Friday, March 27, 2009

Housing Prices

I know that a lot of people are talking about the drop in real estate prices/sales, but honestly, it was BOUND to happen. Prices in many areas have far exceeded what the homes are really worth, what did you think was going to occur? Prices remain at extortionate highs, or go even higher? It's really ridiculous.

Case in point: My city started building homes with Classic Communites. They were peddled all over via billboards, bus stop benches, tv, radio,,,, and advertised as being an answer for people with lower incomes. A friend of mine looked into it and brought back the spec sheets -this was only 2 years ago, a bit less in fact. The 2 bedroom homes in the south of the city were going for $95,000. I have now seen them listed for over $200,000. Are you kidding me? What kind of lower income family can afford that? I just found a listing in the exact same housing estate putting a 2 bedroom at $190,000 today. Going up a hundred grand in less than 2 years (the homes had only just started being built - and you can see from the link that this one was built in 2007 so I'm not fiddling numbers just to make it sound better).

How long could homes continue increasing in price at this rate? Of course they were going to start falling, but they would be falling to what their VALUE is, so what's the problem? If you had a huge 3000 sq ft home and it was suddenly only worth $125,000 then I can see where people would be up in arms. But a supposedly low income "affordable housing" home going for 200 grand?? You've got to be kidding me. The bubble HAD to burst some time or soon, many more people would be homeless than is being reported now.

There is a mortgage assistance program for these homes, but unless they have since changed their policy, this only runs for a few years, maybe 7 at the most. I cannot remember every detail of the paperwork my friend brought over, but we sat down and crunched numbers and realized that in only a handful of years, people would have to suddenly start paying a great deal more per month than they started out with, and the change was not affordable for my friend and her family - who together earned more than double minimum wage in Alberta. That was when the cost was under $100,000... what will people be suckered into paying with prices the way they are now?


  1. The price of housing sky rocketed since 2005.
    But that's not the problem.

    The problem is that every bank was pushing home equity loans,
    what those loans boil down to is selling the increased
    'market' value of their homes,
    to the homeowner.

    How the homeowner spent those home equity funds is the crux of the matter,
    and is the responsibility of the individual, not the bank, stock market nor the government.

  2. I agree, there are many factors at play here. In the end though, it was each individual who signed there name on the dotted line. My friend and I figured out in about 10 mins that it was not a plausible answer to get into the housing market at that time, just by fiddling with online mortgage calculators and good old fashioned Math. Neither of us has ever owned a home or has a single clue about big purchases, but we had to figure out our earnings and see if it was manageable, especially if interest rates went up even 1%, and the answer was NO.

    I know people in my city who were making $1 above minimum wage, had only been working at a particular job for a few months, and jumped on the 'no money down' and 40 year mortgage enticements. With the larger number of people qualifying to buy suddenly, prices went up and up and up, but the people kept buying them! It was seriously bonkers. My old house built in 1972 sold for almost $300 grand last year. Trust me, it was NOT worth that! Insane.



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