interested
Senior Member
recharts.
I like the data you are providing. I assume it is correct.
However, as Kenny did point out, perhaps the rethoric could be toned down slightly while still making your point.
May I ask a personal question.....do you own or rent, and have you owned in the past? I appreciate this is a personal question which you need not answer but I wonder why the extreme desire to convince all that the the market is "crashing".
I believe I am a fairly balanced person with an interest in the discussion and will readily admit that I am a small landlord, however, a well capitalized one. As such, a drop of 10 or 15% will be of absolutely no importance to me. Given the 10% transaction costs, not to mention that if one has a capital gain 1/4 of that money will disappear and for investors who have been depreciating their properties who will have to declare recaptured depreciation, there is very little incentive to sell.
Let me explain by actual numbers. Say you have a condo which you bought at $200K 7-8 years and for simplicity it is worth $300K today. Depending on your tax bracket...let's say 40% your $100K capital gain at 1/2 taxable rates is $20K of income tax.
Your sales commission @ 5% is $15K. Let's say you have legals and soft costs of $2K. Then if you depreciated @2% the first year and 4%/year thereafter...let's call it 26% on say $250K that is another approximately $52K of depreciation you will have to declare or this@40% tax or $21K which totals totals $58K on $300K or approximately 20 %.
So as long as you are not in a loss position on your condo, why would you sell unless there is at least a 20% drop and probably more like a 25-30% drop if you view rental condos or properties as an investment as opposed to a flip? Furthermore, where do you invest the $242K ($300K-58K)? and get a better return on your condo. For some of us, we are happier to get some rental revenue. Now @ current prices, I agree the rental market does not make sense but unless you bought in the past 2-3 years, you are probably fine.
I appreciate there are others on the margin and they will get burnt but there is probably a fair amount of the market / rental market that is reasonably well capitalized. In fact, that segment is probably waiting on the sidelines for some correction....not the massive one people seem to want which I think will not happen. In fact, a 20-25% drop in prices might just start to bring them into line where it becomes reasonable to invest.
I may be wrong but I do not believe we will have a 1989 style meltdown....interest rates are simply not where they were then and rents back then were similar though slightly lower than now and even that was about 40% decline from peak. Also, we did not experience 30% year on year price escalation as was the case in 1986-1989.
But I readily admit, I do not have a crystal ball.
I like the data you are providing. I assume it is correct.
However, as Kenny did point out, perhaps the rethoric could be toned down slightly while still making your point.
May I ask a personal question.....do you own or rent, and have you owned in the past? I appreciate this is a personal question which you need not answer but I wonder why the extreme desire to convince all that the the market is "crashing".
I believe I am a fairly balanced person with an interest in the discussion and will readily admit that I am a small landlord, however, a well capitalized one. As such, a drop of 10 or 15% will be of absolutely no importance to me. Given the 10% transaction costs, not to mention that if one has a capital gain 1/4 of that money will disappear and for investors who have been depreciating their properties who will have to declare recaptured depreciation, there is very little incentive to sell.
Let me explain by actual numbers. Say you have a condo which you bought at $200K 7-8 years and for simplicity it is worth $300K today. Depending on your tax bracket...let's say 40% your $100K capital gain at 1/2 taxable rates is $20K of income tax.
Your sales commission @ 5% is $15K. Let's say you have legals and soft costs of $2K. Then if you depreciated @2% the first year and 4%/year thereafter...let's call it 26% on say $250K that is another approximately $52K of depreciation you will have to declare or this@40% tax or $21K which totals totals $58K on $300K or approximately 20 %.
So as long as you are not in a loss position on your condo, why would you sell unless there is at least a 20% drop and probably more like a 25-30% drop if you view rental condos or properties as an investment as opposed to a flip? Furthermore, where do you invest the $242K ($300K-58K)? and get a better return on your condo. For some of us, we are happier to get some rental revenue. Now @ current prices, I agree the rental market does not make sense but unless you bought in the past 2-3 years, you are probably fine.
I appreciate there are others on the margin and they will get burnt but there is probably a fair amount of the market / rental market that is reasonably well capitalized. In fact, that segment is probably waiting on the sidelines for some correction....not the massive one people seem to want which I think will not happen. In fact, a 20-25% drop in prices might just start to bring them into line where it becomes reasonable to invest.
I may be wrong but I do not believe we will have a 1989 style meltdown....interest rates are simply not where they were then and rents back then were similar though slightly lower than now and even that was about 40% decline from peak. Also, we did not experience 30% year on year price escalation as was the case in 1986-1989.
But I readily admit, I do not have a crystal ball.
