Comments on: Housing Bubble

By: dee

dee — Thu, 02 Oct 2008 15:20:57 +0000

FINALLY!
someone (GAIL) has said in plain english what we all need to hear.

thank you thank you thank you.

By: Blaine

Blaine — Thu, 02 Oct 2008 02:57:37 +0000

Gail,
Don’t worry, the American government is here to bail out the banks! Just like you said, the banks overextended everyone and now all that credit is going bad so the banks are tightening up on lending and it’s tanking the economy. No problem, the US government is going to spend $700 Billion of taxpayer money to buy up all that bad debt from the banks so that they’ll ease up on lending. This way, the credit keeps flowing and so does that falsely inflated world economy!

By: Karen

Karen — Thu, 02 Oct 2008 02:03:48 +0000

I remember when we bought our house just as we got married. I owned a condo, the sale of which paid for the wedding and the bulk of our down payment on this house. We felt good that we chose NOT to buy at the maximum purchase price the bank offered, although other people balked at us not buying bigger. We were glad because we weren’t left house poor. We’ve accumulated some debt now and are refocusing to pay it off (thanks for the inspiration, Gail & responders!). Everywhere we look we see people of the same age and income level in serious debt situations with no plan. Thankfully we have a plan!

By: Rita

Rita — Thu, 02 Oct 2008 00:04:44 +0000

I used to own an investment property in downtown Toronto that I was renting mostly through a free advertising on a Craigslist. Finding good tenants was very easy back then (from 1998 to 2007). I sold it in Dec 2007 for a very good price, without the real estate agent and it took less than 20 days.
How the things have changed over the last 9 months.
I checked the Craigslist yesterday just to see if I made the right decision to sell, and indeed I did.
Where there were maybe 20+ ads offering the condos for rent, now there are dozens upon dozens of them..Some of them read “for rent or for sale”, so obviously, people are already stuck with properties they can neither unload nor profitably rent out.
Wow, that must be really scary, when you have to pay 2 mortgages – one on your own house and another one on your rental..Just want to wish everyone the best of luck in these uncertain times..

By: Stephanie H.

Stephanie H. — Wed, 01 Oct 2008 23:55:48 +0000

Personally I never have liked big houses. A well designed small house can actually feel larger than a mid size house that is poorly designed. I grew up in a 1300 sq ft house and it felt huge. Occassionally it would have been nice to have an additional room but we didn’t need it. The house I just bought is about 1100 sq ft which is plenty. Another problem with a bigger house is that you have to clean it. Also if you have a smaller house there is also less space to put junk.

By: LiveLikeAEuropean

LiveLikeAEuropean — Wed, 01 Oct 2008 19:45:55 +0000

To answer a previous question – the 35% refers to ALL costs associated with owning a home – including mortgage payment, insurance, taxes, condo fees, maintenance…etc.
Great post once again Gail! My only frustration…all I would like is a simple, modest home (a bungalow would be a dream)…but in my neck of the woods starter homes (including townhouses and condos) are unaffordable…even for a family who makes a 6 figure income. Sigh – guess it’s all about patience at this time…and relief that we didn’t fall for the “0/40 hurry now cause prices will rise” sales pitch!

By: Sandra

Sandra — Wed, 01 Oct 2008 19:23:53 +0000

We are very lucky as we bought our modest 3 bedroom semi in 1985 for 82.5 We had to put down 25% Very difficult at the time. We have raised 3 teenage daughters in this 3 bedroom 1 bathroom house. Everyone says we should have moved and bought bigger. We did not and now are mortgage free while everyone else has huge mortgages. The good thing is we wont have to downsize cause weve lived downsized since day 1.
I cross my fingers and hope others will not loose their home.
Again Gail Love your show and cant wait for the new episodes to start on october 8

By: Karen

Karen — Wed, 01 Oct 2008 18:33:01 +0000

What a great topic!

Debbie is right when she says that Calgary has a severe case of “affluenza”. I work in the oil patch, have since the mid-80’s, and I can remember $10 a gallon oil and what it was like to go years without a raise. Bonuses & stock options were for the mucky-mucks, not for us regular Joes.

The last several years have been very prosperous in the energy industry in Alberta and anyone who is about 35 or under has lived the life of yearly bonuses, stock options, big raises and plentiful jobs. Many of the people I work with have big, new houses, new cars, expensive trips, the latest toys & gadgets.

They would not be happy settling for a house like my 1140 sq foot, 30-year-old bungalow that I paid $100K for 12 years ago and paid off recently. They had to have the 2000+ sq foot home on the golf course or in a newer neighborhood with a more prestigious address. I’ve worked with several people who claimed they had mortgage payments of over $2000 a month….I just can’t imagine!

What will happen to these folks when the down turn comes, how will they cope? At least, like one person has already said, I can sleep at night knowing I won’t have to sell my home unless I want to, not because I can’t afford it. Our home might be humble, but it’s ours, and no one can take it away!

By: chloe

chloe — Wed, 01 Oct 2008 18:23:56 +0000

heard you on the radio this morning Gail – great as always. As much as I know we need that $700 billion bailout, sometimes I think that the we & the financial industry need to be accountable for our free spending ways…

By: Lisa

Lisa — Wed, 01 Oct 2008 18:02:43 +0000

While I agree that alot of people were very careless getting in over their heads over the last few years; I don’t know if it was all of the people simply buying a home without a down payment or a 40 year mortgage that drove up the prices. I think the whole “flip” a house had a lot to do with this. Tons of people wanted easy money by buying some run down house and doing some maintenance on it and then selling it for a fortune making sometimes $100k for a couple of months work. Some people had no choice but to pay the prices to have somewhere to live with their family when they moved to where the work was as there was a complete shortage of rental spaces in certain areas.

So I think the whole flip generation has had an impact on our housing prices as well.

By: Frugal Trenches

Frugal Trenches — Wed, 01 Oct 2008 17:45:24 +0000

Absolutely wonderful post, the banks & people need to re-think how we think, feel & use money asap.

By: MadeMistakes

MadeMistakes — Wed, 01 Oct 2008 17:17:12 +0000

Gail, great post as always, but I had to laugh when I got to this part:

“The thing we need to do is to recognize the mistakes we’ve made and take our best shot at protecting ourselves and planning for the future. This We-Can-Have-It-All-At-The-Same-Time crap has to stop.

We can have it all… but not ALL at the same time. We have to make choices.”

Only because, yesterday I started my own blog, entitled “Making up for Past Mistakes,” for those exact same reasons. We want more, but realize we won’t get it the way we’ve been going…we have to work hard to clean up our acts, then start fresh and make the RIGHT choices!

Thanks for the advice that you’ve put out there, you’ve helped me get off to a good start.

By: Michelle

Michelle — Wed, 01 Oct 2008 16:58:49 +0000

I think the homeowners who don’t have a grasp on cost are the ones who received help for their downpayment or had parents co-sign. If you need this help there clue #1 that you can’t afford it!
They can’t handle the payments because they take hand-outs from parents and don’t know the value of a dollar simply because they didn’t earn it.

I see a ton of younger people who have the biggest house, trendiest furnishings, biggest vehicles, etc, just merely because they feel they’re entitled and they have money still from parents. They want to come across as the Joneses but you can see they scramble to watch that every bill is paid on time and are super-stressed.
What happened to modesty? It seems the majority are either extremely frugal or extremely extravagant.

By: Rebecca

Rebecca — Wed, 01 Oct 2008 16:45:21 +0000

When I looked at housing prices over the past few years I was wondering, “How could I ever afford that?” That’s because I was thinking with a hefty downpayment in mind – the people driving up the prices were those willing to pay anything as long as they could get a giant home loan.

By: Debbie

Debbie — Wed, 01 Oct 2008 16:33:03 +0000

Wonderful article, Gail. Here in Calgary people have been suffering from a serious case of “affluenza” for the past few years. I think a lot of them are starting to get a reality check. Those stock options they thought were so grand are not looking so fabulous lately. Many of them are too young to remember the late ’80’s.

I heard a segment this morning on the financial news that some (if not all) of the credit cards companies are going to be cutting people’s limits. $10K limits will drop to $5K, $5K to $1K, etc. I would love to read your thoughts on this.

I consider hubs & I lucky that we bought our home before prices started their major increases (2003), we bought well under what we could have been approved for, and when we renewed this year we (voluntarily) increased our payments.