Some New 2019 Stories

I have to admit I am pretty disappointed about what is going on in our Stock Markets. I am talking about the Stock Markets in both Canada and United States.

I cannot believe how nice the Markets were in the early part of the year by increasing so well and then how badly they were doing and how far the Markets have fallen. Now, they seem to be rising again.  

To be honest, I don’t have the faintest idea whether they are going to go up, go down or stay around the same position for some time. I am not exactly happy either to see that the Markets have not finished off very well to end 2018.

Oh sure, one can give reasons why the Markets are doing what they are doing but who knows if they are true or not. Are the economies doing well even now or are they having economic/financial problems arising? Are we facing problems between different countries in the world that hurt businesses?

All that I know is I will be out of the markets for quite some time and hopefully be able to go back in when all this financial mess is over. Whenever that is. After all, it is the way that I can hopefully make a few dollars to live better given my real-life situation.

I have to let you know this, dear reader. I just found it funny how little we were warned that the Markets were in bad shape. I really did not see very many stories in the media about it. Oh sure there was the odd one about prices going down but I don’t remember seeing anything telling people to sell our shares to protect ourselves against major falls. 

All of a sudden now, I can see stories in the media warning us about the mess that we are in.

Notwithstanding all this, dear reader, I wish everybody great success in this new year of ours. And just to occupy your time a little bit, I have written these stories for you to read.

UNEMPLOYMENT NUMBERS

This is absolutely fantastic isn’t it, dear reader:

“Windsor’s unemployment rate dropped to its lowest point in nine months, according to the latest labour force survey by Statistics Canada.

The city’s unemployment rate for December was 5.4 per cent, matching the provincial rate.

Both the city and the province’s unemployment rates are down 0.4 per cent from November.” (Taylor Campbell, Windsor Star, January 4,2019) 

One little problem for me was that this just seemed so unexpected:

“The economy has been percolating pretty well in Windsor over the past few years, but this is a pleasant surprise,” said Stephen MacKenzie, CEO of the Windsor-Essex Economic Development Corporation.”

My, my. Aren’t you surprised, dear reader, that it seems that he did not know this was going to happen considering that the unemployment rate a few months ago was 7.3%. It would seem that he was not involved in reducing that rate.

In reading the story, I found it interesting that it did not tell us how the reduction happened. Was it something that happened based on some good job creation or could it be simply that a whole bunch of people have just stopped looking for work and dropped out of the market. That would reduce the unemployment rate, not finding a new job.

Let us see what happens in the future, dear reader. And let us see if we can find the real reason why the rate went down.

RENT VS. MORTGAGE

Tell me dear reader, are you better off economically buying a house or just renting an apartment? What is interesting to me, and should help answer that question, dear reader, is how the real estate market has changed so drastically a number of times over a relatively short time. Who knows if it is still going to happen in the future but let me tell you what I mean.

When I was much younger, I bought a house to live there. That’s all, nothing very dramatic. Interestingly, a number of years ago, a person could live someplace for a relatively long period of time and, when the place was sold, the sale price was very close to what that person paid for it when it was purchased. One did not make capital gains in the real estate market.

That changed and in a very surprising fashion. What seemed to happen is that one would buy a home and then sell it but at a price that was remarkably much higher. It came to the point that one bought a house not merely to live there but rather to sell it and make a lot of money. Then one would buy another place and try and do it all over again. It became a way of making money, not just by getting a job and going out to work.

To be direct about it, if one timed everything perfectly, then a lot of money could be made. Of course, it was difficult to do that timing but I suspect that some people have tried and were successful at it.

I thought about this all over again when I saw these numbers:

“The average rent for a two-bedroom apartment in the Windsor Census Metropolitan Area, which includes LaSalle, Tecumseh, Lakeshore and Amherstburg, was $915 a month, an increase of 4.3 per cent from 2017 to 2018.” (Sharon Hill, Windsor Star, January 4, 2019) 

Moreover, that rental amount was expected to increase in the future as well. Now consider the following example that I am going to provide to you.

If one went back several years before the house prices rose as high as they are today, only a few mind you, you would get a very interesting set of numbers. If one had a monthly mortgage payment of what the rent is today, about $915 a month, then one could have purchased a house in the $250,000 range with a big mortgage in the sum of of around $200,000. However, the mortgage payment every month is based on a very low percentage rate, probably under 3% per year.

Of course, I expect that the rental rate set out in the story is probably low since this is not the location of one of the higher cost areas and does not include some of the other amounts the tenant has to pay when renting these days.

Jump forward to relatively recently. Of course, the mortgage amount is still the same because one would have probably entered into a five-year renewal mortgage back then. The rents however would have risen fairly dramatically and are expected to go up even higher these days. Here is why:

“The average rental rate is expected to rise six per cent across Canada this year, according to a Rentals.ca report released Friday.

“Landlords currently hold a lot of power generally in the Canadian market,” Ben Murchison, head of communications for Rentals.ca, said Friday.

There is little turnover as tenants remain in their apartments, in part because it’s difficult to enter the housing market, Murchison said. The report predicts that will continue as interest rates rise.”

Now here is a very interesting part with respect to the value of the house. Between a few years ago and today, a house price of $250,000 could have risen dramatically higher. It could have increased, depending on the location, to over $400,000! That is a tax-free profit of $150,000 in a very short period of time.

Do you see what I mean, dear reader? Buying a house for $250,000 and paying a relatively low amount for the mortgage, about the same as renting a 2 bedroom apartment, puts a person into position of making a huge profit in only a very few years.

Of course, one ought not to buy another house at the high price today just to be able to resell it quickly afterwards at an even higher price as far as I am concerned since I expect the price to go down. In certain circumstances, it can go down a significant amount as happened in the past. Therefore, one has to be careful what steps one takes to make the huge profit because it may not be possible right away to buy another house if its expected price would go down significantly.