Proper Way to Look at Cost of 2 Buying Options

[X2 Buyer]

^ ^ ^

for those new to the forum ... end of sarcasm.

Thank you cdr108. My point there is no rocket science only your personal belief. If you would ever believe in economist or financial advisors LOL go ahead. My own experience over the past three years 50% of return on my condo on the base price I paid. Although you cannot predict future based on the past, all depends on what you believe. If even the market up only 1% over the next three year, as far as it is an upward market, the bigger the base the bigger the return.

By the way this topic is over the option to buy existing or pre-construction home, so I have the assumption the questioner has the belief on the upward market. If otherwise why bother to purchase at all, just wait until the market claps then get into the market!

 

[MadMax]

I'm new to the forum, but the sarcasm is so clear it's splish splashing all over the board.

A question though... where do the calculations for 5X income come from? In other words, where does income basis come from? Is it derived by average incomes and then is the region taken into account? Or is it then the target market for that condo within that region?

Does anyone have links to any analysis related to prices versus income?

Good point UrbanVigor....nobody knows anyones individual income situation. Banks use formulas and multiples of income when approving prospective purchasers and their mortgages. Plus, I don't think anyone in their right mind would willfully extend themselves to the point that they couldn't keep up with their monthy mortgage payments or overpay for something they didn't see value in. Let's face it folks....the times they are a changin' and people better get used to it.

 

[UrbanVigor]

I'm not saying that I scoff at the idea of price versus income ratio. I just don't know how it's derived.

Plus there are other variables. If anything, mortgage amount versus income ratio is probably a better determinant of whether one can afford their home. After all, if someone, regardless of their salary manages to put down a larger down payment on a similar priced home than someone else with a large salary then there's a likelihood that they could very well manage affording their home better regardless of salary.

So it's case by case. Mind you, perhaps the analysts are able to see trends on a broader perspective and therefore the price to income ratio does deserve greater recognition.

 

[X2 Buyer]

After all, if someone, regardless of their salary manages to put down a larger down payment on a similar priced home than someone else with a large salary then there's a likelihood that they could very well manage affording their home better regardless of salary.

I know some of my friends do not have income at all (new immigrants), as long as they put 35% down the bank approved the mortgage. Btw, the age matters too, if you are over 65 year old then you need have a guarantor even you put 35% down.

 

[X2 Buyer]

Does anyone have links to any analysis related to prices versus income?

If you are interested in reading I have posted the BMO article in "bubble" thread - Chart 7 the price income ratio is hitting the record high as of current.

Canadian Housing: Booming Rebound, No Bubble

 

[cdr108]

I don't think anyone in their right mind would willfully extend themselves to the point that they couldn't keep up with their monthy mortgage payments or overpay for something they didn't see value in. Let's face it folks....the times they are a changin' and people better get used to it.

the exact same things occurred everywhere around the world prior to the correction ...

in the US, people earning $30K were buying $500K houses ...

some for living, some for flipping, some thought it wasn't over-valued b/c all they experienced were increasing prices and bought into the marketing and fearl of being priced-out of the market.

some bought with the notion that if they can't make mortgage payments when interest rates rise, they will either sell for a profit or refinance based on the assumption of higher prices.

Let's face it folks....the times they are a changin' and people better get used to it - famous last words heard before every bubble deflates.

 

[X2 Buyer]

Maybe I am being stubborn - In my mind (every immigrant from Beijing, Shanghai, HongKong or Tokyo, and more around the world), the market is indeed inflated back home NOT here.

For example, not even any close to downtown Shanghai only rural area - somewhere as Elgin Mill up north in GTA

1 sq. Meter = 20k RMB = CAD $3100 so
1 sq. Feet = CAD $288

And the income level is 1/10 of GTA's...