Do you worry about your kids’ future, and this crazy world in which we live? What can you do?
REASONS WHY PARENTS SHOULD BUY A HOUSE FOR THEIR KIDS
A way to distribute the inheritance while you are alive to see it.
Senior care – You might need them to take care of you some day!
Affordability – If prices stay strong, buying a house could get out of reach for most. A salary of $100,000 can barely buy a $600,000 house with 20% down today – and you have to go to an outlying area to find a decent house for that money.
Appreciation – Even if price didn’t go up much, paying down the mortgage builds equity.
Rental income – Pay cash or low-leverage a house purchase and hand over to a property manager. The resulting positive cash flow will help pay their expenses while searching for a high-paying job.
Help to establish an investment portfolio, and to diversify their holdings.
Create a cap on kids’ housing expense.
Safety Net for emergencies – Ill-liquid, but that ensures it’s only used for catastrophic events.
Help the kids grow up. Owning real estate is for adults, and it inflicts responsibility.
Relieve pressure on kids from having to marry rich.
Help determine where the grandkids grow up.
Ensures they live in a quality area with good schools.
Taking care of the kids and grandkids makes grandma happy.
1953 Willy’s CJ3B. It had the original flathead four-banger engine that could crawl over anything. We changed that out for a Chevy 283V8. Rolled it two different times, no one killed. We built a big cake around it and cruised the last Fullerton homecoming parade like in Animal House (they cancelled the football program the next year). It was also the ride I was driving when I met my wife – I borrowed my dad’s car to take her to Bobs.
1958 Cadillac Convertible – with the big fins! One of the few decent things done by the Padres when they gave Trevor this one as they retired his number 51. The 1959 version is great too.
1969 Chevrolet Camaro SS Convertible – Indy Pace Car. A staple on favorite-lists everywhere and mine made a little more special when John Doe and Exene drove up in one when they played at Fullerton.
Our cruise around the world looking for similar real estate markets has to include a stop Down Under, where the auction format to sell homes and the lack of capital-gains tax on seller proceeds from the sale of their primary residence has to add extra juice. Add in some mortgage funny business….and well, these guys think there’s a bubble:
Bronte Capital’s chief investment officer John Hempton and economist Jonathan Tepper (founder of research house Variant Perception) toured suburbs across north-west and south-west Sydney to view housing developments and met with 20 mortgage brokers three weeks ago.
They discovered that mortgage brokers were advising them to lie on loan application documents about the deposit for a house and about income, the Australian Financial Review (AFR) reported.
Mr Tepper has also used charts to support his housing bubble theory.
When the pair asked banks to call their employer, ‘both reputable and disreputable brokers said banks rarely verified payslips,’ Mr Tepper wrote in a report.
They also encountered developers lying about units and houses being sold in the west, the ‘epicentre’ of the housing bubble.
To Mr Tepper’s surprise, some of Sydney’s poorest suburbs, such as Blacktown, Rooty Hill and Mount Druitt in Sydney’s west had properties selling from $500,000 to $700,000 – prices at least eight times the income of local workers.
‘The further west I went, the more irrational it felt. Lots and lots of supply and prices that bore no resemblance to construction cost and income of people around there,’ Mr Hempton told AFR.
There were more advertisements for deposit guarantees, where rather than putting a deposit down on a house you can take out an insurance contract that will pay the deposit if you default.
Another shocking revelation was that the verification of documents was sometimes done by Indian call centres, according to Mr Hempton.
On loan applications low-income earners were often offered discounts on the advertised mortgage rate of up to a one percentage point, increasing the vulnerability of the banks if there were a correction.
Mr Hempton claims they were ‘coached on how to get things through banks’ as opposed to banks having high quality underwritings.
In Mr Tepper’s report, he warns of sharp fall in Australian bank stocks and predicts falls in the Australian housing market of up to 50 per cent in Sydney and Melbourne and of about 80 per cent in mining towns.
These national pundits never look too deep into these topics. Instead, they just run with a sexy tagline and hurry back to their lunch martini.
Let’s qualify the inventory story by price range:
NSDCC New Listings Between Jan 1 and Feb. 22
$2,400,000 and higher
If you are trying to buy a home around here priced under $800,000, then yes, inventory is in short supply.
But there are plenty of choices above $800,000. Already this year there have been 27% more homes between La Jolla and Carlsbad priced over $1,400,000 that have hit the market than in 2015 – glut-watch ahead!
The daughters of wealthy Chinese Canadians who star in the reality show the “Ultra Rich Asian Girls of Vancouver” pursue modeling careers, carry Birkin bags, and sip on Veuve Cliquot. And they snap up million-dollar Vancouver homes with the same level of dedication that some of us use to shop for a new pair of shoes.
“It’s not that expensive in Richmond,” 24-year-old Chelsea Jiang told a local news channel shortly before beginning the show in 2014. Jiang, born in Ottawa, Canada, was looking to buy a single-family home in Richmond, part of the Vancouver metro area, in addition to a luxury condo she already owned. “It’s really cheap and I have a budget of $2 million.”
Many locals blame a massive influx of Chinese wealth in recent years for the city’s skyrocketing real estate prices, which have quickly grown to be among some of the most expensive in the world, and left all but the super-rich scrambling for housing. Others say the charge is racist, and complain that Chinese are being stereotyped as clueless and corrupt — a stereotype that isn’t helped by shows like “Ultra Rich Asian Girls of Vancouver.”
Many Americans in major cities may feel left out by rising housing prices. But these cities have nothing on Vancouver, where a shabby house – described by realtors as a “knock-down property” valuable only for the 32-foot-wide lot underneath – recently sold for nearly 2.5 million Canadian dollars, or $1.8 million in U.S. dollars.
The stunning rise in Vancouver’s home prices is a recent phenomenon. As Justin McElroy, a Canadian journalist, pointed out on Twitter last week, the average price of a Greater Vancouver home rose as much in the past six months as it did from 1980 to 2006. (When those figures are adjusted for inflation, the trend looks even crazier. In today’s Canadian dollars, the city’s housing prices grew by only roughly $150,000 between 1980 and 2006, but shot up by $375,000 in the last six months.)
Vancouver doesn’t have direct metrics on the role of Chinese or any other foreign money in the local market, says Yan — just a resounding sense that local real estate prices seem to move independently of the local economy and local wages. “In short, I’m searching for the “dark matter” in Vancouver residential real estate.”
Attitudes toward Chinese property purchases are mixed in Vancouver, which remains a relatively multicultural and tolerant city, with a substantial Chinese community. Still, some locals complain that foreign purchases are degrading the quality of life for others in the city, by driving up property prices and pushing all but the uber-wealthy out of the market. They claim that high property prices trickle down from the luxury market into the middle-income market and even to renters, as people of all income ranges are displaced into lower-quality housing.
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