# US Housing mess........



## sags (May 15, 2010)

Realty Trac has announced 2.8 million homes were foreclosed in 2010. That is an increase from 2008 and 2009.

Attached is a visual that gives it some perspective. 

http://www.businessinsider.com/sate...et#unfortunately-prices-are-still-dropping-22


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## osc (Oct 17, 2009)

I wish Canada would have a similar "mess" and housing prices would be the same as in US.


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## Addy (Mar 12, 2010)

Like osc I too would like to see that but only for purely selfish reasons. I know it would seriously screw a lot if people who do not have recession proof jobs.


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## NotMe (Jan 10, 2011)

osc said:


> I wish Canada would have a similar "mess" and housing prices would be the same as in US.


So will the guy who is looking to buy a house the day after you do. Get in line.


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## Square Root (Jan 30, 2010)

osc said:


> I wish Canada would have a similar "mess" and housing prices would be the same as in US.


Pretty short sighted. The cost of guaranteeing all the mortgages that would default would cost our gov't(that you and I) a ton of money.


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## Berubeland (Sep 6, 2009)

I would never wish the kind of personal devastation that is occurring in plague numbers in the USA on my worst enemy. 

Every single one of these foreclosed homes represents a family that has suffered complete financial ruin, not to mention the personal trauma that these families go through. Imagine being thrown out of your home and think twice before saying stuff like this. 

I wish house prices would go down too but not at the expense of the financial and emotional well being of my compatriots.

I've known people here in Canada who lost homes during the last bubble melt and they told the story years later with tears in their eyes. They lost a lot of money and pride and self worth due to losing their homes, it's not only about the bricks and mortar.


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## I'm Howard (Oct 13, 2010)

You are right, it is about greedy people taking on more debt than they can afford, then crying when it bites their butts.

Hopefully they will learn, but they don't, they still max their Credit Cards and pay minimum monthly.


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## dogcom (May 23, 2009)

This is why mortgage rules should stay the way they used to be. Sure many may not qualify but then again they won't be losing their homes either.


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## osc (Oct 17, 2009)

I wish the idiots who took too much debt and screwed the housing market for all of us would go bankrupt and be forced out of "their" houses. Just like the idiots in US.


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## osc (Oct 17, 2009)

Square Root said:


> Pretty short sighted. The cost of guaranteeing all the mortgages that would default would cost our gov't(that you and I) a ton of money.


Maybe that will lead to smarter decisions in the future, like not using taxpayer money to insure mortgages for non-qualified buyers.


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## MikeT (Feb 16, 2010)

Ya, no sympathy from me. Some of the oversize mortagages I'm hearing about at work are crazy. Ratios are being ignored / stretched daily. "how much do you think you'll make next year?". "ok, add a couple zeros... Ok we'll write this down so you'll qualify.". No subprime problem in Canada? Bull s h I t.


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## Four Pillars (Apr 5, 2009)

Addy said:


> Like osc I too would like to see that but only for purely selfish reasons. I know it would seriously screw a lot if people who do not have recession proof jobs.


So people losing their jobs and homes would make you happy?


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## LondonHomes (Dec 29, 2010)

I think the biggest problem with the US market was that the ability to claim mortgage interest against your income tax gave people no incentive to pay off their mortgages.

Why would you pay off your mortgage when it would increase you tax bill and potentially reduce your net income? Which is why many Americans refinaced their homes in the recent bubble market, since it allow them to buy a bunch of toys and reduce their income tax. This of course is what set many Americans up for foreclosure since even though they had owned the home for years they had no equity in it when the market tanked.

The situation in Canada is different because people try to pay off their mortgage and end up with equity in their homes. So the majority of people truely vulnerable to these sort of corrections are relatively new to the housing market. The recent mortgage rule changes are positive and should only enchance the equity position of home owners in their property.


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## Four Pillars (Apr 5, 2009)

LondonHomes said:


> I think the biggest problem with the US market was that the ability to claim mortgage interest against your income tax gave people no incentive to pay off their mortgages.
> 
> Why would you pay off your mortgage when it would increase you tax bill and potentially reduce your net income? Which is why many Americans refinaced their homes in the recent bubble market, since it allow them to buy a bunch of toys and reduce their income tax. This of course is what set many Americans up for foreclosure since even though they had owned the home for years they had no equity in it when the market tanked.
> 
> The situation in Canada is different because people try to pay off their mortgage and end up with equity in their homes. So the majority of people truely vulnerable to these sort of corrections are relatively new to the housing market. The recent mortgage rule changes are positive and should only enchance the equity position of home owners in their property.


Good point.

Another factor is that Americans can lock in their interest rate for 30 years. They don't have the same kind of interest risk that Canadians have.


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## K-133 (Apr 30, 2010)

> Why would you pay off your mortgage when it would increase you tax bill and potentially reduce your net income?


Let's assume your tax rate is a flat 25%. If you could pay off your mortgage but decided not to, you'd pay 4 times more in interest than you'd save in taxes. i.e. Net Loss. Sure, taxes aren't 'flat', but they'll still be less than 100% of the funds evaporated by interest.

FT brings up a good point of the comfort most find in being able to create a very predictive situation over the longterm. People seem to prefer predictive behaviour over variance in which might bring savings over the longterm. 

This 'mess' down South has cost people more than their houses. You may think you're being selfish by wanting the same up here, but it would likely impact you far more than simply seeing house prices drop. Sooner or later, you'd no longer be an outsider in the chain of events - the ripple will make its way to your wallet too. The paradigm in which our financial economies function depend on people spending their money.


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## HaroldCrump (Jun 10, 2009)

K-133 said:


> This 'mess' down South has cost people more than their houses. You may think you're being selfish by wanting the same up here, but it would likely impact you far more than simply seeing house prices drop. Sooner or later, you'd no longer be an outsider in the chain of events - the ripple will make its way to your wallet too.


Agreed, and that just goes to show how deeply and permanently stupid govt. policies can impact us.
The Canadian finance ministry and central bank is at a state where they are scared s*th-less to increase interest rates or do anything else that may trigger a housing collapse like the US.
And thus the housing bubble continues....

For us, the best possible outcome is a steady but slow increase in interest rates that may bring down house prices.
Any sudden movements and we risk a housing collapse.
At best that process will take 3 - 5 years before we see any appreciable reduction in home prices relative to inflation%.


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## Addy (Mar 12, 2010)

Four Pillars said:


> So people losing their jobs and homes would make you happy?



Good catch, I didn't realize my words could be taken that way until you asked that question. No, I wouldn't like to see people lose their jobs and homes. Part of me wants to see house prices plummet as they have in the states (ie the remark about me being selfish) but I wouldn't want it to happen as a result of what many families have gone through.


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## marina628 (Dec 14, 2010)

osc said:


> I wish the idiots who took too much debt and screwed the housing market for all of us would go bankrupt and be forced out of "their" houses. Just like the idiots in US.


We own multiple properties and have put 25%+ down on everyone of them .Our debt ratio is only 11.9% with the two mortgages I have as well as one Mortgage my husband has on his investment property.So you would like to see people like myself lose our shirts so some of you can buy a house?

In 1991 my friend lost her house because she was $60,000 upside down when the market corrected,she bought a townhouse in Bramalea for $220,000 which then was worth $160,000 and a 11% mortgage.They choose to walk even though her husband was a police officer and she worked for Royal Bank.it is 20 years later they had to declare bankruptcy and they are still scared and embarrassed over having to do that.

My brother lives in Fort Mcmurrey Alberta ,he is 51 years old retired from Military with full pension and now works full time For Suncor Security Team earning total of $80,000 a year.He bought a home there for $600,000 and he rents out the three bedrooms @ $800 a month and he converted the basement rec room into a bedroom/tv room for himself.I understand how the houses are very expensive in some places and how $1000 a month gets you a bedroom in places like Fort Mcmurrey .My brother would love to enjoy his home himself but renting rooms is only way he can afford to own out there and he put down $212,000 cash!I would suggest relocation over wishing a total collapse of housing market in Canada!


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## kcowan (Jul 1, 2010)

I believe the Canadian correction will be flat housing prices for 7 years. There will be minor corrections here and there, but if they manage it properly, there will be slightly increasing interest rates during that period as well.

When people count their capital gains, they will find them to have reduced by half over the period on the house purchases.

US home owners who were counting on mortagage deductibility found most of it clawed back by AMT. Somehow the RE promoters never mentioned this.


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## kubatron (Jan 17, 2011)

I'm Howard said:


> You are right, it is about greedy people taking on more debt than they can afford, then crying when it bites their butts.
> 
> Hopefully they will learn, but they don't, they still max their Credit Cards and pay minimum monthly.


You mean to say it's greedy of the lenders and brokers involved down in the states to completely blind-side the buyers?

yeah, I thought that's what you meant.


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## kubatron (Jan 17, 2011)

I echo the sentiment that people who wish for an economic collapse are so incredibly short-sighted and greedy themselves, yet fail to realize the massive effect it would have on their lives as well.


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## marina628 (Dec 14, 2010)

kcowan said:


> I believe the Canadian correction will be flat housing prices for 7 years. There will be minor corrections here and there, but if they manage it properly, there will be slightly increasing interest rates during that period as well.
> 
> When people count their capital gains, they will find them to have reduced by half over the period on the house purchases.
> 
> US home owners who were counting on mortagage deductibility found most of it clawed back by AMT. Somehow the RE promoters never mentioned this.


I agree with you on this ,even through the year we can see a 2-3 % price change in what homes are selling for and it has been this way for the 20 years I have been investing.I do not think homes will go down much ,if any but I think they will stay close to what they are now.I also see interest rates going higher which is why we took 5 year fixed recently on all our mortgages with idea if they go up to 7+% we can sell one house in 2015 and be mortgage free then.
First time home owners also need to realize they can add equity to their homes by doing updates on their own without needing to know too much.I watch the flipping shows,Homes under the Hammer ,Flip this House etc to get ideas all the time.


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## kcowan (Jul 1, 2010)

marina628 said:


> ...First time home owners also need to realize they can add equity to their homes by doing updates on their own without needing to know too much.I watch the flipping shows,Homes under the Hammer ,Flip this House etc to get ideas all the time.


Yes people that are handy can add value to the house while they occupy it. We owned 4 houses in total (and one cottage), and completed the basement ourselves in 2 of them. The last house, at 5000 sq.ft. was speculative because we had 2 teenage boys. All that space was a treat, and we sold it after the youngest graduated from university. I remodeled the kitchen and added a jacuzzi spa/room too.


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## kubatron (Jan 17, 2011)

I suck at home renos and let professionals do their job. My skills are weak, at best.

11% of homes in the states are vacant. Scary.


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## Four Pillars (Apr 5, 2009)

kubatron said:


> I suck at home renos and let professionals do their job. My skills are weak, at best.
> 
> *11% of homes in the states are vacant.* Scary.


That's hard to believe. Do you have a link?


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## Larry6417 (Jan 27, 2010)

kubatron said:


> You mean to say it's greedy of the lenders and brokers involved down in the states to completely blind-side the buyers?
> 
> yeah, I thought that's what you meant.


A wee bit simplistic don't you think? It's all the fault of evil bankers and brokers? The mess down south is a confluence of weak regulation, sometimes criminal activity of brokers/bankers, foolish policy encouraging home ownership for all (even those who can't afford it), and widespread individual irresponsibility.

Yes, some of the brokers and banks did target vulnerable (financially illiterate) consumers. But those weren't the only people taking out huge mortgages. Middle class and wealthy people speculated in real estate too. Yeah, I thought that was what you meant.


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## CanadianCapitalist (Mar 31, 2009)

You can find the report put out by the Financial Crisis Inquiry Commission here. There is plenty of blame here to go around:

http://www.fcic.gov/report


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## marina628 (Dec 14, 2010)

Four Pillars said:


> That's hard to believe. Do you have a link?


I can believe this with Florida ...


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## LondonHomes (Dec 29, 2010)

marina628 said:


> I can believe this with Florida ...


I agree about Florida. We rented a house near disney twice and both times the subdivision was nearly deserted. Every where you looked houses had big "for sale bank owned" signs in front. It seems that most homes had been purchased with the intent the flip them and now the flippers were stuck with them with nobody to buy and nobody to rent. There are probably hundreds of these nearly empty subdivision in Florida.


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## marina628 (Dec 14, 2010)

We have been looking to buy in Florida for a year now and this is our biggest issue ,most of the communities are 40% empty.We run the risk of living in a community where nobody is caring for the property.Our real estate agent sends us photos of homes where the grass is straw and seriously depressed area.These are homes less than 5 years old that look worn and tired already.


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## sags (May 15, 2010)

Las Vegas, Arizona, California are in rough shape.

But I think the worst has to be places like Detroit, Michigan or Cleveland, Ohio, where whole city blocks look like a war zone.

Do a Google search of Detroit vacant buildings......it is mind boggling.

Train stations, museums, department stores, office buildings, ballrooms, theaters..........all abandoned, empty, and falling apart. Even Governor Mitt Romney's childhood home is slated for demoliton among 10,000 others.

http://online.wsj.com/article/SB10001424052748703950804575242433435338728.html

Some in Detroit have called for levelling whole blocks of the city, so that fire, police and municipal services don't have to be maintained. They are talking about building greehouses in downtown Detroit and growing vegetables.

Who would have thought it...........

Here is a link to an interesting housing blog. It is called Homes of Genius and it shows asking price histories and often digs into the borrowing background of the home. It is readily apparent what was going on. People were remortgaging upwards every few months, with the blessing of mortgage brokers like Countrywide etc. People were virtually stealing money, the brokers were stealing money, the lenders were stealing money, the appraisers were stealing money, and all because they could package up the loans and ship them to parts unknown.

http://drhousingbubble.blogspot.com/search/label/real-homes-of-genius


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## Addy (Mar 12, 2010)

I'm not that familiar with Detroit (somewhat as I dated someone from Detroit years ago... but that was years ago...), and I am quite surprised by the house prices in the city. If you check out realtor.com you can find a lot of decent looking houses for around $40K to $50K (I searched min 3 bdrm 2 baths). Some of the REALLY cheap houses (ie $5000 and under) have severe mold issues, but the houses in the closer to $50K are quite nice looking.

Is the market TRULY this bad in Detroit? Are people now renting? I'm wondering what would prevent someone from sinking a few K into (non-forclosure) homes and renting them out? Surely the people who once owned these houses need SOME PLACE to live?? Where did they all move to?


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## Plugging Along (Jan 3, 2011)

Well, we looked into Detroit too. My old collegue lives there, and says its a ghost town. 

Vacanciy rates are around 20%, so it's really not worth it. My understanding is people are moving to places where their are jobs.


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## sags (May 15, 2010)

Detroit is one of those places you wouldn't want to live, regardless of the price.

I would choose somewhere like Las Vegas or Arizona first.


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## sags (May 15, 2010)

If you are interested in reasonable priced homes in Canada, you should check out the mls listings for the Windsor, Ontario (across the river from Detroit) through to Chatham, Ontario areas.

Some pretty nice properties available for very reasonable prices.


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## Four Pillars (Apr 5, 2009)

Housing vacancy rate for Q4 2010 was 2.7%.

http://www.economicpopulist.org/content/home-ownership-vacancy-rates-q4-2010


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## Berubeland (Sep 6, 2009)

How many of you would be insulated at your next mortgage financing if house prices dropped 50%? 

The lady I spoke of put $80,000 down on a $400,000 new house a few months later... she would have had to put another $80,000 down to get the mortgage. That's what happens when prices drop. 

Have a good look at what happened in 2008 to the real estate market, house prices dropped 13% in about 2 months across Canada. I was driving around in Mississauga one weekend on a quiet side street and as far as I could see on both sides of the street there were for open house signs at every single stop sign. We escaped only because our government instituted emergency level interest rates to keep the market afloat. 

When the fear grips people, the market will just collapse. That is the difference between a collapse and a correction. Society's fear level. Who predicts this? 

If you think you're so smart ask yourself how many of you loaded up on stocks during the market collapse? If your answer is that you were freaking out everyday as your portfolio was decimated and sold at the bottom then rest assured that you'll be among the group of sheeples who will do the exact same during the real estate meltdown. 

If you were buying at that time we both know you'll be fine in any situation  but you'll get to observe a large percentage of your friends, coworkers and family go through it. Housing is a very large part of our economy, from stores that sell building supplies to construction workers to real estate agents all of whom will be hurting for money and not spending on other things. 

During 2008 when no one could sell their house my business did extremely well. Will yours?


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## jamesbe (May 8, 2010)

Haha, I bought almost all my portfolio in 2008  Best time to buy when people are selling!


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## marina628 (Dec 14, 2010)

My husband and I make monthly contributions so we bought right through the bad spots and we never sell anything !


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## Berubeland (Sep 6, 2009)

Yeah a large percentage of this forum will be just fine


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## crazyjackcsa (Aug 8, 2010)

Heck, I'm on the low end of the spectrum on the forum, and we'd be fine. In less than 4 years, we have half the house paid off.

I'm in Chatham actually, and mls doesn't lie, there are some nice places here for "cheap". 10% unemployment in the area though, and low paying jobs.

"Detroit" is kind of a misnomer though, the "burbs" are no worse than any other area in the US. Royal Oak, Auburn Hills, and many others are fine. And Downtown detorit has been empty for a long, long time. The population has actually been declining in the Downtown core for 60 years.


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## Addy (Mar 12, 2010)

If you were to buy some land (no buildings, just land) for cash as something purely to sit on for 20 years or so then resell (or whenever the land went up enough in value to make you want to sell it), where would you look?

I've heard Texas and Arizona are places you can buy land extremely cheap as well.


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## Addy (Mar 12, 2010)

crazyjackca what do you think of the areas where (these are just examples) these lots are located? I found these on realtor.com, and I've included the listing price. All I believe are bare land (no buildings).

14540 Lamphere Detroit, MI 48223 $100
13563 Mackay St Detroit, MI 48212 $150
4675 33rd St Detroit, MI 48210 $1500
5720 Cabot St Detroit, MI 48210 $4200
5942 Joseph Campau Detroit, MI 48211 $5000


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## Addy (Mar 12, 2010)

sags said:


> If you are interested in reasonable priced homes in Canada, you should check out the mls listings for the Windsor, Ontario (across the river from Detroit) through to Chatham, Ontario areas.
> 
> Some pretty nice properties available for very reasonable prices.


sags, or anyone who would know, are there areas of Windsor that would be easy to rent out? Say student rentals? I'm interested in starting to buy rental property again and Windsor has me curious. I grew up in Ontario and have an Aunt who lives in Windsor, so I will ask her opinion as well, but I'm curious what others here think. It seems you can buy a little wartime type bungalow for around $50K in Windsor.


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## Berubeland (Sep 6, 2009)

If you were located in Windsor it might work, but you're going to be far away. In a depressed economy like Windsor's it's hard to find good tenants. Vacancy rates are high as well.


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## Addy (Mar 12, 2010)

Berubeland said:


> If you were located in Windsor it might work, but you're going to be far away. In a depressed economy like Windsor's it's hard to find good tenants. Vacancy rates are high as well.


Good to know Berubeland, and I know you know a lot about rentals so I respect your advice. Do you think it would make a difference if we were to say buy really really close to the University there? I'm talking less than a 5 min walk? I know as a student I always preferred the closest rental as long as it was decent enough to live in.


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## sags (May 15, 2010)

I don't know about rentals. Perhaps close to the University or St. Clair College.

My uncle lives a block from St. Claire College, and it is a very nice, well kept, more upscale type of neighbourhood. You won't find any really cheap property in that area, but prices have come down considerably and are very reasonably priced by other city standards.

My uncle owns a huge Spanish style ranch home on a corner. Completely finished on both levels, with a bricked courtyard and 3 car garage. Real nice property that would sell for 350,000 in London, Ontario and probably 1,000,000 or more in the GTA. He says he will be lucky to get 200,000 for it when he sells.

If you are looking for rental property, I think it makes sense that you have to own a place where people want to live and work, and Windsor isn't that place right now.


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## Berubeland (Sep 6, 2009)

Addy said:


> Good to know Berubeland, and I know you know a lot about rentals so I respect your advice. Do you think it would make a difference if we were to say buy really really close to the University there? I'm talking less than a 5 min walk? I know as a student I always preferred the closest rental as long as it was decent enough to live in.


Student rentals do better again when closely supervised... I rarely recommend them they are so labor intensive. You make a lot more but you also have to trade your time for that. For the most part they can be OK but if things go wrong they really get out of control fast. 

I knew a guy who had three within walking distance of Humber but he had a presence there... he was there almost every day and certainly on the weekend to make sure things were going smoothly. 

Most property management companies want nothing to do with student rentals as well so finding a company to help you will be almost impossible. 

Next the other problem is that many municipalities have rules about student rentals which are constantly changing. You'll pay a lot more for a legal student rental and if they change the laws you won't get your money back.


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## kcowan (Jul 1, 2010)

The 11% figure of empty US houses is of those with a mortgage, and represents just 2.7% of the total houses, including ones that are owned outright.


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## humble_pie (Jun 7, 2009)

kcowan really ? i didn't know, it's hard to think that so many US homes are owned outright, without mortgage ...

from time to time the mainstream media publish articles about extreme housing breakdown in parts of the US & these make fascinating reading about the future. It's too soon to see any future pattern clearly but some snippets leap out.

snippet: almost a decade ago, the first deer was sighted browsing in a vacant lot within metropolitan detroit.

snippet: a lifelong community activist in a devastated detroit neighbourhood has, according to the ny times, gathered up a group of homeless or street children & adolescents. This youthful gang is operating an organic farm within the city & apparently make a living at it.

snippet: in flint michigan, a number of younger families including a high proportion of academics & artists have bought dirt-cheap old houses along 3 or 4 otherwise vacant or bulldozed streets, and these families are urban homesteading. They deliberately bought close to one another for safety & security reasons.

snippet: some municipalities are said to be giving away empty houses for free, since they can't afford to board them up or police the constant squatters & vandals to prevent arson.

is this the beginning of the future ? in another thread people are discussing the flight of the middle class from toronto. Maybe another global crisis could begin to force the poor out of toronto also, leaving behind depopulated substandard housing areas that governments might have to consider bulldozing. Only the rich would be left, huddled in their high rises behind their security guards. Although it seems unlikely that any canadian city could ever follow the severe breakdown pattern of the michigan cities, is it possible that we might see a milder version in canada.

and where will the poor go. In paris, they're living in instant slum exo-banlieux outside the city limits. These are the riot locations.


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## Square Root (Jan 30, 2010)

Berubeland said:


> I would never wish the kind of personal devastation that is occurring in plague numbers in the USA on my worst enemy.
> 
> Every single one of these foreclosed homes represents a family that has suffered complete financial ruin, not to mention the personal trauma that these families go through. Imagine being thrown out of your home and think twice before saying stuff like this.
> 
> ...


Agree Well put. Everybody who loses their home isn't greedy. And that is a heartless ignorant thing to say.


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## Square Root (Jan 30, 2010)

Four Pillars said:


> Good point.
> 
> Another factor is that Americans can lock in their interest rate for 30 years. They don't have the same kind of interest risk that Canadians have.


Agree with both these points. Americans like to act like mini banks- borrow low and invest high. Works most of the time but I think the Canadian model is better.


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## Square Root (Jan 30, 2010)

kcowan said:


> I believe the Canadian correction will be flat housing prices for 7 years. There will be minor corrections here and there, but if they manage it properly, there will be slightly increasing interest rates during that period as well.
> 
> When people count their capital gains, they will find them to have reduced by half over the period on the house purchases.
> 
> US home owners who were counting on mortagage deductibility found most of it clawed back by AMT. Somehow the RE promoters never mentioned this.


This would be a good outcome. Hope you are right.


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## Square Root (Jan 30, 2010)

Addy said:


> If you were to buy some land (no buildings, just land) for cash as something purely to sit on for 20 years or so then resell (or whenever the land went up enough in value to make you want to sell it), where would you look?
> 
> I've heard Texas and Arizona are places you can buy land extremely cheap as well.


I would be a lot more comfortable buying good quality dividend paying equities instead. Real estate is very illiquid and the bid ask spreads very high.


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## Square Root (Jan 30, 2010)

These anecdotal stories presented by various media have to be taken with a grain of salt. (Like the recent "snow storm of the decade" in Toronto). Their objective is to get you to watch or listen. If you believed everything you read or watched you would never get up in the morning-or maybe just to crawl under the bed with your little TV tuned to CITY TV.


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