Personal Finance

Canada’s Housing Bubble Is Stretched to the Limit

Posted by Robert Morely - TheTrumpet.com

on Thursday, 9 February 2012 7:00

Houses-NewZealand

 

Vancouver the second least affordable city in the World. But perhaps the biggest sign of a Canadian housing bubble is debt. The average debt burden of Canadian families stands at a remarkable 153 percent of disposable income—and growing. If the bubble bursts millions of Canadians will be left paying a fixed mortgage on a rapidly depreciating asset that will destroy their financial lives.

 

Canada’s Housing Bubble Is Stretched to the Limit


Do the math: If you earned a salary of $50,000 per year, and bought an average house, it would cost almost $300,000 (in Regina a 900sq ft house built on a small lot in the 1930’s goes for more than $200,000). In Canada, this salary puts you in the 20 percent tax bracket. That means you really only bring home $40,000 per year, or $3,300 per month.

 

Now look at your mortgage costs. A 4.5 percent, fixed-rate, 30-year mortgage has a monthly payment of $1,520 per month. Almost half your total income goes to paying just the mortgage. That’s why the mortgage industry started providing zero-down 40-year loans, before the federal government banned them for being too risky for consumers.

 

If you are like many people, and don’t have a 20 percent down payment, you will need to buy mortgage insurance. Estimate another $250 per month if you have close to 20 percent. If you only put down 5 percent, you will need to cough up closer to $700 per month.

 

Then there are property taxes: Add at least another $500 per month. Property insurance: Another 250 per month.

 

You haven’t even begun to consider upkeep costs, or home owner’s association fees, and you are already paying $2,520 per month. If you only put 5 percent down, you would be paying $2,970 per month. That would leave you a miniscule $330 per month, all of which would probably be needed to pay utilities.

 

….read it all HERE

Plunge-o-Meter Predicts Real Estate Lows of Spring 2005 to be revisited on the way down

Posted by Canadian Housing Price Charts

on Wednesday, 1 February 2012 10:58

 

2551186 orig

 

The chart above shows the detached housing prices for Vancouver, Calgary, Edmonton, Toronto, Ottawa* and Montréal (*Ottawa are combined residential). In December 2011 Canadian real estate prices resumed the trend down (Click HERE or on the image for Larger Chart) especially in Toronto, Ottawa and Calgary with M/M drops of 6%, 4.4% and 3.6%. Year end sales dropped off (Scorecard) and we will have to wait for January-February figures to get a glimpse of buyer appetite which certainly is not being held back by the cost of money (Yield Chart). Borrowing costs are low and asset prices are high. Should you be a buyer or a seller… start with figuring out your ROI here.

 

Jim Rogers: Paramount Advice to All Investors

Posted by Jim Rogers via Michael Campbell's Money Talks

on Tuesday, 30 November 1999 0:00

In the Investment World, Rogers is remarkable. Unusually gifted. He is a legend. 
 
He first became recognized when his Quantum Fund averaged 420% a year over a 10 year period while the S&P 500 averaged just 5% a year. More recently Rogers forecasted the China Boom and the Commodity Boom well before they began. 
 
On May 2012 he remarked during an interview with Forbes Magazine that “there’s going to be a huge shift in American society, American culture, in the places where one is going to get rich. The stock brokers are going to be driving taxis. The smart ones will learn to drive tractors so they can work for the smart farmers. The farmers are going to be driving Lamborghinis.
 

Jim Rogers: Paramount Advice to All Investors

 

 
 1. To avoid making mistakes in this and future investment markets keep an eye on the Federal Reserve and Washington. 
 
“Mr. Bernanke has no clue about economics or currencies, and no clue about how markets work. You have to be very careful and watch those guys. Many people for some reason have some kind of faith, even worship of the Central Bank like they know what they are doing. Its has only been in the past few decades people even knew who Central Bankers were. Nobody knew about these guys 100 years, 80 years ago yet know they have become exalted and that is a bubble. 
 
Fortunately Central Bankers are going to pop and this particular crisis may well lead to it. In America we’ve had 3 Central Banks, the first two disappeared and this one will too in my view. They are making such horrible mistakes. “
 
 2. “The other thing to watch out for is please don’t follow the crowd. When everybody is doing something, especially these days, you have got to go the other way.”  Gold was up 12 years in a row. “I know of no asset in World History that has been up twelve years without a decline. So Gold has been acting very very strange in the last twelve years and It had to go down for a while. Well it has.” 
 
“Be very very careful when something is accepted, this is age old advice but it is especially true in the markets today. Like the Japanese Yen right now, when over 90% are bearish then you have to go the other way.” Jim is long the Japanese Yen. He knows he may not be right but he knows he will have made an intelligent decision. 
 
3. “There is always Extraordinary Change Going On.” Rogers goes further and says that there has been no time in his life when there hasn’t been “Change Confusion & Complexity”.  
 
streetsmartsWriting is his book Street Smarts he makes the point that:
 
“You can take any year you want in history, then look at the world 15 years later and it is nothing, NOTHING,  like it was before”
 
As an example in 1930, 40, 50 we had Depression,  then War, followed by the beginning of suburban America. Just dramatic changes. “Nothing we know today , everything we think is true today is going to have changed 10, 15, 19 years from now. It always, always, always has been and always will be.”

 
4.  ” The world changed in the 1920’s, 30’s,as Capital moved from the UK to the US exacerbated by a financial crisis and mistakes made by the politicians. We have another change taking place in World History right now. This time Capital is moving from the largest Debtor Nations to the largest Creditor Nations in the world  now which are China, Korea, Hong Kong, Taiwan, Singapore, Japan. 
 
The assets are in Asia, you know who the debtors are. You just have to look out the window and you will see some of it.”
 
5. “This is the first time in recorded History when nearly every Major Central Bank is printing money trying to debase their currency.” Japan was first, the US second, then the British followed. We have a lot of money being printed around the world. “If you ask me the US has been the major beneficiary because people are afraid of other currencies at the moment.” I expect this to end very badly because throughout history when you have had artificial money printing it has ended very badly in the country that it has happened. But this time it is happening in the whole World!”
 
“Some people are having a lot of fun right now. If you give me a trillion dollars I will show you a very good time. But I don’t think it is going to last.”
 
I hope you are worried, you should be.”
 
 

About Jim Rogers

In the Investment World, Rogers is remarkable. Unusually gifted. He is a legend. 
 
He first became recognized when his Quantum Fund averaged 420% a year over a 10 year period when the S&P 500 averaged just 5% a year. More recently Rogers forecasted the China Boom and the Commodity Boom well before they began. 
 
On May 2012 he remarked during an interview with Forbes Magazine that “there’s going to be a huge shift in American society, American culture, in the places where one is going to get rich. The stock brokers are going to be driving taxis. The smart ones will learn to drive tractors so they can work for the smart farmers. The farmers are going to be driving Lamborghinis.