COVID and the housing market | Page 147 | GTAMotorcycle.com

COVID and the housing market

GreyGhost

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@george__ Poloz is part of a company offering fractional ownership. You'd have to check if the numbers make sense. On first glance they don't seem to make sense financially but the program may provide the stability of owning at a buy-in normal people can afford.

The example in the article has a 1 bed 560 sq ft condo at 400 Adelaide for $13,425 upfront+1911/mo. It looks like rentals in that building are ~1900/mo so you are paying market rate but have a small equity stake. They estimate that your investment (the upfront money plus a tiny amount per month) will increase by 30% over the next five years which is pretty crap and I don't know how they get that number. If you decide to leave, you get back your equity put in plus appreciation. I haven't looked into how they calculate appreciation. The interesting question for me is, does the 13.5k up front buy you stability? As you are an equity partner, do you have some ability to prevent a renoviction/family moving in? Your percentage is very small, maybe they just buy you out and do whatever they want? I think I'd be more interested in the scheme if they let you buy 51% and they owned 49%. Then you have housing for ~250k which is a mortgage the banks will grant with a normal income (although I'm not sure how banks feel about mortgages and fractional ownership), sure you miss some of the run-up but if the banks won't approve for 500K+, you miss all of the run-up. No idea if this company wants tenant/owners with control or if they are just looking for suckers as a small equity stake could be a way to vet renters and minimize renter destruction of unit (basically a huge security deposit framed a different way).

 

mimico_polak

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@george__ Poloz is part of a company offering fractional ownership. You'd have to check if the numbers make sense. On first glance they don't seem to make sense financially but the program may provide the stability of owning at a buy-in normal people can afford.

The example in the article has a 1 bed 560 sq ft condo at 400 Adelaide for $13,425 upfront+1911/mo. It looks like rentals in that building are ~1900/mo so you are paying market rate but have a small equity stake. They estimate that your investment (the upfront money plus a tiny amount per month) will increase by 30% over the next five years which is pretty crap and I don't know how they get that number. If you decide to leave, you get back your equity put in plus appreciation. I haven't looked into how they calculate appreciation. The interesting question for me is, does the 13.5k up front buy you stability? As you are an equity partner, do you have some ability to prevent a renoviction/family moving in? Your percentage is very small, maybe they just buy you out and do whatever they want? I think I'd be more interested in the scheme if they let you buy 51% and they owned 49%. Then you have housing for ~250k which is a mortgage the banks will grant with a normal income (although I'm not sure how banks feel about mortgages and fractional ownership), sure you miss some of the run-up but if the banks won't approve for 500K+, you miss all of the run-up. No idea if this company wants tenant/owners with control or if they are just looking for suckers as a small equity stake could be a way to vet renters and minimize renter destruction of unit (basically a huge security deposit framed a different way).

Interesting suggestion.

As I recall banks do NOT like fractional ownership. This was a few years ago but fractional ownership in a building we lived in (>10 years ago) it was very difficult for people to get mortgages. The large condos were MUCH cheaper than anything around due to this fact (like 50% less).

A handful of people got rich handing out private mortgages to buyers in the co-op we lived in.
 

GreyGhost

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Interesting suggestion.

As I recall banks do NOT like fractional ownership. This was a few years ago but fractional ownership in a building we lived in (>10 years ago) it was very difficult for people to get mortgages. The large condos were MUCH cheaper than anything around due to this fact (like 50% less).

A handful of people got rich handing out private mortgages to buyers in the co-op we lived in.
There are only a few companies that will write co-op mortgages. Co-op adds another layer of abstraction as you own 3.2% of the building but have exclusive use of your unit. The bank has trouble selling 3.2% of the building if you default.

The poloz solution is cleaner imo as george would owe 250K on a suite worth 540K. There is a specific suite registered on the mortgage. Not sure how the investors bank and georges bank would want things organized. They would both want position one. It seems simple enough to deal with through a more conservative ratio (eg, only loan 60% instead of 80%) so banks are fully protected in almost every conceivable market situation.
 

danp

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Very cool, I also have a pile of Russian/Soviet watches in the collection, all mechanical. Most show the Soviet manufacturing philosophy. They all run pretty solid and are pretty "loud" which is cool. Some Poljot 3133 mechanical chronos (sort of a Soviet answer to Breitling), a couple Raketas and a bunch of vintage Soviet era mostly military watches, 24 hour dial, Spetsnaz UDT, etc.

The Poljots get a lot of wear, I really wanted a Breitling Navitimer in the collection....I picked up a Poljot to bridge me until I bought one, never did buy a Breitling but I bought more Poljots.... The 3133 movement is based on the Swiss Valjoux 7734
My Vostok just arrived. Came in a simple paper box. It looks better than in the pictures. For about $70 I am pleased. Gonna wear this one a lot.
 

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mimico_polak

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My Vostok just arrived. Came in a simple paper box. It looks better than in the pictures. For about $70 I am pleased. Gonna wear this one a lot.
I like it. Where'd you buy it?
 

GreyGhost

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A few houses around me that I thought were priced 100 to 150 to high (as comps sold weeks or months before were 100 to 150 less) have now been taken off the market after they couldn't get an offer they liked after two to three months listed. Further constraining supply is not going to help prices for those that want to buy.
 

george__

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Houses in Fergus and Elora are going for $800-900k now!!!

What the heck!????????????

EDIT


rosenberg-housing-market-bubble-ranking-1.png
 
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mimico_polak

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A few houses around me that I thought were priced 100 to 150 to high (as comps sold weeks or months before were 100 to 150 less) have now been taken off the market after they couldn't get an offer they liked after two to three months listed. Further constraining supply is not going to help prices for those that want to buy.
Happened to my cousins neighbour. House didn’t get the bidding war he wanted, so he delisted, added 100k to his price, and THEN got 30k over asking.
 

mimico_polak

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THIS should be illegal. Developer wants more money for reasons (justified to themselves by higher cost of material I’m sure).

All the developer has to do is cancel and give you back the deposit.

It should be that if they cancel, or renegotiate, then 1.5x the deposit.

However….if the housing market tanked, the buyer would want to back out as it’s happened a year or two ago.
 

nobbie48

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THIS should be illegal. Developer wants more money for reasons (justified to themselves by higher cost of material I’m sure).

All the developer has to do is cancel and give you back the deposit.

It should be that if they cancel, or renegotiate, then 1.5x the deposit.

However….if the housing market tanked, the buyer would want to back out as it’s happened a year or two ago.
It could be legitimate, theoretically. If the builder was going to be so far underwater before completion the company could fail and work stops. Forcing the builder to honour prices could push them over the edge.

It wouldn't be the first time a trade delayed a job until the profit weather improved. If the electricians stop working it pretty much corks the job.

If that happens the banks and government get first dibs on assets. A new builder takes over and it's new deal so the original purchasers get hammered anyway as sub trade prices get set at today's rates.

The chain of trades and material is so complex and presently erratic that sorting the mess out will take so long the buyers might as well invest in a LTC suite. I can't imagine tracking escalation clauses for every material and trade.

The solution would be a financial variation of Tarion adding to the base costs. They have such a stellar reputation (Choke, gasp).

One could argue the although the buyer is paying more, they are getting more equity. Unfortunately the reverse isn't the same if the market crashed. Most people buy to the max so another $100K isn't easy to come up with and if a dog bites you once will it do it again. It sounds like the homes are far away from move in stage.

The $100,000 number bothers me. Someone threw dart at a board. If the number was $101,235.97 or $97,583.67 it would indicate someone made accurate calculations. The true number could be considerably less but a fudge factor was added.
 

mimico_polak

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While I agree with you @nobbie48 there have also been instances where the builder held buyers at ransom before the COVID surge.

Housing went up, builder cancelled project, returned the deposits, and the previous buyers had first dibs at X% more. Don’t like it? Too bad there’s a line up outside waiting to take your spot.
 

nobbie48

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While I agree with you @nobbie48 there have also been instances where the builder held buyers at ransom before the COVID surge.

Housing went up, builder cancelled project, returned the deposits, and the previous buyers had first dibs at X% more. Don’t like it? Too bad there’s a line up outside waiting to take your spot.
Sad but true. The paperwork on these things will somewhere in very fine and carefully worded phrases say "In case of dispute, We win." It is impossible to legislate ethics.

It isn't like someone buying a lot and contracting out the house build. The buyer still owns the lot and, subject to hold backs, the completed portion of the house. He has a decent amount of control if he played his cards right.

It doesn't seem possible for that to happen with semis and towns as any attached property is affected by work on the adjoining property.

Keep in mind that all it takes is one trade to bail on the ethics deal and the toilet gets flushed.
 

GreyGhost

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While I agree with you @nobbie48 there have also been instances where the builder held buyers at ransom before the COVID surge.

Housing went up, builder cancelled project, returned the deposits, and the previous buyers had first dibs at X% more. Don’t like it? Too bad there’s a line up outside waiting to take your spot.
If builders were required to return deposits with "interest" correlated with current selling prices, that could clean up a lot of this mess. It's not perfect but better than the current approach of 2% below bank rate (ie 0 for the past while and foreseeable future). Now, 20% interest on 40K doesnt really help you get into the market but at least it shares some of the profit with those that were taken advantage of.
 

nobbie48

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If builders were required to return deposits with "interest" correlated with current selling prices, that could clean up a lot of this mess. It's not perfect but better than the current approach of 2% below bank rate (ie 0 for the past while and foreseeable future). Now, 20% interest on 40K doesnt really help you get into the market but at least it shares some of the profit with those that were taken advantage of.
It's a start but suddenly the b******s change the price increase to $120,000.

I don't know about Pace but when I was working in the condo supply chain every building went up as a seperate numbered corporation. The big signs made it look like the building was being erected and sold by ABCE Developements but every nut and bolt was sold to 12345654321 Ontario Ltd or equivalent. There are no deep pockets to go after but I'm sure there are deep pockets around if lawyers need to be paid.

The builder has the money and ability to bail when something goes sideways. The buyer needs every penny for their down payment.

Sucks.
 

mimico_polak

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Let the bidding war begin...

I remember reading there was some ‘rule’ where a house couldn’t be listed ridiculously low. Obviously not a real rule but at least they’re true to the bidding war.
 

GreyGhost

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`1900 sq ft typical subdivision house outside of Barrie listed for 900 (lower than comps) and sold for a little over 1M in 3 days. I guess if Brampton average is north of 1M, it makes sense that Barrie gets there soon too but it is still crazy to try to get in.

I don't think they understand the concept of a pergola. The company that sold them a special metal connection for every wood to wood connection must have loved them.

38639_7.jpg
 

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