Comments on: Priced out of the market? Think Again

By: Randy B.

Randy B. — Fri, 01 Apr 2011 07:22:14 +0000

So Joel, am I understanding you correctly? If I had taken your sage advice just 9 short months ago and bought that ‘fixer-upper’ in Big Gheddo for $350k…I’d ‘only’ be down $30-55K by now? But you’re absolutely certain we’ve now bottomed right?

And who cares, cause I financed it all and so I really have lost nothing…just the bank’s money. Right? Except it has left me so depressed that I don’t even shovel the snow away, and I can’t afford a lawnmower for summer.The ty-wrap looks like as far as I’m going on this reno cause I hate sinking more cash into this dream of home ownership you sold me on. Looks like we’ll fit right in…Tyvek siding and an overgrown lawn.

But I really just need to think long-term and if interest rates rise above historical lows (no-brainer) then all I need to do is add two more boarders? But Joel, I’m sick of the two smelly ‘mates’ you advised me to put in the basement already!

I guess the wife and I and two girls could all move into the master bedroom…at least we would still have one bathroom where the boarders hadn’t peed up the walls. But they are cleaning us out of our last drop of milk and jar of vegemite constantly! Please advise Joel!

By: Joel

Joel — Mon, 21 Mar 2011 21:10:17 +0000

Correction:

We are only allowed mortgages where less than 20% is put down on mortgages for 30 year time periods.

By: Joel

Joel — Mon, 21 Mar 2011 21:09:25 +0000

Hi Karen:

Sure, this article was written nearly a year, so we know also are only allowed mortgages over 30 Year Mortgages.

Another thing that has changed is houses have dropped, it is very common to see homes now in the 295k-320k range, will will make a difference.

It should also be considered that the amount you can qualify is not what you should necessarily buy. Every situation is different, and any financial service provider should consider this when dealing with clients.

Here are some higher calculations as you would like:

I didn’t do a four percent increase, but here are some higher ones that should be considered.

5.5%-$1973.68
6.5%-$2192.41
7.5%-$2419.86

That should give some good context, of course this shouldn’t derail people from home ownership. It just means you should take precautions. Buy a little lower, take on a border. Again, all situations are different. There isn’t really a one size fits all.

Hope that helps

By: Karen S

Karen S — Mon, 21 Mar 2011 17:11:32 +0000

Joel in the interest of educating, perhaps you would also like to do those calculations over again using higher interest rates, which are inevitable…let’s say, two percent, and four percent higher. The optimism of your article is nice, but I would love to see the whole picture.

By: Karen S

Karen S — Mon, 21 Mar 2011 17:00:19 +0000

Great discussion going on here; on reading the article I immediately wanted Joel to do some research and find out what percentage of the population actually has a $55000 income…As a single adult in Revelstoke, I have, many times, be-moaned in the impossibility of affording a house here. My line of work is far from service industry wages, yet I still fall far short of the income needed to make an old, run-down, badly-in-need-of-updating house affordable in Revelstoke. The affordable housing dream died here (even a committee formed to address just that can’t come up with anything that flies) and will send a lot of people packing who would love to stay; eventually, me included. “The lifestyle” will wear thin chained to the two possibilities: an unaffordable mortgage, or a life lived renting a bedroom in a shared house.

By: Joel Olson

Joel Olson — Wed, 08 Sep 2010 06:37:18 +0000

Randy:

Thanks for your responses.
You clearly have your mind made up on a number of things.
I disagree, but you are free to think how you like.

And, yes I do tell client we have historically low interest rates and they will need to account for much higher interest rates in the future. I consider clients who have come under my care, well taken care of and prepared for the worst case situations, should they happen.

By: Randy B.

Randy B. — Wed, 08 Sep 2010 06:26:27 +0000

Joel, your argument shows that real estate is a dreadful investment, long or short term. Take some simple numbers: $350,000 average home price, multiple of median-income to median home-price 2.5 times (has been actual North American average for 50 years, with the exception of 2004-2010), Revelstoke median family income $44,661 (2001 Census) (no, it has not increased, how’s your Latin? Service Jobs = Service = Serve = Servitude = Serf …get it yet?). So based on historical averages, that $350,000 Revelstoke home will again trade at $111,000. The earning demographic is PRECISELY why Revelstoke (and elsewhere) is overpriced! Again this displays AVERAGES and does not take into account the likelihood that any number of events would send Revelstoke home prices significantly below the $111,000 average where real value is/should be today; eg. Interest rates rising above historical lows, Major industry closure, Gaglardi’s L.O.C. being called as Simpson’s was, global financial meltdown Etc. Etc.
So you say, ‘short-term price fluctuations matter little to someone who plans to live a home for twenty-thirty years’. Tell that to CA,FL,AZ,NV,OH homeowners who are making monthlies on an asset worth 40% of what they paid…soul destroying! My parents had two careers in their lifetime, I’m at six and counting, my children… ? Overpriced real estate is completely illiquid in a world that is not static; who can say with even 80% probability that they will even be in Revelstoke 6 months from now?
Your last argument is completely absurd; what guarantees are there that what I can ‘afford’ today, I will be able to tomorrow? You are basing ‘affordability’ on historically record-low interest rates, do you warn your marks that if rates climb 2 points, (still well below historical averages) their broke? If you do not you are void of a conscience…if you have not thought the above through…you have no place peddling something you don’t understand when you have a fiduciary responsibility to potential clients.

By: Rick

Rick — Sun, 05 Sep 2010 22:23:02 +0000

I don’t think Joel knows what he’s talking about. Take a few night classes, and anyone can be a “mortgage broker”. All you are is a scam.

By: Jean Mallen

Jean Mallen — Sun, 05 Sep 2010 16:57:28 +0000

Wow Joel you must be a amazing “young” man to be grouped together with Tony Robbins and Joel Osteen?
Keep challenging the mindsets of the nay sayers…….People need new creative ideas,….I guess if we want something different than what we have we might need to try something different than what we have tried before? Guess time will tell…….? But I see no reason to make fun of a generation that will soon be making the decisions for our future

By: Joel

Joel — Sun, 05 Sep 2010 15:39:55 +0000

Thanks for the comments Randy.

You are right, real estate does go down. However, I’m not speaking about some kind of quick flip strategy. I’m talking about buying a home that you have for twenty-thirty years. If you can afford the mortgage payment now, you can afford it throughout the life of your mortgage.

Don’t forget what drives real estate values down. Real estate values are driven down by it being unaffordable for the average income earner in your demographic. This is not the case in this region. In fact, many industries that drive the income level upwards in Revelstoke are not related to the ski hill or tourism, but rather those hard-working manufactoring jobs that you speak off.