal if they could.

Your parents probably still try tell you that buying is cheaper than renting over the long term because that used to be true....30year ago.

Perfectly stated! The problem with most real estate cultists and realtors is that even when confronted with basic math they will still deny the advantages of renting & investing over buying in a bubbly market. Perhaps a rent-vs.buy calculator might at least show them how off the mark they are. Just punch in the average house price in Kelowna: $500,919 (source: my favourite realtor clown family, the Kriegs: http://wolfhomes.com/blog/)

Here is the rent vs. buy calculator. Have fun, bubble deniers, real estate cultists and other housing-always-wins delusionals:

http://michaelbluejay.com/house/rentvsbuy.html

[atenbacon]

Perhaps a rent-vs.buy calculator might at least show them how off the mark they are. Just punch in the average house price in Kelowna: $500,919 (source: my favourite realtor clown family, the Kriegs: http://wolfhomes.com/blog/)

Here is the rent vs. buy calculator. Have fun, bubble deniers, real estate cultists and other housing-always-wins delusionals:

http://michaelbluejay.com/house/rentvsbuy.html

What would the rent be on a home that is worth $500.919.00? Just wondering.... I'm guessing in the 2400 to 3500 range per month? I mean at that price, even in Kelowna you are looking at a detached home with 3 bedroom 3 bathroom 2 story home and on top of that it would have a basement suite that you could rent out to supplement your Mortgage payments, and that is at the absolute minimum. I can see one in the mission area right now that is only going for $479,900.00 and it has a home theatre built in.

Most renters I know either live in a basement suite, duplex, tounhouse or a condo, hardly a fair comparison to a split level single family home, that is unless in all fairness you also factor in that the home owner is renting their basement suite to the very same renters that are supposedly saving a bundle. Or maybe use the value above for a condo, which would be somewhere in the range of way the heck under the price of $500,919.00. I do have a friend that used to pay $1375.00 per month to rent a town house, it was listed for $285,000.00 to buy, even with a 30 year mortgage(Beyond me why anyone would want the term to be that long).. it would take ony 5 years to make owning more profitable.

But please, run the numbers using fair examples, so as to make a comparison and show us how you are way ahead by renting. I think maybe the palace you are currently renting is stunting your powers of calculating as well as making comparisons that are reasonable. If you don't make fair comparisons, you are simply lieing to yourself, I already know through experience how my decision panned out and I am happy with it.

[dreamon]

Perfectly stated! The problem with most real estate cultists and realtors is that even when confronted with basic math they will still deny the advantages of renting & investing over buying in a bubbly market. Perhaps a rent-vs.buy calculator might at least show them how off the mark they are. Just punch in the average house price in Kelowna: $500,919 (source: my favourite realtor clown family, the Kriegs: http://wolfhomes.com/blog/)

Here is the rent vs. buy calculator. Have fun, bubble deniers, real estate cultists and other housing-always-wins delusionals:

http://michaelbluejay.com/house/rentvsbuy.html

Can someone give accurate information as to the rent amount on the average Kelowna house price of $500,919?

[TylerM4]

Lol....we'll see.

So you expect a greater than 50% price reduction? Cause that's what it would take at this point for me to regret that decision. By the time I factor in the cost of rent payments during that 8 year period (more than home maintenance and tax costs) it would need to be a at least a 60% reduction and it would need to stay that way (not like the US market than has now recovered a lot of what was lost) before I would regret the decision to buy.

[cv23]

Here is the rent vs. buy calculator. Have fun, bubble deniers, real estate cultists and other housing-always-wins delusionals:

http://michaelbluejay.com/house/rentvsbuy.html

Very interesting. This is a great tool
When you unlock the ridiculous things and put in real numbers it says I'm $1.6mil ahead by buying in 30 years and $260k ahead by buying in just 10 years. Even in 5 years buying is $100k ahead of renting. It actually says that by buying a person would be ahead in just 2 years.

[TylerM4]

Very interesting. This is a great tool
When you unlock the ridiculous things and put in real numbers it says I'm $1.6mil ahead by buying in 30 years and $260k ahead by buying in just 10 years. Even in 5 years buying is $100k ahead of renting. It actually says that by buying a person would be ahead in just 2 years.

That was going to be my same feedback. The default values in that calculator are crazy. Default property taxes, insurance, etc are more than double normal costs in BC.

[GrooveTunes]

Good read today. Looking forward to this happening country wide.

http://www.greaterfool.ca/2014/07/25/knowledge/#comments

[snowtires]

Here's from another perspective. I bought my house in 2008 when the prices were at a peak. I overpaid and renovated, even with the renovations my house is barely worth what I paid plus renos
Probably down about 20%.
If the prices drop another 20% then that's bad too. Now I will have to wait 5 more years before I move into another house to have enough equity.
Bad news, I'm stuck here for a while (I like it here tho, that's why I bought the place)
Good news, when I want to buy my new house it will also cost 20% less money
Other news. If I rented I would be down way more then 20%

So there

[TylerM4]

If the prices drop another 20% then that's bad too. Now I will have to wait 5 more years before I move into another house to have enough equity.

Thanks for your perspective.

I did want to comment on the above statement tho. Just wanted to remind you that when you buy and sell within the same market, the state of the market doesn't really matter as much. If your existing home is worth 20% less, so is the new home you want to buy. If you wait until your home recovers that 20% - the new home you want to buy will also have recovered that loss and will cost you 20% more.

The only benifit to waiting is that you'll pay off some of that debt 1st.

[canada bound]

You still get to live in one of the premier spots in the World!

[LANDM]

In Kelowna, we're already off the 2008 top by a significant margin. It will get much, much worse. The same real estate cultists who have cheered on this bubble will be the first to deny it when it pops... all the way down. It's not a matter of if, but when. The higher it keeps inflating in Canada's bubblicious centres the more drastic the burst will be.

Millions of Canadians who overleveraged themselves with mortgage debt will learn a too-little-too-late lesson. Then the blame game will begin. Meanwhile, those of us who prudently stayed out of the circus profiting even more than the danger-fraught housing gains with liquid, diversified, balanced portfolios will nod wisely at each other. Forgive us if we sport a barely visible smirk then.

And forgive us if we sport a barely visible smirk when you are wrong yet again.
So, it's much much worse now than the beginning of 2014, eh?

Tick tock, broken clock. Don't worry one day you will be correct. You and Garth.

And I'm not being facetious.....you both actually will be right one day. But in the meantime......well, just like The Garthster....every month from the very early 2000's to 2008 it was doomsday. And finally he could pat himself on the back and shout from his soapbox....."See, I told you so!!"

[Fallguy007]

And I'm not being facetious.....you both actually will be right one day. But in the meantime......well, just like The Garthster....every month from the very early 2000's to 2008 it was doomsday. And finally he could pat himself on the back and shout from his soapbox....."See, I told you so!!"

A buddy of mine is buying a house that was built here in 09, The people that own it are making 100K over what they had into it from 09 IMO, thats after fees and what not.

[forum]

The government kept interest rates low so that half of Canadians carrying a mortgage wouldn't go under water like the USA did when their market corrected. They also didn't want to cripple the Real Estate Cartel.

At least the USA took it on the chin and let it crash. While that happened our government let it's people pile on more debt with cheaper money. Now we carry the most debt of any of the G7 countries. Think you're smart for taking on so much debt? If you're really smart, pay all that debt off by next year.

If you have a debt on something, you don't own it until the debt is paid. The bank loves charging you interest, and then taking the house away from you when you default. It's great for them!

I feel sorry for people that are in denial and have so much debt. It's gonna tear your family apart.

Oh well, record debts, record divorces. No shame for some people. It's their right after all!